A damning report

KEN Somerville must be cursing his bad luck. Since January the senior Legal Department lawyer has been making an internal investigation which would ultimately end in criticism of his boss, Attorney-General Jeremy Mathews. By his own account, it has been a major and difficult investigation. After being put by Mr Mathews in the invidious position of having to examine his own department and the actions of some of its past and present chiefs, Mr Somerville had to make findings on their handling of a highly controversial matter. The matter revolves around Graham Grant, 42, a lawyer who worked in the Legal Department for six years on the prosecution of the Carrian-related Bumiputra Malaysia Finance Ltd (BMFL) case, one of the most expensive and longest-running in Hong Kong legal history. In 1991, Mr Grant decided to resign from the Legal Department and join the private Bar as a junior counsel. It was at the time a fortunate move. For Mr Grant, whose monthly remuneration working in the Attorney-General's chambers amounted to $67,500, began making on average of more than $500,000 a month. How did he do it? Simply by leaving and then working extraordinarily long hours. After Mr Grant resigned, the Legal Department generously negotiated an arrangement which would allow him to continue prosecuting the BMFL case at an hourly rate which crept up to $3,025. For three years until last January, Mr Grant toiled very long hours, which he very carefully set out in the fee notes he submitted to the Legal Department for payment. Some of the fee notes were so detailed that the time it took him to compile them was also included as an item for payment. Since an investigation by the South China Morning Post last October revealed the massive fees the Legal Department was paying to Mr Grant for the same case he had worked on before he resigned, Mr Mathews has faced demands from Legislative Councillors for an explanation. Was it a case of 'jobs for the boys'? How could Mr Grant have worked up to 17.5 hours a day? Were claims for so many hours fair and reasonable? These were some of their questions. When the Post asked similar questions during its investigation, the Director of Public Prosecutions (DPP) Peter Nguyen said: 'Every consideration was given by the Legal Department to ensure that these fees, which were subsequently subjected to the scrutiny of the Director of Audit, were fair and reasonable.' As the controversy deepened amid the efforts of legislators and journalists to prise facts out of the Legal Department, on January 11 Mr Mathews asked Mr Somerville and another in-house officer, treasury accountant Simon Chan, to investigate the costs and submit a written report. Today, Mr Somerville's report will be tabled in the Legislative Council. His findings make a mockery of the notion of accountability in the Legal Department, the largest law firm in Hong Kong. For Mr Somerville's report of some 100 pages demonstrates how the Legal Department failed to control and direct Mr Grant. It finds that although there were 'good and compelling' reasons for appointing Mr Grant to continue working on the prosecution of BMFL after he resigned from the Legal Department, he was paid far too much. This was happening during the Government's 'zero growth policy' which was supposed to save money in the Civil Service. As Mr Mathews was earnestly talking last month about accountability and value for money for legal work when he introduced a manifesto for change in the law in Hong Kong, his own office was about to be revealed in the Somerville report as a reckless spender of public funds. Mr Somerville finds the fee arrangements for Mr Grant, which were agreed in 1992 by the then DPP John Wood, were overly generous. The fees were increased by 10 per cent twice, in 1993 by Clive Grossman, former head of the department's Commercial Crime Unit, and in 1994 by senior lawyer Graham Harris. The Somerville report also highlights a number of curious items - he describes them as 'questionable' - relating to some of the fee notes submitted by Mr Grant. 'The problem from an audit viewpoint is not whether Mr Grant worked the hours he claimed in his fee notes, but whether the charges are reasonable for the work actually carried out by him,' it says. However, Mr Somerville does not appear to have audited any of the expenses, amounting to $627,777 claimed by Mr Grant during 18 duty trips abroad, despite these being a feature of the concerns expressed by legislators. The figures of the Legal Department's overall expenditure on the BMFL proceedings make 'interesting reading'. The total briefing-out cost increased from an average of $5.9 million a year at the end of 1991 to an average of a staggering $38.5 million a year by September 1994. The Somerville report says this rise in annual costs by a factor of six from 1991 to 1994 is not readily explained by reference to court hearings, although there was a substantial increase in trial preparation work in this period. The escalation in costs was alarming. Radical solutions were required. As early as July 1992, solicitors Clifford Chance had advised that 'while they had no reason to doubt Mr Grant was working the hours claimed, they had more difficulty as to whether the hours claimed were reasonable', the report says. In private correspondence with the Attorney-General's chambers, Clifford Chance also 'commented upon what they characterised as Mr Grant's continuing 'roving ambassador' role in the proceedings which in their view resulted in increased costs and reduced efficiency'. But one possible solution, that of capping the fees, was never raised until late last year when the Post 's reports were published. Mr Grant was the junior counsel on the case and his fees were fixed at two-thirds that of his leading counsel, London silk Clive Nichols. As the two worked together and were in almost constant telephone contact, Mr Somerville said 'one would expect therefore that their fee notes would closely correlate with each other'. But this was not the case. DURING 10 out of the first 12 months, a year in which Mr Grant was paid about $6 million for the same work for which he had been receiving $800,000 a year in the Legal Department, he was billing for sums 'substantially in excess of two-thirds of leading counsel's fees including months in which the two counsel were working side by side', the Somerville report says. 'In some cases, he was billing for sums substantially in excess of those paid to leading counsel,' it says. 'During the 33-month period from January 1992 to September 1994, the total fees paid [to Mr Nichols and Mr Grant] in respect of the BMFL proceedings were approximately the same, namely $17.5 million and $17.1 million respectively. In hindsight, it seems to me that these figures should have given rise to some concern on the part of the supervising officers in the Attorney-General's chambers, not just in terms of the overall escalating costs . . . but also in respect of the level of fees being claimed by Mr Grant . . . which amounted to some $125,000 per week. 'In my opinion, from a cost control viewpoint this was too much . . . and Mr Grant's fees should have been capped, if not at the beginning of his private Bar appointment, then within six months of it.' Nonetheless, says the Somerville report, Mr Grossman 'repeatedly voiced his concern at the escalating costs' and discussed with solicitors Clifford Chance ways in which costs could be cut, but 'these arrangements had no effect on the number of hours being worked by Mr Grant on the case'. When Mr Grant inadvertently overcharged by about $13,200 for some court attendances, this was not picked up by the solicitors or the Legal Department. In May 1992 the treasury accountant queried a fee note from Mr Grant claiming '14.5 continuous hours without any break'. Mr Somerville notes reservations over 'the physical possibility of continuous working on this basis without a minute's break'. He also comments on the fee notes by Mr Grant and Mr Nichols during one five-day period in which they charge for between 11.5 and 17.5 hours a day. Neither lawyer provided a detailed accounting for how the time was spent and Mr Somerville says: 'I find it difficult to understand how counsel were physically able to work such extended hours without taking a break of any kind or how they could retain full working efficiency in doing so.' Mr Somerville, according to one of his colleagues, 'is a straight-shooter who fears there is a highly unreasonable expectation that his report will solve anything'. In a brief entry at the end of the Somerville report, Mr Grant's solicitors say that 'any criticism should properly be directed at those who were responsible for approving Mr Grant's terms, not at Mr Grant'. In any case, Mr Grant in January ceased work on the BMFL case, citing personal reasons, including the pressure of publicity arising from the controversy. This came despite the Legal Department's insistence as recently as January that it was 'essential he continue to act as counsel'. An in-house counsel, Anthony Schapel, has replaced Mr Grant at a fraction of the cost. Mr Nichols was replaced late last year. How their departures will affect the case after so many years of work on it remains to be seen.