When Chief U.S. District Judge Federico Moreno first read the final fee request for the Mutual Benefits fraud receivership, he thought lawyers were seeking $1.1 million, not $11 million.
Then he realized there was no decimal point, the judge recounted Thursday at a hearing in Miami.
“I needed a defibrillator,” he joked. “We’re talking about a lot of money.”
It is up to Moreno to resolve a simmering dispute over how richly to compensate lawyers for five years of work on one of the largest scams in South Florida history.
Roberto Martinez, the court-appointed receiver, is seeking the $11 million bonus to split between his law firm, Colson Hicks Eidson, and primary counsel Kozyak Tropin & Throckmorton. To date, the two Coral Gables, Fla., firms have jointly collected about $4 million.
Moreno did not say when he would rule on the request.
Robert Levenson, regional trial counsel for the Securities and Exchange Commission, argued against any fee enhancement, saying it would reduce payments to bilked investors and award lawyers a windfall equivalent to more than $800 per hour.
Receivers should be viewed as public servants and be paid moderately in fairness to victims, he said.
“The investors are only going to recover a fraction of their losses,” Levenson said. “These aren’t corporate, market-rate clients.”
In his fee request, Martinez, a former Miami U.S. Attorney, acknowledged an “inherent tension” between maximizing the payout to victims and compensating professionals for their work on the case.
He said awarding the bonus would barely dent the investors’ recovery, decreasing payments by 1 percent to 4 percent. Without his team’s work, there would be far less to distribute.
“We stepped in, and we preserved assets that could have dissipated,” Martinez said.
Fort Lauderdale-based Mutual Benefits traded in viatical settlements, acquiring life insurance policies from elderly and terminally ill people and selling shares of their death benefits to investors. In 2004, the SEC accused firm leaders of operating a massive Ponzi scheme, and a federal judge turned over operations to Martinez.
At the time, the company was administering 7,000-plus insurance policies worth more than $1.5 billion for 30,000 investors around the world, making it a complex case to unravel for law enforcement and the receiver.
The investigation spawned numerous criminal prosecutions, including a case against four Mutual Benefits principals set for trial in 2011.