A story in Washington Business about the Fairfax County Economic Development Authority referred to the "commonwealth's" attorney. It should have been the county attorney.
Fairfax County Economic Development Authority lawyer Thomas O. Lawson, following a billing practice he said is used by other attorneys in commercial financing, receives thousands of dollars a year in legal fees from companies seeking funding from the agency he represents.
The payment procedure has been sharply criticized as an apparent conflict of interest by Fairfax supervisors Audrey Moore and Sandra Duckworth and a lawyer in the commonwealth's attorney's office who did not wish to be identified.
The three officials say they believe Lawson should not be paid directly by business representatives awarded loans by the agency since Lawson's role is to protect the legal interest of the authority, which last fiscal year awarded $19.4 million in low-interest rate industrial revenue bonds to help finance the creation or expansion of 22 private businesses.
"It seems to me he should not be making a living depending on how many IRBs Industrial Revenue Bonds are granted," said Moore. "A better procedure would be to put him on a retainer or salary. I think legitimate questions can be asked about it," Moore said.
Lawson, who has served as the authority's lawyer since its inception in 1966, defended the method of payment and likened his role to that of a bank attorney. He, and several other bond lawyers, argued that financial institutions routinely require borrowers to pay the legal fees of private lawyers they retain to help the institution process loan applications.
"I don't see any problem at all," said Charles G. Gulledge, chairman of the commissioners of the Fairfax County Economic Development Authority. He said the authority considered other methods of paying the lawyer but rejected them because it was thought that the alternatives would generate abuses.
David Dickson, community development director of the Virginia Division of Industrial Development, agreed and said that many local Virginia authorities follow the practice Fairfax County uses.
As the authority's lawyer, Lawson reviews financial documents, drafts the resolution authority commissioners approve to allow companies to secure bonds, writes the legal and technical language of the bond itself and occasionally files lawsuits to obtain court review of a particular bond to ensure that it meets legal standards. He does not vote on bonds, although he often writes legal opinions for authority commissioners--as he did in a controversial furniture retail warehouse case two years ago--that can determine whether the authority can properly finance a particular business.
However, some other Virginia officials say they specifically choose not to pay authority lawyers in the manner used by Fairfax County to avoid the appearance of impropriety.
The Richmond Industrial Development Authority uses lawyers in the city attorney's office to handle the work. "I think it's a conflict of interest to pay a lawyer in that manner," said Howe Todd, secretary-treasurer of the Richmond authority. "It would be more proper for the agency to bill the applicant directly or charge a fee--if that's how they want to do it--so there is a more indirect, arms-length relationship."
In Fairfax City, loan applicants pay a flat $2,000 fee to the Industrial Development Authority, which in turn pays its lawyer out of those proceeds. "I don't think it's a good idea for an applicant to pay the lawyer directly," said Assistant City Manager Tom Norris.
The method by which Lawson is paid his fees was first questioned last March at a meeting of the County Board of Supervisors when supervisor Duckworth told Lawson: ". . . It seems to me that it is a conflict of interest to have the attorney for the EDA also be the attorney for the applicant. I just wonder how it is, because you have heard that old adage no man can serve two masters."
"I'm not serving two masters," Lawson said during an interview last week. "I am emphatically saying there positively is no conflict. There is no basis for such an allegation. The applicant usually has his own attorney. I think the user should be the one who pays the expenses and the costs. . . instead of the taxpayers."
"I'm still concerned about it," said Duckworth. "I'm concerned about the public perception . . . I'm going to be reviewing this," she said, refusing to say what action she might take.
The lawyer in the commonwealth's attorney's office who criticized the payment procedure said that he is troubled that Lawson is usually paid only by successful bond applicants and therefore is rewarded when bonds are granted. The number of industrial revenue bonds awarded by the authority more than doubled in the last year from nine in fiscal 1980 to 22 in fiscal 1981 as more companies, finding tight credit and high interest elsewhere, sought such loans.
"That's like saying lawyers encourage their clients to get sued so they can make more money," responded Lawson. "The proof of the pudding is we've been doing this bond work for a number of years and every one of these loans is up to date. I think frankly that the IRB program has been a fantastic benefit to citizens of Fairfax County."