Thursday, April 10, 2008

Telephone giant SBC spent as much as $7 million last year hiring 112 Texas lobbyists — and ended up with a new law that allowed it to charge what it wants for no-frills phone options, and made it easier to offer television service. The value of lobby contracts has risen virtually every year, soaring last year to anywhere from $146 million to $304 million — lobbyists are required to report amounts only in ranges — according to Texans for Public Justice, a nonpartisan group that tracks money in Texas politics. That's 77 percent higher than 1995 figures. Read the article at the San Antonio Express-News

Lobbyists' money talks — softly, but it's heard

San Antonio Express-News

AUSTIN — Telephone giant SBC spent as much as $7 million last year hiring 112 Texas lobbyists — and ended up with a new law that allowed it to charge what it wants for no-frills phone options, and made it easier to offer television service.

Insurance interests have contributed $414,095 in the past five years to the campaigns of the 18 legislative committee members who oversee insurance laws — and wound up with a homeowners' bill in 2003 widely seen as favoring the industry.

No one has proof that SBC's well-funded campaign to overhaul the state's telecommunications law, or the funneling of campaign contributions by insurance interests, led to victory at the Capitol.

But even the state's best-paid lobbyist says it would be naive to suggest that big bucks aren't effective.

Superlobbyist Russell "Rusty" Kelley knows special interest money often prevails. He represents those interests — and sometimes finds himself pitted against consumers.

"There isn't a level playing field," he said.

Last year, he earned between $4.4 million and $5.5 million representing 63 clients — and in turn donated $143,000 to legislators and state officials. He knows that to remain influential, he has to spend generously on candidates who later will, Kelley hopes, support his interests.

Kelley says he's not aware of any quid pro quo connecting money with legislation. Rather, the influence of the lobby is more subtle.

"If you're asking me if I'd give money if I didn't do what I do, the answer is obviously no," the 58-year-old Kelley said.

Welcome to the world of lobbying, where in Texas anywhere from 1,300 to 1,700 special interest representatives try to woo, sway and educate lawmakers into supporting their clients' pet causes.

For four days beginning today, the San Antonio Express-News will focus on the Texas lobby, tracking the money it spends and the influence it yields.

A review of thousands of state records shows legislation often is introduced by powerful lawmakers after lobbyists spend lavishly on their campaigns and entertain them.

Some of the most influential lobbyists once were legislators themselves, and often gain direct access to former colleagues right after leaving office.

Lobbyists work behind the scenes and they don't talk publicly about what they do. "It'd be the kiss of death," one lobbyist said over pizza at a trendy restaurant in downtown Austin.

As most states and the federal government consider various reforms to tighten lobbying restrictions, the lobby in Texas has grown increasingly powerful.

The value of lobby contracts has risen virtually every year, soaring last year to anywhere from $146 million to $304 million — lobbyists are required to report amounts only in ranges — according to Texans for Public Justice, a nonpartisan group that tracks money in Texas politics. That's 77 percent higher than 1995 figures.

Spending on food, entertainment and gifts has skyrocketed 179 percent over the same period, to $2.87 million last year from $1.03 million in 1995. Last year's figure amounts to about $15,900 worth of perks for each of the 181 lawmakers — more than double their $7,200-a-year salary.

Unlike the federal government and 22 other states, Texas has no cooling-off period barring lawmakers or their top aides from lobbying after they leave office, and has no cap on the money lobbyists or their backers can dole out in contributions, meals or entertainment.

The potential for abuse is enormous, and the state agency in charge of monitoring lobbyists has received 1,500 sworn complaints since its founding in 1992. However, the Texas Ethics Commission has never conducted a complete audit or subpoenaed a single document, or subpoenaed and met with a witness in person.

Since 1992, the commission has initiated only one sworn complaint, has conducted one formal hearing and has not forwarded a single case to a law enforcement agency for criminal prosecution, the commission acknowledged.

Jack Abramoff may have made Washington lobbying a bad word, but that hasn't put a dent in the lobby's influence in Texas.

Rookie lobbyist Scott Gilmore has spent $4,000 on meals since early 2005 for Texas lawmakers, their staff and others connected to his clients' largely prison-related interests. Sometimes he bought lunch for entire committees. Other meals were more intimate.

By the end of the session in May, four lawmakers whose names appeared on his itemized spending reports carried bills that would benefit his clients. At least one proposal, opening county jails to private companies selling commissary goods, became law.

Gilmore says the meals had nothing to do with what he described as a good first session.

"I can't imagine any legislator who's willing to be bought with a steak. The notion is absurd," he said.

Robert Stern, president of the nonpartisan Center for Governmental Studies in California, said a steak — or a campaign contribution — might not "buy" lawmakers, but it's almost certain to buy access by buying their time. "And time is worth a lot of money," Stern said.

Though deals probably are rare, Stern said lobbyists and their clients spend money on politicians because over time it's proved to be a good investment.

"It's hard to say, 'We've done a scientific experiment in the lab and here's scientific evidence of what money buys.' You can't prove it, but you can say that smart people don't waste their money."

Money dominates at the Capitol

Critics say the lobby, and the special interest money behind it, exerts a subtle but unmistakable influence on state lawmakers, bankrolling campaigns and in some cases subsidizing lavish lifestyles.

The line between lobbying and influence peddling can be narrow, attracting the interest of prosecutors when gifts and campaign contributions result in explicit agreements for votes or support of legislation.

Former associates of outgoing Rep. Tom DeLay recently pleaded guilty to a variety of influence peddling charges that have implicated several members of Congress in a federal investigation into the Abramoff bribery scandal.

The millions of dollars that lobbyists and their special interest clients pour into political campaigns and the legislative arena help give them access. Elected officials take their calls, invite them into their offices, and typically respond quicker than they do to ordinary citizens who are not financially invested or connected.

"The worst thing is that people are cynical," said San Antonian Kevin Colson, a dairy products exporter who specializes in Mexican trade.

"Money is dominating things today, and people are letting it happen," Colson said. "We have been sitting back on our laurels and forgot that the democratic process means that people participate. I think people are realizing it and starting to push back against corrupt, big money."

But for now, "small people really don't play in this game," said Craig McDonald, of Texans for Public Justice. He said most people seem to understand that "government is by and for the special interests and their lobbyists."

Lobbyists and their clients say they have every right to try to influence government with whatever resources they can muster.

"One of the things we won't do as an industry is apologize for petitioning our government," said Rick Gentry, executive director of the Insurance Council of Texas, a trade association that represents 540 insurance companies. "We hire a lot of people, we pay a lot of taxes and we invest heavily in our state and yes, we do petition our government and I don't find anything wrong with that."

Scandal can breed reform

Texas lobbyists number anywhere from 1,300 when the Legislature isn't in session to 1,700 when it is. At peak levels, the number amounts to more than nine lobbyists per state lawmaker. Each day, this group of men and women try to persuade politicians to push their clients' agendas, from cutting business taxes to deregulating utility rates.

Most work in-house for a single interest, like a corporation or a trade association. A smaller number of hired guns hang a shingle outside an office and work for whoever hires them. Some work alone, others in informal or formal partnerships. Some of the most successful are former lawmakers or former aides to lawmakers who cycle in and out of government.

Former state Rep. Mike Toomey briefly left his lucrative lobbying business in 2002 to become Gov. Rick Perry's chief of staff for one regular and two special legislative sessions.

Toomey wielded enormous influence. Some say he had too much.

"I can't tell you how often I was frustrated standing on the House floor and watching legislators walking out and come back in and say, 'Well, you know Toomey called me and I can't.' It all comes from the top down," former Democratic state Rep. Glenn Maxey of Austin said.

At least 19 lobbyists took in over $1 million last year.

The top earner appears to be Kelley, onetime aide to former House Speaker Billy Clayton. While he earned at least $4.4 million, it is impossible to discern the exact amount because Texas requires lobbyists to disclose their earnings only in ranges. Contracts over $200,000 are reported with an imprecise "$200,000 or more."

About 30 of the 1,700 lobbyists work for consumer or environmental groups, according to Texans for Public Justice. The rest represent business interests.

Schmoozers by trade, they're good for more than just a free meal or basketball game. They're experts on their issues and lawmakers often tap them for a briefing or for help drafting a bill or an amendment.

"Because we're citizen legislators and because there's no way we can be experts on every issue, we depend on people you can trust, which a lot of times are lobbyists who give you very good information," said Sen. Troy Fraser, a Republican from Horseshoe Bay who chairs the Business and Commerce Committee.

They often have been a source of scandal.

In the 1980s, Texas newspapers carried accounts of House Speaker Gib Lewis, on a trip to Mexico, living it up at an $800-a-night hotel paid for by the San Antonio law firm of Heard, Goggan, Blair & Williams. Four lawmakers spent four days on the ski slopes of Taos, N.M. — courtesy of the lobby.

And chicken magnate Lonnie "Bo" Pilgrim, with an interest in workers' compensation reform, handed out $10,000 checks in 1989 to key state senators on the eve of an important vote.

Such reports created an uproar and, in 1991, legislators were pressured into adopting a series of reforms. Among the most far reaching was the creation of an Ethics Commission, which voters passed as a constitutional amendment, to oversee the lobby; and disclosure laws requiring lawmakers to report gifts, meals and entertainment above a certain amount.

Almost overnight, the new laws put a halt to the excesses that had become synonymous with the Texas lobby. Lawmakers now are prohibited from such common practices as walking into a club and putting their drinks on a lobbyist's tab without the lobbyist being present.

But the lobby's influence didn't diminish. Lobbyists went from currying favors with meals and trips to currying favors with campaign money, watchdog groups say and spending reports suggest.

That's been the trend seen around the country, said Stern, of the Center for Governmental Studies.

"As you restrict what a lobbyist can do with gifts and travel, you make campaign contributions more important," he said.

Lobbyists and their firms gave upward of $4.3 million to the campaigns of House and Senate candidates in 2004, compared with the $1.5 million they spent on food, entertainment and gifts for lawmakers, their staff or invited guests.

"If you think lawmakers are being bought with dinners, you're missing the big story," said Andrew Wheat, research director for Texans for Public Justice, noting that far more influence stems from campaign contributions.

Influx of special interest money

It is the unlimited influx of special interest money in political campaigns where watchdog groups focus their ire.

In the 2002 election, for instance, more than $16 million in statewide political contributions flowed from a single ZIP code — downtown Austin, 78701, where lobbyists are concentrated — nearly four times the amount sent from any other ZIP code, according to Texans for Public Justice.

The impact of lobby money trying to influence election outcomes concerns some of the veteran lobbyists.

Campaign money matters more now than it has in the past, says one lobbyist, who didn't want to be identified for fear that speaking out would cause retribution against his clients.

"The system has changed in the last few years. I don't want to say that issues always mattered, but they matter less now than ever before because what happened is that a small group of clients with a tremendous amount of money control the system," the lobbyist said. "What you get is a small group of lobbyists controlling the money.

"I've had more members of the Legislature in the last few years tell me that they're for something and then not vote for it. In the past, they felt bad about it. Now, they say, 'That's where my money comes from,'" the lobbyist said. "What we're starting to see in the Legislature now is more concern about re-election and money and less concern about what's right for Texas."

The most effective groups are ones with enough money to play the game at both ends: trying to elect friendly politicians and also lobbying all members, said Scott McCown, a retired state judge who is now executive director of the Center for Public Policy Priorities, an Austin-based nonprofit organization that advocates for poor and middle-income Texans.

"If I've got money to change an election, it's going to be a lot easier on me to change your mind. If I'm only trying to change your mind on the basis of your intellect and patriotism, it's much harder," McCown said.

Lobby money buys more than just campaign mailers.

It funds — or is perceived to fund — the good life.

Sen. Frank Madla's primary defeat in March after more than 30 years representing San Antonio in the Legislature widely was seen as stemming from unflattering news reports that he took $1.7 million from his campaign funds over the past three years and used more than $19,000 of it on liquor; $7,000 on bottled water; and nearly $83,000 on an apartment in Austin.

Texas law bars politicians from using campaign funds for personal use, but it doesn't define personal use and it doesn't set caps. An apartment in Austin can be useful for a candidate with official business in the capital, but it can also be used to subsidize that candidate's lifestyle.

Lewis, of Campaigns for People, said the current system leaves Texas government agencies vulnerable to influence peddling.

He advocates putting limits on wining and dining and supports reforms ensuring that lawmakers get enough taxpayer-funded resources for their offices that they don't need — and are barred from taking — lobby money.

"They don't appear to be independent actors," Lewis said. "It would be like you and me driving a lobbyist's car and then saying we're independent. It's crazy."

Targeting state's insurance crisis

In the early years of this decade, Texas had an insurance crisis on its hands.

For a series of reasons, including a mold scare and largely unregulated prices, Texas homeowners saw insurance premiums skyrocket to more than double the national average. The price increases weren't enough, however, to reverse the huge losses insurance companies were reporting.

"State Farm was losing $50 million a month" by 2002, said Beaman Floyd, a longtime insurance lobbyist. "The marketplace was about to collapse."

In 2002, Gov. Rick Perry declared the situation a state emergency and assured homeowners they would get relief in the 2003 session.

Consumer advocates say it was a mostly empty promise.

Senate Bill 14, which passed on the very last day of the regular session, eliminated a loophole companies had used to skirt price regulation.

But it did little to decrease rates. Moreover, it eliminated the state's standardized comprehensive coverage policy, allowing companies instead to provide a complex array of coverage options. And it allowed companies to continue to use credit scoring — which critics say discriminates against the poor — in determining who gets covered and how much those who are approved pay.

In the years since, premiums have fallen about 5 percent — they remain more than double the national average — while losses have dropped 85 percent, says Alex Winslow of Texas Watch, a consumer advocacy group that opposed Senate Bill 14.

Consumer advocates have no evidence that insurance money directed at the lawmakers who write insurance legislation resulted in pro-industry legislation.

But insurance interests did give generously.

Between 2000 and 2005, insurance companies contributed more than $414,095 to the campaigns of the 18 committee members who oversee insurance laws, according to an Express-News analysis. In 2002, the year leading up to Senate Bill 14's passage, the total figure to committee members was $108,367.

Sen. Leticia Van De Putte, D-San Antonio, who sat on the committee and has received $45,528 from insurance interests over the past five years, acknowledged that the money spent by special interests "is getting obscene and scary."

She said she didn't know if Senate Bill 14 would have passed had the insurance industry not spent the money it did.

And though she ultimately voted for Senate Bill 14, despite reservations, she said it wasn't because of the contributions she received. She had offered a competing, unsuccessful, bill that was friendlier to homeowners. She felt SB 14 offered important compromises — and was the best Texans could hope for at the time.

"I'm going to do what's best for my constituents regardless of the contributions," Van De Putte said.

Rep. Larry Taylor, R-Friendswood, a longtime insurance agent himself, who was a leading proponent of the 2003 bill and who, since 2002, received $8,500 from the largest insurance interests, said: "I don't care who I get $1,000 from, if the bill's not right, I'm not going to vote for it."

The telecom bill comes calling

Such sentiments are echoed by lawmakers whether the issue is insurance rates or phone rates or prison contracts. Nearly everyone acknowledges the influence of big money in politics, and some say it troubles them. But all deny money ever has swayed their individual votes.

Last year, San Antonio's SBC (now AT&T) launched a massive campaign to overhaul the state's telecommunication laws.

It spent between $3.4 million and $7 million on contracts with 112 lobbyists. It gave $48,000 in political contributions last year to the 16 committee members who shape telecom legislation, according to an Express-News analysis of state records.

It wasn't the first big influx of SBC money into the political arena. Since 2000, the company has donated $149,000 to the coffers of committee members.

What did SBC go home with in 2005?

Senate Bill 5 died in the regular session but passed by an overwhelming vote in the second special session. Besides deregulating rates, it also enabled the telephone giant to negotiate a single statewide franchise in its quest to provide video service, rather than having to negotiate with individual localities as cable companies had been forced to do.

Consumer groups deplored Senate Bill 5.

"Consumers will have fewer choices and they will pay higher prices," said Ed Mierzwinski, consumer advocate for Texas Public Interest Research Group.

He said a campaign that cost SBC millions could now yield it "billions."

"Money talks and the phone companies know that," Mierzwinski said.

AT&T Texas President Jim Epperson said that his company does spend a considerable amount of money to lobby, but added that no amount of lobbying will persuade legislators to pass laws that don't serve their constituents. The company's goal, he added, is to educate lawmakers so that they explain the complex issues surrounding its industry.

"I wouldn't sell lawmakers short," Epperson said. "I wouldn't say lawmakers get their agenda from the lobby."

Fraser, the Republican chair of the Senate Business and Commerce Committee who's received about $26,7000 from large telecommunications interests since 2000, dismissed suggestions that SBC money translated into favorable legislation.

"The bill would have passed as it passed if they had spent zero. All their money had zero impact. And here's the reason: Nothing moves through my committee unless I agree with it," Fraser said.

Rep. Phil King, R-Weatherford, sponsored SB 5 and was the top recipient of large telecom interests' largess over five years, taking in more than $33,000 in campaign contributions. King did not return calls for comment.

Sen. Van De Putte received $29,000 over five years from large telecom companies, claiming the second highest amount of the committee members. She voted in favor of the telecom bill.

She bristled at even the hint that money might have swayed, or be perceived to sway, her vote.

"If I could be bought, I wouldn't be in the Legislature. My family loses $50,000 to $60,000 each session," she said of the earnings she forfeits from not being able to work as a pharmacist.

She said Senate Bill 5 wasn't a perfect bill and she fretted that local phone rates might rise slightly. But she ultimately supported it because she believed it would create jobs and would open the market to more competition. "It's a platform for the future," she said.

Last month, AT&T announced it was raising phone rates for about a third of its customers by an average of $2 a month.

Government-lobby lines blurred

Sometimes, lobbyists can have such insider status that the line between lobbyist and government gets blurred.

Such is the case of Bill Miller, who in 1998 formed a hugely successful lobbying firm with Neal "Buddy" Jones called Hillco Partners.

Four years after its formation, while still working at Hillco, Miller was tapped by Tom Craddick, who was set to become House speaker, to join his transition team.

While lobbyists had for years enjoyed close ties to top government officials, Miller became in essence a government insider for a few months, while keeping his day job representing big money clients.

While the arrangement deeply disturbed watchdog groups, there is no evidence to suggest either party engaged in anything unlawful.

Miller says he did nothing more than serve as Craddick's spokesman, something he has done on and off since the two became friends in the mid-1990s.

Craddick spokeswoman Alexis DeLee said Miller's role was limited to media-related matters, and added that there was no conflict of interest since the two had "been friends for a very long time."

Miller maintains a cozy relationship with the House speaker. In 2004, he helped arrange a private visit with the pope for Craddick, who is a devout Catholic, and his family. Miller went along. They all paid their own way.

"That was the biggest play of any lobbyist's career that I know of," said Tom "Smitty" Smith, who heads the Texas chapter of Public Citizen, a consumer advocacy group.

Hillco commands top dollar from clients, who last year paid as much as $7 million for its lobbying services. That put Hillco third among all lobby firms in the value of contracts.

It has also gotten into the business of giving money, much of it coming from other people.

It established a political action committee, Hillco PAC, which has raised almost $1.4 million for candidates since 2000. Since 2002, it's given $136,000 to Gov. Perry and $110,000 to Lt. Gov. David Dewhurst. Speaker Craddick has collected $26,000 from Hillco since 2000.

One former lobbyist complained that the rise of groups like Hillco have shut out other lobbyists, creating in effect a cartel. "It's a fixed game," he said.

McDonald, of Texans for Public Justice, sees a different problem.

"When contributions come from the Realtors' association, you know the source of the money," McDonald. "When it comes from Hillco, it really muddles the source."

Weak oversight from commission

The 35 or so employees in charge of monitoring the Texas lobby and, more generally, the state's elections system work on the 10th floor of a large granite building overlooking the Capitol.

The Texas Ethics Commission was set up by constitutional amendment in 1992 to regulate elections and to protect the public's right "to apply to their government for the redress of grievances."

The agency is in charge of collecting and maintaining campaign records; leveling fines for late filings: taking questions from the public; and investigating complaints of code violations.

In the years since its establishment, the commission has never completed a thorough audit, or subpoenaed a document and even met in person with a witness. Nor has it ever initiated an investigation, the commission acknowledged in response to an open records request.

"There's no one watching," said Fred Lewis, director of the watchdog group Campaigns for People.

The commission's executive director, David Reisman, refused to explain why the agency has not been more aggressive, saying through a spokesman that the commission did not grant formal interviews.

Watchdog groups say the problem is that the agency is beholden to lawmakers whom it — at least in theory — polices.

"You can't expect it to be efficient," said McDonald, of Texans for Public Justice. "It's a good library but we shouldn't expect it to be a cop."

Two former commissioners and a 2002 review by the Sunset Commission all concluded that the agency had been paralyzed by draconian confidentiality laws, which have not applied to other state agencies and which until at least 2002 barred employees from even discussing complaints with third parties or contacting law enforcement agencies.

Changes to the law in 2003 have apparently done little to change the agency's culture.

"They cannot go as far as they need to, there's no question about it," said Ralph Wayne, the commission's immediate past chair who stepped down last fall. He said the confidentiality statute needed to provide still more protections to staff, who, if convicted of violating the confidentiality statute, face fines of up to $14,000 and as much as a year in jail.

Cleaning up excesses

Top-earning lobbyist Rusty Kelley said he sometimes finds it painful to pick up the newspaper.

Kelley grew up in a small West Texas town and bears none of Jack Abramoff's flamboyance. He credits his success to luck, and help from others.

Kelley understands the public is turned off by the commingling of special interest money and politics.

He said he'd support strict limits on campaign donations, but adds that for the time being, "It would be naive to suggest that I could not participate in these re-election efforts."

With surprising candor, Kelley said watchdog groups have a point when they talk about a political system dominated by big money interests. Though he believes his work normally pits big business against big business, sometimes he goes up against community interests, and knows they probably won't stand a chance.

He doesn't offer any solutions except to say he may not remain in the business forever.

Longtime lobbyist Jack Gullahorn has done more than most to clean up the excesses that surround his profession.

Five years ago, he formed an advocacy group for lobbyists known as the Professional Advocacy Association of Texas.

He hopes to improve the profession's standing with the public. The only way that will happen, he said, "is if we're perceived to be acting ethically."

He's signed up about 100 individual lobbyists, including many of the top players, and several corporations.

Gullahorn educates them on the minutiae of state lobby laws. Every week or so, he includes a new Compliance Tip on his Web site,, and he holds an annual conference — last year's was sold out — on the various dos and don'ts.

And he lobbies, too. Last session, he helped push through a bill that in effect, allows lobbyists to send a holiday turkey to a lawmaker's home without having to be present when it is eaten. "We do a lot of little things like that."

A believer that disclosure generally works better than restrictions, Gullahorn isn't prepared to call for campaign limits, at least not yet.

"We can't save the world," he said. Campaign limits "are on our radar screen but they're secondary."

While the lobby scandal simmers in Washington, few people expect major ethics reform to pass in Texas.

Rep. Craig Eiland, D-Galveston, wrote last year's proposal to bar corporate and union money from being spent on mailers in the last weeks of a campaign. Although it had 89 co-sponsors in the House, the measure was defeated, an outcome largely attributed to opposition from Craddick. Craddick has said he was neutral.

Eiland said he will file the same bill next session, but he's not optimistic. And he hasn't thought about proposing limits on individual or corporate campaign donations.

"I don't know that people would go for that," he said.

Lewis, of Campaigns for People, predicted meaningful reform would probably fail because of opposition from two sectors: lobbyists and lawmakers.

Lobbyists aren't wasting any time even though the November election is still months away and the next regular legislative session doesn't start until mid-January.

Lobbyists organized a fundraiser last month for Republican Dan Patrick, who won the primary election to fill an open Houston state Senate seat. Eight people signed up to host the event at the Austin Club, where most politicians hold their fundraisers. Every sponsor was a lobbyist.

And Patrick won't even join the Legislature for another 272 days.

Staff Writer Gary Scharrer and News Researcher Julie Domel contributed to this report.

As originally published this article contained an error.