Legal fees excessive, U.S. Foodservice says

June 24, 2006|By BLOOMBERG NEWS

WILMINGTON, Del. -- U.S. Foodservice, the food-distributing unit of Royal Ahold NV, says lawyers for two former company executives charged in a criminal case are charging too much and a judge should intervene.

Columbia, Md.-based U.S. Foodservice is paying the legal fees of Michael J. Resnick, a former chief financial officer, and Mark Kaiser, a former chief marketing officer. The pair were indicted in July 2004, accused by the U.S. government of falsifying rebates that the company received from suppliers to inflate reported profits and increase their bonuses.

U.S. Foodservice, required by its bylaws to represent the former employees, sued them in Delaware, saying they have failed to justify the fees billed by their law firms.

"The number of attorneys and firms involved has raised one of many concerns for USF," the June 22 complaint says. It also says, "USF has been concerned that the legal fees and expenses sought as advancements by Mr. Resnick have been excessive and unreasonable."

The company asked the Delaware court to limit its future liability for each man to $2 million. It has paid more than $11 million so far, it said.

Prosecutors in the New York criminal case say U.S. Foodservice overstated earnings by about $800 million from 2000 to 2003.

The company distributes food to restaurants and other food-service establishments.

More than a dozen food vendors have pleaded guilty in the case, admitting that they submitted false verifications of purchase orders.

Several U.S. Foodservice executives, including purchasing executive Timothy Lee, also have pleaded guilty.

Resnick and Kaiser are to go on trial in October.

Resnick has submitted bills from several law firms totaling $8.5 million, and Amsterdam-based Ahold has paid $7.08 million, the complaint said. From January 2005, Resnick's current firm, Dechert LLP in Philadelphia, submitted bills totaling $6.7 million.

From July 2005 to May 2006, Kaiser submitted invoices from his law firm, Chicago's Mayer, Brown, Rowe & Maw, for $2.27 million, the company said. Ahold paid $1.42 million.

Ahold paid Kaiser's previous firm, Washington's Crowell & Moring, $2.57 million, the complaint said.

U.S. Foodservice claims the firms' invoices don't adequately explain what legal work they did. Instead, the bills used terms such as "document review" and "issue analysis" and time allotments of as long as 10 hours.

The company said one freelance attorney hired by Dechert billed for "document review" 12 to 14 hours nearly every day for 182 days, including seven hours on each of four holidays in that period.

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