Hevesi’s Letter

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The New York Sun

In a letter to the editor published on this page today, an aide to State Comptroller Alan Hevesi responds to our editorials of last week on Mr. Hevesi’s role in wresting a $2.65 billion settlement from Citigroup. It’s an illuminating letter. The letter doesn’t dispute our accounting, that two law firms and individuals and committees with ties to them poured a total of $121,800 into Mr. Hevesi’s campaign coffers in the year before an aide to Mr. Hevesi signed a retainer agreement with the law firms under which the two firms stand to share a $144.5 million legal fee for a case that didn’t even go to trial. The letter doesn’t dispute that Mr. Hevesi attended a campaign fund-raising event in the Philadelphia headquarters of one of the firms. The letter doesn’t dispute that the settlement cost city and state retirees $45 million in lost value in the Citigroup stock held by public pension funds. And the letter concedes that the fees for the lawyers are agreed to not by Mr. Hevesi’s “government staff” but by Mr. Hevesi himself, rendering irrelevant the letter’s claim that “his government staff does not know who gave to his campaign.” It’s hard to believe that while setting these legal fees, Mr. Hevesi “does not know” that he attended a fund-raiser in the law firm’s office.

The letter from Mr. Hevesi’s office claims credit for reducing the fees paid to class-action lawyers. He sounds like a used car salesman trying to pass off a used lime-green Oldsmobile with snakeskin upholstery — “Price tag reduced to $150,000 from $500,000!” But $150,000 is still too much to pay for a used Oldsmobile, even one with snakeskin upholstery. The number to focus on is not the reduction in the fee, but the fee itself, which even after the reduction is still exorbitant.

In the Cendant case, Mr. Hevesi began pushing for the fee reduction while he was still the city comptroller — long before he received the $121,800 in campaign contributions, which were for his race for state comptroller. And the $55 million legal fee that resulted — split between two law firms that today, according to their Web sites, have a total of 57 lawyers among them — is a lot of money for a case that never went to trial. As is the $144.5 million fee that a longtime aide to Mr. Hevesi has agreed was “presumptively fair, adequate and reasonable” for the Citigroup settlement. Even assuming that all 57 lawyers at these firms were working full time for a year on only the Citigroup matter — which isn’t true, since both firms have other matters under way — it works out to more than $2.5 million for each lawyer. Mr. Hevesi’s letter defends this as “among the lowest fees ever in securities class action suits,” but that says more about the problems with securities class action suits than it does about Mr. Hevesi. And if Mr. Hevesi wants to emerge as the spokesmen for the merits of paying lawyers working for the state of New York $2.5 million a year, he’d have a lot more credibility if he hadn’t raised all that campaign cash at the law firm’s Philadelphia headquarters. Mr. Hevesi’s letter complains about “corporate corruption scandals.” The point we’ve been making — and that we will continue to press, notwithstanding the comptroller’s invective — is that the scandal here isn’t all on the corporate side.


The New York Sun

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