Penn State's legal, PR bills could run into the millions

STATE COLLEGE, Pa. — One of the first things Penn State University did after learning that former football coach Jerry Sandusky and two university administrators had been charged in a sex abuse scandal was to hire a public relations firm.

It quickly added a second PR firm and two law firms to its payroll.

Despite requests from McClatchy, the university so far hasn't released information about how much it could end up paying those firms for their work, whether there are any specific agreements in place regarding those costs, what such agreements cover or how long they would remain in effect.

A back-of-the-envelope calculation shows the lawyers' fees could run into millions of dollars.

The board of trustees has retained the law firm Reed Smith and the public relations firm Ketchum.

The trustees' special investigative committee — which is spearheading the internal investigation into how the university handled the allegations that Sandusky sexually abused eight boys — has retained former FBI Director Louis Freeh and his law firm, Freeh, Sporkin & Sullivan, to conduct the investigation and determine what changes need to be made at the university.

Freeh and Kenneth Frazier, the trustee heading the committee, said at a Nov. 21 news conference that they didn't know how long the investigation could last or how much it would end up costing.

Penn State spokeswoman Lisa Powers said Friday that the chairman and vice chairman of the board can enter into contracts without a vote at a public meeting.

Craig Staudenmaier, a Harrisburg, Pa., attorney who is general counsel to the Pennsylvania Freedom of Information Coalition, noted that the university is the subject of a number of investigations. He said generally law firms charge by the hour for work done by senior attorneys, law clerks and paralegals. That adds up to hundreds, if not thousands of hours.

"I think it will be in the millions of dollars by the time all is said is done," Staudenmaier said.

According to the Legal Intelligencer, Reed Smith is the largest law firm in Pennsylvania, with gross revenue of nearly $1 billion in 2010. The median hourly fee in Pennsylvania for partners with 11 to 20 years of experience was $330 in 2010.

Nationally, a 2010 survey by the National Law Journal of the 250 largest law firms showed a wide variation in billable rates, some coming in as high as $950 and $1,035 an hour.

The question of how much the university may have to pay as a result of any lawsuit stemming from the scandal — and for legal fees to defend against such suits — was raised this week by a member of the Pennsylvania Senate.

Sen. Mike Stack, a Philadelphia Democrat and minority chairman of the Senate Banking and Insurance Committee, sent Penn State President Rod Erickson a letter Thursday asking whether the university has enough liability insurance to cover those costs, and warning against the use of tax dollars to cover such costs.

"We appreciate your cooperation as we grapple with an understanding of the sexual assault allegations and where to go from here," Stack wrote. "I'm sure you would agree, my heart and sympathies lay with those who have been affected by these terrible acts. With that said, I have concerns about the financial future of the (u)niversity that I'd like to bring into question. I am not alone in my concern."

During a town hall meeting with students Wednesday night, Erickson said that Penn State, like its peer universities, is insured for the actions of directors and officers and has general liability insurance. He did not provide further details.

Keith Trivitt, associate director of public relations at the Public Relations Society of America, said monthly retainers for PR firms can run from $10,000 to $20,000. In a situation like Penn State's, he said, a PR agency would likely receive a project fee rather than an ongoing retainer.

He said hiring outside public relations agencies is generally something that is done in a corporate environment. It's becoming more common in this digital age, he said, when crises can quickly snowball.

He said it's probably good practice in the case of Penn State "because the situation has gone so far beyond what Penn State or anyone else thought was possible."

(Danahy reports for the Centre Daily Times of State College, Pa.)


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