BusinessReport.com

In the small but bustling Ascension Parish city of Gonzales, population 10,000, most city government matters are routine and lacking controversy.

But the July 30 city council meeting was anything but routine and without controversy. On that night, three of five councilmen voted in favor of a motion to pay $31,615 in public money to the city’s bond counsel, Malcolm Dugas.

The mayor and city attorney claimed the action was not only ill advised, but criminal. “The motion you just passed, in my opinion, is illegal,” Mayor Johnny Berthelot said.

Dugas’ firm, Dugas Leblanc & Associates, had already been paid $60,000 for work on the $50 million bond issue for Cabela’s outdoors superstore, but Dugas contends he’s owed another $31,615 from the city for litigation work connected to the project.

The mayor and two councilmen say the original payment covered all of the work Dugas’ firm did for the project, and say it’s not the city’s responsibility to pay that money. Berthelot wondered aloud why three councilmen were so insistent on paying Dugas unnecessarily.

“I do not do personal favors at the expense of our taxpayers,” Berthelot said. “I hope each and every one of you can live with your decision.” Berthelot vetoed the payment the next day, his first veto in 23 years as mayor, and would later remark that his act may have saved the councilmen from committing malfeasance in office.

At the next council meeting, on Aug. 13, Dugas’ supporters didn’t try to override Berthelot’s veto, knowing they don’t have the four votes needed. But by a 3-2 vote, they voted down a measure to fire Dugas as the city’s bond counsel. Councilmen Terance Irvin, Kenny Matassa and Larry Savell—all of whom had voted in favor of the second payment—maintained their support for Dugas, while Joe Waguespack and Alvin Dragg voted to remove him.

Dugas says he has been the city’s bond counsel for between five and seven years, although no one seems to know for sure, possibly because they never had a major bond issue until Cabela’s. It was Matassa’s idea to make Dugas the official bond counsel, councilmen say, and the others went along because he’s the only local bond counsel.

Dugas is not an expert on the tax increment financing that would back the bonds, so the large firm Adams and Reese, which has offices in Baton Rouge and New Orleans, was hired as co-counsel. Dugas’ firm agreed to split the fee that would come out of the proceeds with Adams and Reese, which ended up being $120,000—roughly the maximum allowed by state law for a bond issue of that size.

The maximum fee was justified based on the complexity of the issue, which only got more complicated when the constitutionality of the TIF for the project was challenged all the way to the Louisiana Supreme Court.

Adams and Reese received nearly $360,000, including another $120,000 in litigation fees that came directly from Cabela’s and developer Carlisle Resort. Dugas submitted a statement to the Gonzales’ Industrial Development Board in October 2006 for 180 hours of litigation work for $31,615. A second, non-itemized statement was issued to bond trustee Hancock Bank in May 2007 for $60,000 “for comprehensive and coordinate services as co-bond counsel … with respect to the captioned issuance of bonds.” The city contends the most recent statement covers everything Dugas did.

Waguespack, who proposed the resolution to fire Dugas, says if Dugas had an issue with his fees, he should have dealt with Berthelot, who’s also the city administrator. That’s how things are supposed to work in Gonzales, he says.

“Nobody says, ‘Well, I’ll just go dealing on the side (with certain councilmen),’ ” Waguespack says. “That’s politics, and I never cared for it.

“Adams and Reese, in my opinion, did all of the work,” Waguespack says, which raises the question of whether Dugas even deserved the $60,000 for which he was paid.

Dragg, who voted for Waguespack’s resolution, calls Dugas a “middleman.”

“I don’t see where he did anything except get their money,” Dragg says.

“I don’t know how anyone would know that,” says Ray Cornelius, an attorney with Adams and Reese and one of the authors of the TIF legislation. “The fact that we’re out front arguing the case doesn’t mean (Dugas) didn’t do anything.” When a lawyer puts his name on a bond issue, he’s essentially taking responsibility for that debt by saying everything is in order, Cornelius says.

He says the equal split of the $120,000 fee was more or less pulled out of the air, and says his firm, despite its expertise in TIF financing, would not have tried to solicit business from Gonzales directly out of respect for Dugas’ prior relationship with the city.

“He put together the team,” Savell says. “The man’s a fine attorney. I never heard anything until the other night against him.”

“I thought the right thing to do was to pay the man,” Matassa says. “We asked him for the bill.” In retrospect, however, Matassa says the city should have asked for a monthly bill to avoid confusion.

Berthelot and others mentioned that Matassa proposed floating more bonds earlier this year to pay for capital projects in the city, despite that it has in the neighborhood of $25 million to spend. No one accused Matassa of trying to produce work for Dugas, but the implication was hard to miss. Matassa says he simply didn’t want the city to spend all the money it had on hand.

Dugas is also a political supporter of Irvin, who is running for the state Legislature. Irvin did not respond to multiple calls seeking comment.

Dugas says he simply wanted what was fair. He says he went to hearings, helped review and prepare documents and physically filed documents with the court, all of which he says was a separate process from the bond issuance.

“I did the same things all the other attorneys did,” Dugas says.

The city attorney’s fees were paid by the city and reimbursed from the bond proceeds, and Dugas says the same could have been done for him. His hiring as co-bond counsel was codified in an ordinance passed by the council in 2005 and signed by the mayor, making it ultimately the city’s responsibility to see that he’s paid, he says.

However, he says the dispute is finished as far as he’s concerned.

“It never really was the money, it was the principle,” Dugas says. “I felt like our firm did the work and deserved the fee. The majority of the council felt the same way.”