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Trawling in Deep Water

It's mid-afternoon in Kemah, and the winds from an approaching thunderstorm rock the pleasure crafts docked across the street from the law offices of Richard Morrison. Inside, framed by color sketches of hunters aiming shotguns at waterfowl on the wing, the 60-ish attorney is seated before a mounted 75-pound tarpon.

Clad in boots, jeans and a sport shirt printed with trout flies, Morrison is a study in earthy manliness, someone whose amiable nature could warm up a duck blind on a cool morning. But right now, Morrison is losing it. He can't get a bead on his prey, and the frustration is making the great white-haired hunter trigger-happy.

"I'm going to stick it about nine yards up that son of a bitch's ass," Morrison declares, in a tone that could blow the gills off of the petrified game fish on his wall.

The target of Morrison's tirade is George Greanias, the former city controller, who plans to formally declare his candidacy next week for the November 4 election to replace the term-limited Mayor Bob Lanier. Morrison has been stalking Greanias since before the 1995 election, when the attorney's client, Municipal Collections Incorporated, sued the city of Houston.

The trial of the lawsuit -- which essentially pits Greanias against Peary Perry, a friend of Lanier's and the president of Municipal Collections -- was scheduled to begin June 2 but was reset for July 7. The city has since replaced its lead counsel, Randy Pourteau, with Nelly Santos, a young assistant city attorney.

As it happens, Santos is more than seven months pregnant and due to deliver on August 2, raising the possibility that she might give birth before the estimated three-week trial ends. Last Monday, she asked state District Judge Scott Link to delay the start of the trial until November 10 -- about the time Santos would return from maternity leave, and six days after the first-round mayoral election. Link put off a decision on the city's request until June 26.

Morrison, though, has already brought to life a new theory, delivered in a May 29 press release issued by Kirk Public Relations, a firm based in the Dallas suburb of Richardson that Municipal Collections has retained to put its spin on the case.

"I think the city is playing musical chairs with its lead attorneys," Morrison was quoted as saying. "Justice delayed is justice denied."

In the comfort of his Kemah habitat, Morrison is more to the point: "This is nothing but subterfuge to put this thing off until after the election. Does the city owe us money or do we owe the city money? Why not air it out?"

But as Morrison is well aware, Municipal Collections versus the City of Houston has never been solely about money, at least not to Peary Perry. Perry, an ex-cop, was a private investigator when Municipal Collections was incorporated on March 10, 1993, just two weeks before the firm won the lucrative contract to collect delinquent municipal court citations.

In November 1994, Greanias initiated an audit that found Perry's firm had been paid between $500,000 and $1 million too much. That same audit -- prompted by a Houston Press report that raised questions about the awarding of the contract -- also found that a minority subcontractor, Bayou City Enterprises, was in all probability a sham operation that had collected $400,000 in fees for work done by someone else.

In late July 1995, several months after Lanier fired Bayou City, the mayor also cut loose Municipal Collections, which, up to that point, had been paid about $3 million in fees. A week later, it was learned that the FBI and the U.S. Attorney's Office were poking into the affair, and Morrison called an outdoor press conference on a blistering hot afternoon. With Perry sweating profusely beside him, Morrison announced they were suing the city for breach of contract to recoup $737,913 in back pay withheld by Greanias, as well as $1.15 million Perry says the city underpaid him.

The city has filed a counterclaim against Municipal Collections seeking $315,000 in errant fees. Perry is also seeking punitive damages in an amended case, and has another lawsuit pending that alleges copyright violations by Greanias and the city. A second collection agency, West Capital Financial Corporation, has also sued the city for breach of contract. In yet another case, which was tossed out by Link earlier this year, Perry claimed he had been defamed by Greanias.

As might be expected, Morrison and Perry aren't lingering over the political overtones that shadow all this litigation: They're not interested, for example, in explaining how Municipal Collections -- and for that matter, Bayou City Enterprises -- managed to win the contract over established collection agencies. Greanias found that Perry and partner William E. Wells apparently did it with the help of Larry Miller, the Lanier-appointed director of the city's Municipal Courts Administration Department, who recently retired.

 

Miller, whose sister-in-law worked for Perry, is a longtime friend of Wells, an ex-municipal court judge and attorney who was indicted and subsequently disbarred for swindling an elderly woman out of her Social Security checks.

Morrison believes Lanier and the city want to avoid any embarrassing revelations in court -- at least until after the election. But he says he doesn't know who stands to benefit by a delay. It's wholly implausible to believe that it could be Greanias: After years of feuding between the mayor and the ex-controller, no one in the Lanier administration cares about how a trial might damage Greanias's mayoral bid.

"Come on -- get real," says City Attorney Gene Locke of the suggestion that Lanier is somehow trying to protect Greanias. If anything, Morrison's public relations campaign against Greanias suggests that Peary Perry is not so much concerned with settling his grievance as he is in dragging his -- and Lanier's -- nemesis through the muck just before Houstonians pick a new mayor.

"If the trial does not take place before city elections," Morrison said in a June 13 press release, "voters will be deprived of important facts in helping decide to whom they will entrust the mayor's job for the next two years."

Morrison may have a point -- but it's probably not the one he'll end up making if he brings his case to trial.

Let's not pretend that George Greanias is above milking Bob Lanier's troubles for political gain. The two men were -- and presumably remain -- intense rivals. Greanias was the prototypical watchdog. To understand how much Lanier resented such an intrusion, consider the copacetic existence he's enjoyed with the unquestioning Lloyd Kelley over the course of Kelley's first term as controller.

Ultimately, however, the conflict between the mayor and Greanias says something significant about each of them and, perhaps, offers a minor subplot to consider in the months ahead. Lanier and Greanias harbor distinct perceptions of propriety, and nothing illuminates that as clearly as the Municipal Collections contract. Even before the audit in question, Greanias had cast the most jaundiced eye ever leveled at the Lanier era. But in the vacuum created by the absence of any City Council support, the controller's critiques oftentimes seemed shrill or overblown.

Still, Greanias enjoyed far wider support than many people will acknowledge, mostly because his fights with Lanier over issues such as the collection contract have more to do with good public policy than politics.

Peary Perry and Dick Morrison are anxious to shatter that perception. When Perry's lawsuit goes to trial, they plan to introduce something called the "Theory of the Case," Greanias's written musings on the Municipal Collections imbroglio.

According to the three-paragraph document, Greanias viewed the collection contract as Perry's "reward" for his role as a source of the Channel 13 news story that torpedoed Sylvester Turner's runoff campaign against Lanier. The theory also makes mention of private investigator Clyde Wilson, who has said he first tipped Channel 13 to Turner's possible involvement in an insurance scam. Wilson was to be a "consultant" to Municipal Collections, but bailed out before Council awarded the contract.

Greanias never publicly uttered that charge, but it's hardly a novel hypothesis. Neither is the notion that then-city attorney Ben Hall "intervened to insist that Bayou City Enterprises receive a piece of the action," which it did in the form of a Hall-authored clause guaranteeing the firm 19 percent of Municipal Collections' fees.

Greanias posits that Hall's meddling caused a rift between Municipal Collections and Bayou City Enterprises, which resented its status as a mere subcontractor. As tensions increased, he wrote, "persons loyal to Sylvester Turner began raising questions" about the awarding of the contract to Municipal Collections. That led to press reports that triggered the controller's audit, and, from there, it was downhill fast for both companies.

It is Morrison's contention that Greanias, to bolster his chances for a possible challenge to Lanier, gave his "Theory of the Case," plus a more detailed "Statement of the Facts," to the FBI.

"When we questioned certain witnesses during depositions," Morrison says, "they said the FBI interviewed them, almost verbatim, from these documents."

Morrison has already tried this strategy once without success: Greanias's "theory" was introduced during a hearing on the defamation claim, but it failed to persuade the court that Greanias had trashed Perry's name with his audit.

Greanias, who decided not to challenge Lanier two years ago, has denied he ratted to the feds. And in fact, the same dirt could have been gleaned from press accounts at the time. But one unreported twist in the "theory" was Greanias's speculation that Charles Hurwitz provided the financial backing for Municipal Collections as a favor to his close friend Lanier.

 

"Since Perry and Wilson did not have a collections firm," Greanias wrote, "the mayor turned to Charles Hurwitz to fund the new company," presumably by having Maxxam's CEO pony up $400,000 in the name of Elsie McRae, a Municipal Collections board member.

When asked if Hurwitz did, in fact, make such an investment, Maxxam spokesperson Bob Irelan checked into it and replied, "We've never heard of this company, nor Ms. McRae."

In a deposition he gave for the Municipal Collections lawsuit on February 17, Lanier called Greanias's theory "garbage" and said he didn't bother to finish reading it. He described Hurwitz as a "pretty-good-sized businessman" who "shares" a bisected penthouse space atop the Huntingdon with Lanier and his wife. The mayor assured Morrison that Hurwitz had better things to do.

"He's currently in the process of selling a batch of redwood forest to the federal government for $500 million," Lanier said, referring to Maxxam's negotiations over the environmentally sensitive Headwaters area in California. "It's unlikely he would be the secret fence for a woman to get a piece of the municipal courts collection contract."

Why then, the mayor was asked, would the former controller put such allegations to paper?

"Well," Lanier replied, "he's a playwright."

After reigning supreme for almost six years, Lanier probably figures he's earned the right to crack wise at Greanias's expense. Yet it wasn't the former controller's literary bent that brought on the Municipal Collections debacle as much as Lanier's willingness to grant an ill-advised political favor.

Moreover, if the Lanier administration is trying to delay the trial until after the election, as Morrison contends, it's likely because the mayor will be supporting both Lee Brown and the city's affirmative action programs in the November election.

It's no secret that Lanier would like to be succeeded by Houston's first African-American mayor (as long as it's not Sylvester Turner). A victory by former police chief Brown would be the capstone to Lanier's self-cultivated legacy as a champion of diversity. Lanier is equally determined to protect the city's minority contracting goals, which will likely face a stiff challenge if organizer Ed Blum's "Houston Civil Rights Initiative" forces a referendum on the city's policies.

Blum and other critics of affirmative action will have the sorry saga of Bayou City Enterprises on their side. Indeed, right about now, Lee Brown, who supports affirmative action, must be hugely relieved that his self-described "consulting role" with the firm was fleeting.

When the collection contract first went before City Council in early March 1993, Brown's early involvement was golden for Bayou City Enterprises. Some councilmembers were so impressed with the firm's credibility that they wanted to reject Municipal Collections and give Bayou City the contract.

According to Lanier's deposition, the Council vote was tagged, or delayed. In the meantime, Justice of the Peace Al Green, then head of the local NAACP, and the Reverend Bill Lawson, leader of an informal alliance of black ministers and power brokers, visited the mayor at home.

"They said they felt like Bayou City was being treated unfairly -- they weren't getting a good enough deal as a subcontractor," the mayor recalled.

Lanier picked up the phone and called Peary Perry, who replied that, in fact, Municipal Collections was getting shafted. Lanier proposed that the two companies form a joint venture. He also threatened to "put the whole thing out to rebid" if the two sides couldn't work it out.

Lanier's memory then gets a little hazy. He said that he "probably" called Ben Hall, but may have "put it through the chain of command" to draft the collection contract as a joint venture. Lanier stressed that he had nothing to do with the final outcome, which Hall orchestrated by sweetening Municipal Collections' fees from roughly 20 percent of delinquent fines collected to 28 percent, possibly as an enticement to Perry and Wells to let go of a 19 percent share for Bayou City.

But after meeting with Lawson and Green, Lanier had to at least suspect that Bayou City had another problem, namely its ability to provide what Greanias later called "a commercially useful function." According to Peary Perry, Municipal Collections shared that concern.

Perry, during his own deposition for the suit, testified that he was ordered by Wells to "work out a relationship" with the minority subcontractor. He called John Davis, a lawyer and an owner of Bayou City, who proposed a meeting that took place a day or two later. Also in attendance were Davis's partners, Ray Shackelford and former municipal courts director Donald Hollingsworth. Hollingsworth is a close associate of Lee Brown's and was front and center when Brown announced his mayoral candidacy on June 1.

 

Greanias's lawyer, Robert Axelrod, grilled Perry during the deposition on the purpose of his meeting with the Bayou City partners:

Perry: The reason for my discussion with Mr. Davis and his associates was to find out what they intended to do for the 19 percent we were told to pay them.

Axelrod: What did they tell you?
Perry: We just mainly opened it up for discussion as to how they were able to interface with what we were going to do.

Axelrod: What other work did they tell you they were going to do?
Perry: I don't think we got around to that at that time.
Axelrod: So, you had a three-hour meeting for the purpose of ascertaining what work they were going to do to receive the 19 percent and you never got around to discussing the work they were going to do? So what did you talk about for three hours with Mr. Davis?

Perry: What services they could provide that would satisfy the meaning of this contract.

Axelrod: What service was that?
Perry: It was not so much services as it was theory.

Perry explained that the men discussed Lanier's joint venture proposal, as well as the possibility that Davis and company could provide legal services to Municipal Collections. That wouldn't work, though, apparently because it was too obvious. "No one needs $40,000 a month in legal services," Perry testified.

And neither would Perry simply hand over 19 percent of the delinquent tickets for Bayou City to collect. Municipal Collections was developing computer software to do the work, he said. In comparison, Bayou City's method, whatever it was, would amount to "a Crayola and a Big Chief Tablet."

It was finally decided that Bayou City would print and mail notices to delinquent violators. As Greanias discovered, the firm farmed the work out to another company while collecting more than $400,000 in fees. Bayou City even threw back $11,500 a month to Municipal Collections, ostensibly to pay for postage and other expenses. Later, after more than a month of refusing to open its files to the controller's auditors, Davis and his partners produced little evidence that they did anything at all.

If Bob Lanier hadn't been so eager to please Bill Lawson and Al Green -- which wasn't enough to please Bayou City Enterprises, anyway, since they've joined Perry's suit -- Greanias might not have zeroed in on the unusual 19 percent clause in the contract. As it turned out, he followed the trail until Lanier had no option but to fire both companies.

Green and Lawson probably never anticipated that Lanier would later recount under oath their lobbying effort. If they had, they might have stayed home on December 29, 1994, when they joined with other black leaders to accuse Greanias of playing "plantation politics."

It's strange that Dick Morrison wants to put this spectacle on trial before the election, especially if it's to prove that George Greanias is unfit to be mayor. If anything, Greanias, who's been out of the public eye for two years, would have an opportunity to remind voters of the record he amassed during his four terms as city controller.

On the other hand, the Lanier administration would have to scrape the mud off its affirmative action program, while worrying that trial testimony might disclose how much, if any, actual consulting Lee Brown did for Bayou City Enterprises.

Maybe none of it matters. Maybe the city and Municipal Collections will settle their lawsuit, saving everyone the nuisance of dredging the affair up one last time. The litigation strategy Morrison plans to use -- and his peculiar desire to shout it out loud -- suggests that a settlement may be what his client seeks.

The heart of Morrison's case is that George Greanias had no authority to audit Peary Perry's contract. Morrison has hinged his argument on Section IV, Paragraph L of the contract, which he claims was worded precisely to "get Greanias out of it or somehow keep him under control."

What Morrison is saying is that someone in the Lanier administration set the contract up to preclude scrutiny by the controller -- which, in turn, seems to support Greanias's allegation that Municipal Collections padded its bottom line with "the knowledge and cooperation" of city officials.

For Perry -- who has vehemently denied that he took advantage of his friendship with Lanier -- that is a curious defense, to say the least. Consider, as well, Morrison's claim that because Municipal Collections was paid a percentage of delinquent fines collected, and not from the general fund, the city charter did not authorize an audit. Would any jury of thinking taxpayers accept that the city's chief financial officer is prohibited in any instance from checking how the city pays its contractors?

 

And if it were true, Perry would exhibit quite the nerve by crying about his "ruined" reputation. Just the same, he may lay it on thick. For example, in his deposition he recounted how, after three years of happily teaching Sunday school at Sugar Creek Baptist Church, publicity about Municipal Collections's troubles induced six families to pull their children from his class. One father, described by Perry only as "a tall, lean man of about 35, with brown hair," allegedly said, "I don't know why you're even here," before hustling his little girl far, far away.

Beyond that, Perry couldn't provide Axelrod with many relevant details.

Axelrod: Did you ever know their names?
Perry: I'm certain I do.
Axelrod: But you have just forgotten their names as of today's deposition?
Perry: That's correct.

And Perry's sob story about how George Greanias has "destroyed" his future business prospects seems counter to the facts. Perry is now president of a new company, Omnibase Services, which is also backed by his Municipal Collections benefactor, Elsie McRae. Last year, the Austin firm was awarded a contract to manage a database of unpaid traffic tickets for the Texas Department of Public Safety. Perry earned an annual salary of $75,000 with Municipal Collections; his position with Omnibase pays $120,000 a year.

The final irony is that, unlike in the months before he was fired by the city, Peary Perry will have to live without the sympathy and support of Bob Lanier. The mayor testified that he "hated" to cancel Perry's contract, and, in fact, did so only to prevent his friend from borrowing money to save his operation.

But both Lanier and Gene Locke maintain that Greanias had every right to audit the contract, and few jurors are going to believe Dick Morrison has better insight into the city charter than those two.

Nonetheless, Morrison says he and Perry are loaded for bear. They plan to present interoffice memos that outline the testy dispute between Greanias, Lanier and Gene Locke over the controller's decision to withhold payment to Peary Perry's company.

"When you've got a case this well developed in their own words," Morrison says, "it's tough to beat."

Locke says he hasn't paid real close attention to Perry's lawsuit, and knows only what he's been told by his staff. But, after hearing a bit about the opposing counsel's plan, he suggested Morrison might want to cast his line in another direction.

"That's just fishing," he said.


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