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Judge orders inquiry surrounding Hornets' Shinn

NEW ORLEANS -- A judge has ordered former New Orleans
Hornets executive and current state Senate candidate Jack Capella
to respond to an inquiry relating to consulting fees he was paid by
a now-defunct company that received millions of dollars in
financing from Hornets owner George Shinn.

U.S. Bankruptcy Judge Jerry A. Brown ordered Capella to answer
questions and produce documents related to more than $120,000 in
consulting fees he was paid by Watson Energy.

Shinn invested about $7.9 million in effort to help the broke
oil and gas exploration company while Capella worked for Shinn,
according to court documents.

Shinn has declined to publicly discuss details of the case other
than to note that during "the years Mr. Capella worked for me, I
considered him my closest, trusted adviser and attorney."

Capella said Shinn "is a successful businessman who was fully
aware of all aspects of his investments."

"At no time during my tenure with Mr. Shinn did I have any
conflict of interest," Capella said.

Two years ago, court records show, Shinn paid more than $3
million to buy the claim of Mirant Americas Energy Capital, the
largest secured creditor of Watson Energy of Covington. At the
time, Watson Energy was in bankruptcy and looking for money for a
drilling project in St. Mary Parish. Shinn later bought the claim
of a second secured creditor, Union Planters Bank, for about $2
million.

Watson Energy is owned by former car dealer Richard Watson, the
son of "Wild Bill" Watson, whose Ford TV commercials were well
known. Richard Watson also once was a member of the state Mineral
Board when Edwin Edwards was governor.

At the time of the investments, Capella was secretary-treasurer
of Shinn Enterprises, the company through which Shinn made his oil
investments, state records show. Capella also was working as
Shinn's attorney, according to Shinn.

But while Shinn was one of Capella's clients, Capella also was
representing Watson Energy in two federal cases related to the
drilling company's bankruptcy.

Shinn's investment in Watson Energy appeared to pay off at
first, with company later making payments of $2 million to Shinn in
addition to $120,000 to Capella Consulting.

After December 2003, however, business slowed and the payments
to Shinn and Capella ended.

Shinn invested another $2.9 million between December 2003 and
November 2004 in an effort to revitalize the drilling project, but
received no further returns, records show.

Shinn is now trying to recoup $10.6 million in claims backed by
the company's assets as well as another $17 million in unsecured
claims, court records show. The $27.6 million is what Shinn says is
the value of the claims that he bought for $7.9 million.

Watson Energy's attorney, Douglas Draper, did not return
repeated calls and e-mail messages seeking comment from the (New
Orleans) Times-Picayune.

Capella faced similar scrutiny of conflicting client interests
in early 2003, after he was hired as general counsel to the Hornets
while continuing to represent the Louisiana Superdome Commission as
he had done since the early 1990s.

The Hornets are the primary tenant of the state-owned New
Orleans Arena, which the commission oversees.

Both Capella and the commission members serving at the time said
they saw no conflict because Capella would not be representing the
Hornets on any issues involving the commission or other state
agencies.

Capella added that the commission's contract was with the
Capella Law Firm, not with him personally, and that he had sold his
interest in the firm to his two partners.

Brown seems to want proof of that. The judge has ordered Capella
to turn over documents related to his former and current financial
interest the firm, as well as his divestiture while working for the
Hornets.

He also has been ordered to produce records documenting all
legal services he provided to Shinn, the Hornets and any other
Shinn-owned entity, as well as proof that he paid state and federal
taxes on any fees paid to Capella Consulting.

All this is taking place as Capella, a Republican former interim
Jefferson Parish district attorney, campaigns for a June 4 election
in the state 6th District Senate race.