U.S. LAW FIRM BILLS OTTAWA $10.9M FOR SOFTWOOD HELP

Record year for billings: Drug prosecutions and trade spats dominate legal
ledger

Cristin Schmitz Southam News

The federal government paid $10.9-million to a U.S. law firm mostly to act
on its behalf last year in the battle over softwood lumber, making it the
highest fee the Canadian government has ever paid to a law firm in one year.

Weil Gotshal & Manges, the blue-chip Washington, D.C., firm that has
represented Canada in several international trade disputes, including the
ongoing tangle with Brazil over aircraft subsidies, billed for more than
double the previous record of $5-million.

The massive payment was the largest single chunk of the Canadian
government's legal tab last year, which hit a record $63-million.

The cost of legal work by private law firms for the federal government, in
litigation both for and against the Crown, shot up 15% in 2001-2002,
internal Department of Justice records show.

Most of the increase was in legal work on international trade disputes for
the Department of Foreign Affairs and International Trade. That ministry
will pay out $13.7-million for legal representation in the fiscal year
ending March 31, 2002 -- more than triple the $4-million it spent in the
previous year, according to projections. The totals are not yet known
because bills will continue to arrive for several months.

The Crown's legal bill has increased 15% per year, on average, over the
past three record-breaking years, The Lawyers Weekly reports in its annual
survey of Crown agents this week.

As always, drug prosecutions are the single most costly item on the Crown
agent tab. Last year, the government spent an estimated $24-million -- up
nearly 20% from $20.1-million the year before. About two-thirds of the
prosecution expenses were incurred on the West Coast, where world-famous
"B.C. bud" marijuana is grown and distributed.

In British Columbia, the RCMP has been laying more drug charges outside
urban areas, in northern and smaller communities, said Marius Nault, acting
executive director of the agent affairs unit of the federal prosecution
service. The drug cases are also more complex, with greater emphasis on
large-scale marijuana grow operations and trafficking rather than drug
possession charges, he said.

A total of 810 lawyers and 239 law firms, most with Liberal pedigrees, act
as standing Crown agents on the government's drug, tax, fisheries and other
criminal prosecutions.

An undisclosed number of ad hoc legal agents across Canada also handle
civil cases.

It was U.S. attorneys, however, who were the top billing firms to the
federal government in 2001-2002.

U.S. law firms represented Canada in the latest legal battle (dubbed
"Lumber 4") in the long-running, astronomically expensive softwood lumber
trade war. Half-a-dozen U.S. law firms also represented Canada in its
costly and speculative $1-billion civil action against U.S. big tobacco for
alleged cross-border cigarette smuggling.

Weil Gotshal & Manges co-ordinates legal challenges under NAFTA and the
World Trade Organization to the combined U.S. tariff of 27.34% imposed on
Canadian softwood lumber, which is expected to cost Canada hundreds of jobs
and some $2-billion a year.

Last year, 15 attorneys and legal assistants worked on the investigative
phase of the case, said senior partner Jean Anderson, who predicted costs
will drop slightly this year.

The No. 2 Crown agent was the Calgary firm of Macleod Dixon, which billed
$3,159,065 for a team of 10 lawyers and four paralegals. They are defending
the government in a historic Federal Court action brought by the Samson,
Ermineskin, Montana and Louis Bull Indian bands, which started May 1, 2000,
and could continue for several more years.

The bands are suing the Crown for damages and $1-billion for the
government's alleged mishandling of billions of dollars in revenue from the
oil reserves of Pigeon Lake, south of Edmonton, the fourth largest oil
field in Canada. Some of the alleged misdeeds go back to an 1886 treaty.
The case, which could eventually redefine the relationship between First
Nations and the Crown, involves sifting through more than 250,000 documents.

Last year, the federal government spent $4.7-million defending itself
against land claims by aboriginal people and suits alleging physical and
sexual abuse of aboriginal children in government-sponsored residential
schools.

The Department of Justice projects that in 2001-2002 the government will
have spent $29-million prosecuting criminal cases (up from $25-million the
year before) and $22.4-million on civil litigation (down from $24.8-million
in the previous year).

The department with the highest tab, at $26.8-million, was the Department
of Justice, which oversees drug prosecutions and the tobacco smuggling
suit. Other big spenders included Human Resources and Development Canada,
at $4.8-million; the Canada Customs and Revenue Agency, at $3-million; and
the Department of Fisheries and Oceans, at $1.8-million.

By region, spending on Crown agents for 2001-2002 was: $16.9- million in
the United States and other foreign countries; $16.8- million in B.C.;
$11.5-million in Ontario; $8.5-million in the Prairies; $6.2-million in
Atlantic Canada; $2.9-million in Quebec; and $200,000 in the North.

The government also spends millions of dollars for the hundreds of staff
lawyers it employs.