May 26, 2005

Judge Says TRMPAC Official Failed
to Legally Report Corporate Funds

Former Lawmaker Ceverha Liable for $196,000
But Group's Lawyer Vows to Appeal Ruling

By Mike Hailey
Capitol Inside Editor

In a decision that could have far-reaching effects on campaign financing in Texas, an Austin judge ruled Thursday that the Texans for Republican Majority's treasurer violated state law by failing to report hundreds of thousands of dollars in corporate contributions and the way they were spent.

Ruling in a civil court case that's run parallel to a criminal investigation into the 2002 elections, State District Judge Joseph H. Hart determined that TRMPAC official Bill Ceverha is liable for $196,660 in damages to five Democrats who lost Texas House races to Republican candidates who benefited from corporate funds that weren't disclosed as required by state law.

While lawyers for the losing candidates who are plaintiffs in the case declared victory, TRMPAC's attorney Terry Scarborough immediately vowed to appeal the decision to the 3rd Court of Appeals. Scarborough expressed disappointment and disagreed with the decision but acknowledged in a statement that the outcome could have been worse.

Had Hart based the defendant's liability on "election wide" impact rather than limiting it to specific races, Ceverha could have been ordered to pay almost $60 million in damages to 23 candidates who faced opponents in races targeted by TRMPAC. But the judge said the more liberal interpretation would result in an "exorbitant windfall" for the plaintiffs and a "draconian penalty" for the defendant.

Hart shot down TRMPAC's contention that it didn't have to report donations from corporations because they were spent on administrative expenses for which state law makes an exception such as polling, fundraising, direct mail, staff, research and printing for political purposes. The judge also dismissed the argument that the group had engaged in "express advocacy" without specifically advocating the election or defeat of specific candidates.

"I do not believe that the legislature intended that a campaign treasurer could avoid performing his statutory duties by turning a blind eye to the obvious facts," Hart wrote in a 10-page summary of his decision.

The civil court ruling has the potential to have an indirect effect on the shape and direction of a Travis County grand jury investigation that District Attorney Ronnie Earle launched more than two years ago. But while the central issues in the civil and criminal cases are similar, the tests that prosecutors must meet are stiffer. The ongoing criminal probe has resulted in indictments so far against three TRMPAC consultants who are associates of DeLay and several corporations on charges related to illegal corporate contributions. Two of GOP consultants under indictment - John Colyandro and Jim Ellis - could face up to 99 years in prison if convicted on money laundering charges stemming from their roles in TRMPAC.

Hart ruled that Ceverha is liable for damages of $17,332 each for former Democratic House candidates Paul Clayton, Mike Head and ex-lawmaker David Lengefield. The judge awarded damages of $57,332 to Danny Duncan and $87,332 to former representative Ann Kitchen.

The plaintiffs were all involved in races won by Republicans with fairly comfortable margins of victory. Head received 40 percent of the vote in an unsuccessful campaign to unseat State Rep. Betty Brown of Terrell while Clayton claimed 44 percent of the vote while losing to State Rep. Mike "Tuffy" Hamilton of Mauriceville in his race for an open seat. Kitchen received 45 percent of the vote against State Rep. Todd Baxter in her first re-election race in a district that had been substantially altered by redistricting the year before. Lengefield managed only 43 percent in a rematch with State Rep. Sid Miller, who'd ousted him from the House in 2000. Duncan polled 41 percent in a losing bid to State Rep. Dan Flynn in the first House race he won.

Texas GOP Chairwoman Tina Benkeiser said she thought the court had made the wrong ruling. But state Democratic Chairman Charles Soechting described the ruling as a "landmark decision" that showed that Republicans engaged in "an illegal conspiracy" with DeLay and Texas House Speaker Tom Craddick at the center of it. Soechting argued that the the GOP's House takeover, the congressional redistricting effort in 2003 and unresolved state problems all stem from the alleged conspiracy.

Hart outlined the ruling in a way that made it appear that the case was cut and dried. The judge said TRMPAC's mission was clearly to help Republicans run and win campaigns and that the group promises contributors that all of the money they gave would go to tough races. Hart said TRMPAC used the money exactly as promised.

The judge ruled that the contributions that were not properly reported included $81,000 in non-corporate donations and a voter list that the Texas Association of Business provided in a $65,000 in-kind contribution. The business group has been a target of the grand jury probe. Grand jurors have also looked into Craddick's activities involving his race for speaker in 2002.