The First TRMPAC-related trial set the stage for the criminal process to come
Joe Crews is relating how he convinced his partners at the law firm of Ivy, Crews & Elliott to jump into litigation involving the 2002 election. “I told them ‘it’s going to be a pain in the ass, cost a lot of money, and take a long time to resolve,” he laughs.
On November 22, 2002, the firm had filed a lawsuit against the Texas Association of Business after its president, Bill Hammond, boasted that the TAB’s use of corporate cash “blew the doors off the November 5 general election using an unprecedented show of muscle that featured political contributions and a massive voter education drive.” As the TAB case languished on appeal, new facts emerged about the involvement of Texans for a Republican Majority (TRMPAC) in the 2002 campaign. The PAC, founded by U.S. House Majority Leader Tom DeLay (R-Sugar Land), had filed documents with the IRS that revealed more than $700,000 in corporate contributions that had not been disclosed to the Texas Ethics Commission.
Most of the legwork on the TAB case was performed by an intense and driven young lawyer at the firm named Cris Feldman. A good-government absolutist, Feldman traces his political awakening in part to his junior year of high school in Clear Lake outside of Houston, when he read an expose of the Sharpstown political scandal called “Texas Under a Cloud” by Sam Kinch. At the University of Texas Law School, he took an active role in organizing around diversity issues. Feldman was eager to delve deeper into the 2002 campaign. Long before others recognized it, Feldman saw that the newly elected majority was bought and paid for by special interests. “Secret corporate cash warps the electoral system,” he explains. “It’s out-of-state board rooms tampering with policy that’s supposed to benefit Texas living rooms.”
Crews also enlisted legendary Texas civil rights lawyer Dave Richards for the TAB case. “Nobody has ever done as much political, civil rights, gadfly, beat-your-head-against-the-wall litigation in Texas,” says Crews. Although the 72-year-old Richards is in semi-retirement in California, he maintains a relationship with the firm and joins in cases that interest him. TAB and TRMPAC were such cases.
Still, there were plenty of reasons for the firm not to take the TRMPAC case. The prospects of ever recovering fees were slim to none. The political subject matter and the powerful opposition would be enough to make most establishment lawyers shy away. The plaintiffs would be defeated candidates who usually don’t want to revisit electoral losses, especially since it can open them to charges of sour grapes or foreclose the possibility of a job as a lobbyist. And by the spring of 2003, the architects behind the TRMPAC and TAB campaign had triumphed, electing their speaker candidate, and achieving many of their legislative goals. What was the point?
“The ultimate point of this case was to enforce the election code and uphold the century-old principle that secret corporate cash should not influence elections and the Texas Legislature,” says Feldman.
It was precisely the nature of how the Republicans seized power and what they did with it that produced willing plaintiffs and a consensus among the politically active trial lawyers at Ivy, Crews & Elliott. “I told them, ‘let this be our contribution on the political end,’ and that’s how we got the firm to accept it,” recalls Crews.
On May 8, 2003, Crews, Feldman, and Richards filed a lawsuit against Bill Ceverha, individually and as treasurer of Texans for a Republican Majority. They would soon add as defendants Jim Ellis, whom Ceverha would identify at trial as “the decision-maker on the PAC” and John Colyandro, TRMPAC’s executive director. The lawyers filed the suit on behalf of defeated Democratic candidates Paul Clayton, Mike Head, David Lengefeld, Ann Kitchen, and Danny Duncan.
Plaintiffs alleged that the defendants were active in 21 state House races, including their own, funneling more than half a million dollars of illegal corporate expenditures into the campaigns and not reporting them. While the election code allows for corporate and union cash to be spent on administrative expenses, TRMPAC doled out the money for items that failed to meet that definition, such as polling, direct mail, research, political consultants, fundraising, and printing. Then they failed to report the expenditures with the state.
“TRMPAC held a private reception with candidates at the Republican State Convention paid for with corporate funds, gathered individual campaign plans, worked in tandem with other organizations or PACs, raised corporate money, funded political activity with corporate money and then chose not to report corporate money for political activity to the Texas Ethics Commission,” Feldman would detail at trial.
Leading up to the trial on February 28, 2005, documents entered into evidence from discovery became roadmaps for reporters to decipher one of the most audacious electoral efforts in Texas history. DeLay, pounded by other ethics charges, found himself, as Ceverha’s lawyer Terry Scarborough puts it, the “pink elephant” in the civil suit, not charged in Texas with any wrongdoing, but the focus of attention nonetheless. On September 21, 2004, a Travis County grand jury returned 32 criminal indictments against three individuals and eight corporations. The grand jury indicted Ellis, Colyandro, and Warren RoBold, a Washington, D.C.-based corporate fundraiser. RoBold and Ellis were both close colleagues of DeLay, with Ellis serving as director of the leader’s PAC, Americans for a Republican Majority. In an interview in 2003, Ellis told the Observer that DeLay had hoped to use TRMPAC as a model for other states. Thanks in no small part to Cris Feldman and his colleagues, it’s unlikely that will happen.
It’s not very hard to imagine Terry Scarborough seducing a jury. He has the look of a film star. One blogger at the trial compared him to Jack Palance. Decades of trial experience have burnished an easygoing folksy demeanor. His conversation is punctuated with amusing anecdotes delivered in a soft West Texas drawl. But bring up the topic of Cris Feldman, and Scarborough falls out of character a bit. He cannot hide his irritation. It’s a frustration that grew throughout the trial and culminated in a post-trial press conference where he blasted Feldman for dishonesty and unethical conduct.
“I don’t have great respect for Feldman for a lot of different reasons,” Scarborough says, while sitting in his spacious and well-appointed downtown office. (When asked about the attacks on him, Feldman, whose office is not much bigger than a walk-in closet, plays coy. “I have the utmost respect for Terry,” he says with a smile. “It really was a shame to see him lower himself like that.”)
Scarborough cites the 34-year-old Feldman’s lack of experience as one reason for their conflicts. The older lawyer began practicing around the time Feldman was born. Scarborough also dredges up charges that his predecessor, Andy Taylor, tried unsuccessfully to peddle. Taylor had originally both represented TAB, and TRMPAC and Ceverha but dropped out of the latter case. Crews speculates that Taylor wanted to focus on the more lucrative redistricting litigation; he subsequently charged the state more than $700,000 to defend the congressional redistricting plan passed by the newly minted Republican majority. Scarborough is a partner at the GOP-connected firm of Hance, Scarborough, Wright, Ginsberg & Brusilow. He says that he picked up the case through his partner, DeLay chum Kent Hance, a former state senator and congressman, who provided the connection with Ceverha.
Taylor had alleged Feldman solicited clients for the lawsuits and manipulated the criminal process for his benefit. Feldman denies both charges. Prior to Feldman’s joining Ivy, Crews & Elliott, he had worked as a staff attorney for the campaign watchdog Texans for Public Justice (TPJ). (Full disclosure: award-winning Observer contributing writer Andrew Wheat is a researcher at TPJ.) Craig McDonald, TPJ’s director, filed a formal complaint with Travis County District Attorney Ronnie Earle against TRMPAC. Scarborough believes that Feldman drafted the complaint as a way to leverage a criminal investigation on behalf of the civil suit. Feldman has sworn under oath that he did not write the letter.
But, the depth of Scarborough’s hostility to Feldman hints at something deeper: a clash of worldviews. What bothers Scarborough is precisely that the litigation was not about money. He quotes from one of his mentors who said that there are three ways to a great lawsuit: liability, damages, and a deep pocket; and the third is more important than the first two. “The judgment is going to be against Bill Ceverha. He can’t pay it. So even if they win, financially, they lose. That’s what tells you this case is about politics,” he says dismissively.
Despite a warning from Hance that defending Ceverha would be political, Scarborough says he approached the case somewhat naively, not realizing how much DeLay’s role in TRMPAC would elevate the story for the media.
Scarborough’s inability to accept that, in Crews’ words, “it’s just all us out there foolishly throwing our money away,” explains in part why the defense kept on looking for an ulterior motive like the TPJ connection. “That’s the way Terry and most lawyers perceive litigation,” Crews says. “The way Republicans like Ceverha perceive the world, nothing is ever done because people are fed up.”
According to Scarborough, Ceverha was eager to get to trial because he genuinely believes that he did nothing wrong and was only tenuously connected to TRMPAC. The corporate money did not have to be reported to the Texas Ethics Commission because the expenditures were not political, in that they were not directly related to electing a candidate. Scarborough took issue with the idea that corporate money cannot be used in Texas elections except to finance administrative expenses. The defendants were acting on the advice of their lawyers. Scarborough also questioned the constitutionality of the corporate prohibition and whether it is a violation of his client’s first amendment right to free speech.
After the indictments, the plaintiffs were forced to drop Colyandro and Ellis as defendants in the suit since the criminal proceedings took precedence. At the beginning of the trial, Feldman reminded Senior District Judge Joe Hart, “I want to be clear that they’re not here, and we can’t proceed as to them, and that does affect a portion of our presentation.” At the conclusion of the trial, this would cause some confusion. Originally, plaintiffs charged the men with civil conspiracy, violations of Chapter 253 of the Texas Election Code having to do with acceptance and use of corporate contributions, and violations of Chapter 254 of the same code involving the reporting of expenditures and contributions.
Feldman began his opening statements by using TRMPAC’s own words against it to make the point that its purpose was to “help Republican candidates successfully run and win campaigns in Texas.” He then led the judge through the many different ways in which TRMPAC had spent corporate cash without disclosing it in Texas. (See “TRMPAC in Its Own Words,” April 1, 2005).
When Scarborough’s turn came, he laid out his argument that the contributions and expenditures didn’t have to be reported. He then attempted to paint Ceverha, a state representative from 1977 to 1989, as someone who had very little interaction with TRMPAC, even going on vacation for much of the summer of 2002. The real “decision maker” was TRMPAC executive director John Colyandro. “And you will see a pattern of activity where John Colyandro makes decisions and does things, some of them even sending letters with Bill Ceverha’s name, that he never saw or approved or authorized, only to show that Bill Ceverha’s involvement was very minimal.”
Throughout the trial, witnesses would point to Colyandro’s involvement and responsibility in the enterprise, quite possibly deepening the former TRMPAC executive director’s legal troubles. But Colyandro’s attorney, Joe Turner, does not believe that the civil trial will have an impact on the criminal charges of money laundering and campaign violations that Colyandro faces. “Our position is that no one committed a crime here,” he says.
Next Ceverha took the stand. The 68-year-old former newsman has expressed bitterness about the process and by the end of his testimony his complaints of an “unfair system” poured forth. “It has cost a lot of money and a lot of time and a lot of stress in my family, and I wanted to have my day in court, and I’m finally getting it.”
However, he looked less than happy at the opportunity as he lashed out at the plaintiffs and their attorneys: “They have intimidated contributors. They have brought activities of TRMPAC to a screeching halt. The PAC, while still theoretically alive, has been inactive since we’ve gotten into this suit. And in that, they have been successful.”
The next day, reporters packed the courtroom in anticipation of the testimony of TAB President Bill Hammond, who had not been deposed in the case. In the 2002 campaign, TAB sent out 86 mailers and four million mail pieces as part of their $1.7 million “education” effort. Hammond testified how he coordinated closely with Colyandro and TRMPAC. Together they agreed that TRMPAC would pay for polling to identify voters and TAB would then mail to them. Individual campaigns were discussed, sometimes with the participation of a representative of Texans for Lawsuit Reform. Hammond’s testimony further strained the TAB’s definition of their independent issue campaign and could well come back to haunt him in civil or criminal proceedings.
The next day, TAB campaign consultant Chuck McDonald further detailed how the Republican effort worked. McDonald has already testified before the Travis County grand jury and the trial presented the first opportunity to hear what he likely told them. He detailed regular meetings between Colyandro, Hammond, and Mike Toomey, then a lobbyist but soon to be chief of staff to Gov. Rick Perry.
“The three individuals that I mentioned all would talk to me about the message and, you know, the strategy and those kind of things,” he testified.
McDonald portrayed the effort as massive, with huge amounts of mail being produced and sent out in a very short period of time. “We were very busy,” he said.
It was not until four days into the trial on March 3 that the focus shifted to the issue of a check for $190,000 in corporate contributions that was sent in September 2002 to the Republican National State Elections Committee in Washington, D.C. Two weeks later, on October 4, RNSEC sent the $190,000 back as seven now non-corporate contributions to Texas Republican candidates. In the criminal proceedings this transaction is alleged to have been money laundering and has resulted in felony charges against Ellis and Colyandro. Ceverha had testified that he was aware of the transaction and that it had been discussed on a conference call with
he TRMPAC advisory board, in which he did not participate. (This could have been of interest to staffers from the Public Integrity Unit of the Travis County District Attorney’s Office, who sat through the entire trial.)
Scarborough called Charlie Spies, a lawyer from RNSEC, as a defense witness. Conveniently, Spies himself had no personal knowledge of the transaction. Spies explained how corporate money was less valuable than individual contributions, since it carried certain prohibitions. Normally, when corporate money is sent to RNSEC, the exchange rate for hard money would be of a lesser amount. Spies described the TRMPAC exchange as “an ill-advised swap.” But he insisted that since it’s perfectly legal to send corporate money to RNSEC and for the organization to send hard money to Texas, there was nothing illegal about the transaction. The $190,000 was just a small sum of money in a larger pool that went back and forth between Texas and D.C. He then gave one of the more memorable quotes of the trial. “My comment would be, ‘so what?'”
To make a point in his cross-examination, Feldman had Spies stand in front of an easel. Together they went down the list of seven checks that RNSEC cut on the very same day, writing the amount and the check number of each on the easel. The numbers were sequential and totaled $190,000 exactly.
“Are you telling this Court that it was pure coincidence that TRMPAC sent $190,000 in corporate money up to RNSEC and then two weeks later RNSEC sent seven TRMPAC-supported candidates on the same date $190,000 in hard contributions? Is that your testimony today?” asked Feldman.
“I don’t know that I’d use the word ‘coincidence,'” replied Spies. “I don’t know?I don’t have personal knowledge of exactly why that money was sent down. What my testimony is, is that it’s irrelevant.”
Prior to closing arguments on March 4, Scarborough noted that plaintiffs had limited their scope to the reporting requirements of Chapter 254.
Are they conceding on the other points, Scarborough asked hopefully.
Crews argued that the indictments precluded them from presenting all their evidence on the conspiracy and Chapter 253 claims.
Scarborough protested to no avail.
It took two months for Judge Hart to deliver a preliminary ruling on the case. Scarborough read the draft opinion and knew that he had lost on every point but one. The lawyers for the losing Democratic candidates had read the statute to mean that liability allowed each candidate to recover twice the total contributions and expenditures that should have been reported for the whole election. If he had accepted this interpretation, Hart could have hit Ceverha with a judgment of almost $60 million. Instead he ruled that the plaintiffs could recover only for unreported TRMPAC corporate expenditures spent on their specific races. The judge came up with a total damage award of $196,660.
“If this was all about dollars, I would absolutely tell you this is a huge victory,” says Scarborough, “but I cannot tell you that because I’ve already said, this is not about the dollars. And so, because it’s about politics, I can’t describe this as a victory because on the political issue he ruled against us, that TRMPAC should have reported this money that it didn’t report.”
Hart went even further than that. He demolished TRMPAC’s freedom of speech argument. “As TRMPAC’s principal purpose, by definition and in fact, are supporting or opposing candidates as well as accepting political contributions and making political expenditures, I hold that campaign contributions and expenditures of TRMPAC need not meet the ‘express advocacy’ test to be reportable by its treasurer.”
The judge cited TRMPAC’s own words to bolster his opinion. He mentioned the group’s brochure to potential donors that stated that “[e]very dollar you contribute will go directly toward helping win the tough races in November.”
“TRMPAC did exactly what it represented to the public and contributors: dollars contributed were used in connection with campaigns for public office,” Hart wrote. “I do not believe that the legislature intended that a campaign treasurer could avoid performing his statutory duties by turning a blind eye to obvious facts.”
He also ruled against Scarborough’s broad definition of administrative expenses. And while Hart did not explicitly mention the $190,000 sent to RNSEC, he gave a de facto ruling on the matter by taking it into account when determining damages. He awarded Ann Kitchen $87,332 and Danny Duncan $57,332, which could only be arrived at by incorporating damages for the $35,000 and $20,000 respectively for each candidate that RNSEC sent back to their opponents.
Advocates who believe TRMPAC and TAB broke the law rejoiced in the belief that Hart’s ruling bolsters the criminal case. “I think it has strengthened the perception among all the players that the criminal prosecutions are legitimate,” says TPJ’s Craig McDonald.
But for Ivy, Crews & Elliott, the case is far from over and may well outlive the firm. (For reasons unrelated to the litigation, according to Crews, the firm will likely dissolve itself in the fall.) Hart’s letter of opinion was not a final judgment. The conspiracy and Chapter 253 claims are still outstanding and until they are either severed from the case or adjudicated, there can be no final judgment.
“What Judge Hart is saying is that Bill Ceverha has to wait; he gets his [Chapter 253] trial when Colyandro and Ellis get theirs and that’s not going to happen until Ronnie Earle gets finished prosecuting them in the criminal case,” says Scarborough, who believes that could be as late as 2007.
In the meantime, on August 5 of this year, the plaintiffs filed their request for attorney’s fees. Feldman, the driving force behind the lawsuit, has claimed 1,874 hours on the case, with Crews coming in a distant second at 486 hours. The firm is asking for a total of $745,849 from Ceverha. According to Scarborough, the former treasurer’s legal fees to date have been paid for with the last of the TRMPAC money, gifts, and from his own pocket. Ceverha has told reporters he may have to declare bankruptcy, although come October, when federal law changes, it could be more difficult.
Contacted on the phone last week, Scarborough took issue with the request for fees, believing that Ivy, Crews & Elliott didn’t separate out the time spent on the issues Hart did not rule on. And he still can’t temper his anger at Feldman, who he contrasts with Buck Wood, a trial lawyer also involved in a case against TAB. Wood has already reached several settlements with corporations that gave to TAB. “For [Wood] he’s all professional, it’s about making a few dollars,” says Scarborough. “I bet you Buck has already made $100,000 on this deal.”
Crews is more sanguine, both about the trial and the case’s future. “This will be a career case, in that it will take my entire career,” he says. “That’s okay. I can’t think of anything I’m doing that has more impact. By the time Feldman gets to be my age, maybe he’ll see some change.”