Following money trail in transgender bill, costing taxpayers thousands of dollars
SALT LAKE CITY (KUTV) — Our 2News Investigates team has been following the money trail in the recent transgender bill, which is costing taxpayers hundreds of thousands of dollars.
HOW A RETIREMENT PARTY LED TO A CONTROVERSIAL CONTRACT
A 2News Investigation shows how a retirement party led to a controversial contract for your tax dollars that was awarded with no other bids to defend the state against the lawsuit over Utah’s transgender athlete law. The Attorney General hired outside legal counsel to defend the state. The contract was awarded to a former Utah Supreme Court Justice and a now former Assistant Solicitor General in the AG’s office. Our investigation found that contract would become effective only hours after Utah Supreme Court Associate Justice Thomas Lee was off the bench and within days after Assistant Solicitor General John Nielsen resigned from the AG’s office.
JUSTICE LEE’S RETIREMENT PARTY ON JUNE 30, 2022
On June 30th to commemorate Justice Thomas Lee, the brother of United States Senator Mike Lee, time on the bench, the Utah Supreme Court held a reception in his honor on the fifth-floor rotunda at the Matheson Courthouse. The retirement reception began at 4:30 p.m. and ended after 6 p.m.
SOLICITOR GENERAL MELISSA HOLYOAK APPROACHES LEE ABOUT A “POTENTIAL JOB” DURING PARTY
It was at this party that the AG’S office confirmed Utah’s Solicitor General Melissa Holyoak , appointed by Attorney General Sean Reyes who serves as a chief deputy of the office and the chief appellate advocate for the State of Utah, approached Justice Lee about a potential job. Within hours of his retirement party, the Attorney General hired his private law firm Lee Nielsen to defend the state against the lawsuit.
ASSISTANT SOLICTOR GENERAL JOHN NIELSEN RESIGNED FROM AG’S OFFICE JUNE 25, 2022
Lee’s law partner, John Nielsen began working for the state on September 20, 2005, and became the assistant solicitor general in the Attorney General’s office on June 13, 2013. According to Marilee Richins, the Deputy Executive Director for the Utah Department of Government Operations, Nielsen went on leave without pay on June 20th of this year. She confirmed the state processed his resignation from the AG’s office five days later, on June 25th.
ATTORNEY GENERAL’S SELECTION OF OUTSIDE COUNSEL
R105-1 lays out the requirements for procurements that are managed by the Attorney General including the hiring of outside counsel, expert witnesses, and litigation support services. It says, “The Attorney General may select Outside Counsel, expert witnesses, professional litigation support services, litigation related consultants, as well as management software and services pursuant to any authorized process under the Utah Procurement Code.”
However, the AG can hire outside counsel without going through the normal request for proposal process using the R105-1-8 Emergency Procurements clause. The AG did not talk to any other law firms for the case.
THE CONTRACT WAS EFFECTIVE JULY 1, 2022
The contract was effective July 1, 2022 and listed the address of the firm at 299 South Main Street Suite 1300 in Salt Lake City. However, the doors were not yet open. We asked Lee and Nielsen about that, and Nielsen replied in an email.
“On your question about our firm: the firm opened for business on July 1 in the sense that Tom and I began our legal practice together on that date. We didn't get the physical office downtown until a few weeks later. Like many people since the start of the pandemic, we worked remotely.”
PREVIOUS REPORTS
- Tracking how state spends your money to protect law preventing trans athletes in sports
- Senator who changed transgender bill reacts to governor, says measure was heavily debated
- Judge declines to dismiss lawsuit over Utah transgender sports ban
Online records show Lee and Nielsen filed a Certificate of Organization, for Lee Nielsen PLLC on May 18, 2022.
The contract, while effective on July 1st, was not signed until 14 days later on August 15th by Nielsen.
LEE NIELSEN BEGAN BILLING THAT SAME DAY
Billing records obtained by 2News Investigates show the law firm began billing that same day. There are two-line items for attorney hourly rates totaling $1,600.
The plaintiffs are being represented by Wilson Sonsini Goodrich & Rosati, the ACLU of Utah and the National Center for Lesbian Rights. 2News Investigates reached out to both and in an email ACLU of Utah Senior Staff Attorney Valentina De Fex wrote, "I can confirm that all counsel for plaintiffs in this case, including the ACLU of Utah, are pro bono." Attorneys for the NCLR, according to Aaron Welcher, Communications Director for the ACLU of Utah are pro bono as well.
SENATOR DEREK KITCHEN: “I AM DEEPLY TROUBLED BY WHAT I AM SEEING”
We brought this to the attention of State Senator Derek Kitchen, a member of the LGBTQ community and Democrat who represents District 2. Kitchen has been vehemently opposed to H.B. 11 from the beginning and when we interviewed him, he did not mince words. He said, “It doesn’t look good. This isn’t a good look for the state of Utah, and I’m deeply troubled by what I am seeing.”
Kitchen also said, “The fact that the State of Utah is spending even one dollar of taxpayer money defending House Bill 11 which its constitutionality is up in question right now, the fact that we are wasting taxpayer dollars targeting children in the State of Utah is wrong.”
FIRST INVOICE DATED AUGUST 15TH
Billing records show Lee Nielsen sent an invoice on August 15th subtotaling $205,637.50. Holyoak approved payment one day later, on the 16th. A more recent invoice from Lee Nielsen obtained by 2News Investigates, subtotals $122,625 dollars for August 1st through August 12th. The total of the two invoices is $328,262.50.
Those same billing records shows the attorney hourly rate ranged from $300 to as high as $750.
Lee’s hourly rate is $750.
Nielsen’s is $550.
Kitchen reviewed the legal billing records 2News Investigates obtained and said, “It’s concerning to see that you have a former Supreme Court Justice, a former Assistant Solicitor General out of the Attorney General’s Office coming together and profiting off a Bill that is frankly unconstitutional on its face.”
AG SHALL ENSURE HOURLY RATES ARE REASONABLE, DO NOT EXCEED INDUSTRY STANDARDS
The procurement rule specifically says the attorney general's office shall ensure that fees for outside counsel are reasonable and do not exceed industry standards. But it does not define or indicate what reasonable is. 2News Investigates contacted the American Bar Association to find out what the industry standard is. The ABA sought out experts from a couple of ABA entities but was unable to find an expert to discuss fees.
COMPARISON COST PROPOSAL
So, we asked for and received a proposal a different law firm submitted to the AG’s office last year as a comparison. The cost proposal from the Consovoy McCarthy law firm was for the State to enter into an agency contract for legal services to assist the Attorney General’s Office with legal challenges to President Biden’s designation of national monuments regarding the Bears Ears National Monument Proclamation and the Grand Staircase-Escalante National Monument Proclamation. The cost proposal form reveals the hourly rate for the lead attorney and the senior attorney was $675. Lee commanded $75 dollars more per hour.
“TOM AND JOHN WROTE OFF 10% OF THEIR HOURS”
However, the invoices reveal Lee Nielsen cut taxpayers a break giving a 10 percent discount.
At the very bottom of the first batch of legal billing records 2News Investigates obtained, it says, “The discount is from Tom and John each writing off 10% of their hours.”
That discount reduced the first bill $13,587.50. It went from $205,637.50 to $192,050. The second invoice we recently obtained for legal billing from August 1st through August 12th subtotals $122,625.
The invoice discount shows $65,675.00. The total owed is $56,950.
The very bottom of the records says, “Discount to stay within the contractual limit. Additional 20.5 hours for associate Jake Lee not included in bill, but is additional $6,150 off, for total discount of $71,825.”
The records further show the first invoice was due on September 14th. The most recent invoice is due for payment on October 14th. It also shows the outstanding balance owed to Lee Nielsen is $249,000.
ATTORNEY GENERAL SEAN REYES STATEMENT
Rich Piatt the communications director for the AG’s office sent 2News Investigates a statement via email that reads:
“Outside counsel is obtained according to state law based on expertise and resource needs. Former Utah Supreme Court Justice Thomas Lee is an expert in constitutional law and was hired on those merits. He was retained for the USAA case on July 1. Former Justice Lee announced his retirement from the Utah Supreme Court in January. The implication that he was hired because of family connections or for any other reason is ludicrous and uninformed. The Utah Attorney General’s Office was fortunate to retain his expertise when the Office was experiencing significant strain on resources including an unfilled position in the constitutional defense division. As Attorney General Reyes recently testified to the legislature, below-market salaries and changes in the Salt Lake legal market has gravely impacted the Utah Attorney General Office’s ability to retain and fill attorney positions.”
On September 2nd after asking Piatt questions over the phone, if there was any communication with Lee or Nielsen prior to June 30th, he added to what he previously sent.
“Any statement or implication that contacts with Mr. Lee and Mr. Nielsen occurred improperly is false.”
REPRESENTATIVE KERA BIRKELAND WEIGHS IN
When 2News Investigates asked the bill's chief sponsor State Representative Kera Birkeland for an interview we told her who was awarded the contract and when. She said she did not know.
“My only thought is again not knowing a lot about it; however, I have full trust and confidence in our Attorney General’s office. I really think they do a great job, and they go into every court battle with the intent and plan to win and so I’m sure what they have done has been well within the bounds of legal and appropriate, and they’re doing what they have to do to ensure that they win this case to continue to preserve women’s sports.”
2NEWS INVESTIGATES SOUGHT COMMENT FROM LEE NIELSEN
2News Investigates reached out to Thomas Lee and John Nielsen seeking comment. Nielsen acknowledged receipt of an email and a voicemail. He later sent an email that read, “We got both of your messages. We appreciate your reaching out beforehand and giving us the chance to comment. We have no comment at this time, and refer you to Richard Piatt the Attorney General's office.”
We circled back with them, and Nielsen wrote, “I don't have anything to add to what you've gotten from Rich on the HB11 litigation.”
