Bar pursues attorneys for overbilling

by Nancy McCarthy
Staff Writer

In what is perhaps a new trend in the world of attorney discipline, State Bar prosecutors are pursuing four overbilling cases and seeking the disbarment of two attorneys.

"These are very serious cases because, for the most part, they are misrepresentations to the client," says Andrea Wachter, the bar attorney handling the matters. "It is difficult for clients to even be aware that itís happening."

Overbilling can take various forms, Wachter explained, and can lead to charges of dishonesty and moral turpitude. In some cases, it amounts to outright fraud when a client is charged for work that is not done. In other cases, bills are mischaracterized.

The bottom line in all cases is that clients are misled.

The case which has gone the farthest is that of Jerome Berg, a San Francisco attorney who faces disbarment for repeated fraudulent billing of an insurance company. Berg was accused of overbilling The Dentists Insurance Co. (TDIC) by more than $250,000 while he served as cumis counsel for four of its insureds in 41 separate malpractice cases. Cumis counsel handle cases in which there is a potential conflict of interest between an insurer and its insured.

A San Francisco Superior Court jury, finding that Berg acted with oppression, malice and fraud, awarded more than $282,000 to TDIC when it sued Berg for fraud. The Court of Appeal affirmed the judgment and the California and U.S. Supreme Courts denied review.

According to the bar charges, Berg regularly billed TDIC for work before it was performed. In a ruling by the State Bar Courtís review department, Judge James Obrien wrote that Berg claimed many times to have worked more than 24 hours a day and in some cases more than 100 hours a day.

An audit of Bergís bills by TDIC determined that the company had overpaid him by about $250,000.

Berg "has shown no remorse and has continuously asserted the propriety of his conduct even though it has been determined to have been fraudulent," Obrien wrote.

Berg, who has been on involuntary inactive status with the bar since September 1996, has filed for reconsideration by the review department.

A second case, filed against John Rex Hardie of Danville, accuses him of dishonesty, moral turpitude and charging unconscionable fees. The bar is seeking his disbarment.

Hardieís firm, which is no longer in business, was convicted of 24 counts of mail fraud in U.S. District Court in the Eastern District. The firm had 33 attorneys and offices in Stockton, San Jose and Salinas.

In the mid-1980s, it represented insurance companies and stated in a letter to them that it charged $75 an hour for attorney fees, and did not charge for other add-ons common in legal profession, such as file control and special charges for paralegal work. It later increased the hourly rate to $85.

From 1986-1989, the bar charges, Hardie gave the firmís billing clerk a chart which outlined how much actual hours billed should be increased.

For instance, two-tenths of an hour was converted to three-tenths, eight-tenths increased to a full hour, and nine-tenths increased to 1.2 hours.

Secretarial time was billed at the same rate as attorney time, and contrary to statements made in the original letter to clients, paralegal hours also were charged. Those hours were inflated as well.

Then the billing clerk was instructed to add 15 percent of the total bill as a charge for costs.

In this way, Wachter said, the firm overbilled by more than $1 million between May 1988 and August 1989.

Neither clients nor associates at the firm were aware of the hidden charges, she said.

Hardieís partner, Stuart Crymes, reached an agreement with the bar in July under which he will receive an actual 60-day suspension, a two-year stayed suspension and two years of probation. The recommendation is pending before the Supreme Court, which orders all attorney discipline.

Wachter said that although Hardie and Crymes were the two shareholders in the firm, the bar could not establish that Crymes had actual knowledge of the overbilling scheme.

Under the federal conviction, both Crymes and Hardie agreed to make some restitution to their clients.

Wachter could not provide specifics about two cases still in the investigative stage.

However, she said one firm is being investigated for submitting bills which mischaracterized some activities.

Another case involves false billing by an attorney for work he may or may not have done. The attorney submitted timesheets prepared by a paralegal and misrepresented his hours.