Judge Refused To Open Up FundNovember 8, 2009 – In The News
A federal judge has denied a receiver's request for payment from what authorities contend were proceeds of a Saddle River man's Ponzi scheme. However, the receiver -- attorney Lee Richards of Richards Kibbe & Orbe LLP in Manhattan, appointed to oversee the eventual liquidation of James Nicholson's Westgate Capital Management LLC -- has asked the judge to reconsider allowing his law firm to be paid before the government's cases against Nicholson conclude.
Richards has so far requested about $3 million. Half of that sum would go toward attorneys' billable hours, the remainder to a forensic accounting firm, along with other expenses. Westgate's estate, meanwhile, had about $10 million in U.S. Treasuries and cash on hand as of Sept. 30, according to court records.
U.S. District Judge Richard Berman has set a hearing date to discuss the fees.
Concern over receiver's fees comes as the Westgate case enters its ninth month and highlights an inherent conflict in receiverships of securities firms. Attorneys specializing in receiverships and alleged fraud cases can be expensive, so the more money they uncover, the more they are likely to charge.
"There's a lot of work to do with a receivership. It's not that simple," said Ernest Badway, a former Securities and Exchange Commission enforcement attorney. The Westgate receiver fees, Badway said, don't seem "really that out of the ordinary."
The receiver's fee applications are accompanied by lists of behind-the-scenes tasks the receiver's attorneys have performed: drafting letters, reviewing records, meeting with lawyers before court hearings and coordinating with attorneys for Nicholson, the federal government and investors.
"The lawyer's stock in trade is the lawyer's time," said Badway. "And the only way you can make money is if you bill your time."
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