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Editor’s Note: This is the third in a series of occasional articles about the awarding of city legal contracts. Many a Philadelphian caught up in a criminal investigation has sought legal advice from someone who’s helped run one before. The city’s municipal employees don’t seem to be any different. After the emergence of the U.S. attorney’s sweeping investigation of local municipal corruption – known to most City Hall insiders as “the probe” – the group of lawyers receiving the largest resulting city contracts included a high number of former federal prosecutors. Those attorneys’ contracts accounted for a large chunk of the roughly $4 million in legal fees spent on outside counsel work related to the investigation. Below is a look at some of the recent legal contracts related to the probe. The Probe The boundaries of the probe vary depending on who’s talking. The most well-known aspects, however, are of a federal investigation that began around 2000 with wiretaps on local drug dealers, shifted its focus to politically influential Muslim cleric Shamsud-din Ali, and later included “the bug” placed in Mayor John F. Street’s office. It culminated with indictments targeting two purported criminal enterprises – one centered around Ali, the other, local power lawyer and Street fundraiser Ronald White (who died in 2004.) Eventually indicted alongside Ali were Street aide John Christmas, a nine-year veteran of the Law Department before joining the mayor’s office in 2000, and Steven Vaughn, chief of staff for City Councilwoman Donna Reed Miller of Northwest Philadelphia. White’s city-employed co-defendant was Corey Kemp, the Street administration’s treasurer. The common theme in both sets of indictments was the assertion that the defendants had engaged in fraud in pursuing access to, and influence over, professional contracts awarded by the city. As the saga unfolded, a number of high-placed city employees were called to appear as witnesses before a grand jury attached to the investigation. They included City Councilwoman Jannie Blackwell of West Philadelphia and George Burrell, widely regarded as Street’s closest political adviser. Exactly what was asked of those who cooperated with the investigation isn’t quite clear. Some witnesses may have done little more than give the grand jury an insider’s perspective on the daily functions of city government. Others were facing the possibility of being charged with a crime. As of this spring, 43 current and former city employees were officially interviewed in connection with the probe, according to City Solicitor Romulo L. Diaz Jr. There were also some 330,000 pages of documents and roughly 200,000 e-mail that ultimately required review. Financial records maintained by the City Controller’s Office indicate that when the probe first surfaced in 2003, the city’s first line of legal defense was manned by two former federal prosecutors already working on the city’s behalf in another federal investigation. City records show that prior to the probe, both Gregory Miller of Miller Alfano & Raspanti and Old City-based solo practitioner Gregory Magarity had been serving as outside counsel for the city for the purposes of an unrelated federal investigation into the relationship between the city’s Board of Pensions and Retirement and local law firm Barrack Rodos & Bacine. Magarity, who had been a federal prosecutor from 1973 to 1980, would eventually receive a contract with a maximum spending limit of over $1 million for his work on behalf of the city in those two investigations. City financial records indicate that his representation of the city with respect to the probe tapered off by early 2005. Miller, before entering private practice in 1984, had been head of the criminal division in the local U.S. Attorney’s Office. His firm would eventually receive an $810,000-maximum contract for work concerning the probe, the pensions board investigation and unspecified labor litigation. It was widely reported in the fall of 2003 that Street was receiving legal advice concerning the probe from longtime friend Arthur Makadon, chairman of Ballard Spahr Andrews & Ingersoll. That firm would go on to receive a contract with a $260,000 maximum for legal work related to the probe. As the probe’s grand jury phase got under way, the Law Department needed one main outside counsel to coordinate the situation on the city’s behalf. Enter Michael Holston. Holston began his career at Drinker Biddle & Reath as a commercial litigator in 1987, after graduating from Villanova University School of Law. He joined the Philadelphia U.S. Attorney’s Office in 1993, where he was assigned to the criminal division. Holston returned to Drinker Biddle in November 1993 and made partner three years later. He developed a reputation as a white collar law rainmaker whose corporate clients included Hewlett Packard. In March 2005, Holston and a group of other Drinker Biddle white collar lawyers moved to Morgan Lewis & Bockius. Assistant U.S. Attorney Michael Schwartz, who heads up the Eastern District’s anti-corruption unit, said that Holston began doing city legal work related to the probe when he was still at Drinker Biddle, and that the work followed him when he went to Morgan Lewis. Before Holston moved to Morgan Lewis in early 2005, he had been representing Blackwell and the city itself in conjunction with the probe during his time at Drinker Biddle. City records indicate that for fiscal year 2004, Drinker Biddle had a city contract with a maximum spending limit of roughly $1 million for work related to the probe. That contract took effect in late October 2003, about two weeks after the bug was discovered in Street’s City Hall office. Not long after Holston joined Morgan Lewis, an April 2005 letter from Holston to Law Department litigation chief Donald Marino confirmed Morgan Lewis’ brand new contract for legal representation related to the probe. Holston’s letter laid out a billing scheme of $200 per hour for work performed by himself, and $190 per hour for work performed by Noreen Alvarado and Sandra Moser, two associates who had also made the switch from Drinker Biddle to Morgan Lewis. Morgan Lewis’ contract with the city was extended the following two years, and currently has a $900,000 maximum spending limit. According to Diaz, Morgan Lewis attorneys have taken the lead with respect to outside counsel work stemming from the probe. Diaz said the Law Department’s spending on outside counsel for work related to the probe hit a crest in fiscal-year 2004: In FY 2003, just more than $25,000 was spent; in FY 2004, approximately $2.06 million; in FY 2005, less than $1.4 million; more than $840,000 in FY 2006; and just less than $18,000 in FY 2007, as of this April. But Morgan Lewis was just one of about 20 firms working on the city’s behalf in conjunction with the probe, Diaz said. The key reason: avoidance of conflicts. Schwartz said there are two main ways in which potential conflicts arise in federal corruption investigations. The first stems from the representation history of a law firm acting as outside counsel for the city. When a federal investigation sparks subpoenas, according to Schwartz, there will often be requests for certain businesses’ financial records. If a firm serving as outside counsel for the city also represents (or has represented) one of those businesses, the potential conflict will quickly become apparent. Often, Schwartz said, the potential conflict is brought to everyone’s attention by the firm itself. Other times, he said, Law Department higher-ups, having received a copy of a subpoena, will discuss possible outside counsel choices with counterparts at the U.S. Attorney’s Office, and identify potential conflicts during that process. “I might say to [the Law Department's] Don Marino, ‘You want to retain XYZ Law Firm, and that may be a problem, because of other representations they have,’” Schwartz said. But other times, Schwartz said, the potential conflict will arise when an individual’s interests with respect to the investigation are thought to possibly be at odds with the city’s own. “When we go outside of the general firm that is representing the city,” Diaz said, “it’s usually because the U.S. Attorney’s Office has indicated to us that there’s a potential conflict between the city’s representational role and an individual for whom representation is sought.” Schwartz said the city typically will defer to the U.S. Attorney’s Office to determine if the law firm serving as the city’s main outside counsel in an investigation should represent a particular city employee called before the grand jury. On certain occasions, according to Schwartz, the Law Department learns, over the course of its coordination of the city’s legal representation in an investigation, that an individual city employee might have criminal exposure and needs his or her own attorney. Schwartz and Diaz both declined to comment on specific representations related to the probe. Choosing Counsel One key city-employed figure in the probe who, for whatever reason, did need his own attorney was Burrell, the top Street aide. A former professional football player with both his undergraduate and law degrees from the University of Pennsylvania, Burrell had been viewed as an opponent of Street’s when both men were members of City Council in the late 1980s. It was said that as the Street administration’s secretary for external affairs, many major city contracts for professional services crossed his desk. Transcripts of a government-recorded telephone conversation between Burrell and Ronald White in mid-2003 seemed to show Burrell butting heads with the power lawyer over the particulars of a significant city contract. A January 2004 letter to the Law Department’s Donald Marino from Gaetan Alfano of Miller Alfano & Raspanti – former federal prosecutor Gregory Miller’s partner – confirms a $50,000 payment to his firm as part of its continued representation of Burrell in conjunction with the probe. Despite frequent appearances before the probe’s grand jury in late 2003 or early 2004, Burrell was never identified as anything more than a witness. In a spring 2004 interview with the Philadelphia City Paper, Burrell denied rumors that he had become a federal informant and was under witness protection. Burrell remained a member of Street’s staff throughout the probe; he left the mayor’s office for the private sector in early 2006. As mentioned above, City Council’s Blackwell, another top city employee identified as a witness in the probe, was represented by main city outside counsel Holston during the process. Local media reported in March 2004 that Blackwell had testified before the probe’s grand jury about two specific meetings she’d had with Ali several years before. (Holston left Morgan Lewis in February to become general counsel of longtime client Hewlett Packard, which had found itself at the center of a well-publicized pretexting scandal.) City records suggest that none of the city employees named as defendants in indictments stemming from the probe wound up having city-funded attorneys as the trial process began. Nelson Diaz of Cozen O’Connor, who served as Philadelphia’s city solicitor from late 2001 through early 2004 (and is not related to successor Romulo Diaz), said that when he ran the Law Department, a city employee would receive city-funded legal representation until indicted, at which point the city would typically stop paying for that employee’s legal costs. But if the employee were acquitted at trial, according to Nelson Diaz, he or she would be compensated by the city for what it would have paid outside counsel to handle the trial. John Christmas, the Street mayoral aide indicted alongside Ali, was listed as represented at trial by attorneys not on the city’s outside counsel payroll. Nelson Diaz said Christmas didn’t like the Law Department’s choice for his individual counsel going into the grand jury process, and effectively used his own, non-city-funded attorney from that point forward. The June 2005 federal jury in U.S. v. Ali did not convict Christmas on any of the charges against him, and he was soon back at City Hall – this time, as an aide to Blackwell. City Council staffer Steven Vaughn, another Ali co-defendant, was also listed as having been represented post-indictment by attorneys not on the city’s payroll. Nelson Diaz said the city stopped paying for Vaughn’s legal counsel after he was indicted. In the spring of 2005, he pleaded guilty to mail fraud charges and was later sentenced to five months in prison. Ronald White co-defendant Corey Kemp, the Street administration treasurer, went with legal counsel not funded by the city early on in the probe, according to Nelson Diaz. He said the city’s main outside counsel for the probe informed the Law Department that Kemp was managing his own legal affairs because he was possibly going to become a cooperating witness. Convicted in the White-related conspiracy case alongside two local banking executives, Kemp was sentenced to 10 years in prison in July 2005. White died of cancer in the fall of 2004 at the age of 55, several months after being indicted. The probe’s other key figure, Ali, was convicted of a number of racketeering-related charges at his 2005 trial and later sentenced to more than seven years’ imprisonment. The government’s prosecutors had attacked Christmas and Vaughn for their roles in helping an Ali-controlled company win an early 2001 Law Department contract for delinquent city real estate tax collections. The government said Ali’s company wound up receiving a $60,000-plus fee, despite having performed no real work. As The Legal reported earlier this month, the Law Department had by August 2004 effectively consolidated its various real estate tax collections contracts into the largest single contract awarded by the city to an individual law firm. The winner of that $10 million-maximum contract, Linebarger Goggan Blair & Sampson, is a Texas-based law firm that’s dedicated to collections and has offices across the country. No Lobbying Schwartz said that if the Law Department tended to pick former federal prosecutors for legal work related to the probe, it’s not because of lobbying on the part of the U.S. Attorney’s Office’s. “We never tell them who to use, we never suggest to them who to use,” Schwartz said. “I don’t know how they select them. We don’t get involved, in any event. We don’t comment or even get into the bigger issue as to who’s paying for these lawyers – whether or not the city has a right or a duty to pay for these things.” Romulo Diaz – who took the reins at the Law Department in April 2005 – noted that “people who go into white-collar defense work typically start out doing prosecution work.” “From the prosecutor’s side,” Schwartz said, “our intention is to deal the same with any lawyer, no matter whether we know them because they’re former colleagues, whether they’re well-renowned or they’re the solo practitioner for whom this is their first federal investigation. “Do some people choose lawyers believing that because they’re a former assistant, they’ll have an easier time negotiating with us? I certainly believe that, but that doesn’t matter to us.” Alfano, whose firm was heavily involved in legal work stemming from the probe, said he doesn’t believe Miller Alfano was picked by the city because it was perceived as having a close relationship with the U.S. Attorney’s Office. But Alfano did say that in handling such work, “it’s important to have credibility” with the U.S. Attorney’s Office – something that can take years to develop. Romulo Diaz said the probe “was an example of an extraordinarily important and quickly emerging requirement for legal representation of the city, and city officials.” “I think the people of Philadelphia should have a sense of confidence and comfort with the professionalism of the process,” he said, adding later, “The focus on the selection [of outside counsel] somehow ignores the bigger story, which was that you had very professional people from the Law Department, and on behalf of the Law Department as outside counsel, working to provide excellent representation under extraordinary circumstances.” But Nelson Diaz said he believes that during the probe, the U.S. Attorney’s Office was quick to say there was a potential conflict with respect to legal representation of city employees. “If you see what’s happening with the Sprague [& Sprague firm in the Vincent Fumo] case, that’s what they’re trying to do,” he said. Next: A look at how minority-owned firms fare in the competition for city legal contracts.

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