Another Clinton Democrat:
June 16, 1999
Review & Outlook
Faust in Texas
When the state of Texas extracted the mother of all settlements from the tobacco industry last year, you knew that it was only a matter of time before we all learned who traded what for this $20 billion pact with the tort devil. That time has elapsed, and we now have our Faust. His name is Dan Morales.
In 1996 Mr. Morales was the $93,000-a-year Attorney General of Texas. Mr. Morales decided that his 600-plus legal team wasn't up to the task of claiming the state's share of the tobacco bonanza, and said so: "The state of Texas needs and wants the best, most successful plaintiffs' attorneys to win this lawsuit," he told the Journal in 1996. "You want the toughest, meanest, most aggressive you can find."
Thereupon, the attorney general recruited five of the nation's biggest tort sharks as outside counsel: Walter Umphrey, a renowned asbestos litigator and John O'Quinn of breast implant fame were among the group, known in Texas as the Big Five. The Big Five agreed to take on expenses of the lawsuit. In exchange, Attorney General Morales promised them a 15% share, or 3% each, of the big tobacco prize. No need to be shocked, of course, that some of these fellows had contributed money, a total of $150,000, to the political campaigns of Mr. Morales.
In January 1998 it became clear that the tobacco settlement would hit at least $15 billion; later that figure ratcheted upward to an undreamed-of $20 billion. The Big Five would indeed receive something like at least $600 million each--and this for a copycat case that had never gone to trial. Republicans, including the state's Governor, George W. Bush, began issuing regular blasts about the outrageous scale of the fees. How this all must have appeared from the point of view of a $93,000-a-year desk in the AG's office is hard to imagine.
Then at the very first settlement meeting that January, Mr. Morales suddenly produced another outside counsel, a personal friend and political ally named Marc Murr. Messrs. Murr and Morales had known one another since 1981, when the two started work the same day at a Houston law firm. Soon Mr. Morales was to be seen waving around a contract that said Mr. Murr was entitled to a "reasonable fee." Around the same time he also announced that he would not seek office again.
Throughout 1998 people commented on several strange things about the Murr arrangement. None of the other lawyers in the AG's office or outside of it knew much about Mr. Murr's involvement in the case. And unlike the rest of the outside counsel on the Texas tobacco bandwagon, Mr. Murr did not report to Harry Potter, Mr. Morales's lead staff attorney. Mr. Murr reported directly to Mr. Morales. Mr. Morales also created a controversial state arbitration panel to evaluate compensation for Mr. Murr.
By the time the panel met, Mr. Murr was asking for a full 3%, $520 million, like the other lawyers, and suddenly he had Mr. Morales's explicit, written support. The two produced a heretofore-unseen contract, dated 1996, a contract that gave the 3% rate. Mr. Morales told the panel that Mr. Murr had worked on the case since 1995. It awarded Mr. Murr $260 million.
But the outside counsel payments, all of them, also had to pass muster with a national panel that oversaw the tobacco awards from New York. When that panel met on December 5, Mr. Murr didn't show up to collect his $260 million; instead, Mr. Morales appeared to argue that Mr. Murr deserved payment, though he refused to go under oath. The national panel dropped Mr. Murr's fee to $1 million.
So Mr. Murr, apparently not one to give up easily, filed a motion in Texas court to claim his original $260 million from Texas taxpayers. In the same weeks, Mr. Morales completed his term, moved into a $775,000 house, and dropped out of politics.
Even before Mr. Morales's successor, Republican John Cornyn, took office, employees in the Attorney General-elect's office approached him to express concerns about the arrangement with Mr. Murr. After a five-month investigation, the new Attorney General filed charges in federal court alleging that Messrs. Morales and Murr backdated and fabricated the compensation contracts. (The Dallas Morning News hired independent forensic experts and concluded that the papers had been doctored.)
The next day Mr. Murr gave up all claim of the $260 million rather than face cross-examination under oath. He waived any claim to even the last, $1 million fee. His attorney, Roy Minton, told us that he couldn't comment on the case, but that "there is not any question Mr. Murr was on board," that people who believe Mr. Murr was not involved are "dead wrong," that Mr. Murr was an enormous help to the Attorney General for "a year, year-and-a-half, two years," and that he was "entitled to some compensation." Mr. Morales's attorney did not return a call for comment. So far, no evidence has emerged that Mr. Morales benefited personally from the Murr arrangement.
Earlier this month a federal grand jury in Austin began issuing subpoenas for an investigation of criminal fraud on the part of Mr. Morales, the beginning of what is bound to be a long story. But the sobering effect on Texas's tort-drunk culture is already clear.
On May 31, the Texas legislature sent Governor Bush a new bill requiring that in the future, a board created by the lawmakers approve any contingent-fee contract where the settlement or award is expected to top $100,000. Next week, Mr. Cornyn will be in Washington to speak to the Chamber of Commerce and the Federalist Society and to tell Texas's story. Some of Mr. Morales's former allies in Texas are now speaking openly about the cloud of shame hanging over the state's settlement.
From the start, this tobacco litigation flowed forward on a river of righteousness. We suspect that for many who rode it, the torrent of tobacco money will prove a curse for years to come.
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