The sharks are biting at Colorado's Ocean Journey. Not the sharks inside the fish tanks, but the sharks along Seventeenth Street, who are circling the aquarium even as it bleeds red ink.
In March, a tearful Doug Townsend, head of the aquarium, told the public that it would close on April 2...unless, of course, a tidal wave of financial support suddenly appeared. In the weeks following his announcement, children emptied their piggy banks, aquarium volunteers opened their wallets, and residents of one Denver neighborhood handed over the proceeds of a community garage sale. In all, Ocean Journey netted $72,000 from such small donations. And then bigger fish jumped in: The Barbara Bridges Family Foundation donated $1 million on the condition that Ocean Journey raise an additional $2 million; an aquarium diver pitched in $500,000; and Hensel Phelps Construction Company gave $250,000.
Even with those generous donations, Ocean Journey knew it wouldn't be able to stay afloat for long. But there was still hope: bankruptcy! When Ocean Journey announced on April 1 that it would file for Chapter 11, it was no April Fool's joke. While the nonprofit reorganized, aquarium employees could keep their jobs, and those generous kids would know that their allowances hadn't gone to waste.
And then the sharks started circling.
On the advice of its longtime lawyers at Holme Roberts & Owen (HRO), Ocean Journey hired LeBoeuf, Lamb, Greene & MacRae to handle its reorganization. The prestigious firm, which has offices in Paris, Johannesburg and Beijing, to name a few truly world-class cities, has one of the biggest bankruptcy practices in the country.
LeBoeuf's Denver office, on retainer with Ocean Journey, has already collected $185,000. The firm's law clerks are billing out at $85 an hour, the paralegals are charging $100 an hour, and the lead partner on the case is raking in $395 an hour -- that's $6.58 a minute, more than most of Ocean Journey's young visitors will make in one hour at their first jobs.
And that's supposed to be a bargain. Carl Eklund, lead partner at the Denver office of LeBoeuf, Lamb, Greene & MacRae, couldn't be reached for comment, but in a motion to the United States Bankruptcy Court, he explained that the firm's rates for Ocean Journey are "reduced from its ordinary and customary hourly rates for cases of this nature."
"It's outrageous, isn't it?" says bankruptcy attorney Douglas Jessop. "What's really astounding is how expensive litigation is in general. But as in medicine, you can go to a general practitioner, you can go to a specialist or you can go to the specialist.
"LeBoeuf probably charges the highest going rate in town, but Carl Eklund can do in a fraction of the time what someone who charges half that can," adds Jessop, who charges $250 an hour. "Mine is a boutique firm, so I can afford to be more competitive price-wise. If you look at it this way, the bondholders are probably paying attorneys in New York $500 to $600 an hour, and they have minions working on it. So it's all relative."
And those aren't the only legal fees the aquarium will pay. Although HRO doesn't specialize in bankruptcy -- which is why its attorneys referred Ocean Journey to LeBoeuf -- the aquarium decided it wanted HRO to help with certain parts of the reorganization, such as negotiating how the $57 million in bond debt will be restructured and handling any contributions that come in while the bankruptcy is in progress. For that, HRO collected $80,000 on retainer, with rates comparable to LeBoeuf's: The partners bill out at up to $395 an hour, while the paralegals command anywhere from $110 to $145 an hour.
Although the law firm had already secured payment, HRO still had to seek permission to work on the case. And the court initially denied HRO's application, saying that it wanted to prevent the appearance of a conflict of interest. Not only do two HRO attorneys -- Charles Maguire and Manuel Martinez -- sit on Ocean Journey's board of directors, but HRO has also represented five of the aquarium's twenty largest creditors: the City and County of Denver, Downtown Denver Inc., Dain Rauscher, Qwest Communications and AT&T Media Services. In fact, HRO itself is one of Ocean Journey's creditors.
In his May 21 order, Judge A. Bruce Campbell wrote: "The [Charles] Maguire affidavit candidly catalogues HRO's many connections with parties in interest in this case. The affiant then concludes that he does not believe that 'HRO's representation of the creditors identified...on unrelated matters, or the other involvement of HRO on behalf of (this debtor) results in or constitutes...an issue concerning HRO's disinterestedness in this case....' In this conclusion, Mr. Maguire's belief is incorrect."
But HRO didn't give up. The firm quickly filed a motion to reconsider the denial, and at a hearing on June 19, the judge agreed to let HRO assist Ocean Journey with tax- and nonprofit-related matters. (HRO's Maguire did not return calls from Westword.) The judge's decision won't result in any savings, however. "The money equals out in the end, because what we don't spend on HRO for those things, we'll spend on LeBoeuf," says Ocean Journey spokeswoman Kimberly Langston.
The large donors who came to Ocean Journey's rescue were well aware that some of their contributions might go toward bankruptcy costs. "We knew going into this that it was going to be expensive, and we knew they wanted the best attorneys," says Bruce Kelley, the Ocean Journey diver whose family donated $500,000. "Right now, those legal fees are just as important as any other operating expense. They're high, but they're commensurate with the legal fees I'd expect in a case like this."
"Obviously, we'd rather have all of the money be donated to the operations of Ocean Journey, but that's not possible," says Steve Leatherman, president of the Barbara Bridges Family Foundation. "We wanted competent legal counsel, and you get what you pay for. Hopefully, at the end of the day, Ocean Journey will be a financially viable organization. Regrettably, part of the process requires expensive legal representation."
Some of the money donated directly to Ocean Journey has gone into a general fund used to pay for everything from legal fees to educational materials; however, donations routed through the Greenway Foundation, a nonprofit organization that works to preserve the South Platte River, are being held in a savings account until the final reorganization plan is accepted. "None of the money I've collected has gone toward legal fees, and Ocean Journey hasn't asked for that. If they were to ask for that, I'd send letters to every donor asking if they'd like their money to go toward legal fees," says Greenway Foundation executive director Jeff Shoemaker, who offered to raise and handle money in an effort to help the aquarium.
Ocean Journey knew that attempting to swim through red ink into the black would be costly. "We have constant filing dates, and we have to produce so many documents; it's really a lot of work," Langston says. "We see it as an investment. I haven't heard anyone on our board argue the point of the retainers. No one around here has been shocked by the rates."
Assistant City Attorney Stephen Ford, who's representing Denver in the bankruptcy proceedings (the city loaned Ocean Journey $6.1 million and is still owed $5.7 million), agrees that the fees are standard. "They're certainly not gouging," he says.
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And the attorneys have been earning their money, Langston points out. They've worked it out so that Ocean Journey can continue to collect pledges that had been made prior to the bankruptcy filing (such pledges are typically frozen during reorganization, she explains), and have protected donations from the bondholders' demands.
That came as a relief to Hannah Evans, who's part of the aquarium's 21st Century League, a group of Ocean Journey members who've pledged $5,000 a year for four years. "There had been quite a spirited discussion among the group over the bondholders getting our money," she says. "I felt I'd pledged my money to the fish, not them, so I was like, 'Come get me, motherfuckers.'"
The bankruptcy process is moving along quickly. Throughout July, appraisers will be assessing the building and land to determine their worth; they'll also look into whether part of the land could be developed to bring in extra money. By the end of the summer (or late November, if the court grants a requested extension), Ocean Journey will file a draft reorganization plan with the court. That draft will include suggested changes in admission price, a schedule for how the aquarium will pay off its debts, and an outline for how the institution will survive after bankruptcy. The plan will also spell out Ocean Journey's intent to apply for funds from the Scientific and Cultural Facilities District in 2003, a request the SCFD rejected last fall ("A Daunted House," October 25, 2001).
If the bondholders agree to the reorganization plan, Ocean Journey could be out of hot water by the end of the year. If not, the process could extend halfway into 2003, Langston says. And by then, she predicts, the total price for bailing the aquarium out of bankruptcy could rise as high as $1 million.