Million Dollar Man

by Robert Bryce

  

photo of James Leininger

James Leininger

John Sharp didn't loseto Rick Perry. Nor did Paul Hobby lose to Carole Keeton Rylander. Rather, it appears, the two Democrats lost their races to James Leininger's money.Leininger, a San Antonio multimillionaire with an ultra-conservative bent, helped guarantee two loans shortly before the November election -- $1.1 million to Perry on October 25 and $950,000 to Rylander on October 1 -- that likely made the difference in the races for lieutenant governor and comptroller. Those were the closest races on the statewide ballot. Perry beat Sharp by 68,700 votes. Rylander beat Hobby by just 20,223 votes in one of the closest statewide races in Texas history. In each race, about 3.7 million votes were cast. Sharp lost by 1.8% of the vote, Hobby by just 0.55%.

Handicapping political races is an inexact science. And there is no way to prove that Leininger's loans were the decisive factor in the two races. "It's almost impossible to narrow down the result to a single thing," says Bruce Buchanan, a professor of government at UT. "But when the races are as close as those two races, it's reasonable to suggest that money like that may have made the difference."

Leininger's money certainly provided critical ammunition to both GOP candidates. Consider these facts:

  • Over 10% of the $10.3 million that Perry raised before the election came from a loan guaranteed by Leininger and two other businessmen.
  • Nearly 25% of the $3.85 million that Rylander raised in the year prior to the election came from a loan guaranteed by Leininger and four others.
  • On the same day that Leininger's loan was approved, Rylander's campaign wrote a check for $850,000 to National Media in Alexandria, Va., for media buys.
  • Within five days of getting their loan money, the Perry campaign spent over $1 million on media, with the bulk of that -- $966,000 -- going to David Weeks & Co., Perry's Austin-based media consultant.
  • Leininger's money came at critical times for both campaigns. When Rylander got the money, she was trailing Hobby in the polls, and being outspent by more than two to one. From July through September, Hobby had spent $3.7 million to Rylander's $1.7 million. In late October, when Perry got his loan, he was in a dead heat with Sharp, with polls showing both candidates with 37% of the vote. And Sharp was outspending him by a margin of nearly three to one -- $6.8 million to $2.3 million, from July to September.

Weeks, who did the media buys for the Perry campaign, discounts the notion that Leininger's money catapulted Perry to victory. "We stayed competitive all the way through," said Weeks. "Even without the loan, we would have been competitive."

But would Perry have won without Leininger's money? "Yeah, he would have won," said Weeks, who added that buying TV time at the end of a campaign is difficult. "We did increase [TV] buys at the end of the campaign, but not significantly. It was not a huge amount. We were already pretty maxed out. It's hard to plan for because you assume it's going to be sold out." However, Weeks conceded, "Every dollar helps. But it's an assumption to say they [Perry and Rylander] would have lost without [Leininger's money]."

Reggie Bashur, a political consultant to Rylander (and paid lobbyist for the city of Austin) refused to comment, saying he was not authorized to speak for the Rylander campaign. Messages left for Scott McClellan, Rylander's campaign manager, were not returned.

Kathy Miller, deputy director of the Texas Freedom Network, has no doubt that Leininger's loan made the difference. "When you have a race as close as the Sharp-Perry race, one or two million dollars can make one, two, or three percentage points difference," she said. And Miller argues that Leininger's activities "undermine the power of the electorate to see what they want done. It weakens Texas' democracy."

Miller's group is one of several that are working to counter Leininger's influence. Much has been written about the reclusive hospital bed magnate, whose net worth has been estimated at $340 million (see "Wallet and Spirit," p.22). And to be fair, he did not provide the loans to Perry and Rylander by himself. The Perry loan was co-signed by chemical company executive William McMinn of Houston and telecommunications executive James Mansour of Austin, who chairs the pro-school voucher group, Putting Children First. Leininger and McMinn also co-signed the note for Rylander, along with Harlan Crow of Dallas, Kenneth Banks of Schulenberg, and J. Virgil Waggoner of Houston.

But although the other co-signers on the loan have deep pockets, none can match Leininger's network of influence, nor can they match his record of dumping big money into political campaigns. In 1996, according to figures compiled by the Houston Chronicle, Leininger's political contributions topped $550,000. His political donations and loans in 1998 may well exceed that amount.

Leininger underplays his role in the elections, saying his cash donations were far less than his loans to candidates, and that it is deceptive to count the loans he co-signed.

"It's just a lot of talk," Leininger said in a story in Wednesday's San Antonio Express-News. "I don't have any desire to be a player or a powerhouse."


Taking Stock

One member of the Sharp campaign estimated that Leininger, along with other advocates of school vouchers, contributed some $700,000 to Perry's campaign. As an individual, Leininger gave Perry $56,908. In addition, three of Leininger's brothers and his mother all gave money to Perry, with contributions ranging from $1,000 to $25,000. Perry's connections to Leininger also include stock and airplane deals. Perry made $38,000 trading stock in Leininger's hospital bed company, San Antonio-based Kinetic Concepts. And in 1996, Perry's campaign bought a 10% interest in a 1980 Piper Cheyenne I turbo prop airplane, while Leininger and his brother, Peter, bought the other 90%. In 1997, the Houston Chronicle quoted Leininger as saying that Perry convinced him to buy the plane. "Rick's the guy who talked me into getting an airplane," he said. In July of 1997, the Perry campaign bought the Leiningers' 90% interest in the plane for $346,000, a price that Sharp loyalists insist was far below its market value. Perry's campaign manager, Jim Arnold, defended the price to the Houston Chronicle, saying the plane was worth less than planes of similar vintage because of the high number of hours on the engines.

photo of Carole Keeton-Rylander
Carole Keeton-Rylander

photograph by Alan Pogue

The Leiningers not only sold the plane to Perry's campaign, they agreed to finance the purchase as well. According to Perry's latest expense report, on December 1, the campaign paid Convenant Aircraft Investment Inc., a company run by Daniel Leininger, $3,040 for "airplane expenses." Ray Sullivan, Perry's spokesman, said that the Perry campaign has "approximately $300,000 outstanding on the airplane loan" that Covenant made to the campaign, and that the campaign makes payments to Covenant on a regular basis to pay it off.

In spite of Leininger's close ties to Perry, Sullivan said, Perry "owes one group of people in Texas, and that's the citizens who put him in office and entrusted him with that office. He owes nothing to any of our donors and contributors. He owes everything to the citizens of the state."

Perry may owe everything to the citizens. But is it true that he and Rylander owe nothing to Leininger? If nothing else, the two officeholders are making sure that they stay in the good graces of the Texas Public Policy Foundation (TPPF), a conservative, pro-school voucher think tank which gets the bulk of its financial backing from Leininger. Tuesday night, all of the statewide elected officials, including Gov. George W. Bush, attended the TPPF's 10th anniversary dinner, at $250 per plate, at the Four Seasons Hotel. And on Feb. 3, Rylander is scheduled to be the keynote speaker at the foundation's "1999 Legislative Conference" at the Four Seasons Hotel. Topics for discussion at the conference include "government downsizing" and "school choice."

TPPF is working hard to shape this year's legislative agenda. It is also hoping to get conservative operatives into state jobs. TPPF recently formed a "job bank placement service." The agenda, according to TPPF's Web site, is "to help place conservatives with public policy oriented employers." Toward that end, TPPF has posted a long questionnaire on its site (http://www.tppf.org), asking job applicants to indicate how much they agree or disagree with a list of statements including: "Communism has been sent to the trash can of history. There is no chance it will resurface as a serious threat to world peace." And, "Busing of school children to achieve racial balance is wrong." The application also asks prospective employees to rank their feelings toward individuals from a wide political spectrum, including U.S. Rep. Lloyd Doggett, former Democratic Gov. Ann Richards, and Nobel Prize winner Alexander Solzhenitsyn. Other politicos -- presumably the ones who are more politically palatable from the TPPF perspective -- include Gov. George W. Bush, Senator Jesse Helms of North Carolina, conservative radio man Rush Limbaugh and -- surprise! -- Rick Perry and Carole Keeton Rylander.

photo of Rick Perry
Rick Perry

photograph by Alan Pogue

In a January 8 column in the San Antonio Express-News, Rick Casey quoted TPPF president Jeff Judson as saying that Rylander had given the group "strong encouragement" for its job bank effort. And Judson told Casey that the comptroller's office "is the one institution that will probably use this more than anybody. ... Over time, there will be a shift of the focus of that agency. They'll need the people who are consistent with that policy," he said.

Two weeks after Casey's column appeared, Rylander spokesman Keith Elkins wrote a letter to the paper saying that Rylander was "informed in passing of the job bank, but at no time did she support, endorse, or make any commitments about the service."

For his part, Perry made certain that he paid back Leininger's loan. Records show that his campaign paid off the $1.1 million loan on December 17, an amazingly short turnaround. How did he do it? In part, by leaning on lobbyists. After the election, several lobbyists who had supported Sharp were contacted by Perry's campaign and told that they were expected to help retire Perry's campaign debt. In some cases, they were given specific amounts of money to raise and/or contribute, with amounts ranging up to $50,000. Said one lobbyist who asked not to be identified, "There was no direct mention of the Leininger loan, but you don't have to do any high math to put two and two together. Most of the people who were contacted understood where that debt came from."

Sullivan insists no fundraising quotas were given, and dismisses the complaints as "sour grapes from lobbyists whose guy lost the election." Perhaps so. But questions about Leininger's influence on Perry and Rylander will undoubtedly continue, particularly as the issue of school vouchers becomes more prominent.

Sharp, an opponent of vouchers, says he has no choice but to admire Leininger's effectiveness. "I congratulate Leininger," the former comptroller said. "He wanted to buy the reins of state government. And by God, he got them."