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Case against UT regent Wallace Hall is a sham — here’s proof

By   /   September 6, 2013  /   8 Comments

Part 3 of 31 in the series Trouble in Texas
AP photo

HALL: There are more than 9,000 reasons to think the accusation against UT regent Wallace Hall is a pretext.

 

By Jon Cassidy | Watchdog.org

HOUSTON — Some of the most powerful politicians in Texas mean to impeach Wallace Hall, a regent of the University of Texas System, for asking too many questions about legislators pulling strings to get kids into college.

They can’t admit that’s why they want to shut him up, so they have worked themselves into a fever of unrighteous indignation over some obscure lawsuits.

In tremulous tones, they accuse him of a crime most foul: He didn’t fill out a form correctly.

Their outrage is contrived. The only thing uncommon about Hall’s disclosure form is that it actually discloses lawsuits, and is accompanied by a letter offering “a comprehensive review” of all his litigation with “as much detail as required.”

Watchdog.org decided to do its own comprehensive review — of every undisclosed lawsuit involving an appointee to a state university or educational board.

We got to 9,291 cases, give or take, before throwing up our hands. They ranged from piddling credit disputes to stuff that’s hard to forget, such as antitrust lawsuits brought by the U.S. Justice Department.

Only two officials in state history have been impeached, so you know Hall is doing something uncommon to provoke such a reaction. It’s not that he summarized his legal history rather than list every case by name. That’s the accusation, but if that was really grounds for impeachment, most of the regents would have to be impeached, Watchdog.org has found.

The thing that makes Hall unusual is that he dares to question the influence-peddling taking place in the Legislature.

Don’t expect the cynics in the Legislature to get too upset about these other undisclosed lawsuits. Hundreds of them involve two regents on their side. But for the past few months, they’ve been making quite a fuss.

PITTS: Rep. Jim Pitts, who is leading the charge against Hall, recently admitted that he wrote a letter to get his son into UT’s law school.

State Sen. Kevin Eltife pronounced himself “disturbed.” Rep. Jim Pitts, the House Appropriations chairman, called on Hall to resign, and when that failed, he started impeachment proceedings.

“Clearly this was withheld. It would seem to indicate Mr. Hall felt like it was disqualifying for his nomination,” State Sen. Kel Seliger said a few months ago. “Withholding that, I think, is a very, very serious thing.”

We skimmed through hundreds of pages of applications to various state boards, spot-checking for lawsuits against the companies run by these applicants, almost always finding something.

Just on the board of regents for The Texas A&M University System, every voting member but one had something that should have been disclosed and wasn’t.

Regent Cliff Thomas attached to his application a seven-page printout of every lawsuit involving his businesses. That’s the level of detail that lawmakers are now pretending to demand, but Thomas is the exception, not the rule.

The other A&M regents all missed something.

SELIGER: State Sen. Kel Seliger has been feigning outrage about some paperwork.

Elaine Mendoza, the CEO of Conceptual MindWorks, Inc., said she had no litigation to disclose on her 2010 application, but in 2009 her company was sued by Prompt Medical Systems.

Anthony Buzbee mentions two malpractice suits against him — without including names — and some evictions that his property company pursued. But he doesn’t list some minor federal cases in which he was a plaintiff. He also denied that he had ever been investigated by a state regulatory agency, although the Texas Bar and its Louisiana counterpart looked into complaints against him in 2004 — finding nothing, it would appear, as he has a clean public disciplinary record.

Judy Morgan checked a box saying that no company of hers had “been involved in any bankruptcy proceeding,” although her Jack B. Kelley Enterprises had been in a bankruptcy case the year before, as a creditor. There’s no shame in that, of course, but Hall is being dragged through the mud for a lawsuit that he filed and won, too.

Jim Schwertner’s Schwertner Farms has pursued debtors in bankruptcy court, too, as has Schwertner State Bank. He had checked “not applicable” for the litigation question, and no to bankruptcy proceedings.

John D. White’s Standard Renewable Energy Group has sued Chevron (not disclosed) and his Murphree Venture Partners has been in bankruptcy proceedings as a creditor.

Phil Adams is on the board of American Momentum Bank, which has been involved in 37 federal civil and bankruptcy cases.

Charles Schwartz, who has been a partner at two prominent law firms, acknowledged that he would have a material interest in any lawsuits against the firms, although he didn’t list the lawsuits by name.

He was right. We found 150 federal cases overlapping with his time at Vinson & Elkins and Skadden, Arps, Slate, Meagher & Flom LLP.

Unlike most applicants, Hall actually did list his major lawsuits by name. Whoever leaked Hall’s application to the Texas Tribune clearly did not include the letter to the governor’s appointments office, which Hall attached to his application.

“There was a question on the Appointment Application that did not provide enough room for a comprehensive response but I wanted to address it now,” Hall wrote. “Per the question of litigation, I have during the course of business in my capacity as a fiduciary both as an investor and operator been involved in litigation from time to time in addition to the two cases listed. Much of this has involved eminent domain lawsuits. I am happy to provide as much detail as required, if you and your office so desire to review it in its entirety.”

It turns out that the governor’s office wasn’t interested at all in hearing about a fight over pipeline in the wetlands. Gov. Rick Perry’s appointments office received both the application and the attachment on Jan. 29, 2008. Two days later, Kenneth Anderson, director of governmental appointments, wrote back, assuring Hall the office would “contact you if we need additional or updated information during the appointments process.”

FOSTER: As a former top executive at Exxon Mobil, regent Morris Foster should have disclosed thousands of lawsuits.

Morris Foster, a regent at the Texas A&M system, would get the death penalty under the new standard, as he was a vice president of Exxon Mobil Corp. and president of its development and production companies. He didn’t disclose any lawsuits, and if you want to guess that Exxon Mobil gets sued a lot, you’d be right.

The only question is how many thousand counts you want to charge him with.

This is the question he answered in the negative: “Have you, your spouse, or any company in which you or your spouse have a material interest been party to litigation? If yes, give details.”

The question doesn’t ask whether the lawsuit is material to Texas A&M, or even material to Foster’s own wealth. It’s asking about any litigation involving a company he has a stake in, which may explain why so many applicants flub their answers.

Under state law that determines whether a regent has a “substantial interest” in a company, Foster had such an interest three times over, as an employee, elected officer and holder of more than $25,000 worth of stock.

Foster was president of Exxon Upstream Development Co. when Exxon and Mobil merged Nov. 30, 1999. When he retired in 2008, he got $12.1 million in restricted stock options, and already owned nearly three times that amount of stock.

A search of federal court records from Dec. 1, 1999 through April 10, 2013 — when Foster filed his most recent application, a month after his reappointment was announced — turns up 8,027 lawsuits naming Exxon Mobil Corp. as a party.

The problem isn’t unique to Texas A&M, or education appointees. We checked out Dr. David Teuscher and Fred Heldenfels IV of the Texas Higher Education Coordinating Board and regents Steven Hicks and Robert Stillwell of the University of Texas System.

Heldenfels listed a personal lawsuit against his homebuilder and three disputes involving his company, although he didn’t name the parties, so it’s hard to know which of some 48 cases involving his company he’s referring to.

Most of the lawsuits against Heldenfels Brothers — the name under which the family business he runs operated for nearly a century — stem from the infamous 1989 Alton bus crash, which killed 21 schoolchildren. His company made the guardrails.

Teuscher, is a partner at the Beaumont Bone and Joint Institute, which had been sued at least 27 times in state and federal court at the time Teuscher filed his application.

On his 2012 and 2013 applications, Teuscher’s answer to the litigation question is “professional liability and business interests only. None in over five years.”

That wasn’t strictly true. From 2007-12, at least six lawsuits were filed against Beaumont Bone & Joint Institute in state courts, by plaintiffs Norma Schroeder, James Zagone, Ted Slaughter, Amy Modica, Justin Brewer and Jacqueline Freeman. Another patient tried unsuccessfully to sue in federal court.

HICKS: We found nearly 1,000 lawsuits involving companies that regent Steve Hicks had a stake in, but Hicks is friendly with Hall’s persecutors.

The group of lawmakers persecuting Hall has two friends on the UT Board of Regents who consistently support Bill Powers, the president of the University of Texas at Austin.

These two regents — Stillwell and Hicks — also have failed to disclose lawsuits in which they had a material interest – Stillwell a few dozen, Hicks nearly a thousand.

Stillwell answered “no” and “not applicable” to the litigation question on his 2009 form, yet he had an interest in at least 31 lawsuits at the time, and since he joined the board, he’s been personally named as a defendant in 11 more state and federal lawsuits.

Stillwell was a party to five lawsuits in 1995, three of them state and two federal. He was divorced in a Harris County court in 1980.

Stillwell was a founding partner of Mesa Petroleum in 1964 — along with T. Boone Pickens — and was a director of the company until 2001. Federal court records list 21 cases involving Mesa Petroleum in that time, not counting appeals.

On his application, Stillwell reports being director of Warren Equipment Co., a Caterpillar dealer in Dallas, which had been sued in federal court at least four times in the previous two years and a half years, not counting related cases.

Hicks, the chairman of an investment firm called Capstar Partners LLC, is best known as a radio mogul whose stations ultimately were merged into the behemoth known as Clear Channel Communications in a $23.5 billion deal.

When AMFM Inc. of which Hicks was the vice chair, merged into Clear Channel Communications, Hicks’ Capstar Broadcasting Partners  got some $3 billion worth of Clear Channel stock, according to SEC filings and shareholder notices.

Hicks and his brother Tom, whose finances were often interwoven, stayed invested in Clear Channel for more than five years.

So for starters, you’d count every lawsuit involving Clear Channel filed between Oct. 4, 1999, and May 9, 2005. The federal database lists 750 cases — some of them duplicates — in that time.

Add in 39 distinct federal civil lawsuits involving AMFM Inc. and related entities. Then add 20 distinct federal civil suits involving SFX Broadcasting, which Hicks built, sold, reacquired a year later, and eventually merged into Clear Channel.

Hicks has used the name Capstar for business entities for decades.  A search of the federal courts database turns up 167 cases naming Capstar, although scores of them are clearly unrelated to Hicks.

Then there are the companies that Capstar Partners owns now. Harden Healthcare was sued in 2008 by the U.S. Justice Department after a home-health aide at one of its subsidiaries claimed that she was forced to participate in defrauding Medicare and Medicaid by doing yard work and errands during nursing visits.

Hicks was on the board of HealthTronics Inc., from 2002 to 2010. The company was involved in 13 federal lawsuits during that time. DMX Inc., which Capstar controls, has been in three federal lawsuits and five bankruptcy cases.

Hicks was personally named in the bankruptcy of Urban Box Office Network Inc., which spanned much of the past decade. He was divorced in a Texas court.

On his 2009 application, Hicks didn’t mention any of these cases, instead checking the “not applicable” box.

When he submitted another application 22 months later, for his reappointment, he decided to mention litigation that he hadn’t included before. He mentioned a fight with a venture capital group called Syncom over a failed business called ClickRadio, as well as a lawsuit some homeowners had filed over road access near a lodge his company runs in Montana.

That was it.

If we were going to pick just two cases for Hicks to disclose, we’d probably pick the time the U.S. Attorney General filed an antitrust suit against his company. And the other time.

Contact Jon Cassidy at jon@watchdog.org or @jpcassidy000.

Part of 31 in the series Trouble in Texas
  1. Texas’ Rep. Pitts announces retirement after improper influence story
  2. University of Texas regents show support for Wallace Hall
  3. Case against UT regent Wallace Hall is a sham — here’s proof
  4. Texas senator got $477k for supposed ‘cameo’ appearance in Wallace Hall lawsuit
  5. Lawmaker admits pulling strings on UT admissions
  6. Trustee accused of crime for rejecting dodgy accounting
  7. Longhorns: Senator used clout in UT law school admissions
  8. Children of Texas lawmakers get into UT School of Law, but struggle to pass bar exam
  9. Chancellor is probing favoritism in UT admissions
  10. UT report: Charge against Hall is legally ‘absurd’
  11. Attorney in UT case hides six-figure charges despite terms of contract
  12. University of Texas clout scandal grows as new e-mails surface
  13. Four more get into UT Law despite low LSATs
  14. Reports on UT favoritism, impeachment expected soon
  15. Attorney: Secret tape covered up by lawmakers proves regent’s innocence
  16. Dozens of UT Law’s least qualified students are connected politically
  17. University of Texas uncovers admissions corruption, halts investigation
  18. UT admissions: Straus, Branch, Pitts pulled strings
  19. Who got the 128? UT Law admits students with bad LSAT scores
  20. Patrick’s win may doom Hall impeachment effort
  21. Chancellor promises complete investigation of UT admissions
  22. Board to decide UT president’s fate Thursday
  23. Texas politicians smarten up, ditch UT pres this time around
  24. Tribune story may have doomed UT’s Powers
  25. Academics condone the privilege they denounce
  26. Three essential stories on the UT admissions scandal
  27. Texas AG Greg Abbott embraces Roe v. Wade
  28. Roe v. Wade is AG’s new pretext for blocking Texas law school investigation
  29. Two UT regents pressed for records destruction
  30. New crime invented for Hall: assisted guesswork
  31. Texas lawmaker failed to disclose his own clout letter in UT flap

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Jon Cassidy is the Texas bureau chief for Watchdog.org. He also writes a weekly column on politics for The American Spectator. He was formerly a reporter and editor for The Orange County Register in California and a reporter at The Hill in Washington, D.C. His work has been published by Fox News, Reason, The Federalist, Human Events, and other publications. He is a 2014 Robert Novak Journalism Fellow and a graduate of the University of Southern California. He and his wife Michelle live just outside Houston with their two children.

  • hocash

    Awesome article, Jon. Always look forward to your work. Top notch research and perspective.

  • Jon Cassidy

    Thanks!

  • Steve Hicks

    A lot of your facts are incorrect. I never worked for or held a position with Clear Channel. The question asked as I remember it was: Are there currently lawsuits that you or your companies are involved in?

  • Frank

    The article does not claim that Steve Hicks worked for or held a position with Clear Channel. Instead the article states that Steve Hicks had a material interest in Clear Channel. And the question was: “Have you, your spouse, or any company in which you or your spouse have a material interest been party to litigation? If yes, give details.”

  • SixSixSix

    Single party politics and you wonder why the corrupt try to suppress any form of resistance to corruption. The Repub party has gotten so arrogant, people don’t count in the slightest. How dare anyone get in the way of putting snouts in the into the governing trough? Snort, snort.

  • Jon Cassidy

    The 2009 application had a box asking you to “Describe any
    litigation in which you or your spouse has been party or any litigation
    involving a company in which you or your spouse has a material interest.” You checked N/A.

    The 2010 application asked: “Have you, your spouse, or any
    company in which you or your spouse have a material interest been party to litigation? If yes, give details.” You answered with the two cases mentioned in the story.

  • Guest

    So, there’s an equivalency between lawsuits Hall was personally involved in, and lawsuits involving corporations (unique legal definitions) Hicks and others were shareholders/officers in? Right…
    Sounds like Wallace Hall is taking aim at his fellow regents out of pique, and the University of Texas is forced to suffer due to his tantrum at not getting his way.

  • Jon Cassidy

    Please, explain your distinction between a company that Hall owns and one that Hicks owns. FYI, lots of the other lawsuits named the other regents by name, but I didn’t keep a tally, as I wasn’t interested in jesuitical distinctions by anonymous commenters. You want to pretend now that the real issue is a question not even asked on the form? Pathetic.