Judge Questions Propriety of High Expenses From Blackjewel Attorneys, Professionals

Dec 4, 2019

An example of the itemized questioning by federal Judge Frank Volk of five group's expenses involved in the Blackjewel bankrutpcy
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The federal judge overseeing Blackjewel's bankruptcy is disputing the "propriety and necessity" of noticeably high fees from attorneys and professionals.

In a court filing yesterday, Judge Frank Volk questioned restaurant, travel, and lodging expenses from five firms totaling $73,583. That included three law offices, a financial services group, and a research firm. It accounted for about 30 percent of the total expenses racked up by the groups in only four months since Blackjewel filed to reorganize.

Squire Patton Boggs, the law office representing Blackjewel and related debtors, had two Jimmy Johns expenses nearing $400. The judge asked, "how many individuals were involved in this Jimmy Johns lunch?"

The same office had a $982.32 hotel bill. The judge asked, "was this hotel room for one night? Was it necessary to stay at the Westin?" Judge Volk asked the same thing of a hotel stay at the Marriott.

The law office representing unsecured creditors, Whiteford, Taylor & Preston LLP had a meal charge for $206.70. The judge simply wrote, "this is a large amount for a meal for three people."

After questioning all expenses, Judge Volk wrote, "the Court understands that expenses naturally occur during a bankruptcy case, especially during the pendency of a case as frantic and time-consuming as the above-captioned matter. However, it is the Court's duty to the Estate and Unsecured Creditors to question the propriety and necessity for some of these expenses."

Michael J. Roeschenthaler, an attorney with Whiteford, Taylor & Preston LLP, replied over the phone, "it's our intention to comply with the court's order and provide the explanation sought."

Clark Williams-Derry, energy finance analyst for the Institute of Energy Economics and Financial Analysis, said there's more to the story than just these expenses.

"Maybe the real outrage is that some of these highly paid professionals are earning more than $1,000 an hour when a lot of creditors just are waiting to get pennies on the dollar back for what they're owed," he said. "I'm sure that's a salary that a lot of the folks who didn't get paid would love to have."

When Blackjewel filed for Bankruptcy on July 1 of this year, the company involuntarily furloughed nearly 600 employees in Wyoming and about a thousand more at Appalachian mines. Many were left without paychecks for work done.

Williams-Derry said the expenses Judge Volk is disputing are not abnormal, but it does highlight a disconnect.

"It just goes to show you that the bankruptcy process is no longer a process that is protecting the little guy, that's protecting workers and retirees," he said. "It's really a process that's protecting investors and high fee professionals."

Squire Patton-Boggs did not respond in time for publish.

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.