The Board of Examiners on Thursday raised to $450,000 the total amount the state will pay the McDonald, Carano, Wilson law firm to fight the Tax Commission's battle over what the attorney general says was an open-meeting law violation.
The decision came after an acrimonious series of exchanges between Attorney General George Chanos and Tax Commission Chair Tom Sheets.
Sheets reacted sharply to accusations Chanos made a week ago that the commission had ignored direct advice by a deputy attorney general that they had to deliberate the case against Southern California Edison in public. He said the commission relied on advice from a series of deputy attorneys general for more than 20 years in handling confidential evidence in tax appeals and he resented statements by Chanos both in court and at last week's board meeting that those deputies were "non-senior, indifferent and somehow incompetent."
"We have an expectation we were going to get competent representation," he said.
Sheets said Chanos' argument justifying the lawsuit because the commission relied on deputies who were inept or wrong is "absurd."
That prompted Chanos to demand he be allowed to respond, to which Sheets replied: "You had 80 pages of response at two meetings. It's time you let somebody else talk. You have created the legal case and you have created the conflict."
Gov. Kenny Guinn stepped in to put the debate back on point: whether the law firm should be paid for the legal bills it has already run up - which total just about $450,000 when the original contract was for a maximum $150,000.
That happened because the attorney general's office, which normally manages outside legal contracts, was in a conflict this time because it was the tax commission's opponent in court. Guinn said Nevada doesn't have an adequate system to deal with that situation and pointed out that, no matter whether Carson District Judge Mike Griffin rules the commission was right or that it violated the open meeting law, the state needs regulations and possibly legal changes to fix that problem.
Chanos agreed and agreed with Guinn that it's a bad situation for his office to be choosing and setting the budget for a private law firm hired to oppose his office in a legal case.
But for this case, he said, a court would probably rule the state should pay the firm for services which were authorized by and already provided to the commission.
As for any appeal, Chanos said he would sit down with the managing partner of the firm, John Frankovich, to work out a new contract in the event Griffin's decision is appealed by any of the parties.
When Guinn suggested the AG and commission could resolve the issue without an appeal, Frankovich pointed out that might not be in their hands since Southern California Edison might object to the ruling and appeal, forcing participation by the tax commission and attorney general.
But he made Chanos and the state an offer: "We will negotiate a flat fee and donate it to the Nevada Patriot Fund. We're not looking to make money off the state of Nevada."
He also agreed to assist Chanos and the governor's office in drafting legal changes to prevent this conflict from happening again.
• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.