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III. Well-Appointed State Boards

A. Patronage Problems

The appointment powers of the Texas governor are un-usually susceptible to political patronage abuse because Texas imposes no limits on how much money an individual or PAC can give to candidates for state office. Within this indulgent system, individual appointees have given more than $100,000 apiece to Governor Bush’s gubernatorial campaigns.

This patronage system, in which huge donors get appointed to top state posts, poses two public policy hazards:

First, it can interfere with governors appointing the best-qualified individuals to important state posts; and

Second, well-appointed appointees with vast economic interests are much more prone to entangling themselves in ethical snares while in office.

To illustrate these hazards, consider the case of the Bush appointee who has contributed the most money to the governor’s gubernatorial campaigns. Then-Governor Bill Clements first appointed lobbyist Tom Loeffler as a University of Texas (UT) System regent in 1989. Bush reappointed Loeffler—who is now vice chair of the regents—to the post in 1995. Loeffler’s official qualifications to be a regent stem from his stints as a member of Congress and then as a revolving-door lobbyist with Arter & Hadden.

One dark spot on Loeffler’s congressional record raises questions about whether that experience strengthened or weakened his qualifications for public office. Loeffler topped the list of five members of Congress whose campaigns received illegal corporate contributions from Vernon Savings & Loan. An officer at this S&L (which taxpayers bailed out for $1.3 billion) testified that Loeffler offered to set Vernon Savings up with a damage-control meeting with then-Treasury Secretary James Baker III if the S&L helped Loeffler pay off his debt from his failed 1986 gubernatorial campaign.

In the end, it is difficult to disentangle Loeffler’s other qualifications to be a regent from the fact that he gave $45,000 to Bush’s gubernatorial campaign before the governor reappointed him in February 1995. Altogether, Loeffler gave a total of $141,000 to Bush’s two gubernatorial campaigns, enough to buy almost two hours of political ads in one of the top television markets in the state.

The other problem with appointing big donors to top state posts is that they often have myriad economic interests that foster ethical entanglements. As discussed below, makers of ephedrine herbal diet remedies hired Loeffler and other members of his lobby firm to get Bush’s Board of Health appointees to bury proposed state rules that would have cracked down on the marketing of ephedrine, which has been linked to eight Texas deaths.

Loeffler also resigned as a corporate director of Introgen Therapeutics in 1999 amid ethical questions about his actions as a regent. Loeffler and the other regents voted in 1994 for a UT licensing agreement with Introgen to commercialize a cancer therapy discovered at UT’s M.D. Anderson Cancer Center. Three years later, Introgen gave Loeffler options on at least 10,000 shares of company stock when he joined its board of directors. That amount of stock was worth at least $120,000 when Introgen went public in October 2000. In response to media inquiries, Loeffler resigned from Introgen’s board. But he kept the stock options, initially saying only that he would not cash them in until he stepped down as a regent. Responding to new media coverage in October 2000, Loeffler pledged to donate his proceeds from these controversial stock options to a charity.

B. The Governor Gets A Commission
 

C. The Most Lucrative Appointments

Half of the $1.4 million in appointee contributions tracked in this report came from Texas’ vast higher education patronage system. Bush’s gubernatorial campaigns raked in a grand total of $679,106 from the 76 regents whom he appointed to the eight state universities analyzed in this report.

The single biggest cash cows for Governor Bush’s gubernatorial campaigns were the 10 appointments each he made to the University of Texas System Board of Regents (producing an astonishing $432,606) and the Parks and Wildlife Commission (yielding $201,877).

Few outsiders can grasp the allure of these appointments. While both bodies wield influence that affects the lives of millions of people, the real reason that these are the ultimate prestige appointments is that they are synonymous in the Texas psyche with the twin Lone Star passions of huntin’ and UT Longhorn football.

The average UT System Regent gave Bush’s gubernatorial campaigns $43,261. Just two of these 10 appointees did not contribute to Bush’s gubernatorial campaigns. One of these appointees is S&B Infrastructure President Raul Romero, whose engineering firm’s PAC gave $15,500 to Bush’s gubernatorial campaigns.

The second largest source of Governor Bush’s appointee patronage is the Texas Parks and Wildlife Commission, whose members supplied Bush’s gubernatorial campaign with $201,877. Parks and Wildlife has sparked controversy on Bush’s watch by:

Selling alcohol and tobacco ads in brochures distributed to park visitors; and

Granting permits that allow landowners to trap and breed “wild” deer to sell on the hoof to the hunters who lease their land.

Because this report tallies individual contributions to Bush’s gubernatorial campaign, the political influence of Parks & Wildlife Commission Chair Lee M. Bass appears to be overshadowed by BeautiControl Cosmetics magnate Richard Heath (who might have looked like a candidate for the Texas Cosmetology Commission were it not for the $124,449 that he gave to the governor). In fact, Bush’s gubernatorial campaign received $210,000 from PAC’s controlled by the Bass family, which has extensive ties to George W. Bush. When Bush’s ailing Harken Oil suspiciously won exclusive offshore drilling rights in Bahrain in 1990, the Basses bankrolled the venture. Later, Bush’s regent appointees and other members of the University of Texas Investment Management Co. (UTIMCO) board agreed to invest $20 million in a deal with Bass Brothers Enterprises in 1998.

To be sure, Republican and Democratic governors alike have used the UT Regents and the Parks and Wildlife Commission as major fonts of political patronage. Two wealthy donors appointed to these bodies by Democrats—Tom Hicks and Tony Sanchez—have been known to mix personal with public business, regardless of which party controls the governor’s mansion.

As then-Governor Ann Richards was making a failed reelection bid in 1994, she appointed Tom Hicks as a UT System regent. Though Hicks had backed Richards, he moved his first $25,000 check to Bush within a month of Bush’s election. Hicks then served as the first chair of UTIMCO, which began awarding lucrative contracts to people with close ties to Hicks and to Bush. (Hicks made Bush himself a millionaire 15 times over when he bought the Texas Rangers baseball team in 1998.)

Governor Mark White appointed oil and gas magnate Tony Sanchez as a Parks and Wildlife commissioner in the mid-1980s. Shortly after he completed this tour of duty, the same commission awarded Sanchez’s company a controversial 1993 permit to drill gas wells in Falcon State Park. Insisting that gas drilling improves state parks, this recently departed Parks and Wildlife Commissioner said, “There would be no greater joy than to see a beautiful park that our children and adults can go to and learn about the oil and gas industry.” Although this Democrat is reportedly flirting with the idea of running for governor in 2002, Sanchez is one of Bush’s Pioneer fundraisers. His family and businesses are Bush’s second largest patrons, having contributed $320,150 over the years to Bush’s campaigns. Sanchez is currently a Bush-appointed UT System regent.

D. Appointees In the Hot Seat

Given that money plays such a big role in Texas’ appointments, it is hardly surprising that at least eight of the 50 state bodies analyzed here have been rocked in recent years by mismanagement and ethics scandals. Members of the bodies listed below serve six-year terms. With Governor Bush nearing the end of his sixth year in office, the current members of these boards are now virtually all his appointees.

Economic Development Department
A January 2000 State Auditor report uncovered “gross fiscal management” in the Department of Economic Development’s (DED’s) largest program. The so-called “Smart Jobs” program grants money to companies to train workers. Having given away this money to the likes of General Motors and Southwestern Bell without written policies or contracts, DED cannot account for millions of tax dollars. The audit found that one employer that received $261,056 to train 64 workers just trained three of them. In May 2000 Smart Jobs hired its fourth director in six months. His predecessor, Randall Riley, said Economic Development Board Chair Mark Langdale (who contributed $46,000 to Bush’s gubernatorial campaigns) forced him to resign because he was too candid with legislators about the extent of the agency’s problems. A state “Sunset” commission, charged with rooting out state bureaucracies that have outlived their usefulness, recommended in April 2000 that DED and the Texas Department of Housing and Community Affairs (see below) be given two years probation to rationalize their existences.

Funeral Service Commission
A Funeral Service Commission (FSC) panel recommended a record $445,000 fine against the world’s biggest funeral chain in 1998 for allegedly failing to tell consumers that it was sending corpses to unlicensed embalmers and for failing to cooperate with investigators. Soon thereafter, Gov. Bush’s top aides summoned then-FSC Director Eliza May and then-FSC Chair Charles McNeil to the Governor’s Office, where they were chewed out for the investigation in front of Service Corp. International (SCI) Chair Robert Waltrip and one of his lobbyists. May says she refused to end the SCI inquiry when she was summoned to a second Governor’s Office meeting. The FSC board fired her two months later. In legal papers SCI filed in response to May’s subsequent whistleblower lawsuit, SCI first claimed that Waltrip discussed his FSC beef personally with Bush; later SCI said Waltrip’s discussions were limited to Bush’s top aides. SCI’s PAC gave the Bush campaign $35,000. Waltrip paid Bush’s father $25,000 to speak at a trade meeting and is a big supporter of the Bush Presidential Library. Tony Coelho, who recently stepped down as the Democratic Party’s ethically challenged fundraiser, also served on SCI’s board.

Health Board
Eight Texas deaths since 1994 have been linked to herbal diet remedies containing ephedrine. When the Texas Department of Health (TDH) began drafting tough new ephedrine regulations, the industry made heavy political expenditures in Texas. Executives of Metabolife contributed $10,000 to Governor Bush and hired Arter & Hadden lobbyists, including UT Regent Tom Loeffler. Arter & Hadden lobbyists pressured TDH to abandon the tough ephedrine rules drafted by agency staff. In 1999, Texas Health Commissioner Reyn Archer and Bush’s Board of Health appointees threw out their staff’s proposal, adopting a weak alternative drafted by the industry. One “Pioneer” who raised at least $100,000 for Bush’s presidential bid is Craig Keeland, who heads a company that sells ephedrine products. Other ephedrine-linked Pioneers include Tom Loeffler and William Ceverha, a lobbyist whose wife, Mary, is Bush’s top appointed donor on the Board of Health ($14,000).

Housing and Community Affairs Department
A Houston developer pleaded guilty in 1999 to forming a business partnership with a Department of Housing and Community Affairs (DHCA) board member to steal up to $10 million in federal low-income housing tax credits. In 2000, federal prosecutors indicted Florita Bell Griffin, the DHCA board member who contributed the most money to Bush’s gubernatorial campaigns ($8,000). Denying the allegations, Griffin levied a few of her own, saying she had evidence of lawmakers sleeping with lobbyists and joining homosexual orgies. In another agency scandal in late 1999, DHCA official Tim Almquist recommended Countrywide Credit Industries for a million-dollar DHCA contract shortly before taking a new job at Countrywide (which got the contract). Housing activists and federal officials have criticized this agency for sitting on millions of dollars in federal funds intended to house the poor.

Lottery Commission
Upon taking office in 1995, Gov. Bush appointed his personal lawyer, Harriet Miers ($22,000 to Bush’s gubernatorial campaigns), to watch over the Texas Lottery Commission. The Texas Lottery is intertwined with ex-Texas Speaker and Lieutenant Governor Ben Barnes. In 1991, Barnes lobbied to create the Texas Lottery. The next year Barnes became arguably the highest paid lobbyist in Texas history. Gtech—the only contractor that the Texas Lottery has ever had—agreed to pay Barnes annual fees of up to $3.2 million. Barnes kicked back one-third of this money to a Gtech executive who was convicted in 1996 of taking New Jersey lobby kickbacks. In a further revolving-door scandal, Gtech hired top Bush aides Cliff Johnson and Reggie Bashur as lobbyists as they exited the Governor’s Office. In the wake of these scandals, Gtech paid $23 million to buy Barnes out of his lobby contract and the Lottery Commissioners rebid Gtech’s contract. Gtech simply won the contract again. Gtech paid $300,000 in 1999 to settle a lawsuit by ex-Texas Lottery Director Lawrence Littwin. Littwin alleged that the commissioners fired him for digging into Gtech’s political influence. He said the company controlled the commissioners because of what Barnes knew about Bush’s military service. As House Speaker in 1968, Barnes wrote a letter to help get young George W. Bush a coveted spot in the Texas Air National Guard—far from the Vietnamese rice paddies.

Natural Resources Conservation Commission
Before becoming Bush’s air-quality point man at the Natural Resources Conservation Commission (TNRCC), Ralph Marquez lobbied for cement giant Texas Industries (TXI) to kill a bill to crack down on emissions from cement kilns that burn hazardous waste (TXI President Robert Rogers gave $3,000 to Bush’s gubernatorial campaigns). TXI’s neighbors outside Dallas blame these toxic emissions for health problems and animal deaths. Commissioner Marquez later failed to recuse himself from voting for two TNRCC pollution permits for his former lobby client.

University of Texas Regents
Five of Bush’s UT and A&M regents have been on the board of the scandal-plagued University of Texas Investment Management Co. (UTIMCO). Since 1996, the UTIMCO board has awarded contracts to private investment companies to manage portions of UT’s $13 billion endowment. UTIMCO’s board repeatedly awarded these lucrative contracts to investment companies with close ties to Bush. The Carlyle Group, which received a contract to manage $10 million of these public university funds, is run by top White House appointees of Bush’s father, who reportedly has equity in this firm. Other UTIMCO deals have benefited two Bush “Pioneers” who rank among Bush’s top 10 “career patrons.” These beneficiaries are Charles and Sam Wyly (who recently sold two software companies for $8 billion) and the family of Bush’s Parks and Wildlife Chair, Lee Bass. Bush’s regent appointees who have sat on UTIMCO’s board are: Robert Allen, Woody Hunt, Tom Loeffler, A.W. Riter, Jr. and Tony Sanchez. Each of these regents contributed from $7,000 to $141,000 to Bush’s gubernatorial campaigns.

Workforce Commission
Texas’ 1995 welfare privatization law promised to save tax dollars by jobbing out welfare services to private contractors. The huge value of this contract (up to $3 billion a year) attracted the likes of Lockheed Martin, which sold $640 toilet seats to the Pentagon. A year after Texas passed its welfare overhaul, several architects of this reform resurfaced as Lockheed lobbyists. Dan Shelley resigned as head of Gov. Bush’s Legislative Office and became a Lockheed lobbyist. Shelley brought along his ex-aide, Richard Evans, a Workforce Commission administrator who helped design the state’s new welfare system. Lockheed also hired Steve Bresnen, the welfare reform point man of Bush’s mentor, the late Lieutenant Governor Bob Bullock. Bush and Bullock each controlled a seat on the panel that was to award Texas’ welfare contracts. The Clinton administration shot down this privatization plan in 1997, saying it would violate federal rules that bar non-civil servants from determining eligibility for federal welfare funds. Instead, such eligibility decisions would have been made by contractors who had financial incentives to disqualify welfare applicants.

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