Chicago City Council committee questions fees paid to bond counsel.

CHICAGO - The Chicago city council Finance Committee yesterday dealt with city payments to bond counsel amid concerns by some aldermen that the city pays too much in legal fees.

In the wake of questions raised by Alderman Robert Shaw about alleged overbilling by the law firm of Chapman & Cutler, another alderman proposed that the city disclose how bond counsel would be paid on a proposed $310 million airport revenue bond issue.

Alderman Lawrence Bloom added an amendment to the bond ordinance that would require the city to detail specify the lawyers who work on the issue, their hours, and their fees.

"We pay lawyers a lot of money, and the feeling is it's repetitive boiler-plate work. Now, obviously there are creative nuances on every bond deal. But whether it's worth a couple of hundred thousand dollars creates a lot of skepticism on the city council," Bloom said in an interview.

The ordinance with the amendment was passed by the committee. If the amendment is approved for the bond issue by the city council today, Bloom said that he may seek to extend the amendment to all city bond issues.

Deputy Chicago corporation counsel Susan Sher said that Bloom's amendment was "a laudable goal." However, she said, the amendment "is not necessary" and could "hamstring" the city's flexibility.

"I think we do a good job of monitoring fees and negotiating fees," Sher said.

Bloom introduced the amendment after a lengthy discussion of bond counsel fees by the committee.

Shaw, who began the discussion, threatened to hold up the airport bond issue if the city failed to answer his questions about bond counsel fees before the next Finance Committee in July. Specifically, Shaw requested that the city provide him with a list of bond counsel firms that worked on city deals so far in 1994, the numbers of hours they worked for the city, and the amount of money they were paid.

But at the request of Alderman Ed Burke, the chairman of the committee, Shaw agrees to let the ordinance pass with an agreement that the corporation counsel would provide Shaw with information before the council meeting today. If Shaw is not satisfied with the information, he has the option to hold up the bond issue at the council meeting.

Burke said if the committee waited to vote on the issue until the next meeting in July, then the city may not be able to issue the bonds for O'Hare International Airport this summer as planned. Morgan Stanley & Co. would be senior manager on the deal. Katten, Muchin & Zavis would be bond counsel.

Shaw said that an article in the Wall Street Journal led him to question city payments to bond counsel. The article said that Chapman & Cutler partner James E. Spiotto charged his clients for 6,022 hours of work last year, or $2.3 million, which is double the hours billed by an attorney at a typical large law firm.

Though article did not name any of Spiotto's clients, Shaw said the city should investigate whether the firm overbilled the city.

In a statement released yesterday, Chapman & Cutler said that "Jim Spiotto did not bill clients for 6,022 hours in 1993, and he did not work at all for the city of Chicago last year. And hours that Mr. Spiotto did work and bill last year were, as always, entirely appropriate."

The city has paid Chapman & Cutler $809,000 since 198, Burke said.

In response to questions by Shaw and other aldermen, Sher said that the city's corporation counsel decides how bond counsel are paid and selected.

The corporation counsel negotiates fees with bond counsel on a per bond basis, taking into account many factors, including the complexity of a transaction, tax matters, time spent by lawyers on a deal, and the size of a bond deal, Sher said.

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