Texas, White-Collar Crime

Dallas DA Learns You Don’t Mess With Texas… Judges

When the gavel fell yesterday, Dallas District Attorney Craig Watkins found his office’s high-profile mortgage fraud case dismissed. What’s worse, Watkins found himself held in contempt of court by Judge Lena Levario.

The judge did not issue a sentence for the contempt charge, but jail time is not out of the question. I’d imagine District Attorneys are not popular in jail.

The trouble for Watkins revolves around the charge that he trumped up a case against a litigious spendthrift backed by a portion of a multi-billion dollar fortune, who nonetheless took out a giant mortgage that may or may not have been fraudulent. Blast you, adversarial legal system! Can’t we find a way to punish everyone in this case?

Until yesterday, DA Craig Watkins was best known around the country for using his prosecutorial power to get people out of prison. One of the hallmarks of his administration is the Conviction Integrity Unit, created to investigate, and potentially overturn, around 400 convictions using modern DNA evidence. Given the stereotype of Texas as a harsh “law and order” state, the odds of finding a wrongly convicted inmate are pretty good. Tony-Romo-botching-a-playoff-run good.

But he’s also developed a reputation as a tenacious, even bullying prosecutor. Al Hill III, the heir involved in this case, banked on that reputation to fight his indictment for filing false paperwork to secure a $500,000 loan. Hill alleged that his prosecution was a high-profile witch hunt, devised by Watkins to help out the DA’s campaign donor, Lisa Blue of the firm Baron & Blue. Blue has a multi-million dollar fee dispute with Al Hill III. As it turns out, lots of people think Al Hill III owes them money.

The “victim” in this case, Al Hill III, also known as “Al Three,” is, by most accounts, the epitome of the spoiled rich kid you desperately want to punch. Al Three is the heir to the fortune of billionaire H.L. Hunt, the one-time “richest man in America.” How much did H.L. Hunt personify the “Texas oil tycoon?” The character of J.R. Ewing was partly based on him, right down to his penchant for fooling around on his wife — maintaining multiple parallel families. How did he find the time?

When the time came to inherit the family fortune, Al Three sued his father and every other family member he could in an effort to secure all the money. Hey, if you divide $4 billion into six or seven shares, you’re hardly left with anything. Especially if you spend like Al Three does:

The first major bailout occurred in February of 2002, when Al III was 31 years old. Staff members for the father added up the personal debts of Erin and Al III and came up with a payoff figure of $2,275,117, including a $1,567,055.70 mortgage balance, a $97,093.85 revolving balance at Neiman Marcus, and an $80,626.92 revolving balance at Stanley Korshak, another luxury department store. According to the father’s documents, Smith Barney advanced $2,275,000, collateralized by Al junior, to wipe away Al III’s personal debts.

The business debts were far more significant. In 1997, Al III had begun amassing a chain of service stations and convenience stores. By 2002 the business, Food Fast Holdings, was in bankruptcy. According to documents prepared by Hill-family accountants, Al III’s combined business debts and personal debts by May of 2002 topped $20 million. Most of the business debt was discharged in bankruptcy proceedings.

Note this was labeled the “first major bailout,” not the “only major bailout.” No wonder Al Three needed to sue his family… and take out huge loans — bringing us back to the allegedly fraudulent loan.

Judge Levario heard testimony from some prosecutors assigned to the case, and grew suspicious the more she learned of emails amongst the prosecutors expressing doubts about the case and a “pitch meeting” with a troubling slideshow:

Three prosecutors involved in the case testified Thursday about how it was handled, including a “pitch meeting” before Watkins to discuss it before it went to a grand jury.

Prosecutors showed a slide presentation used at the pitch meeting that makes clear they were aware that Hill was famous. The presentation lists several of Hill’s failed business ventures, outlines his family’s bank accounts and mentions that his wife, Erin Hill, is a former Miss Georgia and Miss America runner-up.

The people at the DA’s office may have just wanted to cover their bases and know everything out there about Hill. But it certainly comes across as though they wanted to go after a big fish.

When called to the stand, Watkins refused to testify, citing his privilege as a prosecutor not to divulge how the sausage is made. Then why did he allow lower-level prosecutors to testify? The answer is, “Who knows?,” which is a more satisfying answer than “Whoops!”

The Hill case, Wilson said, will not change how the DA’s office prosecutes or investigates cases. But, he said, the DA’s office will never again allow prosecutors to testify about behind the scenes activities that the DA’s office believes are privileged prosecutorial matters.

Prosecutors “will stand on our privilege as opposed to testifying,” he said.

The DA’s office allowed other prosecutors to testify before Levario even when Watkins refused to do so. When asked about the difference, the DA’s office did not directly answer. Harris said it was Watkins’ duty to protect privilege for DAs throughout the state.

“He has an obligation not to,” Harris said. “This is not just about Craig Watkins. This is about every DA.”

Judge Levario then threw out the case and held Watkins in contempt.

There’s a shortage of people to root for in this case. There’s the guy who sued his whole family after he got tired of receiving their bailouts for the large sums he squandered, whose ability to secure a $500,000 loan and avoid trial was described by a spokesperson for the DA’s office as “an example of rich people manipulating the system.” On the other hand, there’s the prosecutor seemingly shielding his office from inquiry into how it wields its potentially devastating power.

I’ll go ahead and root for the judge. Right or wrong about the proper scope of prosecutorial privilege, it takes some gumption to even suggest holding a DA in contempt for arguably abusing the power of the office.

If Watkins ends up in jail, at least he’s created the Conviction Integrity Unit to try and spring him.

Dallas D.A. Watkins Refuses To Testify, Judge Dismisses Case [CBS 11]
Dallas County DA Craig Watkins Held In Contempt After Refusing to Answer Question Over Allegations of Prosecutorial Misconduct [Dallas Morning News]
Oil In the Family [Vanity Fair]

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