Firm wants $1M for 8 weeks of work with bankrupt Mercy

IOWA CITY — With Mercy Iowa City already inciting objections to the more than $1 million it has accrued in attorney fees tied to its Chapter 11 bankruptcy proceedings, the hospital’s interim management and restructuring firm last week submitted another $1 million bill.

The $1 million charge from New York-based ToneyKorf Partners covers its work for eight weeks between Aug. 7, when Mercy filed for bankruptcy, and Sept. 30. It doesn’t include any hours worked since, or the more than $3.2 million Mercy paid ToneyKorf for bankruptcy-related work — before it’s actual filing in August.

The new bill incorporates travel and “senior management contractual discounts” that shave off $206,405. Without the discounts, the eight-week bill from ToneyKorf would have reached $1.2 million for the work of seven individuals.

“Expenses represent amounts recorded to date and do not represent full amounts incurred,” according to a footnote in the bill related to $60,815 spent on plane tickets, hotels, food and “miscellaneous” items. “Further expenses may be reported after this reporting period.”

Mercy’s dwindling resources — threatening its ability to stay open through a transition to new ownership — upended the results from a first bankruptcy auction that would have sold the hospital to bondholder Preston Hollow Community Capital and master trustee Computershare.

Although the bondholder submitted the highest bid — deemed the winning bid — it did not commit to cover Mercy’s operating losses without first draining the millions coming from Mercy’s nonprofit foundation. Because the other bidder — the University of Iowa — promised not to touch the foundation dollars, thus giving Mercy more room to cover swelling attorneys and management fees, the hospital flipped its auction results to make UI the winner.

Breaking down the new ToneyKorf bill, Chief Restructuring Officer Mark Toney — making $950 an hour — billed Mercy $363,137 for the 382 hours he worked over the eight-week period. Chief Financial Officer Jim Porter, at $725 an hour, accumulated $266,075 over the two months.

Much of the 1,714 hours ToneyKorf billed Mercy for over the two months were spent on “business operations” — with ToneyKorf representatives accounting for four of nine members of Mercy’s leadership team, according to its website.

Another 331 hours were billed for work on the asset sale and bankruptcy reporting — amounting to more than $226,400. ToneyKorf also billed Mercy $63,190 for “travel time,” including nine flights for Mark Toney — largely to and from Portland, Maine. Toney has a home in Maine, according to the firm’s website.

The firm charged Mercy more than $19,000 for “legal fees regarding retention of ToneyKorf.”

Acting U.S. Trustee Mary Jensen earlier this month filed an objection to the nearly $1 million that law firm McDermott Will and Emery billed Mercy for just the first three weeks in August.

McDermott recently filed another bill for $650,000 for its work in September — with 14 of its 23 attorneys on the Mercy case charging more than $1,000 an hour. A second law firm in Cedar Rapids has billed Mercy tens of thousands, along with an investment banker.

A U.S. Bankruptcy judge has set a hearing on the McDermott Will & Emery compensation request for Nov. 28.

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