Law Department Management Blog
Here’s an item for the “go-figure” bucket: a general fired for processing legal fees late?
As reported in the Fin. Times, Oct. 17, 2008, Michael Mocniak, was the general counsel of Calgon Carbon during 2005. The Financial Times reports that “Mr. Mocniak left Calgon in 2006 after an internal audit discovered that – according to the company – late processing of legal service invoices had cost it $1.2m the previous year.”
Something doesn’t make sense or this is an example of the error of post hoc ergo propter hoc. Law firms do not charge interest on delayed payments, or if Calgon’s firms did, the penalties didn’t hit seven figures. I can understand that if accrual numbers for 2005 had been $1.2 million too low and the CEO and CFO went berserk over that amount hitting in 2006, they would be angry, but to fire a general counsel for that financial misstep would be extreme. The company’s first quarter 2006 release reported that “Legal expenses for the first quarter of 2006 were $0.9 million higher than for the comparable period in 2005,” which doesn’t suggest such a calamitous over-run.
Calgon Carbon reported revenue of close to $300 million for 2005 and it was steadily losing money, so a million dollars had significance. Still, it appears something else triggered Mocniak’s department than dilatory payment of law firm invoices. “The audit revealed invoices for certain legal services totaling $1.4 million were not recorded as expenses.” According to the Pittsburgh Tribune-Review</em> on March 28, 2006.
Aha, the fatal error of the general counsel may have been improperly capitalizing legal fees. Accounting wrongly for legal fees can be career threatening (See my post of March 18, 2007: accounting terms with 15 references; Aug. 12, 2008: options expensed; Sept. 5, 2007: compensation over $1 million; and Dec. 3, 2007: cash basis and reserves and P&L.).