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Taxpayers Fund Lawyers To Defend Highly Paid Federal Managers Under Fire

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Luke Rosiak Investigative Reporter
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Taxpayers are forced to cover much of the costs of defense attorneys for highly-paid federal managers facing termination or criminal charges, thanks to a cozy deal engineered in part by a law firm whose lobbyists helped draft and gain passage of legislation requiring it, The Daily Caller News Foundation’s Investigative Group (TheDCNF) has found.

Lobbyists for the Washington, D.C., law firm Shaw, Bransford & Roth (Roth) — which earns its money representing federal employees who are being disciplined — “proposed” and secured passage of the obscure bill Congress passed in 1996, according to the website of a group connected to the firm. That bill requires taxpayers to pay for legal insurance for management-level employees.

Roth lawyer Anthony Vergnetti then left the firm to launch the Federal Employee Defense Services (FEDS), just such a legal insurance business that, Vergnetti acknowledges, primarily steers clients to Roth when they have insurance claims, and profits off their premiums when they don’t.

Roth got its legislative sway by operating through the Senior Executives Association (SEA), which is ostensibly an organic group representing managers, but which is actually founded and run by the law firm’s partners and employees, as TheDCNF showed last year. SEA collects dues from members and pays lobbyists from Roth to conduct legislative advocacy, according to lobbying disclosures.

SEA’s website says it “proposed and secured legislation” requiring taxpayers to pay for the insurance in 1996. As a result, “Agencies are required to reimburse executives, managers and supervisors for up to one-half the cost of their liability and legal defense insurance,” it says. “SEA endorses Federal Employee Defense Services.”

The idea was pitched to Congress as protecting managers from personal lawsuits for simply doing their jobs, like firing a subordinate who then wants revenge. But in all but “very rare” such circumstances, the insurance isn’t needed because “DOJ does represent or hire private counsel to represent federal employees in civil suits for acts or omissions that occur within the scope of their employment,” FEDS acknowledges.

The main function of the insurance, then, is to protect employees who are accused of misconduct. The insurance covers “legal defense up to $200,000 for any disciplinary or judicial sanction proceeding or administrative investigation into alleged misconduct from any act, error, or omission committed by a federal employee,” according to FEDS. The insurance also provides lawyers in criminal cases.

Having the insurance gives employees little reason not to contest any and all discipline regardless of merit–bogging down the appeals system to the extent that in-limbo employees are often on paid leave for months, while generating business for lawyers.

FEDS entices employees to purchase coverage by recounting on an “endorsements” web page a litany of anecdotes that mock investigators for pursuing waste, fraud and abuse, and gloat that lawyers — Roth is virtually the only firm mentioned — got them off on the charges.

Among the examples is Paul Prouty, a top General Services Administration executive official who was fired as a result of an unnecessary and extravagant employee conference in Las Vegas. Prouty seemed to scoff at the idea that people should care about wasteful spending.

“I was accused of wrongdoing as part of the GSA ‘scandal,'” he wrote. “Mistakes were certainly made,” but “I was the lucky one — I had professional liability insurance from FEDS. As part of that, I immediately received the wise counsel of Tony Vergnetti with FEDS.

“Even better, he led me to the brilliant lawyers at Shaw, Bransford and Roth. After nearly three years and over $200,000 worth of legal fees, I was vindicated by MSPB — twice. GSA was forced to reinstate me with back pay, benefits and interest and they were obligated to pay my legal fees.”

FEDS’ website quotes SEA president Bill Valdez saying SEA “exclusively” endorses FEDS because it “performed a review” of its policies. Carol Bonosaro, its past president, also said she “exclusively” endorses them. FEDS’ other top endorsements come from Roth partners. None disclose the formal and informal connections between the three firms.

In 2006, two firefighters burned to death while waiting for a helicopter that was late. “Federal investigators found that poor judgment and numerous violations of safety standards”— including by firefighter Rick Hafenfeld — “led to the deaths.”

Hafenfeld appeared baffled why anyone would feel the need to hold someone accountable. “The focus was to assess blame and hold employees accountable in order to protect the perceived integrity and reputation of the organization and its upper management, as well as to appease outside stakeholders such as the media and Congress,” he lamented on FEDS’ site.

The father of one of the dead firefighters longed for justice and closure. “Who was in charge of Shane and Jeff that day? Who didn’t put the watch up? We still don’t know,” he said.

Hafenfeld crowed that “if it were not for outstanding legal representation provided by my professional liability provider, I am not so sure the results would have been as positive.”

Vegnetti, who left Roth in 2007 to found the insurance firm, told The Daily Caller News Foundation’s (TheDCNF) Investigative Group he has no financial stake in Roth, nor do the law firm’s partners in the insurance company, and neither receives referral fees.

Roth is “our lead panel counsel,” but “I’m not going to tell you” how often the company steers business to any other lawyers. Because of his connection to the firm, “I’m acutely aware of the quality of representation you’ll get at [Roth],” he said.

He would not say how much money in premiums taxpayers paid to FEDS each year.

He also said though the insurance covers misconduct and wrongdoing, it has to be sufficiently connected with “rendering a professional service.” Being terminated for poor performance is also not covered.

“Someone engaged in time and attendance abuse” would not be covered, nor would a doctor hitting another doctor, since it wasn’t sufficiently related to job duties.

Of course, the insurance company doesn’t advertise to prospective clients the ways it can keep the premiums but avoid paying out. “We turn [claims] away all the time,” he said.

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