Madoff: The $43 million legal bill

@CNNMoney May 17, 2011: 4:54 PM ET
As part of the legal bill for cleaning up Madoff's mess, the trustee racked up more than $1 million in expenses.

NEW YORK (CNNMoney) -- What does it cost to clean up after the biggest swindle ever?

A lot.

The court-appointed lawyers working to recover money for victims of Bernard Madoff's Ponzi scheme want a judge to approve a $43.7 million legal bill, for work done over a recent four-month period.

Court-appointed trustee Irving Picard and his firm, Baker & Hostetler, submitted the bill to a U.S. bankruptcy court judge, who will decide whether to approve it on June 1.

The documents reveal that the firm's lawyers were paid at an average rate of $437.89 per hour, while paralegals and library staff were paid a rate of $250 per hour, as they scoured the earth to recover money and assets stolen by Madoff.

All told, 285 lawyers and 66 paralegals and staffers worked on the case.

This is in addition to the $128 million that has already been paid to the firm. The fees are paid from money collected from Wall Street firms by the Securities Investor Protection Corp.

For his part, Picard put in for $714,000. He has so far been paid $3.2 million for his work on the Madoff case.

But Picard was not the highest paid lawyer. That distinction goes to the firm's chief counsel David Sheehan, who has requested $893,000.

Documents filed by the firm say that Sheehan worked 1,075 hours during the four months that ended in January. His hourly rate: $830.45. That comes to an average of about nine hours a day, seven days a week -- Thanksgiving and New Year's included.

The documents provide some insight into the type of work the lawyers were doing.

The lawyers spent 5,230 hours investigating hedge funds that fed funds to Madoff's scheme -- for which they were paid $2.6 million.

They have requested another $1.7 million for the 4,266 hours they spent investigating the Madoff family. In December, Picard's firm sued Madoff family members and former employees of their tainted firm for $69 million, accusing them of benefiting from the Ponzi scheme.

The lawyers are seeking more than $80,000 for the 146 hours they spent handling inquiries from the press. Court appearances, totaling a mere six hours during the four months, were worth $2,800 for the firm.

The judge is being asked to approve $1.1 million worth of expenses for Baker & Hostetler. The expenses run the gamut, from $74,000 for making copies to $248,000 in translation costs. The single biggest category was for out-of-town travel, worth $202,000. Business meals totaled nearly $54,000. Postage cost $1,500.

A spokeswoman for Baker & Hostetler declined to comment.

While the firm's bills might seem pricey, the payscale at Baker & Hostetler is typical for New York lawyers, said David Paige, chief executive and founder of Sterling Analytics, which analyzes legal fees.

"The rates do seem on the higher side, but not out of line for top firms," said Paige.

Picard has spearheaded the recovery of about $10 billion worth of funds and assets that were lost in Madoff's massive fraud, which netted thousands of hapless investors. Another $10 billion in stolen money has yet to be recovered.

The largest source of recovered funds is the $7.2 billion settlement agreement with Barbara Picower, widow of Jeffry Picower, who the trustee considers to be Madoff's biggest beneficiary. Picower died of a heart attack in 2009.

Madoff ruined thousands of lives

Of the 16,518 investors who have filed claims with Picard's firm, he has recognized 2,414 claims as being eligible for compensation. The legitimate claims total nearly $6.9 billion, according to the trustee. This includes the approximately $800 million that has already been paid to the victims by SIPC.

Meanwhile, Madoff languishes at a medium security federal prison in Butner, N.C., where he is serving a 150-year sentence. Madoff was arrested in December of 2008 and pleaded guilty three months later to running the largest pyramid-style scheme in history. To top of page

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