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New Mississippi furor: 14% fee for tax collection



In Mississippi, a furor has arisen over the latest cozy partnership between state attorneys general and profit-seeking private lawyers, this one involving what can only be called contingency-fee tax collection. Jackson Clarion-Ledger editor Sid Salter sums up the basics:

Democratic Attorney General Jim Hood hired Booneville attorney Joey Langston -- a major campaign financier of both former Democratic Gov. Ronnie Musgrove's and Hood's 2003 campaigns -- as outside counsel to represent the state in negotiations to collect back taxes owed the state by MCI/WorldCom, the homegrown telecommunications giant that collapsed in 2002 after an $11 billion accounting fraud was revealed.

The settlement reached was $100 million, plus negotiated contributions of $2.95 million to a newly formed nonprofit organization called Mississippi Children's Justice Center. Langston got $14 million in legal fees from the deal -- and will donate $1.25 million of that to the new nonprofit agency.

Interestingly, MCI itself hired former Mississippi AG Michael Moore, a Hood ally whose freelance partnership with Dickie Scruggs set the pattern for mutual backscratching between AGs and private lawyers, to represent it in the deal. Republican Gov. Haley Barbour has criticized the proceedings, but was powerless to stop them because of the independence of the AG's position from gubernatorial control. The contemplated establishment of the new nonprofit center means that once again, as in the tobacco round, the AG's office has managed to create a new program with taxpayer money not voted for that purpose by the legislature -- an especially remarkable outcome since, as Salter notes, "the Legislature rejected funding the Justice Center during the 2005 regular session".

AG Hood, meanwhile, is defending the deal and dismissing critics who claim the state could have gotten a better deal from MCI. And the Biloxi Sun-Herald is sifting through some of the many political connections between Hood and attorney Langston, such as, f'rinstance,:

Hood, who has promoted state campaign finance reform, last year issued a warning that he may try to prosecute those who sidestep state campaign finance laws. But a Sun Herald article last year pointed out that Hood's campaign had benefitted, to the tune of $300,000, from some of the same type of donations he was criticizing.

Hood called the process of businesses giving money to PACs and nonprofits, which in turn give the same amounts to certain candidates, "money laundering." But Langston gave $100,000 to the Democratic Attorney Generals Association one day during Hood's '03 campaign, and DAGA gave Hood the money the next day.

For more on the adventures of state AGs, see our regulation through litigation page.

 

 


Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.