By Jo Becker and John Pomfret
Washington Post Staff Writers
Tuesday, October 11, 2005
AUSTIN, Oct. 10 -- As a corporate lawyer, Harriet Miers once urged then-Gov. George W. Bush to veto legislation that would have prohibited the Texas Supreme Court from regulating or capping attorneys' fees, charging that the legislation did "violence to the balance of power between the legislative and judicial branch."
Miers, President Bush's nominee to the Supreme Court, said in her 1995 letter to Bush that the legislation was a blatant attempt to protect a "handful of greedy, but immensely rich and powerful" trial lawyers.
The letter was among 2,259 pages of documents released Monday by the Texas State Library and Archives Commission. Most of the papers involved Miers's 1995-2000 tenure as chair of the Texas Lottery Commission. The documents provide a glimpse into her views on the proper separation of powers and the debate over making the civil justice system more fair and predictable.
In addition to chairing the lottery commission, Miers was the managing partner of a large Dallas law firm, Locke Liddell & Sapp. While she was running the firm, it helped accounting firm Ernst & Young LLP sell a sham tax shelter in 1999 by advising investors that they "should" be able to beat the Internal Revenue Service in court, according to a February 2005 Senate investigation report that came to light Monday.
The tax shelter in question, which was banned three years ago, allowed investors to turn ordinary income into capital gains income, which is taxed at a lower rate, and at the same time declare a substantial loss. According to the Senate report, Locke Liddell & Sapp appears to have made $3.5 million on 70 such deals, which the report called "potentially abusive or illegal."
The report quoted the legal adviser of a potential investor as blasting Locke Liddell & Sapp for effectively signing off on such investments. "From all indications, the transaction appears to be a classic 'sham' tax shelter that would be successfully challenged on audit by IRS," the legal adviser is quoted as writing to his client.
Miers was not mentioned in the Senate report. She was not a tax law specialist and did not have direct involvement in recommending the tax shelter, according to White House spokesman Allen Abney. "As we understand it, Miers had nothing to do with these transactions and was not in any way a part of them," he said.
Tom Connop, who has been the firm's spokesman on Miers, did not return a phone call.
Miers's letter urging Bush to veto legislation came as lawmakers were debating a host of measures he had pushed that were aimed at limiting lawsuits. The Texas Supreme Court had announced that it was going to launch a study of contingency fee arrangements, in which lawyers agree to take a case in return for a percentage of the verdict, which prompted trial lawyers to lobby lawmakers to pass the bill in question.
Bill Whitehurst, former president of the Texas Trial Lawyers Association, said lawmakers were concerned that the state Supreme Court was "getting ready to do something that was not the court's prerogative."
But Miers called the legislation an "assault" on the state Supreme Court's authority to regulate and discipline lawyers and said the legislature had overstepped its bounds. If the bill became law, she warned, it would only benefit special interests that had "brought shame on this State, badly hurt our economic development efforts and continue to this day to cause our State to be held in disrepute for 'justice for sale.' " Bush vetoed the bill.