March 31, 1999
 

In the Matter of:

 Puerto Rico Legal Services, Inc.
 Ave. Ponce de Leon #859 Pda.26
 P.O. Box 9134
 Santurce, PR 00908-9134

 Traditional Values Coalition
 139 C Street, SE
 Washington, DC  20003

    and

 National Legal and Policy Center
 1309 Vincent Place, Suite 1000
 McLean, VA 22101

 Moreover, the fact that this event featured speakers from liberal advocacy groups promoting homosexual special interest legislation, denial of parental consent rights in minorsÕ abortion cases, and a host of other social/political causes means that once again legal services lawyers have demonstrated they care more about their political agenda than the poor.

 The attendance at this event of Legal Service Corporation professional staff, including the LSC President, once again demonstrates to Congress that LSC cannot be relied upon to curb the abuses for which the legal services program is so well-known.

 This complaint is submitted with no real confidence that Legal Services Corporation will ever properly consider it.1   LSCÕs record of hasty and superficial
treatment of complaints alleging wrongdoing by legal services programs was underscored by the recent decision in Regional Management Corporation, Inc. , et al. vs. Legal Services Corporation, 10 F. Supp. 2d 565, U.S. District Court for the District of South Carolina, July 1, 1998.  In that case a company, RMC, filed a well-founded complaint with Legal Services Corporation against a legal services program for illegally lobbying before the South Carolina legislature.  When LSC arbitrarily and without serious consideration of the key facts found no violation of the law, RMC appealed the decision to a federal court for judicial review.   The federal judge ruled:
 

 ÒLSCÕs cursory treatment of RMCÕs allegations did not provide a
 rational basis for its decision in regards to the South Carolina
 matter.Ó

 The site of the conference was the Caribe Hilton (Los Rosales St., San Geronimo Ground, San Juan, Puerto Rico), a luxury resort hotel located on a  secluded beach.

 Those responding to the promotional materials produced by PRLS were instructed to register for the event by making checks payable to Puerto Rico Legal Services.  Registration covered attendance at the sessions of the conference dealing with issues as well as specified meal functions.

 Hundreds of individuals attended the conference.

 The program provided to those registering listed the conference sessions, speakers, topics and related information.  Of the 24 sessions described in the program, 22 featured facilitators listed as affiliated with Puerto Rico Legal Services.  Additionally, officers of PRLS were listed as speakers and PRLS support personnel assisted with conference activities throughout the event. (see: Exhibit One: Programa)

 The sessions dealt with a variety of youth issues.  Topics included the impact of education and culture on children and youths, sexuality in adolescents, the relationship of homosexual youths to social institutions, and the problems associated with children in families headed by homosexuals. A plenary session even featured a speaker from the United Nations critical of the United States for failing to sign the Convention on the Rights of the Child.

 A number of the speakers were affiliated with advocacy groups promoting homosexual Òmarriages,Ó homosexual adoption, rights of the Òtransgendered,Ó denial of parental rights in abortion cases involving minors and an assortment of other liberal social causes.

 Among the prominent homosexual activists featured as speakers at this taxpayer-funded event were:

 Kate Kendell:   National Center for Lesbian Rights (San Francisco, CA)

- a legal center which describes itself as providing Òrepresentation and resources to gay men, and bisexual and transgendered individuals on key issues that also significantly advance lesbian rights.Ó

-NCLR is currently co-counseling with the American Civil Liberties Union to force the Salt Lake City school board to recognize a gay high school student group

-NCLR is also supporting, along with the National Organization for Women, a case before the Vermont Supreme Court in support of same-sex marriages
 

- a homosexual activist group which describes its mission as creating Òsocieties free from heterosexism.Ó

-The IGLHRC website quotes Ms. Negroni as follows, ÒI chose the job at IGLHRC because of the opportunity to work closely with gay, lesbian, bisexual, and transgender activists in Latin America and other parts of the world.Ó

 Registrants received conference tote bags, color-illustrated conference materials and printed materials from the advocacy groups invited to attend.

 The Caribe HiltonÕs 17 acre site on the beach provided a luxury resort setting for activists interested in networking, coalition-building, advocacy, and even passing resolutions.  All sorts of activities were taking place except one: no poor people received any help with their legal problems.
 

 ÒThereÕs no shortage of cases. ItÕs like a tidal wave,Ó
said McKay, a Seattle lawyer named last year to lead LSC.
Under current funding, weÕre not meeting all the needs.
People are being turned away.Ó
     Washington Post, July 28, 1998

 If PRLS was simply a left-wing advocacy group, the decision to host a large event event at a resort would just be a question of whether the cost, staff time and other resources could be justified.  However, PRLS is the recipient of more than $16 million in Legal Services Corporation funds annually.  These funds are appropriated by Congress to provide civil legal assistance to the poor and, like most federal funds, there are regulations in effect to make sure the money is properly spent.

 The LSC regulation on priorities in the use of resources (45 CFR Part 1620) prohibits LSC recipients such as PRLS from expending resources on activities that are outside their specific written priorities.

 On its face, the youth conference represents major and multiple apparent violations of 45 CFR Part 1620.

 The Legal Services Corporation Act clearly spells out the mission of LSC to fund groups which assist the poor with their civil legal needs.  Section 1006 of the Act authorized the Corporation to Òundertake directly, or by grant or contract, the following activities relating to the delivery of legal assistance--research, except that broad general legal or policy research unrelated to the representation of eligible clients may not be undertaken by grant or contract.Ó

 If there was any doubt that Congress wanted the legal services program to concentrate on helping the poor with their day-to-day legal needs, it was removed by a steady stream of appropriations riders restricting legal services from involvement in an increasing number of political activities.  The greatest number of reforms and restrictions came with the passage of the omnibus spending measure containing LSCÕs Fiscal Year 1996 appropriations (Pub. L. 104-134, 110 Stat. 1321).

 As part of the reforms passed in Pub. L. 104-134, there was increased emphasis on restricting programs to specific priority areas of service.  The governing boards of programs were directed to set specific priorities in writing of the types of matters and cases to which they will devote time and resources, and the legal services staffs were required to sign written agreements  not to undertake cases or matters other than in accordance with these specific priorities except in emergency situations [Section 504(a)(9)].  LSC was directed to promulgate a suggested list of priorities that local boards of directors could use in setting their local priorities [Section 504 (c)].

 The resulting suggested list of priorities was passed by the LSC board on May 20, 1996 (61 Federal Register 26934).  In promulgating the list, LSC cited the recent funding cuts by Congress and stated:
 

 Ò ...the Corporation expects each program to respond to
 the most compelling and critical needs of its eligible
 citizens and to leverage its resources in order to
 compensate to the greatest degree possible for the
 inevitable reduction in client service resulting from
 this cut in funding.Ó

 Ironically, the suggested list of priorities suggested programs Òplace a high priority on on those cases in which legal assistance supports the integrity, safety, and well-being of the family.Ó  A far cry from the favorite agenda items of the homosexual/bisexual/transgender activists gathered in Puerto Rico.  The contrast once again illustrates the sharp difference between LSC as it presents itself to Congress and LSC as it truly is.

 The clear language of 45 CFR 1620.3 (Establishing priorities) sets forth the procedure by which a local program should set priorities as well as the factors to be considered in setting priorities.

 The procedures required by Section 1620.3(b) include:

• an effective appraisal of the needs of eligible clients in the geographic area served by the program

• input from the eligible clients themselves as well as the programÕs staff, governing body members, local bar and other interested persons

 The factors required to be considered by Puerto Rico Legal Services in determining its written priorities are also found in 45 CFR Part 1620.3.
The relevant language is:

 (c) The following factors shall be among those considered by the recipient in establishing priorities:

 (1) The suggested priorities promulgated by the Legal Services Corporation;

 (2) The appraisal described in paragraph (b) of this section;

 (3) The population of eligible clients in the geographic areas served by the recipient, including all significant segments of that population with special legal problems or special difficulties of access to legal services;

 (4) The resources of the recipient;

 (5) The availability of another source of free or low-cost legal assistance in a particular category of cases or matters;

 (6) The availability of other sources of training, support, and outreach services;

 (7) The relative importance of particular legal problems to the individual clients of the recipient;

 (8) The susceptibility of particular problems to solution through legal processes;

 (9) Whether legal efforts by the recipient will complement other efforts to solve particular problems in the area served;

 (10) Whether legal efforts will result in efficient and economic delivery of legal services; and

 (11) Whether there is a need to establish different priorities in different parts of the recipientÕs service area.

 The hosting of a youth conference is so far removed from the factors just enumerated, many of which - appropriately enough - deal with the delivery of legal services to the poor, that it is inconceivable how hosting such an event could have made it as a written priority of Puerto Rico Legal Services.

 In the event that the hosting of a major youth conference was not a written priority of PRLS, then the regulation clearly requires that the only way the conference could have been undertaken was if it was an Òemergency.Ó  The preamble to 45 CFR Part 1620 discusses the importance to a recipientÕs board setting up written policies regarding emergencies:

 Since the recipient is prohibited from expending its
 resources and time on any activities outside its
 priorities other than emergencies, each recipient
 must clearly define those emergencies to give its
 staff clear guidance regarding their identification and
 acceptance.

 Section 1620.4 Establishing policies and procedures for emergencies.

 The governing body of a recipient shall adopt written policies and procedures to guide the recipient in undertaking emergency cases or matters not within the recipientÕs established priorities.  Emergencies include those non-priority cases or matters that require immediate legal action to (1) secure or preserve the necessities of life, (2) protect against or eliminate a significant risk to the health or safety of the client or immediate family members, or (3) address other significant legal issues that arise because of new or unforeseen circumstances.

 The common element of each of the three types of emergencies is Òthose non-priority cases or matters that require immediate legal actionÓ (emphasis added).  By definition, a conference would be considered a ÒmatterÓ as opposed to a Òcase.Ó (see: 45 CFR 1630.2 Definitions).  Since a youth conference not included as a written priority could only be undertaken as an emergency and the definition of emergency stated above precludes matters not requiring immediate legal action, it is difficult to see any formulation which would allow such an event to have been subsidized and run by PRLS.

Burden of Proof

 The burden of proof is on Puerto Rico Legal Services to show that its youth conference at the Caribe Hilton was reasonable and necessary for the performance of its grant from LSC to provide legal assistance to the poor of Puerto Rico. (45 CFR Part 1630.4 - Burden of proof)

Advance Understanding

 If a legal services program is planning an activity in which there is uncertainty as to whether the costs are going to be reasonable and allocable, as required by this regulation, the program may seek Òa written understanding from the Corporation in advance of incurring special or unusual costs.Ó (45 CFR Part 1630.5(a) - Advance understandings)

Reasonable and Necessary?

 Under 45 CFR Part 1630.3(a)(2) - Standards Governing Allowability of Costs Under Corporation Grants or Contracts, expenditures by a recipient are allowable under the recipientÕs grant or contract only if the recipient can demonstrate that the cost was:

 (2) Reasonable and necessary for the performance
 of the grant or contract as approved by the
 Corporation;

 (b) Reasonable costs   A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the same or similar circumstances prevailing at the time the decision was made to incur the cost.  If a questionable cost is disallowed solely on the ground that it is excessive, only the amount that is larger than reasonable shall be disallowed.  In determining the reasonableness of a given cost, consideration shall be given:

 (1) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the recipient or the performance of the grant or contract;

 (2) The restraints or requirements imposed by such factors as generally accepted sound business practices, arms-length bargaining, Federal and State laws and regulations, and the terms and conditions of the grant or contract;

 (3) Whether the recipient acted with prudence under the circumstances, considering its responsibilities to its clients and employees, the public at large, the Corporation, and the Federal government; and

 (4) Significant deviations from the established practices of the recipient which may unjustifiably increase the grant or contract costs.

 Puerto Rico Legal Services has the burden of proof to demonstrate its resort conference on youth issues met all the standards of reasonableness listed above.  On its face, itÕs difficult for the program to make a credible argument it met any of the standards:

• Both the nature and amount of the cost exceed what a prudent person would undertake in that a conference  which was totally irrelevant to the provision of legal services to the indigent was sponsored at an expensive resort hotel during an expensive time of the year (December) for Caribbean travel and hotel rates.  45 CFR 1630.3(b)

• Hosting an issues conference at a beach resort and using legal services lawyers as facilitators for three days of panel     discussions (instead of, say, helping poor people with legal problems) does not represent a cost Òof a type generally     recognized as ordinary and necessary for the operation of the recipient or the performance of the grant or contract.Ó 45 CFR 1630.3(b)(1)

• Nothing in grant or contractual relationship between LSC and PRLS authorizes such a cost.  The LSC regulations,     especially 45 CFR 1620, encourage, if not require, that scarce resources be used for the priorities associated with     serving the poor with their civil legal needs. 45 CFR 1630.3(b)(2)

• No serious argument can be made that PRLS acted with prudence with respect to its responsibilities to its clients. Not only was the large conference diverting funds and other resources from providing assistance to clients, but the      pervasive use of PRLS attorneys and staff throughout the event meant that clients were shortchanged in receiving the     time and attention from the legal services attorneys, paralegals and support staff.  To argue otherwise is essentially to advance the absurdity that clients do not need the time and attention of the PRLS staff for their legal matters. 45 CFR 1630.3(b)(3)

• PRLS is hard-pressed to argue that the time and resource intensive conference was not a significant deviation Òfrom the established practices of the recipient which may unjustifiably increase the grant or contract.Ó  Every cost associated with the conference (transportation, hotel, promotion, staff time, etc.) represents resources which were diverted from the purpose for which Congress intended the LSC funds to be used.  The costs unjustifiably increased the costs of the grant or contract with absolutely nothing to show for it with respect to increased assistance to the poor. 45 CFR 1630.3(b)(4)

 Under 45 CFR 1630.3(c):

 A cost is allocable to a particular cost objective, such as a grant, project, service, or other activity, in accordance with the relative benefits received.  Costs may be allocated to Corporation funds either as direct or indirect costs according to the provisions of this section.  A cost is allocable to a Corporation grant or contract if it is treated consistently with other costs incurred for the same purpose in like circumstances and if it:

 (1) Is incurred specifically for the grant or contract;

 (2) Benefits both the grant or contract and other work and can be distributed in reasonable proportion to the benefits received; or

 (3) Is necessary to the overall operation of the recipient, although a direct relationship to any particular cost objective cannot be shown.
 

 The standard for allocability of a cost also presents difficulties for PRLS if it is trying to allocate the costs of the conference to its funding received from LSC.  The benefit received from the hosting of the conference is certainly not anything detailed in its LSC grant.  No clients were served at the conference, it was not a legal training event, and many of the participants were not legal services lawyers or lawyers of any sort.

 Promoting the political agenda of assorted advocacy groups is not an allocable cost with respect to LSC funds.  If LSC determines that resort events for advocacy groups is a proper use of LSC funds, that determination may confirm what critics of LSC have said for some time.  However, the plain meaning of the language of LSCÕs regulations requires that grant funds be spent for the purposes intended by Congress and that diversion of those funds for other purposes be disallowed.
 

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