Saturday, April 24, 2004

The Texas Republican Party went on a drive during the last major statewide elections to raise corporate cash like never before, collecting $2.2 million from companies such as energy firms and nursing home chains. While raising the money was legal, it may have been spent in violation of state law, the Houston Chronicle found through a review of more than 10,000 pages of state and federal campaign finance reports.

Texas Republican Party went on a drive for corporate cash

By R.G. RATCLIFFE, Houston Chronicle
April 25, 2004

AUSTIN -- The Texas Republican Party went on a drive during the last major statewide elections to raise corporate cash like never before, collecting $2.2 million from companies such as energy firms and nursing home chains.

While raising the money was legal, it may have been spent in violation of state law, the Houston Chronicle found through a review of more than 10,000 pages of state and federal campaign finance reports.

Texas law prohibits political parties from spending corporate or labor union money on anything other than running a party primary, paying for a convention or administrative expenses. State law also requires those funds to be spent through a separate, restricted account, which can also include money from other sources.

But the state Republican Party transferred its corporate donations to a federal committee it runs and designated all general election expenses as administrative.

In one instance, the party defined $1.9 million in television advertisements as "administration" in campaign reports. Another $453,815 in direct mail was reported as "admin."

A week before the state deadline for raising or spending corporate money, the Texas Republican Party raised $929,000 from corporations in four days and transferred the money to its federal account.

Republican officials deny any violation of state law and say all the expenditures were legal under federal law. But the state ethics commission says spending on Texas races and other state political activities must comply with state law.

"I apologize that it wasn't more" money, Wayne Hamilton, former GOP executive director and now a special adviser to the party, told the Chronicle.

The Texas Democratic Party handled its accounting of so-called soft money from corporations and labor unions differently. The Chronicle's review of its financial documents found no readily apparent violations of state laws.

The Chronicle's review of the state Republican and Democratic party campaign records was separate from a Travis County grand jury investigation of possible 2002 campaign finance law abuses.

Travis County prosecutors are investigating whether the Texas Association of Business and U.S. House Majority Leader Tom DeLay's political action committee, Texans for a Republican Majority, illegally spent a combined $2.5 million in corporate money to win a state House majority.

Republicans criticize the investigation as a partisan witch hunt by Democratic District Attorney Ronnie Earle.

Whatever the case, there is no doubt that Republicans turned to corporate money to finance the 2002 elections at a level previously unheard of in Texas.

All told, the Texas Republican Party ran more than $5 million through its restricted corporate campaign account in 2002 -- about 10 times more than the Texas Democratic Party had in its own restricted-use campaign account. Most of the Republican money ended up in the party's federal account, the Texas Republican Congressional Campaign Committee.

Mixing the money

The amount of money the Texas Republican Party ran through its corporate account jumped from $904,177 in 1998 to $5.7 million in 2002. The 2002 tally includes money raised directly from corporations and funds from national party committees that raise money from corporations and large-dollar individual donors.

Because the party mixes corporate money with individual donations in its federal account, the sources of those payments cannot easily be determined.

Blending individual donations and national party donations with the restricted corporate contributions, the Texas Republican Party used its federal committee to run a $12.3 million general election effort in 2002. Federal reports list all spending as administrative, even if for advertising, direct mail or other political activities. About 70 percent of that spending was allocated to state election activities.

"If the Republican Party of Texas spent corporate money on things that are not normal operating or administrative costs, then they potentially violated state election law," said Fred Lewis, executive director of Campaigns for People, a campaign finance reform group.

Federal law in 2002 was far less restrictive than state law on how corporate and labor union money could be spent on campaign activities by political parties. The McCain-Feingold campaign finance law, passed in 2002 but effective after that year's elections, has eliminated almost all soft money spending by political parties.

Hamilton said state law did not apply to the Republican Party's 2002 coordinated campaign because the party was raising and spending money to build party support and voter turnout for both federal and state candidates. The spending was done through the party's federal committee following federal election law.

"We're governed by federal law in all our noncampaign activities," Hamilton said. "We don't spend money under state laws. We spend money under federal laws. State law has no say over this account over here."

But Texas Ethics Commission Executive Director Karen Lundquist said it would not matter whether a political party's spending is done by a federal committee. She said spending to affect Texas elections would be governed by state law and the restrictions on corporate money. The commission cannot take action unless a complaint has been filed.

In one case, a 1995 commission opinion interpreting state law said a political party may not use corporate contributions to pay the costs associated with the printing and distribution of brochures soliciting donations or membership in the party, or costs associated with voter registration drives.

George Smaragdis, a spokesman with the Federal Election Commission, said state and federal laws can apply to a state political party's spending.

"Our law supersedes state law only in cases of federal elections," Smaragdis said. "Whether state funds were raised and spent in accordance with state law would be a matter for the state."

There is some vagueness in the state law governing special interest groups and political action committees such as the ones Earle is investigating. A separate, more explicit law governs political parties.

A violation of the law restricting the use of corporate money for general election campaigning by political parties is a Class A misdemeanor. Violating the law forbidding parties to raise corporate or labor union money for the separate account within 60 days of a general election or spend money from it within the same period is a third-degree felony.

Laws restricting corporate and labor union money were passed in the early 1900s because state lawmakers believed their economic clout would give them undue influence over the political process. There also was a belief that the organizations' leadership should not be spending the money of others -- shareholders and union members -- for political purposes.

Democratic Party spokesman Mike Lavigne said his party is careful to segregate corporate and labor union money from other fund raising.

The state party received $5.9 million in donations from the Democratic Congressional Campaign Committee in 2002 and put $194,000 of that into the party's restricted account.

Although Democratic Party coordinated campaign spending is done through its federal account, its state reports show specifically how the corporate and labor union money is spent under state law.

Aggressive fund raising

Hamilton said the Republican increase in corporate funds was the result of aggressive fund raising.

That fund raising included $400,000 from two national nursing home chains that wanted caps on pain-and-suffering awards in neglect and abuse cases. The Legislature in 2003 passed such caps.

Just before the deadline, the state GOP transferred the money from its corporate account to its federal account. Hamilton said the transfer was made "to comply with state law, not get around state law."

He said the corporate money was used to reimburse the federal committee for bills that already had been paid. So none of the restricted corporate money was spent after the 60-day cutoff, Hamilton said.

"It's a felony if you raise or spend money (from the corporate account) during that 60 days. So nobody's getting around anything. It's complying with state law."