Lee Zurik Investigation: Who's still making money from 'Dirty Deeds'?

Updated: May. 8, 2012 at 12:45 AM CDT
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A simple map helps tell the story of the money trail from the Win or Lose Corporation.

It helps show your money, from your property flowing every year out of state.

"In 2012, they are still getting their royalties," says independent researcher Keith Cressionnie.

Descendants of the Win or Lose Corporation continue to get money -- millions every year -- and many of them aren't your neighbors. The Win or Lose heirs have scattered to at least 21 states.

"It's become almost a birthright for the continuation of funds, going from the Win or Lose Corporation, through the state, to a select number of people," says former journalist Bob Barton.

A public document from 1994 is the last that lists all the heirs of Win or Lose. It shows that the grandson of the late Huey Long, Palmer Long, collects a royalty check, and more recent state records show he likely still does, as does his cousin, Rory Scott McFarland, who lives in Boulder, Colorado.

Also on the 1994 list: the late U.S. Senator Russell Long. In fact, a 1982 newspaper article said Senator Long supplemented his $60,000 salary with $625,000 that year from oil and gas royalties, care of the Win or Lose deal from the 1930's. Long has since passed, and passed on his interest.

The 1994 records show Earle Christenberry, Jr., the son of Huey Long's late secretary, collects a royalty check. Christenberry lives in New Orleans and, according to state records, he still has a royalty interest.

The 1994 document shows more than 150 owners of some type of royalty interest. Some have a little stake in the oil leases, while others have a much greater stake.

"Most of them are decent people," says Barton. "But they've inherited millions of dollars through an act that took place in the 30's."

The state says more than 200 people now hold an interest in these lucrative state leases -- leases awarded by governors in the 1930's, and then assigned to companies that those same governors had a stake in.

"How do we fix that?" wonders Tom Arnold, a member of the State Mineral Board, which oversees today's state leasing process. "If it was wrong back then, and obviously it was, today that would never happen, because in order to actually be on the Mineral Board and award leases, you can have nothing to do with any mineral or oil companies… Where do we go?"

That's what we've been asking for weeks, getting in touch with attorneys, trying to find out if the state has any legal method to reclaim the property, perhaps canceling the 1936 contract.

"It was their deal to make," says attorney Mark Davis, "their deal to undo."

Four attorneys we spoke with pointed to Louisiana civil code and a legal term called the "absolute nullity" of contracts as the most likely possibility. The law says a contract is absolutely null when it violates a rule of public order, as when the object of a contract is illicit or immoral.

"If you can prove somehow that the public fisc – that is, the money used in the state for the people of the state – was misappropriated, I think that could be a strong case," lawyer Ronald Scalise told us.

When a contract is ruled absolutely null, that means it never existed, and the law states that "the parties must be restored to the situation that existed before the contract was made." So, if the contract is ruled absolutely null, the state could claim damages from the past.

Scalise tells us that you do not have to prove fraud in such a case. "You have to prove that the contract violated, again, a rule of public order," Scalise said.

One other key point about the absolute nullity of a contract is that it has no prescription, or statute of limitations. So if a contract is ruled absolutely null, then the year in which the contract was signed is irrelevant.

Attorneys we spoke with say the state could take a few other paths to try and null the contract.

First, there's Louisiana's criminal law as of 1936, and specifically the section on bribery and corruption in office. At that time, the state had a statute called "Officer Influencing Awarding of Contract."

This law says "any public officer of this state who shall exercise his power or use his position to secure the awarding of any contract for the construction of work, or to secure the custody of any public funds to any partnership of which he is a member, or to any corporation of which he is an officer, shall be deemed guilty."

Remember -- documents we have show James Noe as the president of the Win or Lose Corporation. And while he continued to be a member of Win or Lose, Noe became governor; days later, he awarded State Lease 340 to W.T. Burton, and Burton then assigned part of the royalties from that lease -- royalties coming from public land -- back to Win or Lose and Noe.

"He certainly gave some of these rights away that he later benefited from," says FOX 8 legal analyst Joe Raspanti. He says Noe could have broken that 1936 state law.

It should be noted that this particular statute uses the phrase "public funds". One question that would have to be asked is whether oil pulled from state land and sold can be considered a public fund.

Other documents show Noe may not have awarded the lease to the highest bidder -- attorneys say that's another possible option for the state to null the contract.

Burton paid a $75,000 up-front bonus, and $500,000 once he produced the first oil.

A competing bid by Gulf Oil had a lower bonus, $61,000, but a higher payment upon oil production, $1.2 million.

It had state employee Edward Gay question in a 1941 memo "whether or not the lease was granted to the person submitting the most advantageous bid as required by law."

So the state made $575,000 from the Burton bid, but it could have made $1.3 million from Gulf. That's a difference of $736,000. To put that in a number you might understand better, that would be $12.1 million in today's dollars.

Now, back in the 1930's, drilling was much more uncertain. Some could make the argument that the state took the surer thing by selecting the higher bonus. But that leads one to ask why that extra payment was included once drilling started, if all the state cared about was the higher up-front bonus.

And some attorneys point us to one case that could help the state recoup money, and this lease. It involves former Plaquemines District Attorney Leander Perez. After his death, the Plaquemines Council sued his descendants in the 1980's for oil royalties they inherited from a Perez deal in the 1930's. Perez represented the parish levee boards, which handed out the lease, and also made money from the company which got the lease, Delta Development.

The courts ruled that Perez breached his fiduciary duty. Perez's family ended up losing that royalty interest.

If James Noe breached his fiduciary duty, some attorneys say that could make the contract absolutely null.

"There are a number of ways that you could possibly say that this was a nullity, or that there were enough problems that legally you would have enough basis to open up the lease," says attorney Mark Davis. "But it would be up to the state to raise those, and up to this point they have not done that"

Courts have certainly nullified contracts before, based on breaches of fiduciary duty. But in the Perez case, attorneys did not seek absolute nullity – they won, nonetheless.

These contracts have earned descendants of Win or Lose hundreds of millions. In 1994, of the 150 or so descendants, 88 of them -- more than half -- lived out of state.

David Stare in Sonoma, California is among the descendents. He owns Dry Creek Vineyard, which he founded in 1972, but has interest in state leases passed down from former Governor O.K. Allen.