The Insider

Shakedown Cruise: Mugging Rice is not nice on its first stroll through Mayor Brown's turf

When Rice University financial officials and their lawyers packed their briefcases and drove to City Hall for a Council committee hearing earlier this summer, they thought they'd be discussing plans for new dormitories and academic facilities for their students. They had come seeking city sponsorship for $220 million in educational bonds, which involve no taxpayer dollars or liability to the city.

Some Rice board members had been reluctant to go through the city on the bond issue for fear of political complications and bad publicity. But the fact that Mayor Lee P. Brown was a former professor at the school assuaged their fears. At least till the committee meeting got under way.

Mayor Pro Tem and Councilman Jew Don Boney began peppering the Rice delegation with questions, and it quickly became clear that the subject on his mind wasn't education. It was employment; more specifically, employment of minority lawyers.

Boney set the stage for his buddy Foreman.
Daniel Perlaky
Boney set the stage for his buddy Foreman.

Although Boney didn't mention the firm by name, the most likely beneficiary of his effort was Burney & Foreman, a law firm that includes the councilman's longtime campaign supporter Zinetta Burney and partner Peggy Foreman. The two are qualified to do bond work, but it is clear they would not have been hired without the intervention of their friend.

During his questioning Boney wondered why Rice didn't have minority co-counsels on the bond issue as did the City of Houston, which sets goals for participation of minorities. Never mind that Rice wasn't using city funds and was under no obligation to follow city guidelines. In fact, a previous city sponsorship of St. John's School for an identical bond issue had carried no such strings.

Rice treasurer and vice president of investment Scott Wise was clearly a babe in the woods of city politics as he stood at the committee's podium. Wise told Boney that Rice did indeed include black and Hispanic-owned bond underwriting firms, but that they "didn't really feel a need to have co-counsel."

With an earnestness that had some crowd members behind him giggling, Wise told Boney that the school hired downtown legal giant Vinson & Elkins, which was more than up to the task of handling the routine bond issue.

Boney eyed Wise wearily, like a professor dealing with a rather dense student. "It is an opportunity to increase diversity, more participation," he recited softly, as if reading from a primer. Then in rapid-fire succession, he inquired, "You have co-underwriting counsel on this?" Wise said no. "So that is something that can still be done," Boney said. It didn't sound like a question so much as a verdict.

For a moment, the Rice treasurer looked like a deer transfixed in Boney's headlights.

"Scott was an old baseball pitcher in his days at Rice," recalls one meeting participant, "and this was like somebody threw him a real tight inside pitch and sent him into the dust."

Michele Vobach, representing underwriters Goldman, Sachs & Co., tried to explain to Boney that in bond issues by nonprofits, co-counsels were not necessary. She said minority attorney Yava D. Scott had turned down work on the bonds. Boney responded that there are numerous other minorities who could be hired for the work — which is not quite true.

According to a Houston bond specialist, only three local African-American firms have extensive experience as bond counsel. Scott's firm is one. Another was already representing the issuer of the bonds. That left only Burney & Foreman.

Burney had contacted V&E earlier about working on the bonds. Rice's bond counsel, Hank Coleman, said V&E was handling it but that he'd recommend Burney's firm for work if the opportunity came up. Boney seemed hell-bent on making sure that opportunity materialized.

He wasn't alone. Councilman Carroll Robinson took it upon himself to pass a note to Coleman just to make sure the slow learners at Rice got the message.

"How can you consider doing a deal without using Peggy Foreman?" the councilman inquired. "She is the greatest!"

Following Robinson's heavy-handed assist, the Rice delegation bowed down to the perceived pressure.

After a flurry of whispered consultation, school officials ran up the white flag.

"In terms of the underwriting counsel, that's their call," Wise told Boney. "In the case of Rice, yes, we could add some financial counsel."

In a post-meeting huddle, V&E agreed to give Foreman work valued at about $20,000. Thinking ahead, the group decided that they'd better throw the Hispanic community a bone as well. Al Luna, a former state representative, was added as a co-counsel. Thus were the interests of diversity served.

Robinson explained to the Insider that he passed the note praising Foreman because he wanted to demonstrate that there were minority bond counsels available. He and Boney said they were not pressuring anyone to employ her.

"I share names with people," commented Robinson, "and say, 'Here's as many people as I know who are qualified, and you can reach out to them.' "

Boney later said the only issue was Rice's insensitivity to diversity, rather than getting a particular attorney hired. "Some constituents concerned with Rice University raised the issue with meŠ. I asked the same questions."

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