Wednesday, March 3, 2004

In January 2002, Texans for a Republican Majority announced its arrival at the state capital with a large fund-raiser. The featured attraction: the Florida recount leader, Secretary of State Katherine Harris.

GOP fund-raiser may have broken law

Grand jury investigates; Republicans say use of corporate money legal

March 3, 2004

AUSTIN – In January 2002, Texans for a Republican Majority announced its arrival at the state capital with a large fund-raiser. The featured attraction: the Florida recount leader, Secretary of State Katherine Harris.

The event, attended by Republican politicians and stalwarts offering up at least $250 each, was a first step in a $1.5 million campaign. It sought to wrest control of the Texas House from Democrats, install a Republican speaker and advance a conservative agenda that would include congressional redistricting.

It also raised the first questions that a Travis County grand jury is examining.

Donations from corporations put the fund-raiser together. If corporations can't advance anyone's candidacy and if corporate money can be used only for a political organization's administrative overhead, was Texans for a Republican Majority crossing the legal line?
,p>Texas election law – enacted 100 years ago to stop "robber barons" from using investors' money to advance political causes – says "a corporation or labor organization may not make a political contribution or political expenditure."

The law allows an exception for administrative expenses to operate a political committee. A violation is a third-degree felony, punishable by up to 10 years in prison and a $10,000 fine. Lawsuits filed by some of the candidates who lost to Republicans argue that administrative costs are utility bills and office rent and that the business group went well beyond those bounds.

Republicans say any business could incur operational expenses such as hosting a reception, conducting polls or raising money to benefit the organization.

Texans for a Republican Majority began in late fall 2001 as an offshoot of Americans for a Republican Majority, a political committee established by U.S. Rep. Tom DeLay of Sugar Land. It was designed to raise money to help targeted campaigns where the GOP could displace Democrats. The $1.5 million it raised included about $800,000 from individuals and $700,000 from corporations.

In the 2002 campaign, the group used the contributions from individuals as donations to 20 House candidates. Victory in 15 of those races helped lead to the first Republican-dominated House in 130 years.

It used much of the $700,000 in corporate money for events, receptions, polls, salaries, consultants and telemarketers.

One of the first outlays of corporate money was for the Jan. 16, 2002, fund-raiser at the Austin Hyatt Regency ballroom.

About $3,600 went to the Hyatt, at least $3,700 to fund-raiser Susan Lilly and $5,000 to Coastal Consulting, run by Mr. DeLay's daughter, Dani Ferro, who helped organize the event, public federal disclosure records show.

Because the event was designed to raise money to be given to Republican candidates, the group's critics believe the costs associated with it were inherently political and not administrative.

Fred Lewis, executive director of Campaigns for People, said the event used corporate money to subsidize overt political activity.

"Basically, you can't spend corporate money to fund raise. That is illegal and it has been illegal for as long as anyone can remember," he said.

Texans for a Republican Majority's executive director, John Colyandro, defended the spending, saying that other political groups operate similarly.

"When we got started in fall of 2001, we were the new kids on the block," Mr. Colyandro said. "We did not do this without legal counsel and without referring to ethics opinions."

He cited an ethics opinion that holds that administrative costs are those that would be incurred in the normal course of business activity, whether or not the group is engaged in political activity.

"Fund raising is not, in and of itself, a political activity," Mr. Colyandro said, pointing to charities and others that raise money.

"The statute contemplates that committees will do political things. But that doesn't mean those activities are tied directly to the support of candidates or measures," he said.