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327(c)). The relationship should be thoroughly disclosed in the employment application and disclosed in
the declaration or verified statement.

Retention by Other Parties

An accountant or financial adviser may be retained by parties other than the debtor, the trustee or an of-
ficial committee in a bankruptcy proceeding, such as a secured creditor, an agent for a group of secured
creditors, an indenture trustee, an ad hoc group of lenders, a potential investor or purchaser or others.
Because the party retaining the accountant or the financial adviser pays the fees, court approval is not
required. Fee applications, however, may be required if the party seeks to recover the professional’s
costs under its agreements with the debtor.

Prepetition Retainers

Additionally, an accountant or financial adviser may request and obtain a retainer from its client. Any
retainers received prepetition and the unused amounts of those retainers must be disclosed in the em-
ployment application, as well as in subsequent fee applications. In some districts, retainers must be kept
in segregated, interest-bearing accounts upon the filing of a petition. Retainers received prepetition can-
not be applied to fees and expenses incurred postpetition without court approval. The receipt of a prepe-
tition retainer should not cause the accountant or financial adviser to be disinterested.

Multiple Roles

Many accounting and financial advisory firms provide a range of services, such as turnaround and crisis
management services, financial advisory services, management consulting services, information systems
services and claims management services. In some cases, the firm may provide services as adviser to the
debtor and in other cases, one or more of its staff serve as corporate officers and other members of its
staff fill positions as full time or part-time temporary employees. A protocol followed by the Office of
the U.S. Trustee provides that a financial advisory or accounting firm may render services in only one of
four roles in a particular bankruptcy case. The four roles are (1) crisis manager retained under Section
363 of the Bankruptcy Code, (2) financial adviser retained under Section 327 of the Bankruptcy Code,
(3) claims agent or claims administrator appointed pursuant to 28 USC 156(c) and any applicable local
rules, or (4) investor or acquirer. Once employed as a financial adviser or accountant pursuant to one of
the first three foregoing categories, an accountant or financial adviser may not be also employed in a dif-
ferent capacity in the same case and, as an investor or acquirer, shall not make any investments in the
debtor or reorganized debtor for three years.

Indemnity

Some courts will approve an indemnification provision for an accountant or financial adviser (excluding
for gross negligence, willful misconduct or fraud). The Office of the U.S. Trustee often requires addi-
tional language in any order approving the retention of the accountant or financial adviser regarding the
process for allowance and payment of any indemnification claims. In addition, the debtor is permitted to
indemnify those persons serving as executive officers retained under Section 363 of the Bankruptcy
Code as crisis managers on the same terms as provided to the debtor’s other officers and directors under
the corporate bylaws and applicable state law, including any insurance coverage provided by the debt-
or’s directors and officers liability insurance policy.

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