Audit Clears Law Firm of Padding Fees

An independent audit, released Friday, cleared the Los Angeles law firm of Rubinstein & Perry of charges that it padded its bills to the Department of Insurance for work on two big insurance insolvency cases.

But the report also recommended changes in Rubinstein & Perry’s billing practices, and the firm has agreed to credit $23,000 to the estate of Executive Life Insurance Co., one of the cases examined in the audit. The other was the collapse of Mission Insurance.

Legal fees are a hot issue these days, and have been of particular interest in the Executive Life case because of their size--$60 million charged so far by lawyers and financial advisers--which are paid out of the company’s remaining assets. That reduces the amount that policyholders eventually can recover. The audit looked into charges of a fired Rubinstein & Perry employee, Adriana Moore, who said the firm systematically overbilled the state and charged for personal business such as divorce preparation and taking children to an Easter Parade.

Insurance Department spokeswoman Elena Stern said the audit cleared Rubinstein & Perry of intentional overcharges, but added that the firm will voluntarily rebate $23,000 for questioned items.

“We feel the audit fully vindicates Rubinstein & Perry,” said Dana Carli Brooks, a partner in the firm.

The law firm agreed to refund $15,000 on work undertaken by Moore, saying it was done inefficiently, and $8,000 worth of questioned air-fare charges as “good faith to the client, nothing more,” she said.

Neither Moore nor her attorney could be reached for comment.

An attorney who represents some Executive Life investors was skeptical.

“Presumably, it isn’t a clean bill of health, or there wouldn’t be any givebacks,” said Robert L. Wallan of Pillsbury Madison & Sutro, which represents Executive Life “muni-GIC” holders--investors whose municipal bonds were backed by Executive Life.

The $63,000 report, from auditor Gary Greenfield of Oakland-based Litigation Cost Management, did not offer full support for Rubinstein & Perry and its practices.

While no evidence of systematic overcharging or billing for personal business was found, Greenfield said he could not conclude that the hours billed by Rubinstein & Perry were accurate because of the way records were kept.

Although he noted that Rubinstein & Perry’s charges were similar to those of many other law firms, Greenfield recommended that the Insurance Department modify elements of its agreement with the firm--for example, to make sure that charges for document production, faxes and copying reflect actual costs.