Corporate cash testing legal limits
By Laylan Copelin, Austin American-StatesmanSunday, February 22, 2004
When it comes to campaign cash, state politics is not a poster child for restraint.
Although their federal counterparts must operate under the $2,000 limit per individual donation, state politicians argue they should be able to take as much money as possible as long as the public knows who gave it.
Six-figure donations from one individual are not unusual in statewide campaigns, and legislators routinely collect five-figure sums from one supporter.
The Texas Association of Business and Texans for a Republican Majority, targets of a yearlong grand jury investigation, did not pour unprecedented sums of corporate money into the 2002 elections because candidates are having a hard time raising money from individuals.
They did it, in part, because company executives and their lobbyists are more willing to donate their stockholders' money than their own.
In doing so, however, both organizations tested one of the few restrictions in the Texas campaign finance laws: corporate or labor dollars cannot be used as campaign expenditures. Call it the ban against using other people's money, stockholders' or union employees', without their consent.
They also added a layer of secrecy to Texas elections. The state's largest business organization is refusing to disclose which corporations financed its $1.9 million advertising campaign for the 2002 elections.
Texans for a Republican Majority only had to reveal its corporate donors, who provided $600,000, because of a one-time fluke in federal regulations.
The two groups spent their money to produce a Republican- controlled, business-friendly Legislature that would curb lawsuits, oppose taxes and redraw congressional districts to cement the GOP's control over the U.S. House of Representatives.
The grand jury investigation into corporate spending simmered for a year until last week, when it was disclosed that state House Speaker Tom Craddick, R-Midland, raised money for Texans for a Republican Majority and delivered it to legislative candidates who were crucial to his election as the first Republican leader of the House since Reconstruction.
Investigators are trying to determine whether the two organizations violated the ban against corporate campaign expenditures and whether Craddick used the Republican Majority committee's assistance in getting elected speaker. Craddick and both groups deny any wrongdoing.
The temperature of the rhetoric, red-hot for a year, only will rise with one of the state's most powerful officials now facing a grand jury investigation.
For months, Republicans and their allies in the business community have said that Travis District Attorney Ronnie Earle, a Democrat, is just being partisan with his investigation.
"His job is to try to investigate crimes -- murders, rapes, arsons -- not to try to change the political landscape of our state because he doesn't like the way voters voted," said Andy Taylor, a prominent Republican lawyer representing the Texas Association of Business.
Earle said his investigation is about the corporate takeover of state government, not partisan politics. In a courtroom speech, he likened the business association to Italian dictator Benito Mussolini and to American robber barons of a century ago.
"They dictated laws; they enriched themselves and produced public anger that resulted in a reform movement," Earle said. "We really can't allow corporate wealth to translate into political power without abusing the public interest."
No matter the investigation's outcome, lawmakers are likely to reconsider the campaign finance rules. Because of the added layer of secrecy, the controversy already is undercutting the Legislature's long-held notion that disclosure is better than spending limits.
The business organization flooded voters' mailboxes with positive and negative assessments of legislative candidates. Bill Hammond, the association president, argued that his group exercised a First Amendment right to educate voters about issues. He said he was not making a campaign expenditure because he didn't consult with any legislative candidates about the ads.
Although Hammond has denied coordinating the ad campaign with anyone, sources familiar with meetings between the two groups said Hammond brainstormed what the ads would say, where they would go and when with political allies.
Texans for a Republican Majority, a political action committee created by U.S. House Majority Leader Tom DeLay, R-Sugar Land, took a different approach in using corporate cash. It spent $1.5 million in the 2002 elections, including $600,000 from corporations, which was raised mostly through Washington, D.C., lobbyists.
State law allows a corporation to spend its money on administrative expenses to run its PAC, which is a collection of individuals, such as a corporation's employees, bundling their donations.
The Texas Ethics Commission has ruled that administrative expenses means the committee's overhead, such as office rent, utilities and salaries of bookkeepers.
Texans for a Republican Majority argued that its corporate money, 40 percent of the money it spent in 2002, went to administrative expenses benefiting the committee and not candidates. The money paid for staff salaries, consultants, fund raising, polling and voter contact.
The committee also used its $900,000 from individuals as cash donations to candidates or to assist candidates with polling, voter turnout, consulting and other election-related activities.
John Colyandro, the committee's executive director, determined whether an expense was political or administrative. But in its own pitch to corporate donors, Texans for a Republican Majority promised more than business as usual.
"Unlike other organizations, your corporate contribution will be put to productive use," the pamphlet read. "Rather than just paying for overhead, your support will fund a series of productive and innovative activities designed to increase our level of engagement in the political arena."
Although the Texas Association of Business avoided disclosing its corporate donors because it is not a regulated PAC, the Republican Majority PAC had to reveal its contributors under a one-time interpretation of federal regulations that was later rescinded.
Fifteen of 33 corporations accounted for more than $500,000 of the $600,000 in corporate donations. The donors are involved in oil and gas, electricity, railroads, tobacco, liquor, nursing homes and more.
Ten perennial Republican donors, such as Houston builder Bob Perry and San Antonio businessman Jim Leininger, gave more than two-thirds of the $900,000 from individuals.
Investigators also are looking at an exchange of money between the Texas PAC and an arm of the Republican National Committee.
Texans for a Republican Majority sent $190,000 in corporate contributions to the Washington, D.C., group. In a single day two weeks later, the national organization returned $190,000 from individual donors to Republican candidates running for the Legislature.
Critics accused the two organizations of laundering corporate money into legal donations to candidates. Colyandro and Republican National Committee leaders said it was a coincidence.
Before 2002, Craddick led efforts similar to Texans for a Republican Majority.
A lawmaker since 1968, Craddick has worked long to become speaker by electing a Republican majority in the House. But in 2002, Craddick's name did not appear on the roster of GOP officials running the GOP committee.
Craddick said he distanced himself from the group, heavily populated with his supporters, to avoid any conflicts between it and his campaign for speaker. At the time, other GOP lawmakers were weighing a race for speaker. Texans for a Republican Majority had to appear neutral.
Former Rep. Bill Ceverha, a Craddick ally and the committee treasurer, denied using the organization to boost Craddick over other Republicans. He also said the GOP committee did nothing that Democratic organizations haven't done.
A year ago, when the grand jury investigation began, Craddick said he had done nothing for the GOP committee except attend a fund-raiser or two. Now investigators are checking why the committee sent Craddick $152,000, more than one-sixth of the $900,000 that the committee raised from individuals, to give to Republican House candidates.
Craddick, through a spokesman, said he was not trading the committee's money for support for his speaker campaign.
State law tries to keep a speaker race a contest among House members by limiting outsiders' influence. The law bars organizations, whether they are corporations or PACs, from aiding the speaker candidate and prohibits the candidate from benefiting from a group's help.
Detractors such as Craig McDonald with Texans for Public Justice, a group that monitors campaign finance, see a scheme behind the 2002 elections: DeLay puts his Washington, D.C., fund-raising muscle into Texans for a Republican Majority. Hammond and Colyandro brainstorm the business group's ads even as Colyandro is directing the PAC's efforts on behalf of the same candidates that the ads will help. Finally, Craddick raised money for the committee and delivered some of it to Republican House candidates.
"They both got what they wanted," McDonald said. "Craddick got to be speaker, and Tom DeLay got a new (congressional) map."
Republicans dismiss the allegations as sour grapes.
The GOP landslide on Nov. 5, 2002, ensured Craddick's election as speaker, spawned a pro-business legislative session and delivered new Republican-friendly congressional districts that should elect more DeLay allies to Congress this fall.
Hammond reveled in the electoral victory: "The Texas Association of Business blew the doors off the November 5 general election using an unprecedented show of muscle . . ."
A few months later, after another hearing in the protracted legal battle, Hammond's lawyer predicted eventual victory for his client but only after a long fight.
"I think Ronnie Earle's investigation will boil down to the old adage, 'You can beat the rap, but you can't beat the ride,' " Taylor said. "It's the ride we are on now, and there's little we can do about it."
It's a prediction that reverberated through the Capitol last week.
