Magazine | March 23, 2015, Issue

Texas Has a Corruption Problem

Greg Abbott (AP/Dallas Morning News/Andy Jacobsohn/Pool)
Can Greg Abbott solve it?

Texas is a fantastic place to do business: Taxes are low, the trial lawyers are on a short leash, regulation is light, and the state government is an energetic advocate of business growth.

Also: Texas is an insanely terrible place to do business: It has corrupt public officials — law-enforcement officers on the cartel dime, judges selling verdicts, members of a drug task force shepherding contraband from Mexico, school-board races in which cash and cocaine are traded for votes — along with a corrupt university system flouting its admissions rules for the family and friends of state legislators, a generous statewide economic-development program that swaps grants for job creation but fails to adequately keep track of either, an out-of-control prosecutor in charge of a state ethics office who, when she is not berating and threatening the police officers who have hauled her in on drunk-driving charges, uses her office as a political weapon — just as her predecessor in the office did — while the state’s Medicaid program alone is a cavalcade of hilariously unethical shenanigans: Texas’s Medicaid-fraud police are so bad at their job and spend so much money that a state audit suggested that taxpayers would be better off if the office did not exist; a former state actuary working on Medicaid fraud is being investigated for fraud; a purveyor of Medicaid-fraud-detection software won a state contract under questionable circumstances that led to the resignation of the top lawyer at the Health and Human Services Commission . . .

In Texas, $100-a-barrel oil contributed to a boom so loud and long that it drowned out the niggling little voice in the heads of the state’s leaders, which surely must have been whispering that something was wrong; with oil at $60 a barrel the mood is decidedly less indulgent, and the new governor, Greg Abbott, has a substantial challenge in front of him.

During the 2014 gubernatorial election, Abbott made ethics reform a key issue — and accused his opponent, Democrat Wendy Davis, of improperly profiting from public-sector contracts. Among other things, Davis was contracted to be paid $400 an hour to provide legal services to the North Texas Tollway Authority while she was sitting on the state senate’s transportation committee. By Texas standards, that’s not outrageous, and Abbott didn’t need a scandal to run up a 21-point victory over the single-issue late-term-abortion enthusiast, beating the pink off her sneakers. But Abbott also got some guff on the subject: During a debate, he bemoaned the “Third World” corruption in which the border region is mired, and was met with the usual Democratic refrain: “That’s raaaaaaacist!”

Abbott didn’t back down — he just recited the facts: “A former Starr County sheriff’s deputy was sentenced last year for accepting bribes to protect drug dealers and their smuggling routes. Members of a drug-enforcement task force and other law-enforcement agents in Hidalgo County are awaiting sentencing for money laundering and drug smuggling. A former state district judge was convicted for accepting money in return for favorable rulings in a public corruption investigation that included a former district attorney and a former state representative.”

Oil companies are used to dealing with corrupt governments. But Texas is more than the energy business, and it needs to be much more. If the state wants to go on being an engine — if not the engine — of American job creation, to continue its remarkable recent run, and to diversify its economy in investment-intensive ways, it is going to have to do a great deal better.

The grossest sort of corruption — the Third World stuff to which Abbott referred — is a more or less straightforward matter of policing. Like any border state, Texas will suffer more of it, particularly given the criminal networks associated with Mexico’s cartels. Taking a stand against public officials who accept cartel bribes is not a particularly controversial or brave stance, at least not on this side of the border. But Texas’s problems go deeper than that.

The Texas Enterprise Fund (TEF), one of the several corporate-welfare programs operated out of Austin (and every other state capital), is supposed to be a proposition offering a measurable return on investment: A company moves to Texas or expands its operations there and, in exchange for creating a certain number of jobs at a certain level of pay, gets payoffs from the state. As a matter of principle, those programs are repugnant; as a matter of pragmatism, they are defensible — if at all — only when the benefits outweigh the expenses.

Whether that is the case in Texas is anybody’s guess. The programs are widely criticized as amounting to little more than a corporate slush fund under control of the governor, his lieutenant, and the speaker of the state house — all Republicans and de facto provisional allies, even though they are not always happy about that — and even some high-profile conservative friends of former governor Rick Perry privately describe the program as corrupt. The office of the state auditor stopped short of that characterization in its assessment, but it found real cause for concern: TEF did little to confirm that the jobs companies were being credited for had actually been created, or that businesses given money to dissuade them from choosing out-of-state sites were really considering other locations. More than $220 million was given to companies that not only were not required to prove that they were creating jobs but did not even complete applications. Some $40 million went to one organization, the semiconductor consortium Sematech, that swapped loyalties when it got a better offer to move to Albany, N.Y. The state was frequently unable to demonstrate that it had followed the law and program rules, that projects met legal criteria, or that Texans had in fact enjoyed a return on their investments. Of course there was money moving both ways: grants to businesses, donations to politicians.

Conservatives engaged in the corporate-welfare fight know from bitter experience that this sort of monster — the U.S. Export-Import Bank being the Godzilla of the species — is difficult to control, much less to kill. But having hundreds of millions of dollars on tap to pour into the pockets of business interests on very little more than the say-so of the top three elected officials in the state is an invitation to corruption.

And fighting corruption is a tricky business. Rick Perry is, as of this writing, under felony indictment for the purported crime of vetoing funding for the Public Accountability Office, a division of the Travis County district attorney’s fiefdom that, as a result of local political peculiarities, acts as the statewide ethics enforcer. When Travis County district attorney Rosemary Lehmberg was videotaped not only excoriating the police officers who had brought her in on drunk-driving charges but also threatening to have them jailed if she did not receive special treatment, Perry demanded her resignation, and threatened to veto her office’s funding if she did not depart. She didn’t; he did; and her office indicted him on felony corruption charges for the veto. It is a ridiculous case, but then so was the prosecution of Tom DeLay by the same office. He was vindicated, but it ruined his political career.

Governor Abbott, if he’s serious about ethics reform, has a multi-front campaign ahead. Rosemary Lehmberg cannot be impeached by the legislature, but she can be disbarred; more important, Travis County, an island of Democratic dominance in an overwhelmingly Republican state, can be stripped of its special role in statewide political affairs. Jim Pitts, the Republican former chairman of the house ways and means committee, probably cannot be charged with a crime for browbeating the University of Texas law school to admit his grossly unqualified son — or even for his role in the impeachment of the UT regent who exposed that wrongdoing — but he can be shamed, and the relevant documents can and should be released. Governor Abbott has voiced support for a number of measures related to lobbying relationships, conflicts of interest, and the like, many of which have Democratic support, notably from state senator and former Austin mayor Kirk Watson, and many of those deserve to be pursued.

But big pieces such as the Texas Enterprise Fund present problems that are not going to be rendered tractable through greater transparency and bureaucratic reform. What is needed in those cases is not new procedures ensuring that corporate-welfare programs are run with greater probity but a philosophical and moral shift — an acknowledgement that such programs are corrupt and corrupting by their nature, and that they are illegitimate.

The view from Washington is not encouraging for reform in Austin: The rush of so-called progressives and “inequality” warriors such as Senator Elizabeth Warren to defend the Export-Import Bank — the main purpose of which is to subsidize Boeing — is an unhappy reminder that the power to dole out million- and billion-dollar favors is one that few politicians are ready to give up. But as a Republican governor in Texas, Greg Abbott is one of the few well suited to do just that — and if it means he wins his next election by only ten points instead of 21, the republic will thank him.

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