By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Richard Connelly
By Jeff Balke
By Casey Michel
By Craig Hlavaty
By Jeff Balke
For a congressman who wants to get an idea across, there are few pulpits more bully than that of a House committee hearing. Tom DeLay, the six-term U.S. representative from Sugar Land, is fully aware of that, and so on the morning of September 20, he sat before a microphone in a hearing room in the Rayburn House Office Building ready to present his objections to an international ban on CFCs, or chlorofluorocarbons.
DeLay has sponsored eight different bills to amend the 1990 Clean Air Act, and one of his targets has been the Act's proposed ban on Freon and other CFCs, which scientists around the globe have long claimed are partly responsible for a growing hole in the ozone layer. Now, facing the dais on which sat his colleagues from the House Science subcommittee, DeLay read from a statement saying that the talk of ozone depletion is nothing more than a "media scare" and that "it is clear that man-made CFCs do not have as much of an effect on the atmosphere as normal climatic fluctuations." He lamented the cost of the chemical that will replace CFCs in air conditioning and refrigeration units. He told the committee that "there is another school of thought that is not tied to Chicken Little approaches to the environment."
DeLay was sailing along, suggesting reading material on environmental terrorism and proclaiming his background as a scientist, when he said something that seemed to indicate that he hadn't read what many consider to be the basic study on ozone depletion. Suddenly, Congresswoman Lynn Rivers, a first-term Democrat from Michigan, posed a question. She held up a glossy copy of a report titled Scientific Assessment on Ozone Depletion. The report featured a satellite photograph of the ozone hole over Antarctica and the seals of NASA, which is headquartered in DeLay's own district, the United Nations Environment Program and the World Meteorological Organization. The study represented the consensus of 200 scientists from around the world, and had been reviewed by another 200 scientists. Seven months earlier, when it had been published, the Environmental Protection Agency had sent out thousands of free copies of it through an ozone information hot line.
What Representative Rivers wanted to know was, if DeLay was so interested in the ozone issue, and if he was upset that scientists didn't listen to both sides of a question, why hadn't he read "the most important study on this issue, the ... broadest, the one that has worldwide input?"
DeLay, as it happens, didn't have much of an answer. Still, being caught in an act of outrageous rhetoric has never done much to slow DeLay down. (And his comeuppance from Rivers received little attention outside the hearing room.) If there is one thing Tom DeLay truly loves besides playing golf, it is attacking the conclusions of environmental scientists. And because the former exterminator from Sugar Land is the majority whip of the U.S. House of Representatives -- and therefore one of the most powerful politicians in Congress -- his attacks have clout.
Rachel Carson's conclusion in Silent Spring that DDT was destroying such birds as the bald eagle and the brown pelican by thinning their eggshells? Wrong, insists DeLay, who claims that two million people a year die of malaria because DDT has been banned globally. (And never mind that a team of international scientists has attributed the rising toll of malaria to the destruction of tropical rain forests, which produces new breeding grounds for mosquitoes.)
Concerned over acid rain killing trees and lakes in the Northeast? It's a simple issue, says DeLay, and one Washington only made worse by ignoring the conclusions of its own scientists. There was no need to spend tens of millions of dollars on cleaning up smokestacks in the Midwest, DeLay insists. The whole problem could have been solved by pouring half a million dollars' worth of lime in the northeastern lakes.
DeLay does not flinch in his denunciations. The committee who awarded the Nobel Prize to the two scientists who discovered the ozone problem are a bunch of Swedish environmental extremists, he says, and as for the EPA, that's nothing more than a "Gestapo organization."
Invoking two pet phrases, "common sense and sound science," Delay insists that he's not a "crazy bug killer from Houston," but that he simply wants to rein in environmental overregulation. He points to his degree in biology from the University of Houston, and his business experience as a professional exterminator, as proof that he has both the scientific and business expertise to know what he's talking about. Indeed, as DeLay has often said, it was frustration with the EPA's regulation of his exterminating business that originally drove him into politics. When he gets going, the congressman can offer horror story after horror story of regulatory excess -- many of them, as it happens, provided by researchers from the Heritage Society, a conservative Washington think tank.
And DeLay's rationale for his attack on environmental laws sounds selfless: government regulation raises the cost of everything consumers buy, and if you decrease environmental regulation, you put money in the pockets of average people. In the current anti-government climate, that's a message many people are interested in hearing.
But the message has another element: decreased environmental regulation puts money in DeLay's campaign coffers as well. His anti-EPA stance has secured DeLay a warm spot in the hearts of polluting industries and business groups, who have been generous about underwriting him.
That the Republican Contract with America had no environmental platform, and that the idea of reversing environmental laws doesn't fare well in most polls, doesn't seem to faze DeLay. Greg Wetstone, legislative director of Washington's Natural Resources Defense Council, considers DeLay to be "about as extreme as I have ever seen. We have never seen a Congress like this or a congressman like DeLay." But that may not matter. DeLay has found his environmental niche, not only in the staunchly Republican 22nd District, but in Washington's corridors of power. And it's going to take something a hell of a lot stronger than DDT to knock him out of it.
Golf, not politics, was on the minds of many of DeLay's constituents at a late October town meeting in Lake Jackson. But what Tom DeLay wanted to talk about was the Republican revolution. After taking off his suit jacket and handing it to one of his several political aides, DeLay launched into a description of the exhilarating time he has had in Washington as the first Republican majority whip in more than 40 years. The Republicans are fundamentally changing government, DeLay declared, and he was almost lightheaded about it. They've been hauling the liberal pigs from the trough, and the squealing can be heard for miles.
With his helmet of dark brown hair parted as with a knife and a slight paunch hanging over his belt, DeLay is not a particularly charismatic orator. But he was at ease before the crowd. The media, DeLay explained, have distorted the Republicans' environmental program, which is bent on stopping federal bureaucrats from issuing new regulations that go beyond the intent of law. DeLay said he simply wants federal agencies to send new regulations back to Congress for review, but until he gets that requirement passed into law, he's doing a little micromanaging through the budget process.
"I put a piece in the [budget] bill -- rather unusual," DeLay said, "that said the [U.S.] Fish and Wildlife Service could not use any funds to interfere with the permitting process for the Lake Jackson golf course."
It was a good example of how DeLay builds support -- using a local concern to make a national point. DeLay's addendum to the budget bill may well be the savior of a proposed municipal golf course in Lake Jackson. Situated on the Brazos River only a few miles from the Gulf of Mexico, Lake Jackson and Brazoria County abound with densely thicketed forests of hardwood trees. A spreading live oak adorns the town's seal, and it is among just such live oaks that Lake Jackson's citizens want to build a municipal golf course.
Five years ago, the city bought a 400-acre tract of undeveloped woods on the flood plain of the Brazos. But there was a hitch: the golf course site contains wetlands, one of the most hotly debated terms in the EPA's rule book, and one with major implications for developers. The EPA and the Fish and Wildlife Service have also designated the golf course site as Columbia Bottomlands -- prime habitat and a resting place for tens of thousands of neotropical birds that migrate from Central and South America across the Gulf of Mexico every spring. To professional wildlife managers, the hardwood forests of Brazoria County are a resource of international importance. But to DeLay, the golf course has been a perfect venue for him to display his new power as majority whip.
Since U.S. Fish and Wildlife had been so intransigent about the course, DeLay added language to the budget bill that would prevent the service from developing a wildlife refuge in Brazoria County, one that had been in the planning stages for years. To environmentalists, the action was simply an act of retaliation against -- or blackmail of -- Fish and Wildlife. The political tit for tat appears clear: give DeLay the golf course, and he'll allow the wildlife refuge.
DeLay has rallied the leaders of Lake Jackson and Brazoria County to his position, claiming fear of a federal land grab that could stifle development and take property from the county tax roll. Supporters of the wildlife refuge have pointed out that it would be created with land from owners who want to sell their property, and that this is private land that the government would then open to the public. They also point out that federal funds from Duck Stamps would flow into the county to make up for the loss of local property tax revenues.
But to the leaders of Lake Jackson, there's something emotionally satisfying in running the federal government out of local affairs, even if it looks like cutting off your nose to spite your face. What sounds good to Tom DeLay sounds good to the burghers of Lake Jackson: local control of local resources. But the question is, if they get control, how wisely will they use it? If DeLay has his way, we may be headed toward finding out.
Thomas Dale DeLay was born in 1947 in Laredo, but spent his early childhood in Venezuela, where his father, a wildcatter, had moved the family of five. They later relocated to the rapidly growing suburban town of Sugar Land, southwest of Houston. DeLay reacted to his domineering father, who pressured him to attend medical school, by developing a rebellious streak. After attending Baylor University, DeLay completed a B.S. in biology at the University of Houston. When he couldn't get accepted to medical school, he took a job behind the counter at Redwood Chemical, a firm that sold chemicals to the pest control industry.
In 1974, DeLay struck out on his own with a small pest control company that he later merged with a company called Albo. For DeLay, business was a struggle: During the next dozen years he sought to expand Albo by acquiring two more companies. In both instances, his deals produced lawsuits. In one suit, DeLay was forced to pay a judgment of $30,000. The second was settled last year, with both parties agreeing to keep the terms confidential. [See "Buggy Business," page 6.]
In recent years, DeLay has often told reporters that it was his frustration with government regulation of his pest control business that led to his entering politics. He didn't see, for example, why the state licensed exterminators when a city license should be sufficient. He also objected to the EPA's banning of Mirex, a chemical he used to fight fire ants, and which he believed was perfectly safe.
In 1978, DeLay was elected to the Texas House, becoming the first Republican state legislator his district had sent to Austin since the Civil War. DeLay was more or less drafted by the newly organized Republicans to run, and he swept into office on the coattails of Republican governor Bill Clements. But drafted or not, Betty Cox, DeLay's first campaign manager, remembers her old boss' taking to politics immediately.
"He wasn't a very effective speaker at the beginning," Cox says, "but he had a good way of saying he was a businessman, not a lawyer, and he called for less regulation."
In DeLay's largely white, suburban district, the message worked well. In Austin, recalls Houston state Representative Debra Danburg, he was sometimes teased on the floor with shouts of "De-Lay, De-Lay," because he would take a lot of time at the microphone. But it wasn't long before DeLay had learned to work the system. He had a feeling for negotiating compromise, Cox says. Even Billy Clayton, then Democratic speaker of the Texas House, was extremely fond of him, she adds.
Democrat Craig Washington, a politician distinctly on the other side of the ideological fence from DeLay, says he respected DeLay as a man who kept his word. "DeLay blossomed, I think," says Washington, who served with DeLay both in the Legislature and in Congress, "because he's smart and he's good at consensus-building. We would meet in the back and talk through issues sometimes, and he would come to me on a sticking point between Democrats and Republicans, and if he thought I could help, he would ask me to intercede. He's a good guy as far as I know."
After six years in state government, DeLay moved up to Congress, succeeding libertarian Republican Ron Paul in the 22nd district. The 22nd was a perfect district for DeLay, drawing on largely white suburban and rural areas in Harris, Fort Bend and Brazoria counties. After taking the Republican primary, DeLay trounced his Democratic opponent, whom he outspent $527,000 to $82,000, with 65 percent of the vote. He hasn't faced major opposition since.
From the beginning of his time in Congress, DeLay was a hard-core free-market conservative with a dislike for government regulation. Though he's taken money from the tobacco industry, he's voted for the repeal of tobacco crop subsidies. He's also voted against rice subsidies that benefit farmers in his own district. No isolationist, he's been a fervent supporter of the North American Free Trade Agreement.
This ideological purity may have helped him during his first term in Washington, when he became the only freshman on the GOP's Committee on Committees, giving him clout on committee assignments. He maneuvered well with not only the Republican leadership, but also the majority Democrats, winning assignments to House committees on transportation and space. NASA and Clear Lake are part of DeLay's district, and he vigorously defended NASA's multibillion-dollar space station from attempts to kill it. From his post on the transportation committee, he also helped Mayor Bob Lanier kill federal funding for Metro's expensive monorail proposal, and then restored federal money to Metro that might have gone to other cities.
Not all these positions necessarily jibed with DeLay's stated philosophies, but then, he's no ideologue when it comes to the political benefits of delivering federal dollars back to his district. On environmental issues, though, DeLay's voting record has been consistent. In 1987, DeLay was the only member of the Texas delegation to vote against a measure that forbade U.S. vessels from dumping plastic trash at sea and foreign vessels from similar dumping on the Great Lakes and within 200 miles of the U.S. coast. That same year, when 401 members of the House voted to override Ronald Reagan's veto of the Clean Water Act Amendments, DeLay was one of 26 members to side with the veto. DeLay has voted against a federal coastal management plan, which passed 391-32; against the Clean Air Act of 1990, which passed 401-25; and in 1987, he was one of 16 House members to vote against the reauthorization of the Endangered Species Act. In 1992, the League of Conservation Voters, which ranks legislative voting records, gave him a rating of zero on conservation issues.
But it's one thing to oppose legislation, and another to initiate it. When the Republicans swept into power in the House last year, DeLay was poised to take on the environmental regulators in a new way. He introduced a series of 17 "riders" to the appropriations bills that fund the EPA. Besides slashing the agency's budget by 32 percent, the riders would restrict the EPA's ability to enforce regulations and to create new ones. Some of the riders would restrict the EPA from enforcing the widely disliked vehicle emissions control program. Other provisions would suspend enforcement of water quality standards for the Great Lakes and prevent the enforcement of new standards on toxic air pollutants emitted by oil refineries. Domestic oil and gas industries would not be required to develop accident prevention programs, as required by the Clean Air Act.
Betsy Loyless, the political director of the League of Conservation Voters in Washington, describes DeLay's use of the EPA riders as a "savvy backdoor special-interest tactic."
"It's one thing to hide special interests in the Contract with America," she says, "but it's another thing to debate rolling back the standards for arsenic and radon in people's drinking water. It's a lot easier to roll these actions into these EPA riders, where they're not debated in public. They know that the more public the debate, the more public their ideas of protecting special interests and the less public support they're going to gather."
That's not how DeLay would put it, of course. Writing in an August 15 opinion piece in the Houston Chronicle, the congressman defended the riders by claiming that while they "restrict the Environmental Protection Agency's ability to penalize, they in no way authorize activities that are illegal under current law."
Skeptics may well point out that people and corporations tend not to obey laws that aren't enforced, and the EPA has protested that the riders tell the agency to quit doing its job. Environmentalists have characterized the riders as a "stealth attack."
DeLay has complained that the news media has constantly mischaracterized the riders. But if he's had a hard time persuading the media that his restrictions are harmless, he's had an even harder time persuading some of his fellow Republicans.
Other than the president, DeLay's principal roadblock in his move to cut back the power of the EPA has been a group of 30 to 40 of what DeLay calls Republican "greenies," politicians who are squeamish about throwing out the environmental regulations. That's not necessarily surprising: the people who developed the environmental regulations that DeLay attacks weren't all Democrats. It was Richard Nixon who helped create the EPA, and it was Ronald Reagan who signed the "community right to know" act, which requires large polluters to measure and register their discharges with the government, where anyone can get access to the data.
One of the leaders of the "greenies" is Representative Sherwood Boehlert of New York, and when the EPA riders came before the House in September, Boehlert proposed an amendment to abolish them. He won with a 212-206 vote. Then industry lobbyists went to work, and when DeLay brought the issue back to the floor a few days later, Boehlert's amendment was defeated.
Still, realizing that he hadn't completely won his party's heart on the issue, DeLay sent a ten-page letter to House Republicans on September 29 that justified the measures, and insisted that his measures will improve, not roll back, environmental programs. After all, DeLay reminded his colleagues, "our families drink the same water and breathe the same air as the families of Democrats."
But if DeLay's reasoning doesn't always sway his colleagues, he's found another way to build support: raise money. Once it became clear last year that the Republicans had a chance of winning a majority in the House, DeLay set up a "leadership" PAC for Republican challengers called Americans for a Republican Majority. Such PACs allow individuals to donate $5,000, or five times as much as they can give to an individual campaign. When 73 Republican freshmen were swept into House in the 1994 elections, DeLay had sewn up most of their votes for the office of majority whip. In addition to traveling and speaking on their behalf, DeLay, by his own account, had distributed more than $2 million in funds to their campaigns. And nothing solidifies a political debt better.
In the process of fundraising, DeLay has become a coordinator of lobbyists. His most important production so far has been "Project Relief," a business lobbying effort with a PR budget of $500,000. Project Relief included the U.S. Chamber of Commerce, the oil and chemical industries, the National Association of Manufacturers and the Christian Coalition. The purpose of Project Relief was to pass a 100-day moratorium on all federal rule-making. DeLay worked closely with Project Relief's lobbyist, Bruce Gates, to build Democratic support for the moratorium. Gates matched lobbyists with district-sensitive interests to wavering members. Lobbyists were also installed in a room near the House floor to help members answer the opposition. When the bill passed this February, it was just 14 votes shy of the two-thirds majority needed to override a presidential veto.
Though it's not a big environmental issue, one of DeLay's more interesting displays of advocacy came this summer, when he circulated a letter to House members urging support to reduce tariffs on the Mexican cement monopoly, Cemex. DeLay also wrote an unsolicited opinion piece for the Chronicle that called for relaxing the tariff. What the congressman neglected to mention in the piece is that his brother, Randy DeLay, is a registered foreign agent for Cemex in a joint venture with the Washington office of Fulbright and Jaworski.
DeLay has denied that his brother influenced him on the issue. Nothing surprising there; nobody should ever expect DeLay to back down from a fight. He seems to thrive on confrontation.
In his town meeting in Lake Jackson, he told the crowd that "the issue is not clean air or clean water. The problem with environmental extremists is that they want zero risk. They want water coming out of Dow Chemical that is cleaner than the water that they drew to use. It's true. Go down to the bayous down here. They have run people off from their drainage ditches, because the government won't let them fish in water that is cleaner and has more fish than the bay out there."
It is tempting to think about the implications of what DeLay is saying here. Does he mean that Dow should be allowed to discharge dirtier water? Or that fishing should be banned in Galveston Bay, which receives Dow's pristine water? Or merely that Dow ought to allow people to fish in its drainage ditches?
Still, if DeLay's only excesses were rhetorical, he might easily be dismissed as an ideologue. But he's far more powerful than his rhetoric. Fueled by money from big business and industry, he exploits a populist distrust of the federal agencies to push his agenda. DeLay has mastered the tools of power, and he makes no apologies for using the techniques of lobbying, fundraising and junket-hopping to forge a coalition to support his agenda.
Unlike his fervent freshman Republicans, DeLay has been reluctant to call a halt to gifts from lobbyists. When Newt Gingrich proposed a set of tough limits that prohibit members from taking free travel and meals to charity golf tournaments and other sports events, the House passed the restrictions by a vote of 422 to six. DeLay, who wasn't one of the six, was nonetheless quoted in the New York Times as saying during the debate, "We are beating ourselves on the head to prove that we are pure enough to deserve the public trust."
What DeLay doesn't seem to realize is that in building a political campaign on distrust of government, he must apply the same standards to his own behavior that he applies to that of others. If he attacks the science of his opponents, he can expect his science to come under scrutiny. If he accuses bureaucrats of pursuing special interests, his own special interests will be examined. If the media is said to exaggerate environmental problems, creating "eco-terrorism," what do we make of DeLay's own rhetoric, such as that used in Lake Jackson? "We can work together and have clean air and clear water," DeLay said at his town meeting, "... and I still think the EPA is a Gestapo organization."
Unquestionably, there's much that could be done to improve environmental regulations. But polls clearly show that the public is reluctant to jeopardize environmental protection. The nation has already experienced a period when environmental protection was left to the common sense and goodwill of industry, and it got toxic waste dumps and the loss of half of the country's wetlands as a result.
Tom DeLay may have never met a regulation he liked, as he once admitted to the Wall Street Journal, but he's living in an increasingly complex world that often requires rules. And as the majority whip, he has a tremendous ability to change those rules. Comfortably ensconced in a spacious office near the floor of the House, and well financed by big business, DeLay may not have to worry too much any more about what he says. Though he's now stymied by the presidential veto and a few "greenie" Republicans who make overriding the veto difficult, if a Republican is elected president, DeLay may not have to worry about a presidential roadblock. He'll have more than just the bully pulpit then. He'll have what he's been working for over the last 16 years: the votes.
Last November, just a few days after he had won election to a sixth term as congressman for the 22nd District, Tom DeLay called a meeting of the Fort Bend County Republican leadership.
"When I asked what it was all about," recalled one person who attended, "I was told that I would see when I got there. That made it mysterious, which made you want to go all the more."
About 25 to 30 people showed up at DeLay's district headquarters in Stafford, expecting either an election celebration or a discussion of political strategy. What they got was something far different.
With the help of an aide running a VCR, DeLay spent almost three-quarters of an hour taking his fellow Republicans through the videotaped deposition of Robert Blankenship, a man who had once owned a third of Delay's exterminating business, Albo Pest Control Inc. In January of last year, Blankenship had sued DeLay and another business associate, Darrell Hutto, over the proposed sale of Albo. Blankenship's claims included, among other things, the charge that DeLay had taken $150,000 in loans from Albo without paying them back. DeLay countersued, alleging that Blankenship had used company equipment and chemicals for his personal benefit and had diverted money from customers.
On November 10, 1994, DeLay and Blankenship settled for an undisclosed sum, with each side promising not to discuss the terms of the settlement. That agreement, though, didn't stop DeLay from putting Blankenship's taped deposition on display the very next day.
"He [DeLay] must have watched that deposition a hundred times," says a Republican volunteer who asked not to be named, "because he could quote things in it verbatim."
Eric Thode, chairman of the Republican Party of Fort Bend County, was also present at the congressman's show, and says he thinks that DeLay was dispassionate in his approach to the video.
"It was not going to impact the way they viewed either party," Thode says. "That was my take."
But many of those present were clearly uncomfortable, say two other audience members who asked that their names be withheld. Some were particularly bothered because Blankenship's wife, Jacqueline, had long been one of Fort Bend County's most stalwart Republican campaign leaders.
According to one witness, DeLay offered a running commentary on the video that blasted Blankenship. "I think he enjoyed himself," the witness says. "He was like a kid, laughing, saying, 'Now listen to this, now listen to this.' It was a nauseating performance."
"I do think Tom was trying to show his side," says another witness, "but as soon as it started, I didn't want to be there. I was trying to think of an excuse to get out, but Mona [Stevens, DeLay's local staff director at the time] stood at the door the whole time. It was the kind of thing I didn't want to be in the middle of. My first thought was, where are these other people and do we get to hear their side?"
After DeLay was finished running through Blankenship's deposition, most of the crowd left quickly and without comment, the witness says.
The witness also recalls that DeLay said he was showing the tape because he anticipated that news stories would grow out of the lawsuit. If that was his true motive, he needn't have bothered; the media never looked closely at Blankenship's lawsuit. Though Tom DeLay has often complained that excessive government regulation by the EPA and OSHA is what made it difficult for him to earn a living as an exterminator -- and drove him into politics to do something about it -- Blankenship's lawsuit, as well as another lawsuit DeLay settled with a business associate, suggests a different reason for DeLay's business problems. It's a reason that has nothing to do with DeLay's favorite enemies, government bureaucrats, and everything to do with what was at best sloppy business practices.
Tom DeLay got his start in Houston business during the boom years, when new companies were prospering overnight. After graduating from the University of Houston with a degree in biology in 1970, DeLay worked behind the counter at Redwood Chemical, a company that sold pesticides to exterminating companies. Then around 1973, he started a pest control company called Environmental Services. A few years later, DeLay merged Environmental Services with the larger and better-known Albo Pest Control.
In 1975, seeking to expand his business further, DeLay made a deal with Bob Bartnett, who had become head of the Harris County Mosquito Control District. According to documents in a lawsuit he filed later, DeLay agreed to pay Bartnett $32,000 for three used trucks, spraying equipment and the customer list of Bartnett's company, Entomological Services. DeLay made payments on his note until September 1977, at which time the balance was $24,000. Bartnett says he pressured DeLay to bring the note up to date, but got nowhere. Finally, in 1980 DeLay sued Bartnett for fraud, saying Bartnett had misrepresented the value of Entomological Services and the willingness of its customers to pay higher prices. The suit dragged on until November 1984, when it was ruled that DeLay hadn't succeeded in proving fraud; Bartnett won a final judgment against DeLay for $30,000 and interest.
That judgment was still being carried on Albo's books in April 1986, when Robert Blankenship made a deal to sell his pest control business, A-Abco, to DeLay. In his lawsuit, Blankenship would later claim that he had a profitable business, but, as the result of a divorce, needed cash to settle with his ex-wife for her share. According to documents filed in Blankenship's suit, DeLay and his business partner Darrell Hutto, president of Albo, paid Blankenship $37,000 for the assets he brought to the company, which included a truck, spraying equipment and a list of customers. In addition to cash for the assets of his old company, Blankenship was awarded one-third of the stock in the new Albo corporation, of which DeLay would be chairman, Hutto would be president and Blankenship would be vice president.
Despite his title, Blankenship appears to have taken little interest in Albo's books or corporate affairs until 1993, when he heard that Hutto and DeLay were looking for buyers for the company. He approached Hutto and asked that he be allowed to find a buyer, someone who would let him remain with the company as a partner. According to Blankenship's suit, he found an interested buyer in a pest control operator named Ami Borovick.
By December 1993, Blankenship and Borovick believed that they were close to a deal. Borovick had examined Albo's books and insisted on a clause in the sales contract stating that Albo had not made any "illegal political contributions with corporate funds." But Randy DeLay, Tom DeLay's lawyer and brother, notified Borovick that Albo would accept only a cash deal for the company, which effectively killed the negotiations.
On December 14, 1993, when Blankenship showed up for work, he found that the locks had been changed and that a letter firing him, a notice signed by Hutto, had been taped to the door. DeLay and Hutto justified the firing by saying Blankenship had taken a list of Albo's customers home with him, and they feared he would share it with Borovick. But Blankenship, who now feared the company would be sold out from under him, claimed he took the list home at the invitation of Hutto, who had suggested Blankenship sort out the original customers he had brought to the company and go his own way. Not surprisingly, this dispute soon moved to a courtroom.
In January 1994, Blankenship sued his partners. His lawyer, Gerald DeNisco, took an aggressive approach to the litigation, getting a temporary injunction to stop DeLay and Hutto from selling Albo. He also alleged that DeLay and Hutto had wasted the corporation's resources by paying DeLay's personal debts. DeNisco obtained copies of Albo's company records, which DeLay, in a deposition, admitted weren't in very good order.
"In gathering records for the negotiations of selling Albo, it was pointed out to me by my lawyer that our records were not kept up to date and we needed to get them up to date," DeLay said in his deposition. "That's the extent -- I assume they were brought up to date because Darrell [Hutto] was told."
When DeNisco asked DeLay if he personally knew whether the records had been brought up to date, DeLay said, "I was told that they were. I don't know if they were or not. I haven't seen them."
DeLay was deposed by DeNisco on February 5, 1994, as a preliminary to a possible jury trial. DeLay said that since being elected to Congress, he'd had little to do with Albo, and that his longtime associate Hutto handled all the details. He said that "two or three years" before the deposition, he had orally resigned as chairman of Albo in conversation with Hutto. DeLay said the resignation had never been made in writing.
Nevertheless, DeLay certainly gave the appearance of still being in charge of Albo. In his 1991, 1992 and 1993 income filings with the House of Representatives, DeLay stated that he was chairman of Albo's board. And on February 3, 1993, DeLay and Hutto signed a guaranty with Southern National Bank for a loan to consolidate Albo's debts. In his deposition, DeLay also said he read a monthly report on the company's books, occasionally consulted with Hutto on business matters, had discussed with him the sale of Albo and had approved the firing of Blankenship.
At the center of DeNisco's case lay what might be called the balance sheet argument, a disagreement between Hutto and Albo's bookkeeper, Lynn Colby, on how to carry the company's debt on its books and corporate tax returns. In May 1994, when Colby was deposed, he said that it had been his understanding that an item carried on Albo's 1990, 1991 and 1992 corporate tax returns as "loans to stockholders" was the personal debt of Tom DeLay. Copies of the tax returns indicated that in 1990 loans to stockholders were reduced by $3,542; in 1991, they were reduced by $6,990; and in 1992 they were reduced by $9,119.
Colby said when he took over the books in 1986, he found some bank loans on them. Though he wasn't exactly sure what the loans were for, he was under the impression that the corporation was paying DeLay's personal debt, so he carried the item as stockholder loans: that is, they were carried as loans from the corporation that DeLay would be expected to pay back.
When DeNisco asked DeLay about stockholder loans from the corporation, DeLay denied that there were any loans to the stockholders, even though copies of Albo's monthly balance sheets and its corporate tax returns carried such a category. DeLay said he had never seen the corporate tax returns. According to DeLay's deposition, the following exchange between DeNisco and DeLay took place:
"DeNisco: Have you ever personally taken a loan from the company?
"DeNisco: Have you ever personally taken a loan and had the company pay for it?
"DeLay: Well, if you mean the loan that is now with Southern National Bank that was -- that was Albo's before we incorporated and the loan to Bob Barnett [sic], yes. Those -- the company has been paying for those loans."
In his deposition of February 8, 1994, Hutto said that the tax entries for stockholder loans were the result of "an ongoing difference of opinion as to an item on the ... balance sheet between Mr. Colby and Albo." When DeNisco pressed him about why the difference was unresolved on the company's tax returns, Hutto said, "This is what the CPA has put down there, and I just stopped arguing about it."
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.
"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."
DeNisco also questioned DeLay about payments made to him by Hutto for Hutto's share of the company stock. Hutto had been working as Albo's manager for about a year when Blankenship was brought into the company. In the new corporation that was formed, DeLay owned two-thirds of the stock and Blankenship owned one third. The three men signed an agreement that Hutto could buy a third of the stock from DeLay for $50,000. The agreement further stated that Hutto's debt would be reduced by $5,000 a year, regardless of whether the corporation made money.
According to copies of Albo's canceled checks, in 1992 DeLay received $4,000 from Hutto for stock. Copies of the checks to DeLay were signed by Hutto and carried a memorandum that they were "deferred salary for D.L. Hutto for stock purchase." DeLay said he didn't remember whether the checks he received from Hutto were personal or corporate.
When deposing DeLay, DeNisco questioned the congressman about the propriety of those checks. "Do you think it would be appropriate for the corporation to be paying you the personal debt or obligation of the president of the corporation without the knowledge of the other officers?" he asked. To which DeLay responded, "Yes. Darrell Hutto from the very beginning that he brought [sic] to Albo was to run the company, manage the company, manage the assets and liabilities of the company, make all decisions with consultation and he was to make all those decisions."
DeNisco also raised questions about the stock payments when deposing accountant Colby, who said the checks had been improperly entered in the books as a company expense and should have been carried as a loan to be paid back by Hutto.
In November of last year, DeNisco and Blankenship heard that DeLay and Hutto were on the verge of selling Albo. So DeNisco sought a fresh injunction to stop the sale. This time he had a hearing with a Democratic judge, Shearn Smith. On November 10, 1994, after listening to a summary of the case, Smith strongly urged DeLay's and Hutto's lawyers to settle with Blankenship before selling the company. The lawyers agreed. Albo's customer list and other assets were eventually sold to Rodger's Pest Control in Stafford.
The balance-sheet argument was never fully explored, and the loan papers and tax returns that might have definitively answered the question of whether Albo had paid DeLay's campaign debts were never made public. Neither Hutto, Colby or Lindsay returned calls from the Press for this story.
A Washington spokesman for Tom DeLay declined to respond to a list of detailed questions from the Press about the lawsuit, except to say that the congressman would make no comment, and that the issues are a matter of public record.
That second point isn't entirely accurate. While the legal petitions and motions can be seen by anybody at the Harris County Courthouse, the depositions and records cited in this story were obtained by the Press from Robert Blankenship's lawyer. Because Blankenship's suit was never heard by a jury, the depositions and exhibits of the case are not part of the public record. Neither was the videotaped deposition of Robert Blankenship that DeLay used to try to embarrass his former stockholder.
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