Campaign Money Shuffle?

Six months after the Republican Party captured the Texas House of Representatives in a stunning election-night landslide, the question lingers: Was the victory fair and square?

Your answer may depend, in large part, on whether you're an R or a D. Republicans cheerfully acknowledge that their campaign umbrella groups procured millions from corporate benefactors, but insist that, as required by law, they kept corporate money separate from their direct political activities.

The PAC efforts were greatly responsible for garnering 26 House seats for GOP freshmen and were particularly generous with Austin candidates Todd Baxter and Jack Stick, winners in tight races. Former Travis Co. Commissioner Baxter defeated Democratic Dist. 48 incumbent Ann Kitchen, who faced two major disadvantages -- a newly drawn Republican district and a flood of GOP money. After beating Democrat James Sylvester in narrowly Republican Dist. 50, freshman Stick was rewarded with a coveted appointment to the all-powerful Appropriations Committee.

In all, 11 freshmen scored vice-chair positions on key committees from new Speaker Tom Craddick, who had House seniority rules changed to accommodate the appointments -- partly to promote inexperienced but loyal GOP reps to key positions and partly to bar experienced Democratic reps from the same seats.

Five major campaign organizations helped promote and underwrite newly minted GOP candidates. Public-interest watchdogs charge that at least two of the groups -- Texans for a Republican Majority and the Texas Association of Business -- may have illegally utilized corporate money to clinch control of the House.

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Business as Usual or Blatantly Illegal?

State law prohibits corporations and unions from funneling money directly to political campaigns, but it does allow such contributions for administrative expenses. "Corporations can either give the PAC money to pay for administrative expenses or they can pay [the expenses] directly," explained Karen Lundquist, executive director of the Texas Ethics Commission. "These are expenses that [they] would incur in the normal course of business. If the expenses are somehow attributed to a political activity, then they're not permissibly payable by a corporation," she continued. "If you're doing phone banking for a candidate, that would not be an administrative expense. You'd pretty much have to look at each activity to determine whether or not it was administrative."

Campaign finance laws are inevitably murky, but campaign finance reformers point to disclosure records (or lack thereof) for last fall's elections and say the inference is sufficiently strong to support allegations of wrongdoing. Several defeated Democratic candidates (including Kitchen and Sylvester) have filed lawsuits against T.A.B. or TRM, and a Travis Co. grand jury continues to investigate the undisclosed corporate financing of T.A.B.'s $1.9 million "issue ad" campaign. In that case, T.A.B. President Bill Hammond is fighting a subpoena requiring him to testify.

Reform advocates recently turned up the heat on Texans for a Republican Majority, a Craddick-directed political group whose national equivalent, Americans for a Republican Majority, was founded by U.S. House Majority Leader Tom DeLay. In a lawsuit filed earlier this month, two defeated Democrats, Paul Clayton of Orange and Mike Head of Athens, allege that TRM failed to report all of its political contributions and expenditures to the Texas Ethics Commission. Assistant Travis Co. District Attorney Gregg Cox, who runs the special investigations unit, says he has not yet decided whether to mount a new investigation into TRM's campaign finances, as the public-interest watchdog Texans for Public Justice requested in a March complaint. TRM "is definitely not part of the T.A.B. investigation," Cox said, "but we're still talking to a few people and looking at the law to determine whether we'll investigate or not."

Jim Ellis, a TRM board member and political adviser to DeLay, says critics should take a closer look at all registered PACs. "If we've done something improper, then so has every other PAC," he said. Ellis acknowledged TRM's corporate expenditures made to polling companies and political consulting and research firms, but he said those companies were retained strictly for the organization's benefit and not for any particular candidate. "We wanted to find out where people stood on issues, because that was for our long-term building of the organization. We conducted research to find out which people out there might be of like mind with our group, so we could ask them to join our group -- that's purely administrative in establishing and building our organization."

As for the like-minded people that TRM was able to identify, Ellis said, "We did not call those people on Election Day. We did none of that. ... If [Texans for Public Justice] has a problem with that, they need to go to the Legislature and change the law."

TPJ Director Craig McDonald believes that TRM's political action committee subsidized its campaign endeavors "to a huge degree" with corporate money. "It's odd that they would so blatantly and carelessly overstep the Texas law ... with no fear of retribution." McDonald charges that, of the more than $1.5 million that TRM-PAC contributed to political campaigns, at least $602,300 was illegal corporate money.

Financial records suggest TRM also may have laundered corporate money through the Republican National Committee. In one instance, TRM sent $190,000 to the RNC; two weeks later, the RNC sent $190,000 in separate checks to the campaigns of seven Texas House candidates including Baxter and Stick, who received $35,000 apiece. TPJ also points out that much of what TRM duly reported to the Internal Revenue Service, including the RNC contribution, is not disclosed in its state ethics filings, as required by law. In an e-mail response, Stick said he recalled TRM running several phone banks during the election season. "I think they included me in two of those banks, and I declared them on my ethics disclosure. As to where they received the money to pay for the phone banks, I am not advised of the origin of the money." (At press time, Baxter had not responded to phone calls or an e-mail requesting comment.)

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All in a Day's Work

Bill Ceverha, who served as TRM-PAC's treasurer and one of a trio of business lobbyists named to Speaker Craddick's transition team, dismisses all the allegations. "We have some sore losers on our hands," he said. Addressing the recent lawsuit filed against TRM, he says he had little knowledge of the corporate contributions made to the group. "I was a campaign treasurer and one of five board members," Ceverha said, "but the activities were run primarily by our executive director, John Colyandro." (Colyandro in turn deferred to Ellis for comment.) "I never saw any corporate contributions. I know they came in, but they are separate and apart from the PAC. They were filed with the IRS. In fact, that's where [TPJ] got their information, from public records, unlike their own organization, which does not file any information there."

"We file all the required IRS forms," responded TPJ's McDonald. "Ceverha can go look them up." He said his group is not required to file political expenditure reports. "Unlike TRM-PAC, we do not spend money to elect political candidates."

Ellis, like his fellow TRM board members, dismisses the whole controversy as much ado about nothing. "We have corporate funding sources, and they [Democrats] have the labor unions and trial lawyers. And labor unions give about 97% of their money to the Democrats -- they enjoy the best political support in the country." But contributions to the Dems from labor unions and trial lawyers do not begin to match the tobacco, oil, and telecommunications money going to Republican PACs.

"Both sides have more than enough resources," Ellis concluded, "but we did have a good year. People are more in line with our issues."