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USA: DeLay's Corporate Fundraising Investigated

by R. Jeffrey SmithWashington Post
July 12th, 2004

In May 2001, Enron's top lobbyists in Washington advised the company chairman that then-House Majority Whip Tom DeLay (R-Tex.) was pressing for a $100,000 contribution to his political action committee, in addition to the $250,000 the company had already pledged to the Republican Party that year.

DeLay requested that the new donation come from "a combination of corporate and personal money from Enron's executives," with the understanding that it would be partly spent on "the redistricting effort in Texas," said the e-mail to Kenneth L. Lay from lobbyists Rick Shapiro and Linda Robertson.

The e-mail, which surfaced in a subsequent federal probe of Houston-based Enron, is one of at least a dozen documents obtained by The Washington Post that show DeLay and his associates directed money from corporations and Washington lobbyists to Republican campaign coffers in Texas in 2001 and 2002 as part of a plan to redraw the state's congressional districts.

DeLay's fundraising efforts helped produce a stunning political success. Republicans took control of the Texas House for the first time in 130 years, Texas congressional districts were redrawn to send more Republican lawmakers to Washington, and DeLay -- now the House majority leader -- is more likely to retain his powerful post after the November election, according to political experts.

But DeLay and his colleagues also face serious legal challenges: Texas law bars corporate financing of state legislature campaigns, and a Texas criminal prosecutor is in the 20th month of digging through records of the fundraising, looking at possible violations of at least three statutes. A parallel lawsuit, also in the midst of discovery, is seeking $1.5 million in damages from DeLay's aides and one of his political action committees -- Texans for a Republican Majority (TRMPAC) -- on behalf of four defeated Democratic lawmakers.

DeLay has not been named as a target of the investigation. The prosecutor has said he is focused on the activities of political action committees linked to DeLay and the redistricting effort. But officials in the prosecutor's office say anyone involved in raising, collecting or spending the corporate money, who also knew of its intended use in Texas elections, is vulnerable.

Documents unearthed in the probe make clear that DeLay was central to creating and overseeing the fundraising. What the prosecutors are still assessing is who knew about the day-to-day operations of TRMPAC and how its money was used to benefit Texas House candidates.

Several weeks ago, DeLay hired two criminal defense attorneys to represent him in the probe. He previously created a fund for corporate donors to help him pay legal bills related to allegations of improper fundraising, and is now considering extending its reach to include the fees for these attorneys.

DeLay declined to comment for this article. Stuart Roy, his spokesman, said: "DeLay is doing everything moral, legal and ethical to increase the Republican majority and advance conservative ideas. He raised legal campaign money for effective political activity and that makes his critics enraged. Unfortunately, some Democrats are making an attempt to criminalize politics."

Cristen D. Feldman, the Texas lawyer who filed the suit, said in response, "I guess DeLay and his team forgot they were from Texas . . . [where] the prohibition against clandestine corporate cash is 100 years old."

Many corporate donors were explicitly told in TRMPAC letters that their donations were not "disclosable" in public records. But documents from several unrelated investigations offer an exceptional glimpse of how corporate money was able to influence state politics -- and also of DeLay's bold use of his network of corporate supporters to advance his agenda.

By investing as much as $2.5 million in corporate money in the 2002 election, TRMPAC and another group, the Texas Association of Business, were able to help elect 26 new Republican candidates to the Texas House. The new Republican majority then redrew the congressional district boundaries and, as a result, five Democrats are likely to lose in the Nov. 2 election, according to political experts.

This case "is only one piece of a much larger picture," said Ronnie Earle, the Travis County district attorney running the investigation. "And the larger picture is a blueprint of what is happening in the country, namely a saturation of the political process by large corporate interests with large amounts of money."

Earle, an elected Democrat who oversees the state's Public Integrity Unit, previously prosecuted four elected Republicans and 12 Democrats for corruption or election law violations. So far, he has issued about 100 subpoenas in this case, most of them secret.

Texas is one of 18 states that bar political contributions from corporations for election purposes. But the law has an exception for expenses incurred by political action committees. At issue in Earle's probe, and the lawsuit, is whether the law permits corporations to finance only routine administrative expenses, such as rent, as an official of the Texas Ethics Commission contends, or whether the law permits corporations to finance virtually any activity besides direct contributions to candidates, as TRMPAC's lawyer contends.

The Texas statutes involved -- barring the acceptance of prohibited contributions, the donation of corporate money for improper purposes and the expenditure of money for unauthorized uses -- have been invoked in only a few previous cases. Violations are punishable by as many as 10 years in prison.
Requests to Enron

DeLay's effort to build a Republican majority in the state legislature by channeling large campaign donations to Texas from lobbyists and corporations with interests before Congress dates at least from the 2000 election.

In an e-mail dated July 24 of that year, Enron Executive Vice President Steven J. Kean advised colleagues that DeLay had sent notes to company executives "about designating portions of their contributions for use in Texas."

Three days later, Enron sent a check for $50,000 to the Republican National State Elections Committee (RNSEC) in Washington, and three top executives sent checks totaling $25,000. Around the same time, RNSEC transferred $1.2 million to the Texas Republican Party, which in turn donated $1.3 million to 20 legislative candidates that year, according to federal and state records.

Public records do not track the final destination of the Enron contribution. But Republican National Committee spokeswoman Christine Iverson said any corporate money sent to Texas by RNSEC was spent only for allowable purposes.

In 2001, DeLay assisted Enron in its efforts to secure deregulation legislation. Houston business lobbyist Anne Culver also sent executives at Enron and other energy firms an e-mail in March of that year stating that "Mr. DeLay is interested in what he and the other congressmen may be able to due [sic] legislatively to assist in addressing some of the issues we have" with new pollution-control rules.

DeLay's daughter, Dani Ferro, played a role in arranging access for corporations that gave money to DeLay's project and earned fees for planning fundraising events. On Oct. 10, 2001, Ferro called Enron's Washington-based lobbyists to remind them of an upcoming fundraising event in Florida. "As part of platinum sponsorship, we have the opportunity to have a dinner with Congressman DeLay either here or in Houston," said an e-mail from lobbyist Carolyn Cooney to colleague Linda Robertson. "Dani wants to know" when to schedule it, Cooney added.

Roy, the DeLay spokesman, said there was nothing unusual about DeLay's contacts with Enron, a major local employer that had not yet become notorious for accounting fraud.

Ferro, who has not been named as a target in the investigation but has turned over documents to the grand jury, declined to be quoted for this article.

For a Republican Majority

The efforts to collect money from Enron represented a small part of DeLay's overall campaign to build a GOP majority in the Texas House. DeLay conceived of TRMPAC as a way to counter Democratic spending and pour new money from corporations and their executives into the redistricting effort.

TRMPAC's startup expenses in 2001 were covered by $50,000 in corporate money from DeLay's principal political action committee, Americans for a Republican Majority (ARMPAC). A second payment of $25,000 was made in late 2002. TRMPAC then raised $525,000 in corporate money on its own, and spent less than $70,000 on its director's salary; the rest went mostly toward fundraising, receptions, polls, candidate evaluations, voter identification and private investigations of key Democratic candidates, according to files obtained by The Post.

TRMPAC's director was John Colyandro, a veteran of White House political adviser Karl Rove's direct-mail firm; one of its decision-makers was Jim Ellis, who runs DeLay's ARMPAC; and its chief corporate fundraiser was the same person who performed that function for ARMPAC. As it turned out, ARMPAC donated money to 15 of the same Republican candidates in Texas, sending along cover letters printed on TRMPAC stationery, lawyers said. No allegations of wrongdoing have been made about the ARMPAC donations.

DeLay chaired the TRMPAC advisory board, wrote his own cover letter for its fundraising brochure and received copies of memos that described Texas candidates being considered for TRMPAC funding. He also traveled to Texas to appear at fundraisers and meet with donors, flying at least once on a plane provided by a private company reimbursed by TRMPAC.

TRMPAC never incurred much in the way of expenses such as rent, utilities and supplies -- of the sort that the Ethics Commission says corporations are allowed to finance. "For all functional purposes," Colyandro said in his court deposition, it was run from the home office of its treasurer. Colyandro did not remember leasing any office space or paying a utility bill.

Colyandro set up a multi-tiered membership program for corporate donors: $100,000 bought a "private dinner" with board members such as DeLay, and $50,000 guaranteed a "special dinner" including two other contributors. But even smaller sums brought access: Jack Dillard, a Philip Morris official, sent $10,000 to TRMPAC in July 22, 2002, and in a letter expressed thanks "for the invitation to meet Congressman DeLay in Austin next week."

Some corporations were careful to specify that their contributions were solely meant to defray legally permissible administrative expenses. TRMPAC solicitations being investigated did not mention the restrictions. For example, DeLay was the featured "special guest" at a fundraising luncheon for TRMPAC at the Houston Petroleum Club, where donors were asked to contribute $15,000 to be considered a co-chair and $25,000 to be listed as an underwriter.

"Corporate checks are acceptable," the invitation stated, according to a copy obtained by The Post.

TRMPAC's appeals worked. More than $254,000, out of a total of $600,000, was collected from 14 corporations between the middle of May and early September in 2002. Only two were headquartered in Texas -- a beer distributor and a builder of prisons; the others were mostly firms with regulatory or policy interests in both Washington and Texas.

For example, Westar Energy, which in 2002 sought a federal tax break, gave $25,000 to win "a seat at the table" during congressional deliberations about the provision, even though it had no business in Texas, according to an internal company e-mail that surfaced in a criminal probe. Its executives joined DeLay -- and top officials from other TRMPAC contributors -- at a golf resort in Puerto Rico owned by a TRMPAC contributor that year. DeLay supported the tax break Westar wanted.

Two other internal documents point to heavy involvement by DeLay in TRMPAC's activities. State Rep. Dianne White Delisi, a TRMPAC board member, told oilman T. Boone Pickens in a letter before the 2002 election that "House Majority Whip Tom DeLay agreed to help us and has been an ardent advocate for us by raising money, making phone calls, serving as a special guest at events, and providing assistance with leading strategists," according to a copy. Pickens's company subsequently donated $5,000, and Pickens sent a personal check for $50,000.

A TRMPAC fundraiser also told members of its "finance" board around the same period that DeLay would participate in a conference call "to update everyone on TRMPAC's efforts to date and to discuss our strategy." Roy said DeLay appears to have participated in the call, adding that Delisi's letter accurately summarized DeLay's overall involvement.
RNC Involvement

Besides spending the corporate money it collected to benefit targeted candidates in 2002 -- through polls, fundraising events, voter identification efforts and investigations of Democratic opponents -- TRMPAC also sent corporate money to the Republican Party in Washington, starting a chain of events under review by prosecutors.

It worked like this: On Sept. 10, TRMPAC's director told its accountant that "a blank soft-dollar check" made out to the Republican National State Elections Committee should be sent overnight to Ellis, the ARMPAC director, at his headquarters in Washington, according to a copy of the director's e-mail. "Soft dollars" was a reference to corporate money. Ellis inscribed $190,000 on the check.

The national committee, in turn, sent the same total amount in seven checks ranging from $20,000 to $40,000 to Texas House candidates on Oct. 4, 2002, completing a transfer that Earle and others believe may have been intended to hide the corporate origins of the money and circumvent the law.

The RNSEC contributions were highly unusual. In no other instance did RNSEC spend more than $2,000 on a state legislative candidate in September, October or November; virtually all of its money went instead to Republican governors and attorneys general.

Earle is scrutinizing the Oct. 4 contributions and trying to determine who was involved in "the decision-making process," according to a copy of one of his subpoenas.

Iverson, the RNC spokeswoman, said the Oct. 4 donations were drawn from a non-corporate account, altogether different from the corporate-related account into which the TRMPAC check was deposited. The fact that the total incoming and outgoing amounts were identical was simply "coincidence," she said. She declined to make available documents she said would support the claim, citing the pending lawsuit.

Terry Scarborough, a lawyer for TRMPAC, similarly said he considers the transaction legal.

Jonathan D. Pauerstein, a lawyer for Ellis, who signed the TRMPAC check, said he also considers the transaction legal and noted that matching dollar exchanges of this kind between state organizations and federal parties are common among Democrats as well as Republicans. If they constituted improper laundering, "lots of Democrats and Republicans around the U.S. would have soap on their hands," he said.
Help From Friends

TRMPAC played a central, but not unique, role in DeLay's project, which included other political organizations and was assisted in the end by a key Texas lawmaker.

The nonprofit Texas Association of Business spent $1.9 million in corporate money in 2001 and 2002 to send 4 million letters to voters in many of the same districts where TRMPAC's efforts were concentrated. The group is now a target in the investigation, but its lawyer, Andy Taylor, said it is not subject to the same laws as TRMPAC and did nothing illegal.

The Texas lawmaker who played a critical role in the project was state Rep. Tom Craddick (R), a DeLay ally who was running for House speaker in 2002. On Oct. 21 of that year, TRMPAC sent checks for 14 Republican House candidates to Craddick's office; his office then mailed the checks. The grand jury is now looking into whether this or other actions taken in connection with the speaker's race amounted to using "money or things of value" to influence the outcome of the speaker's election, a violation of state law.

Craddick's lawyer, Roy Minton, said that "there is absolutely nothing illegal" about any actions Craddick took in connection with the race.

In all, 17 House members who received money from TRMPAC were elected. Craddick was elected speaker in a secret ballot, and in May 2003, as the redistricting plan came to the Texas House floor, he ordered state police to help track down Democratic lawmakers trying to boycott the vote. The effort was closely coordinated with DeLay, whose chief political aide Julie Ann Sullivan telephoned the Federal Aviation Administration to find a plane used by some of the Democrats.

The House approved the redistricting plan on Oct. 12, 2003. TRMPAC never reported the bulk of its corporate spending to the Texas Ethics Commission; it was reported only to the Internal Revenue Service, a discrepancy first noticed by a nonprofit advocacy group called Texans for Public Justice. Scarborough, the TRMPAC lawyer, said he believes reporting of this spending in Texas was not required by law.

But Karen Lundquist, the Ethics Commission's nonpartisan executive director, said all expenditures derived from corporate money -- whether for administrative purposes or not -- should have been reported. She also said the rules governing spending by political action committees are clear: Corporate money cannot be used for politically related expenses, such as fundraising and vote drives.





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