By Sean Pendergast
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Richard Connelly
By Jeff Balke
By Casey Michel
By Craig Hlavaty
By the time of the merger, Oliver Heard and his firm had created an interesting public image.
In 1990, under investigation by the Travis County District Attorney, it was revealed that then-State House Speaker Gib Lewis admitted to flying to a Mexican resort with four members of Heard's firm, with the tab picked up by a lobbyist. (There was at least one report that they were accompanied by a topless dancer, possibly named Chrissee. Lewis claimed not to remember being accompanied by a stripper, or anyone named Chrissee, for that matter).
The investigation also revealed that Lewis failed to report a $5,000 payment by Heard's firm toward back taxes on a business Lewis had a piece of. Ultimately, Lewis agreed to plead no contest to misdemeanor ethics violations, pay a $2,000 fine and quit public office.
A year later, State Rep. Albert Bustamante was convicted in federal court of "accepting an illegal gratuity" in connection with a $20,000 guaranteed loan he accepted from Heard and another attorney. He was sentenced to 42 months in prison.
A few years after that, Heard came up with a way to make even more money off the deadbeats his firm collected from: offer them a loan, through a separate company, so they could pay their taxes and keep their property. Heard's firm took a one-third interest in Texas Tax Liens and offered the loans at the too-good-to-refuse interest rate of 18 percent. And if the owner couldn't keep up, Texas Tax Liens took the property.
Oliver Heard was the undisputed king of collections, and Dale Linebarger wanted a piece of that dream. Vince Ryan was only too eager to make the dream a reality.
Nearly every city and county in Texas uses outside firms to collect back taxes. And a lot of those cities use Linebarger Goggan, which claims about 2,800 clients nationwide. With approximately 1,600 employees across the country, the firm says it collects about $1 billion a year for its public clients.
The thinking is that private firms have more incentive — and more efficiency — to collect, since they take a percentage of funds collected. Linebarger Goggan is paid anywhere from 15-30 percent. It's a competitive field, and the firm makes no bones about its extensive lobbying. But some critics say the firm gets a little too cozy with the people it works for. And sometimes it appears they're right.
In the past five years, the firm has:
• Seen a name partner imprisoned for bribery.
• Lost its contract with the City of Chicago for paying for a Chicago employee's trip to San Antonio. Chicago's inspector general called it "either a fundamental incompetence of their core function, a deliberate blind eye to...malfeasance, or both."
• Been told by a Louisiana appellate court that its contract with the City of New Orleans violated that state's constitution, meaning a potential $28 million refund to debtors. The case is on appeal before the Louisiana Supreme Court.
• Settled a lawsuit with a rival firm that accused Linebarger Goggan of offering illegal gifts and rigging contract bids.
• Lost its contract with the City of Mansfield, Texas, for what the city council called an inappropriate $2,000 campaign contribution the firm made to the mayor after his election.
In addition, when Congress passed a 2004 measure allowing the IRS to hire private collectors, Linebarger Goggan was one of the three firms hired. Unfortunately, they were also the first (and only) firm to not have their contract renewed, for reasons the IRS never disclosed. (The firms were able to keep up to 24 percent of what they collected. The IRS's public advocacy officer said the arrangement would wind up costing the public more than if the IRS had collected the taxes itself. And, in an astonishing feat of pot-kettle pyrotechnics, the advocacy officer claimed that private firms showed "poor customer service").
But Dale Linebarger and former firm attorney Bill King say that private firms are able to collect more, and more efficiently. They say this benefits those who pay their taxes on time — which is about 95 percent of the people. The vast majority of delinquent property owners, according to Linebarger and King, are slumlords and absentee owners. The law firm itself isn't shoving grandma out into the street, forcing her to survive by her walker and wits.
Structurally, say Linebarger and King, the cost of government collection comes out of an entity's general fund — which ultimately means that it's taxpayer-funded. But private collection, they say, is solely deadbeat-subsidized. The delinquent taxpayer has to pay attorneys' fees along with the past due amount.
"The cost is being allocated to the person that caused the problem," King says, "instead of being spread out among all the taxpayers. Which seems to me to be a fundamentally equitable situation."
The firm also tries to be a good corporate neighbor — an art it hasn't mastered nearly as well as that of lobbying.
In 2005, when city and community leaders in San Antonio created a hurricane relief fund to help Hurricane Katrina evacuees, the San Antonio Express-News reported that United Services Automobile Association contributed $1 million, the Greater San Antonio Chamber of Commerce donated $32,000 and Linebarger Goggan stepped up to the plate with...$10,000. The firm spent approximately 12 times that amount on federal lobbying in the last six months of 2005 alone.
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