Lawyers Seek Denial of $48-Million Bonus

County lawyers on Thursday pleaded with a federal judge to deny a $48-million bonus sought by the law firm that represented Orange County and a pool of public investors in its historic bankruptcy litigations.

Hennigan, Mercer & Bennett recovered $865 million in settlements from Wall Street firms such as Merrill Lynch & Co. and others accused of helping cause the bankruptcy in 1994.

“They recovered a lot of money,” admitted Assistant County Counsel Thomas C. Agin. But “they were hired to recover a lot of money and they were paid the highest rate, not bargain-basement rates.”

The firm has received $26 million in hourly fees for its services, but it argues it deserves a retroactive enhancement of those fees because it performed beyond expectations.

“What we are asking here today is judge us on the totality of our performance,” J. Michael Hennigan said.

If the request for additional money is granted, it would bring the total legal fees paid to $74 million--or about 8.5% of the amount the county has collected in settlements with firms it accused of helping cause the bankruptcy.

Any additional fees to lawyers would be subtracted from money being returned to government agencies that lost funds with the financial collapse.

At the center of the dispute is a vaguely worded contract signed by former state Treasurer Thomas W. Hayes, the court-appointed representative for the county and other investors involved in the litigations. Hayes signed a contract in July of 1996 with Hennigan, Mercer & Bennett that calls for an adjustment of the hourly fees once the case is over.

Hayes, speaking through his attorney Gerald McMahon, on Thursday maintained he reserved the sole discretion to accept or refuse any fee adjustments. . The law firm argued his refusal to adjust the fees was a breach of the contract.

Agin added that even if Hayes had agreed to retroactively adjust the compensation, that would be illegal. Payments for government contracts cannot be adjusted after services are delivered lest they be considered gift of public property, he said.

“This just a cute way to circumvent” the law, Agin said.