April 17 (Bloomberg) -- Solutia Inc., the bankrupt nylon and plastics maker, can pay about $197 million to lawyers and other professionals, including $57 million to law firm Kirkland & Ellis, over objections from the U.S. government.

U.S. Bankruptcy Judge Prudence Carter Beatty in Manhattan said today that law firms and consultants were entitled to most of what they'd requested. The U.S. Trustee, an arm of the Justice Department that oversees bankruptcies, had objected to some requests, citing exorbitant expenses and Kirkland's alleged failure to disclose a conflict of interest with Citigroup Inc.

``I'm not prepared to dock the fee applications for these issues,'' Beatty said, telling Greg Zipes, a lawyer for the U.S. Trustee, that ``a lot of what I see is penny-ante moralism. People getting moral about technical issues.''

Beatty also approved most expenses, saying that lawyers were obligated to take car services so they wouldn't get sweaty, and treat clients to meals that weren't ``hot dogs.''

The judge didn't rule on a request from consultant Rothschild Inc. for $10.5 million from December 2003 to February 2008, which included a request to reimburse a meal for $1,003.14 singled out by the trustee. The meal, at an undisclosed restaurant, was for Solutia Chief Executive Officer Jeffrey Quinn and an official from another company.

St. Louis-based Solutia, which filed for bankruptcy five years ago, settled litigation in February with Citigroup Inc., Goldman Sachs Group Inc. and Deutsche Bank AG, allowing it to emerge from bankruptcy after lenders had threatened to pull a $2 billion loan it needed to emerge from court protection.

Court Documents

The U.S. Trustee said in court documents that the case wasn't entirely successful because retirees' future distributions depend on the future health of the company.

Retirees are predicted to recover 70 percent of their $35 million claim. Unsecured noteholders received around 88 percent of their $455.4 million claim and general unsecured creditors got around 83 percent of a claim of between $317 million and $367 million.

``Success does not entitle professionals to a blank check,'' the trustee said.

The U.S. Trustee singled out Kirkland & Ellis's request for fees for work done from 2005 to 2008, saying it should have been reduced by $6 million due to a failure to disclose that because New York-based Citigroup was a client, it couldn't sue the bank in connection with Solutia's exit loan. The conflict was undisclosed as Solutia brought in an outside law firm, Quinn Emmanuel Urquhard Oliver & Hedges, to sue the lenders.

``Almost every big firm in this city is conflicted out to Citibank,'' Beatty said. ``Solutia was in a life and death struggle at that moment. If they didn't get that money, Solutia was going to go down,'' Beatty said, adding that Quinn Emmanuel's work was ultimately what saved the case.

Deal to Emerge

As part of Solutia's deal to emerge from bankruptcy, former parent company, Monsanto Co., which spun off the company in 1997, agreed to waive around $30 million in legal expenses in exchange for Solutia's waiver of future fees it expected from Monsanto.

The case is In re Solutia Inc., 03-17949, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York bankruptcy court at tkary@bloomberg.net.

Last Updated: April 17, 2008 14:11 EDT