Having outlived the good ol' boy era, when it had a hand in every deal, houston legal giant

Vinson & Elkins is entangled in a legacy of litigation from its past.

The Morans charge that V&E lawyers misled them on tax matters, raising a red flag over the possible loss of a federal estate tax deferral that beneficiaries had elected to take. The provision allows estates containing family businesses to defer taxes at favorable interest rates. The Moran estate qualified, so long as the businesses were not sold.

Reasoner says problems with the estate were caused by feuding among the Moran survivors, not by anything his firm did or didn't do.

"I think where we made a mistake was continuing to represent the executors when there was obviously such bad blood among the various factions of the family," he says. "Two of the executors testified [in Pat Moran's suit] that we had behaved in a completely proper fashion and to the great benefit of the estate. We were trying to help the executors solve difficult problems, and in retrospect we should have said, 'Sorry, too much controversy. People at each other's throats and we need to get out.' "

By the mid-eighties, Pat Moran had grown alarmed over reports of financial problems at First City and the bank's placement of more than $60 million in estate funds in short-term, low-interest deposits. According to court briefs filed by the Moran family for Vinson & Elkins' appeal, V&E lawyers justified the arrangement as necessary to provide liquid assets in case the estate should lose its estate tax deferral. During last year's trial of the Moran lawsuit, however, financial experts testified there was never a risk of losing the deferral and no justification for the unusual placement of the estate funds. With First City facing growing financial difficulties, the Morans say their estate funds were used to provide desperately needed cash assets. The V&E attorney who monitored the trial, Marie Yeates, contends that the record does not support the assertion that the estate was used to prop up the bank.

With questions raised about the financial condition of First City, Vinson & Elkins' Washington attorneys prepared an opinion letter declaring that the Moran assets "might" be protected in the event of First City's insolvency. Pat Moran contends the document was useless because it was strewn with qualifiers and conditions. Eventually, the firm billed $21,000 to the estate for production of the letter, which Moran says was intended for the benefit of First City, not his family. Moran had had enough, and proposed moving half the estate's funds out of First City to Texas Commerce Bank.

The Morans allege that a major undisclosed conflict of interest in V&E's representation of the estate was the presence of Evans Attwell, then V&E's managing partner, on the board of directors of First City Bancorporation. It's a claim at which the firm has scoffed, explaining that the relationship between the bank and the law firm was very well known.

"The Morans didn't just drop off the back of a watermelon truck," laughs one former V&E partner. "Everybody knew about the ties between the bank and the firm."

Attwell says his presence on the board was public knowledge, and, in any case, First City Bancorporation was simply a holding company for First City Bank and 19 other banks, and his position allowed him no input on either loans or trust management by the Houston bank.

First City reacted to Pat Moran's proposal to remove the estate funds by cutting off his line of credit, but the transfer of half the estate funds to Texas Commerce was eventually made, shortly before the First City Bancorporation was declared insolvent in 1987. (First City Bancorporation was recapitalized in 1988 under Chicago banker Robert Abboud, but eventually failed altogether and its assets sold to other financial institutions.)

With the approval of the executors, First City earlier had brought in an executive recommended by Vinson & Elkins to run the Moran companies. He was W.J. Wooten, a friend of Attwell's and a former consultant to First City, according to Pat Moran. The Morans claim Wooten took a number of actions that damaged the family companies, including moving the Moran Corporation, the umbrella for the estate's corporate assets, into expensive new headquarters in First City Tower, where both the bank and the law firm officed.

According to court documents, Wooten awarded himself a large bonus without the approval of all the executors, and in an act hugely symbolic to Ann Moran, appropriated the use of the Moran family's coveted Astrodome box for the Houston Livestock Show and Rodeo.

"My grandfather was one of the original founders, had tickets, and the employees of our companies used them for their kids," says Ann Moran. "[Wooten] took it and crossed off my grandfather's name and wrote, 'To the account of W.J. Wooten' and he gave his home address. And that was the end of a piece of property that belonged to the employees of the Moran Corporation and my family. In that one piece of paper it says [to me]: 'We are entitled to take whatever we want from these people and do what we want with it.' And that entitlement is what you see in their behavior."

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