The Passions of Privatization
The battle over who gets to collect Harris County's delinquent taxes continues to escalate like a Balkan skirmish. Ever since Commissioners Court decided to privatize the lucrative collections business last May, County Attorney Mike Driscoll has been doing battle with the commissioners and the firm they selected for the job, Heard Goggan Blair & Williams. The passions expressed as each side rails against the other are only slightly less piquant than your basic Serb and Croat press conferences.
"What's amazing about this deal is that you have a county attorney and tax assessor-collector working against the county's interest," says William E. King, a former Heard Goggan lawyer who is representing his old firm. "If they are successful, they are going to cost Harris County millions of dollars."
First assistant county attorney Marsha Floyd, who is leading the charge for Driscoll's office, calls that assertion absurd, arguing instead that privatized collections will put the screws to property owners and enrich Heard Goggan, which, by law, is entitled to a 15 percent surcharge on delinquencies it collects, in the process. "They just want money, and we just think it's bad public policy," Floyd says. "And it hasn't been done in compliance with the law."
No less snarly is the tangle of litigation the contract has spawned. First into the courthouse was Driscoll, who, in mid-June, challenged the legality of the move in a suit against the commissioners, Heard Goggan and, as a pro forma measure, Tax Assessor-Collector Carl Smith. Two months later, Driscoll went to court again, this time representing Smith, with the commissioners and Heard Goggan again on the receiving end.
Last week, King retaliated with a counterclaim against the county attorney and says more litigation is soon to come. "We're real serious about that," says King.
The matter could well take years to resolve. Despite the rhetoric, the county is unlikely to lose much revenue either way the decisions ultimately go. Only Heard Goggan clearly stands to win or lose millions, depending on the outcome.
One interested party, however, will reap its reward regardless: the law firm of Vinson & Elkins. Commissioners Court last week approved a contract with V&E to represent them in their dispute with Driscoll. They also approved a bill V&E attached for services rendered to date, totaling $146,934.60. In addition, the commissioners authorized additional payments to V&E not to exceed a total of $250,000.
Marsha Floyd questions how it is that V&E racked up a hefty bill with no contract. "Nobody negotiated the first deal," Floyd says. "They're just billing."
At the commissioners meeting, Margaret Wilson, the lead V&E partner in the firm's representation of the commissioners, defended the bill, which included hours from 18 different lawyers and three paralegals, as well as charges for meals at Vincent's and other restaurants. The commissioners retained the firm on short notice, Wilson said, and having to prepare for a court hearing just a week later meant pulling together a team of attorneys with expertise in different areas of the law.
Perhaps so, but V&E had been lurking on the sidelines prior to the county attorney's opening legal salvo. V&E partner Joe B. Allen initially called Driscoll to chat about privatization on April 25, before the commissioners had publicly aired the matter. On May 9, commissioner Steve Radack led an attempt to give Heard Goggan the privatization contract outright, although El Franco Lee temporarily blocked the award by insisting his fellow commissioners examine other proposals.
That didn't sit well with Driscoll, who made noises about legal action to preclude the move altogether. On June 7, Allen met with Driscoll and Floyd to help broker a compromise agreement that would give Heard Goggan the contract while satisfying some of the county attorney's concerns. At the time, County Judge Robert Eckels told the Press that Allen was acting as "a concerned citizen helping us all out." But when Driscoll filed his suit two weeks later, the commissioners hired V&E to defend them. And lo and behold, Allen's meeting with Driscoll and Floyd, as well as various phone conversations with Eckels, Floyd and Heard Goggan partner Jim Blair, appear on V&E's bill to the county.
Margaret Wilson says the bulk of the legal work was done in that intensive pretrial week and explains the Allen billings this way: "There are a few entries before that date, which no doubt have to do with the fact that Mike Driscoll had threatened the suit, but he'd not filed it yet, so obviously no work is going to be done of a team-litigation nature until that suit is filed."
Line items aside, no one has explained why, after V&E got past that first legal hurdle, it then took the commissioners six months to finally draft a contract with the firm, during which time about half the charges accrued. "I cannot tell you why we have not approved a formal agreement before now," says County Judge Robert Eckels.
But no matter, says Eckels, reiterating a point he made at the commissioners meeting: according to the contract with Heard Goggan, the collections firm picks up V&E's tab. "I don't want to say that we didn't care what the fees were, but we knew that this is something we had to do, it costs what it costs, Heard Goggan's paying for it, and we had confidence that V&E wasn't gonna gouge us on the deal."
Relying on Heard Goggan to pay V&E may not be the risk-free arrangement Eckels envisions. The city of Houston, which terminated a similar arrangement with Heard Goggan in 1990 after the firm failed to meet the terms of its contract, is still in litigation over the soured relationship. Heard Goggan attorney King acknowledges the two sides remain about $600,000 apart. "If Harris County thinks it's gonna get Heard to pay these bloated legal bills," says Marsha Floyd, "they need only look at the city of Houston's experience."
On the other hand, the V&E issue may be the easiest part of the Heard Goggan contract to resolve. To meet its modest collections obligation, the firm need only take in as much as the county attorney's office did two years ago. But Eckels and King say that Driscoll's legal maneuvers are making it difficult for Heard Goggan to do the job properly. "I don't know that I'm going to have any real numbers, because we've been so involved in these lawsuits," says Eckels.
King is less politic in his assessment: "Driscoll and Smith, for the last 15 years, repeatedly and adamantly expressed their opposition to privatized tax collections. This is clearly an attempt to sabotage privatization."
Marsha Floyd is no less acidic in her observations. Heard Goggan, she says, is using the suits as an excuse for not meeting its obligations to the county. "They're already building their case for [failure]," Floyd says. "That's what they did with the city of Houston.
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