State bid for unclaimed bonds includes interesting players | Arkansas Blog

State bid for unclaimed bonds includes interesting players

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AUDITOR LEA: Finds interesting allies in pursuit of unclaimed bonds.
  • AUDITOR LEA: Finds interesting allies in pursuit of unclaimed bonds.
The Arkansas Democrat-Gazette reported this morning on a Pulaski Circuit Court lawsuit filed by Republican Auditor Andrea Lea seeking to convert unclaimed U.S. savings bonds into cash for the state of Arkansas.

The path to the money isn't clear based on events elsewhere, but it's a strategy apparently developing in legal action around the country. Here in Arkansas, Republican Sen. Jake Files collaborated with old Mike Beebe friend, campaign adviser and lobbyist Ruth Whitney on legislation that gives Lea what's believed to be a better foothold in court to go after the money. 

That connection is interesting. Interesting, too — and unexplained — is why Attorney General Leslie Rutledge is not representing the state in this lawsuit. Instead, the McMath law firm of Little Rock, Democratic in leaning it's fair to say, is representing the state, along with Cooper & Kirk of Washington, D.C., and Kessler Topaz Meltzer & Check in Radnor, Pa.,

The Kessler firm's name  jumped out at me because I'd run across it previously in writing about financial contributions to candidates for Arkansas Supreme Court. Some big class action lawyers including  lawyer John Goodson — husband of Supreme Court Justice Courtney Goodson — pitched in to help pay campaign expenses for a couple of candidates for Supreme Court (where this lawsuit could eventually wind up.) Lawyers believe Goodson has been instrumental in lining up such support.

The Kessler firm, as well as Goodson and the McMath firm, helped Justice Jo Hart ($2,000 from Kessler) to pay off her personal debt in a 2012 race. Small change compared with the huge sums nursing home owner Michael Morton chipped in, but you had to wonder about a Pennsylvania lawyer chipping into a Supreme Court race.

The Kessler presence was particularly noticeable in the 2014 race of Justice Karen Baker, who was unopposed. She still had expenses and the lawyers stepped up. David Kessler and his wife gave $3,000 together; Marc Topaz and his wife gave $3,000 together; Andrew Barroway, a member of the firm, gave $2,000; and the firm itself gave $2,000. That's a lot of Pennsylvania interest in an unopposed candidate for Supreme Court, about a fourth of the money Baker had to spend. The Baker contribution list includes a number of other class action lawyers, including Goodson and associates.

Never hurts to have friends. I'd add that this lawsuit seems likely, whatever happens at the state level, to be finally decided in federal court and turn on federal law pertaining to bonds. But it's always fun to follow the money. There are no defendants in the declaratory action case. But I'm guessing the U.S. Treasury might have something to say about Arkansas's efforts to cash its bonds for its own use.

Here's the lawsuit, by the way.

PS — It's probably worth noting that the 2015 legislature passed a law limiting contingency fees for outside lawyers who join with the attorney general in class action lawsuits. That law wouldn't apply here since the attorney general is not involved. The U.S. Chamber of Commerce loved that bill and lauded Leslie Rutledge for her help.

What you have here potentially is what's known as a win/win — for everybody but the U.S. Treasury. If the action succeeds, Arkansas gets a windfall, Lea's lawyers get a whopping windfall (surely she'll disclose the contingency fee arrangement), Lea gets a big political windfall. The only cost is to the U.S. Treasury in redeeming unclaimed bonds — not for owners or heirs, but for the little ol' state of Arkansas and every other place such enormous actions are pending. Throwing away federal dollars is normally much condemned by Arkansas politicians (think Obamacare). I suspect this situation will be viewed differently. Of course, they COULD say this money will be used, if won, to pay the state's share of Obamacare.


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