Sunday, August 28, 2005

More troubles for Hatch

Don’t know how I missed this from yesterday’s Star Tribune. It looks like Mike Hatch has more questions to answer to.

Law firm's fees draw scrutiny from GOP
Conrad Defiebre

With Minnesota poised to reap as much as $30 million in a securities fraud settlement with Time Warner Inc., a Republican legislator is questioning the fee due the state's lead attorney in the case, a prominent campaign contributor to DFL Attorney General Mike Hatch.

Samuel Heins of the Minneapolis law firm of Heins Mills & Olson said Friday that the fee for work on the worldwide class-action suit has not yet been set by a federal judge in New York, but that it will be "many millions" of dollars.

A pretrial settlement of the case negotiated by Heins and other lawyers calls for Time Warner and its accountants to pay $2.5 billion to perhaps millions of shareholders in the world's largest communications company, including the Minnesota State Board of Investment. Hatch, who assigned the case to the Heins firm in 2002, estimated the board's share at $25 million to $30 million.

"The deal is done," Heins said. "But it could be years before we get paid or the class gets paid." Several court approvals, time-consuming notification of shareholders and possible appeals by some of them may drag the process out, he said.

The investment board has claimed losses of up to $249 million to the public employee pension funds it manages because of alleged false revenue reporting by Time Warner and a merger partner, AOL.

Reports of the proposed settlement prompted Rep. Marty Seifert, R-Marshall, to raise questions with Hatch about Heins' role in the case and his prospective compensation.

"Obviously, he should be paid," Seifert said this week. "But there needs to be some legislative parameters in these kinds of things or you end up enriching a very few people at the expense of something else."

In many ways, the case echoes Minnesota's $6.1 billion fraud settlement with the tobacco industry in 1998, for which a law firm led by DFL activist and contributor Michael Ciresi collected a fee of $440 million. That led to a chorus of Republican protests and unsuccessful legal efforts to strip Ciresi of the money and transfer it to the state.

Heins hinted that his firm's overall fee as lead counsel for the entire class of plaintiffs could rival Ciresi's. Heins noted that the tobacco settlement will be paid over 25 years, while Time Warner's $2.5 billion will be "cash on the barrelhead" that is roughly comparable to $6.1 billion in present value.

Like Ciresi, Heins has been a generous political donor to Hatch and his predecessor as attorney general, Hubert Humphrey III. Since 1996, Heins has given $1,900 to Hatch's campaigns and $3,000 to Humphrey's. Humphrey was the DFL nominee for governor in 1998; Hatch is considered a likely candidate for the job in 2006.

Meanwhile, the Heins firm has kept busy with lawsuits on behalf of the state of Minnesota. In 1999, it won a $3.75 million settlement from Minnesota dairies over alleged price fixing, with the award going in the form of milk to state food banks. The $550,000 fee in that case also was unsuccessfully challenged by Republicans, although the Legislature later outlawed diverting state lawsuit proceeds to charities.

Heins said his firm also has secured more than $200 million in settlements of other securities fraud cases from which the state has benefited.

But Hatch said no political favoritism was extended to Heins because no other law firms were seeking to press any of the cases. Such suits are initiated by proposals from class-action law firms to public entities such as the Board of Investment, which typically lack the resources to conduct them, Hatch said.

"There are very few class-action firms," he said. "They invest tens of millions of dollars in cases like this, usually with lines of credit against all they own. It's a very high-risk business."

Consensus choice

Hatch said he had sole authority to put Heins on the Time Warner case in 2002, but as a courtesy got the approval of all other members of the Board of Investment.

Secretary of State Mary Kiffmeyer, then the only Republican on the board, said Friday that she did not object to Heins' appointment, which was backed by the board's staff.

"We defer to the expertise of the staff and the right of the attorney general to choose," she said. She added that she is "delighted" with the prospective settlement and considers it outside the realm of partisan politics.

Under an agreement signed by Hatch and Heins, the law firm's fee will be set by U.S. District Judge Shirley Wohl Kram, who also designated it as lead counsel because Minnesota's claimed losses were larger than any other plaintiff's.

Several other law firms that assisted in the complex case will also get compensation, Heins said.

"There were 40 or 45 lawyers working on it on any given day," he said, including a dozen that Heins Mills hired just for that purpose. They pored over 13 million documents in Minneapolis and did "a tremendous amount of forensic accounting," Heins said.

The steep costs of that effort, which Heins said was "heavily contested" by top East Coast law firms representing Time Warner, will figure prominently in Heins Mills' fee request to Kram.

"It was an enormously expensive undertaking," Heins said, noting that it got results. "But Mike Hatch has nothing to do with how much we get paid. It's not state money, and the amount will all be public."
(Source: Star Tribune, August 27, 2005)

So Hatch handpicked a strong financial backer to try a case that would undoubtedly being in a lot of money for the attorney. Wonder what other skeletons the man is hiding in his closet? I guess the only people that know are Mike Hatch and Matt Entenza.


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