By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Ben DuBose
Normally, the news that a city department head was resigning would generate little interest beyond the City Hall press corps. But Harvard-educated lawyer Benjamin Hall III has not been your average city department head, and the crowd that showed up for his resignation announcement was a visible testament to that fact. Among those who packed Lanier's office to mark the former Vinson & Elkins lawyer's passage back to the private sector was a small group of men who constitute the foundation of African-American political power in Houston: state Representative Ron Wilson; Justice of the Peace Al Green, who heads the local NAACP; the Reverend Bill Lawson of Wheeler Avenue Baptist Church; HISD Superintendent Rod Paige; businessman Howard Jefferson; and others.
Many of the city's black leaders were initially skeptical of Lanier after the wealthy white developer first won election, but in the ensuing three years he has won their grudging admiration by his willingness to listen -- and act -- on their concerns. One of their primary concerns of late has been the way the city of Houston has historically shortchanged minority contractors, and only a few days before Hall's announcement some of the same men had marched through downtown Houston to highlight that and other grievances.
Almost two years earlier, Wilson had confronted Lanier by threatening to have the Legislature hold up the city's pending $500 million bond package unless Lanier promised to dole the funded projects evenly between African-American, Hispanic and Anglo contractors -- a threat that was withdrawn when Lanier promised to work to increase minority participation in city business.
The presence of Wilson and the others at Hall's going-away ceremony spoke quietly to one of the more unusual roles that Hall had played during his City Hall tenure -- that of Lanier's conduit to African-American leaders, a job that has involved the head of the city's legal department to an extraordinary and unprecedented degree in the dispensing of city contracts. It was a role that, at least until recently, seemed to work to the political advantage of both Lanier and his confrontational city attorney, who, should he one day decide to act on his barely disguised ambition to succeed Lanier as mayor, will have plenty of chits to collect.
That role as both enforcer and facilitator of the city's effort to spread its business to minority vendors also has been one that has contributed to Hall's image of being, as he cheerfully admitted during his resignation announcement, "reliably controversial." Last spring a representative of First USA of Dallas, a credit-card collection company, testified before City Council that her firm was passed over for a city contract because it did not heed the city attorney's directive to hire a particular minority subcontractor. The allegation was reviewed by both the police department's Public Integrity Review Group, which cleared Hall of any wrongdoing, and a Harris County grand jury, which took no action.
Hall, in a recent interview with the Houston Press, suggested that First USA just didn't understand who was calling the shots when it came to deciding which companies got certain city business.
"What they didn't understand," he said, "was that if Ben Hall wanted to go out and just say , 'I want Timbuktu to collect this and I don't care if Timbuktu is unborn,' the law permits him to do that."
Not everyone agrees with that interpretation.
The Press has learned that in the weeks leading up to his resignation, an ongoing review by the city controller's office had raised questions about the propriety of Hall's award of a subcontract on a $1.5 million contract for the collection of delinquent traffic tickets. According to documents obtained by the Press, Hall inserted language in the contract that guaranteed the subcontractor, Bayou City Enterprises, 19 percent of city funds paid on the contract -- although it appears, according to the controller's review, that another company was doing Bayou City's work.
The review also has determined, according to the documents, that Bayou City, which is owned by three prominent African-American attorneys, has been de-certified from the city's Minority, Women or Disadvantaged Business Enterprise (MWDBE) program, and is therefore ineligible to receive city business.
City Controller George Greanias declined comment on the review pending a response from Hall's office. But the Press has found that Hall may have tried to pressure another ticket-collection contractor into entering into a joint venture with a company owned by Robert Muhammad, a member of Lanier's ministers' advisory committee and the head of the local mosque of Louis Farrakhan's Nation of Islam.
In June 1993 that contractor, San Diego-based West Capital Financial Services Corporation, won the right to pursue warrants on unpaid traffic tickets that were from 210 days to 450 days delinquent. Last month, Hall's office sent West Capital president Mike Joplin a letter threatening termination of the contract unless it agreed to, among other things, "immediately increase its local service presence." Publicly available records and interviews with sources familiar with the contract indicate West Capital was to do that by going into business with Delinquent Recovery Inc., whose president, Robert Muhammad, had sent an unsolicited business proposition to the mayor's office shortly after starting the company five months ago.
A recent letter from West Capital to Muhammad rejecting the joint-venture offer asked the Nation of Islam leader to pass along "unending appreciation to City Attorney Benjamin L. Hall and Texas Rep. Ron Wilson for their assistance and direct commitment in negotiating your proposal with us." According to the sources, Hall and Wilson, who is Muhammad's attorney, told West Capital representatives on separate occasions that unless they found a way to cut Delinquent Recovery in on the contract, it would be canceled.
Hall, Wilson and Larry Miller, who oversees the collections contract as director of administration for the city's municipal courts department, deny West Capital was pressured to do business with Muhammad. Wilson refused additional comment on his role in Muhammad's business dealings, citing attorney-client privilege.
Hall and Miller argue that the joint venture was recommended as a way to improve West Capital's performance and increase revenue to the city. They contend that because the city's revenue from the contract had been dropping steadily, any proposal -- even an unsolicited one from a new company with no address, telephone or staff -- would be given consideration.
"All I know is that I want someone to collect the dollars, and that's what [West Capital] has been told," Hall says. "If it's an issue of long-standing [companies] versus new, that's not impressive. If we can get some new people who are hungry, who don't have any money and who'll say, 'I'll collect it,' short of breaking people's knuckles -- man, all we want is the money."
As far as collection jobs go, pursuing ticket scofflaws is a relatively new field. Like most cities, Houston had taken its chances on catching those who don't pay their fines by nailing them on repeat violations. But a few years ago, seeing a potentially lucrative source of revenue going to waste, the city began looking for companies interested in collecting on unpaid tickets.
In 1992, newly elected Mayor Lanier's transition team split the city's existing ticket-collection contract into two parts. The idea was that the city would realize more revenue by having one company collect tickets up to 210 days delinquent and another to collect more outstanding delinquencies.
However, the combination of a new business opportunity and new contracts (with fees ranging from 28 percent to 40 percent of some $66 million in delinquent fines) had another effect: ticket collection has become the contract-of-choice for politically connected entrepreneurs.
One such beneficiary is Municipal Collections Inc. In March 1993, Municipal Collections was awarded one of the ticket-collection contracts, though the company had no office, computer, telephone systems or accounting capability. The ink hadn't even dried on the company's articles of incorporation when it won the contract over a half-dozen established companies -- thanks to Miller's amendment to the city's original "request for proposal" that waived a requirement that the successful bidder have five years experience in the collections business. Even though Municipal Collections had used four different addresses and phone numbers since submitting its bid, Miller somehow managed to inform the company that it had won the contract.
Municipal Collections has indeed performed for the city, which has realized more than $5.5 million in revenue from the company's efforts. But at the time of its initial proposal to the city, Municipal Collections primary asset appears to have been its well-connected principals: William E. Wells, a former municipal court judge and colleague of Miller's who was convicted in 1990 for embezzlement and fraud after he converted an elderly legal client's Social Security checks to his own use; Peary Perry, a private investigator and former Lanier campaign volunteer who at one time did security work at apartment buildings and banks owned by the mayor; and Clyde Wilson, another local private investigator.
Peary and Wilson have been linked to a Channel 13 story on the eve of the 1991 mayoral runoff that raised questions about whether Lanier's opponent, Sylvester Turner, was involved in an insurance scam perpetrated by one of Turner's legal clients. Turner has sued the television station for libel. Channel 13's story, and the suggestion that it may have originated with the Lanier campaign, was something of sore spot between Lanier and the city's African-American leadership early in the mayor's tenure.
One impressive aspect of Municipal Collections' proposal was its vow to "greatly exceed" the city's affirmative action goals for minority participation in city contracts. The company listed on its proposal five minority-owned firms whose services they wanted to employ. However, none have received anything close to the amount of business promised them. Instead, at Hall's direction, Municipal Collections is obligated to pay 19 percent of its fees from collections to Bayou City Enterprises.
Hall recently admitted that the written promise to pay a share of the fees to Bayou City -- a company started by attorneys John Davis, Ray Shackelford and Walter Strickland a few weeks before Hall drafted the contract -- is "unusual."
But the city attorney has offered contradictory explanations for how that arrangement came about. In late October, he told the Press that it was a "joint-venture kind of deal" worked out by Municipal Collections and Bayou City. More recently, he suggested the city insisted on the guarantee because Municipal Collections did not submit an affirmative-action plan. When it was pointed out that the company's proposal had addressed those requirements rather handily, Hall experienced a rare loss of cool.
"I don't care who they proposed," he said. "They got Bayou City Enterprises. Now if anything is nefarious about that, that's who they have to deal with."
Calls seeking comment from officers of Bayou City and Municipal Collections were not returned. But a third explanation from Hall suggests that Bayou City, which was a losing bidder on the contract won by Municipal Collections, either asked for -- or was offered -- a special subcontracting deal as a consolation prize. "All we were going to have was feuding between the two of them unless each of them thought that they had equal dignity to work in the contract together," Hall explained. "They came to my office and they worked out an agreement and said that's the way they would work with one another."
Hall said Bayou City handled the printing and mailing of notices for Municipal Collections. But, according to documents in the city controller's review, Bayou City, in fact, provided "no service of value to the city, or for that matter to [Municipal Collections] ...." The review found that another company -- Premier Printing Inc. -- apparently carried out those duties, and Bayou City acted as nothing more than a "pass-through" -- meaning it paid Premier Printing with city funds from its guaranteed cut of the Municipal Collections contract.
Last week, the city controller's office began withholding payment to Bayou City. But by then, the firm had been in line to receive more than $420,000 from the city through Municipal Collections.
Hall appears to have taken a similar approach in his efforts to cut Robert Muhammad in on West Capital's contract to collect tickets that are delinquent for more than 210 days. Muhammad had sent an unsolicited proposal to Lanier's office in July, suggesting that the city create a third contract, this one to collect some 500,000 tickets that are more than 450 days delinquent. He offered to start a business to collect those tickets, which are so old and difficult to track down they are returned to the city.
"I was thinking to myself at the time," Muhammad recalled recently, "'How can somebody locally try to make a dent in whatever portion he can and serve the purpose of employing people? I know people who are bondable, trustworthy, don't use drugs, don't smoke, don't drink.'
"I thought, 'Man, this can work.'"
Muhammad, who reportedly has several years of experience in the collections business, says he received no response from Lanier's office. Then, at the NAACP Freedom Fund Banquet in early November, Muhammad raised the proposal in an informal chat with the mayor, who suggested that he resubmit his plan. The NAACP function was held at about the same time as another gathering, this one on November 3 in Hall's office. At the meeting were representatives of West Capital, who were told by Miller and Hall that the company was in danger of losing its contract. How West Capital could avoid that fate was spelled out the following day in a letter faxed from the city attorney's office to West Capital president Mike Joplin.
According to the letter, one of the problems West Capital allegedly had was with its affirmative-action plan. "They didn't have the minority component here in Houston doing anything in terms of meaningful collections, except in a support role," Hall says. "They had to improve their minority participation here so that local people could actively collect the tickets."
However, the city's original "request for proposal" for the contract said nothing about assigning specific duties to minority subcontractors. Moreover, a report presented by West Capital in May shows that from August 1993 through April 1994 the company paid more than $189,000 -- or about 25 percent of its fees -- to businesses owned by women and minorities; 21 percent, or about $153,000, was paid to Houston firms (the city's minority-participation goal on such professional service contracts is 19 percent).
But the real problem with West Capital, according to Hall and Miller, is the amount of revenue the company has produced for the city. "I was unhappy with the numbers that were coming in," Miller says. "I told West Cap the amount of money that I had to have per month, net to the city, and that they had to do that or we're going to have to go somewhere else."
In its November 4 letter to Joplin, a copy of which was provided to the Press by Hall, the city demanded that West Capital immediately increase its monthly net revenue to the city to $175,000. That was at least the third increase in revenue demanded of West Capital since it was awarded the contract.
Yet while the city kept demanding more revenue, data provided by Miller shows that the municipal courts department was simultaneously decreasing the number of delinquent tickets given to the company to collect.
From January through June, West Capital was assigned 245,879 new delinquencies to collect. West Capital's net revenue to the city during that period averaged about $170,000 a month -- more than enough to meet the city's original standards. However, from July through the first half of this month, the number of assigned delinquencies to West Capital dropped almost 60 percent. As a result, average monthly revenue to the city dipped to about $107,000; in November, the city's net gain on the West Capital contract was a paltry $48,268.
Hall and Miller have offered contradictory accounts of when Robert Muhammad's Delinquent Recovery Inc. was mentioned as a solution to West Capital's "problems."
When first contacted by the Press, Miller said he was unaware of another company's interest in a collection contract. Asked specifically if he had ever seen a proposal from Delinquent Recovery, he said there would be no reason for him to since "we don't have a [request for proposal] out on the street right now." Asked if options were being considered to either replace or supplement West Capital, Miller replied, "No, not to my knowledge."
When the Press informed Hall of Miller's comments, the city attorney suggested a three-way call with the municipal courts administrator. "Now that we have Larry on the phone, let's just make sure that all of us understand what's been said," Hall said by way of opening the conversation. He then laid out a version of the November 3 meeting suggesting that everyone at the table knew that Muhammad's company stood ready to help West Capital. Hall said he recalled telling West Capital, "I would propose that you get with Delinquent Recovery and increase your minority participation and then come back and see if we can reach an agreement along those terms and guarantee the city $175,000 worth of business."
As the conference call with the Press continued, Hall then said, "Larry, correct me if I'm wrong, did I hand you a copy of the proposal?"
"All of that is absolutely correct," Miller replied.
Miller blamed the apparent contradiction of his earlier comments on a memory lapse. "The difference is I don't remember the part about the two of them working together. I learned that sitting here listening to Ben. And when he said it, I remembered it."
In separate interviews, Miller and Hall also offered conflicting statements on what right Muhammad had to receive a city contract without following city policy on competitive bidding. During an interview in his City Hall office, Hall said that Miller "has the ability to choose whomever he wanted to without even going back to council." Hall added that, while the city prefers the competitive process because it usually results in a better deal, "the law does not require that [professional service contracts] be competitively bid or competitively proposed."
"I'll be honest with you," he continued, "we have the right to select anybody we want .... I don't have to get up here and go through some big elaborate process that satisfies all of this, quote, 'sense of fairness' that you all like to talk about."
Miller, however, had a different understanding of city policy. When asked if his department would be required to issue a public request for proposal if a contract for 450-day delinquencies was to be awarded, he replied, "Absolutely."
Greanias spokeswoman Maryann Young, addressing the practice of inserting firms into contracts without bids or competitive proposals, says, "Good government means the jobs should go to the most qualified firms offering the best deal for taxpayers. Because we fully support the intent of the MWDBE ordinance, we want it to maintain a level of integrity worthy of everyone's support."
West Capital officials refused to publicly discuss their troubles with the city but issued this statement: "We stand by our year-end report, which was distributed to City Council, the city attorney, the mayor and members of the Municipal Court system prior to the contract renewal. We're shocked and dismayed that the city attorney would claim that we are a non-performing company. The numbers do not indicate such."
On November 16, Robert Muhammad faxed a letter to West Capital, proposing that his company and West Capital launch a joint venture. At the time, Muhammad's Delinquent Recovery Inc. still did not have its own office or telephone numbers. The address and phone numbers listed on the company letterhead are those of Ron Wilson. (When the Press phoned the number recently and asked for Delinquent Recovery Inc., a woman replied, "You have the wrong number, sir.")
Although Delinquent Recovery apparently lacked the resources to mount a viable collections operation, Muhammad was confident enough to ask for not only the right to collect 450-day delinquent tickets but for a substantial portion of West Capital's existing contract as well.
For instance, Muhammad requested that his company be given "direct access" to $2 million worth of West Capital's backlog of 210-day to 450-day delinquent tickets each month. He also asked that West Capital pay Delinquent Recovery 40 percent of its fees generated from collection of tickets that are 240 to 449 days delinquent.
In addition to wanting a big piece of West Capital's action, Muhammad also asked West Capital to provide "technical and resource support necessary to perform the work" and to handle Delinquent Recovery's accounting and collection statistics.
To make it official, Muhammad asked that West Capital deposit $5,000 in escrow to create the "DRI and West Capital Financial Services Corp. Joint Venture." He also asked West Capital to issue a letter of intent for a joint venture within 24 hours and to execute a contract with his company within a week.
Muhammad admits that his proposal was "pretty blanket. I mean, I just said, 'Well, I'll ask for the stars and maybe they'll give me the moon.'"
In exchange for the financial equivalent of a celestial body, Muhammad offered to collect 22 percent of West Capital's monthly assignment. He also said he was willing to pay West Capital 40 percent of whatever 450-day plus tickets he managed to collect -- tickets that would normally be returned to the city because they are considered nearly impossible to catch up with.
Muhammad also made the rather curious offer to provide West Capital with "ongoing consultation as it relates to city, county and state political developments." When asked to explain that offer, Muhammad at first said he was going to do "some marketing." When pressed further, the minister was unusually frank.
"Look, if they were all purely business developments, you and I wouldn't be on the phone. If there wasn't an element of politics, meaning what's coming up, what's available, who knows who and who knows what and how can we get in the business... Okay? Who can we introduce to whom, that kind of thing, you know."
And in those terms, Muhammad indeed has some contacts: the articles of incorporation for his company were drawn up by lawyer John Davis, a principal in Bayou City Enterprises -- which, according to the controller's ongoing review, was guaranteed a chunk of the city's other ticket-collection contract by Hall.
West Capital officials were exposed to more political clout when they agreed to meet with Muhammad and Wilson three days after receiving Delinquent Recovery's joint-venture proposal. Wilson confirmed that he took part in the discussions as Muhammad's attorney, but he declined to discuss details of the meeting.
Though no agreement was reached that evening on Muhammad's proposal, West Capital officials appear to have left the meeting with the understanding that their contract was in jeopardy if they didn't make some kind of deal with Muhammad. On November 28, West Capital sent the minister a counterproposal, making reference to the city's "interest in implementation of a grassroots collection effort." West Capital proposed that Muhammad set up shop with Burney & Foreman, a law firm that is one of West Capital's minority subcontractors, which would then "employ additional collectors under Robert Muhammad and DRI."
West Capital proposed that, as a subcontractor, Muhammad would receive 30 percent of the company's 40 percent fee for every ticket collected from violators with confirmed addresses and 35 percent of those tickets with unconfirmed addresses. Once Muhammad approved the contract, he was to schedule a conference with West Capital president Joplin.
That meeting never took place. On December 8, Joplin sent Muhammad another letter breaking off negotiations. "It is unfortunate that our counterproposal did not meet your needs at this time," he wrote. Muhammad insists that he never had the chance to respond to West Capital's offer. "To me, everything is still on the table," he says.
But apparently Muhammad was not happy with the offer to be a subcontractor to a subcontractor. He says that when he sent his unsolicited proposal to the mayor's office, he was looking "to get up and do something for myself."
"The philosophy that I operate under, my religious philosophy, is that we don't consider ourselves no minority to anybody," he says. "We want an equal opportunity with everyone. So I did not go in there proposing to be a minority or a joint venture with anyone."
Despite West Capital's final letter to Muhammad conveying the company's "unending appreciation" to Hall and Wilson for "negotiating" Muhammad's proposal, Hall says he didn't "directly negotiate" with anyone.
"Apparently, when they got together, that didn't work out," he says. "There were references [by West Capital] to Louis Farrakhan and the Muslim faith and Robert Muhammad came back and said, 'City, I'm going to be concerned about you all if you are discriminating against my religion.'"
"So West Capital was in a situation where they're still not performing as represented, and I was informed to give notice that we were going to cancel the contract."
That has yet to happen, though Hall acknowledged two weeks ago that he had already drafted a termination letter to West Capital. Sources say it was never sent because on November 30 -- two days before Hall's resignation and while West Capital and Muhammad were still trying to come to terms -- Larry Miller took a phone call in his municipal courts office.
"Joplin called Miller," one source says, "and basically gave him the ultimatum, 'Look, we don't do business the way you want us to do business. If you don't let this contract run out in June, when it's supposed to, I'm afraid I'm going to have to go down to the courthouse steps and hold a press conference.'"
That source says Miller told Joplin he would have to contact Lanier's office and get back to him.
Both Hall and Miller confirm that West Capital is now in no imminent danger of having its contract canceled. Miller says he has "reassigned some cases" back to the company for collection, with the promise from West Capital that it would increase revenue to the city. Lanier did not respond to requests from the Press for an interview.
The collection contract will no doubt be canceled in June, when a new "request for proposal" will be issued by the city, Hall and Miller said.
Hall added that he "would love to see Robert Muhammad's company do business with the city, because I think he'll collect the money."
Muhammad's future dealings with the city will have to be brokered by somebody else, as Hall will be gone from City Hall when the New Year dawns. And while both he and the mayor were all smiles at their news conference announcing Hall's resignation, his departure -- which both claimed was voluntary -- comes after weeks of mounting frustration by Lanier with his city attorney.
That frustration showed last month when Lanier publicly questioned Hall's attempt to skirt the city charter by settling a $150,000 lawsuit without City Council approval. A week later, Lanier removed from the council agenda amendments Hall had proposed to allow his legal department to make future lawsuit settlements without council's approval. Lanier acknowledged the items were placed on the agenda without his knowledge.
A source inside City Hall says Lanier was so angered by Hall's "secret settlement" maneuver that he called the city attorney in for a closed-door meeting.
"The mayor basically told him who's the conductor of this train, and it ain't Ben Hall," the source says.
Hall will now conduct his own train, one that could eventually route him back to City Hall. But for now, at least according to Hall, it's a gravy train on a one-way track. During his farewell announcement, Hall's usually smiling countenance turned a bit sheepish when he was asked if his history of controversy was behind his departure. No, he explained, money -- "seven figures" worth -- was the motivating factor.
A week later, Hall would announce his intent to join the firm of high-powered personal injury litigator John O'Quinn. The announcement came as little surprise. Lanier reportedly had suggested last month -- as the review by the controller's office was questioning Hall's awarding of the subcontract to Bayou City -- that O'Quinn approach his city attorney about a job. And it's not like Hall and O'Quinn haven't worked together before: Hall hired O'Quinn to help the city in a dispute with a pipeline company over unpaid taxes, for which O'Quinn stands to earn a sizable contingency fee from a $14 million settlement.