Citizens audit clears $525 per hour lawyer deal despite ‘subjective’ fee standards, critics not assuaged

March 11--Skeptics are calling "not comforting" and "suspicious" an internal audit by state-run insurer Citizens that blesses the company's $6.5 million contract awarded to a West Palm Beach law firm despite what it acknowledged were "subjective" standards for fees.

A "targeted review report" on the contract is part of materials available online for a Citizens audit committee meeting Tuesday.

No other bidder came near the $525 per hour fees of West Palm Beach lawyer Scott Link when his firm won a speeded-up, "expedited" contract to serve as coordinating counsel for claims lawsuits, bidding records examined by The Palm Beach Post showed. The closest was $360 among 18 bids for two Citizens contracts his firm won since 2012.

Link's projected billing under the latest contract is more than $1 million a year, triple the annual pay of Citizens CEO Barry Gilway.

A review under the direction of Citizens chief of internal audit Joe Martins found "evaluators had used a subjective approach to scoring proposed fees as opposed to a mathematical approach" commonly used in other bids. Company officials said to do otherwise would have led to an "improper ranking" because of the nature of the legal services provided, but auditors said the subjective standards made it difficult to review the scoring.

"We could not, however, substantiate the criteria used when scoring fees subjectively hence impairing our ability to re-perform the scoring independently," the review said.

Citizens also lacked a "clear or defined negotiation strategy" to hold down fees, the report found.

Auditors treated those as "specific areas requiring additional attention" but reached this overall conclusion: "Based on the information gathered and the facts derived from the steps performed above, we have not discovered any instances or wrong-doing, violations of public trust, or conflicts of interest."

That provided little reassurance to those who have questioned the company's dealings with Ackerman, Link & Sartory of West Palm Beach, including former state insurance consumer advocate Sean Shaw, a Tampa attorney who sues insurers.

"This entire process looks suspicious," Shaw said. "Citizens' decision to hire a coordinating counsel was unnecessary and wasteful for a many reasons. A private business would never do business this way. Citizens' attempt to have its own auditor review its procedures and declare the process fair and transparent is not comforting."

Citizens spokesman Michael Peltier said Monday, "The use of a coordinating counsel is a well recognized resource when there is a need for a uniform and consistent strategy to manage a large number of cases. We owe it to our customers and all policyholders to make sure we are handling cases consistently and in a cost effective manner."

Citizens executives have maintained the contract is a great deal if Link's firm helps the company resolve 13,000 claims lawsuits more efficiently without necessarily setting foot in a courtroom, by directing strategy for other lawyers the company already pays. Link described his role in a company interview as "the mover of the chess pieces."

His firm cited no special expertise in property insurance before applying for the first of two contracts that stand to pay it more than $8 million combined, instead emphasizing experience with complex civil lititgation involving financial companies and others.

On applications asking for potential conflicts, the firm saw no need to disclose ties to former Citizens President Tom Grady, an ally and neighbor of Gov. Rick Scott, and Florida Chief Financial Officer Jeff Atwater. The law firm paid Grady, who was interim Citizens president when the first contract was bid, as an "of counsel" attorney as recently as 2010 and partner Wendy Link listed Grady and Atwater as references on an application for a state post in 2011.

The audit report "did not find any direct evidence" that potential conflicts "had any influence on the outcome of the contract award."

Records reviewed by The Post showed the West Palm Beach firm finished third of nine bidders in initial scoring by a Citizens evaluation panel for the first contract on sinkhole claims, based on written applications. It barely made the cut for interviews, yet leapfrogged competitors scoring higher and charging less per hour after an interview lasting less than 30 minutes.

Citizens president Gilway vigorously defended the award of the larger, $6.5 million contract to coordinate all claims litigation, saying in November, "We need the talents Scott Link is bringing to the table."

Some outside the company see it very differently. The deal "doesn't pass the smell test," Jay Neal, president and CEO of the Fort Lauderdale-based Florida Association for Insurance Reform, said in January.

As for negotiating fees down, The Post reported Link and Citizens officials shared a chuckle when he was asked about changing his fees in a recorded company interview for the second, larger contract.

"I would certainly increase them if you insisted on it, but I would do it reluctantly," Link said. After the laughter subsided, Link repeated earlier statements that to lower the fees would be unfair to the firm's other clients.

What The Post found

Citizens hired a West Palm Beach law firm with no expertise in property insurance when it barely made the cut for an interview in 2012. One of its principals could make three times the salary of the Citizens CEO under a second, larger deal approved in December.

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