The title of this short chapter refers to events described in the chapter, "Lanny Landfil's Toxic Tax Cut,"that it would have followed had it not been removed.
That chapter told, among other things, how Susan Kennedy (the "Emelle Enabler") over-ruled lawyers at the Alabama Department of Revenue, thus paving the way for a substantial lowering of taxes paid by Waste Management at its hazardous waste landfill at Emelle.
Kennedy was appointed general counsel of the Revenue Department shortly after Waste Management signed a secret deal with Lanny Young. The company had pledged to pay him $500,000 if the Revenue Department made the change.
In large part because of Kennedy's decision, the department issued a private ruling that reduced the tax rate at Emelle; Waste Management routed $500,000 to a Birmingham law firm; and the firm sent it on to Young.
-- Period between Susan Kennedy’s final day as Revenue Department general counsel and when she started billing the department on contracts she’d helped award to Pam Slate, her law partner upon her departure from state service. The firm of Slate Kennedy was to be paid more than $4.6 million on the contracts.
“… someone, prior to making records available to me, had literally covered over the very portions of those records which they knew to be the subject of my inquiry.”
-- E-mail I sent to Gov. Siegelman's general counsel Ted Hosp and governor's office spokeswoman Carrie Kurlander after discovering that records provided me by the Revenue Department had been doctored to conceal when Kennedy started billing the state and how much she and her firm had billed.
In her first days at the Revenue Department, Susan Kennedy helped Lanny Young. Before departing, she helped herself.
A 2008 audit of the state tax agency found that Kennedy may have violated the portion of the ethics law that prohibits government employees from creating an employment opportunity for themselves on their way out the door from public service.
The audit by the Examiners of Public Accounts reported that Revenue paid about $4.6 million to the small law firm of Slate Kennedy LLC on contracts that were awarded to the firm during the last eight months of Kennedy’s tenure as the department’s general counsel. Kennedy had played a role in selecting Slate for the work, left state government to work with Slate, then apparently made a mint on the contracts.
This substantial finding wasn’t widely reported, the reason being, I suppose, that but for some updated dollar figures, it was old news.
This is a story about reporters exposing what, certainly in my opinion, were misdeeds, and everyone else letting it all slide.
A few weeks after our first Emelle story (which ran Jan. 9, 2002), I received an anonymously sent letter suggesting I review Kennedy’s activities following her resignation from the Revenue Department the previous June.
Not long after Kennedy's departure, veteran AP reporter Bill Poovey reported that she had, upon leaving, gone into private practice with Pam Slate, a friend from law school. This was newsworthy because Kennedy, while with the Revenue Department, had been the primary reason that the department awarded five $100,000 contracts to a Birmingham law firm whose partners included Slate.
In late spring 2001, Slate left the Birmingham firm, moved to Montgomery, and took the Revenue Department contracts with her. A month later, Kennedy walked out of state government and into a partnership with Slate. There, the contracts she arranged – a ready-made supply of work – awaited her.
Poovey discovered the arrangement after the department presented a sixth contract to the firm Slate Kennedy LLC to the Legislature’s Contract Review Committee. His questions led to the death of the contract. Revenue Commissioner Michael Patterson told Poovey that he’d withdrawn it to avoid “anything that even has the appearance” of impropriety.
Poovey's story included a quote from Jim Sumner, the ethics commissioner, expressing concerns about the situation.
That, or so it appeared, was the end of Slate and Kennedy’s work for the Revenue Department.
But the tipster who contacted me in late January said Slate and Kennedy hadn’t skipped a beat. They'd continued working on the contracts, with the obvious blessing of the Revenue Department.
For confirmation I visited the source of sources – the state comptroller’s office. Bills pulled there showed that in the six months since Kennedy resigned as Revenue’s chief lawyer the department had paid $277,743 to Slate Kennedy.
Kennedy had been making $86,000 a year as Revenue’s top lawyer. In her first six months with Slate Kennedy she personally billed the state more than $120,000, and presumably had other clients as well.
The real stunner: The bills showed Kennedy started billing the state on June 23. That was one day after her final day as the Revenue Department's top lawyer.
I checked the Secretary of State web-site and found additional evidence of Kennedy’s -- and Slate's -- audacity. The pair had incorporated their new firm in May 2001. That was a month before Kennedy left state government.
It’s difficult to imagine a more blatant, on-point violation of the revolving door provision of the ethics law.
Sumner, ethics commission lawyer Hugh Evans and state Rep. Neal Morrison, who served on the Contract Review Committee, told our readers they were surprised to learn that Kennedy had been paid that much by the state since leaving her public job. “We thought that this one contract was an isolated contract and that when it was drawn or pulled, that that pretty much was the end of it,” Evans said, referring to his understanding of the situation after Poovey published his story.
In defense of the ethics commission, regardless of what Sumner or Evans may think they can’t start an investigation unless someone files a complaint, and to the best of my knowledge, no one ever did. It would appear that Jim Zeigler slept through this one.
The contracts were awarded to Slate at a time when the state faced several taxpayer class actions. By far the most threatening involved claims by thousands of out-of-state corporations who accused the state of overcharging them on franchise taxes. The franchise tax cases were widely reported and for a time considered a potentially gave threat to state finances.
The Siegelman administration had hired the highly regarded Montgomery firm, Melton, Espy, Williams & Hayes, to lead the state’s defense of the franchise tax situation; and Slate – who specialized in class actions – was added to the team following a recommendation from Kennedy.
I e-mailed questions to Slate and Kennedy. Slate, to her credit, obviously spent time on her response. It was well-reasoned and absent the "attack-the-messenger" tone of responses from, for example, the Siegelman administration. What it didn't do, though, was alter the basic facts.
Slate wrote that Kennedy, seeking guidance on class actions, had called her for advice. That led to the department hiring Slate. While working on the cases – Kennedy with the state, Slate under contract – the pair realized they liked working together and agreed to become law partners. They realized the arrangement might pose problems; met with Jim Sumner to ensure they weren’t violating any laws; and received assurances that they were not.
Sumner’s recollection of the meeting was somewhat different, and with his comments to me he indicated a belief that Kennedy had crossed the line.
The story on Kennedy’s legal work led to second story proving that the administration had continued to oversee and block production of public records, at least as it applied to me.
In early February (2002), I’d asked the Revenue Department to produce various records relating to Slate’s hiring, including copies of Slate Kennedy’s bills.
Legal bills follow a pretty standard formula. They list work by each lawyer, by date and time increments; brief descriptions of what the attorney did during that time; the lawyer’s billing rates; and totals for each attorney.
I will concede that in some cases it’s probably allowable for agencies to black out the description portion if such information reveals strategy on pending litigation. But if so, the records law would require the agency to disclose that information was being withheld, and to explain why.
Revenue gave me copies of the bills, but the bottom two-thirds of each was blank. If you didn’t know better, you’d think there was nothing below the summaries atop each page. But I knew better. I had, as noted earlier, retrieved the bills at the comptroller's office. The bottom two-thirds of those were not blank.
Department officials -- I suspected, under orders from the governor’s office -- had tried to trick me, and by extension, the public. Had they been honest they’d have blacked out the withheld portions, or done so in some manner that made it clear that parts of the records were being withheld. Instead, they doctored the bills to make it appear they were producing complete records.
They conspired – and I don’t think that too strong a word – to violate the public records law. They’d gone to considerable lengths to prevent me from reporting that Kennedy started billing the state the day after leaving its employ and that she’d personally charged more than $120,000 since departing.
I called the Revenue Department, told them that they’d been, well, caught, and that we were planning a separate story on the concealment of the records. Cynthia Underwood – the third commissioner since Siegelman became governor – didn’t try to deny it. Underwood said she didn’t believe the records to be public and ordered the department’s media staff to white out those portions of the bills.
I didn’t believe her. I suspected the responsibility lay elsewhere, and that she was – perhaps after being ordered -- playing the “protect the boss” game so prevalent during the Siegelman administration.
To both avoid laying the blame on Underwood and, most importantly, to report the truth, I violated protocol by e-mailing Ted Hosp and Carrie Kurlander. I told them I was probably “breaking some cardinal rule” by contacting them; and wrote that “someone, prior to making records available to me, had literally covered over the very portions of those records which they knew to be the subject of my inquiry.”
Despite the wars I knew Carrie and Ted to be good people who’d come to public service with the best of intentions, only to be sandbagged by the boss’s lack of ethics. The letter was a bald, in some ways over the top appeal to conscience, and here’s part of it:
“I’m asking you, out of what I believe is your decency and respect for the truth, to either tell or message me, or tell or message my bosses, if indeed the decision to cover up portions of those records was made in the governor’s office, as opposed to by Commissioner Underwood alone …..
“If it wasn’t Ms. Underwood’s idea, or if it was but she ran it by someone in the administration first, and the two of you know that but take no action to correct what’s been told me, then my story will contain a lie and it will be your fault. If that’s the case, then both of you will be party to a lie told to the public, and will be a party to letting Ms. Underwood accept responsibility for something she did not do. Sorry to put it like that, but that’s just the way it is.”
It worked. The governor’s office didn’t respond, but the next day Underwood e-mailed a short statement: “Upon the advice of Ted Hosp, the governor’s legal advisor, I made the decision not to give up any records that would be considered attorney/client privilege.”
It turned into a pretty good story, and the Associated Press picked it up. The incident, as with so many before and yet to come, made me wonder – as I still do – how much public information was withheld by Team Siegelman.
The Slate Kennedy saga developed a pattern that began with the first story, by the AP's Poovey’s.
That pattern: A reporter (Poovey, then me, twice) would write about Kennedy’s apparent use of her position to arrange lucrative post-government work; quote various officials expressing dismay; and everyone would move on, assuming that just had to be the end of it. Only it never was.
In November 2005, I received another letter, also anonymously sent and probably from the same source as the first. The writer suggested I revisit the story, because Slate Kennedy was still billing up a storm.
And indeed the firm was. By this point the firm’s tally on the Revenue Department contracts had reached a bountiful $3.35 million. Of that, only about $200,000 had been billed before Kennedy came aboard.
Once again the comptroller's office bills told an interesting story. They showed that in the three years since my first story, three lawyers other than Slate and Kennedy performed most of the work on the Revenue Department contracts.
I punched their names into the state bar association database and found that the two came to Slate Kennedy straight out of law school and the third was also quite young.
I tallied each lawyer’s bills and was able to report the following:
The bulk of the billing since November 2002 -- about $2.4 million -- has been by the younger lawyers, one of whom graduated from law school in 2000, and two others who graduated in 2003. ….Generally, young lawyers work as salaried associates, and the more they bill, the more the partners make. It’s unclear what the set-up is in the Slate Kennedy firm, as neither partner responded to the Register's questions.
Of more than 17,000 hours billed by Slate Kennedy in that period, Slate accounted for 380, most of them in 2003. That compares to 3,916 hours by Kennedy, and more than 5,500 hours by Jason Thomas, who has done more work on the Revenue Department contracts that any of the other Slate Kennedy lawyers.
Kennedy generated fees of almost $500,000, while Thomas’ work accounted for about $740,000 in charges during the almost-three-year period.
Translation: The Revenue contracts had developed into a gravy train for partners Slate and Kennedy. Most of the work was at a level of complexity that a lawyer fresh out of law school could do it, thus allowing the firm owners to sit back and watch the money roll in.
The use of the young lawyers was a result of a major legal development in late 2002, when the Alabama Supreme Court ruled for the state in the franchise tax case. The ruling eliminated most of the plaintiffs and greatly minimized the state’s potential losses. However, some 800 companies still had claims that needed resolving, if for pennies on the each dollar they’d claimed. The department elected to use Slate Kennedy to negotiate settlements with those companies.
From that point on, Slate – whose class action experience had been the sole reason for the original contracts – cut way back on her billing and Kennedy and the young associates took over.
By this time Riley was governor, so the post-2002 use of Slate Kennedy couldn’t be pinned on the Siegelman administration. By this point the question was: Why didn’t the Revenue Department hire someone, say, right out of law school, to do the same work, and at a fraction of the price?
To the department’s credit, in 2004 it had cut the billing rate on the contract from $150 an hour to $100. In written responses to questions, the department said it considered using staff attorneys to negotiate the settlements but “determined that it is a more efficient utilization of its legal resources to employ outside counsel … (for cases) which are one-time in nature.”
The 2008 audit by the state examiners re-hashed the previous reporting and gave new totals for Slate Kennedy’s billings. By the end of 2007, the firm's tally on the Revenue Department contracts had reached $4.6 million. That was $1.3 million more than the last time we’d reported on the matter. (A recent review show that the firm has now been paid more than $5 million on the contracts arranged by Kennedy.)
I suppose Kennedy, and perhaps Slate as well, might have run into ethics-related legal problems but for one thing: The firm apparently did good work.
For the first story I'd called the attorney general’s office, which oversees major litigation, as the franchise tax case certainly was. The call presented Bill Pryor an opportunity to bash the Slate Kennedy hiring as another example of the Siegelman administration cronyism; and at time when the governor was starting to accuse Pryor of engaging in a partisan prosecution of him.
But that’s not what happened.
“The work Pam Slate has done has been great, and Bill has been very, very pleased with the work she’s done on those franchise tax cases. The briefs she’s written have been exceptional,” Pryor’s top assistant, Richard Allen, told readers.
Allen said he didn’t recall reviewing Kennedy’s work but in meetings she “always has a good handle on things, and seems to be a very competent lawyer.”
It’s my experience that most contracts and shady deals produce shoddy work for the public, but not always. But does providing good services in effect clear someone from breaking laws to get the work?
The answer: Of course not.
If someone bribed a state official, got a contract, and did great work, it wouldn’t absolve the contractor and official of bribery.
I believe it's an open and shut case that case that Kennedy broke the revolving door provisions of the ethics law by using her public position to enrich herself upon leaving state government.
It would, though, have been a difficult case to prosecute. Kennedy, after all, could call Bill Pryor as a witness praising the firm’s work; and the Revenue Department, over not one but two administrations, had used the firm despite being fully aware of the circumstances of its hiring.
Kennedy and Slate got away with it, and rich in the bargain.
Kennedy, in addition to her work for Slate Kennedy, had a more public position as a lobbyist/lawyer for the state teacher’s union, the Paul Hubbert arm of state government.
She’s a political player, the type only a Don Siegelman would make the chief attorney for Alabama's tax agency.