Lofty legal fees: untangling Ohio State’s spending on outside counsel

Jerrod Mogan
Thu, 18 Apr 2019 01:59:46 +0000
Campus, News, attorney, attorney general, battle, controlling board, court, court battle, featured, fees, funding, law, lawyer, legal battle, legal fees, legislative, ohio state, ohio state office of legal affairs, ohio state spending, ohio state university, richard strauss, Strauss, the ohio state university

[author image=”/files/2018/11/IMG_9713-2120cyo.jpg” ]Jerrod Mogan produced this story in his role as John R. Oller Special Projects Editor.[/author] After Ohio State fired marching band director Jonathan Waters in 2014, a legal battle ensued that would last three years. It cost the university nearly $1.6 million in legal fees. In 2018, the school hired the Debevoise & […]

[author image=”/files/2018/11/IMG_9713-2120cyo.jpg” ]Jerrod Mogan produced this story in his role as John R. Oller Special Projects Editor.[/author]

Ohio State outspends other state colleges on special counsel by a large margin. Credit: Casey Cascaldo | Photo Editor

After Ohio State fired marching band director Jonathan Waters in 2014, a legal battle ensued that would last three years.

It cost the university nearly $1.6 million in legal fees.

In 2018, the school hired the Debevoise & Plimpton, LLP, law firm to investigate how domestic violence accusations against Ohio State assistant football coach Zach Smith were handled by head coach Urban Meyer and others.

It lasted just two weeks. Debevoise & Plimpton collected $1 million.

So far, Ohio State has paid three different law firms more than $1.5 million to handle ongoing lawsuits and an investigation into sexual assault allegations against former Ohio State doctor Richard Strauss.

As legal fees pile up, questions as to how much the university spends on legal work — and whether it’s wisely spent — are largely unanswered. Though the state attorney general is responsible for providing legal representation and Ohio State employs more than 60 legal professionals, the university spends millions each year on outside legal counsel.

Contracts with outside counsel are just one piece of Ohio State’s total legal spending, but the university could not provide a complete accounting of its annual spending on legal matters.

A Lantern analysis of spending authority awarded to Ohio universities by state officials in the past 14 years shows Ohio State could have spent more than $119 million on private law firms. That amount is four times higher than what officials awarded any other Ohio university in the same time frame.

Source: Controlling Board. Actuals provided by Ohio State. Graph by Jack Westerheide | Managing Editor for Design

Records provided by Ohio State officials show the university actually spent a little more than half that amount on law firms — $63 million.

Even that amount is still twice as high as the authorized maximum a state board approved for any other university over the past 14 years.

University officials contend that direct comparisons cannot be made between Ohio State and other state universities.

Ohio State spokesman Ben Johnson said spending on special counsel is a wise investment to protect the university, which has an annual operating budget of $7.2 billion.

“There is risk involved, great risk for institutions who run afoul of state and federal law,” he said.

However, when it comes to determining what is a fair rate for adequate legal service, there is no set standard.

One state lawmaker, Sen. Bill Coley, R-West Chester, favors creating a system that would objectively score law firms based on their performance handling different legal issues to ensure taxpayer money is not being wasted.

“Let’s create a way to keep track of the performance of different law firms,” Coley said.

The Ohio attorney general is ultimately responsible for appointing private law firms to work for all state agencies, including universities. However, a review of records shows that, within the past five years, the attorney general seldom refuses to hire a law firm Ohio State wants.

Since 2006, Ohio State received waivers to spend more than $61 million with just seven firms. The specific work they do is largely unknown and not publicly available.

Large contracts, budgets and actual spending

For the entire state, the Ohio Controlling Board has authorized $416 million in spending on outside legal counsel for all state agencies, including universities. The largest chunk of that — nearly 30 percent — went to Ohio State.

Because legal contracts are not competitively bid on, when spending with a single firm might exceed $50,000, a waiver must be approved by the Controlling Board.

Ohio’s 14 public universities received most of the approved spending, about $260 million. Nearly half of that went to Ohio State, though the university represents about 21 percent of total student enrollment.

After sharing the Controlling Board findings with Ohio State officials, the university provided its actual special counsel budget and spending numbers. The budgeted amounts are less than Controlling Board-approved maximums, but include contracts that do not require waivers.

Less than a week later, the university produced a new set of numbers, which reported different figures and an additional $1.8 million in spending.

The second report shows Ohio State spent $59.7 million on special counsel from 2006 to 2018: about 53 percent of its $112.6 million budget. Spending in a single year never exceeded its budget, and ranged from $2.5 million to $6.1 million.

However, the total budget is not determined in advance and increases whenever a new firm is appointed or a legal matter requires additional work, Coley said. He personally has received state legal contracts in the past. Since 2006, budgets ranged from $5.5 million to $12 million.

The average initial budget provided to law firms upon appointment was roughly $42,500 in the past five years. The average budget law firms ended up with was almost double that amount.

Ohio State’s actual spending amount is more than double any other Ohio university’s maximum approved spending from the Controlling Board. However, the Controlling Board numbers do not reflect all contracts an agency can have.

In the past five years, the university has contracted with outside counsel 517 times, and 118 times in the past 10 months.

A Wise Investment

Ohio State spends disproportionately more than other Ohio colleges because it is one of the most complex and far-reaching institutions in the state, Ohio State spokesman Ben Johnson said.

“None of [Ohio’s other public colleges] literally have an office in every county,” he said, “and agricultural research sites around the state and an airport and a radio and TV station and a medical center.”

Specifically, the Wexner Medical Center — which accounts for about half of the school’s $7.2 billion budget — generates legal work that schools without a medical center such as the University of Cincinnati don’t deal with, Johnson said.

Most of Ohio State’s spending on special counsel is not for litigation, Johnson said, but is spent proactively to protect assets and ensure the university remains in compliance with the numerous regulations that apply.

“Duke [University] agreed to a $112.5 million settlement because of research misconduct. In 2015, [The University of] Florida agreed to a nearly $20 million settlement,” he said. “So, it’s important that in all of these very specific areas around the university, we are adhering to [the law].”

Duke was accused of falsifying data to earn roughly $200 million in federal research grants. Florida was accused of diverting research grant money to pay unapproved salaries and inflated expenses.

When considering what the university is protecting, spending on special counsel is a modest and controlled expense with a great return on investment, Johnson said.

“It’s a very reasonable amount when viewed in the context of a $7.2 billion budget,” he said. “And it’s not increasing. It’s a consistent number and an important part of the business that we do here at the university.”

Scoring Law Firms

Accusations that the special counsel selection process was not operating in the best interests of taxpayer dollars have been made against several attorneys general, Coley said.

In 2017, Coley — who served on the Controlling Board for seven years — was critical of the lack of information the attorney general provided the board when requesting waivers for special counsel contracts. He said the lack of transparency in the process opened the door for accusations of favoritism that weren’t warranted.

“Every time [the attorney general] went to hire an outside law firm, people … questioned whether that was being done as a result of some political thing, or whether or not that was the result of a true business need,” he said.

Coley proposed a technological solution to the problem, which Gov. Mike DeWine — attorney general at the time — accepted

Source: Controlling Board. Actuals provided by Ohio State. Graph by Jack Westerheide | Managing Editor for Design

and implemented, he said.

“[The Controlling Board] made sure the attorney general bought computer systems that had really good analytical programs in them,” Coley said, “so that you could compare the work of one law firm to the work of another law firm.”

The ultimate purpose behind the data gathering, which Coley said is at least partially built and in use, is to track and score the performances of law firms and make sure state agencies are getting the most out of their special counsel spending.

“[Attorney General Dave Yost] is working on a robust system of scoring … His director of special counsel is going to really build on work that Gov. DeWine’s people started,” he said.

Dominic Binkley, a public information officer at the attorney general’s office, said there is an analytics system in development at the office to track and score law firms, but only those selected to collect debt on behalf of the state. There is no current or planned system to track law firms that perform any other type of work, he said.

“The [attorney general’s office] in concert with the client determines if the legal work performed meets expectations of competence, timeliness and value,” Binkley said.

Coley said the system would score all types of legal work, including “more complex litigation.”

“It’s not something that you can just throw together in a couple of hours,” he said. “But it’s something that you can develop over time into a really, really effective monitoring tool.”

The Selection Process

For complicated legal matters, the attorney general has the authority to appoint private attorneys to assist state agencies, Binkley said.

The process begins with the submission of a special counsel request form to the Office of Outside Counsel where a state agency provides its “justification for why they believe they need special counsel as opposed to existing attorney general resources,” Binkley said.

Originally, Binkley said these forms “must” be submitted. Upon the completion of a records request, however, he said the forms are submitted only “when practicable” and requests can be made verbally “due to the urgency of the matter or in the interest of efficiency.”

Justification is still provided in those instances, Binkley said. However, there is no documentation of the reason for those requests. More than a third of Ohio State’s new appointments since 2015 were completed without a written request. In 2019, only 17 percent include the form.

The office then works with the requesting agency to determine if outside counsel is necessary or if the matter can be handled with existing resources. In the past five years, the office determined that attorney general resources alone were insufficient in every documented request made by Ohio State.

The office also works with the agency to identify which law firm is suited to perform the legal work. Typically, the office selects from a list of private law firms that approached the attorney general’s office with an interest in securing state contracts, according to Coley.

The office uses specific criteria to determine which firm to select, Binkley said.

“The attorney general’s office takes into account the firm’s expertise in the given area of law, geographical proximity to the work being performed, experience of attorneys performing the work, past history with these firms with regard to competent representation, capacity to perform the work under deadline, and ability to clear a conflict check,” Binkley said.

On more than a third of requests, Ohio State explicitly recommended the firm they preferred.

The recommended firm was appointed 96 percent of the time.

Once a firm is selected, it receives an appointment letter outlining the budget and hourly compensation it will earn for its work. Compensation for legal work involving bonds, immigration and patents are subject to a fee schedule. No other legal work has any standard pay scale.

Appointments can last for up to one year, but then must be renewed by the attorney general if the contract is still necessary. Nearly three-quarters of Ohio State’s contracts since 2015 have been renewed.

Once outside counsel is appointed, Ohio State’s Office of Legal Affairs oversees the day-to-day work being performed.

“Our in-house attorneys are in all of those meetings, they’re on all of those email chains, they’re an active part of that,” Johnson said.

The involvement of the attorney general’s office, state Controlling Board, and Ohio State’s own attorneys guarantee the university is getting the best deal, Johnson said.

“People can rest assured that the process is efficient as possible and that we’re getting good bang for our buck,” Johnson said.

Who Gets Paid?

The Controlling Board has approved waivers for 68 firms to represent Ohio State since 2006, but more than half of the approved spending has gone to just seven. Each of those firms received at least $5 million in Controlling Board waivers.

When requesting information regarding Ohio State’s legal spending, the university indicated that it could provide an annual figure related only to its spending on special counsel, but that figure would “not include information about specific issues, cases or firms.”

Nearly all of the documentation that would show what these firms specifically do for Ohio State is protected by attorney-client privilege, according to Johnson.

While board approvals represent the maximum amount that can be spent with a firm and not what is actually spent, they can provide a glimpse into Ohio State’s preferred legal partners.

Vorys, Sater, Seymour and Pease had the highest authorized spending amount from Ohio State since 2006, nearly $15 million. The firm has performed a wide range of legal services for Ohio State, from providing investment and privacy advice to defending the university in a 2017 class-action lawsuit brought by Chris Spielman.

Of the 13 times Ohio State has received authorizations totaling more than $1 million since 2006, six of those have gone to Vorys, Sater, Seymour and Pease.

Kristin L. Watt, a partner in the Vorys Columbus office, serves as a nonvoting member of the Ohio State Board of Trustees.

Porter, Wright, Morris & Arthur LLP, which is providing the university with legal counsel in the Richard Strauss investigation, has been authorized to earn $10.6 million from Ohio State since 2006.

Hogan Lovells, based in Washington D.C., is paid an average hourly rate of $675 by Ohio State, according to appointment letters, and has received $9.5 million in waivers since 2006. Some of its work includes providing advice on cybersecurity and federal research grants to Ohio State, according to request forms.

Ohio-based Calfee, Halter & Griswold LLP has received $9.2 million in waivers since 2006.

Ohio State has been authorized to spend $6.1 million with Jones Day since 2006 for advice related to Medicare and Medicaid and other legal work.

Elizabeth P. Kessler, partner-in-charge of Jones Day’s Columbus office, was appointed to the Ohio State Board of Trustees in 2018. The firm has not received work from Ohio State since Kessler’s appointment, reflecting how seriously the university takes potential conflicts of interest, Johnson said.

After receiving $6 million in waivers — including two more than $1 million in 2012 and 2013 — MacMillan, Sobanski & Todd LLC has not received any waivers to represent Ohio State since 2014. The Toledo-based firm, which specializes in intellectual property law, still receives work from Ohio University and the University of Toledo.

Kegler Brown Hill + Ritter, based in Columbus, has not received waivers to represent Ohio State in since 2015. Before that, Ohio State was authorized to spend $5.1 million with the firm.

Considering these firms work under increased scrutiny and at discounted rates when operating under a state contract, The Lantern wanted to ask what was in it for them. However, none of the seven law firms mentioned in this article responded to our requests for an interview or comment.

(How the analysis was done)

Maximum approved spending numbers for Ohio’s state agencies and private law firms were calculated using data from State Controlling Board 59 bulk approvals of 2,807 “competitive selection” waivers for special counsel appointments since FY2006. To calculate spending per student, maximum numbers from each year were divided by the head count of the institution for that year according to “Headcount Enrollment by Institution” numbers contained in reports from the Ohio Department of Higher Education, and then averaged. Ohio State’s “actual spending” per student was calculated the same way using figures provided by the university. Hourly rates were calculated from special counsel assignment letters provided by the attorney general’s office, which consisted of all new appointments made since March 2014, according to the attorney general’s office.