A prominent Baltimore law firm is being accused of systematically padding its legal bills -- and that could cost it tens of millions of dollars.
Weinberg and Green, which specializes in complex commercial litigation and is Maryland's eighth-largest law firm, is being sued for $70 million by a savings bank that claims it wasn't getting an honest hour's work for $200 an hour.
The 77-year-old Charles Street firm, which prides itself on its squeaky-clean image, is at the center of an often ugly and bitter trial in its third week in Montgomery County.
It's been "a soul-wrenching process," Weinberg and Green former executive director Robert M. Howse testified about the firm's anguish over having to reveal the overbilling.
The trial has pitted lawyers against lawyers -- in other than the standard way. Called to testify, attorneys from the firm and those grilling them have engaged in heated, sometimes caustic exchanges.
In court, former employees of Weinberg and Green have admitted that they set up a computer program that automatically billed Fairfax Savings Bank for work that never was done.
But the law firm contends the fraudulent billing -- committed between 1984 and 1987 -- was orchestrated without permission by one of its former partners, Stanford D. Hess, who abruptly left Weinberg and Green after admitting that he padded the bills.
The overbilling has become one of the central points in the suit, in which Fairfax alleges that the law firm not only overbilled but cost the thrift millions because of incompetence and unscrupulous practices.
Fairfax was one of the law firm's biggest clients and had been promised a 15 percent discount on all legal fees. But Mr. Hess, who handled the account, inflated the billable hours to make the discount moot, according to depositions and testimony.
"The bottom line was still the standard fee," said Mr. Hess, a former Maryland assistant attorney general. He said that Howard Miller, then Weinberg's managing partner, ordered that a
computer program be set up to expedite the overbilling. Mr. Miller testified he knew nothing of the practice.
Mr. Hess said in court yesterday that Fairfax's chief executive officer, Malcolm Berman, invited him to Sabatino's restaurant in December and offered him a $1 million bribe "if I changed my testimony and agreed with his version of the facts."
He said Mr. Berman -- who at one time was a close friend of Mr. Hess -- also promised him that "he would help me if the bar association wanted to do something about all of this . . . he said when he sold the bank he would give me $1 million."
Mr. Berman denied making such a claim.
Such notables as John T. Willis, Maryland's secretary of state, have come from Weinberg and Green. Several former attorneys general work or have worked for the firm.
Extent of scheme unknown
"I would like to think overbilling doesn't happen very often," said James L. Shea, the managing partner of Venable, Baetjer & Howard. "The overwhelming majority of lawyers are meticulous about billing their clients fairly."
Attorneys for Fairfax say they haven't determined the full extent of the billing fraud scheme. The law firm refunded $110,000 in overbilled fees to Fairfax, but more may have been overcharged, sources said.
"The means used by Weinberg and Green to systematically overbill Fairfax . . . resulted in grossly inflated bills by Weinberg and Green that did not reflect the work actually performed by the firm," the lawsuit said. "The billing fraud documents also show that other clients of Weinberg and Green may have been similarly defrauded."
Officials at Weinberg and Green refused to speak to a reporter about the case.
But in courtroom testimony, past and present partners at the law firm said the Fairfax overbilling was an isolated case and that Mr. Hess acted on his own.
"[Mr. Hess] was naive and stupid about this and ill-advised," said Mr. Howse, the former executive director who went to a bigger law practice. "There was never any suggestion that he had done anything in his own mind that was wrong."
Mr. Howse said the firm discovered the overbilling in the late 1980s and went through months of agonizing decisions over how to break the news to Mr. Berman, Fairfax's chief executive
"There were partners who said it's not illegal or unethical and it doesn't have to be paid back. There were others who said it should be paid back regardless of whether it's legal or not, and there were others who said it was illegal and has to be paid back," Mr. Howse said.
No criminal actions taken
While overbilling of a client represents fraud, no criminal actions have been taken against Mr. Hess or any other member of Weinberg and Green.
Christopher J. Romano, chief of criminal investigations for the state attorney general's office, said no one has filed a complaint alleging criminal activity in the overbilling case.
At the federal level, fraud carries a five-year statute of limitations, which has run out, said First Assistant U.S. Attorney Gary P. Jordan.
And Melvin Hirshman, bar counsel for the state's Attorney Grievance Commission, said no complaints have been received by his office, either. If public charges were brought by the grievance commission, a lawyer could face a reprimand, suspension or disbarment, he said.
"We get complaints about attorney fees with some regularity from the 2,000 complaints we receive each year," Mr. Hirshman said. "Usually they're people who call us and say, 'I was with my lawyer for a half-hour and I got billed for two hours.' "
He said that the grievance commission brings charges against individual lawyers and not entire firms. "A firm doesn't really exist. If some action is taken, it's taken against the individual lawyers," he said.
The most notorious overcharging lawyer in recent years was Annapolis attorney Edward S. Digges Jr., a product liability specialist who in 1990 was sentenced to 30 months in prison for overbilling his clients millions of dollars.
The Weinberg and Green case is unique in that it involves a firm. A key issue in the trial is whether the managing partners of the firm knew of the overbilling or if it was simply the work of a single lawyer.
Julia Hedges, a former accounts clerk with Weinberg and Green, testified that she was asked to set up a spreadsheet program to jack up Fairfax's billing.