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Judge has concerns with Freedom’s legal fees

By David Gutman, Staff writer

The nearly $2 million in fees billed to Freedom Industries by its coterie of lawyers, advisors and consultants has a federal bankruptcy judge worried about the company’s ability to clean up and tear down its Elk River tank farm.

“The Court has received and reviewed fee applications over the past few weeks that raise concerns with respect to the resources available to accomplish environmental remediation and wind down operations of the estate,” U.S. Bankruptcy Judge Ronald Pearson wrote in an order filed Friday.

Freedom Industries, the company whose leaky chemical tank contaminated much of the Kanawha Valley’s tap water in January, has filed for bankruptcy and will cease to exist as a business once it tears down the tank farm and winds up its affairs. A number of the company’s former executives started a new chemical company, Lexycon LLC, last month.

Pearson asked that Mark Welch, Freedom’s lead financial adviser, prepare a report detailing major categories of the company’s receipts and expenses from Jan. 17, the date it filed for bankruptcy, through April 30.

There are five law firms on Freedom’s payroll, including one that represents the committee of unsecured creditors that Freedom owes money to. Freedom also has a special environmental consultant and a financial advisor. Those seven firms charged Freedom more than $1.8 million for work performed through March 31.

Pearson requested a forecast of the company’s legal fees for April, May, June and July.

He also asked each firm to provide more information about their fees, including the professional credentials of anybody who worked on Freedom’s case.

“It is requested that persons or timekeepers be identified as partners, associates, paralegals, professional engineers or environmental specialists,” Pearson wrote.

None of the fees billed to Freedom will be paid unless Pearson approves them. The judge will consider the various fee applications at a hearing in U.S. Bankruptcy Court on May 13.

Also last week, Freedom asked the bankruptcy court for permission to hire another consultant. Freedom wants to hire Rust Consulting Omni Bankruptcy to help it carry out an administrative claims process for those affected by the chemical leak.

The company has been named in more than 60 lawsuits, most of them class action suits, which are mostly on hold during bankruptcy and may never come to fruition. The company and its creditors have been working to develop an administrative claims process, through which any compensation will likely be paid.

Rust Omni, a firm based in Los Angeles and New York, was chosen from among five candidates as the best company to administer that claims process, according to court filings.

The company will handle the claims process, including receiving and reviewing claims and maintaining records.

Rust Omni gave Freedom a 20 percent discount on its normal fees, according to court filings, and will charge anywhere from $20 per hour for clerical work up to $140 per hour for senior consultants. It’s fees will rise no more than 10 percent per year.

Also last week, Freedom submitted a request to extend, through May 2015, its contract with its health insurance provider.

Reach David Gutman at david.gutman@wvgazette.com or 304-348-5119.


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