Morales Takes Federal Rap

Former Texas attorney general and 2002 gubernatorial candidate Dan Morales was indicted in federal court on March 6 on 12 counts, including fraud, conspiracy, and filing a false tax return. Among the charges is that Morales attempted to defraud Texas of a portion of its tobacco-lawsuit settlement to "enrich" his friend, Houston attorney Marc Murr, who was also indicted on three counts of mail fraud and one count of conspiracy. Morales and Murr both appeared in federal court March 7 and were released on their own recognizance, but Morales was ordered by U.S. Magistrate Andrew Austin to surrender his passport to the court. He and Murr deny all charges.

According to the indictment, from 1997 to 1999 Morales "devised and intended to devise" a scheme to convert political contributions for personal use by moving donations through campaign bank accounts into certificates of deposit and then into his personal bank accounts. In so doing, the indictment alleges, he defrauded the state, the Texas Ethics Commission, his contributors, "and others by converting political contributions to personal use and by making false representations to cover up the conversions." Among the allegedly ill-gotten gains detailed in the indictment is Morales' $775,000 home in West Lake Hills.

Morales is also charged with leveraging his power as attorney general to snag a hefty portion of the tobacco settlement -- nearly $261 million -- in fees for his friend Murr, who, the indictment alleges, did not work on the case. "It was part of the scheme that [Morales and Murr] made fraudulent representations, mischaracterized, told half-truths, exaggerated, and concealed material facts about ... Murr and the tobacco case in order to disguise payments received by ... Murr as legitimate attorney's fees," the indictment alleges. (By the way, none of the charges relates to Morales' brother Michael's plot to extort funds from Morales' opponent Tony Sanchez, a charge to which the younger Morales pled guilty in January.)

Former Chronicle and Texas Observer editor Louis Dubose, who is writing a book on the tobacco settlement, said he was not surprised by Morales' indictment. Dubose says he learned that Morales could be in serious trouble during his 2002 Democratic gubernatorial primary campaign against Sanchez. Morales was, in theory, spending campaign cash left over from his AG races on his 2002 campaign (he had not raised any new money since 1997), but Dubose said most of the campaign money was in fact being spent on criminal defense attorneys. "Morales had spent $516,627 of funds from his officeholder account, and $458,429 was spent on lawyers," Dubose says. "That didn't even include [San Antonio attorney] Gerry Goldstein, whom Morales was apparently paying out of his own pocket. When I read those filings, I knew he was in deep shit."

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