Audit of Legal Fees Paid to Lathrop & Gage L.C.

(Audit Report No. 98-076, August 31, 1998)

The Office of Inspector General (OIG) completed an audit of Lathrop & Gage L.C., a law firm hired to provide legal services to the FDIC. The audit was conducted by the independent public accounting firm of Mir Fox & Rodriquez, P.C., and covered billings paid by FDIC during the period of September 1, 1996 through September 30, 1997.

The objective of the audit was to determine whether the firm's legal bills were fair and reasonable, adequately supported, and consistent with the terms and conditions of the governing agreements. The total paid to the law firm during the audit period was $1,176,916. Except for $2,038 discussed below, the audit concluded that the firm's fees and expenses were generally fair and reasonable, adequately supported, and complied with the terms of the governing agreements.

After considering management's comments to the draft report, the OIG recommended that the Assistant General Counsel, Legal Operations Section, Legal Division, disallow a total of $2,038 related to excessive hourly rates billed during travel, unauthorized hourly rates, unsupported time entries and unsupported facsimile charges.

The General Counsel provided a written response dated July 21, 1998 to the draft report. The Legal Division has determined that it will disallow and demand reimbursement of fees and expenses totaling $2,038. The Legal Division expects to complete the collection process within 90 days from the issuance of the final audit report by the OIG.

After considering management's response to the draft report, we will report questioned costs of $2,038 in our Semiannual Report to the Congress.