Party Time

How the state Republican Party spent $5 million in corporate campaign money


Dave Mann

Will the Republican Party of Texas join Tom DeLay’s Texans for a Republican Majority (TRMPAC) as shorthand for campaign malfeasance? As most Observer readers know, TRMPAC is under investigation by a Travis County grand jury for its use of corporate money in the 2002 election. But the amount of corporate cash TRMPAC marshaled is dwarfed by what the Republican Party of Texas spent in 2002. The state party raised and spent more than $5 million in corporate money in 2002. It was an effort that was unprecedented in size and complexity for a state political party. And it may have violated the law.

Some of the heftiest checks came from unlikely sources. On September 5, 2002, for instance, the for-profit nursing home company Health Care & Retirement Corp., based in far-off Toledo, Ohio, sent the Republican Party of Texas a corporate check for $150,000. The contribution, two months before the 2002 general election, seemed out of place. Health Care & Retirement Corp. runs several nursing homes in Texas, but it also operates homes in 15 other states. Moreover, Texas political parties had little use in the past for large amounts of corporate cash. Both the Democratic and Republican state parties had utilized just tiny amounts of corporate contributions that come with tight legal restrictions. It’s illegal in Texas to spend corporate or union money directly on political campaigns. It has been that way for 100 years now. (All electioneering must be funded with contributions from individuals or hard money from political action committees.) Political parties can spend corporate money only on overhead costs such as the phone bill or paper for the photocopier. So why would a nursing home company from Ohio give so much corporate money to the Republican Party of Texas in 2002?

Nursing homes were not the only corporate interest to donate to the RPT that year. They joined what appears to be a coordinated campaign to funnel corporate cash into the 2002 election. Their successful goal: capture the Texas House for the GOP for the first time in 130 years. Some of the actors in this scheme are well known to regular Observer readers. In September, the grand jury indicted three TRMPAC officials and DeLay aides and eight companies on 32 felony counts for funneling corporate money into Texas campaigns. The Texas Association of Business (TAB) and TRMPAC invested a combined $2.5 million in corporate money in the 2002 election. While Travis County District Attorney Ronnie Earle’s investigation has received most of the attention, Travis County attorney David Escamilla has also launched a probe into the Republican Party’s activities.

An in-depth analysis by the Observer reveals that the state Republican Party raised and spent more than $5 million in corporate money on the 2002 campaign. Much of it flowed from the very same benefactors—AT&T, Lockheed Martin, ACS, Reliant Energy, and firms owned by prolific Republican donor and hospital-bed magnate James Leininger—that funded TRMPAC and TAB. The Republican Party’s operation, however, was significantly more complex. The party wove corporate money through an array of state and federal accounts that appear to have exploited Texas’ weak enforcement of campaign finance regulations. There are existentialist novels that are easier to comprehend than the Republican Party’s 2002 campaign finance reports, which may have been confusing for a reason. The Observer analysis confirms findings that the Houston Chronicle first reported last spring: the Republican Party of Texas may have violated state law by spending $2.9 million in corporate money on political activity. As a result of a complaint by the campaign watchdog group Public Citizen, the Travis County attorney’s office began an investigation into how the party dispersed its money in 2002.

For three months, the Observer combed through thousands of pages of state and federal filings in an effort to decode how the Republican Party of Texas spent its corporate money in 2002. Those filings don’t reveal much, however. Records at the Texas Ethics Commission, the flaccid state agency that nominally oversees campaign spending, show only a long list of corporate money transfers between various Republican Party of Texas accounts. In the months before the 2002 election, the state party transferred $5.5 million in corporate money to various federal party accounts, according to the Federal Election Commission records. On September 6, 2002, the day after it received the Health Care & Retirement check, the state Republican Party shipped $900,000 to one of its federal accounts. That was fortuitous timing. Texas political parties can’t spend any corporate money, even for overhead, in the 60 days before an election. So the state Republican Party in 2002 simply sent all its corporate cash up to its various federal accounts. This appears to exploit a loophole in state campaign finance law. It’s impossible to be sure where the corporate money ended up, though. Once the money reached one of the federal accounts (the Republican Party of Texas Allocation Account, for instance, or the Texas Republican Congressional Committee), it’s impossible to track it any further. The money simply disappears into a pool of cash from various other sources.

All that’s available is a summary of the party’s finances at the Federal Election Commission (FEC). The FEC forms are filed under the name Republican Party of Texas Federal Committee, as well as the Texas Republican Congressional Campaign Committee and the Victory 2002 fund. (When a person has two aliases, it’s usually a bad sign. The same goes for a political party.) The complexity of the federal disclosure forms rivals anything the Internal Revenue Service has to offer. For anyone who hasn’t spent years researching campaign finance law, the FEC provides handy online guidebooks that read like cryptic VCR manuals.

Clearly, checks received by the party from corporate accounts were corporate money. Can the same be said about contributions from the National Republican Congressional Committee or the Republican National State Elections Committee or the National Republican Senatorial Committee? Contributions from all these committees must be traced back to their source to determine whether the money was indeed corporate. The good news is that all these committees have disclosure forms filed with the FEC, and the forms are available online. Unfortunately, they’re not searchable. That means anyone curious about how the Republican Party used its corporate cash must click through each page of each monthly report in search of about 22 corporate checks. Some of these monthly reports exceed 1,300 pages. To locate a contribution that appears on page 553, a member of the public must read through 553 forms to find it.

In this dim alley of accountability, it’s all too easy to exploit the regulatory system to mask illegal activity. The Republican Party of Texas appears to have taken advantage of the weak oversight of the Texas Ethics Commission and the FEC. The party seems to have manipulated the disclosure system so that much of its campaign finance activity is hidden under a tangle of forms, committees, and accounts. Still, if regulators were manning the controls, the state Republican Party’s activity in 2002 should have set off some sort of alarm.

The party appeared to use corporate money—potentially illegally—to pay for political activity. The Republican Party spent, according the Observer analysis, at least $11.3 million on unmistakably political expenses (polls, television ads, and so on). Those can be paid for only with noncorporate money. The party raised only $8.4 million in noncorporate money. That leaves a gap of $2.9 million in apparent political expenses that the party appears to have financed with corporate cash, a potential violation of state law.

To account for the $2.9-million gap between the party’s political expenses and the money it legally could use to pay for them, the party appears to have operated under an expansive definition of “administrative.†In 1995, the TEC issued an opinion that defined administrative costs as only overhead outlays like rent and utilities. The TEC decided that voter registration drives, party mailers, and printing costs were political activities, not administrative. Yet the state Republican Party seemingly reclassified some of those political activities as administrative expenses in order to pay for them with corporate cash. Among the items the Republican Party labeled as administrative, according to 2002 federal filings: $1,649,228 worth of party mailers, a $377,617 political phone bank effort, $188,721 for acquiring a list of Republican voters, $85,785 for a voter registration drive, and several million dollars worth of issue ads.

Wayne Hamilton, the executive director of the Texas Republican Party in 2002, didn’t respond to three calls from the Observer seeking comment, but he told the Houston Chronicle’s R. G. Ratcliffe in April that the party had not broken any laws.

Travis County attorney David Escamilla, who prosecutes misdemeanor offenses, has been investigating the Republican Party of Texas’ 2002 spending since last summer. According to press reports, party officials refused to cooperate with the investigation. The statute of limitations on misdemeanor offenses is two years from the date the corporate cash was spent. With time running out and a frustrated Escamilla preparing to file charges, a negotiated settlement between the two sides extended the time frame during which charges could be filed to June 2005, according to the Austin American-Statesman.

“I am not worried about the statute of limitations anymore,†is all Escamilla will say on the subject. “The investigation is continuing.â€

Whatever the outcome of the investigation, the companies who backed the Republican Party campaign have already benefited. During the 2003 regular session, AT&T, for instance, saw rival SBC’s prized telecom deregulation bill halted in the Lege. Reliant Energy blocked numerous pro-consumer bills and pushed through a favorable deregulation proposal of its own. The right-wing Leininger delighted in the passage of several treasured ideological bills, though his prized school voucher pilot program remains unfinished. Lastly, the massive rewrite of the civil justice code, known as House Bill 4 and its companion constitutional amendment Proposition 12, will save numerous business interests millions in potential damages.

As for Health Care & Retirement Corp., a company spokesman responded to emailed questions from the Observer this way: “We believe our contribution of $150,000 to the Republican Party of Texas complied with all applicable laws, including the Texas Election Code. We are not aware of any investigation, nor have we been contacted by any law enforcement or government agency, regarding this contribution.†Nevertheless, the nursing home companies had a substantial interest in GOP control of the Texas Legislature. Included in HB 4 is a specific section that caps jury awards against nursing homes. Now, no matter what a nursing home does to a patient in Texas, the victim can win at most $250,000 for pain and suffering. A large company like Health Care & Retirement Corp, stands to save tens of millions of dollars. Not a bad return for $150,000 in corporate donations.

Additional writing and reporting by Jake Bernstein.