Miers Helped Lead Law Firm That Settled Over Clients' Fraud
By David Koenig Associated Press Writer
Published: Oct 5, 2005
DALLAS (AP) - Supreme Court nominee Harriet Miers was co-director of a major Texas law firm that paid more than $30 million to settle claims that it vouched for the reputation of two clients who cheated investors out of millions.
There is no evidence that Miers knew about the actions of partners who represented the problem clients until investors began filing lawsuits against the firm, Locke Liddell & Sapp LLC.
The law firm represented some of the state's biggest corporations and most famous residents, including George W. Bush before and after he was elected governor in 1994.
The lawsuits stemmed from work done by partners at Locke Purnell Rain Harrell, one of Dallas' largest law firms when Miers ran it during the late 1990s.
In 1998, the law firm, by then called Locke Liddell after a merger, found itself on the receiving end of lawsuits over two of its clients, Brian Russell Stearns and Russell Erxleben, a star football player at the University of Texas in the 1970s.
Erxleben's firm, Austin Forex Investments, placed short-term investments in volatile foreign currency markets. The investors contended Erxleben and Stearns used money from new investors to pay off old ones until the schemes unraveled. They also said Stearns often bragged that he used the same law firm as Bush.
The investors said they were cheated in part because Locke Liddell helped make the operations look legitimate and ignored signs of fraud and the selling of unregistered securities. They alleged that the law firm used its trust fund to direct millions in investor money to Stearns.
The lawsuit over Erxleben also named Locke Liddell partners Curtis Ashmos, Daniel N. Matheson III and Jane Matheson as defendants, and the case involving Stearns named another partner, Phillip Wylie. All but Ashmos have since left the firm.
In 2000, Locke Liddell agreed to pay Erxleben's clients $22 million, and in 2001 it agreed to pay $8.5 million to settle claims by Stearns' customers.
Linda Eads, a law professor at Southern Methodist University, where Miers got her undergraduate degree in mathematics and her law degree, wrote an ethics report for the plaintiffs in the Stearns case. Eads said one of the firm's partners, occasionally sending notes on Locke Liddell letterhead, "represented to investors that Stearns was up-and-up."
However, Eads said she found no evidence that Miers was involved.
"I'm sure she knew when they were sued, but I didn't see any sign that she knew what was going on prior to that," Eads said.
R. Bruce LaBoon, who had led the Houston firm that merged with Locke Purnell and was co-managing partner with Miers for more than two years at Locke Liddell & Sapp, said it was unfair to fault her in the fraud cases.
"We have internal rules on what our lawyers will do for clients," LaBoon said. "Both cases were resolved to the satisfaction of the investors."
A Dallas lawyer who successfully sued the firm in a separate real estate case said the evidence must have been strong.
"Lawyers always take the position that, 'Our clients' sins are not our own,'" said Dallas attorney C. Randal Johnston. "If they settled, there was reason for concern. They don't settle if they think they can win."
Johnston and other lawyers who have won settlements from Locke Liddell declined to discuss their cases. They said Locke Liddell insisted on confidentiality agreements barring them from talking to the media.
Erxleben and Stearns were both sentenced to prison terms.
Miers was listed as the attorney of record on relatively few cases during her time as a litigator, but she handled some involving very large clients, including a mid-1990s lawsuit against Microsoft Corp. over defects in its operating system for personal computers.
Plaintiff lawyers persuaded a state district judge and an appeals court to certify the case as a class-action lawsuit. According to Locke Liddell lawyer Jerry Clements, Miers was instrumental in persuading the first judge to reverse her ruling and deny class-action status for the case, a crucial victory for Microsoft. The case was eventually dismissed.
Miers also represented The Walt Disney Co. in trademark and other cases.
Miers became the first female attorney hired by Locke, Purnell, Boren, Laney & Neely when she joined the firm in 1972. In 1996, she became the first woman president of Locke, Purnell, Rain & Harrell, then a firm of about 200 lawyers. During this time, she also became the first female president of the Dallas Bar Association and the Texas Bar Association.
After the 1998 merger, Locke Liddell & Sapp LLP had about 400 lawyers. Miers was co-managing partner when she left the firm after Bush was elected president.
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Published: Oct 5, 2005
DALLAS (AP) - Supreme Court nominee Harriet Miers was co-director of a major Texas law firm that paid more than $30 million to settle claims that it vouched for the reputation of two clients who cheated investors out of millions.
There is no evidence that Miers knew about the actions of partners who represented the problem clients until investors began filing lawsuits against the firm, Locke Liddell & Sapp LLC.
The law firm represented some of the state's biggest corporations and most famous residents, including George W. Bush before and after he was elected governor in 1994.
The lawsuits stemmed from work done by partners at Locke Purnell Rain Harrell, one of Dallas' largest law firms when Miers ran it during the late 1990s.
In 1998, the law firm, by then called Locke Liddell after a merger, found itself on the receiving end of lawsuits over two of its clients, Brian Russell Stearns and Russell Erxleben, a star football player at the University of Texas in the 1970s.
Erxleben's firm, Austin Forex Investments, placed short-term investments in volatile foreign currency markets. The investors contended Erxleben and Stearns used money from new investors to pay off old ones until the schemes unraveled. They also said Stearns often bragged that he used the same law firm as Bush.
The investors said they were cheated in part because Locke Liddell helped make the operations look legitimate and ignored signs of fraud and the selling of unregistered securities. They alleged that the law firm used its trust fund to direct millions in investor money to Stearns.
The lawsuit over Erxleben also named Locke Liddell partners Curtis Ashmos, Daniel N. Matheson III and Jane Matheson as defendants, and the case involving Stearns named another partner, Phillip Wylie. All but Ashmos have since left the firm.
In 2000, Locke Liddell agreed to pay Erxleben's clients $22 million, and in 2001 it agreed to pay $8.5 million to settle claims by Stearns' customers.
Linda Eads, a law professor at Southern Methodist University, where Miers got her undergraduate degree in mathematics and her law degree, wrote an ethics report for the plaintiffs in the Stearns case. Eads said one of the firm's partners, occasionally sending notes on Locke Liddell letterhead, "represented to investors that Stearns was up-and-up."
However, Eads said she found no evidence that Miers was involved.
"I'm sure she knew when they were sued, but I didn't see any sign that she knew what was going on prior to that," Eads said.
R. Bruce LaBoon, who had led the Houston firm that merged with Locke Purnell and was co-managing partner with Miers for more than two years at Locke Liddell & Sapp, said it was unfair to fault her in the fraud cases.
"We have internal rules on what our lawyers will do for clients," LaBoon said. "Both cases were resolved to the satisfaction of the investors."
A Dallas lawyer who successfully sued the firm in a separate real estate case said the evidence must have been strong.
"Lawyers always take the position that, 'Our clients' sins are not our own,'" said Dallas attorney C. Randal Johnston. "If they settled, there was reason for concern. They don't settle if they think they can win."
Johnston and other lawyers who have won settlements from Locke Liddell declined to discuss their cases. They said Locke Liddell insisted on confidentiality agreements barring them from talking to the media.
Erxleben and Stearns were both sentenced to prison terms.
Miers was listed as the attorney of record on relatively few cases during her time as a litigator, but she handled some involving very large clients, including a mid-1990s lawsuit against Microsoft Corp. over defects in its operating system for personal computers.
Plaintiff lawyers persuaded a state district judge and an appeals court to certify the case as a class-action lawsuit. According to Locke Liddell lawyer Jerry Clements, Miers was instrumental in persuading the first judge to reverse her ruling and deny class-action status for the case, a crucial victory for Microsoft. The case was eventually dismissed.
Miers also represented The Walt Disney Co. in trademark and other cases.
Miers became the first female attorney hired by Locke, Purnell, Boren, Laney & Neely when she joined the firm in 1972. In 1996, she became the first woman president of Locke, Purnell, Rain & Harrell, then a firm of about 200 lawyers. During this time, she also became the first female president of the Dallas Bar Association and the Texas Bar Association.
After the 1998 merger, Locke Liddell & Sapp LLP had about 400 lawyers. Miers was co-managing partner when she left the firm after Bush was elected president.
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