By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
Moreover, under the HISD contract, any legal fees Heard, Goggan collects on bankruptcy cases are subtracted from the 33.07 penalties awarded. And in cases involving federal agencies, such as the Federal Deposit Insurance Corp., which often waive fees and penalties, the school district has no obligation to compensate Heard, Gog-gan for its work.
In other words, the HISD contract specifically limits Heard, Goggan's fees to those taxes that become delinquent in the contract year, and which the law firm actually collects. And the school district decides what is or isn't a legitimate fee under the tax code. Also, Heard, Goggan is obligated to provide some services to HISD for which the law firm is not compensated, precisely because simply mailing out notices, then taking 15 percent of what comes back in, can be very lucrative.
The HISD contract is similar to the city of Houston's delinquent tax collection agreement with Calame, Linebarger, Graham and Pena, which also spells out strict limitations on compensation. The collection contract Heard, Goggan once had with the city -- which was terminated in 1989 after the law firm failed to meet its performance goals -- likewise had such limitations. But in its arrangement with Harris County, Heard, Goggan appears to be trying to set a new standard for delinquent tax collection contracts.
Unlike the HISD contract, there is no language in the county's deal that restricts Heard, Goggan's compensation to that outlined in the tax code. Therefore, Heard, Goggan can argue, as it has, that Judge Lindsay's ruling prohibiting 33.07 penalties on taxes delinquent prior to 1994 doesn't apply to their contract.
The $1.1 million now sitting in the escrow account overseen by Lindsay's court represents only a portion of the compensation that Heard, Goggan has claimed since it began collecting delinquent Harris County taxes last summer. Since last July, Heard, Goggan has been paid approximately $1.15 million in uncontested fees. That total could reach $10 million if the law firm matches the collection performance of County Attorney Driscoll and Assessor-Collector Smith for the 1994 tax year.
That amount would include $4.5 million for taxes that became delinquent on February 1 of this year. Previously, such taxes weren't assessed penalties until July 1, and late last week, the county attorney's office determined that Heard, Goggan has no right to collect any penalties on those taxes. But, county attorney Floyd admits, Heard, Goggan may well challenge that opinion. "There are a lot of places where they indicated they wanted 15 percent, and it's not tied to any of those fees in the statutes," Floyd says.
Harris County could be stuck with its deal with Heard, Goggan. Though HISD's contract gives the district the right to terminate its pact at any time, for any reason, Harris County commissioners can only cut Heard, Goggan loose for cause -- and even then, Heard, Goggan can continue working cases and collecting fees on those cases for a year.
County Judge Robert Eckels says he hopes to sit down with Floyd and Heard, Goggan to work out "some sort of global settlement" of the Smith lawsuit. Until then, he believes that Heard, Goggan is entitled to the disputed $800,000, and probably more.
"When it was being looked at, it was assumed that it was all going to be 33.07 fees," says Eckels. "But whatever has been collected, whether it's 33.07 or 15 percent, it's probably Heard, Goggan's, because they have been collecting it."
The law firm's unusually generous contract with Harris County appears to have been the result of a rush to privatization. Last June, Eckels, a privatization proponent, wanted to hire Heard, Goggan without soliciting bids from other law firms. Two commissioners objected, so Eckels gave interested law firms three days to submit proposals.
The following week, commissioners voted 3-1 to award the contract to Heard, Goggan. But because by that time County Attorney Mike Driscoll had already filed his suit challenging the whole idea of an outside collection agency, county commissioners couldn't get the county's legal arm to negotiate its contract with Heard, Goggan. Instead, it hired the law firm of Aiken, Gump, Hauer and Feld to do the job, something that ended up costing the county around $65,000 in legal fees and apparently produced a less than perfect document.
Eckels says the final contract might not have turned out so lopsided if the county attorney's office had been involved in the negotiations. "I blame part of this on the county attorney for suing us instead of helping draft the contract," says Eckels. "If they had taken a cooperative stance instead of being antagonistic, we probably would not be having these problems."
But "these problems" were the very reason Driscoll has repeatedly questioned the wisdom and legality of privatized collection deals. The county attorney has long argued that his and Smith's offices -- which brought in more than $400 million in delinquent taxes in the last decade -- are the ones that should go after back taxes. And, the county attorney has pointed out, unlike private collectors, he and Smith do not earn individual fees for their efforts. Even so, the legal fees charged by the county attorney's office on cases in litigation have tended to total more than $1 million annually -- enough to cover the operation of Driscoll's office and put an extra $300,000 or so a year into the county treasury.