Round Rock mayor’s law firm netted $622,000 on city contracts

Round Rock Mayor Craig Morgan in an interview with KXAN. (KXAN Photo)
Round Rock Mayor Craig Morgan in an interview with KXAN. (KXAN Photo)

ROUND ROCK, Texas (KXAN) – When Ken Tuck walked out to his Creek Ridge Lane mailbox last month, he didn’t know it, but he was walking right into some costly legal trouble.

He pulled an envelope from the box and the first thing he noticed was a law firm’s name in the top left corner: McCreary, Veselka, Bragg & Allen, P.C. The letter made it clear what this was about.

"NOTICE OF INTENT TO FILE FORECLOSURE LAWSUIT" was written across the top. Williamson County, Round Rock, Round Rock Independent School District all wanted tax dollars Tuck owed them. The total 2016 tax bill was $2,312.58.

"Sounds to me like it’s a conflict of interest."

KXAN asked Tuck if he’d ever heard of the law firm, which goes by the name “MVBA.” “I don’t know anything about this law firm,” Tuck told KXAN.

He also didn’t know his mayor was the man behind the tax collection efforts, which led to the letter he was holding. That is, until we told him about it.

“Sounds sort of like the king sending out his men, trying to collect taxes there,” Tuck said after finding out Mayor Craig Morgan oversees MVBA’s Williamson County tax collections. “Sounds to me like it’s a conflict of interest."

In 2013, the Round Rock City Council gave MVBA the right to do whatever it takes—legally—to collect millions of dollars from Round Rock businesses and city taxpayers. Since then, the law firm has collected nearly $622,000 in past due library fines, court fines and property taxes, according to city and Williamson County records.

The MVBA website shows, Round Rock Mayor Craig Morgan heads one of the most lucrative arms of the law firm—the one responsible for Williamson County and Round Rock tax collections.

The Contracts

On March 28, 2013, the Round Rock City Council voted to hire MVBA to handle all of its municipal court fines and fees collections. The contract allowed MVBA to charge the people it collected from an additional 30 percent of the total fines owed—the maximum allowed by law.

At the time of the of the contract agreement, Morgan was a city council member. City records show Morgan did not file a Conflict of Interest Affidavit until the day of the city council meeting. The affidavit is needed when a public official has a “substantial interest” in any contract or item council will vote upon. In this case, Morgan filed the form stating he earns his income from MVBA.

The contract shows MVBA attorney Shelburne J. Veselka, a naming partner in the firm, had the contract and signed it on March 3, 2013. The city could not provide KXAN records to show when negotiations started between MVBA and the city and when Morgan knew his firm was in negotiations with the city.

Craig Morgan filed this 2014 Conflict of Interest Affidavit the day council voted on the Williamson County tax collection contract.

When the item came up for a vote, it was unanimous, except for Morgan, who did not vote. The official minutes from the meeting show no disclosure form noted in the minutes, which is required by city ordinance.

On July 24, 2014, Round Rock council members voted on a second contract. In this deal, the city handed all delinquent property tax collections over to Williamson County. The contract allowed Williamson County’s collections law firm to charge 15 percent of the total tax bill to the people it collected from. The law firm behind all of Williamson County tax collection efforts: MVBA.

In the 2014 vote, Morgan abstained from voting and never mentioned filing a conflict of interest form with the city, although he did the day of the meeting. He also did not explain from the council bench why he could not vote on the contract. Official meeting minutes from the July 2014 vote do not include any notes regarding a conflict of interest being filed related to any of the items that went before council.

On March 3, 2015, a third MVBA-linked contract passed through city hall to allow the company to collect library fines and fees. This one never made it to council for a vote, city records show. The city did not have a conflict of interest affidavit from Morgan on this contract. The contract was signed by MVBA attorney Harvey M. Allen on Feb. 4, 2015--a month before the city manager signed it.

The city told KXAN it did not put any of the three contracts out for competitive bidding, citing a state law that allows professional service contracts to be handed out without a bid process. That means a competing law firm would have had no way to know the contracts the city gave MVBA were up for grabs.

The city provided invoicing to KXAN showing $520,947.68 paid to MVBA between 2013 and August 2017 for municipal court and library collections. Williamson County tax office records show another $101,031.37 paid to MVBA on property tax collections.

Round Rock has a total of $2.2 million in delinquent taxes as of this report. If MVBA collected all outstanding Round Rock delinquent taxes, the firm would pocket $335,485. MVBA could earn $1.8 million if it collected all outstanding WIlliamson County taxes today.

The Mayor's Role

A section of the Round Rock City Charter appears to ban public officials from having any interest in a city contract.

“Even if the mayor isn’t, himself, doing that legal work, he benefits because his law firm benefits,” said Carol Birch on behalf of Texas Public Citizen. Birch--the group's legislative counsel--and her group write ethics reform laws at the Texas Capitol.

Birch points to a provision in the Round Rock Charter known as “Personal Financial Interest" which states: “No member of the City Council or employee of the City shall have a financial interest, direct or indirect, in contract with the City…” The provision provides an exemption when the interest being questioned involves the amount of stock a city official might own, which must be less than 1 percent of the corporation stock.

Craig Morgan's bio on the MVBA website on Sept. 7, 2017, which described him as a partner. (Screenshot of MVBA website on Sept. 7, 2017)
Craig Morgan's bio on the MVBA website on Sept. 7, 2017, which described him as a partner. (Screenshot of MVBA website on Sept. 7, 2017)

Part of KXAN's investigation delved into whether Morgan owns an amount of stock in MVBA that could exempt him from the charter prohibition. According to Morgan’s biography on the MVBA website in July, the page called Morgan a “Partner.” A second check on Sept. 7 showed the same.

But, within days of KXAN emailing Morgan for an interview concerning the contracts, his online biography was changed. The word “Partner” was taken out of the sentence describing Morgan’s duties at the firm. Morgan claims he has no ownership interest in the law firm.

Morgan’s financial disclosures show the “substantial interest” he disclosed was a financial interest stemming from his salary from MVBA, not stock ownership.

The Round Rock law appears to make a distinction between whether someone's financial interest is because of their employment at a corporation or by being a stockholder in that corporation, alone.

The ethics experts we interviewed for this report believe Morgan—because of his employment—holds an indirect financial interest in all three MVBA contracts with the city. Morgan could also hold a direct financial interest in the Williamson County contracts, those experts argue, because of what his attorney profile shows on the MVBA website.

Our investigation also uncovered six Williamson County tax lawsuits filed against Round Rock taxpayers where Morgan is listed as “retained” and the “Lead Attorney” representing the city of Round Rock.” Those suits were filed between March 2015 and July 2015, eight months after MVBA started collecting Round Rock property taxes.

Morgan's Mayoral Benefits

  • Salary: $1,000/month
  • $200 vehicle allowance
  • City health insurance option

Another potential ethical conflict, the experts explained, involves Morgan’s attempts at balancing his duties as a public official and his duties as a paid attorney doing legal work on behalf of the city. The experts we interviewed said a lawyer’s priorities in billing for legal work don’t always match up to the priorities of an elected official responsible for protecting a city’s purse strings.

A search of Williamson County court records show MVBA’s Harvey M. Allen, MVBA attorney Connor Buchanan, and Morgan are listed as “Lead Attorneys” on a combined 15,272 tax lawsuit cases. Allen’s cases date back to 1988.

Buchanan works out of the county’s main Georgetown tax office in an office leased to MVBA by the county. Buchanan’s name is listed as lead attorney on many of the Round Rock lawsuits filed after December 2015, court records show.

County court records also show Morgan handled 4,373 tax lawsuits between 2004 and December 2015. The county clerk’s office does not show any lawsuits listing Morgan as "retained" after December 2015.

“The plain language of that ordinance [Section 14.04] says you can’t do that,” Birch explained. “The disclosure requirements do not give you permission; do not override the prohibition against contracting with the city.”

On Oct. 12, KXAN sent an email to every Round Rock council member, Mayor Craig Morgan and City Manager Laurie Hadley asking for an interview concerning our investigation into the MVBA contracts. None of the officials we wrote to responded.

Instead, the city’s spokesperson, Will Hampton, emailed written statements on Oct. 16. One statement was from Mayor Morgan, the other was from the city. Morgan agreed to an on-camera interview with KXAN on Oct. 25.

“I can see where that would be a very confusing thing to the public, but again, I filed the appropriate disclosure statements that show I have no interest—or ownership interest in the firm. I’m an employee,” Morgan explained when asked about his potential conflict of interest with the three MVBA contracts.

“That’s just a flat prohibition—you can disclose all day long—you can’t do it,” Birch said when we asked her whether Morgan’s disclosure filings helped him with the charter contracting prohibition.

We also asked Morgan about the city charter provision ethics experts said would ban public officials from having any interest in a public contract.

“The one thing I would say is that’s probably a city attorney question because they’re aware of all the conflicts that are filed at the dais and, so, I think that’s more probably a question for legal,” Morgan told KXAN. “I don’t have enough information on it to answer that question."

Morgan appeared unaware of the charter prohibition and the apparent prohibition of public officials’ involvement in contracting when we interviewed him. Morgan said many times through the interview that he followed the disclosure laws and abstained from voting on all three contracts.

“The law might not have been followed as far as there is a prohibition in RR—stating that you can’t do what you’re doing now—do you disagree with that,” KXAN Investigative Reporter Jody Barr asked Morgan. “Well, I’m going to have to look at it. That’s not what I was told. Again, I feel like I followed the law and followed what was required of me,” Morgan said.

When asked if Morgan would consider removing himself from office or hire another firm to handle collections, Morgan said, “Again, I understand clearly what the perception is, I mean, we’re headquartered here in Round Rock. Our firm’s been here since 2006, and again, the law was followed and right now I have no intention of doing either."

Other Potential Violations

KXAN's investigation also looked into whether the city and MVBA complied with all of the disclosure laws in Round Rock’s law books and whether disclosure laws passed by the state legislature were followed. We found potential violations related to MVBA’s disclosure requirements, as well as potential violations by the city.

Under Texas’ Local Government Code Chapter 176, firms that contract with governments are required to file a “Conflict of Interest Questionnaire” with the city when the business “begins discussions or negotiations to enter into a contract with the local government entity."

The MVBA contracts from 2013 and 2015 show the law firm had finished negotiations with Round Rock at least a month before each contract was signed. The MVBA representative, in both cases, signed each contract nearly a month before council voted on the deals.

We filed a Public Information Request with the city, asking for “all conflict of interest questionnaires” filed by MVBA since Jan. 1, 2013. That timeframe would have captured any questionnaires filed during the time related to the three MVBA contracts.

In an Oct. 3 email, the city’s clerk’s office wrote, “We have no documents in our records that are responsive to your request.” There were no questionnaires filed by MVBA telling the public Morgan worked for the firm.

The questionnaire law was passed to force vendors to tell the public about conflicts like Morgan's situation. Those forms are required to be filed with Round Rock's City Clerk's Office "not later than the 7th business day after the date the vendor becomes aware of facts that require the statement to be filed," the Texas Ethics Commission website showed.

MVBA filed the form within two days of KXAN questioning the firm's management about it.

"Thank you for bringing this oversight to the attention of MVBA. After researching this matter, yesterday MVBA filed the appropriate documentation (CIQ form) with the City of Round Rock," MVBA's Harvey Allen wrote in a Nov. 2 email to KXAN.

The city clerk is also required by city ordinance to place the disclosure on the city’s permanent record, according to Round Rock's Code of Ordinances.

A search of the official minutes for March 28, 2013 and July 24, 2014 show neither set of minutes included any mention of Morgan’s conflict with the MVBA contracts, only that the mayor abstained in the final vote tally. The city minutes were still not updated with those disclosures as of this report's posting.

The final decision on whether Morgan violated the city charter lies with Round Rock's City Council. The city's charter allows give the council power to remove an elected official as long as two-thirds of the members vote to do so.

As of this report, there is no word out of Round Rock City Hall to address this through any future council meeting.

City Pays for Second Opinion

Within a couple of days of KXAN's interview with Morgan, Round Rock city attorney Steve Sheets had the city’s spokesman call KXAN to reiterate that Morgan did not have an “ownership interest” in the contracts, which the city argues exempts him from the contract ban.

In an effort to contest the findings of the ethics law experts we interviewed for this report, Round Rock hired ethics law attorney Ross Fischer to write an opinion regarding the city's charter in this case. The city paid Fischer $3,248.50 for his work in researching this paragraph of the city's charter. The city says they plan on charging taxpayers "around $1,000" more for Sheets' work on this report.

In a four-page report dated Oct. 31, Fischer says since Morgan doesn't have any "ownership interest" in MVBA, he's not in violation and "falls within the exception established by Section 14.04." Ethics lawyers we interviewed maintain Morgan's case has nothing to do with stock ownership--solely his employment by the firm--and the city's misinterpreting the law.

For Birch, the part of the law highlighted in yellow (below) is the part that she believes pertains to Morgan. However, the part highlighted in blue is what the city and Fischer cite as to why Morgan isn't violating any part of the city charter.

Sec. 14.04. - Personal financial interest.

No member of the City Council or employee of the City shall have a financial interest, direct or indirect, in contract with the City, nor shall be financially interested, directly or indirectly, in the sale to the City of any land, or rights or interest in any land, materials, supplies or service. The above provision shall not apply where the interest is represented by ownership of stock in a corporation involved provided such stock ownership amounts to less than one percent (1%) of the corporation stock or as falls within the scope of V.T.C.A., Local Government Code § 131.903 as now or hereafter amended. Any willful violation of this section shall constitute malfeasance in office, and any elected official or employee of the City found guilty thereof shall thereby forfeit his or her elected office or employment. Any violation of this section with the knowledge, express or implied, of the persons or corporation contracting with the City shall render the contract voidable by the City Manager or the City Council.

“You’ve got to read the charter as a whole. You can’t read one sentence then read the second sentence independently. What it says is that a public official—not just a member of the council but an employee—cannot have a financial interest, direct or indirect, in contract with the city. The next sentence, which you can’t ignore, that sentence says this doesn’t apply if you have less than a one percent ownership interest,” Fischer told KXAN.

Birch said because the mayor's employed by the law firm, the second sentence of the law doesn't apply to him. "Financial interest is a broader term than ownership interest," Birch said. "The second sentence carves out an exception for a small ownership of stock, which doesn't mean he can still be involved financially," Birch said referring to the contracts and Morgan's employment.

"The second sentence doesn't negate the entire section because you don't own any stock. If he wasn't an employee and owned less than one percent ownership interest, then he would be exempt," Birch said. "He doesn't own stock in the firm but he does work at the firm, so the second sentence does not apply to him."

So, the bottom line, Morgan may not own stock in the law firm, but city records show he does have a financial interest in the firm by virtue of his employment. Morgan even acknowledged the interest in the Conflict of Interest Affidavits he filed with the city in 2013 and again in 2014.

Fischer admitted, there are problems with this Round Rock law.

“Ethical standards need to be clear. They shouldn’t be fuzzy. They shouldn’t be gray. They should be clear and that way if they’re clear, everybody knows what all rules we’re playing by. This could be clearer and it should be clearer,” Fischer said.

KXAN Investigates

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