By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
When people get mad at the Dallas school board, they often talk about how dumb the members are. But the dumbest thing Dallas school boards have ever done over the years is accept the advice of their own well-educated, high-dollar, ought-to-know-better lawyers.
The absolutely most egregious example of all is the well-known Finlan-Venable litigation that started more than eight years ago when two public-citizen gadflies sued the district for misappropriation of bond money. They didn't sue to make money; they didn't even ask for damages. They sued to make a point.
A series of external audits by accounting firms and various state agencies seemed to prove the gadflies right. But the district has never stopped fighting them in court. Estimates of what you and I have paid by now to fight Don Venable and Rick Finlan in those lawsuits vary from $3 million to $8 million, with the more authoritative guesses coming in around $3 million to $4 million.
And that clock is still running. The Finlan-Venable litigation is going strong today. The main case is about to get booted out of state district court, whence it will go back to an appeals court, where it has already been once (DISD lost), and then maybe back to the Texas Supreme Court, where it has already been once (DISD lost), and then probably back home again, where it has already been twice.
Years of litigation lie ahead. Every little two-bit hearing along the way, every piece of paper, every phone call is chick-chick-chick rrrrring on that legal cash register.
That bell rings for you and for me.
Former school board member Dan Peavy, who knows the ins and outs of school district litigation all too well, talked to me last week about the law firms representing DISD:
"These are high-dollar sons of bitches," Peavy said. "Every time they go to a hearing, they carry everybody down there. They've got a $300 man and a $200 man and a $100 secretary. By the time they sit there for a couple hours, you know what happens."
What makes the Finlan-Venable case especially galling is some new evidence that is about to surface -- a very enlightening, totally depressing peek behind the curtain of secrecy that normally shrouds the relationship between the Dallas school board and its lawyers.
The school board in question is the 1992 board, of which only one member, Hollis Brashear, still sits. But every board since then has opted to keep pushing this litigation instead of settling with the gadflies.
Last week, Superintendent Waldemar Rojas was served with a subpoena in yet another brand-new lawsuit that has grown out of this mess.
What the new evidence will show is that the whole thing -- the original lawsuit against Finlan and Venable in which the district went after them for $280 million in damages -- was a nasty little legal ruse set up by the board and its lawyers. In this scenario, the board fakes an injury to itself in order to sue Finlan and Venable, like a con man carrying a banana peel into a grocery store so he can fall on it.
The school board sued Finlan, a builder, and Venable, a paralegal, claiming they had damaged the district's relationship and credibility with a New York financial firm that sets up loans to local governments. The claim was that, at a time when the district was trying to get Goldman Sachs & Company to underwrite a $60 million loan, Finlan wrote Goldman Sachs and told them he and Venable were suing the school district.
So upset was Goldman Sachs at DISD, according to the district's lawsuit, that they sent a testy letter down to Dallas demanding an explanation. Only through adroit diplomacy was the district able to chill out those nervous bond underwriters up in New York City.
But that's a bunch of crap. It's not at all what happened.
According to a previously secret audiotape of the September 24, 1992, meeting of the Dallas school board, this is how we got talked into throwing millions of dollars in tax money -- your dollars and mine, money that was supposed to educate children -- into the legal toilet:
Finlan and Venable were suing the school district -- not seeking a penny in damages, asking only for injunctions, totally on principle -- because they felt they had caught the district using capital-improvement bond money for the day-to-day operating budget. That's a big financial and legal no-no.
It's early September 1992. DISD is going to Goldman Sachs, trying to set up a $60 million loan in something called tax-anticipation notes. Finlan notices that the prospectus for the notes doesn't include any legal warning that Finlan and Venable are suing the district.
So Finlan starts calling around, trying to find out whether the district shouldn't warn investors that its finances are under a fairly major cloud.
One of the people he calls is the district's banker -- a guy at the old NationsBank. The banker gets the idea that Finlan may also call Goldman Sachs in New York.
That very evening, the banker shows up at a school board meeting with Leonard Schwartz, one of the main lawyers representing the district against Finlan and Venable. There's a big debate about whether Finlan is right. Most of the board members and even the NationsBank guy say he is. They agree the warning should be included in the prospectus to protect the district from lawsuits by investors