The Work

September 14, 2011 6:02 PM

Minnesota Bounces Dorsey & Whitney as Bond Counsel

Posted by Brian Baxter

While scores of lawyers at several firms are busy helping states roll out billion-dollar bond offerings, Dorsey & Whitney is on the outside looking in after Minnesota's attorney general terminated the firm's contract to serve as the state's chief bond counsel.

The Minneapolis Star-Tribune reported Wednesday that Lori Swanson—a Democrat who became Minnesota's first woman attorney general when she was elected in 2006 and then won reelection last year—opted to end Dorsey's contract to help the state out of its debt doldrums because of alleged conflicts of interest that arose during Minnesota's budget battle this summer.

Dorsey, which has earned $2.5 million for handling state bond matters over the past four years, has a long history of doing such work. One of the firm's founders, former public finance practice head Arthur Whitney, once boasted of writing the language that helped Minnesota start selling bonds in 1962, according to the Star-Tribune.

(Dorsey currently employs former U.S. Vice President Walter "Fritz" Mondale as senior counsel. Mondale also spent four years as the state's attorney general in the early sixties and later served two terms representing Minnesota in the U.S. Senate. The American Lawyer recently named Mondale, the 1984 Democratic presidential nominee who lost in a landslide to Ronald Reagan, one of its 2011 Lifetime Achievers.)

Swanson's decision to dump Dorsey came despite the fact that the firm was among the major contributors to her two election campaigns, according to data compiled by The Center for Responsive Politics. Swanson's top donors over the past five years were lawyers and law firms, who kicked in $85,373. Dorsey contributed $5,325 of that sum, second only among law firms to the $8,700 raised by Minneapolis-based Robins, Kaplan, Miller & Ciresi.

The Star-Tribune reports that Swanson's office released a detailed explanation of its decision to terminate Dorsey's bond counsel contracts with the state's main financial office at Minnesota Management and Budget and with the Minnesota Housing Finance Agency. Swanson spokesman Ben Wogsland did not immediately respond to a request for comment from The Am Law Daily on the matter.

One reason Swanson moved to cut Dorsey loose, according to the Star-Tribune, was the firm's refusal to shave more than $11 per hour off the $423 to $465 hourly rates its top lawyers were charging the state's Housing Finance Agency.

Another issue, according to a statement by Wogsland to the Star-Tribune, was Dorsey's "serious and irreconcilable conflict of interest" stemming from its representation of the tobacco industry in a $6.5 billion settlement with Minnesota tied to a series of landmark lawsuits filed against major tobacco companies in 1998.

Future payments from that settlement are earmarked to back "tobacco bonds" issued by Minnesota to help the state manage its current deficit, according to the Star-Tribune. When the tobacco bond proposal first emerged in a session of the Minnesota legislature in July, the Star-Tribune reports that Swanson made the decision to axe Dorsey and hire Omaha-based Kutak Rock as the state's new bond counsel.

Dorsey told The Am Law Daily in a statement that the firm has "had a long history of great work" as bond counsel to Minnesota and believes that state agencies have been happy with the services provided by the firm. (Click here for the firm's full statement.)

"Resolution of the 2011 Minnesota budget crisis included issuing bonds related to future litigation settlement payments by tobacco companies," the firm said. "Over ten years ago, Dorsey and other Minneapolis firms represented the tobacco companies in that litigation. The attorney general (who makes the law firm hiring decisions for those agencies under Minnesota law) concluded that a firm based outside Minnesota would not be conflicted regarding the tobacco bonds."

The firm added that "conflicts have not precluded Dorsey from providing bond counsel services to state agencies for the last 50 years. Dorsey respects the attorney general's view that the state would be best served by other counsel regarding the tobacco bonds, but there are no developments—including the tobacco bonds—that conflict with Dorsey's ability to continue to render bond services to the agencies."

While Dorsey may no longer be providing bond counsel to Minnesota, the firm continues to pick up work representing other state governments. The Des Moines Register reported this week that Dorsey lawyers had been hired at a rate of $440 per hour to advise on an $875 million public infrastructure program. (Former Iowa governor Tom Vilsack was a partner at Dorsey before leaving the firm in December 2008 to become the Obama administration's agriculture secretary.)

Elsewhere in the Midwest, Mayer Brown beat out 17 other law firms seeking to become bond and public disclosure counsel to Illinois for the next two years. The state's procurement office made the decision to hire the Chicago-based firm this week, according to reports by The Bond Buyer and Crain's Chicago Business.

Mayer Brown stands to reap about $1 million in fees for its advice in connection with $6 billion to $10 billion in capital development bonds for infrastructure work during the next two years. The firm, which is known for its municipal finance work and enjoys close ties to many Illinois political figures, beat out such competitors as Drinker Biddle & Reath, Foley & Lardner, Katten Muchin Rosenman, Kutak Rock, Nixon Peabody, and Perkins Coie for the work. (The Bond Buyer has more on Mayer Brown's bond expertise and the raft of firms that sought to advise Illinois.)

Orrick, Herrington & Sutcliffe is serving as bond counsel to California on its expected sales of $8 billion of short- and long-term debt, according to The Bond Buyer. The sale comes as yields on U.S. municipal bond markets have fallen to their lowest on record, the Financial Times reports.

Firms interested in seeking further opportunities to act as bond counsel might want to consider Europe. European Commission president Jose Manuel Barroso proposed this week that eurobonds be issued in order to stem the escalating debt crisis plaguing several European Union member states.

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