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Legal Disservices Corp.

Friday, September 1, 1995

The Legal Services Corp. (LSC) exists ostensibly to provide legal counsel in civil matters to people who cannot afford it. Since it was set up as a quasi-independent government corporation in 1974, it has weathered accusations that it promotes an activist, ideological agenda at the expense of its poor clients, and it has survived numerous attempts at abolition or reform.

Now the House Budget Committee, under the leadership of its chairman, Congressman John Kasich of Ohio, has proposed to phase out its annual appropriation, currently at $400 million, over the next two years. American Bar Association President George Bushnell has defended the program and has called LSC critics "reptilian bastards." Numerous defenders of the LSC have taken to the floor of Congress to denounce proposals to trim funding for the agency on the grounds that without it, America's poor will be deprived of civil legal representation.

We offer a twofold answer. First, Americans should realize that the LSC is not the noble bulwark of the rights of the poor that its supporters claim. Its effectiveness at serving the poor has always been marred by its pursuit of a political agenda that wastes effort and money and at times works to the long-term detriment of the poor.

Second, alternatives to the LSC do exist. Private legal-aid societies predated federally-funded legal services by almost 90 years, and would be thriving today had the lure of federal money not ensnared many of them. Other alternatives flourish in spite of the hostility of groups such as LSC grantees and the organized bar.

On a political level, the legal-services "movement," as it styles itself, is a 30-year success story. Since its founding as part of Lyndon Johnson's "War on Poverty," it has pursued its agenda virtually unimpeded. It has withstood budget cuts and a challenge to its existence in the Reagan years, when it waged an extensive "survival campaign." During the 1990s, it has enjoyed increasing appropriations. Its grantees receive an additional $255 million per year (as of 1993) from state and local governments, money from interest on many accounts that lawyers hold in trust for their clients (known as IOLTA funds), and private sources. Its biggest achievement, however, has been securing astronomical amounts of money for recipients of government programs. The movement, however, must face up to a crisis even greater than Republican opposition in Congress: The entire rationale for its existence is flawed:

Misunderstood needs. The LSC was created to provide help in civil cases. Most legal problems that poor people face fall into several basic categories: family law, including divorce, custody, guardianship, and child-support issues; housing, including disputes between landlords and tenants; financial issues, including bankruptcy, wills, estates, and credit problems; employment law; public benefits; prisoner rights; and immigration.

LSC supporters say that if it were not for the LSC, the 1.6 million poor people it assisted last year would be without any legal recourse whatsoever. The LSC itself proclaims its inadequacy to meet the needs of the poor by asserting that demand for its services vastly outstrips the $400 million provided by the federal government. The agency pleads for ever-increasing amounts of money on the basis of studies conducted by the American Bar Association (ABA) and in several states. These studies purport to show that only a minority of the legal needs of the poor are being met. The state studies asserted that the range was 14 to 23 percent of need.

Their methodology appears defective, however, because they fail to distinguish between "unmet" and "unrecognized" legal needs. Poor people were contacted randomly by phone, mail, or in person and asked whether they had problems in various areas, such as housing. If they responded that they had a problem with roaches, for instance, it was counted as an unmet legal need, even if the person had no intention of involving a lawyer in solving the problem. Under the consumer category, the most frequent problem cited was "turned down for credit." Many people are denied credit, but very few hire a lawyer. Yet, these responses were considered unmet legal needs.

Misdirected agenda. Even if we took these claims at face value, it's not hard to see why LSC resources don't go very far, because many LSC grantees have other plans for their money. Sixteen LSC grantees known as "support centers" provide virtually no direct legal services to the poor. They are organized to address specific issues such as housing, welfare, immigration, youth, and food. National in scope, the support centers often initiate litigation far from their offices. In 1993, the San Francisco-based National Center for Youth Law forced Arkansas to expand its child welfare system, and won $314,107 in legal fees for itself in the process.

The real agenda of the federal legal-services program is "law reform." It is not to serve the needs of poor individuals, but to "rescue" the poor as a class from poverty through litigated increases in transfer payments. However well-intentioned, this mission suffers from the same contradiction as the "War on Poverty" itself. The welfare state has not led men and women out of poverty but instead created dependency and a permanent underclass. As long as the LSC dedicates itself to bolstering and expanding the welfare state, it will fail to "meet the needs" even as it defines them itself.

Nevertheless, federally-funded legal services pursues its goal of law reform to effect a redistribution of income. Through class-action suits and lawsuits against local, state, and federal governments, LSC grantees have won hundreds of billions of dollars in expanded rights to welfare, Medicaid, and food-stamp benefits. In recent years, LSC grantees have sought to protect earlier gains by filing suits to obstruct or stop welfare reform in nearly every state in which it has been attempted. Yet a consensus seems to exist among political parties that the current welfare system has been eroding the family and fostering dependency for more than a generation. Expansion of benefits under the current system hardly seems like a compassionate cause on behalf of the poor.

After year s of abetting dependency by winning more social welfare benefits for more classes of people, LSC grantees have turned to pursuits overtly destructive of the poor. In dozens of cities, the legal-services movement has prevented local public-housing authorities from evicting drug dealers. LSC grantees have signed up thousands of alcoholics and substance abusers for Social Security Disability Insurance benefits. They have also litigated to protect aggressive panhandling and to establish the right to camp in city parks and streets. Some legal-services litigation has undermined parental rights and family cohesion. For example, some LSC grantees have sued to force housing authorities to lease apartments to unmarried minors.

Bureaucratic structure. The LSC is wedded to providing services by the so-called "staff attorney" model, which is essentially a bureaucratic model. A legal-services office is manned by lawyers who are employed by the program. An indigent person walks in the door, describes his or her problem, and a legal-services attorney decides whether to take the case. The LSC grantee is under no obligation to render assistance, and often does not. Instead of setting priorities in response to individual needs, LSC grantees may select cases according to their potential for advancing a social agenda.

A Prime Alternative

In evaluating how the LSC is doing, it is worthwhile to look at two groups in Indianapolis that provide legal help to the poor. The Indianapolis Legal Aid Society (ILAS) was founded in 1941 and last year received all of its $458,000 budget from private sources, primarily the United Way. The Legal Services Organization of Indiana (LSOI), on the other hand, was founded in 1966 as part of the federal legal-services program. Last year it received 84 percent of its $4.5 million budget in grants from the LSC, and another 12 percent from other government sources.

One might think that the group with the larger budget does a more effective job serving the poor. Unfortunately, it does not. In 1994, ILAS handled 6,079 cases while LSOI says that it handled 12,347. (A LSOI brochure complains that it was forced to reject over 6,000 additional cases "due to budgetary restraints.") The private group handled one-half as many cases on one-tenth of the LSC grantee's budget. That works out to an expenditure of $75 per case for ILAS and $367 for LSOI.

A closer look at these figures, however, may point to an even greater disparity. The ILAS figure of 6,079 includes only those cases that were actually contested, whether they went to trial or not. It does not include consultations and referrals. On the other hand, the LSOI figure of 12,347 appears to include brief consultations and the like. It reported to the LSC that it closed only 1,273 litigated cases in 1994!

ILAS materials state that it is "non-partisan and non-ideological" and does not engage in class-action suits. On the other hand, LSOI employs a full-time lobbyist and has, for example, filed a class action suit to stop implementation of Indiana governor Evan Bayh's welfare-reform plan.

Another difference is that ILAS does not take cases on behalf of individuals seeking benefits under government welfare programs. Public-benefits cases are a significant part of the LSOI caseload, and they are sometimes zealously pursued. For instance, LSOI sued Indiana in 1993 to continue AFDC benefits to a parent even though her children had been removed from the home because she failed to exercise responsibility for their care.

Life after the LSC

The most remarkable thing about the private ILAS is that it exists at all. Private legal-aid societies like ILAS numbered in the hundreds across the country until the 1960s, when the federal government began offering direct grants to legal aid organizations (See sidebar). ILAS was in the minority that resisted. Since 1974, each LSC grantee has enjoyed automatic refunding. The money flows to the same agencies, often administered by the same personnel, year after year. The system has never employed competitive grant procedures. Only a handful of programs have been defunded, and the LSC has not even tried to defund one since 1986. Scant evidence exists of innovation or experimentation with different approaches to meeting the legal needs of the poor. Luckily, others within the legal profession are meeting the challenge.

Expanded "judicare." A preferable alternative to the LSC's staff attorney model is "judicare," offering legal services based on the so-called British System. Under judicare, an indigent client employs the private attorney of his or her choice, who is reimbursed by the government in accordance with a set schedule of fees. The LSC has funded only a few judicare programs, presumably because they offer little opportunity to practice so-called law reform.

In 1983, long-time judicare advocate Samuel Jan Brakel made his case this way: "What point or purpose is there in having a separate legal-aid establishment for the poor, staffed overwhelmingly by young and inexperienced lawyers, armed with a socio-political agenda and a whole folklore about what poor clients want, need, or what is good for them? Why patronize low-income people in this way? Why deprive them of the diversity of views, practices, and talents that abound in the private sector? Why deny them the right to choose their own lawyers? In no other area of social or human service that I am aware of have we made such a concerted, almost perverse, effort to avoid using the resources already existent and available."

In South Carolina, the LSC funds a judicare program called Legal Services of the Fourth Judicial District. This is an excellent model for private legal aid to the poor. Covering six counties, the program contracts with fifty-two private attorneys who receive referrals from a staff member in each county. According to the South Carolina Bar Foundation, last year the other five LSC programs in the state budgeted between 42 percent and 50 percent of their resources to direct client services, whereas the Fourth Judicial District group budgeted 68 percent.

Executive Director Robert Adams claims that he offers better service, too. "By offering the services of 52 panel attorneys, we feel the clients have access to a diversity of legal expertise instead of limiting them to a few staff attorneys." Adams also points out that new attorneys starting practices in small communities have benefited and have seen clients return as paying clients. Adams also notes that "our program has never been involved in class action suits, abortions, or fee generating cases."

Pro bono legal work. While overstating legal needs of the poor, LSC proponents understate services that are already available, particularly in the amount level of pro bono legal work. Pro bono is a shortening of pro bono publico which means "for public good." It refers to legal help rendered to a client by a private attorney for no fee or a reduced fee.

The LSC underplays the amount of free legal work that is done in order to aggrandize the agency's importance. In May 1995, LSC chairman Douglas Eakeley and LSC president Alex Forger testified in Congress that 130,000 attorneys do pro bono work. But this figure is the number of attorneys who are formally enrolled in organized pro bono programs affiliated with LSC grantees.

The actual number doing pro bono work, including work on an ad hoc basis, is much higher. Although no national study exists, studies in individual states provide some useful data. A 1991 study by the State Bar of California reported that 64 percent of its members engaged in some form of voluntary, uncompensated legal work. A 1994 New York State Bar Association report put the figure at 49 percent. The American Bar Foundation places the total number of attorneys in the United States in 1995 at 896,000. If one adopts a rather conservative assumption that at least 40 percent engage in pro bono work, the number is 358,400, between two and three times the number cited by Eakeley and Forger.

Eakeley and Forger went on to testify that "pro bono services from private attorneys are at an all-time high primarily because of the efforts of the organized bar, the LSC, and local programs to involve private attorneys in the delivery of legal services." They were correct in pointing out that pro bono is at an all time high, but wrong to award the LSC a central role. During the 1980s, the ABA put a new stress on attorneys' pro bono obligation. A 1988 ABA resolution asked all attorneys to devote at least 50 hours per a year. An ABA directory of pro bono programs published in 1984 had 300 entries. The 1993-94 edition contained over 900 programs and indicates that no more than 375 of the programs are substantially supported by LSC grantees. (Some grantees are involved with more than one program.) Thus, the majority of pro bono programs would exist without the LSC and they are today more numerous than all the programs existing in 1984.

The LSC's involvement with pro bono largely stems from a somewhat modest attempt in the 1980s by the Reagan-appointed LSC board to provide competition to the staff-attorney system. Grantees were required to establish a "private-attorney involvement program," on which they must spend 12.5 percent of their annual federal grant. The attitude of the legal-services "movement" toward pro bono has often been hostile. Some LSC pro bono programs are notoriously inefficient. For instance, Legal Services Organization of Indiana managed to spend $408,867 in 1994 on a program that supposedly relied on voluntary help. It closed just 668 cases at an average cost of $612 per case.

Legal-services groups can only assist clients whose annual income is within 125 percent of the poverty level. Often, individuals cannot afford a lawyer, but have incomes which exceed this level. For example, Bay Area Legal Services, the LSC grantee in Tampa, Florida, was turning away a hundred legitimate cases a week because the clients earned too much. In response, 35-year-old real-estate attorney Mike Bedke sought to address the problem by launching the Courthouse Assistance Project. Except for office space provided by the Clerk of the Hillsborough County Court, the program receives no government support. It is staffed by volunteer attorneys who help 300 individuals per month right in the Courthouse on a first-come, first-served basis. Attorneys answer questions, help people fill out forms, and tell them what to expect in court. According to Bedke, "A lot of times we don't even have to help them file a lawsuit. It's a matter of resolving a dispute over the phone, writing a letter for them, or directing them to a particular agency."

Bedke, a board member of Bay Area Legal Services, says that Bay Area directors worried that the new program would compete for resources, but that he has found a "new class" of volunteers to staff the project. Bedke explains that many attorneys felt that Bay Area represented "welfare queens" and that they are much more willing to help clients who have jobs and are trying to get ahead. Through his position as chairman of the ABA's Young Lawyers Division, Bedke has been seeking to spread the program to other cities; so far 14 have emulated the Tampa project. Another two dozen have expressed interest.

Bedke says part of his inspiration came from a six-year-old Richmond, Virginia, project aimed specifically at the working poor. Hunton & Williams, the largest law firm in southeastern United States, opened an office in a basement in a distressed Richmond neighborhood.

Last year, the office handled about 600 client representations for a flat $50 fee, plus out-of-pocket expenses. For every reduced-fee client representation, the office handled two to three more consultations free of charge, usually resulting in some resolution short of legal action or a referral to another agency. Clients may earn up to twice the LSC eligibility level, although eligibility is not strenuously investigated, freeing time for the staff to work on actual cases. According to George H. Hettrick, a partner in the firm, "We believe the $50 fee is a good thing for the client. That person feels like a real client and not the recipient of charity. When people are given dignity, it fosters a more successful lawyer-client relationship."

The Hunton & Williams office in Church Hill receives no government support whatsoever. It is staffed by 60 of the firm's lawyers, who put in an average of 40 to 60 hours per year. The office handles housing, family, and guardianship cases, three types of cases shunned by private attorneys. In the housing category, the office not only handles landlord/tenant disputes, but also closings for first time home buyers, and the closings for the new owners of homes built or rehabilitated by Habitat for Humanity and other housing programs.

Alternative dispute resolution. More and more poor people are avoiding legal services altogether by turning to Alternative Dispute Resolution (ADR). Informal ADR procedures like conciliation, arbitration, and mediation have enjoyed explosive growth in recent years.

The programs run the gamut from taxpayer-supported programs affiliated with state court systems to private, neighborhood programs. In New York, all 62 counties now have a Community Dispute Resolution Center. Each center is a private, nonprofit agency with a contract with the state court system. The program was established in 1981 with the support of both liberals and conservatives in the state legislature. By 1988, every county had one. Each currently receives up to 50 percent of its budget from the state. The balance is raised from local governments and private sources, like the United Way. New York will provide a total of $3.1 million for fiscal year 1995.

Administered by a staff of four in Albany, the program depends on 2,254 trained volunteer mediators from all walks of life, including housewives and retirees. Most are nonlawyers. By any measure, the statistics quoted by the program's statewide office are impressive. In fiscal year 1994, the centers conducted 25,015 conciliations, mediations, and arbitrations involving 63,210 people. The first step is conciliation, where an attempt is made to work out the problem by phone or mail. If that doesn't work, the parties actually meet face-to-face with a mediator present. In 79 percent of the matters that reached the mediation stage, a voluntary agreement was reached. If there is still no resolution, the parties go to arbitration.

In fiscal year 1994, it took 16 days from the intake to final disposition for the average single-hearing case and 41 days for the average multi-hearing case. There were 13,609 cases involving a single hearing and just 623 requiring more than one. The average time per mediation or arbitration was one hour and 11 minutes. The average cost to the state for each case screened as appropriate for dispute resolution was $68. The average state cost per conciliation, mediation, and arbitration was $121. The centers reported $2,919,276 awarded in fiscal year 1994 in restitution and through mutual agreements. The average award per case was $788.

The centers are open to anyone. State courts make both voluntary and mandatory referrals, accounting for about half of the caseload. Clients may seek advice from lawyers, but very few disputants use them. A review of the disputes handled shows that they include those common to the poor. Thirty-four percent involved allegations of harassment, 24 percent alleged breach of contract, 7 percent housing, 7 percent interpersonal disputes, 7 percent assault, 4 percent personal or real property, and 4 percent custody, support, or visitation.

Interestingly, many dispute-resolution programs handle minor criminal cases. Thus, the approach to dispute resolution is comprehensive. Its goal is to prevent the escalation of problems, especially among people who know each other. A mutually acceptable resolution of a simple trespass case can prevent an assault later on. Sixteen percent of the disputes were between neighbors, 15 percent between acquaintances, 13 percent between tenants and landlords, 9 percent between consumers and merchants, 6 percent between family members, 4 percent between former boyfriends and girlfriends, and 4 percent between strangers.

According to the National Institute for Dispute Resolution, 27 states have formally incorporated various ADR methods into their court systems, up from just 10 in 1980. The National Center for State Courts reports that at least 1,200 programs around the nation are receiving referrals from state courts.

One doesn't have to live in New York to take advantage of ADR. "Neighborhood justice centers" now exist in many urban areas around the country. Some receive support from local governments and some are privately funded. Some receive referrals from local courts and some do not. What they have in common is a minimum of bureaucracy and a reliance on volunteers to serve as third-party referees. The federal role in the development of these institutions is instructive. In 1978, the Justice Department dispensed 18-month seed grants to three neighborhood justice programs in Kansas City, Atlanta, and Los Angeles. Smaller grants were also provided for another year of operation. But in contrast to the automatic refunding enjoyed by LSC grantees, the programs were on their own in the third year. The programs survived and centers in other cities blossomed with no federal seed money at all. Today, there are several hundred community and neighborhood justice centers. The National Association for Community Mediation has 150 programs in 37 states.

Services by nonlawyers. Along with ADR, nonlawyer practice (NLP) is growing rapidly. Independent paralegals and other specialists are performing tasks previously reserved for licensed attorneys. Nonlawyer practitioners handle such matters as uncontested divorces, wills, estates, bankruptcies, real estate closings, child custody and support, and immigration problems. They appear before 38 federal agencies. Many LSC-eligible clients take advantage of these services. Help Abolish Legal Tyranny (HALT), a Washington-based legal reform advocacy group, estimates that 5,000 independent paralegals (paralegals not employed by an attorney) are currently working in private practice.

There would be more if not for the bitter opposition of state bar associations. These powerful groups lobby for "unauthorized practice of law" (UPL) statutes, which are on the books in every state except Arizona. The vast majority of UPL complaints are not filed by dissatisfied consumers, but by members of the bar. Not only has for-profit NLP been targeted for formal complaints, but also individuals and non-profit organizations that have been helping the poor. The most celebrated case is that of Rosemary Furman, a legal secretary who escaped going to jail in the mid-1980s. Her crime was to charge a small fee for helping battered women fill out civil protection orders and divorce forms. HALT says that it gets an average of two calls per week from nonlawyers being investigated or charged under UPL.

The LSC has fought competition from nonlawyers. In Jacksonville, Florida, nonlawyer Susan Longley operated American Legal Clinic, Inc., now known as American Documents Clinic, Inc. Among other things, Longley assisted people in the preparation of Chapter 13 bankruptcy filings. She handled a filing for Sandra Samuels for $215, saving her home from foreclosure. Jacksonville Area Legal Aid, Inc., an LSC grantee, soon after launched a successful UPL action against Longley, and in December 1994 was awarded $5,316.20 in legal fees even though the judge found that the client had not been harmed in any way.

In response to the NLP phenomena, the ABA formed a Commission on Nonlawyer Practice scheduled to make a report in 1996, but most state bar association officials remain deadset against any increased role for NLP. Most argue that clients are put at risk by nonlawyers handling legal problems. But former New Jersey Bar President Thomas Curtin was quoted in the July 3, 1995, Lawyers Weekly, "I have no difficulty saying my position is protecting the interests of lawyers. Why is the ABA, an organization that is supposed to working for lawyers, trying to find work for nonlawyers? That is not the business of the ABA. This is the American Bar Association, not the American Paralegal Association."

Do-it-yourself. In her unsuccessful fight to offer legal services, Longley was also enjoined from using any computer program or legal form designed for use by attorneys. It is easy to see why lawyers are concerned about these tools. Self-help legal publications and computer programs are enjoying expanded sales. Ralph Warner, the editor of NOLO Press of Berkeley, California, estimates that how-to legal publications are now a $50 million business. One of NOLO's most popular titles is "How to File for Bankruptcy." Another is "Plan Your Estate." Its most popular software package, allowing individuals to create their own wills, sold 60,000 last year.

What to Do?

The best thing the government can do for the poor is to do away with the LSC. The agency won't go willingly, so Congress should abolish it. Additionally, care should be exercised in replacing it with something else. The potential of unintended consequences is a central lesson of the last 30 years. A number of ideas have been proposed, but should be discarded:

  • "Reform" of the Legal Services Corp. No new regulations or restrictions can reform a program founded on a flawed premise (see sidebar).
  • A federal judicare program. The last thing the country needs is Medicare for lawyers. State and locally-funded judicare programs are worthy of support, particularly in rural areas.
  • Block grants to the states. Preferable to the present LSC-grant system, they may be useful during a phase out of federal funding. Block grants pose the danger, however, of preserving a federal role in legal services.
  • Mandatory pro bono. Pro bono should not result from coercion. It is a violation of attorneys' free association rights and undercuts the voluntary spirit necessary for successful pro bono work.

How then should the legal needs of the poor be met? First, it should be recognized that there are certain needs the poor don't have. Without deep pockets, they seldom get sued. When injured or harmed due to the negligence of others, there is no need for a taxpayer-provided lawyer. All a victim has to do is to call the number on the television screen. Plenty of private lawyers await with open arms to take contingency cases.

Second, it should also be recognized that many of the present legal problems of the poor do not require lawyers. Deregulation of the legal profession will provide disproportionate relief to the poor. ADR and NLP are well suited for many of the kinds of problems the poor encounter.

Third, legal needs which actually require a lawyer should not be established on the basis of self-serving and nonsensical studies sponsored by federal grant recipients. It may be impossible to quantify legal needs in the first place. In our lawyer-rich society, legal problems are whatever clever lawyers decide to bring forth. Actual needs can only be established by poor people themselves exercising free choice. A federal income-tax deduction for Pro bono work would help make the system client-based, rather than attorney-based. Such an incentive was proposed by GOP Congressman Henry Hyde of Illinois in the early 1980s with a monetary cap on the total deduction.

The good news is that an expansion of pro bono work is already underway and the legal profession has been aggressively promoting it, notwithstanding ABA support for the LSC. Ending the federal legal-services program would further oblige attorneys to assist the poor. The existence of a federal program has undoubtedly provided some attorneys with the rationale to shirk responsibilities in their own communities. A federal income tax deduction is not a panacea, however. The success of pro bono should not be dependent on the availability of a tax deduction, but on a renewal of the voluntary spirit of members of the bar.

Many attorneys will be more likely to engage in pro bono in a structured program, and there are many areas where a storefront, walk-in office would a tremendous convenience for the poor and working poor. As is being demonstrated in Indianapolis, a private institution can serve the poor better than a public one. We should work to restore the ethos of the private legal-aid society that not dependent on government funds.

Indeed, the private legal-aid society can serve as a useful model for LSC grantees if they should lose federal funding. The transition to a nonfederal system will not be tumultuous. As noted, LSC grantees already receive $255 million from non-LSC sources. Unlike other federal programs, LSC grantees may carry over surpluses each year, and some programs have significant reserves socked away. A simple policy decision to stop doing class-action suits, public-benefits cases, advocacy, and lobbying would allow most grantees to help more poor individuals, even on a reduced budget. If programs are truly providing a valuable service, they should be able to raise money locally.

Ultimately, legal services for the poor cannot be separated from legal services for everyone. Problems of affordability and accessibility are not limited to the poor or working poor. Our society threatens to become "overrun by hordes of lawyers, hungry as locusts," as Warren Burger, the late chief justice of the Supreme Court, put it. Reducing litigation and lowering its cost through tort reform and other measures would benefit everyone. Getting lawyers out of lives of Americans, including the poor, is the real point.

The Destruction of Legal-Aid Societies
The Legal Aid Society of New York was the nation's first, opening its doors with one part-time attorney in 1876. Private societies numbered more than 200 by the mid-1960s and, except in a few municipalities, received no government support. Overall, about 60 percent of their financial support came from community chests, 15 percent from bar associations, and the rest from individuals and businesses.

An 89-year-old tradition of private legal aid ended in 1965 when the federal government began making direct grants to legal-aid organizations through the Office of Economic Opportunity (OEO), a cornerstone of Lyndon Baines Johnson's "War on Poverty." The previously private societies constituted 60 percent of the grantees of the new federal program.

With federal funding came dramatic change. Sargent Shriver's OEO spearheaded a shift in emphasis to "law reform," the expansion of poverty benefits through litigation. The directors and staffs of many programs resented Washington setting local priorities, but were quickly overwhelmed. The law gave the OEO powers to award grants to antipoverty agencies on any basis.

The introduction of federal funds provided huge power to the small but highly ideological OEO staff to set priorities and demand changes in local organizations. Few local aid societies and bar organizations could resist the allure of new federal funds. The annual budgets of the private legal-aid societies totaled about $4 million in 1964. The federal program initially promised an annual expenditure 10 times that amount to groups administered or heavily influenced by local bar groups. In cases where the existing legal-aid operation refused to remake itself to the OEO's liking, a competing organization was founded and funded instead. By 1967, the OEO was distributing $42 million to 300 organizations. The OEO's crash campaign resulted in a network of law offices and attorneys equal in size to the U.S. Department of Justice and all its U.S. Attorney offices.

The OEO placed its own personnel in programs it funded through something called the Reginald Heber Smith Fellowship Program. Beginning in 1967, young attorneys were recruited and trained in the principles and tactics of "poverty law." Sent out to local grantees, the "Reggies" remained employees of the Smith program.

By 1971, 25 percent of all LSC lawyers were graduates of the program. Fred Speaker, an OEO official at the time, expressed the OEO attitude to the formerly private groups: "We are a program that six years ago rose out of the sloth of token, tired, 19th-century legal-aid societies." Private institutions were not just crowded out by public ones, but were actively undermined and infiltrated in a campaign akin to a corporate takeover.

"Law reform" proceeded at a furious pace. By 1972, some 219 cases had been brought all the way to the U.S. Supreme Court by LSC attorneys. Under the former private system, not one case had ever gone that far. Through the end of 1972, some $290 million in federal funds had been spent on legal services, but the cost to the taxpayer was actually more than $2 billion.

In 1973, President Nixon proposed to dismantle the OEO, and appointed as its director Howard Phillips, who promptly canceled "law reform" as a goal. Congressional supporters of legal services moved to "insulate" the program from "political pressure" and sought to establish an independent Legal Service Corp. (LSC), along the lines of the Corporation for Public Broadcasting. Richard Nixon signed the Legal Services Corp. Act on July 25, 1974—the last legislation he signed before resigning. During congressional hearings this year, LSC officials pointed out that Nixon created the LSC, but they did not mention that liberal senators were holding up funds for his Watergate defense at the time.

The new LSC has dispensed funds in much the same way as the OEO did. According to Indiana University Law Professor William F. Harvey, a director of the Indianapolis Legal Aid Society and chairman of the LSC during the 1980s, "The effort to undermine the private legal-aid societies continued under the LSC, particularly during the chairmanship of Hillary Rodham Clinton [1978-80]. The Washington-based LSC ideologues cannibalized the standards, criteria, the concepts, even the esprit de corps of America's legal-aid societies."

Why the LSC Cannot Be Reformed (sidebar)
Responding to criticism of the Legal Services Corp. (LSC), the agency's defenders in Washington favor reform over elimination. But the LSC is not reformable. The Legal Services Corp. Act of 1974, which created the corporation, allows it to take public funds—$400 million this year—and transforms them into private funds, immune from the checks that apply to other types of federal spending.

The law also established a unique, hybrid structure for the corporation that guarantees it can never be accountable. The LSC is an independent, private, nonprofit corporation that makes grants to 323 separately incorporated private nonprofit grantees. The LSC's 11-member board is appointed by the president, subject to Senate confirmation, but the board has little actual influence over the grantees and how they spend their grants. Nor does the executive branch have much influence over the LSC budget. By law, it goes straight from the LSC to Congress, and the Office of Management and Budget may only review it.

The LSC's status as a private corporation exempts it from many federal criminal laws pertaining to government officials, such as the Anti-Deficiency Act. Although it is a felony for a federal official to misappropriate federal funds, the LSC Act frustrates operation of that law by declaring that "officers and employees of the Corporation shall not be considered officers and employees" of the federal government.

From time to time, Congress and the LSC board have sought in vain to exercise oversight. Restrictions on LSC involvement in abortion, Congressional redistricting, politics, lobbying, and advocacy have been ignored or circumvented, primarily through the nonfederal funds "dodge." Since most grantees receive some funding from IOLTA and state and local governments, they are able to claim that any restricted activities are not done with their LSC funds.

There is no way to verify this because legal-services attorneys do not keep time sheets, thereby eliminating the only means of federal oversight. Furthermore, legal-services lawyers do not report the cases on which they work to anyone beyond their offices, and all case records are off limits. This secrecy, shielded by an invocation of the attorney-client privilege, prevents Congress from evaluating the effectiveness of any legal-services program. There are no provisions for the privilege to be waived for purposes of oversight, even though the overseers have paid for the services.

As a result of these factors, we have little information on expenditures by case or by category or service. While most government programs are required to have detailed accounting systems to explain how taxpayer money is used, the LSC has continued to ask for funding increases without offering any detailed evidence that previous funding has been used well.

The LSC can track the use of its grants through a monitoring program that includes on-site visits by Washington-based staff. During the Bush administration, about 125 visits took place annually, meaning the average program could expect a visit once every three years. Under the Clinton-appointed board, only six monitoring visits took place last year.

The LSC structure is ripe for abuse, and abuses will be rampant as long as it exists. It makes little difference who is in the White House, the Congress, or on the LSC board. As long as funds flow through the 323 LSC grantees, public funds will continue to be spent by private citizens pursuing a private political agenda. As Alan Houseman, a legal theorist who helped draft the 1974 Act, wrote in 1984, "Since the central directions of the program were not created by statutes or regulations, they are invariably difficult to undo by regulations and LSC policies."