In 2009, I filed a federal lawsuit accusing Judge Robert M. Stem of participating in a racketeering enterprise that included other elected officials and lawyers in Booger County, particularly attorneys Bryan F. “Rusty” Russ, Jr. and James H. “Jimmie” McCullough of Palmos, Russ, McCullough and Russ, PLLC. You can read the complaint by clicking here, and that's probably the best starting point. (You don't need to be a lawyer to understand most of it, just begin on page 7). As you can see from the complaint, the Booger County Mafia has been thieving and scheming for generations, and Booger County is probably the only place in America where you can get shot five times with a bolt-action .22 rifle and have your death declared a suicide.The BCM had corrupted just about everything that passed through the local courthouse, and plenty of things that didn't pass through the courthouse. They were particularly fond of swindling real estate owners, especially owners of oil and gas interests. Here's an excerpt:
When stealing land or mineral interests, Russ and McCullough often use shell companies to create sham transactions. Shell Company A, for example, will purport to transfer its land or mineral interests to Shell Company B, even though Shell Company A never owned the land or mineral interest in the first place. Russ and McCullough, acting through The Firm, then seek a declaratory judgment that Shell Company B owns the land or mineral interest. Judge Stem grants Russ and McCullough permission to serve notice on the allegedly undetermined owners by publication in local newspapers. After the actual owners fail to respond, Judge Stem, at the behest of Russ and McCullough, appoints Defendant Dona Harris as attorney ad litem, ostensibly to represent the interests of the actual landowners. On the same day he is appointed, Defendant Harris declares that he cannot locate the actual owners (even though most of them are readily identifiable), and Judge Stem appoints Defendant Nestor Leamon as receiver to sell the property. Leamon then sells the property to Russ and McCullough at prices far below market value, and the proceeds are put into the registry of the court. If the actual owners fail to claim the money within seven years, Judge Stem gives it back to Shell Company B, i.e., back to Russ and McCullough.First Amended Complaint (mislabeled "Original Complaint"), p. 8, ¶78. Paragraphs 144-160 give a lot more detail, explaining how Rusty and Jimmie used their shell companies to swindle the mineral estate (i.e., ownership of the oil and gas) beneath 157 acres from the Erwin heirs. All of the documents referenced in the complaint can be found in the Robertson County Courthouse (I have my own certified copies, as do the FBI and the State Bar of Texas).
Immediately after the lawsuit became public, I was approached by Judge Stem's estranged brother, mother, and sisters about the judge's refusal to return certain memorabilia that had belonged to the judge's late father. No lawyer within a hundred miles wanted to represent the family against Judge Stem, but I figured I had nothing to lose at that point since I had already accused the judge of participating in a racketeering conspiracy. I sent a demand letter to Judge Stem threatening to sue him on behalf of his own mother (never a good way to make friends), and he finally returned his father's memorabilia. You can click here to read what his mother wrote in response (and you can read this recusal motion if you want a better idea of why Stem hates me so much). If you get a letter like that from your own momma, you probably ought to be asking yourself what kind of man you are.
Meanwhile, Judge Stem's brother Wiley was the first to tell me that Judge Stem was a personal friend of U.S. District Judge Walter S. Smith, Jr., the judge presiding over the racketeering lawsuit in Waco. That was the first indication that I had stepped in front of a buzz saw. I had not yet served the Waco lawsuit on any of the defendants, so I decided to refile the case in a Houston federal court and abandon the Waco case.
My very own special prosecutor
Around the same time, the BCM tried to frame me. You can read the affidavit of attorney Jeff Duke and the affidavit of our mutual client, Alan Eppers, to see how the BCM set the process in motion. I'll have a lot more to say about the incident in Liars & Horse Thieves, but here's the gist: John C. Paschall, who was then the district attorney for Robertson County, colluded with Judge Stem, Rusty, Jimmie, and Rusty's son Trey to frame me for barratry, which is the illegal solicitation of a client. Specifically, the BCM accused me of illegally soliciting clients for the federal lawsuit against Rusty, Jimmie, et al. Now that may not sound like a big deal, but barratry is a third-degree felony in Texas, which means it is punishable by up to ten years in prison. [UPDATE 9/11/2014: I have obtained an audio recording of a telephone conversation in which Judge Stem tried to convince Jeff to file a bar grievance against me -- the audio is linked to a post on LawFlog.com].
At the time I lived in Brazos County, not Robertson County, so Paschall tried to get the Brazos County DA to charge me with barratry. An investigator from Brazos County called me, I gave him e-mail correspondence disproving the allegations, and the case was closed. Not satisified, Paschall filed a false affidavit in Stem's court claiming that I had solicited clients for a case pending in Robertson County. In reality, Paschall knew full well that (1) the federal case was pending in Harris County, (2) neither I nor the clients in question lived in Robertson County, and (3) none of the alleged solicitation could have occurred in Robertson County.
Brad Beers, an attorney from Houston, was appointed special prosecutor. I gave him the same evidence that I gave Brazos County – and more – but Beers kept dragging out the investigation and calling new witnesses. Two grand juries no-billed me before Beers finally gave up. Meanwhile, the presiding judge had assigned Beers the task of investigating the false affidavit that Paschall filed in order to initiate the investigation, but there is no indication that Beers ever investigated. I guess that was Beers's idea of professional courtesy to his fellow prosecutor. (If you want to know why special prosecutors are inherently problematic, read my blog post on the indictment of Rick Perry).
Nothing to see here. Move along.
Shortly after I filed the federal lawsuit in 2009, the FBI began interviewing my clients and serving grand jury subpoenas all around Robertson County. I thought that meant the momentum was moving our direction, but I was soon to be disappointed. I had filed a bar grievance against Rusty and another one against Jimmie in 2008, laying out the evidence that Rusty and Jimmie had stolen hundreds of thousands of dollars (maybe more) in real estate interests, but the state bar flatly refused to investigate.
According to the rules governing grievances, the state bar was obligated to accept the allegations as true for purposes of deciding whether an investigation was warranted, and bear in mind that the FBI, the U.S. Attorney's Office, and the federal grand jury had already found reason to investigate. Never mind all of that, the bar just rejected both grievances out of hand. As it happens, Rusty had served for sixteen years on the state bar's local grievance committee. I appealed to the Board of Disciplinary Appeals, but the appeal was also rejected. A former grievance committee chairman later told me that politics often played a role in the bar grievance process, and he was not surprised that the case was dismissed.
I had similar experiences with the State Commission on Judicial Conduct, which purportedly investigates judicial misconduct in Texas. Judge Stem's brother had given me documents proving that Rusty Russ had secretly represented Judge Stem in a real estate dispute (I later confirmed that Rusty's services were provided to Judge Stem free of charge, a plain violation of Texas Penal Code §§ 36.08(e) and 36.09). Neither of them had disclosed their attorney-client relationship to the attorneys and parties who appeared opposite Rusty and before Judge Stem. I provided these to the commission in conjunction with a judicial complaint against Judge Stem.
I also provided the commission an affidavit from R.A. "Mickey" Deison, a lawyer who represented a client against Rusty in front of Judge Stem even as Rusty was representing Stem for free. Neither Rusty nor Stem disclosed the conflict:
During the tenure of this case, Judge Stem repeatedly called counsel into chambers to engage in off-the-record conversations of factual and legal matters. I can only conclude that Judge Stem has done this to avoid public scrutiny. When I and my co-counsel objected to the practice of holding arguments in chambers and off the record, Judge Stem started ruling against all our motions. I have been practicing law for over forty (40) years, and it is my observation and my professional opinion that Judge Stem routinely rules in favor of Mr. Russ's clients without regard to the law or the facts.
Affidavit of R.A. "Mickey" Dieson. Mr. Dieson further testified that he would have sought Judge Stem's recusal if he had known about the conflict of interest. In his affidavit, Jeff Duke testified that Judge Stem tried to pressure him into filing a bar grievance against me on the same bogus charge of barratry that got the special prosecutor appointed. All of this information was provided to the state bar and the Commission on Judicial Conduct at one time or another, and each time the bar and the commission did the same thing: nothing.
As I would learn later, the commission was already aware -- long before I was -- that Rusty had been representing Stem for free, and that this was happening during the same general time that Stem was helping Rusty and Jimmie steal mineral estates. If the free services were a quid pro quo, that's not just a misdemeanor violation of the gift ban found at Sections 36.08(e) and 36.09, that's felony bribery. See Texas Penal Code § 36.02. And still, the commission did nothing. (I suspect there was a lot more than free legal services changing hands, but you'll have to wait for the book to read about that).
Back to Waco
Meanwhile, notwithstanding my attempts to move the case to Houston, the case got transferred back to Waco, which means it got transferred back to the only federal judge in Waco: Judge Walter S. Smith, Jr., personal friend of Judge Stem. At a hearing, Judge Smith ridiculed the 48-page complaint, calling it a “junior John Grisham novel,” and he told all the defendants that he wanted them to file motions to dismiss the case. He treated me so badly that a courthouse employee asked me if I knew that Judge Smith was a personal friend of Judge Stem. I told her that I did, but it was already too late. (The same employee asked me if I knew about Judge Smith's alcoholism or his alleged sexual abuse of another female courthouse employee. You can read about that on DirtyRottenJudges.com.).
On August 25, 2010, I propounded discovery requests on Rusty, Jimmie, and their law firm seeking information about the attorney-client relationship between Judge Stem and their law firm. Each refused to answer any questions about the firm's attorney-client relationship with Stem, and most of their other answers were non-responsive, evasive, or downright false. See Interrogatory Answers of Rusty Russ, Jimmie McCullough, and Palmos, Russ, McCullough, and Russ, LLP. Before I could file a motion to compel them to answer the questions, Judge Smith dismissed the entire case on the pleadings.
That means Judge Smith did not consider any evidence, only the 48-page complaint itself. Judge Smith ruled that even if everything in the complaint was true, the defendants had done nothing illegal, therefore he was not going to let the case proceed. Worse, he refused to let me amend the complaint to correct any alleged shortcomings in the allegations. Finally, he sanctioned my clients and me a total of $25,000 sua sponte -- i.e., on his own initiative -- on the grounds that the lawsuit was frivolous, never mind the fact that the FBI, the U.S. Attorney's Office, and the federal grand jury obviously thought the allegations had merit.
One of the most maddening things about the dismissal was that I knew for certain that Rusty and Jimmie had stolen over $1 million in oil and gas revenues, some of that from my clients, with Judge Stem's help. But I could not say how I knew. One of my clients had given me a confidential settlement agreement showing that Rusty and Jimmie had to pay back part of what they had previously stolen, but I could not say anything about the settlement without getting that client sued for breaching the settlement agreement. In any event, Judge Smith never let the case get that far, because he dismissed it without hearing any evidence.
Shortly after the dismissal, an FBI agent told me that the federal investigation was on hold pending the outcome of my appeal to the U.S. Court of Appeals for the Fifth Circuit. He did not explain why, but I already knew the answer: Judge Smith was (and is) the only U.S. district judge in Waco. If he had already thrown out the civil case on the grounds that the defendants had done nothing illegal, then he would certainly do the same thing in a criminal case. (Other FBI agents later confirmed to an acquaintance that the federal case had been closed because Judge Smith blocked the civil case -- and I doubt the agents were any happier about it than I was).
Punishing the victims
The dismissal order was bad enough, but the sanctions order was preposterous. Sanctions and attorney fee awards have numerous procedural and evidentiary requirements, most of which Judge Smith ignored, but his factual mistakes were particularly hard to fathom. For example, he sanctioned the Erwin heirs $9,375.00 for allegedly suing people with whom they had already settled, including Rusty and Jimmie. But compare that to Paragraph 197 of the federal complaint, which states that "notwithstanding any other provision of this complaint, the members of the Erwin Heir Majority do not bring any claims of any kind against the Defendants with whom they have already settled, i.e., Defendants Russ, McCullough, The Firm, Leamon, LK & P, Oaks & Diamonds, Deminimus, Velnon, Flare Royalties, L.P., and Flare Royalties, L.L.C., nor do they seek any damages from them." (emphasis in original). In other words, Erwin heirs had never sued the people with whom they had settled. The bottom line is that the victims of the theft were punished with a $9,375.00 sanction for doing something that they absolutely, positively did not do. Worse, the victims were ordered to pay that money to the very thieves (i.e., Rusty and Jimmie) who had stolen from them in the first place.
Elsewhere, Judge Smith wrote that, "had the claims been pled properly, there might have been a viable RICO claim against Defendants Russ and McCullough arising out of their actions in snatching up properties at tax sales." The problem? The complaint has nothing to do with "snatching up properties at tax sales." He just made that up in his own imagination. At the same time, he implicitly admitted that my clients may have had legitimate claims but for the pleadings. However, you will recall that he would not let me amend the complaint -- not even once -- to address any alleged shortcomings in the pleadings. Thus Judge Smith threw out the entire lawsuit on the premise that it was frivolous, yet he did not even know what the lawsuit was about, and he was not going to let me correct any errors that he imagined to exist in the complaint that he apparently had not read.
I showed the dismissal order and the sanctions order to numerous attorneys, and we all thought it was a no-brainer that the U.S. Court of Appeals for the Fifth Circuit would reverse Smith's orders. It turned out we vastly overestimated the Fifth Circuit. In the appellate brief, I pointed out numerous legal errors in Judge Smith's opinion, but the Fifth Circuit affirmed everything in a per curiam opinion, ignoring most of the issues that I raised. (I have uploaded an abridged version of the brief, and I apologize for the formatting problems). I filed a petition for rehearing en banc, pointing out some of the more egregious problems with the sanctions order, but the petition was denied without explanation.*
The state bar would not investigate, the commission on judicial conduct buried everything, the federal investigation was closed, and now the civil case was dead. From every angle, it looked like the Booger County Mafia had won.
* Neither the appellate brief nor the petition for rehearing en banc are my best pieces of work, but they were certainly good enough to put the Fifth Circuit on notice that Judge Smith had done something indefensible. I'll have more to say about the Fifth Circuit in Liars and Horse Thieves. Meanwhile, you can read DirtyRottenJudges.com -- particularly the sections about Judge Smith and Judge Frank Montalvo -- and decide for yourself whether the Fifth Circuit is tainted.
I should also say a few words about the Erickson claims against Mark Milstead, which are found on pages 39-41 of the federal complaint. Milstead knew he was caught red-handed and, shortly after he was served, his attorney approached me about setting the claims against him. Our clients tentatively agreed to let Milstead keep the land in exchange for a $40,000 payment to my clients. Judge Smith knew about the settlement discussions, because both Milstead and my clients asked for extensions of time to work out a settlement. Before it became final, however, Smith announced that he wanted all of the defendants to file motions to dismiss. Naturally, that was the end of the settlement discussions. Ultimately, Judge Smith dismissed my clients' claims against Milstead, even though Smith knew by then that even Milstead himself thought the claims had merit.
After Smith dismissed the federal case, I realized that I could still go back into state court and vacate Stem's judgment that purported to award the Erickson property to Milstead, because the state-court judgement had been obtained by fraud. I entered an appearance in that case in Stem's court, Stem was forced to recuse, and another judge was assigned. When the new judge made it clear that he might very well set aside the state-court judgement for fraud, Milstead returned to settlement discussions. Our bargaining position was weaker, however, and the ultimate payment from Milstead was reduced from $40,000 to $35,000, but we settled.
While the case was on appeal to the Fifth Circuit, I notified the appellate court that we were dismissing the claims against Milstead because of the settlement. Notwithstanding all of this, the Fifth Circuit upheld the sanctions order, which was grounded on the premise that the entire federal lawsuit was frivolous. This begs a question: if it was all so frivolous, then why did Milstead pay for the land that he and his father had taken from my clients? I defy anyone -- lawyer, judge, or otherwise -- to read pages 39-41 of the federal complaint and explain how we failed to state a cause of action against Milstead, his father, and the law firm.
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