Million-dollar Lawsuit Rips Winstead Advice in NCPA Sex Scandal

Contretemps cost it at least $2 million in fundraising, free-market think tank asserts.

In recent months, the National Center for Policy Analysis has worked hard to put a sex scandal involving its founder behind it. The free-market think tank fired the founder, John C. Goodman, hired a new leader (tea party star Allen B. West), and scheduled several high-profile speakers for its events. Now, however, the Dallas-based NCPA has filed a lawsuit against a prominent law firm and the firm’s chairman emeritus that revisits the sex scandal in detail. Among other things, the suit asserts that l’affaire Goodman caused the nonprofit organization to lose at least $2 million in fundraising—and nearly put it out of business.

In its suit filed Nov. 17 in state District Court in Dallas, the NCPA charges Dallas-based Winstead PC and the firm’s W. Mike Baggett with breach of fiduciary duty, legal malpractice, and negligent misrepresentation in connection with the events that led to Goodman’s firing in June. Baggett was a member of the NCPA board of directors during the relevant timeframe preceding Goodman’s termination and, according to the suit, provided Goodman and the think tank with legal advice as a Winstead attorney. The suit, which was filed by Stephen A. Kennedy of Kennedy Law PC, seeks at least $1 million in relief, including actual and punitive damages, penalties, court costs, expenses, and attorney fees.

Asked to comment on the filing, Winstead Chairman and CEO Kevin A. Sullivan said that while the firm does not give statements on pending litigation, “All of us at Winstead have always taken great pride in Mike Baggett’s many accomplishments whether in the courtroom, on the civic front, or with the bar association. We look forward to vigorously defending these allegations and feel certain that a thorough review of the circumstances will show that Mike acted appropriately and ethically as he always does.”

As previously reported in D CEO magazine, Goodman’s firing stemmed from an unusual arrangement that was made with his assistant, Sherri Collins, after Collins accused Goodman of assaulting her in a Southern California hotel room in 2012. To avoid threatened litigation for violating “both state and federal discrimination laws,” Goodman promoted Collins to be the NCPA’s director of human relations, at an annual salary of $85,000, plus a guaranteed bonus and benefits, for at least three years. The arrangement finally came to the attention of the NCPA board earlier this year, and Collins as well as Goodman left the organization.

In its suit, the NCPA says that in addition to serving as president of the think tank, Goodman ran a speaking business on the side, paying Collins 10 percent of the fees he collected on the speaking circuit. The two “had a sexual relationship during 2012,” the suit goes on, and, in the fall of that year, traveled for a speaking engagement to Santa Monica, California, where Goodman “allegedly assaulted Collins because she would not sleep with him during the trip.” The suit goes on: “Collins retained counsel, who alleged that Goodman had sexually harassed Collins during the course of business at the NCPA, which eventually led to her assault in California. Counsel for Collins claimed that Goodman was liable in his personal capacity and that the NCPA was liable as the employer. To defend both himself and the NCPA, Goodman went to … Baggett, [and] requested legal advice.”

Baggett told Goodman that Winstead could represent both Goodman and the NCPA, the suit claims. The lawyer also told Goodman and Richard Walker, the NCPA’s chief operating officer, that it wasn’t necessary to tell the board about the claims alleged, including the assault charges, because it involved a personnel matter, according to the suit. Not only did the NCPA board not know about the affair and the assault, the suit goes on, it also didn’t know that Winstead was providing legal services to Goodman and the NCPA with respect to the sexual harassment claim. Without the board’s knowledge, the suit says, Winstead also had a hand in negotiating a settlement calling for Collins’ promotion in return for a personal release of all claims against Goodman.

In late November 2012, the suit alleges, when Winstead finally recognized that it had a conflict of interest in representing both Goodman and the NCPA, its general counsel, Don Campbell, decided that the firm could not represent both of them. His decision was conveyed to Goodman, the suit says, and Baggett then referred a proposed employment agreement and Goodman’s personal “release” document to a former Winstead partner to “close the deal.”

Says the suit: “The [documents] that Winstead negotiated in 2012 were ill-advised and designed to satisfy the needs and wants of Goodman to the detriment of the NCPA. … Had Winstead disclosed all the facts in 2012, the board never would have approved the [documents], which served only the interests of Goodman.”

For nearly 18 months after that, the suits says, Baggett “attended numerous NCPA board meetings as if nothing had ever occurred,” and Winstead continued to provide legal advice to the think tank.

Flash-forward, then, to this past February, when Collins again complained that Goodman had sexually harassed her, the suit says, and Goodman again contacted Baggett to secure legal representation. Baggett agreed, telling Walker again in a voicemail message that Winstead could represent both Goodman and the NCPA without a conflict, and that it wasn’t necessary to inform the board about it, the suit says. Over the next two months, it continues, Winstead charged the NCPA nearly $31,000 for working on Collins’ 2014 sexual harassment claim.

In April, the board finally learned about the 2012 incident in California; the 2012 release and employment arrangements; and the new, 2014 harrassment claims, the suit continues. It adds: “News that Baggett and Winstead knew of, and concealed, the incidents that had occurred in 2012 shook the organization to its foundation, nearly resulting in the organization’s demise.” After terminating Winstead as counsel, the think tank engaged an outside attorney to investigate the sexual harassment and fired Goodman on June 8. “Because of the Baggett/Winstead cover-up,” the suit alleges, the NCPA “was forced to settle with both Goodman and Collins on unfavorable terms.”

As a result of all these events, the suit goes on, professional fundraisers for the think tank terminated their relationships, the NCPA lost at least $2 million in fundraising, and the organization suffered injury to its reputation and goodwill and continues to be the subject of “actual and threatened” litigation.

“Putting aside the staggering monetary loses and bad PR, the deepest cut of all came from Baggett,” the suit concludes. “He had been a supporter of [the NCPA] for many years. Yet with no remorse, Baggett actively covered up the ugly events of 2012, looked the other way, and when his conduct was exposed, he repeated the mantra of too many lawyers throughout the land: deny, deny, deny. Baggett pushed the moral compass of the organization to its polar extreme.”

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