Stimulus Fund Allegations Spicing Up AG Contest

The Republican candidates for Texas attorney general have made President Obama a common enemy, but two of them are now accusing the other of benefiting from Obama's signature economic program — the American Recovery and Reinvestment Act of 2009, better known as the “stimulus” plan. 

At issue are millions of federal stimulus dollars received by companies in which state Sen. Ken Paxton of McKinney and state Rep. Dan Branch of Dallas have some ties. Those ties are described as flimsy and remote when a campaign is discussing its own exposure to stimulus money. But it's far too close for comfort when the federal shoe is on the other foot.

In Paxton’s case, stimulus money went to a privately held entity that’s been in the news before: WatchGuard Video, a Plano-based company that once touted having three state legislators, including Paxton, among its investors. The company, known in business filings at Enforcement Video, LLC, provides patrol car cameras to the Texas Department of Public Safety and police agencies all over the United States.

In Branch’s case, the Paxton campaign pointed to several publicly traded companies in which Branch or family members have owned stock and that, according to a federal database, also received money under the stimulus program, such as eBay, Paccar Inc. and Airgas Inc. Paxton campaign strategist Kevin Brannon also cited stimulus money received by companies that hired Branch’s Dallas-based law firm, Winstead PC, to lobby the Texas Legislature. Those clients include Pearson Education, Iberdrola Renewables and Texas Instruments, state and federal records show. 

Branch campaign manager Enrique Marquez dismissed the Dallas lawyer's association with stimulus money as insignificant. Paxton, on the other hand, scored a big payday off of it, he said. 

“It's silly to compare owning shares of eBay or other publicly traded stocks with Senator Paxton's role as an influential owner in a private business profiting directly from the Obama stimulus package,” Marquez said. “It's simple, the law firm that Dan Branch works for has accepted zero stimulus dollars. According to public records, Ken Paxton's private business enriched itself with Obama stimulus money."

Brannon said Paxton today owns a tiny percentage of the company and has zero say in its affairs. 

“Senator Paxton is a passive investor in a great company that provides a valuable product to our police and law enforcement personnel,” Brannon said. “As a limited partner with less than a 1.5 percent investment, he was unaware of the source of any funding. Senator Paxton opposed the stimulus and still does.”

WatchGuard Video has gotten at least $618,000 in federal stimulus money awarded in Vermont, Illinois and Idaho, and at least $264,000 from grants processed through the state of Texas, for a total of almost $900,000, state and federal records show. It was one of thousands of companies that got a piece of the $787 billion (later revised to $831 billion) stimulus package.

The Keynes-inspired spending program put money into road building, academic research, food stamps, home weatherization, battery manufacturing, tax breaks for General Motors, broadband internet for rural areas and a multibillion-dollar state aid package (Texas included), to name a few categories.

The stimulus plan also contained what watchdogs referred to in a New York Times article as 8,500 "pet projects" costing $8 billion, including $1.7 million for a honey bee research lab in Weslaco, Texas; $346,000 to study apple fire blight in New York and Michigan; and a little more than $200,000 for the study of blueberry production in Georgia. 

Paxton criticized the stimulus package in 2010, saying the government should not be in the business of "picking winners and losers." 

How big Paxton's investment was in the beginning isn't discernable under Texas disclosure laws, and Brannon declined to say how much money Paxton made on a previous sale of shares.

In 2008, the McKinney lawyer and businessman was described as an early and “not insignificant” investor in WatchGuard by its founder, Robert Vanman. When asked about the stimulus money received by his company and whether he ever discussed it with the senator, Vanman, who has called himself a friend of Paxton, released a written statement to The Texas Tribune. 

"WatchGuard Video is proud to provide the highest quality in-car video systems to approximately 5,000 different law enforcement agencies across America,'' Vanman said. "When we are successful in winning the opportunity to serve these agencies, the origination of where their funding is derived (internal agency budgets, an allocation by the city manager, or private, state or federal grants) is typically unknown to us. In the rare cases when WatchGuard became aware of where an agency's funding originated, that information is not communicated to passive shareholders."

While downplaying Paxton's connection to WatchGuard’s stimulus money, Brannon said voters should be very concerned about Branch’s ties to the federal program — including those involving clients who hired Branch's law firm to lobby the Legislature.

“The lobby clients of Dan Branch’s law firm have benefited enormously from Obama administration stimulus largesse,” Brannon said. “More recently, at the same time he serves as chairman of the [House] Higher Education Committee, Rep. Branch’s law firm was awarded a half-million-dollar contract from Texas A&M. The baseless attacks from the Branch campaign represent the worst kind of political hypocrisy.”

Like WatchGuard Video, Winstead PC has contracted with the state of Texas, according to online records from the Texas Legislative Budget Board. Winstead's state business includes a recent $500,000 contract with Texas A&M University — for legal services in connection with the redevelopment of the Kyle Field football stadium, according to the LBB records.

Branch and Paxton are also facing Railroad Commission Chairman Barry Smitherman in the Republican showdown for attorney general. In that race, as in the GOP contest for lieutenant governor, the chief strategy appears to be capturing the far right at all costs. So any connection to Obama or his policies is potentially radioactive. Paxton and Branch repeatedly highlight their determination to fight Obama's every initiative on the campaign trail and in their literature.

"Dan promises to continue the efforts of Attorney General [Greg] Abbott to protect Texas liberties by fighting the federal intrusions of President Obama and his allies in Washington,'' Branch says in the third paragraph of the "Meet Dan" section of the campaign's website.

"Dan is committed to relentlessly standing up to Washington, stopping President Obama’s assault on our freedoms and ending this Administration’s war on conservative Texas values." Branch's first TV ad opens with the candidate promising to be "an attorney general who can take on Obama — and win."

Paxton gets to Obama in paragraph 2 of the "About Ken Paxton" section of his campaign website. 

"Washington has a bull’s-eye on Texas, and we need bold leadership to hold the line against our out-of-control federal government as it continually encroaches on our rights and liberties," Paxton writes, repeating the first lines of his campaign kickoff speech. "I have a loud and clear message for Barack Obama: Mr. President, Texans will govern Texas!”

This isn't the first time Republicans have attempted to tar one another with Obama's stimulus initiative. In the 2012 GOP Senate primary in Wisconsin, the leading Tea Party candidate, Mark Neumann, was on the defensive after acknowledging his company took advantage of $80,000 in grants made available under the stimulus package. Neumann lost the primary to former Wisconsin Gov. Tommy Thompson.

Closer to home, Friendswood surgeon Greg Bonnen won a hard-fought and expensive Republican contest for state representative in 2012 after accusing his opponent, Ryan Sitton, of taking stimulus money through his company, Pinnacle Asset Integrity Services. Sitton, now running for railroad commissioner, says the allegation was false but ultimately harmful.

The attack was based on a reprint of a news article that was posted on Pinnacle's website. It said the “company’s executives decided to take advantage of stimulus funds and obtain financing through a U.S. Small Business Administration (SBA) loan.” Sitton said he applied for but never took out an SBA loan, and while the agency got help under the stimulus package, so did a lot of federal agencies. The federal database of stimulus awards shows none went to Pinnacle.

But Sitton soon found himself explaining the SBA loan application to voters who were getting mailers featuring photos of Obama and accusing Sitton of cashing in on the stimulus package. And as they say in politics, when you're explaining, you're losing.

"It was a big shift,'' Sitton said. "It absolutely moved the needle."

The Tribune reviewed the most recent financial holdings, contained in mandatory disclosure forms from the Texas Ethics Commission, of all three Republican AG candidates. The review did not turn up any obvious links to federal stimulus money on the most recent statements turned in by Smitherman, though his 2010 statement contained stocks in some publicly traded companies that have gotten some.

Brannon also pointed out that the Railroad Commission chairman once made a flashy purchase of a Chevy Volt plug-in.

Republican critics said the GM-made car was heavily subsidized by stimulus funding and other federal incentives.

Smitherman traded in his Volt for a Chevy Suburban before launching his bid for attorney general, erasing any association with a potentially unpopular, federally promoted green initiative. Smitherman said at the time he was unimpressed with the car's technology and disappointed by the gas mileage. 

Smitherman campaign manager Jared Craighead said voters should focus not on whether a candidate invested in some company that got stimulus money, but rather how transparent the politicians are about their financial dealings. He noted that Paxton had initially failed to disclose the WatchGuard investment to the Texas Ethics Commission in 2008, and he criticized Paxton for not fully describing his role in a company that has been paid millions by the state of Texas.

"Ken Paxton's refusal to disclose his interests in companies that received stimulus money is consistent with his refusal to disclose his votes to award himself taxpayer dollars through government contracts," Craighead said. "This unethical pattern of abuse of taxpayers makes clear that he can't be trusted to manage the half-a-billion-dollar-a-year office of the attorney general."

Paxton has blamed his failure to list the WatchGuard investment in 2008 on a technology snafu at the Texas Ethics Commission and noted that he corrected the omission in an amended filing. Texas laws related to potential lawmaker conflicts of interest did not require Paxton to recuse himself or take any special action before voting on appropriations bills that have ultimately provided WatchGuard's state funding in recent years. But a far-reaching ethics overhaul proposed by Abbott, now the leading Republican candidate for Texas governor, could change all that.

If none of the three GOP candidates for attorney general win a majority of the vote in the March primary, the top two vote-getters will duke it out in a second-round May runoff. The winner will face Democrat Sam Houston, unopposed in his primary, this fall.