First, an aside. I think this is my 400th post on this blog. Whew!

I had a client (no longer living, but will remain anonymous), who I represented for a number of years. His business was affordable housing, he lived in the Washington area, and he wasn’t a big presence in the affordable housing world, but he operated, I think it was, 7 apartment properties, all in Virginia and all extremely successful and well managed and well maintained. The perfect landlord, in effect.

Except for one thing. Most people he knew seemed to hate him.

He was a bright guy, could be sort of charming at times, was very self-directed and, in his way, a perfectionist. Those were his good qualities. He was also a bit paranoid, perhaps, and for good reason. On the negative side, he couldn’t stand it when anyone told him to do anything (I can imagine what his parents must have gone through), and he snapped back viciously at anyone who dared contradict him. He couldn’t stand stupidity (his version of stupidity), he couldn’t put up with fools (his definition of fools) and boy, could he hold onto a grudge

For some reason he and I always got along.

All of his properties were regulated by the Department of Housing and Urban Development, and HUD (both in their Richmond field office and in their DC home office) hated him. And they were sure he was a crook. And they were out to get him.

Each of his properties was owned by a limited partnership. He was the general partner with full control. The limited partners were investors, who provided funds for the development of the properties and, in return, received certain federal and state tax deductions, and the possibility of limited cash distributions. But my client didn’t believe in giving his partners any distributions of cash, and he hoarded all of this money in what he called “rainy day accounts”. He was waiting for the day when his properties needed something as they aged, and HUD would not be able or willing to provide necessary support. He had the right to do this under his partnership agreements, although it was very unusual, and HUD, looking at the annual financial statements of the property, decided that something was wrong – why should they keep subsidizing properties when the properties themselves seemed to flush. There were continual accusations and arguments.

After years of this back and forth, HUD instituted debarment proceedings against my client. Each of their arguments was bogus, but if successful, they would have eliminated his ability to participate in any additional HUD properties, and probably made it close to impossible for him to hold onto his general partnership and management positions for his 7 properties.

We fought the debarment. I think it took well over a year . We had a full blown trial before HUD’s chief administrative law judge, preceded by months and months of document discovery and depositions. (What went on during this period would fill a book that I am not going to write.)

We won the case. The written opinion of the ALJ was about 100 pages long. It exonerated my client on all counts. It even said that some of the HUD officials involved could have been guilty of prosecutorial misconduct.

OK. All was well. Big victory. Everyone on our side very happy. The legal fees were over $1 million dollars.

Where did my client get the money to pay this level of legal fees? You guessed it: his “rainy day funds”. His investor partners were outraged – “that’s our money”, they said. But, no, his partnership agreements said that partnership funds could be used to pay any expenses the general partner had incurred as a result of his operation of the partnerships’ businesses, and he didn’t hide his use of the funds, even though debarment defense was not on his mind when he set the funds up. So the investors’ claims, as well, were not successful.

My point is not whether my client should or should not have acted the way he did, even knowing that he had the right to do so. My point is that, had he not been able to pay exorbitant legal fees, his would have been debarred. We would not have been able to mount the defense required to defeat the government’s claims. We were correct in our position. He should not have been debarred. But unless you have that kind of money at your disposal, you would likely lose. (By the way, today this case would have been handled in a more summary fashion; the debarment rules have changed.) And, as we know, most people do not have this kind of “free money” available to them.

Of course, the other result of this representation is that my children were able to attend college. I like to think that we paid for their college education…..but in fact, maybe it was my client. Or maybe his investor partners.

Reminds me of something from Poor Richard’s Almanack – and I am really paraphrasing this one: there were two men walking along the shore when they spotted an oyster, picked it up, and discovered a large pearl. But whose was it? They went to a lawyer, who solved the dispute with words something like this — a shell for thou, a shell for thee; the pearl becomes the lawyer’s fee.