Costly Troubles

A number of people believe that the costs of corporate reorganizations are scandalously high. Last week they found a Federal judge who agreed with them. Passing on bills submitted in a Federal court in Wilmington, Del. in connection with the reorganization of National Department Stores, Judge John P. Nields slashed the claims of lawyers and trustees from $1,086,000 to $284,000. Said he: "It is apparent that the allowances claimed are excessive and in certain cases exorbitant."

National owns 18 department stores and specialty shops in big cities throughout the land. Most important are Frank & Seder's and Rosenbaum's in Pittsburgh, Frank & Seder's in Philadelphia, Bailey's in Cleveland, Lipman, Wolfe's in Portland. In boomtimes the chain's sales amounted to $75,000,000 annually. Early in 1933 the company slipped into receivership and a plan of reorganization was approved by the courts last spring.

Two of the trustees asked $55,000 each. Judge Nields allowed one $18,000, the other $12,500. The third trustee asked $110,000, was granted $27,500. Highest claim was made by a Manhattan lawyer named Jacob S. Demov, who had already received $25,000 as associate counsel to the trustees. In addition he asked $295,000, got $35,000.

One of the reasons for the high cost of corporate troubles, said Judge Nields, is the belief among attorneys that they are "entitled to greater compensation when employed in receivership or bankruptcy cases than when serving private interests."

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