January 24, 2004
Nixon and Gramm

You can't win them all: The Travis County DA has cleared State Rep. Joe Nixon of wrongdoing in his mold claim.

Prosecutors have concluded no laws were violated when Farmers Insurance Group paid more than $300,000 to an influential Houston legislator for mold-related claims on his house.

In separate letters this week, Travis County District Attorney Ronnie Earle's office informed state Rep. Joe Nixon, R-Houston, and John Hageman, Farmers chief executive in Texas, that it had formally closed its investigation.

"We have determined that there is no evidence of criminal conduct," said Gregg Cox, director of the office's public integrity unit.

The investigation began in August following news reports about leaked company e-mail in which a Farmers executive complained that Nixon had received preferential treatment.

Isabelle Arnold, who then was Farmers national mold manager but later was fired, raised questions about how Nixon's claims were handled in general. And she complained specifically that the last payment to the lawmaker wasn't covered under his homeowner's policy.

That payment of $13,000 was made while the Legislature was in session last spring. It was paid to replace a driveway and landscaping damaged during work on the house, Nixon said.

In a letter sent Wednesday, Cox told Nixon that the legislator was "never considered a suspect," indicating that prosecutors had focused most of their attention on Farmers. Nixon, however, was interviewed during the investigation.


On April 30 last year, during the regular legislative session, Arnold, the former Farmers executive, complained in an e-mail to her boss about "strong-armed" pressure on company employees to pay Nixon "because he is a legislator."

"I just found out that the claim has been paid once more, without coverage, and without a release," Arnold said in her e-mail to Jim Daues, Farmers vice president for property claims.

Replying in an e-mail on May 4, Daues said other Farmers officials "wanted Mr. Nixon to be a friend of Farmers in the legislative session."

"Each one strongly suggested that an additional payment would be very helpful to the cause," Daues wrote.

It still all looks pretty sleazy to me, but apparently it was not illegal. Greg sums it up pretty well.

In the meantime, we can now all pull up our chairs and watch as the Travis County Attorney takes a look at Phil Gramm.

Travis County Attorney David Escamilla said Friday he will review a Democratic Party complaint that former U.S. Sen. Phil Gramm illegally lobbied state officials for changes to a state pension fund for schoolteachers.

The complaint, filed by Texas Democratic Chairman Charles Soechting, alleges that Gramm, now a vice chairman with UBS Investment Bank, failed to register as a lobbyist with the Texas Ethics Commission.

Escamilla said the allegation, if true, is a potential Class A misdemeanor punishable by up to one year in jail and a maximum $4,000 fine.

"We're going to review the information to see what action, if any, is warranted," the county attorney said. He said the review wasn't a formal investigation but could lead to one.


Gramm, who joined UBS after leaving the Senate in December 2002, started lobbying state officials last year on a UBS plan to use life insurance, annuities and bonds to help the $80 billion Teacher Retirement System of Texas close a $700 million shortfall in its retiree health benefits program. The plan now is funded by state and individual contributions into an investment pool.

Under the proposal, which has drawn fire from teachers groups, the retirement system would buy annuities and life insurance policies on retired teachers and keep the proceeds when they die.

In a written presentation, UBS has said the state would need to make "large and small legal and regulatory changes" to adopt the plan.

Soechting, a lawyer from San Marcos, has called the proposal a "huge, get-rich-quick scheme on the part of Phil Gramm and his buddies" in the investment and insurance industries.

The Democratic chairman initially filed his complaint with the Texas Ethics Commission on Jan. 9 and later sent a copy to the Travis County district attorney's office. The district attorney forwarded it to the county attorney because the alleged violation was a misdemeanor.

The Ethics Commission won't confirm or deny that a complaint has been filed against Gramm. The maximum penalty that the commission could levy would be a fine of $5,000.

The original story was noted here. As always, stay tuned.

Posted by Charles Kuffner on January 24, 2004 to Scandalized! | TrackBack

I certainly hope there's more to this story. Everyone who meets with TRS officials is not a lobbyist. Furthermore, TRS officials cannot change laws. Is it the Democrats' intent to make every person who makes a sales call on TRS a lobbyist? That would be bad for TRS and Texas teachers.

Did Gramm meet with legislators or legislative staffs? I haven't seen anything to that effect.

Posted by: Greg V. on January 24, 2004 5:35 PM

The short version of the proposal was UBS got most of the proceeds. Variation on the "dead peasant" policy idea.

The press implies Gramm was lobbying.

Posted by: Charles M on January 25, 2004 1:02 AM