Sunday, May 16, 2004

In the final weeks of the 2002 campaign, when the Texas Association of Business needed a strong hand to steer its $1.9 million advertising campaign, lobbyist Mike Toomey took charge. Toomey, a TAB board member, supervised meetings, worked on pieces mailed to voters and helped raise money, according to sources familiar with the advertising effort that has been the focus of a yearlong investigation into whether the undisclosed corporate spending was illegal.

GOP heavyweight Toomey led key ad effort

AT&T, Aetna and Cigna helped pay for '02 mailings

By Laylan Copelin, Austin American-Statesman
Sunday, May 16, 2004

In the final weeks of the 2002 campaign, when the Texas Association of Business needed a strong hand to steer its $1.9 million advertising campaign, lobbyist Mike Toomey took charge. Toomey, a TAB board member, supervised meetings, worked on pieces mailed to voters and helped raise money, according to sources familiar with the advertising effort that has been the focus of a yearlong investigation into whether the undisclosed corporate spending was illegal.

AT&T Corp., insurance companies Aetna Inc. and Cigna Corp., all TAB members and Toomey's clients, were among the corporations that helped pay for the ads, according to a source. Company officials confirmed TAB membership, but declined comment, citing the continuing grand jury investigation.

Another Toomey client, Texans for Lawsuit Reform, the state's top-spending political committee, sent its executive, Matt Welch, to numerous Toomey-led meetings whose goal was to elect more Republicans to the Texas House of Representatives. Rounding out the meetings were business association lobbyists, public relations specialists and John Colyandro with Texans for a Republican Majority, the political committee chaired by U.S. House Majority Leader Tom DeLay, R-Sugar Land.

Texans for Lawsuit Reform and Texans for a Republican Majority brought additional political muscle to the table -- about $3.5 million in campaign spending.

Under Toomey's guidance, that vanguard of political professionals helped undertake the complete Republican takeover of state government. The GOP victory led to a legislative agenda favoring business, opposing taxes and curbing lawsuits, while also giving DeLay the Republican map he needed to defeat Texas Democrats in Congress.

Toomey, who became Gov. Rick Perry's chief of staff shortly after the 2002 election, refused to discuss his role last week.

The TAB contends its $1.9 million paid for direct-mail pieces that were unregulated free speech about issues -- not political ads advocating election or defeat of a candidate. The state law barring use of corporate money to pay for political activity does not apply, it argues.

The meetings become relevant, however, if prosecutors continue to argue that coordination among several political groups undercuts the legal defense that the association's ads did not advocate the election or defeat of candidates.

Until now, published reports of Toomey's role had been limited to his part in two or three meetings with public relations specialists to help create ads.

The whole affair might have gone unnoticed but for Bill Hammond, association president and a former House colleague of Toomey's. Shortly after Republicans swept the November 2002 election, he boasted that the $1.9 million effort "blew the doors off" the election. He told reporters the level of corporate money behind the effort -- at $1.9 million -- was unprecedented in Texas.

Travis District Attorney Ronnie Earle, a Democrat, soon initiated a grand jury investigation into the corporate spending, prompting a protracted legal battle by the association to keep its donors secret.

Andy Taylor, the association's lawyer, criticized confidential sources' disclosure of the names of TAB's corporate donors pending the results of the criminal investigation and a legal determination whether TAB's ads were political.

"Every Texan has a constitutional right to criticize our government and its elected officials without fear of retribution," Taylor said. "By publicly disclosing TAB's donors or members, the Constitution of the United States has been trampled."

A key question

Defenders and critics of the business association are reluctant to comment publicly about the Toomey-led meetings because of the risk they'll be dragged into the ongoing investigation. But sources confirm the meetings, as many as two or three a week, in the final weeks leading up to the Nov. 5 election.

While the association's detractors view the meetings as an attempt to hide corporate financing of political campaigns, its defenders say the meetings were not unusual or illegal.

Taylor acknowledged that the business group would forfeit its free speech argument if prosecutors proved that the advertising campaign -- its size, scope, message and timing -- were coordinated with a candidate's campaign. But he insists there is no such evidence.

"Illegal coordination presupposes substantial contact between the sponsor of the ad and the benefitted candidate, not political dialogue between political action committees," Taylor said.

Prosecutors argue that the association's mail pieces are political ads. But they further argue that cooperation between the business group and political action committees constitutes the kind of coordination that would undercut the association's free speech argument.

But without a specific law on the matter, a judge will have to determine from court opinions whether the Toomey-led meetings amount to illegal coordination.

Toomey in charge

The meetings occurred at the offices of McDonald Public Relations Inc. near the Capitol.

People in the room had multiple ties -- political and business -- to one another.

Publicist Chuck McDonald worked for Texans for Lawsuit Reform, as did Toomey. McDonald also did public relations for the Texas Association of Business, where Toomey was a director. McDonald and his associate, Rickey Dailey, wrote the ads.

Jack Campbell, a lobbyist, represented Texas Association of Business and its political committee, BACPAC, which counts Texans for Lawsuit Reform as one of its biggest contributors. Welch, who refused to comment for this story, would come from Houston to attend the meetings on behalf of Texans for Lawsuit Reform.

From time to time, Toomey brought along Hammond and Colyandro, his "kitchen cabinet," according to a source in the meetings.

"Toomey was the man in those meetings," said another source at the meetings. He brought a folder with charts on every campaign. It showed what the money was going for and how much was needed, according to the source.

At times there were disagreements over the money, particularly whether TAB was doing more than others.

"He and Jack (Campbell) would argue," the source said. "A lot of people's money was involved. A lot was riding on it."
Given his experience and temperament, Toomey would be expected to lead the meetings.

He has a reputation for being hard-working.

In the 1980s he served as a Republican lawmaker from Houston. He was a fiscal conservative and one of the first lawmakers to champion curbing lawsuits against businesses.

His nicknames were "Mike the Knife" for his budget-cutting ways and "O.W.," as in One Way -- Toomey's way. In 1985, Texas Monthly named him one of its 10 best legislators: "Bureaucrats feared him. Democrats respected him. But Republicans deferred to him."

Between stints as chief of staff for governors Bill Clements and Perry, Toomey worked as a lobbyist for more than a decade, sometimes billing $500,000 to $1 million a year, according to state records. Just days after the Nov. 5, 2002, election, Toomey resigned from his lobbying firm to join Perry, who served with Toomey in the House.

Mailings targeted

The Toomey-led meetings are just the latest chapter in the expanding story about TAB's direct-mail effort for the 2002 campaign. TAB mailed about 4 million pieces of mail to voters in about two dozen legislative districts without anyone questioning how the business group paid for them.

Immediately after the Republican electoral sweep in 2002, when Hammond was bragging about blowing the doors off the election, he said he tapped corporate donors instead of individuals because it was easier to get CEOs to part with other people's money instead of their own.

Indeed, Hammond let BACPAC, the association's publicly reported account, lie almost dormant until Houston homebuilder Bob Perry and Texans for Lawsuit Reform gave $143,000 in the final weeks of the campaign. Most of the money was used to mail ads that the association's lawyer deemed too political for the corporate-funded project.

After the election, Hammond's critics complained that the corporate-funded ads endangered the trade-off in Texas campaign finance law: Politicians can accept as much money as they want from individuals as long as it's publicly disclosed and corporations and labor unions don't spend money on political activity.

From the beginning, Hammond defended the direct-mail program as educating voters and not advocating the election or defeat of candidates.

He also characterized it as a self-contained effort by the business group.

Then four postcards were discovered in February 2003. Created for the business group, one postcard was mailed under the logo of Texans for a Republican Majority, and three were sent to voters by Law Enforcement Alliance of America, a Virginia-based group supported by the National Rifle Association.

When the investigation began, Hammond hired a lawyer and stopped talking.

At first Colyandro said he created the mail piece with the logo of his group, Texans for a Republican Majority. But ad proofs showed the postcard was first created for TAB. That prompted prosecutors to question Colyandro in front of the grand jury about the direct-mail program.

Then prosecutors expanded their investigation to determine whether Texans for a Republican Majority illegally spent as much as $600,000 in corporate donations on political activity. In a deposition in December, Colyandro said he contacted the law enforcement group about helping distribute the postcards created by McDonald for the business association.

The involvement of Texans for a Republican Majority with Hammond's advertising effort began much earlier than the November general election. In March 2002, Colyandro's group gave TAB $10,200 from its corporate donations to pay for mail pieces in two Republican primary races. The ads were TAB pieces touting the pro-business records of two Republican incumbents who had drawn primary opponents.

Toomey also was involved with Texans for a Republican Majority outside of the meetings at McDonald's offices. According to Colyandro's deposition, he and Toomey met often to discuss the campaign and politics in general. In one instance, Toomey asked Colyandro's group to help pay for detectives to investigate the backgrounds of Democratic candidates.

More money

Despite Hammond's success in raising corporate donations, there was an incessant need for money, particularly at the end of the legislative campaign.

Even Toomey solicited money.

Todd Olsen, an Austin consultant, said Toomey called him during the fall searching for names of more wealthy Republicans to assist the business association.

Hammond has refused to say how many corporations donated the $1.9 million.

The Republican sweep of the 2002 elections paid dividends to business lobbyists and their clients.

Lawmakers protected doctors from soaring insurance bills, created a fund to entice companies to move to Texas and rewrote homeowners insurance rules that consumer groups complained were too friendly to the industry.

Despite a $10 billion shortfall, lawmakers balanced the budget without raising taxes and gave up on expanding the state's primary business tax, the franchise levy, which many corporations, including the Austin American-Statesman's parent company, have legally avoided paying for years.

The pro-business tilt of the Legislature prompted Democrats and consumer groups to nickname the gallery section where business lobbyists sat "the owner's box."

The biggest victory, however, was House Bill 4, which curbed the ability of workers and consumers to sue Texas businesses. Hammond summed up its impact: "Virtually everything that's been on the list for a long, long time was passed and put into law."
In the current special session, when state officials are searching for revenue to allow them to reduce property taxes, the clout of the business lobby is being tested again as lawmakers debate whether the new tax load falls more on consumers or business.