Tipping the Scales: Part II

How Anna Nicole Smith’s Billionaire In‑Laws Secretly Lobbied the Courts

By Zachary R. MiderZachary R. Mider
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Image of Anna Nicole Smith and J. Howard Marshall marrying at altar in wedding chapel
Anna Nicole Smith, 26, marries oil tycoon J. Howard Marshall II, 89, in Texas, on June 27, 1994. Credit: WKAN/MEGA

When the heirs of a Texas oil billionaire went to court in a $75 million tax dispute, they got help from an unlikely ally: Barber-Scotia College, the nation’s first institution of higher learning for black women.

The school, founded in North Carolina after the Civil War to educate the daughters of freed slaves, had fallen on hard times. Stripped of accreditation and mired in debt, it sometimes wasn’t able to pay staff.

Barber-Scotia might seem the last place for the family of J. Howard Marshall II, famous for his May-December romance with Playboy centerfold Anna Nicole Smith, to look for help with a tax matter. And top officials there say they’ve never heard of the case. Yet there was Barber-Scotia’s name, along with those of four other historically black colleges and universities, on a friend-of-the-court brief submitted in 2013 to the U.S. Court of Appeals for the Fifth Circuit in New Orleans.

“I have a feeling someone forged whatever it was,” said David Olah, Barber-Scotia’s president, echoing the school’s outside lawyer and its former executive chairman.

Bennett College
“I’m sure we didn’t sign any such thing.”
–Esther Terry, former president
Clinton College
“We were not involved in it at all.”
–Elaine Copeland, president
Barber-Scotia College
“I have a feeling someone forged whatever it was.”
–David Olah, president
Wilberforce University
I don’t remember it specifically,” but “I just trust [Carter] in a way that I don’t believe he would fabricate that.”
–Patricia Hardaway, former president

The brief was part of a campaign by the Marshall family, orchestrated by a Washington consulting firm, to influence two of the nation’s highest courts, according to an examination of confidential documents and emails as well as interviews with participants. The campaign shows how it’s possible for well-funded litigants to stack the deck by generating phony friends of the court, or by paying advocates who present themselves as independent but are really lobbyists in disguise.

Outside Voices

The friend of the court, or amicus curiae, occupies a peculiar place in the U.S. legal system. Amici are meant to be outside voices, aiding judges by making arguments the parties don’t. Although they’ve been around for more than a century, they’ve proliferated in recent years. The Supreme Court received 863 amicus briefs in the 2015-2016 term, double the number 20 years earlier and more than it got in the whole decade of the 1950s.

Read Part I: ‘Friends of the Court’ Have Hidden Ties to Big Investors

In order to impose some transparency, and to discourage well-funded litigants from using such briefs to overwhelm opponents, the Supreme Court and federal appeals courts require amici to state whether anyone is paying them for their participation.

–Disclaimer in amicus brief purportedly submitted by five colleges and universities

But an examination of the Marshalls’ influence campaign shows how this safeguard can be illusory. Names of some supposed amici were used without their permission; at least one amicus got an undisclosed payment from the Marshalls’ consulting firm; another said he was misled about the source of an undisclosed payment used to secure his help. Two more briefs supporting the Marshalls in unrelated cases came from the same nonprofit, the National Black Chamber of Commerce, which has ties to the consulting firm, DCI Group LLC.

Marshalls’ Campaign

The campaign spanned the family’s Supreme Court dispute with Anna Nicole Smith over her share of Marshall’s fortune, which derives largely from a stake in Koch Industries Inc., as well as the separate tax matter. Each case attracted multiple pro-Marshall amicus briefs and was narrowly decided in the family’s favor, saving it tens of millions of dollars.

A Marshall family lawyer, Edwin Hunter, described the campaign in a confidential 2015 letter later made public in an unrelated lawsuit. According to Hunter, DCI recruited amici as part of a $5.7 million, six-year effort to improve the family’s image. The letter says the firm’s work was supervised by Preston Marshall, a grandson of J. Howard’s.

Hunter’s letter noted that amici are required to disclose financial support to the courts. “Preston also states that no perjury attaches to the amicus briefs and representations to the courts because no support was funneled to the filers until after the filings,” Hunter wrote, calling the matter appalling. The letter didn’t specify which organizations were paid.

Preston Marshall denied making that statement and said in an email to Bloomberg News that the letter, written in the context of a bitter squabble among family members, was “full of distortions.” He acknowledged working with DCI but said other relatives were also involved. “I am not aware of any quid pro quo payments,” he said.

Craig Stevens, a DCI vice president, said without elaborating that Hunter’s letter “deceitfully mischaracterized” the firm’s work. Hunter didn’t respond to inquiries.

Linda Sandstrom Simard, a law professor at Suffolk University in Boston who studies amicus briefs and wasn’t familiar with the Marshall case, said she’d never heard of an example of the court rules being violated. That kind of thing, she said, would pervert the system of justice.

“If one side has lots of money and the other side doesn’t have lots of money, that creates the possibility that the power of amici is only available to one side,” Simard said. “You’re giving the party with more resources more guns—more weapons to go after the party with fewer resources.”

Strange Bedfellows
How five historically black schools wound up on an amicus brief supporting a billionaire’s family in a tax dispute with the IRS

PRESTON MARSHALL

Grandson of Texas oil billionaire J. Howard Marshall II

Allegedly oversaw DCI’s work for family.

DCI GROUP

Washington consulting firm

Donated $25,000 to $49,999 to JCSU.

Recruited “friends of the court” to back the Marshalls.

EVA CLAYTON

Former congresswoman and JCSU alumna

Worked with DCI to recruit Johnson C. Smith University.

JOHNSON C. SMITH

UNIVERSITY

Historically black university

Provided list of four other schools to its attorney.

SUZANNE McDOWELL

Washington lawyer

Submitted amicus brief on behalf of the five schools.

FIFTH CIRCUIT COURT

Ruled 2-1 in Marshalls’ favor.

PRESTON MARSHALL

Grandson of Texas oil billionaire J. Howard Marshall II

Allegedly oversaw DCI’s work for family.

DCI GROUP

Washington consulting firm

Recruited “friends of the court” to back the Marshalls.

Donated $25,000 to $49,999 to JCSU.

EVA CLAYTON

Former congresswoman and JCSU alumna

Worked with DCI to recruit Johnson C. Smith University.

JOHNSON C. SMITH UNIVERSITY

Historically black university

Claimed four other historically black colleges and universities backed cause.

Provided list of four other schools to its attorney.

BENNETT COLLEGE

CLINTON COLLEGE

BARBER-SCOTIA COLLEGE

WILBERFORCE UNIVERSTIY

SUZANNE McDOWELL

Washington lawyer

Submitted amicus brief on behalf of the five schools.

FIFTH CIRCUIT COURT

Ruled 2-1 in Marshalls’ favor.

PRESTON MARSHALL

Grandson of Texas oil billionaire J. Howard Marshall II

Allegedly oversaw DCI’s work for family.

DCI GROUP

Washington consulting firm

Recruited “friends of the court” to back the Marshalls.

Donated $25,000 to $49,999 to JCSU.

EVA CLAYTON

Former congresswoman and JCSU alumna

Worked with DCI to recruit Johnson C. Smith University.

JOHNSON C. SMITH UNIVERSITY

Historically black university

Claimed four other historically black colleges and universities backed cause.

Provided list of four other schools to its attorney.

BENNETT COLLEGE

CLINTON COLLEGE

BARBER-SCOTIA COLLEGE

WILBERFORCE UNIVERSTIY

SUZANNE McDOWELL

Washington lawyer

Submitted amicus brief on behalf of the five schools.

FIFTH CIRCUIT COURT

Ruled 2-1 in Marshalls’ favor.

Source: Court documents, Bloomberg News

White Tuxedo

The Marshalls’ tangled legal disputes arose from their patriarch’s last few months of life. He wed Smith in 1994 at Houston’s White Dove Wedding Chapel. The groom was 89, in a wheelchair and white tuxedo. His blue-jeans-model bride was 26, in satin, cut low.

Marshall died about a year into the marriage with a will providing nothing for his widow. Smith claimed her husband had instructed lawyers to give her half of his wealth—then estimated to be more than $1 billion—but his son Pierce thwarted the plan. Courts issued conflicting judgments and lawsuits multiplied, outliving both Pierce and his onetime stepmother.

When the case came before the Supreme Court in 2010, it attracted a stack of amicus briefs, four in favor of the Marshalls and three against. One pro-Marshall brief stood out. It was filed by the National Black Chamber of Commerce and written by a high-powered pair of Washington lawyers, Democrat Lanny Davis and Republican David B. Rivkin. The brief was accompanied by press releases, a joint op-ed and a flurry of news coverage.

As required by court rules, the lawyers said in a footnote that no one paid the chamber for its participation. But in separate statements to Bloomberg News, each said he never asked the group if it was being paid.

Davis said he got involved when Preston Marshall asked him to represent the chamber. He said the group’s founder and president, Harry Alford, later told him that “a number of my members” were interested in the case and that he could pay the legal fees upfront. Davis said the lawyers’ combined bill was probably less than $100,000.

“If I’d suspected anything, I would have pursued more questions,” Davis said. “I was not willfully closing my eyes.”

Rivkin, a partner at Baker & Hostetler LLP in Washington, has represented the chamber several times.

“If somebody hires me tomorrow to write an amicus brief and pays us for it, I’m not going to ask them if they got paid by someone else,” he said. “It’s not a question you ask your client.”

Alford declined to comment. His group frequently champions causes that overlap with DCI’s client list and accepts donations from the firm’s corporate clients.

At the least, DCI played a behind-the-scenes role to promote the brief. A chamber media release was drafted by a DCI employee, according to data attached to an online version of the document.

Recruiting Allies

DCI is a leading player in the business of recruiting allies to advocate for a client’s policy goals. Founded in 1996 by three tobacco-industry operatives who honed their skills creating smokers’ rights groups, it has worked for some of the nation’s largest companies, including Exxon Mobil Corp., Goldman Sachs Group Inc. and AT&T Inc. More recently, DCI has helped hedge fund managers who own Puerto Rican debt and Fannie Mae shares push for government policies that would make their bets pay off.

In the end, the high court ruled 5-4 in the Marshalls’ favor. But not long after their victory, they were back in court.

The Marshalls had waited more than a decade, while they fought with Smith, to pay the gift tax on a transfer of his holdings in Koch Industries that the billionaire made before he died. (The Marshalls’ stake in Koch is now estimated to be worth about $15 billion.) The delay led to a dispute with the Internal Revenue Service over how much interest was owed. The sides were $75 million apart when the case reached the Fifth Circuit in 2012.

That’s when more friends of the court appeared. One brief was submitted on behalf of several conservative nonprofit groups, including the National Black Chamber. Another came from the Tax Foundation and a group of law professors including Steven Willis at the University of Florida’s Levin College of Law.

Willis said in an interview that he was offered $1,500 by a man who claimed to be working for the Tax Foundation, an influential Washington nonprofit. Willis said he agreed to help write the brief because he believed the IRS’s position was wrong. He said he didn’t want the money, directing it to a student group he oversees.

Image of check for $1,500 to the University of Florida Law Center from the Frontiers of Freedom Foundation
Check provided by University of Florida

A payment to Willis from the Tax Foundation wouldn’t have to be disclosed because their names were both on the brief. But the foundation said it had nothing to do with recruiting other amici. And only after Bloomberg News obtained a copy of the check from the university did Willis learn that it didn’t come from the Tax Foundation but from a different nonprofit, the tiny Frontiers of Freedom Foundation with an address at a UPS Store in Virginia. The payment wasn’t disclosed to the court.

George Landrith, the foundation official who signed the check, said he couldn’t remember many details but that neither the Marshalls nor DCI reimbursed him.

Historically Black Schools

While Willis was being recruited in Florida, a similar scenario was playing out at Johnson C. Smith University, a historically black school in Charlotte, North Carolina. This time, the pitch was from Eva Clayton, a graduate who had served a decade in Congress as the first black person elected to the U.S. House of Representatives from the state since 1898.

Clayton, who now works as a government-relations consultant, offered the school money if it agreed to file a brief supporting the Marshalls, according to a person with knowledge of the pitch who spoke on condition of anonymity.

A brief from historically black schools could be expected to get a sympathetic hearing at the Fifth Circuit. Carl Stewart, who had just been elevated to chief justice, grew up in segregated Louisiana and graduated from a historically black university.

Clayton told school officials to follow up with a DCI executive named Monique Hall, according to the person with knowledge of the matter. Hall, whose LinkedIn profile says she helps manage DCI’s relationships with nonprofits, was once named the National Black Chamber’s “partner of the year.”

After Clayton’s pitch, Johnson C. Smith agreed to put its name on the brief and, in April 2013, began recruiting co-signers. A few days later, an aide to Ronald Carter, the university’s president, emailed a list of four schools to Suzanne McDowell, the lawyer drafting the brief. The email, which McDowell provided to Bloomberg News, includes the names of the presidents at each school who purportedly agreed to take part.

Clayton acknowledged in an email that she recruited her alma mater but said “there was no commitment of a donation.” She said she believes the school agreed to take part because of the merits of the brief’s argument.

Johnson C. Smith’s annual report for the 2012-2013 academic year lists DCI as a member of its “prestigious five-star circle,” indicating a donation of between $25,000 and $49,999.

Image of donor page from Johnson C. Smith University President's Report, 2012–2013, showing DCI Group, LCC in the Prestigious Five Star Circle donor group
Johnson C. Smith University President's Report, 2012–2013, page 72

Carter referred questions to Sherri Belfield, the school’s director of communications. She confirmed that Johnson C. Smith agreed to sponsor the brief but wouldn’t answer other questions.

DCI’s Stevens said in an interview that the firm never paid any friends of the court in the Marshall cases. “We follow the strict letter and spirit of all federal and state laws,” he wrote in a subsequent email, declining to discuss the Johnson C. Smith donation. He said Hall declined to comment.

"DCI Group is proud of our role getting people and groups engaged in the democratic process by alerting them to issues and opportunities that directly affect them or the people they represent," Stevens said in the email.

The list sent to McDowell, co-chair of the tax-exempt organizations practice at Steptoe & Johnson LLP in Washington, included Olah at the now co-ed Barber-Scotia, who said he’d never heard of the case; Esther Terry, then president of Bennett College in Greensboro, North Carolina, who said, “I’m sure we didn’t sign any such thing”; and Elaine Copeland, of South Carolina's Clinton College.

“Clinton College would not care how much a wealthy owner was charged for gift tax,” Copeland said. “If it had something to do with integration, or something to do with our funds from the federal government—maybe. But we were not involved in it at all.”

Five other current or former officials at the three schools gave similar accounts. None of them could recall being asked to participate, let alone agreeing to do so.

The fourth president was Patricia Hardaway, former head of Wilberforce University in Ohio. In an interview in March, Hardaway also said she didn’t recall anything about a brief. Two weeks later, she changed her story, saying Carter phoned her and convinced her that she’d given her consent and then forgotten about it.

“I don’t remember it specifically,” Hardaway said in the second interview, but “I just trust him in a way that I don’t believe he would fabricate that.”

The brief filed by McDowell says in a disclosure required by court rules that none of the schools was paid for its participation. McDowell said she relied on Johnson C. Smith for that information, as well as for the list of co-signers.

‘Devastating Effect’

The Marshalls’ case hinged on how much interest on unpaid gift taxes the IRS can seek from the recipient of the gift. In her brief, McDowell argued that a victory for the IRS could have a “devastating effect” on charities like the five schools because they could find themselves on the hook for an unlimited amount of interest on a donor’s debts to the IRS. She didn’t give any examples of when that’s ever happened.

The Fifth Circuit assigned three judges to hear the case, Chief Justice Stewart not among them. They handed the family a 2-1 victory in 2015, allowing them to hang on to the disputed $75 million. The judges didn’t mention the amicus briefs in their decision. But in an earlier ruling, one of them said she found the three pro-Marshall briefs “persuasive.”

Among the school officials surprised to learn they’d helped a wealthy family beat the IRS was Edward Best, a retired United Methodist pastor in Georgia. At the time the brief was filed, he was executive chairman of Barber-Scotia’s board, desperately seeking a donor to solve the school’s money problems. He’s still trying.

“If you happen to run across anybody that wants to give some money, let me know,” he said. “Honest money.”