Saturday, June 11, 2005

The Texas Association of Business must answer questions about how it raised and spent $1.9 million in secret corporate money that's been at the center of civil lawsuits and a criminal investigation for almost three years, the Texas Supreme Court ruled Friday.

Texas Association of Business had fought questions about 2002 campaign

By Laylan Copelin, Austin American-Statesman
Saturday, June 11, 2005

The Texas Association of Business must answer questions about how it raised and spent $1.9 million in secret corporate money that's been at the center of civil lawsuits and a criminal investigation for almost three years, the Texas Supreme Court ruled Friday.

The all-Republican court denied the association's pretrial maneuver to block the questions without comment, but not until it had frozen attempts by Democrats to ask questions in the politically charged lawsuit for almost 18 months.

The decision is a victory for Austin lawyer Buck Wood, who is suing the state's largest business organization on behalf of James Sylvester, an Austin Democrat who lost a 2002 bid for the Texas House.

In 2002, the Texas Association of Business and Texans for a Republican Majority spent corporate money to help elect a Republican majority in the Texas House of Representatives, which, in turn, supported a pro-business, anti-tax agenda that included redrawing congressional boundaries to favor Republicans.

State law generally prohibits spending corporate or union money on campaign activity.

The business organization sent 4 million mail pieces to voters in two dozen crucial legislative districts without disclosing its corporate donors.

Association President Bill Hammond contended that the mail pieces were beyond state campaign finance laws, saying they only educated voters about issues without encouraging them to support or oppose candidates.

The association's post-election newsletter bragged that the organization "blew the doors" off the election by using its "unprecedented show of muscle." It also offered written testimonials from Republican candidates who credited the organization with making the difference in their victories.

Travis County District Attorney Ronnie Earle is investigating the statewide business group. Several lawsuits seeking millions of dollars in damages also are pending.

With his lawsuit, Wood is trying to prove that the business group functioned as a de facto political action committee that broke state law by raising and spending corporate money on the election, then failed to report it to state authorities.

"Our information is that a small number of corporations gave most of the money," Wood said. "We're claiming they created a PAC with the primary purpose of defeating or helping candidates."

Guarding donors

Although Hammond has refused to disclose the identity of the association's corporate donors, three were named last year by a source with knowledge of the organization's operations: AT&T Corp. and insurance companies Cigna Corp. and Aetna Inc.

Wood's suit names as defendants the business association, Hammond, the undisclosed corporate donors and "John Doe conspirators."

For tactical reasons, Wood did not ask the business group to identify its donors, side-stepping one of its First Amendment defenses.

Instead, Wood wants to gauge the scope of the mail campaign by learning the number of donations, the amounts and the dates the money was given. He also wants to know who planned and executed the mail campaign. His request includes documents ranging from the association's budget to letters soliciting donations.

In January 2004, state District Judge John Dietz ruled that the business group must provide the information, but the organization appealed to the Texas Supreme Court, where the pretrial motion sat for almost 18 months.

Houston lawyer Andy Taylor said Friday that the association would comply with the court's order but added that it does not change the organization's defense.

"Our public information program was well within the letter and the spirit of the law," Taylor said. "The court's ruling doesn't change that fact. Importantly, the identity of our donors will continue to be protected."

Wood eventually might uncover the identity of the donors if he can convince a judge that the business association was functioning as a political committee.

He said a political committee has no First Amendment rights, an interpretation that state District Judge Joe Hart seemed to back last month.

In a separate lawsuit, Hart ruled that the treasurer of Texans for a Republican Majority, a political committee created by U.S. House Majority Leader Tom DeLay, R-Sugar Land, broke the law when it failed to report corporate money it spent on campaign activity.

A delayed defeat

The controversy over the use of corporate money in the 2002 elections began after Hammond boasted of his group's unprecedented use of the money to mail both positive and negative messages to voters. He explained that he used corporate money because it was easier to raise than money from individuals, the method typically used in campaigns.

Friday's decision is another defeat in a string of attempts to keep the business organization from disclosing information about its mail campaign.

For a year, the Texas Association of Business fought prosecutors' attempts to present information to a grand jury. Some of its officials even went to jail briefly for contempt of court.

Eventually the group turned over its documents, and some of its staffers appeared before a grand jury after courts from the district level to the U.S. Supreme Court refused to block the investigation.

This spring, Hammond was subpoenaed to testify in a lawsuit against Texans for a Republican Majority.

Hammond testified that he shared information, including mailers, with John Colyandro, the executive director of Texans for a Republican Majority. But Hammond contradicted testimony that the business group split up responsibilities for campaigns with Colyandro's group and Texans for Lawsuit Reform.