Mike Kueber's Blog

March 27, 2013

Castro’s much ballyhooed seven-figure referral fee

Filed under: Issues,People,Politics,Uncategorized — Mike Kueber @ 3:17 am
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A recent Brian Chasnoff column in the Express-News reported that San Antonio mayor Julian Castro has decided to start collecting speaking fees to help meet personal expenses.  According to the column, this development was prompted by the low mayoral salary in San Antonio (about $4,000 a year) even though Castro’s wife makes $55,000 a year as a teacher and he recently signed a book deal for an undisclosed amount. 

Almost incidentally, Chasnoff mentioned that shortly before becoming mayor, Castro “earned a much-ballyhooed seven-figure referral fee in 2007.”  Much-ballyhooed?  I have been observing Castro for years and don’t recall any public conversation about this subject.  Informally, I had heard that he received a big legal settlement (not a referral, and not seven figures) and that it had been used to help fund his 2009 campaign for mayor, but nothing much more than that. 

Because my curiosity was piqued by Chasnoff’s column, I googled the subject of Castro and seven-figure referral and this is what I found in Current magazine, published during Castro’s successful mayoral campaign:   

  • Julián Castro, 34, is a Harvard Law School graduate, a civil-litigation attorney, and a former two-term Councilmember for District 7. This is his second mayoral bid, following a narrow defeat to Phil Hardberger in 2005.  He’s been criticized for earning a fat referral fee from super-trial lawyer and Dem power donor Mikal Watts. He’s married to Erica Lira Castro; they have one child.

Watts is not only a Dem power donor, he is currently the subject of a federal investigation for potentially illegal lawyering in connection with the BP oil spill in Louisiana.  Coincidentally, my Council opponent  Rolando Briones has already been sanctioned in Louisiana in connection with his engineering efforts to help people hurt by Hurricane Katrina.  Isn’t it ironic how doing God’s work seems to get some people in trouble?  As they say, no good deed will go unpunished.   

A recent article by Guillermo Contreras in the Express-News reported on Watts’ legal troubles and his connection to Castro.  The article included a tidbit about the referral fee:

  • Watts had relocated his family from Corpus to San Antonio, where he took up residence in The Dominion and began pouring more money into races here.  He held at least one major fundraiser for Castro in 2009 as the former councilman battled to become mayor.  During that campaign, Castro’s opponents tried to make political hay of his referral of a drunken-driving lawsuit to Watts’ law firm.  Castro and Watts’ law firm successfully settled the case in 2007, and although the terms of the settlement are confidential, it purportedly netted Castro a sizable fee.

Referral fees, a/k/a forwarding fees, have always been confusing and controversial in Texas because they potentially enable a lawyer to receive an extravagant amount of compensation for very little work, and in the preceding quote, there seems to be such confusion.  First it says that Castro referred the case and then it says Castro and Watts successfully settled the case.  Well, which is it – if Castro referred the case, he wouldn’t have helped to settle it.  And if he helped to settle it, he wouldn’t have referred it; rather, he would have brought in another lawyer to help with the case.

By doing a bit of internet research, I learned that Texas in 2005 modified its referral rule (Rule 1.04 in the DRPC) to create two types of referrals:

  1. The lawyer can refer a case to another lawyer to handle, and thereby receive a referral fee; or
  2. The lawyer can get another lawyer to co-counsel it, and then divide the fee proportionately.

Thus, although the term referral is sometimes loosely used in both contexts, it appears that Castro actually brought in Watts as co-counsel and thereby retained the right to a more generous sharing of the fee.  How generous? – according to reports it was “fat,” “sizable,” or “seven-figure.  Whatever, I don’t think it is much ballyhooed.

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