Wednesday, March 3, 2004

A federal tax return for Texans for a Republican Majority tells a different story about the group's spending in the 2002 election from what the group told Texas campaign finance authorities, according to documents filed late Tuesday by lawyers for Democratic candidates.

GOP tax return tells different tale

Republican committee reported different campaign spending on different forms

By Laylan Copelin, Austin American-Statesman
Wednesday, March 3, 2004

A federal tax return for Texans for a Republican Majority tells a different story about the group's spending in the 2002 election from what the group told Texas campaign finance authorities, according to documents filed late Tuesday by lawyers for Democratic candidates.

A lawyer for the Republican Majority committee said Tuesday night that the Democrats are confusing state and federal regulations.

The political action committee created at the direction of U.S. House Majority Leader Tom DeLay has always said it raised and spent almost $1.5 million during the 2002 state elections. About $600,000 of that came from corporate donors and is the subject of the civil lawsuit and a yearlong grand jury investigation into whether the group illegally spent corporate money to influence two dozen legislative elections.

The Republican Majority committee has said it didn't report the $600,000 to state election authorities because it was spent on the committee's administrative expenses, not to directly benefit Republican candidates. It did report $900,000 in donations to candidates on its state election report.

Yet the committee's 2002 tax return lists $1.16 million -- instead of the $900,000 -- as "activities related to support of Republicans for state Legislature and statewide offices in the state of Texas." It also shows $122,528 in fund-raising costs.

"None of these expenditures can remotely be classified as administrative costs of TRMPAC," according to the lawsuit, "and they total $1,291,041.92."

Furthermore, according to the lawsuit, the political committee reported only $127,457 in management and general expenses on the tax return, not the almost $600,000 it cites as administrative costs on a different IRS form.

"The result is that there was a failure on the part of defendant (Bill) Ceverha to report, as required by law, at minimum some $460,000," the lawsuit alleges.

Ceverha, a former state representative, served as treasurer of the Republican Majority committee. John Colyandro, the committee's executive director, signed the tax return. Terry Scarborough, the lawyer for Ceverha and the committee, said the committee's 2002 money was reported differently on three reports as required by law.

"The difference is how the IRS defines program services and how the (state) election code defines it," Scarborough said. "It's apples and oranges. It's a different set of rules and definitions.

We have complied with all the rules."

In the lawsuit, four losing Democratic candidates are claiming that Texans for a Republican Majority failed to report all the money spent to defeat them. For damages, they are seeking double the amount that the political committee allegedly did not disclose to the Texas Ethics Commission.

The grand jury investigation is covering similar ground.

State law bars spending corporate and union money in campaigns, but it allows political committees to spend corporate or union money for administrative expenses.

The investigation and lawsuit might turn on the question: What's an administrative expense?

Lawyers for the Democratic candidates contend it is only routine overhead, such as office rent, utilities or the salaries for bookkeepers. Lawyers for Texans for a Republican Majority argue that corporate money spent on polls, research and consultants is legal as long as it did not benefit candidates directly.

"There is not going to be much dispute about what happened," Scarborough said. "The dispute is going to be over the interpretation of the law."

The tax return was just one document among an 8-inch-high stack of paperwork filed just before a 5 p.m. deadline.

The paperwork is in response to a motion by the Republican Majority committee to dismiss the lawsuit.

The documents include depositions by Ceverha, Colyandro and the committee's accountant as well as general ledgers, expense vouchers, phone records and e-mails.

They paint a picture that has been reported for several months.

DeLay had the political committee created to help elect a Republican majority in the Texas House of Representatives, which in turn elected Rep. Tom Craddick as the first Republican speaker in modern times. A Republican-dominated Legislature then created new congressional districts favoring DeLay's Republican ambitions.

DeLay and a committee of state Republican officials recruited and supported Republican candidates for the Legislature.

Colyandro was in charge of deciding which of the committee's activities were political or administrative.

Evidence already has shown that professional fund-raisers, paid with corporate dollars, raised and forwarded money to Republican candidates. The committee also paid for lawyers to represent a legislative candidate when his legal residency was challenged. Finally, the committee donated $190,000 to the Republican National Committee in corporate money that could not be legally given to candidates. The national committee then returned the same amount in legal donations to seven Texas House candidates.

Colyandro has said the fund-raising methods might have been sloppy but not illegal. He has defended all of his other decisions on whether to pay particular bills with corporate money. He said Republican National Committee donations to Texas candidates were a coincidence. Among Tuesday's documents was a bill to the Texas Association of Business from Contact America, a California firm that phoned voters.

The document seems to show that Texans for a Republican Majority was paying bills for the state's largest business organization.

One issue in the grand jury investigation is whether the state business group was conspiring with others when it distributed $1.9 million in ads in the legislative elections, then refused to disclose the corporate donors who financed the effort.

However, Scarborough said, the Democratic lawyers did not include documents showing the bill was a mistake.

He said Contact America rebilled Texans for a Republican Majority for the $65,175 in October 2002.

"Contact America just billed the wrong group," Scarborough said. "It was corrected a long time ago."