Dan Walters: Private tax-collecting firm has troubling record
By Dan Walters - dwalters@[EMAIL PROTECTED]
12:00 am PDT Friday, April 4, 2008
A state employee union is complaining about an embryonic scheme in the
state Board of Equalization to hire one or more private collection
firms to track down those who owe taxes to the state.
The Service Employees International Union says the state's own tax
collectors could do the job just as well, for far less cost, if they
were equipped with up-to-date tracking tools.
SEIU obviously wants to bolster civil service worker ranks and stave
off privatization. But in this instance, given the identity of the tax
collection firm that is most aggressive in seeking a contract, the
union's concerns appear to be well-placed.
A Texas-based law firm called Linebarger, Goggan, Blair and Sampson
(LGBS) has hired a veteran politician and former Board of Equalization
member, Johan Klehs, to lobby his former colleagues and, it hopes,
secure a contract that would give it a juicy piece of the state's
estimated $8 billion in uncollected taxes.
LGBS is huge, with operations in dozens of states and contracts, it
says, with 1,800 state and local government agencies to collect taxes,
parking fines and other overdue accounts. It even had a collection
contract with the Internal Revenue Service, one of three firms to
receive the business under an experimental IRS program. However, a
year ago the feds dropped LGBS for reasons they never would specify,
while retaining the other two private tax collectors.
Although the IRS case has received the most national attention, a
perusal of the firm's dealings with state and local governments
reveals a pattern of using political persuasion to secure lucrative
collection deals, some of which have devolved into scandal.
Just a couple of months ago, for instance, LGBS was fired by the city
of Chicago after it was revealed that it had bankrolled a vacation
trip for the city official who oversaw its contract to collect unpaid
parking fines, which had generated $33.6 million in commissions for
the firm.
"Because this is a law firm, we believe it should be held to the
highest ethical standards," Chicago's cor****ation counsel, Mara
Georges, said in a statement announcing that LGBS had been fired. "For
this reason we are terminating their engagement with the city."
Meanwhile, back in Texas, the mayor of Mansfield, a Dallas-Fort Worth
suburb, resigned rather than face a recall election. One of the
allegations against him was that he accepted a campaign contribution
from LGBS, the city's tax collection contractor, after his election.
Mansfield also terminated the LGBS contract.
LGBS has a huge business in Texas. The Dallas Morning News revealed
that it has contracts with nine of the state's 10 largest tax-
collecting agencies, and uses "an army of lobbyists and has millions
to spend on political campaigns" in its efforts to become the nation's
premier private tax collector.
Last year, one of its contracts, collecting overdue property taxes for
New Orleans, backfired when a state appellate court ruled that the
city's imposition of a 30 percent penalty on taxes to cover fees to
LGBS was unconstitutional.
The firm had partnered with a local group, United Governmental
Services, that had what the Times-Picayune of New Orleans described as
"strong political ties." Its principals, the newspaper re****ted, were
part of the inner circle of the mayor who arranged the contract.
And so it has gone as LGBS has attempted to expand its already immense
****tfolio of government business. But the most cautionary episode
occurred in 2002 when one of LGBS' partners, Juan Pe=F1a, pleaded guilty
to bribing two San Antonio city councilmen to win a tax collection
contract.
The insider lobbying campaign being waged by Klehs on behalf of the
firm in California is part of a questionable pattern. Do we really
want to open this door?
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