March 04, 2004
The documents keep flying

More documents from the civil lawsuit against TAB/TRM were released Wednesday, and they appear to bolster the criminal case against those groups on charges of illegally using corporate money in the 2002 campaign. This is a really long post, so I'm going to put the bulk of it under the More link. Click on for the latest.

More than 1,000 pages of documents were released by Democrats suing TRM officials for damages on the claim that they illegally used corporate money to win House races in 2002. The collection includes TRM campaign finance reports, accounting statements and strategic planning documents and depositions by three TRM officials.


TRM interpreted administrative expenses to mean anything other than a donation directly to a candidate. But Democrats in the lawsuit and [Travis County DA Ronnie] Earle's prosecutors believe that definition is too broad and that no corporate money should have been used for polling, fund raising or candidate-support activities.

The documents filed in the lawsuit include depositions from TRM Executive Director John Colyandro, Treasurer Bill Ceverha and accountant Russell Anderson, along with memos, bookkeeping forms and telephone logs.

Colyandro testified that raising corporate money for the TRM effort was part of the game plan from the beginning. He said the person in charge was Warren Robold of [Tom] DeLay's Americans for a Republican Majority. Colyandro said Robold's goal was to raise $600,000 from corporations through his Washington contacts.

TRM filings with the Internal Revenue Service showed the committee raised $574,000 from corporations with $433,000 coming from out of state. Corporate donations accounted for a third of all of TRM's fund raising.

Ceverha, in his deposition, when questioned by attorney David Richards, said the TRM advisory committee, on which DeLay served, was aware of how money was being raised and spent. He said the board knew corporate money could not be spent directly on campaigns and avoided that.

Ceverha said two bank accounts were set up to keep "hard" donations that could be passed on to candidates separate from "soft" corporate donations that TRM planned to use for other purposes.

But a fund-raising letter TRM sent to corporate leaders indicated the political committee planned to go beyond a strict definition of Texas law that allows for the use of corporate money to pay for only administrative expenses such as rent and utilities.

"Unlike other organizations, your corporate contribution to TRMPAC will be put to productive use," the piece said. "Rather than just paying for overhead, your support will fund a series of productive and innovative activities designed to increase our level of engagement in the political arena."

While TRM officials have said they gave no corporate money to candidates, a TRM document released Wednesday raises questions about that claim. The document lists soft money contributions totaling $7,500 to two Republican House candidates. Those donations are listed along with a $190,000 contribution to the Republican National State Elections Committee, which TRM officials have acknowledged was corporate money but a legal donation.

I'm presuming that this is the same lawsuit that I blogged about back then, which was filed by four defeated candidates including Debra Danburg. I'm a little uncertain because the accounts I'm reading now never mention who the plaintiffs are, and the original story I cited said the lawsuit was against the Texas Association of Business, while the stories now refer to Texans for a Republican Majority. It almost has to be the same lawsuit, but I'm mentioning this because it's a little confusing to me to keep track of everything.

Speaking of TRM's IRS filings, there are questions around the amounts it reported as well.

The political action committee created at the direction of U.S. House Majority Leader Tom DeLay has always said it raised and spent almost $1.5 million during the 2002 state elections. About $600,000 of that came from corporate donors and is the subject of the civil lawsuit and a yearlong grand jury investigation into whether the group illegally spent corporate money to influence two dozen legislative elections.

The Republican Majority committee has said it didn't report the $600,000 to state election authorities because it was spent on the committee's administrative expenses, not to directly benefit Republican candidates. It did report $900,000 in donations to candidates on its state election report.

Yet the committee's 2002 tax return lists $1.16 million — instead of the $900,000 — as "activities related to support of Republicans for state Legislature and statewide offices in the state of Texas." It also shows $122,528 in fund-raising costs.

"None of these expenditures can remotely be classified as administrative costs of TRMPAC," according to the lawsuit, "and they total $1,291,041.92."

Furthermore, according to the lawsuit, the political committee reported only $127,457 in management and general expenses on the tax return, not the almost $600,000 it cites as administrative costs on a different IRS form.

"The result is that there was a failure on the part of defendant (Bill) Ceverha to report, as required by law, at minimum some $460,000," the lawsuit alleges.

Ceverha, a former state representative, served as treasurer of the Republican Majority committee. John Colyandro, the committee's executive director, signed the tax return.

Terry Scarborough, the lawyer for Ceverha and the committee, said the committee's 2002 money was reported differently on three reports as required by law.

"The difference is how the IRS defines program services and how the (state) election code defines it," Scarborough said. "It's apples and oranges. It's a different set of rules and definitions. We have complied with all the rules."


State law bars spending corporate and union money in campaigns, but it allows political committees to spend corporate or union money for administrative expenses.

The investigation and lawsuit might turn on the question: What's an administrative expense?

Lawyers for the Democratic candidates contend it is only routine overhead, such as office rent, utilities or the salaries for bookkeepers. Lawyers for Texans for a Republican Majority argue that corporate money spent on polls, research and consultants is legal as long as it did not benefit candidates directly.

"There is not going to be much dispute about what happened," Scarborough said. "The dispute is going to be over the interpretation of the law."

Indeed. I'll point again to this Texas Observer piece which has as good an explanation of all of the moving parts as you'll find.

More bad news for TRM: A lawyer for the Texas Ethics Commission says that TRM was required to report that $600K to the state.

"If the PAC has taken possession of the money, yeah, you have to report it," general counsel Sarah Woelk said in response to questions about state election laws. "That is clearly what the law says."

Woelk, the state's top campaign finance lawyer, said a political action committee must report all expenditures no matter who donates the money or whether it's spent to run the committee or to help elect a candidate.

Lawyers for Texans for a Republican Majority disagreed with Woelk's interpretation of state law and raised questions about her impartiality. However, Woelk's comments repeat the interpretation given three months ago in a related story by Karen Lundquist, the executive director of the ethics commission.


The $600,000 is at the center of a civil lawsuit accusing the Republican committee of hiding the money it spent in the 2002 elections and a grand jury investigation into whether corporate money was illegally used to affect the outcome of almost two dozen legislative elections.

A reporting violation carries a penalty of a $500 fine per campaign finance report, about $4,500 in this example, and the grand jury investigation concerns a different state law barring the use of corporate money as campaign expenditures.

Ethics Commission officials can pursue a fine only if a complaint is filed and the commission refers the case to prosecutors. Commission officials cannot comment about whether a complaint is pending.


In its reports to the state, the committee did not disclose how it spent the $600,000 it raised from corporations, which can give money for a committee's administrative overhead but not to campaign for or against candidates. But a one-time fluke in federal regulations forced the committee to disclose the expenditures.

In addition to routine overhead, the committee spent corporate money on polls, candidate research, consultants, phone banks and similar expenses.

Scarborough has said the money spent on polls, research, phone banks and consultants did not have to be reported to the public because those services were for the internal use of the committee and weren't used to benefit the Republican candidates.

He said his client reported its expenditures just as other political committees do.

"You look at other PACs, you won't see their 'expenses' that weren't political expenditures," he said.

If Woelk is right, however, it could undercut the Republican committee's defense.

Woelk said the Ethics Commission has issued opinions about corporate contributions and the definition of administrative expenses, but not on the law requiring a political committee to disclose all political expenditures, including money used to run the committee.

She said she understands the confusion among officials who run political committees.

Woelk said state law anticipated a corporation establishing its own political committee and paying its administrative overhead.

"If a corporation pays an electric bill directly, there is nothing to report," she said. "If a corporation gives the PAC the money to pay the electric bill, the PAC has to report the expenditure when it pays the electric bill."

Fred Lewis with Campaigns for People, a group that lobbies on campaign finance laws, said the controversy underscores the weakness of the state's reliance on political players disclosing how much money they are giving and spending.

Unlike federal campaigns, Texas has no limits on how much money can be donated. The Texas Ethics Commission has no authority to audit campaign finance records randomly to verify full disclosure.

"If you have no audits and only a $500 fine," Lewis said, "then people are going to disregard the law."

I wouldn't expect anything to change on that front any time soon.

Finally, on another front in the scandalization landscape, lobbyist/DeLay crony Jack Abramoff has resigned from Greenberg Traurig after reports of his megamillion fees charged to American Indian tribes sparked a Senate investigation.

Richard Rosenbaum, a top officer of Greenberg Traurig, said in a statement released late Tuesday evening that Abramoff resigned after he “disclosed to the firm for the first time personal transactions and related conduct which are unacceptable to the firm.”

Greenberg Traurig also has retained Henry F. Schuelke III of Janis, Schuelke and Wechsler to “conduct a comprehensive investigation of these matters so the firm can take any additional action that may be appropriate.”

“The firm will finish its internal investigation before making further public comment,” Rosenbaum added.

Abramoff, in his own statement, said that recent press reports about “my lobbying practice has distracted from my efforts on behalf of my clients whose interests are now, and have always been, my number one priority.”

He added: “Therefore, I have determined that the best solution is to resign effective immediately.”

The lobbyist said he has not made a decision about his future.

“As for what I will do, I have several options on the table, but have not decided from which option to chose,” Abramoff said.

Abramoff’s departure comes after The Washington Post reported that Abramoff had raked in about $15 million in federally reported lobbying fees from four tribes in the last few years and that his business associate Mike Scanlon, a former spokesman for House Majority Leader Tom DeLay (R-Texas), reaped another $30 million from three of the same tribes.

At least one of the tribes is now complaining that they were bilked.

Here's the WaPo story on Abramoff's departure. I must say, I'm a little disappointed that he didn't answer the question about his future with something like "I'm gonna take my boodle and live high off the hog". Maybe next time. Abramoff links via Alfredo Garcia.

Posted by Charles Kuffner on March 04, 2004 to Scandalized! | TrackBack