MORE

Not so fast, Sonny

Dallas businessman William Oates--"Sonny," as he is known to friends and associates--says he is gravely concerned about all the old paperwork crumbling and decaying in county courthouses across Texas.

Binders full of old deeds, land records, tax liens, and other documents faithfully recording the important business transactions of Texas citizens are wasting away, Oates believes.

A man of means, Oates decided he had the wherewithal to do something about this overlooked menace to public order. When the Texas Legislature convened earlier this year, citizen Oates took it upon himself to seek a new law which would levy an additional $10 fee on every document filed at the 254 county clerk offices in the state.

Oates had legislation drawn up, found a sponsor for the bill, and hired a crack team of very expensive lobbyists to shepherd his proposal through the legislative process.

Under the bill, everyone filing a document at the local county clerk's office--things like property titles, plats, assumed business names, liens, and public notices of foreclosures and auctions--would be required to fork over the extra $10. Counties would then have hundreds of millions of dollars available to spend on restoring and preserving their old records.

"If this bill does not pass, then the records in a lot of counties are just going to deteriorate," Oates says in a telephone interview, static occasionally drowning out his far-away twang. "I can just tell you that in many more years, there will be no way to save [them]."

But many counties aren't equipped to perform document restoration work themselves, and have to hire a private contractor for the task. More than 100 Texas counties--including Dallas County--contract for restoration and preservation work with a company called Government Records Services, Inc. The Dallas-based firm is by far the largest provider of document restoration services to county clerks in Texas, and would stand to make millions if Oates' pet bill were to pass the legislature.

And who owns Government Records Services, Inc.?
Sonny Oates.
Even in Austin, where sweetheart bills flourish each legislative session like spring bluebonnets, eyebrows are being raised over Oates' audacity, a classic example of how special interests cultivate legislation for their profit.

It is not yet clear if Oates will reap what he has sown. His proposal might have slipped quietly through the process--helped along by the lobbyists Oates is paying up to $100,000 to push the bill. But Oates apparently neglected to determine whether most of the county clerks across Texas even want the extra money.

Many of the clerks, it turns out, aren't at all excited by the idea of jacking up filing fees by $10, and some are peeved that Oates didn't consult them before pushing his legislation.

A coalition of clerks has emerged as the strongest opposition to Oates' bill, and last month they persuaded legislators at least to water down the proposed law a little. Oates' original bill has now been revised; instead of requiring counties to assess the $10 fee, clerks would be allowed to charge it.

Last month, the revised version of Oates' bill sailed out of the Committee on Intergovernmental Relations, and it now awaits a final vote in the full Senate. A companion bill in the house is still waiting in committee.

Many of the clerks say they still do not like the bill. Just authorizing the new fee virtually guarantees that--over time--counties will start to charge it, they say. Dallas County Clerk Earl Bullock, in fact, says he is already planning to exercise his prerogative if the bill passes and collect the extra money, raising the current $9 fee his office charges for filing a one-page document to $19.

"Don't let them fool you," says Travis County Clerk Dana DeBeauvoir, the co-chair of the county clerks' legislative committee. "Once the fee is in place, it is there."

The offices of Government Records Services, Inc. occupy a nondescript, one-story beige warehouse at 2800 Mockingbird Lane in Dallas, just a few blocks from Love Field. But anyone hoping to speak with GRS President Sonny Oates might have better luck finding him in Austin these days, trying to push Senate Bill 436 through the legislature.

Since the January start of the legislative session, Oates has spent a lot of time and money making friends in the state capitol. Oates hired a five-member lobbying team led by Russell "Rusty" Kelley and Jack Roberts. Kelley and Roberts are Austin heavyweights whose other clients include American Airlines, Owens Corning Fiberglas, USA Health Network, Co., and the Texas Bankers Association.

Oates has set aside more than $100,000 to pay the lobbyists for their services, according to information on file with the Texas Ethics Commission.

Hiring lobbyists to push issues that benefit a special interest is, of course, how business gets done in Austin. And Oates is getting his money's worth from his lobbying team, which is carefully tracking the proposed law and protecting their client's interest in seeing the law passed.

 

"That is all true. That is absolutely true," says Kelley, who doesn't try to downplay his role in pressing the legislation, or dispute its importance to GRS. "If this legislation passes, there's no doubt that this would help [GRS]--if they were to get some of this business."

How much business Oates would get if the legislation passes is a question that's being asked a lot lately, but Oates and his hired guns won't say just how much money GRS expects to make.

Although contracts with county governments are a matter of public record, Oates declined to provide a list of the 100-plus Texas counties he says his company already contracts with to restore old documents.

"I would prefer not to do that, because that would just be a list for my competitors to call," says Oates, whose company is privately held and, therefore, not required to file public reports with the Securities and Exchange Commission.

The Dallas Observer was able to confirm that GRS' clients include Dallas, Bexar, Nueces, Denton, Collin, Cameron, Jefferson, and Lubbock counties--all of which rank in the 15 most populous Texas counties. The state's other big counties, including Harris, Tarrant, and Travis, have purchased their own preservation equipment and restore their documents in-house.

"I think they've obviously got a presence in Texas; how large that is I just don't know," says Kelley. "But I do know there are a lot of other competitors out there also."

Kelley provided a list of four dozen companies that he claims compete with GRS. Of those companies, however, county clerks contacted by the Observer were familiar with only two that they thought compete directly with GRS--Hart Forms and Services in Austin and Business Records Corporation in Dallas.

But Business Records Corporation, housed in a towering office building a few blocks away from GRS, sold all of its Texas accounts to Oates in 1995, according to Oates and documents on file with the SEC. In 1995, GRS paid Business Records Corporation $1.7 million in exchange for the unspecified accounts and some computer equipment, according to BRC's 1997 annual report.

(Records on file with the Texas Secretary of State also show Oates has been the president and/or officer of 10 corporations that are subsidiaries of BRC. They include Business Records Southeast Corporation, Southern Microfilm Services, Inc., and Business Records Title Services, Inc. Of the 10 companies, only three are still active.)

As for Hart Forms and Services, the other possible GRS competitor, vice president of government products Jerry Meadows says he doesn't believe his company would benefit from Oates' legislation. Hart specializes in digital recording systems, which convert information contained on paper or microfilm to computer use, and currently contracts with 12 Texas counties, Meadows says. Because many county preservation contracts involve the restoration of old index books and microfilm, Meadows says his company would not be bidding for the work.

"I'm aware of it [the legislation], but as far as I can tell, it doesn't directly affect our business," says Meadows.

Interestingly, none of GRS' competitors has joined Oates and GRS at the capitol to lobby for the bill. But one person who is supporting the bill is William Chattaway, the executive vice president of American Title Company, the largest title company in the Metroplex.

Title companies, which close real estate deals and provide title insurance for home buyers, are heavy users of county clerk offices. Every day, title company employees file thousands of land and business deeds with county clerks across the state.

Although the legislation would force title companies to pay more money per filing, Chattaway says the companies will just pass the cost on to their clients. When someone is paying several thousand dollars to close on a home, Chattaway says, they're not likely to balk at an additional $10.

"The title companies are the ones who are the most at risk," says Chattaway, who adds that documents must be preserved to guarantee that there is an official record of who owns what land or property. If those records are lost, title companies become vulnerable to legal claims, which in the end wind up hurting consumers.

"It's the public that'll benefit if [the bill] is eventually passed, and it's the public that pays," says Chattaway. "You can pay me now or you can pay me later, but if you pay me later, it's going to be a lot more money."

Chattaway's name appeared on a list of witnesses who registered to testify in favor of the Oates legislation during a March 5 committee hearing in the Senate. At the time, the committee members didn't know one thing about Chattaway's company.

 

Namely, Sonny Oates was the president of American Title Group, Inc.--a parent company of eight Texas title firms including American Title Company--until 1993, when it was acquired by Business Resources Corporation. In 1994, BRC sold the company to Lawyers Title Corporation, which is based in Richmond, Virginia.

Oates says he has "nothing to do" with American Title these days, but his second-in-command does. GRS Vice President John Woolf still serves as an executive vice president for American Title, according to the 1997 Dunn & Bradstreet directory.

Not all title companies--especially those not affiliated with Oates in some fashion--agree with Chattaway's belief that their customers won't feel the effect of increased filing fees.

Officials from two Houston-based companies, Title Data and Lawyers Title Company (no relation to Chattaway's outfit), sent letters opposing the bill to members of the Senate.

"In Harris County alone, it would cost the public some $6 million a year," LTC's P.G. Eckels wrote in opposition to the bill. "We had a presentation surcharge of this nature enacted in 1991...and certainly do not need another."

But even before rounding up people to testify on behalf of his bill, Oates had to find a lawmaker who would introduce and sponsor it. Apparently that wasn't hard, although varying explanations are presented as to who first brought up the idea of raising money to preserve documents.

Tracking down how the legislation was spawned, in fact, is a little like running up a down escalator.

In February, Sen. Eddie Lucio, a Democrat from Brownsville, filed Senate Bill 436. Lucio says he decided to sponsor the legislation at the request of Cameron County Clerk Joe Rivera and Hidalgo County Clerk Jose Eloy Pulido, who are residents of his south Texas district.

"They came to me and showed me some old binders," says Lucio. "I started getting all kinds of phone calls asking us to approach this on a statewide manner."

In its original version, Lucio's bill required all county clerks in Texas to charge a mandatory $10 "use fee" for any and all documents filed in their offices. The money, which clerks would collect for a maximum of seven years, would pay for the preservation of public documents filed prior to 1990.

The additional fee would be collected on top of the $1 to $5 fee that county clerks already collect for records preservation. The existing fee was adopted by state lawmakers in 1993 after some clerks complained that they were losing their records, and that there was no money in their county budgets to pay for preservation.

When asked to comment on the legislation, Rivera started the conversation by emphasizing that his records are in excellent shape.

"Our office is probably one of the most advanced in the state," says Rivera, who boasts that his records from 1969 to the present have all been computerized.

If the legislation passes, Rivera says, he plans to raise $1.5 million as part of his goal of computerizing the remaining documents in his office. In five years, he hopes to make the records available on the Internet.

Rivera, who has traveled to Austin three times to testify in favor of the legislation, says he's not concerned that the extra fees would be a burden on the residents of Cameron County, which ranks as the 12th- poorest county in the state (slightly better than eighth-ranked Hidalgo County).

Although Rivera was quick to praise GRS for the job it has done in his office, he claims GRS had little involvement with the legislation and claims that he's had no contact with any of the company's lobbyists. Instead, he takes the credit for raising the issue with Lucio. Rivera's claims, however, are at odds with those of GRS lobbyist Russell Kelley.

"I think he [Rivera] is the one who brought up the problem to Sonny Oates, and there were several clerks that said, 'You know, we need this, and would you basically help carry the ball for it,'" Kelley says.

When asked how much involvement he had in drafting the legislation, Oates says, "Oh, a lot."

That said, Oates' bill clearly arrived at the legislature unknown to most county clerks, other than Rivera and Pulido.

When he filed his bill on February 4, Lucio asked his colleagues to pass the legislation quickly--as an emergency measure--which would allow suspending rules that require bills to be heard on three separate occasions in the House and Senate. Lucio claimed that the crowded calenders in both houses and the importance of the legislation created an "emergency and imperative public necessity," according to a draft of the bill.

 

(An identical companion bill sponsored by Rep. Ron Lewis (D-Mauriceville) was still waiting in committee at the time the Observer went to press. Lewis did not respond to several telephone messages left by the newspaper.)

Unfortunately for Lucio and Oates, the county clerks caught on to what was happening.

"We did not know about [the bill's] existence until three weeks prior to its first hearing. At that time, we began polling our clerks across the state," says Cochran County Clerk Rita Tyson, the president of the County and District Clerks Association of Texas. "It felt like someone was trying to take care of a problem for us, and we were not aware that it was being done."

Every county and district clerk in Texas is a member of the association, according to Tyson, who also works with a 28-member legislative committee that tracks and responds to legislation relating to clerks. The legislative committee is co-chaired by Travis County Clerk Dana DeBeauvoir and Fort Bend County Clerk Diane Wilson.

As word of Lucio's bill spread outside of Austin, county clerks across the state immediately expressed their opposition--largely because of its mandatory language, which would have forced them to increase the fees regardless of whether they needed more money for document preservation.

Although some county clerks, especially those in smaller counties, want the ability to raise extra money for records preservation, Tyson says the subject didn't even come up in December when the association held a statewide symposium to discuss clerk-related issues.

Late last month, DeBeauvoir says she completed a survey of county clerks and found that the majority are opposed to the fee increase.

Of the 111 county clerks who responded to the association's survey late last month, 81 clerks said they opposed the bill, while 24 were for it. In addition, 88 of the 111 clerks said they believed the current $5 fee is adequate.

"Our association is opposed to the bill. We think the fee will be burdensome to the public," DeBeauvoir says. "If you [county clerks] use your money wisely, then the $5 fee should be sufficient."

Sonny Oates is quickly learning that county clerks tend to be sticklers for detail when it comes to matters of the public record. In March, the clerks embarked upon their own campaign to defeat Oates' bill--or at least tone it down.

About the same time, an anonymous, six-page flyer began circulating in the capitol, warning lawmakers not to fall for Oates' "get-rich-quick scheme."

"Passing HB 1341 and SB 436 in their current form would make liars of the governor and these legislators by creating one of the largest tax increases in Texas history," states the missive, which was purportedly prepared by a group of "concerned county officials of Texas and Voting Texas Taxpayers."

The flyer included a proposed "public notice" (read: threat) that county clerks could post in their offices. The generic form contained blank spaces for the names of any lawmakers who vote for the legislation, and directed voters to take their gripes about the increased "filing tax" to legislators.

Whoever wrote the flyer isn't 'fessing up to it, and the clerks officially condemn it as tacky. But it may have helped slow the passage of the Oates bill.

On March 24, Lucio's intergovernmental relations committee voted 10-1 to approve a reworded version of the bill, which no longer forced clerks to raise their filing fees by a mandatory $10. Instead, it gives them the option of raising the fee by up to $10.

Sen. Steve Ogden (R-Bryan) was the only one to vote against the bill.
"I haven't heard any testimony that supports the fact that county clerks need to raise another $10 per document in order to maintain documents," Ogden says. "The average guy looking at a [total] $16 to $19 filing fee is going to be mad, and he has a right to be mad. I don't like this bill one bit."

Despite his vote, Ogden is no friend of county clerks on this particular issue. Besides the unnecessary financial burden the bill would put on taxpayers, Ogden says, he opposes the bill because it would give county clerks too much money to play with. Instead, Ogden says, county commissioners should have more oversight on how records preservation funds are spent.

"Their role ought to be ultimately to determine how much of this fee is levied and how much of it is spent," Ogden says of county commissioners.

But the last thing the clerks want state lawmakers to do is give county commissioners more power to tinker with the records preservation funds. For years, clerks and commissioners have been fighting over the issue. The ongoing conflict has taken on all the traits of a family feud, and it has spawned at least two nasty lawsuits.

 

The 1993 state law that allowed clerks to charge a $5 filing fee stipulated that the money is supposed to go into a separate fund to be used for document preservation only. The law was enacted because many county commissioners in Texas weren't funding document preservation projects and records were being lost forever--the worst thing that can happen to a clerk.

Once those funds started to build, commissioners courts began raiding the special funds, using the money to fill potholes and build bridges. In other words, the user fee was being used as a vehicle to collect taxes. As part of her survey of county clerks, DeBeauvoir says, 15 clerks told her that their funds had been raided.

Despite the permissive language of the Oates bill, the clerks are still worried that they're going to be turned into tax collectors by the time the session is over. In a state where increasing taxes is an act akin to blasphemy, the clerks are well aware of the ramifications the legislation could have on their political careers.

"The way the bill is written now is very damaging to county clerks. The language makes the fee vulnerable to raids," DeBeauvoir says. "We have verbal assurances from the sponsor that that was not the intent, but until we see some [new] language, the association will continue to oppose the bill."

In the meantime, one county clerk is taking matters into his own hands.
Last fall, Bexar County Clerk Gerry Rickhoff sued the members of the Bexar Commissioners Court, whom he is accusing of illegally taking $1.3 million out of his records preservation money and using it to pay the salaries of sheriffs' deputies.

Rickhoff's case is almost identical to that of El Paso County Clerk Hector Enriquez, who in 1993 successfully sued the El Paso County Commissioners for taking $165,720 of his records preservation money.

When reached by telephone, Enriquez agreed to mail the Observer a copy of his lawsuit, but said he didn't want to think about the case because it still makes him angry, and he's under doctor's orders to stay calm. (He recently had heart surgery.)

Hopefully, Rickhoff has a strong heart; from the tone of his voice, he sounds just as upset as Enriquez.

"I would much prefer to have this arbitrated peaceably, but I wasn't getting any response, and I felt I had to pursue this," says Rickhoff, who hired a private attorney to sue his elected colleagues.

If there's one place that needs more money for records preservation, it's Bexar, which has some of the oldest records in the state. Rickhoff says he's got 100,000 books that need to be rebound, and countless other records, some of which date back to 1699 and are in Spanish. Trying to restore them, Rickhoff says, is like trying to make a copy of the Declaration of Independence.

"I don't want to take money from anyone that I don't absolutely need," Rickhoff says of the legislation. "But in Bexar County, I don't think $50 would be too high. Right now, if we can get $10 and we can get the costs down to rebind these books, then maybe we can get started."

Rickhoff obviously supports the idea of raising filing fees, but he says the legislation won't do any good unless the language is tightened so that county commissioners can't get their hands on the extra money.

The specific part of Lucio's bill to which Rickhoff is referring is an awkwardly worded paragraph that appears to give county commissioners the ability to make a "written finding" that the preservation funds are needed elsewhere.

Or at least that's how DeBeauvoir and the clerks' association interprets it.
"In other words, [commissioners can] write themselves a note and take all the money," DeBeauvoir says.

Oates says he is surprised that the association is still in a tizzy. Since his bill is now permissive, he thinks DeBeauvoir and her people should buzz off and let county clerks decide whether they want to increase their fees.

"I don't understand why anybody would have a problem with it [the bill]," Oates says. "If someone says the five dollars is enough, then that's fine, they don't have to do anything. They [the association] need to leave the other courthouses the discretion to redo their records."

If the legislation passes, Oates stands to make a killing in Dallas County alone, where County Clerk Earl Bullock already pays Oates nearly a million dollars a year to preserve his records.

"If it [the bill] is enacted as law, it will give us the opportunity to collect that additional fee and to recreate old records that otherwise haven't been recreated," Bullock says.

 

Every year, Bullock says a half-million documents are filed in the real estate section of his office alone. At the $19 he plans to charge for each one-page document, Bullock will raise at least $9.5 million a year.

The excess money would be used to microfilm records filed before 1964, which are still in paper form, and to pay for a multimillion-dollar automation and storage project that is already under way, Bullock says.

Kelley, the GRS lobbyist, says he's aware of the clerks' concerns and is currently working with them and county commissioners to reach a compromise.

Kelley and the clerks do agree on one thing--if the Oates bill is passed, the money should be earmarked only for records preservation, and not be susceptible to raids by commissioners courts.

"That's one place where we agree with 'em," Kelley says. "If commissioners courts can dip into it [the fund] and use it to fix potholes, then there's no business for government records or any of these other vendors. We're not in the street business.


Sponsor Content