Insurance lobbyist bribing state officials?

In a social media post from insurance lobbyist Steve Badger, he states Texas Deductible Eaters Beware! Recent hail storms in West Texas have brought out the crook contractors still willing to violate the law and waive deductibles despite our new law making it 100% clear this is illegal. We are looking to make examples out of a couple of these wrongdoers. Send me any documents or information you have showing this is happening. I will make sure that it gets into the hands of the right people at TDI and Texas AG so they can issue fines and cease/desist orders. My email is sbadger@zelle.com How much money has this insurance lobbyist paid our elected officials where he leads TDI and Texas AG around like his pet? While Texas faces record unemployment numbers that exceed the Great Depression, his obsession with putting poor people (likely minorities) in jail is disturbing. Ph.D. Home Club reached out and explained that they were contacted by Steve Badger, who told them that Badger represented the Texas Department of Insurance. Reviewing the website, there is no listing that the Texas Department of Insurance employs Steve Badger.

Serious Concerns

Several ethical concerns can be raised regarding Steve Badger's actions:

1. Misrepresentation of Authority: Badger allegedly claimed to represent the Texas Department of Insurance when contacting Ph.D. Home Club. If this claim is untrue, it amounts to a misrepresentation of authority. Presenting oneself with false credentials or affiliations to manipulate others can be seen as unethical, as it breaches trust and honesty.
2. Possible Misuse of Power: The social media post indicates that Badger is using his position to gather information about illegal activities. While combating illegal activities is a commendable goal, the manner in which he has solicited information might be perceived as using scare tactics or intimidation, especially if he does not have the actual authority or position he claims to have.
3. Potential Conflict of Interest: If Badger, as an insurance lobbyist, has monetary relationships or affiliations with elected officials, and he is using his position to influence regulatory bodies like TDI and Texas AG, it could be seen as a conflict of interest. The main ethical concern here is whether decisions or actions are being influenced by personal or financial gains rather than the public's best interest.
4. Racial and Socioeconomic Bias: The claim that his efforts might disproportionately target poor and possibly minority individuals raises concerns of discrimination and prejudice. If there's evidence that his actions are biased or if the consequences of his actions disproportionately affect these groups, it is a significant ethical concern.
5. Lack of Transparency: If Badger has made significant financial contributions to elected officials, there should be transparency in these transactions to ensure there's no undue influence on policy decisions. If these transactions are hidden or not disclosed, it raises concerns about transparency and possible corruption.

In sum, the ethical concerns raised by these actions and statements can revolve around misrepresentation, potential misuse of power, possible conflicts of interest, potential biases, and a lack of transparency. It's important to note that these are concerns based on the information provided, and a comprehensive assessment would require a deeper investigation into the facts and context.

An Overview of Bribery vs. Lobbying

In the public mind, bribery and lobbying are frequently linked: Lobbying opponents argue that bribery is disguised as a business transaction. Although both practices aim for a positive result, they are not the same. Bribery attempts to purchase power—paying to ensure a specific outcome—while lobbying attempts to manipulate power, often by donations. The critical distinction is that bribery is illegal, while lobbying is not.

TAKEAWAYS Essential

Lobbying is the process of bringing together a coalition of like-minded individuals, industries, or corporations to influence a governing body or a lawmaker, usually by financial donations.

Bribery is described as the payment of something—either money, products, or an intangible favor—in exchange for a benefit or preferential treatment or to obtain an advantage over others.

Lobbying is legal in the United States, but bribery is not.

Bribery attempts to purchase power while lobbying attempts to leverage it—though the line between the two may be blurry.

Lobbying is the process of persuading.

Lobbyists work to influence policies, regulations, and public policy in favor of the organization or group that hires them. Their legal efforts may often be open to the public (or fed to the media to manipulate the public). Still, they usually target lawmakers, elected officials, senators, and government department employees—the decision-makers on Capitol Hill and in state capitals.

According to the Lobbying Disclosure Act of 1995, lobbyists must register with the Secretary of the Senate and the Clerk of the House and file disclosures of their activities and expenses.

Lobbyists—individuals or organizations—have existed for as long as governments; they have historically been regarded as "knowledge givers," a valuable source of facts and data, albeit in favor of their cause or industry. Over years and decades, lobbyists build up support for their reasons in a systematic manner. They always finance a report, poll, or research in the hopes of swaying a politician's—or their constituency's—opinion.

Most of the time, however, they take a more straightforward approach: they give money. Lobbyists also ensure that contributions are made from the ground up to influence policymakers at all levels. These donations aren't made to any government officials or legislators. They might, however, go to that person's election or re-election campaign (advertising, fundraising) or a politician's favorite cause, charity, or hometown/state initiative. There's an unspoken agreement, if not an explicit one: We fought for you and your rights, and you fought back by voting for (or against) this bill, funding the subsidy, expanding that exemption, and loosening the control.

But, if lobbyists have always existed, why are they now so despised? It's partially due to their increased visibility. They used to work secretly, behind the scenes, and out of sight of the public. However, in recent decades, they have grown in size and boldness, working freely as a profession. (In Washington, D.C., "K Street" is slang for the lobbying industry since so many offices are located there, similar to how "Wall Street" in New York City represents the finance industry.) Every month, some ex-statesman or -woman announces their intention to join a lobbying firm, using their awareness of how the government functions.

And the amount of money involved—both what lobbyists earn and what they spend—continues to rise. Lobbying expenditures have increased from $1.44 billion in 1998 to $3.47 billion in 2019. 1 According to OpenSecrets.org, the U.S. Chamber of Commerce ($77 million), the Open Society Policy Center ($48 million), and the National Association of Realtors ($41 million) were the top three spenders in 2019. 2

The Position of Lobbyists

Cigar lobbyists, for example, have fought to keep cigars apart from cigarettes. They lobbied for years to escape federal oversight and promote the image that cigars aren't as dangerous as cigarettes when they are in reality.

Take, for example, the financial sector. In 2019, securities and investment companies invested a total of $100 million. That's a tad lower: This sector spent $103 million a year in the wake of the Great Recession in 2010 and 2011. The majority of this money was invested in ensuring that the government did not regulate the hedge fund industry.

Lobbying has a considerable effect. It impacts policy because it influences policymakers, and therefore people, rather than just individuals. Whether made directly by individuals or by specialist lobbying firms, it is the contributions—dubbed "special interest money"—that have led to the association of lobbying with bribery.

Bribery is a form of corruption.

A bribe, on the other hand, is typically given to a single person. And it's certainly not open to the press. A bribe giver typically makes a cash bid "under the table" to get around standard procedures. Paying a tax officer to clear records of unreported revenue or sending goods without an invoice are examples of this.

A gift or a kind favor may be used as a bribe. A company's procurement manager may give a supplier an order in exchange for undue favor in the form of money, contrary to the company's policy of awarding orders based on quality and price criteria. Bribes are provided to public officials to allow tax avoidance and the resulting liabilities on an individual or corporate level.

A bribe, like its counterpart, the kickback, results in an unfair benefit for the bribe giver, regardless of how it's done. Bribes may seem insignificant compared to lobbying donations, but that is precisely the problem: they are often unaccounted for.

Bribery is the first phase in the economic system's subversion. A crooked, parallel structure emerges gradually but slowly. In the short term, it generates inefficiencies and roadblocks; over time, it erodes the country's economic base, harming the most disadvantaged members of society and instilling hopelessness and resentment in the middle class.

If bribe-based corruption becomes widespread, it could be at the root of some countries' institutional failures. The relationship between bribe payments and a variety of measures of official abuse (management time wasted with bureaucracy, regulatory burdens, and cost of capital) was analyzed in a 2000 World Bank study titled "Does Grease Money Speed Up The Wheels of Commerce?"4 The evidence indicates that the "powerful grease" hypothesis—that bribery can be an effective method for improving corporate practices—is unfounded. Bribery and official abuse policies are positively associated across companies, according to a clear trend. It raises the cost of doing business as well.

Bribery in the Workplace in the Real World

Walmart has been accused of bribing Mexican government officials to expedite the issuance of new licenses so that stores could open earlier.

Johnson & Johnson settled a Justice Department lawsuit brought under the Foreign Corrupt Practices Act in 2011 by agreeing to pay $70 million in civil and criminal penalties (FCPA). According to the SEC, Johnson & Johnson and its subsidiaries bribed government doctors in Greece who chose J&J surgical implants, hospital administrators in Poland in exchange for contracts, and Romanian public doctors to prescribe J&J pharmaceutical products. According to the SEC, J&J subsidiaries have paid kickbacks to Iraq to secure 19 contracts under the UN Oil for Food scheme.

Particular Points to Consider

On Bribery and Lobbying:

While bribery is generally viewed negatively — defined as purchasing favor or advantage through monetary means without moral justification — lobbying plays a multifaceted role in the political sphere. Specifically, human rights and environmental advocacy organizations employ lobbying as a counterweight against commercial and profit-driven agendas. In this context, lobbying becomes an essential tool to mold public policy, ensuring a balanced representation of diverse interests.

Nevertheless, a challenge arises when distinguishing between ethical lobbying practices and outright bribery, as the demarcation is often blurred.

Ethical Concerns in Representation and Influence:

1. Misrepresentation of Authority:

• Concern: Claiming false affiliations, as purportedly done by Steve Badger with the Texas Department of Insurance, misleads individuals and businesses, making them believe in an undeserved authority or backing.
• Implication: Such actions can result in individuals or entities making decisions based on falsehoods, jeopardizing their interests. It further erodes trust and can devalue the credibility of the institutions falsely represented.

2. Possible Misuse of Power:

• Concern: The unjustified use of a position to exert influence or intimidate is indicative of power misuse.
• Implication: Such behavior can foster a culture of fear, deterring honest dealings, eroding industry trust, and potentially harming innocent stakeholders.

3. Potential Conflict of Interest:

• Concern: A lobbyist having undisclosed personal or financial relationships with elected representatives, and attempting to influence these officials, raises ethical red flags.
• Implication: Decisions influenced in this manner may skew towards the lobbyist's interests over the collective welfare, compromising the decision-making process's integrity.

4. Racial and Socioeconomic Bias:

• Concern: Policies or actions that unduly target particular racial or socioeconomic groups are discriminatory.
• Implication: Such discriminatory practices reinforce societal inequities, foster divisions, and inflict harm on marginalized populations, betraying the tenets of fairness and equality.

5. Lack of Transparency:

• Concern: Maintaining transparency is a cornerstone of democratic systems, ensuring accountability.
• Implication: Absent transparency, especially concerning financial ties or influences, public trust diminishes as decisions might be perceived as biased or influenced.

In summary, these ethical concerns underscore the potential pitfalls in practices that might compromise trust, fairness, transparency, and integrity. Indulging in such practices risks degrading public faith in institutions, amplifying systemic disparities, and shaking the foundational pillars of a democratic and equitable society.

Milking Insurance Companies

Insurance carriers should closely monitor Steve Badger's billing practices. In one instance, he charged $30,000 for one single hearing.

Dishonest lawyers use a variety of billing methods to obtain higher payments from insurance firms. Overbilling in law firms, also known as "bill padding" or "billing fraud," is a significant issue that is seldom debated and much less commonly addressed. However, it is difficult to find a legal bill that does not contain any "padding." According to the California State Bar, most accounts are overcharged by at least 10% to 30%.

Two-thirds of lawyers confess to "bill padding" at their offices, one-third of lawyers openly double-bill clients, and more than half of all lawyers do work not because the client or case requires it but because they need to bill more hours. When it comes to keeping billable hour inflation under control, clients must be cautious.

Billing in a Block

Block billing is used by approximately 90% of law firm clients paid on an hourly basis. Block billing is an accounting strategy in which lawyers combine several more minor activities into a single "block" entry with a single time value. The total time paid is equal to the number of durations of each discrete task, in theory. For example, an attorney could bill the client for seven-tenths of an hour after spending five minutes on the phone, 35 minutes revising a junior associate's draft motion, and three minutes sending a quick e-mail to the client. Unfortunately, the final block-billed entry for these activities would look something like this in far too many cases:

- Speak with plaintiff's counsel by phone; send an e-mail to the client; update the draft motion to dismiss. - Duration: 1 hour

Since the client was paid for a full hour rather than seven-tenths of an hour, which is the actual amount of time spent on the client's behalf, the client effectively gives the lawyer a three-tenths-of-an-hour gratuity.

This type of billable hour inflation isn't always the product of intentional deception; lawyers are notorious for keeping inaccurate and up-to-date time records. They often overestimate the amount of time spent on a given job. "Billable Hours," by MacEwen and Stanton, Adam Smith Esq (2012).

Regardless of why it occurs, the fact remains that block billing is big business for law firms - and a massive cost for block-billed clients. According to the California State Bar, Block billing allows lawyers to inflate total hours billed to the client by 10% to 30%.

It was adding the smallest unit of billable time (0.1 hours) to a lawyer's regular timesheet results in an additional $10,000-25,000 in unearned fees over a year, depending on the lawyer's billing pace. Consider that most lawyers' regular time applications include anywhere from thirty minutes to three hours billed to clients that were not worked, according to the California State Bar and almost every state and federal court in the nation. This equates to over a quarter-million dollars in payments per year for work that never occurred for the average senior lawyer.

By its very nature, Block billing makes it almost impossible for clients to ascertain if they are reasonably billed, prompting the United States Court of Appeals to express reservations about its use. Block billing, according to another court, enables attorneys to charge their clients in advance "claim reimbursement for relatively minor activities that would not be compensable if recorded separately" and prevents the client from "determining if specific tasks were expeditiously completed within a fair period because it is difficult to divide into components the services that have been lumped together."

Overbilling in Law Firms and The Case of Steve Badger:

Insurance carriers need to exercise heightened scrutiny over the billing practices of lawyers, especially when it comes to individuals like Steve Badger. In a notable instance, Badger charged a staggering $30,000 for a single hearing, raising questions about the transparency and fairness of his billing methods.

Dishonest legal practitioners employ various tactics to inflate their bills, extracting higher payments from insurance companies. Overbilling or "bill padding" remains a prevalent but rarely discussed issue. The California State Bar highlights that a significant majority of legal bills, often as much as 10% to 30%, are inflated.

Studies have further illuminated this problem:

• Two-thirds of lawyers admit to padding bills within their firms.
• A third of attorneys acknowledge practices of double-billing.
• Over 50% of lawyers sometimes undertake work not out of client necessity but to increase their billable hours.

Given this context, clients must remain vigilant against billable hour inflation.

Block Billing: A Pervasive Issue:

Block billing is a predominant practice, with around 90% of hourly-paid law firm clients being subjected to it. This accounting technique lumps together multiple minor tasks into a singular "block," even if these tasks differ significantly in time and nature. Theoretically, the total time charged should reflect the sum of individual tasks, but this is not always the case.

Consider an example where tasks totalling seven-tenths of an hour are block-billed as one full hour. This essentially grants a three-tenths-of-an-hour bonus to the lawyer, which, while seeming small, can cumulatively result in massive additional costs for clients.

This inflation of billable hours isn't always malicious. Lawyers, often swamped, might not maintain precise time records, leading to overestimations. However, whether intentional or not, block billing is lucrative for law firms, resulting in 10% to 30% inflated bills, as highlighted by the California State Bar.

To put it in perspective, merely adding the smallest unit of billable time can accumulate to $10,000-25,000 in undeserved fees annually for a lawyer. Worryingly, most lawyers reportedly bill clients for thirty minutes to three hours of unworked time, translating to more than a quarter-million dollars annually in unwarranted fees for senior lawyers.

Given its opaque nature, block billing makes it challenging for clients to ensure they're billed fairly. Even courts have voiced concerns. One court observation was particularly poignant, stating that block billing allows lawyers to "claim reimbursement for relatively minor activities" and renders it impossible for clients to discern if tasks were completed efficiently.

Conclusion:

With instances like Steve Badger's exorbitant charge for a single hearing, the legal billing landscape appears riddled with gray areas. Clients, especially insurance companies, should remain vigilant and push for transparency to ensure they receive fair services for their payments.

The Hoarders

Billable hour "hoarding" is another problem that clients are frequently unaware of. The research appears to be maintained and paid by more costly senior lawyers as the economy slows down and billable hours are at a premium. As a result, partners serve as associates, associates work as paralegals, and paralegals work as secretaries. If hourly rates are not discounted to show that the senior person performs lower-level work, the issue arises. On the other hand, senior partners should not bill associate-level tasks at partner rates, and lawyers should never bill for paralegal work. As one court put it so eloquently, "For painting a farmer's barn, Michelangelo could not charge Sistine Chapel prices. As a result, clients must be concerned with the amount of time spent on specific tasks and how certain studies are performed and billed.

Moreover, amid repeated warnings from state and federal courts to stop doing so, many law firms try to pass on company overhead costs to clients by billing secretarial or support work. Clients should never be charged for secretarial, clerical, or word processing services. Clients must be particularly vigilant when reviewing billing entries from paralegals, who are often assigned secretarial work then billed to the client at hourly paralegal rates.

Billing in three-hour and half-hour increments

When billing by the hour, lawyers can never bill in increments more significant than a tenth of an hour. Courts also held that "professional persons who charge their clients fees above $80.00 per hour, based on time spent, cannot, in all fairness and reasonableness, charge their clients for increments over one-tenth of an hour." Find the following billing entries from a $750 per hour partner as an example:

• First Day: Reviewing client records and communicating with opposing counsel (1.0 hours)
• Day 2: Customer consultations and complaint planning (3.0 hours)
• Day 3: Review and finish the outline (2.0 hours)
• On the fourth day, I met with an associate to discuss a complaint (1.0 hours)

These entries billed to the client on separate days were billed in sixty-minute increments (as were around one hundred other time entries billed to the same client over two years). While there's no way of knowing what this lawyer's other billing statements look like, it's a safe bet that each of his clients - or at least those who refuse to check their outside counsel's invoices - is also billed in one-hour increments, regardless of how little work was done.

What's even more surprising is that the bulk of these disproportionate billers are senior and managing partners, who are probably the "brand" and partnership lawyers that clients most trust. Despite this, these trusted advisors continue to overcharge their clients by using large time increments, and they get away with it year after year.

However, when dealing with "one-hour" billers, in-house counsel or other corporate officers must exercise extreme caution. Apart from the evident financial impact, recent court decisions suggest that willful ignorance of blatant billing abuses by outside counsel - such as approving suspect time entries by a $750 per hour lawyer who bills exclusively in one-hour increments - may implicate the corporate officer or in-house counsel in the law firm's billing fraud and expose the corporation. As a result, a person who has been overcharged is not exempt from practicing standard treatment by checking the lawyer's bills.

In other words, it might be time for some awkward - but appropriate - conversations about billing policies between clients and lawyers.

Any client should introduce outside counsel guidelines that ban block billing, billable "hoarding," and unnecessary incremental billing to reduce billable hour inflation. These are only a few of the activities that contribute to overbilling, and clients should scrutinize their monthly statements.

Insurance Companies Should Beware of Steve Badger

Previously, I had a trial with Badger. There, the court struck three of his experts because Badger didn't bother to designate them timely.

It was so bad that Southern Vanguard's corporate representative didn't get to testify because Badger was too busy billing his client $30,000 in attorney fees for a single hearing. Personally, I would have been embarrassed if this happened to me. Imagine being prevented from testifying on your own case solely because your attorney was too lazy to file documents.

THE COURT: Doesn't matter. Bottom line is the answer is no. That would explain a lot of what we are doing here today. No. 2, I'm assuming that you are having your expert come and testify, right?

MR. BOWERS: We would have an expert testify, but Mr. Dick has objected to expert testimony.

This whole ordeal was an expensive circus at the cost of the insurance company. Badger did things like solicit people to write ex parte statements to the judge to influence her. He even sent a subpoena to me (plaintiff counsel of record) to testify as a fact witness - this was very silly and just a way to charge his client more.

Allegations of Steve Badger Engaging in Ex Parte Communication

Insurance lobbyist Steve Badger elicited ex-parte communication from TAPIA to influence Honorable Judge Linda Story. In response, judge appropriately marks "ex-parte communication" on letter. When dealing with Zelle or Steve Badger expect inappriopiate actions similiar to this. Indeed, on information and belief insurance lobbyist Steve Badger helped author this inappropiate ex-parte communication.

Q. How has Mr. Badger tried to intimidate you?

A. Through other public adjusters in the state. He has contacted them and told them that I need to tone down my estimates or he will be coming after me.

Q. Do you know if the insurance company solicited any ex parte communication in this case?

A. I am aware of some, yes.

Q. I would ask the Court to take judicial notice -- where is that? Give me a second.

Okay. I'd ask the Court to take judicial notice of the letter dated 11/27/2017 where Judge Linda Storey handwrites on there copy for desk and filed this inappropriate ex parte communication into case file from James Beneke. I would ask the Court to take judicial notice of that letter, handwritten notes by the prior judge in this case.

What is an Ex-Parte Communication, and how does it work?

One-sided is referred to as ex parte. Any contact between a judge or juror and a party to a legal action or any other person about the case that occurs without the presence of the opposing party or the opposing party's counsel is known as an ex parte communication. The criminal defendant, who the defense counsel represents, and the state, represented by the prosecutor, are the parties in criminal cases.

All parties (or their attorneys) should be present when:

• The judge provides directions to the jury, or the judge (or some other person) is talking to the jury about the case with a client, an attorney, a witness, or someone other than the judge's staff.

Ex parte contact occurs when a prosecutor speaks with a judge about a criminal defendant's case without the criminal defendant or the defendant's attorney present. Ex parte contact occurs when a juror runs into a witness at the grocery store during a trial and asks the witness a question about the witness's testimony.

Judges and jurors can communicate ex parte about administrative matters like setting hearing dates and in emergencies.

Ex Parte Communications: What's Wrong with Them?

In all criminal cases, the Constitution guarantees "due process." This means that the process must be impartial. Ex parte contact jeopardizes the integrity of a legal issue by adding new facts to the decision-maker (the judge or jury) without allowing the other party to clarify or answer.

Ex parte communications do not always result in breaches of due process. In general, an ex parte correspondence may only be considered a breach of due process if it affects the case's outcome. For example, a judge correctly explaining a legal concept to the jury without the presence of the prosecutor and defense attorney is certainly not a due process breach, but it does constitute ex parte contact. In the absence of the other side's counsel, an exchange between a judge and a lawyer about the weather will also not be considered a crime. In a nutshell, there is no harm done.

Insurance companies are wise to hire a different firm to represent them unless they like getting milked like a dairy farmer.

Allegations of Steve Badger's Ex Parte Communication:

There have been concerns surrounding Steve Badger's professional conduct, particularly related to allegations of ex-parte communication. As an insurance lobbyist, it's alleged that Badger sought ex-parte communication with TAPIA to influence the Honorable Judge Linda Story. Such actions, if substantiated, are highly irregular and potentially unethical in legal proceedings. Judge Story, in her professional capacity, recognized and appropriately marked the document as "ex-parte communication."

This incident has raised eyebrows in the legal community, especially considering Badger's association with Zelle. Those who are familiar with or have dealt with Steve Badger or Zelle are cautioned to be wary of potential similar actions in the future. There's a belief based on information that Badger might have played a role in authoring the said ex-parte communication.

Testimony Regarding Steve Badger:

In a testimony, when questioned about Mr. Badger's conduct, a respondent commented on his intimidation tactics. Badger allegedly used other public adjusters within the state to send threatening messages, suggesting toning down estimates to avoid potential legal ramifications.

Additionally, there was a mention of an insurance company possibly engaging in ex parte communication in a case. Specifically, reference was made to a letter dated 11/27/2017 in which Judge Linda Storey made handwritten notes, confirming the inappropriate nature of the ex-parte communication from James Beneke.

Ex Parte Communication Explained:

Ex parte communication refers to one-sided communication, particularly between a judge or juror and a party involved in a legal matter, excluding the opposing party or their counsel. It's a critical concept in legal ethics to maintain fairness and impartiality.

The Constitution guarantees "due process" in all criminal cases, ensuring fairness and impartiality in legal proceedings. Ex parte communication can compromise this by introducing new information to decision-makers (judges or jurors) without allowing the opposing party to address it.

Not all ex parte communications lead to due process violations. They are problematic only if they influence the case's outcome. Simple exchanges, such as a judge discussing administrative matters like hearing dates or innocuous conversations about the weather, don't usually result in violations, as they don't impact the case's integrity.

Conclusion:

Given the potential risks and the importance of upholding due process, insurance companies are advised to exercise caution when choosing their representation. If allegations like the ones involving Steve Badger hold weight, it might be prudent for insurance firms to consider other options for representation to avoid unethical practices and potential financial pitfalls.