A Paige from the Past?

A lawsuit accuses HISD's former chief and a trustee of influence-peddling

Frank Watson says he was just following the orders of then-HISD superintendent Rod Paige on that summer day in 1998 when he walked into that first meeting with Larry Marshall.

Watson, a 32-year district employee, was assistant superintendent over workers' benefits and claims management. Paige, he said, had told him to see Marshall. "Frank, I want you to help [Marshall] in every way you can," Watson quoted his boss as saying.

Marshall had also been a longtime HISD supervisor until his retirement, but now he was even more -- a trustee for the Houston school board. Watson says he went into Marshall's office and found him pleasant enough at first, but as the conversation went on, he began to feel uncomfortable.

The trustee wasn't conferring with Watson in any capacity as an elected official of the district's policy-making board. In this private session, the man who would be voting on district budgets and even employee firings was suddenly a paid lobbyist trying to boost business for a private client doing business with HISD itself.

Watson says Marshall wanted him to transfer roughly 300 district employees (these workers had not designated a primary care doctor) to People 1st Healthcare Network, Inc., a physicians group that had hired Marshall as a consultant. People 1st stood to gain about $15,000 monthly from the transfers.

Marshall's request -- and other alleged requests for favorable treatment -- were ultimately rejected by Watson. In 2000, the assistant superintendent found himself ousted by the same school board that included Larry Marshall.

Watson accused the district of wrongful termination in a whistle-blower lawsuit. Now, after almost three years of litigation, depositions and other evidence have yet to support much of the former supervisor's allegations.

But his case has raised serious questions about the potential for conflicts of interest in the highest echelon of HISD during the administration of the man who is now the secretary of education for the United States, Rod Paige.


Watson says trustee Marshall was blunt about his job to boost business for his client, the minority-owned physicians group.

"He told me when we met he was a consultant for People 1st and his function was to increase membership," says Watson, who, like Marshall, is black. "His exact words were 'Frank, we need to get this done and move these people to People 1st because these white boys have been doing this long enough.' "

Watson says he sensed the move was unethical, but he wanted to avoid trouble and told Marshall he would look into it. After contacting HISD's in-house attorney as well as the district's health insurance carrier, NYLCare, Watson learned that if he transferred employees without their permission, he would be breaking HISD's contract with NYLCare and could get into serious legal trouble. Watson says he explained this problem in a letter to Paige.

"I thought that would take care of it, but it didn't quite work," says Watson. He says Paige and Marshall were soon requesting a list of all nondesignated employees, then asking Watson to solicit them to join People 1st. In a January 1999 memo from Marshall to Paige, Marshall reflects obvious frustration over the lack of participation by Watson and NYLCare.

"HISD requested information via telephone call and letter regarding HISD's undesignated or unassigned members. NYLCare's upper management responded by stonewalling and using delay tactics," Marshall wrote. "Once the information was provided, it was untimely and was not in a usable form (with addresses and telephone numbers)."

The final straw came during the fall of 1999, as a period of open insurance enrollment approached for HISD workers. Watson says Paige called him into his office again and asked him to put People 1st brochures in all employees' information packets.

"I said, 'I can, but if we do it for People 1st, we need to do it for everyone else,' " says Watson. He claims that, in reaction to that comment, Paige "looked at me for what seemed to be two or three minutes and then walked out of the room. He just left me sitting there…That's when the cold war really started."

A few weeks later, Watson's doctor put him on medical leave for hypertension and exhaustion. When he returned to work after a nearly five-month absence, he was told his contract was being terminated because his department was being restructured. His supervisor added that his performance had nothing to do with it (Watson had exemplary work evaluations) and he would be paid the remainder of his contract, including vacation days, Watson says.

"I was stunned," says Watson. "I said, 'You want to fire me because Paige didn't like me, and that's the real deal.' "

In the months that followed, Paige would become President George W. Bush's nominee for U.S. secretary of education. Marshall would continue serving as an HISD board trustee while acting as a paid consultant to companies doing business directly with the district. And Watson went to court with his allegations. "I always envisioned when my career was over I'd go out and have a party with my friends," says Watson, now 65. "I never thought it would end like this."


While the defendants and their attorneys declined comment, their filings in the case show adamant denials of the ousted supervisor's claims. In a prepared statement in response to the original suit, HISD said it was merely a case of Watson being properly terminated under the provisions of his contract, after the district made a "business decision" to reorganize its benefits programs and end the need for his services.

In Marshall's deposition, he claimed he wanted to meet with Watson only because he was "knowledgeable" about cost-saving measures in the health care world.

"The only meetings I ever had with Frank Watson were meetings directed where he, where Dr. Paige, announced to me that he was a liaison for benefits and would be representing him," he said.

Marshall gave obtuse answers in response to questions about his memo to Paige where he called NYLCare's behavior "stonewalling," saying only that the list of employees "would be helpful only because People 1st is an emerging minority business" and that any vendor could have used the list for "introductory purposes."

Part of the reason for the lengthy delays in the case was the difficulty in getting Paige's deposition. It was finally arranged after his Senate confirmation as education secretary.

"He resisted the deposition all the way," says Larry Watts, Watson's attorney. "We even offered to go up there and do it in the Lincoln bedroom."

In his deposition, Paige had trouble recalling certain dates in the dispute, claiming that as CEO of a district with 27,000 employees, he could not deal with small details. While he said he "had no interest in helping People 1st" and claimed that Marshall never told Paige to get rid of Watson, Paige did call Watson "very adversarial." When asked who Watson was adversarial to, Paige referred to himself in the third person: "To the chief executive officer of the Houston Independent School District."

Paige also said that during Watson's sick leave, he attempted to phone Watson but Watson never called him back. (Watson's wife, Ina, states that the couple never received any phone calls from Paige during her husband's lengthy recuperation at home.)

Before his leave, Watson once refused to meet with Paige, the former superintendent said. Watson says, "I would have to be an idiot to refuse to meet with the superintendent of schools."


"Idiotic" is one description the defense team would have for some of the contentions of Watson and his attorney, Watts.

Defendants' attorney Chris Gilbert unloaded on the legal theories of Watson and Watts while responding to their motion to depose others they believe are involved in the case: "The plaintiff's motion to compel is a rambling, repetitive, hyperbolic document that more resembles the synopsis of a soap opera than a court pleading."

Other defendants are People 1st and its CEO and medical director Regina Kyles. Their attorney, Bobby Lapin, filed a countersuit against Watson to collect his legal fees, claiming that the suit is groundless.

The targets of the suit want state District Judge Caroline Baker to throw out the case by granting a summary judgment. Watts says he is confident that jurors will side with Watson if the case is allowed to proceed to trial.

"I just feel that based on the information I have, I don't know how the judge can do anything but let us go to trial," says Watson. "If they let us go to trial then they can see who Larry Marshall really is and who Rod Paige really is. Everything I've said, I've got the information to show it."

However, Watts himself stumbled when asked about the basis for some of his most recent allegations filed in the case. Watts contends that his client was never actually dismissed because the board botched the motion to terminate him -- a claim that the defense labeled as "silly."

The attorney also says Marshall "was secretly paid substantial monies" by People 1st and did not disclose that business relationship until after Watson had "blown the whistle on Marshall's unethical behavior in 1999." However, HISD records show that he filed the required financial disclosure forms for trustees.

Whether the case meets its legal burden of evidence, the information it uncovered raises questions of ethical consideration in the operations of the district. Depositions delved into the past habits of Paige, Marshall and some other district officials of gathering for HISD insiders' sessions during weekly breakfasts at the Buffalo Grille on Bissonnet.

In an almost laughable explanation during his deposition, Marshall offered that these early-morning sessions were open to the public -- assuming any members of the public were ever aware of the gatherings. According to Marshall, the officials on hand discussed "the state of the district and issues that needed to be resolved," and he insisted that the meetings were "above and beyond reproach."

The disclosure forms for trustees require those elected officials to state any ties to companies doing business with HISD, but it took the deposition for Marshall to reveal that he was pulling in a total of about $90,000 yearly lobbying -- he calls it "consulting" -- for Community Education Partners and People 1st.

Marshall abruptly resigned as a consultant for People 1st in April 2000. The Press reported that Marshall made $72,000 a year from consulting work for CEP, which has a $15 million yearly contract with HISD for alternative schooling (see "Hail to the Chiefs," by Margaret Downing, October 25, 2001).

According to HISD documents, Marshall is still a CEP consultant.

While Marshall was easily re-elected in 2001, his opponents attacked his financial ties to HISD contractors as a conflict of interest. The trustee does not vote on board matters involving his clients, but some governmental watchdogs say that by virtue of his position as a board member he has access and influence that go far beyond that of any outside lobbyist or consultant.

HISD gadfly and perennial provocateur George Scott says Marshall's relationship with district vendors is just another symptom of a sick system.

"The fact that Larry Marshall can do consulting with vendors to the Houston Independent School District, even legally, is a testament to what has become a sort of vendor pimp cult in the public school system in Texas," he says.

And as attorneys argue over the merits of Watson's suit, Marshall has made more consulting business for himself. The Texas Education Agency, the office that oversees schooling issues for the state, signed on Marshall last November as a paid monitor for the Jesse Jackson Academy, a Houston charter school.

Agency spokeswoman Suzanne Middlebrook explained that the job involves consulting with districts or schools that are having difficulties -- including problems with board members who overstep their boundaries.

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1 comments
kking8
kking8

We had numerous patients back in 2001 that Nylcare transferred to People 1st. Per Nylcare the claims were paid but the checks were sent to People 1st and we NEVER rec'd those checks. SHAME on People 1st. Bunch of criminals if you ask me & that sure doesn't make minority businesses look very good, does it?

 
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