Posted on 03/06/2003 10:22:18 PM PST by GalvestonBeachcomber
AUSTIN -- A federal grand jury indicted former Texas Attorney General Dan Morales and a longtime friend Thursday for allegedly trying to defraud the state of hundreds of millions of dollars in legal fees in the state's anti-tobacco lawsuit.
The panel also charged Morales with illegally using political funds to help purchase a $775,000 house and of filing false income tax returns for 1998.
"This is a case of an elected official charged with abusing the public trust," said U.S. Attorney Johnny Sutton, who announced the indictments.
Morales was charged with 12 counts of mail fraud, conspiracy, filing a false tax return and making a false statement on a loan application. The charges carry maximum penalties totaling 83 years in prison and $3.6 million in fines, if he is convicted.
Houston lawyer Marc Murr was charged with mail fraud and conspiracy and faces up to 10 years in prison and $500,000 in fines if found guilty.
The charges stem from Morales' unsuccessful attempt to obtain as much as $520 million in legal fees for Murr in the tobacco case, litigation in which other lawyers said Murr did little, if any, work.
In an unrelated transaction, Morales purchased the house in the scenic hills west of Austin in March 1998, nine months before he left office. At the time, a spokesman said Morales had spent $150,000 he had made from the sale of a previous home on the down payment. But Morales, who earned $92,217 a year as attorney general, never explained how the balance was financed.
According to the indictment, Morales largely financed the house purchase with political contributions in a fraud against his donors and tried to conceal what he was doing by filing inaccurate, incomplete and false information with the Texas Ethics Commission.
After leaving office and learning he was under investigation, Morales tried to cover his prior conversions of political money by transferring $500,000 of an employment bonus he received from SBC to an account in the name of the Dan Morales Campaign, the indictment charged.
Morales and Murr weren't immediately available for comment, but each had previously denied any wrongdoing in connection with the tobacco case, which has been investigated off and on by federal and state authorities for four years.
Sutton said both were scheduled to surrender to federal authorities today.
Sam Millsap of San Antonio, one of Morales' attorneys, said Morales never was questioned by prosecutors or the FBI during the investigation. He declined comment.
Morales' settlement of the tobacco case, announced in January 1998, about 11 months before he left office, should have been the highlight of his political career. It won an agreement from cigarette makers to pay the state $17.3 billion over a period of years in exchange for Morales dropping claims over health care costs associated with smoking.
But huge legal fees awarded to private lawyers hired by Morales to handle the case sparked political controversy and, now, an indictment of the former attorney general.
The indictment charged that Morales and Murr arranged for a "sweetheart" arbitration in Austin to recommend $520 million in legal fees for Murr. It said the defendants "fabricated" and "backdated" a bogus contract to make it appear that Murr was entitled to 3 percent of the state's settlement, or $520 million.
"It was part of the scheme that Defendant Morales used the authority, prestige and influence of the State and the Office of the Attorney General to barter the state's interests for the benefit and enrichment of Defendant Murr," the indictment charged.
Although all three state arbitrators were selected by Morales and Murr, they recommended only $260 million in legal fees for Murr, an amount that Morales later tried to convince a national arbitration panel to award.
Morales said Murr made important contributions to the lawsuit, but he wasn't part of Morales' main legal team, a group of five lawyers headed by Beaumont lawyer Walter Umphrey.
Other lawyers in the case said Murr did little, if any, work on the litigation. The national arbitrators awarded the Umphrey group $3.3 billion in legal fees, all to be paid by tobacco companies, and awarded Murr only $1 million.
The indictment also said Morales required lawyers in the Umphrey group to hire his political consultant, George Shipley in 1996.
Morales also told the Umphrey group lawyers he wanted $250,000 in campaign contributions. Morales flew to Beaumont to pick up the money on the private plane of Houston attorney John Eddie Williams, but the money was not paid after Beaumont lawyer Wayne Reaud refused to go along.
After succeeding Morales in 1999, former Texas Attorney General John Cornyn, a Republican, began investigating the legal fees. Cornyn now is a U.S. senator.
In a federal court filing in 1999, Cornyn also had accused Morales and Murr of falsifying signatures and backdating two contracts. One day after Cornyn leveled his accusation, Murr withdrew a claim of $260 million in legal fees, which he had made against the state after failing to win the amount from the tobacco companies.
He also later waived his claim to the $1 million awarded by the arbitration panel.
Houston attorney Andy Taylor, who headed the Morales-Murr investigation as a member of Cornyn's staff, said federal prosecutors have told him he will be a witness against the defendants.
A former assistant Bexar County prosecutor, Morales unseated a Democratic incumbent in a door-to-door primary campaign to win election to the Texas House in the 1980s. During two terms as state attorney general, he was one of the Texas Democratic Party's biggest vote-getters.
He didn't seek re-election to a third term as attorney general in 1998 but attempted a comeback in last year's Democratic gubernatorial primary. He was trounced in a mud-splattered campaign by wealthy Laredo businessman Tony Sanchez.
Still calling himself a Democrat, Morales later crossed party lines to endorse Republican Gov. Rick Perry, who beat Sanchez in the November general election. During the campaign, Morales served as an adviser to the governor's Anti-Crime Commission.
In separate federal charges stemming from the election, Morales' brother, music producer Michael Morales, pleaded guilty in January to attempted extortion against Sanchez by threatening to reveal damaging information if not paid $70,000 a year for four years.
Michael Morales' sentencing hearing is set for April 11.
The tobacco settlement also sparked political controversy over the huge legal fees awarded to Morales' main legal team, all major Democratic contributors, who were hired on a contingency contract to handle the suit.
Morales' Republican critics, including then-Gov. George W. Bush, called the fees excessive.
Federal prosecutors are believed to have begun investigating Morales and Murr in 1999, when Democrats were still in charge of the U.S. Department of Justice. Sutton, who worked for Bush when he was governor, inherited the investigation when Bush named him U.S. attorney for the western district of Texas last year.
Shakespeare had it all right 500 years ago!
Houston attorney Andy Taylor, who headed the Morales-Murr investigation
I had the opportunity to work with Andy Taylor on some issues when I was a poll watcher last year. He was a pleasure to work with and knows his election law well.
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