Deals Reached in Texas Political Donation Inquiry

Prosecutors investigating whether corporations illegally financed the Republican Party’s rise to dominance in the Texas Capitol are negotiating agreements with several companies accused of making improper political donations, and analysts say the discussions could help elicit important leads in the probe.

According to documents filed in Travis County District Court, two companies accused of making illegal political contributions have “flipped” for prosecutors in the last month, signing deals requiring them to cooperate in exchange for dismissal of their cases.

The agreements were signed with Illinois-based Sears, Roebuck and Co. and DCS Inc., a debt-payment firm based in California, and say the contributions were given “on the basis of false and misleading information provided by the fundraiser that solicited the contribution.”

Sources close to the investigation said this week that similar deals were being negotiated with some of the remaining six companies indicted late last year. The six companies are the Williams Companies Inc., Bacardi USA, Cracker Barrel Old Country Store, the Alliance for Quality Nursing Home Care, Questerra Corp. and Westar Energy Inc.

The companies that could be reached declined to comment, as did Gregg Cox, director of the Travis County District Attorney’s Public Integrity Unit and a leader of the investigation.

The sources, who spoke on condition of anonymity, said information gleaned from the companies could be used as leverage to pressure remaining defendants and, potentially, to target more powerful members of the Republican Party in Texas and in Washington.

Prosecutors and grand juries in Travis County, which includes Austin, the capital, for two years have been conducting a criminal investigation of organizations run by Republican activists. At least one of the groups has ties to U.S. House Majority Leader Tom DeLay, a Republican from Sugar Land, southwest of Houston.

Texas law bans corporate contributions to state legislative candidates; prosecutors say political organizations used corporate money to bankroll the campaigns of 22 Republican candidates for the state House of Representatives in 2002, the year the GOP took control of the state Legislature.

Late last year, three of DeLay’s aides were indicted and charged with money laundering and unlawfully accepting and soliciting corporate contributions.

At the time, some campaign finance reformers argued that the indictments pointed to what they believed was, in effect, a conspiracy to cement Republican control of Congress. In 2003, the Republican-controlled Legislature, at DeLay’s behest, drew new maps of congressional districts. In last fall’s election, Republicans gained six seats in the Texas congressional delegation. Without its success in Texas, the GOP would have lost seats in Congress.

Republicans have denounced the investigation and the indictments as politically motivated. Travis County Dist. Atty. Ronnie Earle, who did not return phone calls seeking comment on the agreements with the companies, is a Democrat.

The third-degree felony indictments of the eight companies, which each are accused of making illegal contributions of $20,000 to $100,000, have been largely forgotten amid the debate about whether the investigation is politically motivated.

There is great disagreement among Republicans, Democrats, legal officials and campaign finance watchdogs about the importance of those indictments and the prospect that more companies could sign agreements requiring them to cooperate with prosecutors.

Sherry Sylvester, communications director of the Republican Party of Texas, dismissed the agreements and the negotiations as meaningless “fluff” designed to keep the story of the investigation alive in the media.

“This is what we know about Ronnie Earle: He is a partisan who uses his position as a district attorney and works with the media,” she said. “He simply is not credible.”

San Antonio attorney J.D. Pauerstein represents Jim Ellis, one of the DeLay aides who was indicted. Ellis is the director of Americans for a Republican Majority, a DeLay fundraising organization that seeks to get Republican candidates elected. He was indicted on one count of money laundering and, like all defendants in the case, has denied wrongdoing.

Pauerstein said he was not concerned about the possibility that the companies might provide damaging evidence, because, he said, neither the DeLay aides nor the companies did anything wrong.

“All these companies can do is provide truthful testimony,” he said. “When the truth is told, we will be exonerated. It’s not like someone can turn state’s evidence and tell prosecutors where we buried the gun. I don’t think this is that kind of situation.”

Others, however, said a cooperative relationship with the companies could reap dividends for prosecutors.

The negotiations could underscore a painstaking strategy by investigators to pit defendants in the case against one another. Prosecutors hope to learn specific information from companies that are required to talk -- who solicited donations, who collected the money, how it was delivered and what, if anything, was promised in return.

That information could be critical because investigators believe these sorts of transactions are conducted largely through verbal agreement. Without a paper trail, prosecutors may never fully understand the donations without the cooperation of the companies.

“I’m not saying it means guilty verdicts. But obviously the testimony of one party to a transaction is significant,” said Fred Lewis, director of the Austin nonpartisan organization Campaigns for People, which fights the influence of money on state government.

“This is a significant development for getting to the truth. What happened down here was not pretty. Most people who don’t have on partisan blinders -- blinders of either party -- take this investigation exceedingly seriously.”

DeLay has not been charged with a crime, although prosecutors have made it clear that he could be more actively targeted by the investigation.

DeLay’s spokesman declined to comment, pointing instead to previous instances in which DeLay has denied wrongdoing. He told reporters that Earle was “vindictive and partisan.”

One legal source with knowledge of the investigation said the agreements with the companies could help target “big fish” in the Republican Party by persuading the three DeLay aides to cooperate with prosecutors in exchange for leniency or dismissal of their cases. The aides face 10-year prison sentences if convicted.

“If you are looking at 10 ... years in jail, are you going to take the hit for Tom DeLay?” the source asked.