Page 4


FEATURE Business According to Dewhurst BY MICHAEL KING n September 2Z the Houston Chronicle endorsed David Dewhurst for land commis sioner citing his “strong business background ” That vague description, which apparently means “he made a lot of money in the oil business;’ echoes Dewhurst own campaign literature which says he has “built a successful company based on sound conservative business principle& ” In the newspaper reports as in the campaign slogan& the nature of those principles remains largely unexamined Although Dewhurst won his first election when he defeated Pasadena Senator Jerry Patterson in the Republican primary last spring, the Houston energy millionaire has been deeply involved in state politics for more than a decade. Dewhurst is one of about twenty major funders who have underwritten Republican candidates with huge donations, in a state that imposes no caps on individual contributions. In this election cycle alone, for example, Dewhurst has contributed more than $100,000 to the campaign of George W. Bush, while taking out $3,250,000 in unsecured loans for his own campaign fund of $4.2 million. That war chest has thus far generated a 7 point lead over his Democratic opponent, Richard Raymond, a state representative from South Texas. Dewhurst’s campaign bio also says he is “no stranger to economic adversity” and “to making the most out of resources available.” A lawsuit filed in Houston eleven years ago provides a closer look at Dewhurst’s victory over economic adversity, and a suggestive case study of Dewhurst’s methods in making the most out of limited resources: other people’s money. From court documents on file in Harris County, the Observer has learned that in 1987 Dewhurst and his company, Falcon Seaboard Oil, were sued by a former business partner for fraud and embezzlement, in connection with an investment in oil wells in Moore County. According to court papers and depositions on file in Harris County district court, Arnold Garcia, an attorney from Alice who now lives in Corpus Christi, accused David Dewhurst of fraudulently leading Garcia to invest $540,000 in three West Texas oil wells to be operated by Falcon Seaboard, even though Dewhurst knew the wells had not qualified under federal regulations as oil wells. Garcia’s suit charged that his investment was then wrongfully diverted by Dewhurst to promote his interests in a co-generation plant a plant which became the foundation of Dewhurst’s current multi-million-dollar fortune. Finally, Garcia charged that Dewhurst attempted to use his former partner’s consequent financial distress to force Garcia to sign a release of all claims against Dewhurst and Falcon Seaboard, in return for a loan of some of the money that Garcia had invested. In 1991, Dewhurst paid $1.2 million to Garcia and his attorneys in settlement of the lawsuit, even though Dewhurst contended that Garcia had earlier waived all claims against Dewhurst and his company. The settlement remains subject to an “agreed protective order,” whereby the parties agreed not to release any additional materials not already on file with the court. Contacted at his office in Corpus Christi, Garcia told the Observer he is willing to lift the protective order to allow public review of all the documentation of his lawsuit against Dewhurst. Asked if Dewhurst is willing to do the same, Mark Sanders, a spokesman for the Dewhurst campaign, declined to respond directly, but said: “David has enjoyed a very successful business career that has seen remarkably little litigation. In fact, he has either won or amicably settled the handful of lawsuits in which he has been involved. Arnold Garcia is actively helping David’s campaign in the Corpus Christi area, and we value his support.” Garcia is recuperating from a recent stroke, and is reluctant to discuss his lawsuit against Dewhurst. But when told of Sanders’ assertion that he is supporting the Dewhurst campaign, Garcia said simply, “That’s not true.” But even without the current testimony of the principals, the papers on file with the Harris County 333rd district court provide an eloquent, if incomplete, tale of the man ner in which David Dewhurst managed his businesses, treated his business partner, and made his fortune. According to Arnold Garcia’s court pleadings, Garcia and Dewhurst had done business together for several years and in 1985 were intending to jointly invest in a Texas co-generation project, when Dewhurst persuaded Garcia to invest in three oil three wells were specifically oil wells is important, because in this particular Panhandle field, mineral rights to drill for oil and gas had been severed that is, Falcon Seaboard owned rights to the oil but not the gas \(which were apparently owned by a comvestment funds were due for payment, Dewhurst knew that the wells did not have sufficient oil production to qualify as oil wells under federal regulations, but he failed to tell Garcia and took his money anyway. Asked in his deposition why he failed to inform his major investor of the problems with the wells problems that had the potential of making Garcia’s investment worthless 14 THE TEXAS OBSERVER OCTOBER 9, 1998