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Zimmerman Exonerated as TEC Drops Inquiry Based on Politically-Motivated 2015 Complaint; Decision is Important Victory Recognizing Candidates’ Ability to Trace Funds in Accounts

In an update regarding the sworn complaint filed in February 2015 against then-Austin councilmember Don Zimmerman, Najvar Law Firm issued the following press release today:

Don Zimmerman Exonerated as TEC Drops Inquiry Based on 2015 Complaint Filed by Political Opponent

AUSTIN, TEX.—The Texas Ethics Commission (TEC) has now resolved all enforcement efforts related to Zimmerman’s 2014 payment to his wife for campaign work without any finding that a violation occurred and without any fine.

Soon after Zimmerman took his seat on the Council, Bill Aleshire, the former Democratic Travis County Judge, filed a complaint with the TEC alleging that Zimmerman had paid his wife $2,000 “from political contributions” for campaign work in violation of the Election Code.  The relevant statute provides that a candidate “may not knowingly make…a payment from a political contribution” to the candidate’s spouse or dependent child “if the payment is made for personal services rendered by…the spouse or dependent child.”  Tex. Elec. Code § 253.041(a).  Zimmerman has confirmed that his wife Jennifer worked tirelessly for the campaign, helping with fundraising, proofreading, blockwalking and organizing volunteers.  He estimated the value of her work at a minimum of $10,000, and he was embarrassed to pay her only $2,000.

The TEC initially demanded a $5,000 fine to settle the complaint.  However, in March, Najvar Law Firm (NLF) submitted a legal memorandum explaining why the TEC had no authority to find a violation in these circumstances or issue a fine of any amount.  NLF explained that the TEC’s analysis was faulty because it relied on one particular accounting method (“first in-first out” or FIFO), but ignored the fact that, under “last in-first out” (LIFO) accounting, Zimmerman’s campaign always retained sufficient funds from his initial deposit of personal funds to cover the payment to Jennifer.  There is no requirement in any Texas law or TEC rule governing the tracing of funds within a campaign account, and therefore there was no basis for the TEC to retroactively impose one particular method to find a violation.

Moreover, even if there were no personal funds left in the account under any accounting method, NLF explained that the payment still would be permissible because Zimmerman was entitled to $20,000 in reimbursement on his loans to the campaign.  In effect, Zimmerman had a claim on the entire amount in the campaign account due to his entitlement to repayment for his loans.  He could have written a check directly to “Don Zimmerman” for the entire balance in the account.  There can be no basis for finding that a candidate “knowingly” made a payment “from political contributions” where the candidate is owed reimbursement from the account.  NLF pointed out that the TEC had endorsed this very principle in prior advisory opinions, but was ignoring it here.

“In the end, the TEC did the right thing, recognizing that there was no basis in the law to support finding a violation in these circumstances,” said NLF principal attorney Jerad Najvar.  “But we only got to this point because we pushed back and explained the law to the TEC. That shouldn’t be necessary.  The TEC should be mindful that not every candidate is able to retain a campaign finance specialist to defend them, and the agency has a responsibility to proceed with more caution, especially since everything it does impacts fundamental rights of speech and association.”

Jerad Najvar practices political and appellate law and is founder of the Najvar Law Firm, PLLC in Houston.  He served as co-counsel to Shaun McCutcheon in McCutcheon v. FEC, in which the U.S. Supreme Court struck down the federal aggregate contribution limits, and lead counsel in Catholic Leadership Coalition v. Reisman, in which the Fifth Circuit Court of Appeals struck down a waiting period on Texas PACs.

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NLF moves Corpus Christi Court of Appeals to publish important 2015 illegal-voting decision

In May 2015, the Thirteenth Court of Appeals in Corpus Christi, TX affirmed a judgment in a Hidalgo County election contest which found by “clear and convincing evidence” that thirty illegal votes had been cast in a race with a 16-vote margin of victory, and ordering a new election.  In full disclosure, NLF represented the prevailing party, Letty Lopez, and Lopez won the ensuring court-ordered election in November 2015.  This week, NLF filed a motion with the court of appeals requesting that the opinion be officially published.  This is somewhat inside baseball, but the opinion was designated a “memorandum opinion” upon release, meaning that, while it is still binding precedent and available in online legal databases, it would not appear in the Southwestern Reporter volumes.  We believe it is important that this opinion is accorded the weight it deserves, as it was the first time the Thirteenth Court of Appeals has addressed several critical issues regarding residency and mail-in ballot fraud and illegal voting.  The opinion shows that the voter residency requirement does have teeth and can be enforced.  Also, critically, it affirms that failure to disclose required information on a carrier envelope where someone takes the envelope from the voter to mail will render the ballot uncountable.

NLF Release: Zimmerman Explains Why TEC Must Dismiss Groundless Complaint Filed by Political Opponent

AUSTIN, TEX.—This week, Austin taxpayer-advocate and former District 6 Councilmember Don Zimmerman explained to the Texas Ethics Commission why it must dismiss a groundless complaint filed by a political opponent in 2015.

Zimmerman, a conservative activist who has long rankled the tax-and-spend liberal establishment in Austin, really riled up his opposition when he won a seat on the City Council in December 2014.  That was Austin’s first election cycle with district (rather than at-large) elections.  Many powerful local Democrats had fought aggressively to retain the all-at-large electoral system, fearing that a district-based system would break up the “progressive” stranglehold on local politics.  They lost that battle, and then when Zimmerman actually won the District 6 seat, the opposition intensified further.

Soon after Zimmerman took his seat on the Council, Bill Aleshire, the former Democratic Travis County Judge, filed a complaint with the TEC alleging that Zimmerman had paid his wife $2,000 “from political contributions” for campaign work in violation of the Election Code.  The relevant statute provides that a candidate “may not knowingly make…a payment from a political contribution” to the candidate’s spouse or dependent child “if the payment is made for personal services rendered by…the spouse or dependent child.”  Tex. Elec. Code § 253.041(a).  Zimmerman has confirmed that his wife Jennifer worked tirelessly for the campaign, helping with fundraising, proofreading, blockwalking and organizing volunteers.  He estimated the value of her work at a minimum of $10,000, and he was embarrassed to pay her only $2,000.

Aleshire’s complaint acknowledges that it is based only on Zimmerman’s campaign finance report (which accurately disclosed the $2,000 payment to Jennifer Zimmerman for “campaign office and field work”) and news reports.

However, if Aleshire reviewed Zimmerman’s campaign reports, he must have also been aware that Zimmerman had deposited $20,000 of his personal funds into the campaign account, because those deposits were properly reported as loans as required by law.  Of course, Aleshire had no good-faith basis for alleging whether the payment came “from a political contribution,” which would implicate the statute he cited in his complaint, or from Zimmerman’s personal funds, because he had no access to Zimmerman’s campaign bank statements or any knowledge of Zimmerman’s internal campaign operations.

In response to the complaint, Zimmerman voluntarily provided his campaign bank statements to the TEC, which show that the first deposit was $10,000 from Zimmerman’s personal funds (the first loan, as disclosed on his campaign report).  Between that first deposit and the payment to Jennifer, the balance never dipped below $2,900.  Therefore, more than enough personal funds remained in the account from which to draw the $2,000 payment.

Zimmerman filed a legal memorandum with the TEC this week explaining that Texas law does not require candidates to designate or use any particular accounting method.  This is something Former TEC Chair Paul Hobby has expressly recognized, when he chastised a group responsible for filing numerous complaints based merely on assumptions from information on the face of candidates’ reports.  See Letter from Chair Hobby (Dec. 31, 2014).  Even if a formal accounting method were required, applying “last in-first out” accounting, a generally accepted accounting principle, more than $2,900 of Zimmerman’s personal funds remained in the account when the payment was made.

“The TEC has recognized that the campaign finance reporting system is not an accounting system,” said attorney Jerad Najvar, “but even if formal accounting were required, it’s clear that sufficient personal funds remained in the account.”  Najvar continued: “But we don’t even need to go that far.  Zimmerman had loaned the campaign $20,000, something everyone knew because it was properly reported.  So the idea that he ‘knowingly’ used campaign contributions doesn’t make sense.  He could have written a check to ‘Don Zimmerman’ as a partial loan repayment and put the money in his pocket, instead of writing a transparent check to his wife for a small part of the invaluable assistance she provided to the campaign.”

The TEC is expected to consider the complaint at an upcoming meeting, either March 30 or May 17.

Jerad Najvar practices political and appellate law and is founder of the Najvar Law Firm in Houston.  He served as co-counsel to Shaun McCutcheon in McCutcheon v. FEC, in which the U.S. Supreme Court struck down the federal aggregate contribution limits, and lead counsel in Catholic Leadership Coalition v. Reisman, in which the Fifth Circuit Court of Appeals struck down a waiting period on Texas PACs.

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Texas Ethics Commission v. Empower Texans: Comprehensive Update and Preview of What’s to Come

Empower Texans (dba “Texans for Fiscal Responsibility”) is an influential 501(c)(4) nonprofit corporation dedicated to promoting free markets and limited government; Michael Quinn Sullivan is its President.  Empower sponsors a separate general-purpose committee (Empower Texans PAC, registered in 2007) as permitted under Texas law.  Also, since 2012, Empower Texans (the nonprofit) has elected to exercise its First Amendment rights to make its own independent expenditures for political activity, periodically endorsing candidates and measures under its own name.  One of Empower Texans’ signature, non-campaign activities since 2007 has been to compile a “Fiscal Responsibility Index” grading legislators based on their votes and sponsorship of legislation.  The Index is published online and sometimes distributed by mail to registered voters.

Two nominally-Republican legislators criticized by Empower were State Representatives Jim Keffer and Vicki Truitt.  In April 2012, Keffer and Truitt filed four complaints with the Texas Ethics Commission (TEC) against Empower and Sullivan.  Keffer and Truitt each lodged the same allegations against Sullivan and Empower.

As to Mr. Sullivan, they claimed he failed to register as a lobbyist after receiving compensation for contacting legislators on behalf of Empower Texans.

As to Empower Texans, Keffer and Truitt claimed that the group had violated the Election Code in one of two ways: either by engaging in campaign activity that turned the group into a “political committee” without having first appointed a campaign treasurer with the TEC; or, if Empower Texans did not qualify as a political committee, that it had nonetheless failed to file reports of independent expenditures, as required for corporations making campaign expenditures with their general treasury funds.

These complaints have spawned important litigation regarding many issues, including Texas campaign finance statutes, Texas lobbying statutes, the authority of the TEC and the TEC’s abuse of said authority.  These issues will be covered in more detail on this blog, but first it’s helpful to set out the background and current status of this sprawling litigation.

As to the complaints against Sullivan, the TEC held a formal hearing and issued a final decision on July 21, 2014.  The TEC issued a $10,000 civil fine against Sullivan, ruling that he failed to register as a lobbyist after directly communicating with legislators, on behalf of Empower Texans, in order to influence legislation. Sullivan appealed this decision in district court, and the proceedings are ongoing.

As to Empower Texans, the basic legal theory underlying the enforcement action was that, while Empower Texans is a 501(c)4 “social welfare” organization, it became a “political committee” under Texas law by engaging in activity regulated under Texas’s campaign finance statutes.  In an interesting and revealing twist, after a four-year investigation and multiple rounds of invasive subpoenas, the TEC suddenly dismissed the complaints against Empower Texans in October 2016.   Empower’s claims for declaratory judgment, which include constitutional challenges to the TEC’s theory as how a corporation can “morph” into a PAC, and for attorneys’ fees, remain pending. Future posts will explore how the TEC’s sudden change of heart, while welcome as the TEC finally dropped its ill-conceived enforcement, was disingenuous and self-preserving.

Sullivan Challenges the TEC finding that he violated lobbying disclosure statute

The TEC theory that Sullivan must register as a lobbyist is premised on his contact, on behalf of Empower Texans, with legislators seeking to influence legislation.  Sullivan (a former newpaper reporter) claims that Empower qualifies as a media organization and that he remains a journalist currently, and therefore is exempt under the media exception, which excepts from registration:

a person who owns, publishes, or is employed by a newspaper, any other regularly published periodical, a radio station, a television station, a wire service, or any other bona fide news medium that in the ordinary course of business disseminates news, letters to the editors, editorial or other comment, or paid advertisements that directly or indirectly oppose or promote legislation or administrative action, if the person does not engage in further or other activities that require registration under this chapter and does not represent another person in connection with influencing legislation or administrative action.

Tex. Gov’t Code 305.004(1).

After the TEC fined Sullivan on July 21, 2014 for failing to register, Sullivan sought review of  the agency’s decision in state district court under Texas Government Code § 571.133.  That statute provides for de novo review of final decisions of the Ethics Commission, which means that the court does not give any deference to the TEC’s factual or legal findings.  See Tex. Ethics Com’n v. Sullivan, No. 14-06508-16 (158th Jud. Dist., Denton Cnty.) (filed Aug. 22, 2014).

Sullivan filed the suit in Denton County.  In addition to claiming the media exemption, Sullivan argued that the TEC’s enforcement action should be dismissed under the Texas anti-SLAPP statute (the Texas Citizens’ Participation Act (TCPA), Texas Civil Practice & Remedies Code ch. 27), on the basis that the enforcement action was based on Sullivan’s exercise of his First Amendment rights, and sought attorneys’ fees under the TCPA.  The TEC hired a private investigator to collect evidence that Sullivan was not a resident of Denton County to support a motion to transfer venue to Travis County.  The TEC also argued that the TCPA was not applicable to an administrative-enforcement respondent’s appeal by trial de novo.

On February 18, 2015, Judge Steve Burgess denied the TEC’s motion to transfer venue, and granted Sullivan’s motion to dismiss under the TCPA.  However, five days after the February 18 ruling, the TEC filed a motion to recuse Judge Burgess, in part because the Judge followed Sullivan on Twitter.

The regional presiding judge granted the TEC’s motion to recuse and, on March 9, 2015, assigned Judge David Cleveland to preside in the case.  On March 11, 2015, Sullivan filed a motion for an award of attorneys’ fees based on Judge Burgess’s previous order dismissing the TEC complaints under the TCPA.  The TEC asked Judge Cleveland to reconsider the venue issue.  On March 18, 2015, Judge Cleveland granted Sullivan’s motion to dismiss but denied any court costs or attorneys’ fees, and effectively denied the TEC’s venue argument.

The TEC appealed the denial of its motion to transfer venue.  The Second Court of Appeals in Fort Worth held that the district court had erred as to venue, and ordered the case transferred to Travis County for further proceedings.  Tex. Ethics Com’n v. Sullivan, No. 02-15-00103, 2015 WL 6759306 (Tex. App.—Ft. Worth Nov. 5, 2015), pet. denied (No. 15-0917).   This case doesn’t appear in Travis County’s online docket system yet, but presumably will resume soon.  The issues Sullivan has raised are important, both as to the scope of the media exception and of the TCPA, and this case could yield important precedent.

TEC investigation of whether Empower Texans became a political committee; litigation ensues after “absurd” subpoenas

With characteristic overreach, the TEC kicked off its investigation of Empower Texans with an April 2013 subpoena demanding the “name and address of each person that made a contribution” to Empower in 2011, along with dates and amounts of contributions.  The TEC also demanded (among other things) the account number for every Empower bank account.  This initial subpoena immediately raises red flags, because the TEC doesn’t need the identities of all contributors in order to determine whether a nonprofit became a political committee under the theory advanced by the TEC.  Empower immediately objected and refused to provide the information.  Empower did provide some federal tax documents requested by the TEC, and appeared in two preliminary hearings.  Following these proceedings, the TEC recognized that “there is insufficient credible evidence of violations of laws administered and enforced by the commission,” but issued a Notice of Formal Hearing.

Empower and Sullivan participated in a Pre-Hearing Conference on February 12, 2014, and raised due process objections for the TEC’s failure to adopt procedural rules governing the upcoming formal hearing, despite being statutorily required to adopt such rules (Tex. Gov’t Code § 571.131(c)).  Ironically, that same day, TEC voted unanimously to issue new subpoenas to Empower and Sullivan, requesting documents by March 5, but providing that pre-hearing motions would not be heard until March 14 (i.e., after the deadline for compliance with the subpoenas).

These subpoenas were startlingly broad.  As to Empower, the TEC demanded, for a period of more than three years, “all written communications” sent by or on behalf of Empower Texans supporting and opposing candidates, officeholders and measures and “any” communications “regarding” Empower’s solicitation and use of political contributions and making political expenditures.  These requests are written such that they would require not only Empower’s solicitations themselves (that is, e.g., copies of emails sent to supporters seeking funds), but all drafts and internal communications related in any way to Empower’s solicitations, or even internal communications regarding their “acceptance” and “use” of “political contributions.”

Empower and Sullivan went to federal court on February 26, 2014, seeking to quash the subpoenas.  Empower asserted that the TEC’s theory—that a corporation that receives contributions and then makes “direct campaign expenditures” (independent expenditures) becomes a political committee because it is deemed to be working in concert with others (the contributors)—was being asserted for the first time and violated First Amendment rights.  Empower pointed out in its complaint that, on the same day the TEC issued the new subpoenas, it had also proposed a new rule expanding the disclosures required by nonprofits that make independent expenditures.  (Proposed Rule 20.68 would have presumed a contribution is a campaign contribution based on that contribution’s use by the recipient, irrespective of the contributor’s intent, contrary to the preexisting Election Code definition.) Empower and Sullivan alleged that “[t]he TEC is attempting to ‘out’ any source that have contacted Plaintiffs or had communications with them so that these sources may be silenced.”  Compl. para. 53.

Judge Sam Sparks held a temporary restraining order hearing and stated that the subpoenas were “absurd” and “overbroad,” but ultimately dismissed the case on abstention grounds, holding that Empower must raise its constitutional claims in the TEC enforcement proceedings before bringing them in a federal suit.  (This abstention holding is important because the court found that TEC administrative proceedings are an “adequate opportunity” for plaintiffs to present their constitutional claims.)

The TEC held a meeting on April 3, 2014 and withdrew its third-round subpoenas which a federal judge had described as “absurd” and served Empower Texans and Sullivan with a fourth round of subpoenas.  While the TEC maintains that the revised subpoenas were more narrowly drawn than the requests at issue in the federal lawsuit, in many ways they were broader and more objectionable.  These April subpoenas now defined “Empower Texans” to include “any other affiliated or subsidiary entities” (even though the complaint was filed only as to Empower), and requested many new invasive categories of information (e.g., “telephone and personnel directories”; “personnel files”; “records or evidence of incoming and outgoing telephone calls”; “accounting and bookkeeping records”; lists of recipients of Empower’s emails; and calendars and time records documenting Sullivan’s and other staff time.  [Note that Empower later pointed out that the TEC’s purpose in requesting time records later became clear, when TEC proposed a new definition of “principal purpose” (Rule 20.1(20)]).

Empower/Sullivan raised constitutional objections at the April 3 meeting, prompting TEC Counsel John Moore to advise the Commissioners that it’s not the TEC’s responsibility “to determine whether something is constitutional or not.”  See Transcript of Apr. 3, 2014 hrg.  Sullivan and Empower filed a lawsuit in Travis County district court on April 30, 2014, seeking an injunction against the subpoenas.  Tex. Ethics Com’n v. Empower Texans, Inc. and Michael Q. Sullivan, No. D-1-GN-14-001252 (53rd Dist. Ct., Travis Cnty.).  Empower and Sullivan asserted that the subpoenas should be quashed for violating First Amendment rights. They also argued the subpoenas were not supported by probable cause and thus violated the Fourth Amendment, and that the sworn complaint proceedings violated due process for lack of procedural rules.

Apparently inspired to take Empower’s objections a little more seriously now that their actions were under review in another court, the TEC discussed Empower/Sullivan’s objections in a meeting May 28, 2014, and pared back the subpoenas.  While these modifications did slightly scale back the scope of the requests, they still requested bounds of unnecessary information.  Empower and Sullivan filed renewed objections and responses with the TEC.

At this point, coincidentally, another Texas judicial decision was issued that burnished Empower’s position.  On December 19, 2014, the Third Court of Appeals in Austin released its opinion in the long-running case of Sylvester v. Texas Association of Business, 453 S.W.3d 519 (2014)Sylvester involved a similar claim that a nonprofit entity (TAB) had incurred regulation as a political committee by engaging in a limited amount of communications which losing legislative candidates argued were not merely “issue” ads but “campaign expenditures” in opposition to their respective candidacies.  Importantly, Sylvester applied a textually-sound interpretation to the political committee definition—holding that an entity can have only one “principal purpose”—and held that TAB could not be considered a political committee (even assuming, arguendo, that the ads were express advocacy) because TAB’s principal purpose was to be a trade association, not to influence elections.  Id. at 529-30.  Sylvester additionally explained that “[w]ere we to interpret ‘principal purpose’ in the definition of ‘political committee’ as suggested by appellants so that corporations making independent political expenditures morph into political committees under the Election Code…when they made the expenditures, the definition would be an affront to the First Amendment.”  Id. at 529.

Four days later, a senior TEC attorney emailed TEC legal staff and, with quite a dose of understatement, noted that Sylvestercould be used against us by those wishing to argue that a corporation cannot be a political committee.”  In fact, Sylvester stated directly that a corporation can have only one “principal purpose” for purposes of determining political committee status, directly precluding the TEC’s position that a committee can have multiple principal purposes.  It seems pretty clear that Empower’s principal purpose is to operate as a 501(c)(4) organization, with independent expenditures (and their supporting solicitations) constituting only a minor part of its overall activity.

Nonetheless, TEC staff argued in a memo on May 25, 2015, that the Commission should continue pressing its investigation and, specifically, should seek enforcement of the subpoenas in district court.

The TEC Goes on Offense

Following the staff’s recommendation, the TEC voted on June 11, 2015 to file a lawsuit against Empower/Sullivan, seeking a judicial order to enforce the subpoenas.  The suit was brought under Texas Government Code sections 571.137(c) and 2001.201.  Section 571.137(c) states that when “a person to whom a subpoena is directed” refuses to comply with the subpoena requests, the TEC must “report that fact to a district court in Travis County.” Section 2001.201 authorizes an administrative agency to file suit, in a district court in Travis County, to enforce an administrative subpoena.  The TEC filed their suit on October 5, 2015.  Tex. Ethics Com’n v. Empower Texans, Inc. and Michael Q. Sullivan, No. D-1-GN-15-004455 (345th Dist. Ct., Travis Cnty.).

In response to the TEC’s petition, Empower and Sullivan filed a counterclaim seeking declaratory judgment that a corporate entity cannot be turned into a political committee under the TEC’s “morph-into-pac” theory, and alleged that the TEC complaints were a frivolous claim by a state agency under Texas Civil Practice and Remedies Code, Chapter 105 and that TEC should be liable for Empower/Sullivan’s attorneys’ fees.  Essentially, these counterclaims advanced the same legal theories that Empower and Sullivan were simultaneously asserting in the lawsuit they filed against the TEC.

Empower/Sullivan’s Request for Injunctive Relief is Denied, but TEC Suddenly Drops Investigation

Meanwhile, the suit initially filed by Empower/Sullivan progressed.  In November 2015, Plaintiffs filed their Second Amended Petition.  Primarily, Empower/Sullivan argue that “the TEC does not have an authorized purpose [supporting its subpoenas] because there is no statute it can clearly identify EMPOWER may have broken pursuant to the complaints to authorize the issuance of a subpoena.”  “In fact,” Plaintiffs argue, apparently referring to the Sylvester holding as to principal purpose, “the law is conclusively decided against the TEC’s claim” that Empower may constitute a political committee.  Plaintiffs also sought judicial declarations restricting the definitions of “principal purpose,” “campaign expenditure,” “in connection with,” and “campaign contribution,” and declarations that Empower did not violate the Election Code based on the Keffer/Truitt allegations, and mandating that the TEC adopt certain procedural safeguards governing sworn complaints.  Plaintiffs also seek to force the TEC to pay their attorneys’ fees as a result of the TEC’s frivolous position ignoring governing caselaw. Plaintiffs argue:

[T]he Commissioners have known for one year [that] the interpretation of the Election Code they seek to apply against Empower has been directly disavowed by controlling case authority….Even with the knowledge of the controlling authority eviscerating its case, the Commissioners will not rule on the merits….Instead, they seek to harass the Plaintiffs with multiple subpoenas, hearings, and orders to obtain constitutionally privileged…documents, the result of which is to intentionally and knowingly cause an unnecessary expense of time, cost and attorneys’ fees to EMPOWER.

Second Amended Pet., para. 106.

A temporary injunction hearing was scheduled for December 21, 2015.  Four days before the hearing, the TEC once again modified its subpoenas.  This time the TEC was represented by an attorney from the Texas Attorney General’s office, and drastically reduced the scope of the requests, basically seeking only enough information as necessary to determine how much Empower received from contributors who intended to fund “independent expenditures” (as opposed to, e.g., general operations of the nonprofit, or issue ads) in response to five specific emails Empower had distributed requesting funds for that purpose.  This was now the fifth permutation of the subpoenas.

On December 29, 2015, the district court denied the request for an injunction, in an order stating that Empower/Sullivan’s pleadings were “without merit.”  The court order does not explain its reasoning.  Empower filed an interlocutory appeal.  See Empower Texans, Inc. and Michael Quinn Sullivan v. State of Texas Ethics Commission et al., No. 03–16–00019–CV (Tex. App.—Austin).

The TEC, in its appellate brief filed on June 30, 2016, stated that it would not go forth with any further proceedings related to the Keffer/Truitt complaints if Empower Texans either affirmed that there was no more responsive information, or affirmed that the total amount of funds raised from the solicitations for “independent expenditures” was less than $500.  TEC’s Brief at 2-3 (filed Jun. 30, 2016). (The “political committee” definition includes a $500 threshold.)  In a reply brief filed August 19, 2016, Empower affirmed that the total funds raised were less than $500:

Empower Texans did not request political contributions. Instead, it sent out five e-mails with a donate button, where the accompanying text read: “Our work is made possible only through the generous support of friends like you. Please consider making a monthly or one time contribution of $5, $10, or $25 to fund independent expenditure activities that promote conservative leadership in the Lone Star State.”  (E.g., RR4:DX16 at Ex. 3.) The complaints are based entirely on that statement’s appearing in five e-mails.  However, independent expenditure activities is not a defined term in the Texas Election Code and does not trigger TEC supervision or reporting obligations. Nonetheless, even if the term triggered an obligation to file reports with the TEC, the total amount of all electronic donations during the timeframe the donate button could have been used is $375 from 11 separate donations.  (RR4:DX15.) It is not possible to determine whether the e-mails’ donate button was ever used. The $375 is all electronic donations from every possible source.  If it is assumed that the donate button was used for all electronic donations, the total amount still falls below the $500 threshold that the TEC asserts applies.

After this reply, the TEC moved quickly to dismiss all remnants of the enforcement action regarding the claim that Empower Texans had become a political committee.  The TEC filed a notice of non-suit on September 6, 2016, dropping its request to enforce the subpoenas (in the 345th District Court) against Empower and Sullivan.  On October 13, 2016, the TEC dismissed the underlying Keffer/Truitt sworn complaints against Empower Texans.  A week later, on October 21, 2016, the TEC filed a plea to the jurisdiction requesting that the court dismiss certain of Empower/Sullivan’s counterclaims pending in the 345th, arguing that they were moot because the TEC had dismissed the Keffer/Truitt complaints.

The TEC also moved quickly to argue that, since it had now dismissed the underlying Keffer/Truitt complaints, the appeal in Empower Texans’ own case filed against the TEC (in the 53rd Dist. Ct.) was moot as well. The Third Court of Appeals agreed and, on November 22, 2016, dismissed Empower Texans’ appeal without ruling on any of the underlying legal issues.  Empower Texans, Inc. v. State of Tex. Ethics Com’n, No. 03-16-00019, 2016 WL 6946810 (Tex. App.—Austin Nov. 22, 2016).

Last week, the Attorney General’s office withdrew from the case, so the TEC is now represented only by Eric Nichols of Beck Redden LLP. There have been no other developments in this case since the Court of Appeals’ decision.  While the interlocutory appeal was dismissed, Empower/Sullivan’s underlying claims for relief remain pending.

TEC’s authority under the Texas Constitution: Legislative or Executive Agency?

As noted above, Empower and Sullivan have argued that the TEC’s underlying theory that Empower Texans could morph into a PAC was frivolous (based on Sylvester), and asked the courts in two separate cases to order the TEC to reimburse the attorneys’ fees incurred in defending against that theory.  Texas law allows a court to order a “state agency” to pay fees, expenses, and attorneys’ fees to an opposing party if the agency asserts a cause of action that is “frivolous, unreasonable, or without foundation.”  Tex. Civ. Prac. & Rem. Code § 105.002.  In order to be considered a “state agency” within the meaning of this provision, the agency must be “in the executive branch of state government.”  Id. § 105.001(3).

The TEC claimed that it could not be liable for attorneys’ fees and expenses because it is not an executive branch agency but is in fact a legislative branch agency.  The TEC is, in fact, established under the article of the Texas Constitution establishing the legislative branch.  Tex. Const. art. III (the “Legislative Department”), § 24a.  The TEC challenged the district court’s jurisdiction to hear several of Empower’s counterclaims, including this request for attorneys’ fees, arguing that the attorneys’ fees provision clearly did not apply since TEC is under the legislative branch.

Empower/Sullivan responded by arguing that the TEC was too cute by half: if the TEC is not an executive agency, then the TEC can have no authority to make rules, enforce laws, issue orders, or collect fines under the constitutional separation of powers.  Empower added a claim requesting that if the court found the TEC was not a “state agency,” to find that it was a legislative agency as claimed by TEC, and order that it therefore had no enforcement authority.

The district judge granted the TEC’s plea to the jurisdiction, but did not explain a rationale as to any provision dismissed.  Empower’s request for a declaratory judgment that TEC was an executive agency or, in the alternative, a legislative agency without enforcement authority, was dismissed; its request for attorneys’ fees for TEC’s allegedly frivolous theory was dismissed with prejudice.  Order Granting TEC’s Plea to the Jurisdiction (November 28, 2016), in Tex. Ethics Com’n v. Empower Texans, Inc., et al., No. D-1-GN-15-004455 (345th Jud. Dist., Travis Cnty.).

Empower/Sullivan filed an interlocutory appeal on December 19, 2016; the case is pending in the Third Court of Appeals as No. 03-16-00872-CV and all district court actions are stayed pending a decision on the interlocutory appeal.  Empower’s brief is due March 23, 2017.  Note that these same issues (raised in the plea to the jurisdiction) are still potentially live in the case Empower initiated in the 54th District Court, although it is unclear if any action will be taken there pending this appeal.

Texas Supreme Court hearing in Texas Democratic Party v. King Street Patriots, Inc.

The Texas Supreme Court heard arguments today in part of Texas Democratic Party v. King Street Patriots, Inc.  The Texas Election Code allows private parties to sue political opponents for alleged violations of campaign finance law, and the Texas Democratic Party and some of its candidates sued KSP in 2010 for allegedly acting as a “political committee” as defined in Texas law without registering with the Ethics Commission, and for making corporate political contributions, which are prohibited.  (There is no allegation that actual money was transferred; the allegation is that KSP’s activities resulted in deemed in-kind contributions to certain candidates by training poll watchers, etc.).

I went to Austin to watch the argument.   More to come on this case later, but I wanted to post an initial reaction to the argument.  Among other things, because the plaintiffs are claiming KSP made an illegal corporate contribution, KSP brings a facial challenge to the Texas ban on corporate contributions (which applies to both nonprofits and for-profit corporations).  The attorney for the Democratic Party focused his argument on convincing the Court that if the Texas corporate contribution ban is struck down, it will “open the floodgates” to anonymous contributions funneled to campaigns through sham corporations set up to serve exactly that purpose.  This is misleading.

In fact, just like federal law, Texas law already bans undisclosed earmarking.  In other words, it is illegal in Texas to give money to an intermediary (individual or organization) earmarked for a campaign, without disclosing the true source of the contribution (that is, without informing the campaign of the true source of the funds so the campaign can report the true source).  TEC Rule 22.3 (effective since 1993) states that “[a] person may not knowingly make or authorize a political contribution or political expenditure in the name of or on behalf of another unless the person discloses the name and address of the person who is the true source of the contribution.”  1 Tex. Admin. Code 22.3.

The U.S. Supreme Court has already indicated that the government cannot point to a hypothetical horrible that is “already illegal under current campaign finance laws” to justify additional restrictions on First Amendment-protected contributions.  McCutcheon v. FEC, 134 S. Ct. 1434, 1456 (2014).  Notably, the hypothetical rejected by the McCutcheon Court relied on already-illegal earmarking, just as the hypothetical offered by the Texas Democratic Party attorney today.  In McCutcheon, the government claimed the aggregate limits were necessary because, otherwise, a single person could write a huge check to a joint fundraiser, where each participant would then conspire to transfer its portion of the contribution to a pre-ordained ultimate recipient, which would then spend the money to support a single candidate.  The Court correctly pointed out that “this speculation relies on illegal earmarking.”  Id. at 1455.

There are many aspects of this case.  But the Democratic Party clearly wants to scare the Texas Court into following this theme of anonymous corporate cash. It is a ruse that ignores current Texas law (although nobody cited this provision today). The Court would err if it were to take the bait, as McCutcheon instructs.

Reported #voterfraud investigation in Nueces County, Texas

I just noticed this story from the Corpus Christi Caller-Times, reporting on an apparent investigation by state authorities into allegations that campaign workers filled out a voter’s mail-in ballot without his direction:

“He said he had a mail in ballot, but it had already been filled out,” Franklin said. “I asked if (Gonzalez) had helped him, and he said, ‘No, she took it from me and she filled it out the way she wanted to.’

“There’s so much fraud there it’s unbelievable,” she added.

Franklin, who has been working Nueces County elections for about 15 years, said a relative of Flores “brought in people every day that she didn’t seem to know.”

This type of fraud is commonplace in the Rio Grande Valley, and was part of the reason Letty Lopez prevailed in her election contest and the court ordered a new election.

Election Manipulation Dies Hard in Weslaco, Texas

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The testimony above is from the Feb. 4, 2014 deposition of Maria Berrones, a proud Weslaco voter who has some experience with current candidate for Wesalco Commission District 5, Lupe Rivera, Jr.

Recently, Rivera, Jr. announced that he would challenge Letty Lopez for the District 5 Commissioner seat, providing another chapter in this ongoing struggle against illegal voting practices in South Texas.

After a four-day trial in March 2014, Letty Lopez, represented by Najvar Law Firm, won a landmark election contest.  She proved 30 illegal votes were cast in the November 2013 election between Lopez and Lupe Rivera, Sr, nearly twice the margin of victory. Ten of those votes were cast by friends and relatives of Lupe Rivera, Sr., who registered to vote in District 5 but did not live in District 5. Twenty votes were illegal because the Rivera campaign had violated one or more Election Code statutes specifically passed to protect against coercion or fraud in mail-in balloting. The district court ordered a new election. Najvar Law Firm successsfully defended the case on appeal, and that opinion–from Texas’s Thirteenth Court of Appeals in Corpus Christi–provides a valuable precedent enforcing the residency requirement in the Election Code, and the anti-fraud provisions regarding mail-in ballots.

Back to Maria Berrones.  Her testimony proved devastating to Rivera’s defense, because here-for once-was a rare example of someone willing and able to testify to exactly the type of coercion and abuse of elderly mail-ballot voters that is commonplace in South Texas elections. She said she requested a mail-in ballot because Lupe Rivera, Sr. had come by her house and suggested that she vote by mail. He told her to call him when the ballot arrived, and not to give it to anyone else. He showed up at Berrones’ house after it arrived, even before she called. She handed it to him and he filled it out. He didn’t ask how she wanted to vote. He handed it to her to sign, then left in a hurry because he had to visit other people.

Berrones’s family was incensed when they heard what happened, and tried to take her to vote in person with them, hoping they could cancel the mail ballot. Berrones testified that she wanted to vote for Lopez. But the poll workers told her that the mail ballot had already been counted, so she could not vote:

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After trial, the district court found the evidence sufficient to conclude that the ballot was illegal, and that since Rivera had completed the ballot, he had “voted for himself,” and the court deducted the vote from Rivera’s total.

Apparently Lupe Rivera, Jr., who had helped his father collect the mail ballots, had an idea that Berrones’ testimony would be devastating. So after she had been subpoenaed by Lopez for a pre-trial deposition, Rivera, Jr. went to her house and tried to convince her not to show up.

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Thankfully, to her great credit, Ms. Berrones showed up and testified courageously.  Her testimony was critical to the case and provides a window into the tactics used in coercing and taking advantage of ballot by mail voters. There were 29 other votes the court also threw out.  Weslaco got a new election, and Letty Lopez defeated Rivera Sr. in the rematch in November 2015.

Weslaco residents filed a criminal complaint with the Texas Secretary of State based on evidence from the election contest, and the Attorney General’s office filed 16 misdemeanor charges against Lupe Rivera, Sr. and two against Lupe Rivera, Jr.  Senior pled guilty to unlawful assistance of a voter, i.e., “while assisting Maria Berrones…knowingly prepar[ing] the voter’s ballot in a way other than the way the voter directed or without direction from the voter,” and got a year in jail (suspended during community supervision) and $500 fine. The state prosecutor testified in a legislative hearing in Austin in September that the Weslaco case illustrated an example of how elections are tained by manipulation of voters through false pretenses. Apparently the prosecutors dropped charges against Junior on account of Senior’s guilty plea.

So, naturally, Lupe Rivera, Jr., who desperately tried to convince an elderly woman to disobey a subpoena, is now running to take back the seat that his father lost after Lopez proved in court that the Rivera campaign had harvested 30 illegal votes.

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One lesson from this is that rooting out these practices and restoring integrity to elections in South Texas–famous for Lyndon Johnson’s “ballot box 13” that miraculously put him over the top in 1948’s Senate elections–will require a sustained effort. I hope the voters of Weslaco turn out in droves in November and send a message in this election.

TX Supreme Court orders Houston City Council to honor referendum petition seeking repeal of ERO

The Texas Supreme Court today issued a decision (with no dissenters) ordering the City of Houston to place on November’s ballot the question whether the city’s recently-enacted “Equal Rights Ordinance”  shall be repealed.  Mayor Parker and the City Attorney’s office have been arguing that the petition was insufficient for various reasons (some of which I have written about before), and Council had refused to honor the petition claiming there were not enough signatures. However, the City Secretary had initially “certified” that the petition contained a sufficient number of valid signatures.  The wrinkle was that the City Attorney had conducted his own review, overlapping with the Secretary’s, concluded the petition was insufficient, and the Secretary’s report to Council referred (but did not adopt) the City Attorney’s contrary finding.

The linchpin of the decision is the fact that the Charter vests the City Secretary alone with the duty to certify whether a petition contains a sufficient number of valid signatures.  The Supreme Court’s analysis is pretty simple:  because the Charter vests the Secretary with certification responsibility, and the Secretary’s report stated that she had certified a sufficient number of signatures, the Council’s duty to act (repealing the ordinance or putting it to a public vote) immediately kicked in.  The Court conditionally granted a writ of mandamus ordering the Council to either repeal the ordinance itself or put it to a vote on the November 2015 ballot, which are the only two options available under the Charter once a sufficient petition has been certified.

This blog will cover this case going forward.  If the City wants to challenge the validity of the petition, the Supreme Court states that the City has the duty to seek affirmative relief stopping the election process.  However, this points up another thorny issue as to when it is appropriate for a court to enjoin an election process that has already begun.  I suspect Mayor Parker will want to file an immediate original petition in district court.

The decision will be warmly received by petition groups across the State.  Municipalities commonly throw up objections to petitions, claiming–often disingenuously–that signatures are invalid for various reasons.  This decision will solve that problem, at least in cases where the official vested with certification duty (like the Secretary here) certifies the petition. Most charter petition procedures are written like Houston’s, where the Council’s duty to act becomes ministerial upon certification.  However, if the official with certification authority acts like the City Attorney’s office did here, petitioners will still be required to go to court first.

 

Effort to remove Port Isabel councilmembers goes to Cameron County court Tuesday

The Monitor reports today on an interesting situation with dueling motions to remove three Port Isabel, Texas councilmembers.  One member filed an agenda item requesting the removal of a fellow member for alleged delinquent taxes; subsequently, a motion was made to remove the original complainant as well as another member.  The latter two were in fact removed after a council vote, but they sued, alleging failure to follow charter procedures and due process before the removal. The hearing Tuesday should be to determine whether the council acted properly in removing the two members.