[Watchdogs] Lest We Forget: "Clark, Thomas & Winters Agrees to Pay Millions to Former Client" [Mary Alice Robbins]
milton.hawkins at gmail.com
Fri Dec 10 22:23:10 CST 2010
I'm pleased that the jury returned a guilty verdict. But it is unfortunate
that those at PEC who aided and abetted Fuelberg all those years aren't
being held to account. They bought their immunity from civil charges
through the settlement agreement in the member-filed class-action lawsuit.
And it is likewise unfortunate that the firm of Clark, Thomas, and Winters
was allowed by the PEC Board to settle with PEC for only $4.1 million, when
the actions by attorneys with that firm ultimately cost PEC much more than
that amount, and PEC's outside attorney got a third of the settlement.
Clark, Thomas & Winters Agrees to Pay Millions to Former Client Mary Alice
A double whammy hit Austin, Texas-based Clark, Thomas &
Winters<http://www.ctw.com/>this month. On June 17, a Blanco County,
Texas, grand jury indicted Bennie
Fuelberg, former general manager of Pedernales Electric
Cooperative<http://www.pec.coop/>(PEC), and Walter Demond, a former
Clark Thomas shareholder who represented
the PEC for two decades. Then on June 18, the firm agreed to pay the PEC a
$4.1 million settlement, thereby avoiding a civil suit.
The two indictments obtained by the Texas office of the attorney general,
which investigated and will prosecute Fuelberg and Demond, charge both men
with misapplication of fiduciary property, theft and money laundering
stemming from allegations of payments of PEC money to two outside
Attorneys for Fuelberg and Demond say their clients have done nothing wrong.
Chris Gunter, Fuelberg's attorney and a partner in Austin's Gunter &
Bennett, says the allegations against Fuelberg are not true. "He did not
commit a crime as alleged," Gunter says.
Austin solo E.G. "Gerry" Morris, who represents Demond, says, "Anyone who
knows Walter Demond knows he's never taken a nickel he didn't earn and never
given anybody any client's money that wasn't entitled to it."
Demond no longer works at Clark Thomas, according to firm spokesman Chuck
In a June 18 statement announcing the settlement, Martha Dickie, Clark
Thomas' attorney, wrote, "When Clark, Thomas & Winters management became
aware in December of 2008 of the details of the payments to outside
consultants and PEC's reimbursement of some of those payments, it promptly
notified both PEC management and the Office of the Attorney General. The
firm has fully cooperated with subsequent investigations by both."
By agreeing to pay $4.1 million, Clark Thomas avoided litigation. "If they
had not reached a settlement with us, we would have definitely filed suit
and pursued our legal remedies," says Jimmy Williamson, a principal in
Houston's Williamson & Rusnak who represents the PEC.
Ken Ferguson, a Clark Thomas shareholder in Austin and a member of the
firm's management team, says the PEC has released all of its claims against
his firm. "We decided it wasn't in the best interests of anyone to litigate
this, so we reached a reasonable solution," says Ferguson, who participated
in the settlement negotiations.
Clark Thomas, which Ferguson says has more than 110 attorneys in its Austin,
San Antonio and Houston offices, is the largest firm in the capital city, as
well as one of its oldest firms. "We've been around for 70-something years,"
The PEC, headquartered in Johnson City, is the largest electric cooperative
in the United States, providing electricity to approximately 229,000 meters
throughout 8,100 square miles in Central Texas, according to its Web site.
A December 2008 report that Navigant Consulting Inc. of Austin submitted to
the PEC's board of
the terms of a settlement in a separate class against the PEC brought
to light payments that Clark Thomas had made to two outside consultants
using money obtained by billing the PEC. Two paragraphs in Navigant's
390-page report noted that invoices for $510,000 in payments that the PEC
had made to Clark Thomas between 1998 and 2004 provided "limited
descriptions for the purpose of the payments." According to the report, the
payments went to Curtis Fuelberg, brother of the PEC's former general
manager, and William Price, a Lampasas, Texas, attorney who is the son of
former PEC director E.B. Price.
No charges have been brought against Curtis Fuelberg or Price. But the
payments to them are at issue in the indictments against Bennie Fuelberg and
Each indictment alleges that between Nov. 14, 1996, and March 13, 2007,
Bennie Fuelberg and Demond unlawfully appropriated and misapplied more than
$200,000 of the PEC's money by making payments to Curtis Fuelberg and Price.
With regard to the money laundering charge, each indictment alleges that
between Sept. 1, 2005, and March 13, 2007, Bennie Fuelberg and Demond did
"acquire, maintain an interest in, conceal, possess, and transfer the
proceeds of criminal activity," and "conduct, supervise, and facilitate a
transaction involving the proceeds of criminal activity," that being the
theft of and misapplication of between $100,000 and $200,000 of the PEC's
Curtis Fuelberg, an Austin lobbyist, says the payments he received from
Clark Thomas were for services that benefited the PEC. "Over the years, I
did a ton of work for that law firm," he says.
Curtis Fuelberg did not list Clark Thomas or the PEC among his clients in
the lobbyist reports he filed with the Texas Ethics Commission, according to
a review of years 2004 to the present. While Clark Thomas and the PEC did
not hire him to lobby for them, Curtis Fuelberg says Clark Thomas did hire
him to keep the firm informed about things that might affect the PEC.
"Everything I did for them was legitimate," he says.
Lampasas solo Evan Stubbs, who represents Price, says his client "hasn't
done anything wrong, as far as we're concerned." Stubbs says Navigant's
investigator did not contact Price about the payments.
Navigant's investigation of the PEC was a provision in the settlement of a
class action suit that three members of the member-owned cooperative filed
in July 2007 in a Travis County district court. In that suit, the trio
alleged, among other things, that the electric cooperative's board and
management breached their fiduciary duties and contractual duties, according
to the final judgment in the suit. Judge John Dietz of Austin's 250th
District Court signed the final judgment in *John Worrall, et al. v.
Pedernales Electric Cooperative* on May 5, 2008.
"The fact of the matter is that none of this would have happened if we
hadn't filed suit," Austin attorney William "Bill" Ikard says of the
indictments against Demond and Bennie Fuelberg and the Clark Thomas
settlement with the PEC. Ikard, a partner in Ikard Wynne, was one the
attorneys who represented the plaintiffs in *Worrall*.
Sam Oatman, the district attorney for Blanco County and three other
counties, says he began looking into the matter in January 2008 -- after
news reports on the PEC members' class action -- and he asked Texas Attorney
General Greg Abbott for assistance the following month. "Right away, his
office said they would assist me," Oatman says.
However, Oatman says, he subsequently decided it would be better to turn the
investigation over to the office of the attorney general and he recused
himself from the criminal investigation on Aug. 25, 2008.
Oatman says he has a small staff that currently includes only four assistant
district attorneys. "When it gets down to white-collar crime, we don't have
any expertise in this office," he says.
On the same day Oatman recused himself, the 424th District Court appointed
Eric Nichols, deputy attorney general for criminal justice, or any assistant
attorney general designated by the OAG, as the district attorney pro tem
with respect to the investigation of the PEC and any resulting prosecution.
Tom Kelley, an OAG spokesman, declines *Texas Lawyer*'s request to interview
Nichols and also declines comment on the PEC investigation.
As noted in the indictments against Bennie Fuelberg and Demond, the 424th
District Court impaneled the grand jury that returned those indictments in
Dickie says Clark Thomas and the PEC began a mediation in April that
resulted in the $4.1 million settlement. Dickie, a partner in Austin's Akin
& Almanza, says Clark Thomas' "whole interest here was to do right by a
client, and I'm convinced they did that and more."
Houston solo Lillian Hardwick, a co-author of the "Handbook of Texas Lawyer
and Judicial Ethics," often serves as an expert witness for
lawyer-defendants or clients who sue them. She says that Clark Thomas did
the right thing in settling with the PEC after a mediation.
"What you normally see is the firm denying everything and the lawsuits going
on forever," Hardwick says.
Dickie points out that in settlements like the one Clark Thomas reached with
the PEC, the amount to be paid usually is not made public. The reason the
PEC wanted disclosure, she says, was so people would not think the PEC is
trying to keep the amount a secret.
Williamson says he will receive one-third of the $4.1 million settlement
under the contingent-fee agreement he has with the electric cooperative.
He defends the PEC board's decision to settle with Clark Thomas so quickly.
"If the board had passed up the opportunity to settle and two years from now
there was less money available, imagine the criticism they would receive,"
Ferguson says that Clark Thomas' professional liability insurance carrier
will participate in paying the settlement, but he declines to say how much
of the $4.1 million tab the insurer will pick up. Ferguson also says it is
his understanding that the settlement will have a minimal, if any, impact on
the firm's future insurance premium.
James Pennington, a Dallas solo who usually represents clients suing their
former lawyers but who is not involved in the Clark Thomas-PEC settlement,
says, "Any time an insurance company pays a settlement, that's definitely
going to have an impact on their [the firm's] premium."
Pennington says settlements for the amount of money that Clark Thomas has
agreed to pay the PEC are "very rare." But he also says, "Any time you can
get a settlement, the earlier, the better, for the law firm."
Milton Hawkins milton.hawkins at gmail.com
P.O. Box 1502
Johnson City, Texas 78636-1502
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