CNMI Public Auditor Investigates Fund’s Legal, Consulting Expenses

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‘Exorbitant’ legal fees raise concerns in senate over impropriety

By Alexie Villegas Zotomayor

SAIPAN, CNMI (Marianas Variety, May 18, 2012) – The Office of the Public Auditor (OPA) is looking into whether there was impropriety committed by the financially challenged Northern Mariana Islands (NMI) Retirement Fund in securing the services of its lawyers and consultants.

OPA legal counsel George Hasselback told Variety, "The Office of the Public Auditor has received complaints regarding the amounts paid by the Retirement Fund to attorneys and consultants. We are taking this matter under review, but cannot discuss the particulars of any investigation or assessment we undertake."

Hasselback assured that the OPA would take appropriate action upon completion of their assessment of the situation.

No further details were forthcoming.

Earlier, the Variety reported that the Senate has been conducting a probe into payments made by the Fund to its consultants and counsels, which Sen. Frank Cruz, chairman of the Senate Committee on Executive Appointments and Government Investigation, referred to as hefty legal fees.

For Cruz, the "exorbitant" fees made to legal counsels were the main reason for the Senate committee’s reluctance to confirm the nomination of former Fund board chairman Sixto K. Igisomar to the Fund board.

Cruz noted that the Fund spent $742,931.15 between Jan. 18, 2010 and March 16, 2012 for legal and consultant fees.

[PIR editor’s note: Fund pension recipients have expressed outrage at being required to return allotments that were overpaid, with at least one former policeman expected to sacrifice nearly $93,000 from his current retirement for past payments. Meanwhile, despite the Fund being essentially non-functioning, administrator Richard Villagomez has announced that employers must still submit remittances for their workers to the Fund during the bankruptcy case proceedings.]

Recently, a motion filed by the Fund to allow it to retain the services of Brown Rudnick LLC, raised eyebrows among retirees, who are worried about the possibility of losing their pensions.

The court filing revealed the Fund paid $250,000 in advance retainer to the Boston-based firm covering the period between April 4 and April 17 — the petition filing date.

There was indication in the document filed in the district court that the bankruptcy counsel anticipated that "most, if not all, of the retainer was exhausted and paid on account of services and expenses prior to petition date."

Of the $250,000 retainer, Brown Rudnick LLC, according to court documents, forwarded $15,000 to AlixPartners LLC for communications services.

The same law firm has agreed to continue providing legal services to the Fund at a "blended rate" of $475 per hour, which according to the Fund it had managed to bring down from the $1,000 per hour rate.

It has also capped its monthly fees to $125,000 a month, and it has agreed to a $750,000 cap through the course of its engagement with the Fund subject to the debtor’s written consent and the court’s discretion.

The Fund, the court documents also revealed, paid $20,000 advance retainer to Braddock Huesman as the Fund’s special and designated legal counsel.

Huesman’s hourly rate is $150.

The legal fees associated with the bankruptcy filing, and the imminent collapse of the Fund were the main reason the retirees opposed Chapter 11 proceeding moving forward, as voiced by frustrated retirees in recent fora.

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