Watchdogs Question Fraser's Energy Holdings

If Tesla Motors has any prayer of getting the green light to sell its high-end electric cars directly to Texans, the company could use a little push from state Sen. Troy Fraser.

The Horseshoe Bay Republican alone has the power to schedule a public hearing before his Senate Committee on Natural Resources and Economic Development on legislation aimed at removing barriers to the company's entry into the Texas market. He has no intention of doing so. The state's auto dealers don't want it, Fraser said, and his committee members do not want to hold a hearing, or take a vote. 

Critics wonder if he's motivated by something else: an investment in a politically connected firm tied to auto dealers.

Fraser calls the charge baseless, but as the Legislature ponders reforms to increase transparency and reduce conflicts of interests among its members, Fraser faces new questions about whether that private investment and others impact his public duties.

Specifically, government watchdogs say Fraser's vast holdings could present conflicts with the bills he authors, blocks or lets out of his powerful committee. They also raise questions about the influence wielded by a top energy lobbyist, James Mathis, who is married to Fraser’s chief of staff, Terri Mathis.

“Troy Fraser is the poster child for why we need significant conflict of interest reforms and far better disclosure,” said Tom “Smitty” Smith, director of the consumer watchdog group Public Citizen of Texas. “Because our ethics rules don’t require full disclosure of the value of his assets, we don’t know the extent of his conflicts.”

Fraser says neither his private business interests nor the marital ties of his chief staff determine how he acts on legislation. He said James Mathis’ clients “win some and … lose some.” Terri Mathis declined comment, and James Mathis did not return phone calls from The Texas Tribune.

Fraser said the way his finances are structured eliminates the possibility of a conflict. He founded and sold a successful pallet manufacturing and recycling business and hasn’t had a regular day job since. And he tells his financial advisers to spread his investments out broadly among various sectors but otherwise to leave him uninformed about what goes in or comes out of his portfolio. 

“I have not had any earned income in 18 years. Zero. I’ll show you my tax returns,” Fraser said. “I have never made a single penny as a result of being a legislator. I have no conflict.” Fraser later showed the portion of his 2013 tax return indicating that the only earned income he receives is from his part-time job as a state senator; the rest of the tax return was not shown.

As an investor, Fraser has interests in Fraser McCombs Capital, a firm that invests in automotive software and other technology and touts its connections with “principals of the largest dealer groups.” That is of particular note to Smith and others this session because the bill that would allow Texas consumers to buy battery-powered Tesla cars directly from the manufacturer is vehemently opposed by powerful car dealer interests. Fraser has left the “Tesla bill” bottled up in his committee, where it’s expected to die unless action is quickly taken.

One of the investors — and half of the company's namesake – is San Antonio-based car dealer and businessman B.J. “Red” McCombs. 

McCombs, one of the most prolific Republican donors in Texas, said he’d never met Fraser, and the senator said the same of McCombs. Fraser said he owns only 2 percent of the company. His son, Chase Fraser, is a managing partner, and the senator says he has no say in its affairs.

The senator said it “never occurred” to him that he might have a conflict related to an investment he made primarily to help out his son. 

He said there’s another reason he hasn’t scheduled a hearing or put the Tesla bill to a vote: The House hasn’t approved its own version, and the auto dealers are so opposed that he doesn’t want to expose fellow senators to the blowback they certainly would face if they dared tinker with the law that largely prohibits Texans from buying cars directly from auto manufacturers.

He said he polled his committee members and they told him in no uncertain terms that the last thing they want to do is cast record votes on removing the iron-clad protection for auto dealers; under current law, consumers have no choice but to go through this middleman system to buy a car in person.

(McCombs recently told the San Antonio Express News that the law requiring such purchases from dealers was “as set in stone as it can be. It’s as sacred as Paul’s letter to the Corinthians.”)

Fraser said he sees no reason to “piss off all the auto dealers’’ on a vote that he believes would ultimately be meaningless. He said the members on his committee agree with him. 

"As late as last week, I said, do y'all want to have a Tesla hearing? And they go, 'No, absolutely not. The bill’s not going to pass. Why should I cut myself up with the auto dealers and have to make a bad vote' and then, you know, have them, the auto dealers, beat on their door for the next two years. That's no different than from what we do on all kinds of bills.”

To be sure, the auto dealers have no shortage of influence in the Texas Legislature. According to a recent report by Texans for Public Justice, a liberal watchdog group that tracks the influence of money in politics, dealer interests outspent Tesla founder and billionaire Elon Musk 40-1 in the 2014 elections — contributing more than $1 million to Gov. Greg Abbott and almost $800,000 to Lt. Gov. Dan Patrick.

It was Patrick, as presiding officer of the Texas Senate, who made the unusual decision to send the Tesla bill to Fraser’s committee, which typically handles energy issues and those related to economic development — not the structure of business entities.

Asked why Patrick made that choice, Alejandro Garcia, his press secretary, said in an email that the lieutenant governor “considers many factors” when referring bills but did not specify what those are. He said that donations do not affect bill assignments.

Some watching the legislation suggested the Tesla bill would flounder in any committee.

“I don’t know that there is a conflict, and if there were – even in appearance – I don’t know if it would make a difference to the outcome of the bill,” said former state Rep. Steve Wolens, a Dallas Democrat who helped pass several ethics bills. “Tesla has an uphill road, whether it was in Fraser’s committee or any of the committees, just because of the long-entrenched relationship that auto dealers have with the Legislature.”

The Tesla legislation isn’t the only matter that has riled up the watchdogs. They also point to Fraser's numerous energy holdings.

In his latest filings with the Texas Ethics Commission, Fraser reported holding at least 12,500 – and as many as 45,991 – shares of stock in oilfield operators, refiners or service providers. (Shareholdings are reported in ranges.) He also disclosed earning thousands of dollars of interest in dividends from investments in those companies.

Meanwhile, he is pushing bills that would limit local control over oil and gas operations and curb the rights of citizens who protest industrial developments in their neighborhoods.

Fraser held between 4,000 and 19,996 shares of four companies that testified in support of Senate Bill 1165 — also known as the “Denton fracking bill” — which Fraser authored and pushed through his committee. The companies were Apache Corporation, Devon Energy, ExxonMobil and Occidental Petroleum.

Fraser also reported holding investments in General Electric, NextEra Energy, Entergy and Southern Electric Company.

It is impossible to calculate the percentage of his energy holdings from Fraser’s 88-page-long disclosure form, but Fraser said he has barred his financial advisers from investing more than 5 percent of his holdings in any one sector. 

His financial statement does show plenty of money spread elsewhere. 

The form lists income from 116 entities, public and private, including banks, stores, tech companies, transit authorities and airlines. He reported more than $25,000 a year in income from Texas Water Development Board bonds, the Texas Public Finance Authority and the Main Street Mezzanine Fund, a Houston investment house.

As evidence of his objectivity, Fraser cited his bond holdings with the Lower Colorado River Authority, which supplies water and energy to much of Central Texas. Last year, he accused the authority of making “bad business decisions” and threatened to prevent construction of a new reservoir.

“Is there a conflict with LCRA? I beat the crap of them out of them every day. They sell bonds, I got a good rate,” he said. “My manager got me a good rate.”

Still, John Courage, state chairman of the nonpartisan watchdog group Common Cause Texas, said Fraser’s private holdings and his important role as chairman raise questions.

“We’ve been looking at Fraser, because he does have right now a dozen bills before the Legislature that he authored that are all related to energy in one way or the other,” Courage said. “All this brings into question of whether he may be acting in the best interest of Texans or acting in his own best interests.”

Courage and other watchdogs are pressing lawmakers to adopt new ethics rules requiring them to step aside from voting or participating in measures that might impact their bottom line. Abbott has said he wants to dedicate the 2015 session to ethics reform, and the Senate could vote next week on the first major bill – heavily watered down at this point – that would accomplish some of his objectives.

It's not only Fraser's financial ties to the energy business that have riled critics. Energy interests — namely Occidental International Corporation and the Texas Oil and Gas Association — also appear on the list of clients that Mathis, the husband of Fraser’s chief of staff, represents at the Texas Capitol. The list also includes AT&T, the Texas Association of Manufacturers, Texas Package Stores and Waste Control Specialists.

Fraser described marriages between lawmaker chiefs of staff and lobbyists as commonplace at the Texas Capitol. He said he doesn’t give James Mathis special treatment, and he cited one bill in particular that some of Mathis’ clients opposed. He said the manufacturers association “went ape shit” and “begged me to kill” Senate Bill 774, which instructed regulators to study electric rate-making in other states.

“Sometimes James wins, sometime James loses,” he said. 

Broadly speaking, Fraser described a generally friendly posture toward lobbyists but said his chief of staff is sometimes harder on her husband than on other lobbyists who seek to influence him.   

“We have a reputation for an open door. I’m easy for lobbyists to get in to see — both staff and me — we’re not ones that shut it off,” he said. “So it’s easy to get in here, but just because that’s her husband, I think she actually goes the other direction, and very often she will come in and recommend to me, this is not where we need to go.”

Disclosure: Tesla Motors, the Texas Automobile Dealers Association, ExxonMobil and AT&T are corporate sponsors of The Texas Tribune. Red McCombs is a major donor to the Tribune. The Lower Colorado River Authority was a corporate sponsor of the Tribune in 2013. Apache Corporation was a corporate sponsor of the Tribune in 2011 and 2012. A complete list of Tribune donors and sponsors can be viewed here.