Freshfields Bruckhaus Deringer reaped almost £30m in fees on the three controversial London Underground public-private partnerships (PPPs), it has emerged.
According to a report published by the National Audit Office last Thursday (17 June), the magic circle firm earned £29.2m in fees over a period of five years. Meanwhile, London Underground’s financial adviser Pricewaterhouse-Coopers pocketed £21.4m out of the £109m paid in total to advisers.
Despite repeated requests, the Government initially refused to reveal how much money had been paid to advisers. However, as first revealed by The Lawyer last August, London Underground dropped Freshfields in favour of Herbert Smith after the former had billed an estimated £30m (The Lawyer, 13 August 2003).
Jefffrey Rubinoff, the project finance partner who led the Freshfields team advising London Underground, denied that London Underground’s decision to drop Freshfields from its legal panel last summer was due to cost issues. “We met every month to review fees, and [London Underground] was satisfied with the value it was getting,” he insisted.
The revelation is a huge embarrassment for London Underground, which initially set aside two lots of £4m, one for legal fees and one for financial advisory fees. However, a London Underground spokesperson said: “The fees relate to a different era of London Underground. The current management cannot be held responsible for the fees incurred.”
London Underground was transferred to Transport for London in July 2003.
Rubinoff argued that the firm was not involved in setting the original £4m figure, and said it must have been based on the original 18-month timetable.
According to the report, Freshfields initially agreed an average hourly rate for all qualified lawyers, irrespective of seniority. But that was renegotiated at rates closer to standard billing in 2001, after the firm found that more partner time was required on the PPP. It is understood that Freshfields offered a discount of between 10 and 15 per cent.
In contrast, Metronet is understood to have spent half of its £116m bid costs on professional advisers, which included CMS Cameron Mc-Kenna, CIBC World Markets, Deloitte & Touche and Deutsche Bank. Meanwhile, Lovells, Tubelines’ lawyers, took a share of the total £40m spent on third party costs.