In The News › Karen Carter’s legal contracts draw fire

Nov 19, 2006

Source: Times-Picayune

Karen Carter’s legal contracts draw fire

Karen Carter’s legal contracts draw fire
Ethics laws allow such work, she says
Sunday, November 19, 2006
By Michelle Krupa
Staff writer

In her campaign to unseat U.S. Rep. William Jefferson in Louisiana’s 2nd Congressional District, state Rep. Karen Carter has made it a mantra that during her seven years as an elected official, her integrity and ethics have never been questioned, a clear reference to the ongoing federal criminal probe of the incumbent’s business ventures.

But Jefferson, who has said he eventually will offer an “honorable explanation” for FBI agents’ discovery of $90,000 in marked bills at his Capitol Hill home, has pursued a strategy of challenging Carter’s ethics. Asserting that she “is not some shining knight — or queen,” the incumbent has questioned Carter’s work providing legal counsel to underwriters on public bond deals and has claimed she is not qualified to do the work.

Jefferson portrays Carter as raking in bundles of money through “no-bid public contracts,” then failing to disclose all of her earnings. Lodging similar complaints was New Orleans lawyer Joe Lavigne, a Republican candidate who ran fourth in the primary and whose supporters, should they turn out for the Dec. 9 runoff, could sway the result.

Carter says the work she has conducted as a private attorney is allowed under state ethics laws, a point on which ethics officials concur. And she views the barbs, particularly from Jefferson, as simply an attempt to deflect attention from the far more egregious charges he faces.

“He’s trying to find a way to drag me into the gutter with him, which is impossible, because he’s too far deep, and I’ll never be there,” Carter said. “I’m not going there. I’ll never entertain it.”

Ironically, Jefferson has experience with the kind of bond work for which he has criticized Carter. In the late 1980s, when Jefferson was a state senator, his law firm served as bond counsel on a bond issue for the Regional Transit Authority.

$113,500 collected

All told, public records show that Carter has collected almost $113,500 since early 2005 through her work on public bond deals and with law firms that have public contracts, including the firm that advises the New Orleans City Council on utility matters.

Carter’s current work for the City Council’s Utility Committee includes a family tie: her father, former 1st District Assessor Ken Carter, lost his piece of the regulatory deal when an ally of his in the BOLD political organization was stripped of the committee chairmanship. With another BOLD standard- bearer, City Council President Oliver Thomas, back at the helm, Karen Carter was hired in July to assist the prime contractor, Wilkerson & Henry, whose founding partner has known her family for decades.

Though Carter’s work on public bond projects does not violate any law, government watchdog groups long have called for a law barring lawmakers from participating in negotiated public contracts, such as most legal services agreements. Their argument: The potential for corruption is so great as to render even appropriate deals harmful to the public.

Carter says she would support stricter ethics rules. But if she wins the 2nd District seat, the issue likely will become moot, she said. Promising to devote her complete energy to Washington, Carter has vowed to forgo all legal work, in essence shuttering her private practice, if voters put her in office.

“Going forward, I am going to be a full-time congressperson,” she said. “There will be no conflicts of interest because I will not be doing this kind of work. Being a member of Congress will be my job 100 percent of the time.”

No bids needed

Carter defends her role in the public deals as routine.

Calling contracts for legal work “no-bid” deals is a “farce,” Carter said, because state law does not require such contracts to be bid, and they rarely are. Political bodies in Louisiana are allowed to hand-pick and negotiate with firms for professional services, such as legal or engineering work, under the theory that unlike low bids for equipment or materials, the best lawyers might not always charge the lowest prices.

Carter also insisted that she always has complied with a state law that requires her to disclose to the state Board of Ethics all income she earns as counsel to bond underwriters on deals tied to state agencies. Records show she has filed disclosure forms on two transactions, both in 2005, for bond sales related to construction of a syrup mill in Lacassine and a Union Tank Car factory in Alexandria. For those projects, she earned a total of $22,800, according to affidavits she filed.

Carter added that she did not report income for similar work on bond transactions involving local entities, including cities and parishes, because the law does not require it. Such deals have earned her firm at least $82,000 since last year on projects in Jefferson Parish, New Orleans, Monroe and for the New Orleans Aviation Board, according to a review of state Bond Commission records.

State law requires lawmakers to complete forms annually to report income “received directly . . . from the state of Louisiana or any local governmental entity or political subdivision thereof.”

Carter said she did not report income from the local bond deals because her firm was not paid directly by any political entity. Instead, as the “underwriter’s counsel” — the lawyer for an investment house that purchases or markets public bonds — her firm was paid by the prime contractor: the underwriter. It was the underwriting firm that collected payment directly from the public body, she said.

“You won’t see that because I’m not required to disclose it,” Carter said, adding that if such reporting were required, she would comply. “I’m not hiding anything.”

‘Unique’ experience

Carter used the same rationale to explain why she has not reported to the ethics board the $9,455 she said she earned this year working “of counsel” with Wilkerson & Henry, which earns $600,000 annually to advise the City Council on utility regulation. Jeff Wilkerson, a partner at the firm, confirmed the amount and described Carter’s position as an “independent contractor.”

Wilkerson said he hired Carter to advise the city on its contract with Entergy New Orleans because of her qualifications.

“The utility business is a very specialized area, and you don’t have that many people around who have experience,” he said. “The big reason we hired Karen was she’s young and she was experienced, and that experience was obviously unique and something you just couldn’t go out and grab from the attorney pool.”

Wilkerson also acknowledged that his ties to the Carter family run deep, both personally and through the work his firm once conducted alongside Ken Carter’s law firm, Carter & Cates, on the regulation deal. For a time, Karen Carter worked for her father’s firm on the Entergy project, he said.

“Aside from her father, Karen and I have had a long relationship,” Wilkerson said. “I encouraged Karen to run for her (state) representative seat. I’ve known Karen since college.”

Wilkerson said that to bring Carter onto the current council contract, his firm made a first-ever exception to its ordinary hiring practices, taking her on “of counsel” rather than as a full-time attorney so Carter could maintain her own firm’s independence.

Responding to suggestions that Thomas, the council president and a political comrade of Carter’s, instigated her association on the deal, Wilkerson said his firm had complete autonomy to select Carter.

“The council had nothing to do with who we hired,” he said.

Seeking board’s advice

In spelling out her reporting methods, Carter said she has tried to “go beyond the call of duty” in declaring her income as required by law. She noted that documentation of her income from public bond transactions, including on jobs she has handled for local government entities, is available through the Bond Commission, even if the ethics board does not require her to disclose it.

Further, Carter pointed to an affidavit filed in May 2005 in which she reported her expected compensation of $30,000 for work as an underwriter’s counsel on a project to build student housing at Southern University at New Orleans. But Hurricane Katrina sidetracked the plans, causing Carter to file a second sworn statement last week.

“I didn’t earn any of this money,” she said. “I didn’t do any work, so I filed an affidavit to (disqualify) the first affidavit.”

On the matter of the sworn statements, Carter first filed one in March 2005 after news reports highlighted her estimated earnings on the syrup mill deal. With her name already attached to the plan, she formally asked the ethics board whether she could work on the project. The board approved and instructed her to disclose her income from the state-sponsored deal.

Gray Sexton, the board’s administrator, said he recalls several instances in which Carter has sought his advice on her reporting requirements. After cautioning that he cannot speak for the appointed board, Sexton said he essentially has confirmed Carter’s reading of the rules.

Tighter rules called for

Jim Brandt, president of the nonpartisan, Baton Rouge-based Public Affairs Research Council, agreed that Carter did not break the law by conducting work on public bond deals or in the way she reported it to the ethics board.

But Brandt’s watchdog group, along with the Bureau of Governmental Research, has advocated for more than a decade for stronger ethics rules to bar lawmakers, state employees and their immediate relatives from participating in any deals with state or local governments, save those awarded through the low-bid process.

Problems could arise on deals awarded subjectively, he said, given the potential of lawmakers to wield their influence to win contracts, compromise their oversight of entities with which they do business or vote on appropriations based on the likelihood they could earn income as a result.

“If you have an economic interest with a government entity, we would prefer that there be no contracts or subcontracts between legislators and other government entities, state or local, unless the contract is publicly bid because of the appearance or potential for conflict of interest,” Brandt said.

The policy, he said, was first pushed in 1995, then reiterated in 2003, after a survey of public records found that legislators had earned $2.6 million in the previous fiscal year through contracts or subcontracts with state and local political entities.

Keeping roles separate

Carter said she realizes her position as a state representative could run up against her role as an attorney on public bond issues. As a result, she said, she does not testify before the State Bond Commission.

“I never appear before the Bond Commission. I make it a point not to. I don’t want the appearance of impropriety. I don’t have to be a face for the deal,” she said, adding that she doubts the inclusion of her name on bond applications would sway commissioners to approve an otherwise bad deal. “I don’t think Karen Carter has that level of influence to get an agency like that to do something imprudent.”

On the flip side, Carter said she has never won work on bond deals because of her elected position. She said she got into the “niche” business of public bond transactions in an effort to meld her law degree with her undergraduate studies in international commerce and marketing.

She said major investment houses, such as Morgan Keegan and Jones Walker, that hired her as underwriter’s counsel “are not going to hire people who are not competent and can’t do the work. These are serious financial transactions.”

Qualifications disputed

Jefferson also has claimed that Carter was hired to work on the public bond deals despite lacking qualifications required by the state. Officials at the state ethics board, Bond Commission and attorney general’s office, however, said no strict standards exist for attorneys who conduct the sort of bond work Carter has undertaken.

Bond Commission Director Whit Kling said that when the commission itself issues certain kinds of revenue bonds, attorneys working on the project must have a rating of AV on the Martindale-Hubbell peer-review scale.

Carter, whose rating is BV, has never worked on such deals, Kling said. In all other cases, he said, “we don’t have a role . . . whether or not they have any specific qualifications.”

. . . . . . .

Michelle Krupa can be reached at mkrupa@timespicayune.com or (504) 826-3312.

Nov 19, 2006

Source: Times-Picayune

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