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Hutto insisted that Colby had misconstrued the nature of the debt: "Because whenever Tom incorporated he had some debt in Albo, which was a sole proprietorship at that time. Whenever he incorporated [April 1986], that corporation took over all assets and liabilities of Tom DeLay, the sole proprietor." When DeNisco asked if that didn't mean the debts were DeLay's personal debts, Hutto said "They were Albo debts of Mr. DeLay."
Believing that Albo was paying off DeLay's personal, rather than company, debts, Colby declared the loan payments as assets, something DeLay would eventually reimburse the corporation for. If DeLay's personal debts were indeed being paid, the congressman was required to report those payments as income, and to sign a note with Albo. In his petition, DeNisco charged that Albo was making regular payments on $150,000 of such debt, and that DeLay had never reimbursed Albo for that.
DeNisco pressed Judge Tony Lindsay to order DeLay to turn over his IRS returns to clarify the matter. According to court records, the following exchange took place:
"Lindsay: Are you telling me that you think that money was loaned in the name of the corporation at some point in time, but which actually went not to the corporation?
"DeNisco: That's one of my thoughts, your honor, or that the money was loaned to Mr. DeLay personally for his campaign debt and he's been having the corporation retire his personal debt.
"Lindsay: Well, now, on that particular allegation, I can't imagine why you can't figure that out from the corporation's records about whether they're paying this debt or not.
"DeNisco: Judge, because they don't have complete records. This corporation has never maintained records. Counsel [Randy DeLay] will be the first to admit that they have -- when I first got this case, one of the first things he said to me, was, 'We have never maintained our books and records. We've got to go back and do our minutes. We've got to do our record keeping.' "
DeNisco further argued that since the court had required Blankenship to deliver his tax returns to answer DeLay and Hutto's accusation that Blankenship had defrauded Albo by using company trucks and equipment for personal customers, DeNisco should be able to get the same information from DeLay. But he didn't get very far with Lindsay, a prominent Republican, wife of former county judge Jon Lindsay and, DeNisco charged, a friend of DeLay's. DeNisco tried unsuccessfully to get Lindsay to recuse herself. The lawyer then got a hearing with a visiting judge, who saw no need for Lindsay to step aside.
If Blankenship's case had gone to trial, the accusation that DeLay had used Albo to pay off his campaign debts could have had potentially hazardous implications, given that such actions are a violation of federal law. In their depositions, both DeLay and Hutto denied that Albo had ever paid either DeLay's personal or campaign debts.
In his deposition of May 19, 1994, Albo's accountant, Lynn Colby, said at first that he didn't recall whether Albo was paying DeLay's campaign debts. He said he did recall discussing certain bank loans with Hutto, and asked Hutto, but not DeLay, what the debts consisted of:
"Colby: [Hutto] told me that -- that he had recently incorporated and that there were some personal debts that the corporation was assuming that were set up on the books of the corporation.
"DeNisco: And they were personal debts of Mr. Tom DeLay, weren't they?
"Colby: I believe they were.
"DeNisco: And isn't it true that some of those personal debts concerned campaign debts that he had run up when he was running for Congress?
"Colby: I don't recall exactly what those debts were for."
Under persistent questioning, Colby said Hutto "could have told me that it had something to do with the campaign .... I can't recall exactly." Finally, DeNisco summarized Colby's response this way: "But you have some vague recollection about campaign or campaign debts being discussed [with Hutto], you're just not really clear at this point in time as to what specifically was said? Is that a fair statement?" To which Colby replied, "That's fair."
DeLay's campaign did have debts after his first election to Congress in 1984. In his filings with the Federal Election Commission for that year, DeLay carried forward a loan of $40,000 from MBank. DeNisco seemed intent on linking that campaign debt to loans being paid by Albo, which, in 1986, also listed having a loan from MBank. By the time of Blankenship's suit, MBank had gone out of business, and DeNisco was unable to obtain any paperwork on that Albo loan or several other loans that, in 1993, DeLay and Hutto consolidated into a loan with Southern National Bank.
DeNisco had another major area of questioning concerning money DeLay had received directly from Albo. According to copies of canceled checks attached as exhibits in DeLay's and Colby's depositions, in 1986 DeLay earned $3,000 in consulting fees from Albo. In his deposition, DeLay said that from time to time he made telephone sales for Albo.
"I don't even know if this is before the merger or after the merger," DeLay said, "but when times got hard, we would take a list of potential targets for sales and I would go over the list, and if I knew anybody connected in any way with those people, I'd make a call." DeLay said he made the calls both from Washington and Houston. "To finish the question," DeLay said, "very few calls ... over the whole period of time I've been in Congress, I've probably made no more than 50 calls in nine years."