Pac Men

Among the Texas lobby elite, HillCo Partners stands apart. It has an influence and reach—stretching from the statehouse to the state Supreme Court—that almost gives it the status of a shadow government. Its partners are involved in nearly every big issue facing the state, from water policy to tort reform to changing the school finance system. In addition to lobbying, HillCo also performs public relations and campaign work. HillCo’s success in recent years has come in no small part from its extraordinarily close relationship with Texas’ Republican leaders, in particular, House Speaker Tom Craddick (R-Midland) and Governor Rick Perry. Also, it hasn’t hurt that the GOP’s number one contributor, Bob Perry (no relation), a Houston-based homebuilder, is a HillCo client. (During the 2002 election cycle, Bob Perry and his wife Doylene invested almost $4.1 million in state candidates, mostly Republicans, making the Perrys together far and away the most fecund campaign cash cow in Texas.)

HillCo represents a new trend in lobbying at the Capitol that started about a decade ago. Bill Miller, one of HillCo’s principal partners, calls it the “collective team concept.” In the past, trade associations dominated the profession. The influence of these trade associations waned for a variety of reasons, and in their stead arose independent lobbyists—usually former legislators who had occupied leadership positions. Under the new scheme, these “superstar” lobbyists have banded together to form partnerships like HillCo.

But HillCo is more of an innovator than simply part of a trend. Its participation in every aspect of the political process, from picking candidates to raising campaign cash to helping with elections to fashioning public policy, sets it apart. Another area where HillCo appears to be ahead of the pack is in the operation of its political action committee.

According to records from the Texas Ethics Commission, from 2000 until late 2001, most of the individual contributions that came into the HillCo PAC were from the partners in the firm. During this period, the campaign fund operated like a traditional lobby PAC where donations primarily came from employees or membership.

Among the PAC’s largest donors was HillCo partner Neal T. “Buddy” Jones, who signed the campaign reports. As the principal rainmaker for HillCo, Jones has 47 different lobby clients ranging from school districts to drug companies, according to filings with the Texas Ethics Commission. Between 2000 and 2003, Jones gave more than $50,000 to the HillCo PAC. The closest contributing partner after that was Miller, who gave just over $31,000 during that time period. The expenditures from the PAC went primarily to incumbent representatives and senators from both political parties, cutting across the ideological spectrum.

On December 3, 2001, the HillCo PAC contribution pattern changed. On that date, HillCo client Bob Perry gave the PAC $5,000, the single largest contribution from a non-HillCo partner. Three months later Perry gave the HillCo PAC $30,000. On June 14, 2002, Perry, whose company, Perry Homes, is the ninth-largest homebuilder in Texas, gave the HillCo PAC $15,000. Later that summer, he gave another $10,000, and in November yet another $40,000. In total, between 2001 and 2003, Perry would donate about $200,000 to HillCo’s PAC.

Why would a man, who gives millions in direct campaign contributions to political candidates, donate to a lobby shop’s political action committee? (Bob Perry—despite his over-sized role in Texas’ political system—seldom gives interviews to the press. Calls to the media-shy Perry for this story were not returned.)

While unwilling to make assumptions about Perry’s motives, campaign watchdog Fred Lewis lists possible benefits of contributing to a lobby PAC. If the contributor is a client, the donation enhances the power of his or her lobbyist, giving the lobbyist more money to influence politicians. And political consultants and big party players will know if the source of the money is from a lavish campaign contributor like Perry. “If you are getting contributions from the really big financial donors in this state, it suggests that, if you [the lobbyist] are unhappy with a legislator, you might be able to cut off the whole source of funds,” says Lewis, who heads the public interest group Campaigns for People.

Shuffling large campaign contributions through a lobby PAC also makes it more difficult for the general public to identify the source of the money, he notes. When people look at a candidate’s campaign report they will just see the PAC, not the original contributor. “You might [also] do it because you were putting so much money into the system that you were starting to become controversial,” speculates Lewis.

Bill Miller offered a third reason last year when the Dallas Morning News reported that Dallas Cowboys owner Jerry Jones and his family had funneled more than $141,000 through HillCo’s PAC between August and December 2002. Miller suggested that Jones had taken the unusual step of using the PAC as a stealth strategy against continual requests for contributions. (The Cowboy’s owner, a HillCo client, wants a new stadium paid for by increased hotel and rental car taxes in Dallas County. In the last regular session Perry signed a bill that would put that increase before Dallas County voters in 2004.) Miller’s rationale works less well for Bob Perry, whom everybody knows gives plentifully.

Another reason why a sharp businessman like Bob Perry might give to a lobby PAC like HillCo’s involves the state Supreme Court and its voluntary limits on campaign contributions.

In 1995 the Texas Legislature passed the Judicial Campaign Fairness Act. The new law codified voluntary campaign caps on contributions for statewide judicial campaigns. The caps were triggered when a candidate agreed to abide by them at the beginning of the campaign. The law laid out contribution limits for law firms, political action committees, and individual donors. If the candidate accepts the caps, they include $30,000 in the aggregate for a law firm or its members. The total from political action committees is set at $300,000 in the aggregate and $25,000 per individual PAC per cycle. The limit for individual contributions is $5,000. For purposes of the new law, an individual donor was defined to include children and spouses. So if Bob Perry gave $5,000 to a candidate for the state Supreme Court in a Republican primary, Doylene Perry couldn’t also give $5,000 to the same candidate. While the caps were not binding, the Texas Supreme Court had endured enough public ridicule in the eight years prior to the passage of the act that few candidates dared run the risk of flaunting them.

The nation’s focus on Texas courts as a fount of corruption started in 1987 when 60 Minutes broadcast a report titled “Justice for Sale.” Hosted by Mike Wallace, the segment focused on the influence of the plaintiff’s bar, which footed most of the judicial campaign costs for the Supreme Court justices. It was a time, as one columnist would write years later, when the Texas Supreme Court seldom saw a damage suit it didn’t like. In one famous instance, a Supreme Court justice reversed himself to swing a vote for a motion for rehearing after receiving a more than a $100,000 campaign contribution from a litigant.

Back then, the legal pendulum nationwide had swung toward the plaintiff’s bar and away from the defense bar. “I would say from 1965 to 1985, the academy, the Legislature, and the legal profession as a whole thought that lawsuits were dandy,” says Tom Phillips, who will step down as Chief Justice of the Texas Supreme Court in September. “You know, nothing better than a good lawsuit.”

Today, the pendulum has swung the other way. Now, the defense bar—fronting for big corporations—reigns supreme, and tort reform is the rage. In 1998, Mike Wallace and 60 Minutes returned to Texas to make the point that the faces had changed but the actions had not.

Almost precisely a month after Perry gave his first $5,000 to HillCo PAC in early December 2001, the lobbying firm donated the exact same amount to Republican Supreme Court candidate Wallace Jefferson, who had agreed to abide by the caps. Perry and his wife had already each contributed $5,000 to Jefferson—an apparent violation of the Judicial Campaign Fairness Act. (Jefferson says he tried to reimburse Doylene’s contribution but the Perrys lost the check. So instead, he opted to keep the $5,000 and put it toward a future campaign.) The Jefferson donation began a remarkable yearlong spree of Perry funneling money into HillCo and the PAC doling it out to campaigns. Up until that point, HillCo PAC had been in the habit of giving out donations in amounts no greater than $2,500.

On January 18th, 2002, Perry capped out with a $5,000 contribution to Republican Supreme Court candidate Dale Wainwright for the GOP primary. Perry would do the same for the general election cycle. A little more than a month after the January donation, the HillCo PAC started pumping money to Wainwright and Republican Supreme Court candidate Xavier Rodriguez. By March 21, HillCo had given a total of $30,000 in contributions to court candidates—$25,000 to Wainwright and $5,000 to Rodriguez. (Rodriguez lost the primary.) On March 20, the day before the last and largest installment to Wainwright of $15,000, Bob Perry gave HillCo PAC $30,000—the exact amount the PAC had spent on judicial candidates during that time period.

Did Bob Perry give money to HillCo to evade the caps on individual donations to court campaigns?

HillCo PAC partner and spokesman Bill Miller is quick to stick up for Perry. “That’s not his style,” he says. “He’s not duplicitous in that manner. He’s just too much of a straight-up guy.”

Miller says the firm’s members made their own decisions on the PAC’s donations, not Perry. But Miller also admitted to deliberately not sitting in on decisions involving money and the PAC. “I tried to stay out of that—that’s not because I’m afraid of contributions, heck I’ve given enough by myself,” he says. “I tend to keep a little bit of an arm’s length with that here.” A call to HillCo partner Buddy Jones for comment was not returned.

Supreme Court Justice Wallace Jefferson, who won his election and became the first black Texas Supreme Court justice, is also effusive in his praise for Perry. “I think Bob Perry is honest, straight-forward, and attempts to play by the book,” says Jefferson. “I wouldn’t expect him to evade any law.

“As far as I am concerned, the contributions to that campaign were all above board,” the justice says.

Jefferson notes that in a campaign that cost more than a million dollars, “in my mind, $5,000 is not a lot.” He bristles at the notion that contributors influence how he rules. “I apply the law impartially,” he says. “When the issue comes here to rest around the conference table, I can’t tell you what cases Perry has before the court.”

Justice Dale Wainwright says he doesn’t remember the contributions among the thousands he received. “My obligation and entire focus as a judge is to uphold the law and apply it fairly and consistently as written [for] everyone,” he says. “No contribution, no offer of support, no denial of support for my candidacy in an election is going to change my primary obligation.”

The only way to prove that someone has laundered money through a PAC in order to evade individual contribution caps is if the person admits doing so or some documentation is produced, according to the Texas Ethics Commission. It’s a hard standard to meet. “If the person who made the contribution to the political committee had earmarked it to go to the ultimate recipient, then the contribution is from that person,” says Karen Lundquist, the commission’s executive director.

The exact nature of the relationship between Perry and HillCo PAC might remain partially obscured, but it’s still worth asking the question: What might Bob Perry want from a friendly state Supreme Court?

One person who has some insight into possible answers to that question is Craig McDonald, who heads Texans for Public Justice. The group has long been an insistent voice for judicial campaign reform—usually by shining a bright light on who is paying for campaigns.

“[Perry] gives most often when he has a special interest at stake,” says McDonald. The state Supreme Court is just such a case, he believes.

“The Texas courts have been on a path to protect homebuilders like Perry,” says McDonald. He points to several issues that will likely face the court where a favorable ruling could save tens of millions of dollars for homebuilders like Perry and Dick Weekley, who heads up another big GOP giver, Texans for Lawsuit Reform. (See Andrew Wheat, pg. 8)

As of 2003, Perry Homes had been sued more than 60 times in the past 15 years, according to a search of court records. Now imagine if, instead of homeowners being allowed to sue builders like Perry for defective housing, they were forced into arbitration. Consumer advocates believe arbitration can sometimes be easier to tilt in the homebuilder’s favor than a trial ever would be. Binding arbitration has been a consistent issue in the state Supreme Court of late. The question of third party liability—whether the homebuilder is responsible to pay damages for the harmful actions of its subcontractors—is another issue often before the court. Then there is the matter of lawsuit award limits. “These are real issues that are near and dear to the bottom line,” says McDonald.

These days the argument can be made that contributions to Texas Supreme Court candidates don’t matter. In a Republican state, with a solid GOP court, an occasional lopsided primary battle or the need for a costly first-introduction to voters are about the only reasons money might be needed, according to this analysis. But it won’t always be that way. Eventually—sooner in some places than in others—the appellate courts will become competitive again as Democratic voters increase with changing demographics. That is why reform is urgent now, says Campaigns for People’s Fred Lewis. “[When competition increases] the incentive to cheat rises,” he says.

The most important reform available on the contribution side would be an aggregate limit on individual donations, Lewis believes. Under this scenario, a big donor like Bob Perry would only be allowed to give a fixed sum, say $25,000—the median income of your average Texan—in political contributions.

What kind of scandal it would take to shake such a reform out of the Legislature remains to be seen.

Observer intern Jeremy Brown contributed to this story.