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Texas whistleblower fights uphill battle
For nearly six years, George Green labored anonymously as the sole architect for the Texas Department of Human Services. It was 1989 and life was good: He had a job he enjoyed, he worked in a state he loved, and he was sharing it all with the woman he planned to marry.
All that changed, almost overnight, when he blew the whistle on a lucrative kickback scheme and found himself in a high-profile legal battle with the state. It was a decision that cost him almost everything — his job, his home, his career, his girlfriend and nearly his life.
A Texas jury determined in October 1991 that he had been fired in retaliation for reporting the misconduct and awarded him $13.7 million in compensatory and punitive damages — the largest whistleblower judgment in the state’s history.
But the award didn’t land Mr. Green in the lap of luxury. The Texas Legislature refused to honor the jury’s verdict, igniting a series of court challenges with first state and later federal officials that have consumed nearly 20 years of his life.
The steady stream of lawyers, costly legal briefs and court appearances left him almost penniless.
“I lived all my life with what I thought was decency and courtesy, always respecting and deferring to authority,” Mr. Green said. “But I didn’t understand just how fragile my rights really were. The government says it will give you fair and equal treatment if you have truth on your side.
“But I had truth on my side and I lost. I lost everything but my self-respect.”
Now 61 and unemployed, Mr. Green lives with his elderly parents in Horseshoe Bay, Texas, 50 miles northwest of Austin. A native Texan, he has not been able to find work as an architect — most local firms are afraid to hire him because of his notoriety.
Mr. Green, a 1972 graduate of the University of Texas, works on his family’s small ranch but spends much of his time preparing for his next court challenge. It was his rapt attention to those court appearances that eventually caused the woman he loved to leave.
In November 1995, the state — at the urging of a key legislator — negotiated a $13.7 million settlement in the case, at a time the debt had grown to $20.3 million and was accumulating interest at $5,500 a day.
But $5 million went to his trial lawyer, $3.5 million to the Internal Revenue Service, $1 million to an investor who tried to help him collect the money, and most of the rest to a dozen lawyers Mr. Green hired in an all-consuming effort to collect the settlement and defend him against the federal government.
Between 1991 and 1995, while engaged in his efforts to collect the judgment, Mr. Green’s mental and physical health deteriorated significantly and some of the cash went to pay for repeated hospitalizations for a bleeding ulcer.
A fateful discovery
Mr. Green’s story began in the summer of 1989 at Human Services, where he had received consecutive “exceeds performance” reviews commending his attention to detail and his willingness to do on-site inspections.
He had reported illegal activities on state construction projects, including kickbacks to procurement officers and offers of jewelry and other gifts from contractors to supervisors who were asked to overlook noncompliance at job sites.
Mr. Green, whose duties included checking for contract compliance, discovered what he believed to be “a pattern of fraud and corruption,” though the supervisors took no corrective measures.
In October 1989, Mr. Green took his concerns to the head of Human Services but received no response. He then reported allegations of extortion, kickbacks and illegalities at 10 specific construction sites to the chairman of the House Budget Oversight Committee.
Within days, Human Services began an investigation — not of the fraud and corruption alleged by Mr. Green, but of his long-distance telephone calls. Investigators checked more than 8,000 calls he made from his office over a 30-month period and, according to state records, found one improper call. That call went to his father and carried a long-distance charge of 13 cents.
Investigators also audited his sick leave, setting up a five-person surveillance team to monitor his activities during hours he was excused from work for doctor-prescribed physical-therapy classes for a job-related injury he sustained in 1988. The therapy had been approved by his supervisors, and he had permission to attend the sessions during work hours.
The team documented one occasion in which Mr. Green failed to attend therapy, though court records show he had been turned away from the session because of an expired prescription, which later was remedied.
Within weeks, on Dec. 12, 1989, Mr. Green was fired, accused of abusing his sick leave, falsifying his sick leave forms and misusing his telephone. The matter was referred to the Travis County, Texas, District Attorney’s Office for prosecution, where he was accused in a third-degree felony indictment.
After surrendering to authorities, he was handcuffed and placed in a cell at the Travis County Jail but later released on a personal bond — facing up to 20 years in prison if convicted.
His only recourse
Mr. Green said the only recourse he had to “right the wrong” was to bring a lawsuit under the Texas Whistleblower Act, which he did on March 9, 1990. He said prosecutors then offered to drop the criminal case if he agreed to withdraw the lawsuit, but he refused.
Shortly before the criminal trial was to begin, the district attorney’s office dismissed the charges, pending further investigation.
On Oct. 10, 1991, after a two-month trial, a Travis County jury vindicated Mr. Green, calling his firing retaliation and awarding him the $13.7 million in compensatory and punitive damages. The state appealed the decision, but the verdict was upheld by the State Supreme Court in May 1994.
Testifying at the civil trial on Mr. Green’s behalf was former U.S. Rep. Barbara Jordan, Texas Democrat and keynote speaker at the 1992 Democratic National Convention, then a professor at the University of Texas’ Lyndon B. Johnson School of Public Affairs.
Ms. Jordan, a former Texas state senator, said it was “not easy to get people to serve in public office and who really demonstrate and exercise an attachment for the public interest” and she did not want to see a state agency engage in activity “which may deter young people from wanting to enter government service.”
She told the jury that after a review of the pleadings, discovery, personnel files and investigative reports in the Green case, she concluded he had been subjected to retaliation by state officials. She said it was important to prevent the kind of treatment Mr. Green received, “otherwise people lose faith in their government.”
Ms. Jordan had never testified as an expert witness before and she died less than three months after the trial ended.
In Texas, when a person is awarded a judgment against the state, the Legislature has to approve the payments as an administrative act. But some lawmakers refused, saying they opposed the award of punitive damages. Two bills were introduced to appropriate the funds, but neither passed.
In the best interest?
Robert Junell, then-chairman of the State House Appropriations Committee, said because he was obligated to taxpayers to deny “excessive” judgments, he said he recommended against the $13.7 million jury award. The committee offered to settle the case for $5.5 million, but Mr. Green rejected the deal, saying it wouldn’t honor the jury’s verdict or cover his attorney fees.
“We very carefully reviewed every judgment case that came before the committee and we were not about to rubber-stamp one we believed to be excessive,” Mr. Junell said. “As stewards of state funds, we did the right thing and moved on.
“I had assumed Mr. Green had done the same.”
Named by President Bush in 2003 as a federal judge in Midland, Texas, Mr. Junell said the Green case came up during his confirmation hearing before the Senate Judiciary Committee. Sen. Patrick J. Leahy of Vermont, then the panel’s ranking Democrat, asked why he refused to pay the full amount.
“A lot of people risk everything to point out waste or corruption — why did you want to deny Mr. Green his full award?” Mr. Leahy asked.
Mr. Junell said that under the law of sovereign immunity, a state cannot commit a legal wrong and is immune from a civil suit or criminal prosecution. He said while there was no cap at the time on the damages that could be paid to Mr. Green, he needed to apply for legislative approval and when he did his application was rejected by the committee.
Rejected by the Legislature, Mr. Green and his then-attorney, John C. Augustine, contacted Lt. Gov. Bob Bullock, who chaired the State Legislative Budget Board, which approved appropriations. In a Sept. 21, 1995, letter, Mr. Augustine said his client would settle all claims and causes of action against the state in return for the payment of the original $13.7 million jury award.
By then, the amount owed to Mr. Green had grown to $20.3 million because of accumulated interest and was growing at a rate of $5,500 a day.
“I was forced to accept the fact that the Texas state government would not honor a jury order to pay me for my damages,” Mr. Green said. “My family, my life literally, was drained of the energy to fight on, so I settled.”
On Nov. 15, 1995, the Legislative Budget Board approved a “Release and Settlement Agreement” that was ratified that day by then-Gov. George W. Bush.
The deal, drafted for the state by Harry G. Potter III, a Texas special assistant attorney general, called for Mr. Green to receive a payment of $3.4 million up front, monthly payments over a three-year period, and two lump-sum payments of $3 million and $1.7 million in January 1999. The money was for the loss of “earning capacity, mental anguish and suffering” and for additional personal injuries.
The agreement also set aside $1 million to the investor and $5 million to Mr. Green’s attorneys.
IRS battles begin
It was the details of the release and settlement agreement that pitted Mr. Green against the IRS.
Between 1991 and 1995, while engaged in full-time efforts to collect the judgment, Mr. Green said his health deteriorated, requiring a number of hospitalizations for a bleeding peptic ulcer, anemia and other problems.
As a result, he said, he did not include the $3.4 million lump-sum payment on his 1995 federal income taxes because it fell under an IRS code providing an exclusion from taxation for “damages received — on account of personal injury or sickness.”
Mr. Green said he did report $285,000 of the monthly payments as taxable income but not $483,000 because it represented additional damages that were excluded from taxation under the tax code. He said the bulk of the settlement was not taxable because the money was awarded to compensate him for physical and other damages.
During the tax trial, Dr. Richard E. Coons testified that Mr. Green suffered from depression and post-traumatic stress disorder; that the actions of Human Services caused these conditions; and that the injury would be permanent. He described the symptoms as including compulsive eating, anxiety, crying, decreased confidence, difficulty concentrating and great sleep disturbance.
“As of today, justice has been denied. I have been forced to accept the hard, cold, cruel truth — people like me have little or no chance for any justice in this country,” Mr. Green said. “What is a person to do if confronted with the cold truth? I have decided to stand on it. The truth is clear and visible for all to see.
“No one should be denied their constitutional right of a fair trial.”
But the IRS challenged Mr. Green’s tax payments, saying all of the money he received from 1995 through 1999 was taxable income. The agency also disallowed losses he claimed in those years and a $100,000 itemized deduction he sought in 1999. In addition, the IRS said Mr. Green owed more than $1 million in penalties for all of the years.
According to the IRS, Mr. Green’s negotiated settlement limited as nontaxable only the $3.4 million he received as the first lump-sum payment — $2.5 million for past and future mental anguish and $900,000 for loss of earning capacity. The IRS said Mr. Green had failed to show that any of the additional damages were awarded for personal injuries or sickness.
“Although there is substantial evidence that the petitioner suffered mental and physical deterioration between the time of the judgment in 1991 and the settlement in 1995, there is no allocation — for any additional injuries,” the IRS said in an October 2005 filing in the U.S. Tax Court in San Antonio.
The challenge meant that Mr. Green, according to the IRS, had failed to pay taxes on $10 million of the jury awarded judgment.
Mr. Green challenged the ruling, and while the Tax Court agreed that the $3.4 million cash award was not taxable it upheld the government’s claim on the rest of the settlement. The court said Mr. Green owed $3.2 million in federal taxes and penalties. The IRS already had seized $3.5 million, some three years later returning $300,000 as the difference between the court settlement and the amount of assets seized.
The tax court order was appealed by Mr. Green to the U.S. 5th Circuit Court of Appeals in New Orleans, where a three-judge appeals court panel — Judges Will Garwood, E. Grady Jolly and Carl E. Stewart — said that while the settlement language was “less than clear,” Mr. Green had failed to prove the agreement’s dollar amount did not limit the amount he was to be paid for personal injuries or sickness.
Bullock was ‘very clear’
Mr. Green argued that Mr. Bullock, the lieutenant governor who headed the state budget board, was “very clear in what he said and did” regarding the negotiated settlement and that while the mention of punitive damages was limited in the document because of political concerns, “he wanted to make sure I got what was owed to me because of the considerable anguish and pain that took place right up to the time of the settlement.”
In November 2007, the appeals court agreed in a 20-page opinion that testimony in the case showed that Mr. Bullock was aware of Mr. Green’s “hardship and health problems stemming from the collection efforts,” adding that they “very likely” were the “compelling facts which led Bullock to help Green obtain satisfaction of the judgment in the first place.”
But the appeals court said Mr. Potter, the former Texas special assistant attorney general, prepared the release and settlement agreement, not Mr. Bullock, and that Mr. Green had failed to produce any evidence to the contrary.
“Bullock’s knowledge of Green’s health condition does not satisfy Green’s burden of establishing that Texas intended the money — to compensate Green for personal injury or sickness,” the panel said in upholding the Tax Court ruling.
Mr. Bullock served as lieutenant governor from 1991 to his death in 1999. He was a leading Texas political figure for more than 40 years, also serving in the Texas Legislature, as secretary of state and state comptroller.
Mr. Potter, now practicing law in Houston, said that while it was clear the jury had awarded punitive damages in the Green case, the state could not be ordered to appropriate the funds. He said the negotiated settlement came as a compromise in exchange for Mr. Green’s dropping all pending claims against the state.
“I had a very limited role in the settlement, called in to do the paperwork as a representative of the attorney general’s office,” Mr. Potter said. “But it is what is it, a compromise agreement to which both parties had legal representation and both agreed to a carefully documented list of conditions.”
Mr. Potter said Texas agreed to compensate Mr. Green “for his actual injuries.” During the tax court case, he testified that neither he nor his office had undertaken any independent investigation of Mr. Green’s injuries. He also said the state’s opposition to paying punitive damages “was pretty much a matter of public policy.”
In a November 2007 interview with the San Antonio Express-News and after the appeals court panel published its opinion, Mr. Potter conceded that he did not know how much compensation Mr. Green’s injuries were worth and that Mr. Bullock had handled the negotiations for the state. He said Mr. Green was correct in saying the state did not want to pay punitive damages.
Green wants rehearing
Mr. Green wants the case to be heard by the full 5th Circuit Court of Appeals, where he said he would argue the three-judge panel erred in saying there was no evidence to support his claim that the bulk of the settlement was not taxable.
He said the political climate in Texas regarding punitive damages and Mr. Potter’s lack of knowledge of his post-judgment injuries were “misplaced,” given the evidence. He said it could not be “credibly asserted” that the record contains no evidence supporting his argument.
But Mr. Green’s appellate attorney, Ryan G. Anderson of San Antonio, said his client exhausted his legal challenges, adding that a request for a full hearing before the court was not possible under existing guidelines that allow only arguments that directly conflict with prior Supreme Court, 5th Circuit or state law precedent.
“It’s a shame because at the end of the day justice was not done, George got a raw deal,” Mr. Anderson said. “It was an extraordinary loss for someone who had the guts to fight and win, and I am really shocked. I had hoped that the judges would look at the human side of the case, but that didn’t happen.”
But Mr. Green said the guidelines allow en banc hearings when a “matter of exceptional public importance” needs to be resolved. He said the three-judge panel erred in saying that Mr. Potter and not Mr. Bullock had negotiated the amount and allocation of the settlement payments to Mr. Green.
“The only legal remedy for the violation of my constitutional rights to a fair trial is for the whole court to review and correct the misdeeds of the three-judge panel,” he said. “Some may say the judicial process is over for me. Some may say I had my day in court, that it’s over. But you should never quit the fight for justice when the truth is visible for all to see. Only a coward gives up on the truth.”
About the Author
Jerry Seper is the investigative editor for The Washington Times.
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