In re: Eli J. Segal

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed June 16, 1998

Division No. 96-1

In re: Eli J. Segal

(Segal Fee Application)

Division for the Purpose of

Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

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Before: Sentelle, Presiding Judge, Butzner and Fay,
Senior Circuit Judges.

O R D E R

This matter coming to be heard and being heard before the
Special Division of the Court upon the application of Eli J.
Segal for reimbursement of attorneys' fees and costs pursu-
ant to section 593(f) of the Ethics in Government Act of 1978,

as amended, 28 U.S.C. s 591 et seq. (1994), and it appearing
to the court for the reasons set forth more fully in the opinion
filed contemporaneously herewith, that the motion is well
taken, it is hereby

ORDERED, ADJUDGED, and DECREED that the Unit-
ed States reimburse Eli J. Segal for attorneys' fees and
expenses he incurred during the investigation by Independent
Counsel Curtis Emery von Kann in the amount of $99,767.17
this 16th day of June, 1998.

Per curiam

For the Court:

Mark J. Langer, Clerk

by

Marilyn R. Sargent

Chief Deputy Clerk

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

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Filed June 16, 1998

Division No. 96-1

In re: Eli J. Segal

(Segal Fee Application)

---------

Division for the Purpose of

Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

---------

Before: Sentelle, Presiding Judge, Butzner and Fay,
Senior Circuit Judges.

ON APPLICATION FOR ATTORNEYS' FEES

Opinion for the Special Division filed Per curiam.

Per curiam: Eli J. Segal ("Segal") petitions this Court
under section 593(f) of the Ethics in Government Act of 1978,
as amended, 28 U.S.C. s 591 et seq. (1994) ("Act"), for
reimbursement of attorneys' fees he incurred during and as a
result of the investigation conducted by Independent Counsel
("IC") Curtis Emery von Kann. Segal seeks reimbursement
in the amount of $102,518.20. After considering Segal's peti-
tion we find that his request is for the most part very
reasonable and that he is entitled to an award of attorneys'
fees and expenses totaling $99,767.17.

Background
Pursuant to the National and Community Trust Act of
1993, the Corporation for National and Community Service

("Corporation") was established on October 1, 1993. Presi-
dent Clinton selected Segal as the Corporation's first Chief
Executive Officer. The mission of the Corporation was to
manage the federal government's community service pro-
grams. To that end, the National and Community Trust Act
authorized the Corporation to solicit and accept donations of
money and property.

Segal and other employees of the Corporation, however,
believing that some foundations and corporations would be
unwilling or unable to contribute to a federal agency, incorpo-
rated the Partnership for National Service ("Partnership") as
a private, nongovernmental charitable organization to accept
private donations and to support the operations of the Corpo-
ration. The founders intended the Partnership to be con-
trolled largely by the Corporation's officers. Accordingly,
three of the Corporation's officers, including Segal, became
the original officers and directors of the Partnership. The
Independent Counsel concluded that the founders of the
Partnership did not have a personal pecuniary interest or
motive in forming the Partnership.

18 U.S.C. s 208 provides, in relevant part, that

whoever, being an officer or employee of ... any inde-
pendent agency of the United States ... participates
personally and substantially as a Government officer or
employee, through decision, approval, disapproval, rec-
ommendation, the rendering of advice, investigation, or
otherwise, in a judicial or other proceeding, application,
request for a ruling or other determination, contract,
claim, controversy, charge, accusation, arrest, or other
particular matter in which, to his knowledge, he, his
spouse, minor child, general partner, or organization in
which he is serving as officer [or] director, ... has a
financial interest [shall be guilty of a misdemeanor, or, in
the case of a willful violation, shall be guilty of a felo-
ny].

Therefore, as an officer of the Corporation, Segal was prohib-
ited from taking personal, substantial action in an official
capacity in a particular matter in which he had a financial
interest. As an officer and director of the Partnership, any
financial interest of the Partnership was imputed to him.
Nevertheless, Segal, acting in his official capacity as CEO of
the Corporation, engaged in fund raising for the benefit of the
Partnership. This action became of concern to the Corpora-
tion's Office of Inspector General, which forwarded to the
Department of Justice information that Segal may have vio-
lated, inter alia, federal criminal conflict of interest laws.

The Act provides that upon receiving sufficient information
concerning "certain covered persons," the Attorney General is
to conduct a preliminary investigation, 28 U.S.C. s 591(a),
and from this preliminary investigation she is to determine
whether further investigation is warranted, s 592(a)(1). If
further investigation is indeed warranted, then the Attorney
General is to apply for the appointment of an independent
counsel to conduct the investigation. s 592(c)(1).

Upon receipt of the information from the Office of Inspec-
tor General, the Attorney General determined that Segal was
a "covered person" within the meaning of the Act "because he
was the Chief of Staff of the 1992 Clinton/Gore for President
Committee, and participated in the day-to-day management
of the campaign at the national level." Application to the
Court Pursuant to 28 U.S.C. s 592(c)(1) for the Appointment
of an Independent Counsel, In re Eli J. Segal, Division No.
96-1 (D.C. Circuit, Independent Counsel Division) (filed Octo-
ber 30, 1996) ("Application for Appointment"), at 2. As a
result, the Attorney General commenced a preliminary inves-
tigation in accordance with the Act, and on October 30, 1996,
she applied to this court for the appointment of an indepen-
dent counsel. On November 27, 1996, we appointed Curtis
Emery von Kann to serve as independent counsel for the
investigation.

During the investigation, the IC's office reviewed numerous
documents, interviewed various witnesses, and also inter-
viewed Segal over a two-day period. After reviewing the
evidence, the IC concluded that, based on Segal's financial
interest in the Partnership, he had committed a misdemeanor
violation of the conflict of interest laws. Nevertheless, the IC

declined prosecution, finding that Segal did not possess
knowledge of the financial interest. Such knowledge is not
necessary for a technical violation of the law, but it is
required by Department of Justice guidelines before charges
are brought. Final Report of the Independent Counsel in re:
Eli J. Segal, Dec. 19, 1997 ("Final Report"), at 6, 14-15.
Additionally, the Independent Counsel's office cleared Segal
of any other criminal violations concerning the matter, includ-
ing false statements, conversion of federal funds, and fraud.
Id. at 16-24.

After the Independent Counsel's investigation, Segal, pur-
suant to section 593(f)(1) of the Act, petitioned this court for
reimbursement of his attorneys' fees. As directed by section
593(f)(2) of the Act, we forwarded a copy of Segal's fee
petition to the Attorney General and the IC and requested
written evaluations of the petition. The court expresses its
appreciation to the IC and to the Attorney General for
submitting these evaluations, which we have given due consid-
eration in arriving at the decision announced herein.

Analysis

The Independent Counsel statute provides that:

Upon the request of an individual who is the subject of
an investigation conducted by an independent counsel
pursuant to this chapter, the division of the court may, if
no indictment is brought against such individual pursuant
to that investigation, award reimbursement for those
reasonable attorneys' fees incurred by that individual
during that investigation which would not have been
incurred but for the requirements of this chapter.

28 U.S.C. s 593(f)(1). To obtain an attorneys' fees award
under the statute a petitioner must show that the following
requirements are met:

1) the petitioner is a "subject" of the investigation;

2) the fees were incurred "during" the investigation;

3) the fees would not have been incurred "but for" the
requirements of the Act; and

4) the fees are "reasonable."

See In re North (Dutton Fee Application), 11 F.3d 1075,
1077-82 (D.C. Cir., Spec. Div. 1993) (per curiam). We will
address each of these requirements in turn.

A. "Subject" Status

We have previously defined the term "subject" as a person
whose conduct is within the scope of the independent coun-
sel's investigation such that "the Independent Counsel might
reasonably be expected to point the finger of accusation" at
him. Dutton, 11 F.3d at 1078; see also In re North (Shultz
Fee Application), 8 F.3d 847, 850 (D.C. Cir., Spec. Div. 1993)
(per curiam). As the named subject of the IC's investigation,
Segal surely fits within this definition.

Additionally, in Shultz we held that, under any definition of
the term, the criterion for "subject" status is squarely met
when the independent counsel tells a party that he is in fact a
subject. 8 F.3d at 850. Segal states that he was advised at
the outset of the IC's investigation that he was considered the
primary target; the IC substantiates this, noting that Segal's
subject status was communicated to Segal's attorneys.

However, on June 16, 1997, the IC notified Segal that
criminal charges would not be pursued against him. As Segal
admits, this notification took him outside the definition of
"subject" for purposes of attorneys' fees reimbursement.
Consequently, we will deduct fees that were incurred after
this change in Segal's status, except in connection with the
Final Report. See In re Mullins (Mullins Fee Application),
84 F.3d 459, 463-465 (D.C. Cir., Spec. Div. 1996) (per curiam).

B. Fees Incurred "During" the Investigation

This court has identified the maximum period for which
fees can be sought as spanning from the time an IC begins an
investigation of an individual to the deadline for filing com-
ments to the final report. See, e.g., In re Olson, 884 F.2d
1415, 1420-22 (D.C. Cir., Spec. Div. 1989) (per curiam). The
relevant period in this case is from November 27, 1996, when
IC von Kann was appointed, to October 20, 1997, the deadline

for filing comments to the Final Report. Segal's counsel has
reviewed the billings and rightly excluded all fees incurred
prior to the appointment of the IC. We find that the
remaining entries fall within the relevant period.

C.Fees Not Incurred "But For" the Requirements of the
Act

The Act requires that to be reimbursable, attorneys' fees
must be such as "would not have been incurred but for the
requirements of [the Ethics in Government Act]." 28 U.S.C.
s 593(f)(1) (emphasis added). Therefore, "[a]ll requests for
attorneys' fees under the Act must satisfy the 'but for'
requirement of" the Act. In re Sealed Case, 890 F.2d 451,
452 (D.C. Cir., Spec. Div. 1989) (per curiam). The purpose of
awarding only fees that would not have been incurred "but
for" the Act is to ensure that "officials ... who are investigat-
ed by independent counsels will be subject only to paying
those attorneys' fees that would normally be paid by private
citizens being investigated for the same offense by" federal
executive officials such as the United States Attorney. Id. at
452 (citing S.Rep. No. 97-496, 97th Cong., 2d Sess. 18 (1982),
reprinted in 1982 U.S.C.C.A.N. 3537, 3554 (referring to "fees
[that] would not have been incurred in the absence of the
[independent counsel] law")).

In In re Nofziger, 925 F.2d 428 (D.C. Cir., Spec. Div. 1991)
(per curiam), the Court identified several circumstances un-
der which the "but for" requirement of the Act historically
was satisfied. For our purposes, we note that one of these
circumstances involved "cases in which if the requirements of
the Act, restricting the Attorney General's preliminary inves-
tigation, did not exist, ... the case could have been disposed
of at an early stage of the investigation, without seeking
appointment of independent counsel." Id. at 438. Here, the
Attorney General, in her Application to the court requesting
the appointment of an independent counsel, stated:

Although the Department of Justice would in all likeli-
hood exercise its discretion to decline to prosecute this
case as a criminal matter ... I nevertheless am com-
pelled by the terms of the Independent Counsel Act to

apply for the appointment of an Independent Counsel.
Application for Appointment at 2. Given this statement
by the Attorney General, it appears that Segal would not
have incurred the attorneys' fees at issue "but for" the
requirements of the Act.

D. Fees are "Reasonable" under the Act

We must determine whether Segal's attorneys charged
reasonable rates, and whether the time expended by Segal's
attorneys on Segal's representation was reasonable. In re
Meese, 907 F.2d 1192, 1201 (D.C. Cir., Spec. Div. 1990) (per
curiam).

As to the reasonableness of the rates charged, we note that
Segal has submitted two affidavits by prominent Washington,
D.C., attorneys Stephen H. Sachs and Joseph E. diGenova,
attesting to the reasonableness of the billing rates of Segal's
counsel. Based on these affidavits, as well as on other
exhibits offered by Segal, we conclude that the hourly rates
charged by Segal's counsel ($195-$375) comport with prevail-
ing community standards and are within the realm of reason-
ableness.

We turn then to the reasonableness of time expended. The
IC takes issue with the reasonableness of certain fees and
expenses and has requested that the award be reduced
accordingly. We will address each of these issues in turn.

Sufficiency of billing documentation. In his evaluation of
Segal's attorneys' fees application, the IC argues that it is
difficult to determine the reasonableness of a number of
billing entries because the entries are vague and imprecise.
Specifically, he maintains that the billings fail to specify any
subject matter, and asks us to impose a reduction of ten
percent on the final award as a penalty.

We thank the IC for his labors in citing the particular
entries he believes have been inadequately documented. But
although these entries are perhaps not as detailed as we wish,
we find them to be not so insufficient as to warrant a

reduction penalty. This is especially true in light of the
affidavit submitted by Segal's lead attorney, which describes
with some specificity the nature of the work performed on
Segal's behalf. See In re North (Corr Fee Application), 56
F.3d 261, 264 (D.C. Cir., Spec. Div. 1995) (per curiam) (fees
determined to be reasonable after review of time sheets and
attorney affidavit that provided detailed information about
time billed).

Fees and expenses relating to attorney-client privilege.
During the IC's investigation Segal was questioned under
oath in a two-day interview. Several times during the inter-
view Segal's counsel directed Segal's attention to notes coun-
sel had written on a pad; at another time counsel directed
Segal's attention to a typewritten document. Subsequently,
counsel was asked to produce these documents to the Office
of the Independent Counsel (OIC). Initially, Segal's counsel
refused, asserting attorney-client and work product privi-
leges. After month-long discussions, the parties resolved the
issue. Nevertheless, during the time of the discussions, Segal
incurred fees and expenses of approximately $14,000 on the
question of whether the documents had to be produced to the
OIC. The IC objects to the reimbursement of these fees and
expenses. He relies on the Federal Rules of Evidence and
guidelines set out for civil depositions to support his view that
Segal's counsel had no right to withhold the documents from
the OIC, and that his efforts to do so should be viewed as a
"self-inflicted wound" for which Congress did not intend the
fees and expenses incurred to be paid by the taxpayers.

After reviewing the submissions made to the Court with
respect to this issue, it appears to us that the interview itself
was unusual, in that it was neither a court proceeding nor a
civil deposition; consequently, there were no formal govern-
ing procedures, except those agreed upon by the parties. It
further appears that at the outset of the interview Segal
procured the right to have counsel present and to consult
with counsel at any time. Under these circumstances we
cannot conclude that the assertion of attorney-client and work
product privileges by Segal's attorney with respect to the two
documents was so unreasonable as to require us to disallow

the fees and expenses incurred. Cf. Mullins, 84 F.3d at 466-
67.

Travel expenses. The IC argues that charges by Segal
attorney Ty Cobb of $527.34 for a hotel and $30.68 for meals
for a night's stay in Washington, D.C., are not appropriate for
reimbursement. We agree. Cobb is resident in the Wash-
ington, D.C., office of Hogan and Hartson, and we can discern
no justifiable reason why these hotel and meals charges
incurred in Washington, D.C., should be charged to the public
fisc.

Additionally, the IC takes issue with $265.23 in travel
expenses charged by attorney Joseph Young, who is resident
in the Baltimore office of Hogan and Hartson. As we have
noted previously, expenses for travel are not reimbursable "in
the absence of some showing that local counsel could not have
rendered the service involved and thereby obviated the neces-
sity of employing an attorney" who incurs costs traveling
from his home to the work site. In re North (Bush Fee
Application), 59 F.3d 184, 194 (D.C. Cir., Spec. Div. 1995)
(per curiam); see also In re North (Dwyer Fee Application),
120 F.3d 293, 298 (D.C. Cir., Spec. Div. 1997) (per curiam).
Segal has made no showing that Hogan and Hartson attor-
neys located in Washington, D.C., could not have performed
the work required.

In sum, any travel expenses incurred by Segal's attorneys
in Washington, D.C., are not reimburseable, and we will
deduct these items from the award in the amount of $823.25.

Duplication of effort. The IC objects to certain billings
totaling $1585.60 on grounds of duplication of effort. Approx-
imately two-thirds of this amount is related to a meeting on
December 16, 1996, with the IC's office that was attended by
both Ty Cobb and Joseph Young. The IC argues that having
two of the subject's attorneys attend the same meeting is
duplicative and therefore not reimburseable.

We agree with the IC that in many cases more than one
attorney at a meeting with the IC is duplicative. See Mul-
lins, 84 F.3d at 468-69. In this particular meeting, however,
the IC "met with counsel for Mr. Segal to apprise them of our

existence, to inform them generally of the scope of our
inquiry, and to invite a submission outlining their position on
whether Mr. Segal had violated ... criminal statutes." Final
Report at 6. Having two attorneys at such an important
initial meeting with the IC's office is not unreasonably dupli-
cative.

On April 9, 1997, Segal submitted his outline, pursuant to
the IC's request, concerning alleged violations of criminal
statutes. A week later, on April 16, the OIC's office sent a
letter to Joseph Young requesting additional information on
seven statements contained in the submission. Two days
later, on April 18, a telephone conference concerning these
requests was held with the IC's office with both Young and
Cobb in attendance. The IC argues that Young's preparation
for and attendance at this telephone conference is duplicative
of Cobb's. Taking into consideration the importance of the
submission and OIC's request for additional information, as
well as the fact that the letter requesting the information was
addressed to Young, we hold that his attendance at the
telephone conference concerning the request was not unrea-
sonable duplication.

Finally, the IC objects to a February 6, 1997, entry by
attorney Stephen Sargent concerning a conference with the
IC. We presume that the IC raises a duplication of effort
objection regarding this entry because on the same day Ty
Cobb has an entry for a "[m]eeting with OIG." We assume,
however, that "OIG" is not a typograhical error, but rather
is the abbreviation for the Corporation for National and
Community Service's Office of Inspector General, which had
originally referred the matter under investigation to the De-
partment of Justice. Therefore, no deduction will be made
concerning the entry.

Items not related to defense. The IC states that three
billing entries should be deducted because Segal has not met
his burden of showing that these entries are relevant to his
defense. The first is for $17.50 on November 27, 1996, to
"research and retrieve letter to the editor from L. Cutler
about independent counsel." We agree with the IC. Segal
has not established that such a letter was relevant to his
defense.

The second entry objected to is dated February 3, 1997, by
Joseph Young for $117.50 for a meeting and telephone confer-
ence with Ty Cobb, who had redacted his own time for that
day. The IC presumes that this redaction was done because
the work was not related to Segal's defense, and he therefore
argues that Young's time should have been redacted as well.
The third entry is objected to for the same reason: on April
22, 1997, Cobb billed for "document review and related tele-
phone conferences with J. Young," but Young's time for that
day had been redacted. Again, the IC presumes that the
time was redacted because it was not related to Segal's
defense, and he therefore argues that Cobb's time should also
have been redacted. In both these instances, however, we
will presume that the redactions were done in order to avoid
billing for duplication of effort, and we will not make any
deductions.

Miscellaneous. In his review of the billing records, Cobb
redacted all of Young's time for June 4, 1997; the IC argues
that Young's travel charges for that day, totaling $18.92,
should also be excluded. We agree, and that amount will be
deducted from the award.

Conclusion

In accordance with the foregoing analysis, the award shall
reflect the following:

1.Deduct $1,891.36 in fees that were incurred after
Segal's "subject" status ended.

2.Deduct $823.25 in travel expenses incurred by Se-
gal's counsel while in Washington, D.C.

3.Deduct $17.50 for retrieval of a letter sent to an
editor.

4.Deduct $18.92 for travel expenses where no fees
were incurred.

For the reasons set forth above, it is ordered that Segal be
awarded $99,767.17 in reasonable attorneys' fees and ex-
penses. The computation is set forth in the appendix.

Appendix

Total Fee Request Including Expenses $102,518.20

Deductions in Opinion

1. Fees after "subject" status ended 1,891.36

2. Travel expenses for Washington, D.C. 823.25

3. Letter retrieval 17.50

4. Expenses where no fees incurred 18.92

TOTAL OF DEDUCTIONS 2,751.03

TOTAL AWARD $99,767.17