$1 million in legal costs tallied for Pittsburgh firm

A state authority spent nearly $1 million on legal bills while overseeing Pittsburgh's finances and looking for ways to cut city spending.

Almost all of the Intergovernmental Cooperation Authority's legal expenses since 2004 came from the Downtown-based law office of Reed Smith, which on average charged it about $500 a hour this year and last. That is significantly higher than what lawyers at law firm Eckert Seamans billed to run the state-appointed Act 47 recovery team, the city's other financial watchdog.

Since 2004, the five-member authority has received $4.38 million from state taxpayers to prod city officials to reduce expenses, avoid budget deficits and improve its tax structure. About $969,000 of that went to Reed Smith, the firm of the authority's politically active general counsel, Glenn Mahone.

"I wish we had that money for paving roads," said Mayor Luke Ravenstahl, who has challenged the necessity and effectiveness of the authority. "It could be used for much better things than legal fees. This shows it costs taxpayers too much."

City Democrats, particularly members of City Council, have long viewed the authority as a tool for suburban Republican legislators to meddle in the affairs of the city, where registered Democrats outnumber Republicans by a 5-to-1 margin.

Lawyers at Reed Smith's offices in Pittsburgh and Philadelphia tend to favor Republicans with campaign contributions. In last year's gubernatorial election, Reed Smith attorneys collectively donated $97,000 to Republican Tom Corbett's campaign, but only $1,500 to Democratic Allegheny County Executive Dan Onorato's failed campaign, according to state campaign finance records.

Mahone provided the Tribune-Review with a spreadsheet showing he billed at hourly rates ranging from $382 to $566. Reasons for charges were vague, with notations such as "City of Pittsburgh Oversight" and "Act 47 plan litigation."

Mahone declined to comment.

Mahone, a Fox Chapel Democrat who is chairman of the Allegheny County Airport Authority, has business ties with former ICA Chairman William K. Lieberman of Squirrel Hill, an insurance broker who in March became chairman of the Pennsylvania Turnpike Commission.

John Perzel of Philadelphia, the former Republican state House speaker who faces criminal charges of misusing public money, appointed Lieberman, a Republican, to the ICA. He was among Perzel's key political campaign fundraisers.

He resigned from the ICA in September 2005 to join Mahone as a business partner with Cleveland-based developer Forest City Enterprises and casino operator Harrah's during the companies' ultimately failed bid to win a state casino license.

Lieberman would have had a 9 percent share in the deal, and Mahone would have had a 2 percent share.

"It's none of my business," Lieberman said through a spokeswoman who responded to an interview request. "I haven't been involved for years."

Mahone has other connections.

Pittsburgh labor union boss Rich Stanizzo of Bon Air, the ICA's treasurer, is a member of the Allegheny County Airport Authority along with Mahone. Stanizzo is business manager of the Pittsburgh Building and Construction Trades Council.

'It does seem a little high'

ICA Executive Director Henry Sciortino said legal fees accumulated quickly in the authority's first three years when it had to defend itself against two lawsuits -- one of them a showdown between former Mayor Tom Murphy and then-City Controller Tom Flaherty, who sued to restore money cut from his office's budget under the Act 47 recovery plan endorsed by the authority.

The ICA filed, and later withdrew, a lawsuit in 2005 to contest the length and terms of a new five-year contract with city firefighters.

The authority has paid Reed Smith, a firm with offices across America and around the globe, an average of $121,166 a year over eight years.

"It does seem a little high," said Jim Roddey, chairman of the Allegheny County Republican Committee, who served on the authority's board from 2004 to 2005. "It could be a sign that they challenged people early on and since that time, they've not."

By comparison, City Solicitor Dan Regan is paid $101,369 a year.

Ravenstahl said city finances are stable enough to shed state oversight and its stigma.

Republican legislators who led the creation of the authority disagree, saying the city's anemic pension fund, poor accounting system and debt load should keep it under state control.

It's unclear what must happen to emerge from state control, but Ravenstahl notes the city cut 1,000 jobs since 2003 and avoided increasing the city's debt and received four bond-rating agency upgrades since he took office in September 2006.

Despite the cuts, city spending has increased by $70 million, from $378 million in 2003 to a projected $450 million this year, and debt service consumes about 17 percent of the budget.

The authority must approve the city's annual budget before it is deemed valid under state law. It can deny state funding if city officials don't comply with budget cuts prescribed by the Act 47 recovery team, which have included layoffs, departmental mergers and salary freezes.

'It's time to re-evaluate'

There's room for improvement at the ICA, said House Majority Leader Mike Turzai, R-Bradford Woods, who was part of the Republican effort to approve the legislation that created the board in 2004.

"It's time to re-evaluate whether the ICA has served its purpose," Turzai said. "We have to start by looking at its expenditures and what it may or may not have accomplished with those expenditures."

That includes legal bills.

Other government-paid legal work costs less. For instance, lawyers at Eckert Seamans billed the state Department of Community and Economic Development between $190 and $275 an hour for 690 hours of work in 2010-11, according to a contract in the online State Treasury database.

Reed Smith's yearly legal charges dropped significantly in 2010 and 2011, Sciortino said. It would take weeks to itemize the reasons for Reed Smith charges, he said, in part because some of the information is in the law firm's off-site archiving system.

"You ought to be able to press a button and get that," Roddey said.

Until the 2008-09 fiscal year, a Reed Smith attorney -- typically Mahone -- attended the authority's quarterly meeting and got paid to take the minutes. It's unclear how much he was paid. For the past three years, the authority hired a transcription service at about $45 an hour that provides a verbatim account of the meetings.

"There's no point in having a legal bill for two hours of a meeting," Sciortino said.

ICA board members interviewed other law firms in search of an alternative to Reed Smith, but replacing the firm would be difficult, and perhaps more expensive, Sciortino said.

"They have a world of institutional knowledge about everything that we've done," he said. "If there was an issue, we would be hiring someone to get back up to speed, or they would be hiring Reed Smith as special counsel."

Sciortino, who is paid a base salary of $168,000 a year plus benefits, was hired in April 2004, said he does not know how Reed Smith came to work with the ICA.

Staff writer Brad Bumsted contributed to this report