Loose Texas election rules give Perry financial edge

Texas governor doles out grants, jobs to donors

Governor Rick Perry’s bid for the Republican presidential nomination has been fueled by generous campaign donations from many Texas executives who do business with the state. Governor Rick Perry’s bid for the Republican presidential nomination has been fueled by generous campaign donations from many Texas executives who do business with the state. (Richard Shiro/Associated Press File)
By Michael Luo and Nicholas Confessore
New York Times / August 21, 2011

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NEW YORK - Two years ago, John McHale, an entrepreneur from Austin, Texas, who has given millions of dollars to Democratic candidates and causes, did something very unusual for him: He wrote a $50,000 check to a Republican candidate, Rick Perry, then seeking a third full term as governor of Texas. In September 2010, he did it again, catapulting himself into the top ranks of Perry’s donors.

McHale, a Perry spokesman explained after the initial donation, “understands Governor Perry’s leadership has made Texas a good place to do business.’’

Including, it turned out, for McHale’s business interests and partners. In May 2010, an economic development fund administered by the governor’s office handed $3 million to a pharmaceutical start-up called G-Con, a company that McHale helped get off the ground. At least two other business executives with connections to the firm had also given Perry tens of thousands of dollars.

Perry leapt into the Republican presidential primary this month preceded by his reputation as a thoroughbred fund-raiser. But a review of Perry’s years in office reveals that one of his most potent fund-raising tools is the very government he heads.

Over three terms in office, Perry’s administration has doled out grants, tax breaks, contracts, and appointments to hundreds of his most generous supporters and their businesses. And they have helped Perry raise more money than any politician in Texas history - donations that have periodically raised eyebrows in Texas but, thanks to loose campaign finance laws and a business-friendly political culture dominated in recent years by Republicans, have only fueled Perry’s ascent.

“Texas politics does have this amazing pay-to-play culture,’’ said Harold Cook, a Democratic political consultant.

Mark Miner, a spokesman for Perry, said there was no connection between McHale’s contributions and the grant to G-Con. He said that the purpose of the state funds was to create jobs and that it was appropriate for Perry to appoint to state oversight posts people who support his vision and policies.

“These issues have been brought up in previous elections to no avail,’’ Miner said.

Perry is not the first governor to have taken contributions from contractors or appointees to state commissions and boards who oversee many of the agencies that in other states are controlled directly by the governor.

But because he has been in office more than a decade, he has had greater opportunity than any of his predecessors to stock the government with loyalists - he has appointed roughly 4,000 individuals to state posts - while enacting policies that have benefited allies and contributors.

And Perry has been much more aggressive than any past governor in soliciting from them. According to a study last year by Texans for Public Justice, a watchdog organization, Perry has raised at least $17 million from more than 900 appointees or their spouses, roughly $1 out of every $5 that he has raised as governor.

Perry has drawn scrutiny for two of his signature economic development efforts, the Texas Enterprise Fund and the Texas Emerging Technology Fund. The enterprise fund, which is intended to be a deal-closing tool for the state as it competes for jobs, has dispensed $435 million in grants to businesses since 2003. The technology fund, which has doled out nearly $200 million to companies since 2005, has a similar job creation mandate.

More than a quarter of the companies that have received grants from the enterprise fund in the most recent fiscal year, or their chief executives, made contributions to either Perry’s campaign dating back to 2001 or to the Republican Governors Association since 2008, when Perry became its chairman, according to an analysis by The New York Times.

G-Con is working with the Texas A&M university system on a pharmaceutical manufacturing effort that involves growing tobacco-like plants to produce influenza vaccines. Among the company’s officers, according to records filed with the Texas secretary of state, is David M. Shanahan, the founder and president of a Dallas-based biotech firm, Gradalis, which received a separate $1.75 million grant from the state’s technology fund in February 2009.

Campaign finance records show Shanahan contributed $10,000 to the governor in November 2009. The following month, G-Con filed its application for an enterprise fund grant, said Lucy Nashed, a spokeswoman in the governor’s office.

State records from a network of firms associated with G-Con also list McHale, the longtime Democratic donor, as an officer.

Patricia Haigwood, a spokeswoman for G-Con, said Friday that McHale, who did not return messages asking for comment, was one of the original board members of G-Con. But she said he left the company in late April 2010 and had not made an investment in G-Con.

Gradalis, however, controls 10 percent of G-Con. And both McHale and James R. Leininger, a San Antonio businessman who has given more than $230,000 to Perry over the years, have minority interests in Gradalis, Haigwood said.

Nashed said technology and enterprise grants must be approved by the speaker of the Texas House and the lieutenant governor and recipients go through rigorous reviews. “There’s a thorough and appropriate vetting process,’’ she said.