Virtue may have been its own reward for white knights of old, but the paragons brought in these days to help save corporations battered by scandal are well compensated.
Richard C. Breeden, a former chairman of the Securities and Exchange Commission, is being paid US$800 an hour to help straighten out WorldCom. His firm is billing WorldCom at least US$300,000 a month, according to some lawyers in the case -- the exact amount is being kept under wraps.
Richard L. Thornburgh, a former attorney general, is billing WorldCom about US$600 an hour. William McLucas, a former director of enforcement at the SEC, is charging US$715 an hour for investigating potential fraud at the company. Former New York Mayor Rudolph Giuliani has thrown his hat into the ring as a scrubber of corporate souls, too -- but no one is talking about his hourly rates.
It's not unusual for senior bankruptcy lawyers to charge US$550 to US$650 an hour, with a very few well-known lawyers billing about US$700. Neal Batson, one such expert at the law firm of Alston & Bird, is getting close to US$600 an hour for his role in the Enron bankruptcy proceedings. He submitted a bill for US$122,130 for work in September alone. And big law firms are charging millions of dollars monthly for their expertise.
Unlike Batson, Breeden and Thornburgh are not receiving big paychecks because of their experience restructuring companies. The two men are far better known for their government service, though Breeden, at least, has worked in the area for the last few years. They are valuable because of their prestige and reputations for integrity -- qualities that corporations mired in scandal need.
"They're looking for credibility," said Mark I. Bane, head of the bankruptcy practice at Kelley Drye & Warren in New York. "The higher prices are being paid by the companies that went into bankruptcy not because of business mistakes or because of the economy," he said, but because of crises that have damaged investors' confidence.
So a reputation for integrity and a lack of tolerance for corporate shenanigans has become a most desirable and valuable trait, lawyers, accountants and other bankruptcy professionals say.
"For these high-profile individuals, it's a unique opportunity," said Peter J. Antoszyk, a partner at the law firm of Brown Rudnick Berlack Israels in Boston. "Management and boards of directors in these troubled companies have lost credibility. They're looking for strong, credible leadership, and people like Giuliani may provide that."
Breeden, the former SEC chairman, has set himself up as a go-to adviser on corporate governance for companies trying to reassure investors. He has teamed up with the financial unit of Edelman Worldwide, a large public relations firm.
How much Breeden has cost WorldCom is not public because he does not submit a bill through either the bankruptcy court or the federal court overseeing the securities commission's lawsuit against WorldCom. The fact that Breeden's bills are not disclosed does not sit well with many of the other lawyers, accountants and bankers involved in the WorldCom's proceedings. Not only are their bills public, but they must get the approval of the bankruptcy court and Breeden himself before they are paid.
As WorldCom's "corporate monitor," Breeden has been charged by a federal judge both with controlling the company's expenses and representing the interests of investors and employees who suffered losses from the company's collapse. The amount of money he saves the company will dwarf whatever his services cost, Breeden said in a recent interview.
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