Taxpayers' investment in Digital Domain Media Group proved a boondoggle, but the company's collapse is a boon for the firm managing the bankruptcy reorganization.
West Palm Beach-based FTI Consulting stands to be paid a $1.56 million "completion fee" for the $30.2 million sale of Digital Domain's movie animation studios in California and Canada, according to filings in bankruptcy court.
FTI Consulting (NYSE: FCN) also expects to collect fees of $260,000 for Digital Domain's first month in bankruptcy, $210,000 for the second month, $180,000 for the third month and $130,000 a month after that.
Sound steep? It's a great deal, argued Michael Katzenstein, a senior managing director at FTI Consulting's New York office, in a Sept. 11 letter to a Digital Domain executive.
"The monthly fee provided for the services of the Initial Team is a deeply discounted fee that is less than the fees that the client would incur if FTI were to bill it on an hourly basis," Katzenstein wrote.
Katzenstein wrote that he and another FTI senior managing director normally charge $895 an hour, while the firm's managing directors charge $715 to $745 an hour, and directors bill $560 to $695 an hour.
FTI Consulting also expects to be reimbursed for expenses, including phone bills, overnight mail, messengers, travel and meals.
The bankruptcy court has yet to approve the proposed fees, an FTI spokesman said.
Katzenstein has been appointed chief restructuring officer of Digital Domain. His tasks include overseeing cash flow and working capital, dealing with lenders and managing the sale of assets.
When Digital Domain filed for bankruptcy, Katzenstein said the company had lined up a buyer willing to pay $15 million for the studio. That price would have generated a completion fee for FTI Consulting of only $100,000.
FTI's fees were designed to generate a bigger reward for a larger sale price. The top bonus came for fetching more than $25 million: a reward of $1.04 million, plus 10 percent of any sum exceeding $25 million.
Port St. Lucie-based Digital Domain hired FTI Consulting Aug. 10. The company filed for bankruptcy protection Sept. 11.
In a letter outlining FTI's work on the Digital Domain bankruptcy, the company said it provides Katzenstein and four other executives on "a substantial full-time basis, subject to other existing client and FTI commitments."
FTI's take from the Digital Domain bankruptcy is a small part of its overall financial picture. The firm reported a profit of $104 million last year on revenue of $1.6 billion.
FTI isn't the only firm collecting fees after Digital Domain's demise. Among the hourly fees for attorneys representing the debtors are $955 for Robert Feinstein of New York and $855 for Debra Grassgreen of Los Angeles. Bruce Leonard, an attorney in Canada, gets $885 an hour in Canadian dollars. The attorneys also are reimbursed for their expenses, including "working meals."
The city of West Palm Beach said it's paying its bankruptcy attorneys $375 an hour to represent the city in its attempt to retrieve a 2.4-acre parcel it deeded to Digital Domain.
Digital Domain filed for bankruptcy protection in federal court in Delaware. Ivan Reich, a bankruptcy attorney at Gray Robinson in Fort Lauderdale, said the Delaware court is known for approving generous fees.
"It's not out of the ordinary in that jurisdiction," Reich said. "If it were in this jurisdiction, it would be a little steep."
When West Palm Beach-based hearing aid seller HearUSA filed Chapter 11 last year in bankruptcy court for the Southern District of Florida, the top attorney fee was Paul Singerman's $595 an hour, according to court filings.
Digital Domain's former chairman, John Textor, negotiated $135 million in state and city incentives to build a film studio in Port St. Lucie and a film school in West Palm Beach. The film studio and part of the school closed this month, marking the largest failure in the state's history of providing public incentives to private employers.
Most Popular Stories
- Apple Wants Samsung to Pay $22M for Patent Dispute Legal Bills
- Twitter Coming to Phones Without Internet
- NASA Fellowships, Scholarships Bring Diversity to Workforce
- Dish Network Leads 2013 Top 50 Advertisers List
- Networks Vie for U.S. Hispanic TV Viewers
- Ad Counts Rise in 2013 for Hispanic Magazines
- Entravision Initiates Quarterly Cash Dividend
- Jobs Report Brings Cheer As Unemployment Drops to Five-year Low
- Warner Bros. Unleashes 'Hobbit: Desolation of Smaug' Merchandise
- Shanghai Smog Forces Factory Shutdowns