Source: http://lexpolitico.com/?m=201703
Timestamp: 2019-04-26 10:15:26+00:00

Document:
In May 2015, the Thirteenth Court of Appeals in Corpus Christi, TX affirmed a judgment in a Hidalgo County election contest which found by “clear and convincing evidence” that thirty illegal votes had been cast in a race with a 16-vote margin of victory, and ordering a new election. In full disclosure, NLF represented the prevailing party, Letty Lopez, and Lopez won the ensuring court-ordered election in November 2015. This week, NLF filed a motion with the court of appeals requesting that the opinion be officially published. This is somewhat inside baseball, but the opinion was designated a “memorandum opinion” upon release, meaning that, while it is still binding precedent and available in online legal databases, it would not appear in the Southwestern Reporter volumes. We believe it is important that this opinion is accorded the weight it deserves, as it was the first time the Thirteenth Court of Appeals has addressed several critical issues regarding residency and mail-in ballot fraud and illegal voting. The opinion shows that the voter residency requirement does have teeth and can be enforced. Also, critically, it affirms that failure to disclose required information on a carrier envelope where someone takes the envelope from the voter to mail will render the ballot uncountable.
This entry was posted in election fraud, Lopez v Rivera, residency, Texas election contests on March 31, 2017 by admin.
AUSTIN, TEX.—This week, Austin taxpayer-advocate and former District 6 Councilmember Don Zimmerman explained to the Texas Ethics Commission why it must dismiss a groundless complaint filed by a political opponent in 2015.
Zimmerman, a conservative activist who has long rankled the tax-and-spend liberal establishment in Austin, really riled up his opposition when he won a seat on the City Council in December 2014. That was Austin’s first election cycle with district (rather than at-large) elections. Many powerful local Democrats had fought aggressively to retain the all-at-large electoral system, fearing that a district-based system would break up the “progressive” stranglehold on local politics. They lost that battle, and then when Zimmerman actually won the District 6 seat, the opposition intensified further.
Soon after Zimmerman took his seat on the Council, Bill Aleshire, the former Democratic Travis County Judge, filed a complaint with the TEC alleging that Zimmerman had paid his wife $2,000 “from political contributions” for campaign work in violation of the Election Code. The relevant statute provides that a candidate “may not knowingly make…a payment from a political contribution” to the candidate’s spouse or dependent child “if the payment is made for personal services rendered by…the spouse or dependent child.” Tex. Elec. Code § 253.041(a). Zimmerman has confirmed that his wife Jennifer worked tirelessly for the campaign, helping with fundraising, proofreading, blockwalking and organizing volunteers. He estimated the value of her work at a minimum of $10,000, and he was embarrassed to pay her only $2,000.
Aleshire’s complaint acknowledges that it is based only on Zimmerman’s campaign finance report (which accurately disclosed the $2,000 payment to Jennifer Zimmerman for “campaign office and field work”) and news reports.
However, if Aleshire reviewed Zimmerman’s campaign reports, he must have also been aware that Zimmerman had deposited $20,000 of his personal funds into the campaign account, because those deposits were properly reported as loans as required by law. Of course, Aleshire had no good-faith basis for alleging whether the payment came “from a political contribution,” which would implicate the statute he cited in his complaint, or from Zimmerman’s personal funds, because he had no access to Zimmerman’s campaign bank statements or any knowledge of Zimmerman’s internal campaign operations.
In response to the complaint, Zimmerman voluntarily provided his campaign bank statements to the TEC, which show that the first deposit was $10,000 from Zimmerman’s personal funds (the first loan, as disclosed on his campaign report). Between that first deposit and the payment to Jennifer, the balance never dipped below $2,900. Therefore, more than enough personal funds remained in the account from which to draw the $2,000 payment.
Zimmerman filed a legal memorandum with the TEC this week explaining that Texas law does not require candidates to designate or use any particular accounting method. This is something Former TEC Chair Paul Hobby has expressly recognized, when he chastised a group responsible for filing numerous complaints based merely on assumptions from information on the face of candidates’ reports. See Letter from Chair Hobby (Dec. 31, 2014). Even if a formal accounting method were required, applying “last in-first out” accounting, a generally accepted accounting principle, more than $2,900 of Zimmerman’s personal funds remained in the account when the payment was made.
The TEC is expected to consider the complaint at an upcoming meeting, either March 30 or May 17.
Jerad Najvar practices political and appellate law and is founder of the Najvar Law Firm in Houston. He served as co-counsel to Shaun McCutcheon in McCutcheon v. FEC, in which the U.S. Supreme Court struck down the federal aggregate contribution limits, and lead counsel in Catholic Leadership Coalition v. Reisman, in which the Fifth Circuit Court of Appeals struck down a waiting period on Texas PACs.
This entry was posted in campaign finance, Texas campaign finance, Texas election law, Uncategorized on March 17, 2017 by admin.
Empower Texans (dba “Texans for Fiscal Responsibility”) is an influential 501(c)(4) nonprofit corporation dedicated to promoting free markets and limited government; Michael Quinn Sullivan is its President. Empower sponsors a separate general-purpose committee (Empower Texans PAC, registered in 2007) as permitted under Texas law. Also, since 2012, Empower Texans (the nonprofit) has elected to exercise its First Amendment rights to make its own independent expenditures for political activity, periodically endorsing candidates and measures under its own name. One of Empower Texans’ signature, non-campaign activities since 2007 has been to compile a “Fiscal Responsibility Index” grading legislators based on their votes and sponsorship of legislation. The Index is published online and sometimes distributed by mail to registered voters.
Two nominally-Republican legislators criticized by Empower were State Representatives Jim Keffer and Vicki Truitt. In April 2012, Keffer and Truitt filed four complaints with the Texas Ethics Commission (TEC) against Empower and Sullivan. Keffer and Truitt each lodged the same allegations against Sullivan and Empower.
As to Mr. Sullivan, they claimed he failed to register as a lobbyist after receiving compensation for contacting legislators on behalf of Empower Texans.
As to Empower Texans, Keffer and Truitt claimed that the group had violated the Election Code in one of two ways: either by engaging in campaign activity that turned the group into a “political committee” without having first appointed a campaign treasurer with the TEC; or, if Empower Texans did not qualify as a political committee, that it had nonetheless failed to file reports of independent expenditures, as required for corporations making campaign expenditures with their general treasury funds.
These complaints have spawned important litigation regarding many issues, including Texas campaign finance statutes, Texas lobbying statutes, the authority of the TEC and the TEC’s abuse of said authority. These issues will be covered in more detail on this blog, but first it’s helpful to set out the background and current status of this sprawling litigation.
As to the complaints against Sullivan, the TEC held a formal hearing and issued a final decision on July 21, 2014. The TEC issued a $10,000 civil fine against Sullivan, ruling that he failed to register as a lobbyist after directly communicating with legislators, on behalf of Empower Texans, in order to influence legislation. Sullivan appealed this decision in district court, and the proceedings are ongoing.
As to Empower Texans, the basic legal theory underlying the enforcement action was that, while Empower Texans is a 501(c)4 “social welfare” organization, it became a “political committee” under Texas law by engaging in activity regulated under Texas’s campaign finance statutes. In an interesting and revealing twist, after a four-year investigation and multiple rounds of invasive subpoenas, the TEC suddenly dismissed the complaints against Empower Texans in October 2016. Empower’s claims for declaratory judgment, which include constitutional challenges to the TEC’s theory as how a corporation can “morph” into a PAC, and for attorneys’ fees, remain pending. Future posts will explore how the TEC’s sudden change of heart, while welcome as the TEC finally dropped its ill-conceived enforcement, was disingenuous and self-preserving.
a person who owns, publishes, or is employed by a newspaper, any other regularly published periodical, a radio station, a television station, a wire service, or any other bona fide news medium that in the ordinary course of business disseminates news, letters to the editors, editorial or other comment, or paid advertisements that directly or indirectly oppose or promote legislation or administrative action, if the person does not engage in further or other activities that require registration under this chapter and does not represent another person in connection with influencing legislation or administrative action.
After the TEC fined Sullivan on July 21, 2014 for failing to register, Sullivan sought review of the agency’s decision in state district court under Texas Government Code § 571.133. That statute provides for de novo review of final decisions of the Ethics Commission, which means that the court does not give any deference to the TEC’s factual or legal findings. See Tex. Ethics Com’n v. Sullivan, No. 14-06508-16 (158th Jud. Dist., Denton Cnty.) (filed Aug. 22, 2014).
Sullivan filed the suit in Denton County. In addition to claiming the media exemption, Sullivan argued that the TEC’s enforcement action should be dismissed under the Texas anti-SLAPP statute (the Texas Citizens’ Participation Act (TCPA), Texas Civil Practice & Remedies Code ch. 27), on the basis that the enforcement action was based on Sullivan’s exercise of his First Amendment rights, and sought attorneys’ fees under the TCPA. The TEC hired a private investigator to collect evidence that Sullivan was not a resident of Denton County to support a motion to transfer venue to Travis County. The TEC also argued that the TCPA was not applicable to an administrative-enforcement respondent’s appeal by trial de novo.
On February 18, 2015, Judge Steve Burgess denied the TEC’s motion to transfer venue, and granted Sullivan’s motion to dismiss under the TCPA. However, five days after the February 18 ruling, the TEC filed a motion to recuse Judge Burgess, in part because the Judge followed Sullivan on Twitter.
The regional presiding judge granted the TEC’s motion to recuse and, on March 9, 2015, assigned Judge David Cleveland to preside in the case. On March 11, 2015, Sullivan filed a motion for an award of attorneys’ fees based on Judge Burgess’s previous order dismissing the TEC complaints under the TCPA. The TEC asked Judge Cleveland to reconsider the venue issue. On March 18, 2015, Judge Cleveland granted Sullivan’s motion to dismiss but denied any court costs or attorneys’ fees, and effectively denied the TEC’s venue argument.
The TEC appealed the denial of its motion to transfer venue. The Second Court of Appeals in Fort Worth held that the district court had erred as to venue, and ordered the case transferred to Travis County for further proceedings. Tex. Ethics Com’n v. Sullivan, No. 02-15-00103, 2015 WL 6759306 (Tex. App.—Ft. Worth Nov. 5, 2015), pet. denied (No. 15-0917). This case doesn’t appear in Travis County’s online docket system yet, but presumably will resume soon. The issues Sullivan has raised are important, both as to the scope of the media exception and of the TCPA, and this case could yield important precedent.
With characteristic overreach, the TEC kicked off its investigation of Empower Texans with an April 2013 subpoena demanding the “name and address of each person that made a contribution” to Empower in 2011, along with dates and amounts of contributions. The TEC also demanded (among other things) the account number for every Empower bank account. This initial subpoena immediately raises red flags, because the TEC doesn’t need the identities of all contributors in order to determine whether a nonprofit became a political committee under the theory advanced by the TEC. Empower immediately objected and refused to provide the information. Empower did provide some federal tax documents requested by the TEC, and appeared in two preliminary hearings. Following these proceedings, the TEC recognized that “there is insufficient credible evidence of violations of laws administered and enforced by the commission,” but issued a Notice of Formal Hearing.
Empower and Sullivan participated in a Pre-Hearing Conference on February 12, 2014, and raised due process objections for the TEC’s failure to adopt procedural rules governing the upcoming formal hearing, despite being statutorily required to adopt such rules (Tex. Gov’t Code § 571.131(c)). Ironically, that same day, TEC voted unanimously to issue new subpoenas to Empower and Sullivan, requesting documents by March 5, but providing that pre-hearing motions would not be heard until March 14 (i.e., after the deadline for compliance with the subpoenas).
Empower and Sullivan went to federal court on February 26, 2014, seeking to quash the subpoenas. Empower asserted that the TEC’s theory—that a corporation that receives contributions and then makes “direct campaign expenditures” (independent expenditures) becomes a political committee because it is deemed to be working in concert with others (the contributors)—was being asserted for the first time and violated First Amendment rights. Empower pointed out in its complaint that, on the same day the TEC issued the new subpoenas, it had also proposed a new rule expanding the disclosures required by nonprofits that make independent expenditures. (Proposed Rule 20.68 would have presumed a contribution is a campaign contribution based on that contribution’s use by the recipient, irrespective of the contributor’s intent, contrary to the preexisting Election Code definition.) Empower and Sullivan alleged that “[t]he TEC is attempting to ‘out’ any source that have contacted Plaintiffs or had communications with them so that these sources may be silenced.” Compl. para. 53.
The TEC held a meeting on April 3, 2014 and withdrew its third-round subpoenas which a federal judge had described as “absurd” and served Empower Texans and Sullivan with a fourth round of subpoenas. While the TEC maintains that the revised subpoenas were more narrowly drawn than the requests at issue in the federal lawsuit, in many ways they were broader and more objectionable. These April subpoenas now defined “Empower Texans” to include “any other affiliated or subsidiary entities” (even though the complaint was filed only as to Empower), and requested many new invasive categories of information (e.g., “telephone and personnel directories”; “personnel files”; “records or evidence of incoming and outgoing telephone calls”; “accounting and bookkeeping records”; lists of recipients of Empower’s emails; and calendars and time records documenting Sullivan’s and other staff time. [Note that Empower later pointed out that the TEC’s purpose in requesting time records later became clear, when TEC proposed a new definition of “principal purpose” (Rule 20.1(20)]).
Empower/Sullivan raised constitutional objections at the April 3 meeting, prompting TEC Counsel John Moore to advise the Commissioners that it’s not the TEC’s responsibility “to determine whether something is constitutional or not.” See Transcript of Apr. 3, 2014 hrg. Sullivan and Empower filed a lawsuit in Travis County district court on April 30, 2014, seeking an injunction against the subpoenas. Tex. Ethics Com’n v. Empower Texans, Inc. and Michael Q. Sullivan, No. D-1-GN-14-001252 (53rd Dist. Ct., Travis Cnty.). Empower and Sullivan asserted that the subpoenas should be quashed for violating First Amendment rights. They also argued the subpoenas were not supported by probable cause and thus violated the Fourth Amendment, and that the sworn complaint proceedings violated due process for lack of procedural rules.
Apparently inspired to take Empower’s objections a little more seriously now that their actions were under review in another court, the TEC discussed Empower/Sullivan’s objections in a meeting May 28, 2014, and pared back the subpoenas. While these modifications did slightly scale back the scope of the requests, they still requested bounds of unnecessary information. Empower and Sullivan filed renewed objections and responses with the TEC.
At this point, coincidentally, another Texas judicial decision was issued that burnished Empower’s position. On December 19, 2014, the Third Court of Appeals in Austin released its opinion in the long-running case of Sylvester v. Texas Association of Business, 453 S.W.3d 519 (2014). Sylvester involved a similar claim that a nonprofit entity (TAB) had incurred regulation as a political committee by engaging in a limited amount of communications which losing legislative candidates argued were not merely “issue” ads but “campaign expenditures” in opposition to their respective candidacies. Importantly, Sylvester applied a textually-sound interpretation to the political committee definition—holding that an entity can have only one “principal purpose”—and held that TAB could not be considered a political committee (even assuming, arguendo, that the ads were express advocacy) because TAB’s principal purpose was to be a trade association, not to influence elections. Id. at 529-30. Sylvester additionally explained that “[w]ere we to interpret ‘principal purpose’ in the definition of ‘political committee’ as suggested by appellants so that corporations making independent political expenditures morph into political committees under the Election Code…when they made the expenditures, the definition would be an affront to the First Amendment.” Id. at 529.
Four days later, a senior TEC attorney emailed TEC legal staff and, with quite a dose of understatement, noted that Sylvester “could be used against us by those wishing to argue that a corporation cannot be a political committee.” In fact, Sylvester stated directly that a corporation can have only one “principal purpose” for purposes of determining political committee status, directly precluding the TEC’s position that a committee can have multiple principal purposes. It seems pretty clear that Empower’s principal purpose is to operate as a 501(c)(4) organization, with independent expenditures (and their supporting solicitations) constituting only a minor part of its overall activity.
Nonetheless, TEC staff argued in a memo on May 25, 2015, that the Commission should continue pressing its investigation and, specifically, should seek enforcement of the subpoenas in district court.
Following the staff’s recommendation, the TEC voted on June 11, 2015 to file a lawsuit against Empower/Sullivan, seeking a judicial order to enforce the subpoenas. The suit was brought under Texas Government Code sections 571.137(c) and 2001.201. Section 571.137(c) states that when “a person to whom a subpoena is directed” refuses to comply with the subpoena requests, the TEC must “report that fact to a district court in Travis County.” Section 2001.201 authorizes an administrative agency to file suit, in a district court in Travis County, to enforce an administrative subpoena. The TEC filed their suit on October 5, 2015. Tex. Ethics Com’n v. Empower Texans, Inc. and Michael Q. Sullivan, No. D-1-GN-15-004455 (345th Dist. Ct., Travis Cnty.).
In response to the TEC’s petition, Empower and Sullivan filed a counterclaim seeking declaratory judgment that a corporate entity cannot be turned into a political committee under the TEC’s “morph-into-pac” theory, and alleged that the TEC complaints were a frivolous claim by a state agency under Texas Civil Practice and Remedies Code, Chapter 105 and that TEC should be liable for Empower/Sullivan’s attorneys’ fees. Essentially, these counterclaims advanced the same legal theories that Empower and Sullivan were simultaneously asserting in the lawsuit they filed against the TEC.
[T]he Commissioners have known for one year [that] the interpretation of the Election Code they seek to apply against Empower has been directly disavowed by controlling case authority….Even with the knowledge of the controlling authority eviscerating its case, the Commissioners will not rule on the merits….Instead, they seek to harass the Plaintiffs with multiple subpoenas, hearings, and orders to obtain constitutionally privileged…documents, the result of which is to intentionally and knowingly cause an unnecessary expense of time, cost and attorneys’ fees to EMPOWER.
Second Amended Pet., para. 106.
A temporary injunction hearing was scheduled for December 21, 2015. Four days before the hearing, the TEC once again modified its subpoenas. This time the TEC was represented by an attorney from the Texas Attorney General’s office, and drastically reduced the scope of the requests, basically seeking only enough information as necessary to determine how much Empower received from contributors who intended to fund “independent expenditures” (as opposed to, e.g., general operations of the nonprofit, or issue ads) in response to five specific emails Empower had distributed requesting funds for that purpose. This was now the fifth permutation of the subpoenas.
On December 29, 2015, the district court denied the request for an injunction, in an order stating that Empower/Sullivan’s pleadings were “without merit.” The court order does not explain its reasoning. Empower filed an interlocutory appeal. See Empower Texans, Inc. and Michael Quinn Sullivan v. State of Texas Ethics Commission et al., No. 03–16–00019–CV (Tex. App.—Austin).
Empower Texans did not request political contributions. Instead, it sent out five e-mails with a donate button, where the accompanying text read: “Our work is made possible only through the generous support of friends like you. Please consider making a monthly or one time contribution of $5, $10, or $25 to fund independent expenditure activities that promote conservative leadership in the Lone Star State.” (E.g., RR4:DX16 at Ex. 3.) The complaints are based entirely on that statement’s appearing in five e-mails. However, independent expenditure activities is not a defined term in the Texas Election Code and does not trigger TEC supervision or reporting obligations. Nonetheless, even if the term triggered an obligation to file reports with the TEC, the total amount of all electronic donations during the timeframe the donate button could have been used is $375 from 11 separate donations. (RR4:DX15.) It is not possible to determine whether the e-mails’ donate button was ever used. The $375 is all electronic donations from every possible source. If it is assumed that the donate button was used for all electronic donations, the total amount still falls below the $500 threshold that the TEC asserts applies.
After this reply, the TEC moved quickly to dismiss all remnants of the enforcement action regarding the claim that Empower Texans had become a political committee. The TEC filed a notice of non-suit on September 6, 2016, dropping its request to enforce the subpoenas (in the 345th District Court) against Empower and Sullivan. On October 13, 2016, the TEC dismissed the underlying Keffer/Truitt sworn complaints against Empower Texans. A week later, on October 21, 2016, the TEC filed a plea to the jurisdiction requesting that the court dismiss certain of Empower/Sullivan’s counterclaims pending in the 345th, arguing that they were moot because the TEC had dismissed the Keffer/Truitt complaints.
The TEC also moved quickly to argue that, since it had now dismissed the underlying Keffer/Truitt complaints, the appeal in Empower Texans’ own case filed against the TEC (in the 53rd Dist. Ct.) was moot as well. The Third Court of Appeals agreed and, on November 22, 2016, dismissed Empower Texans’ appeal without ruling on any of the underlying legal issues. Empower Texans, Inc. v. State of Tex. Ethics Com’n, No. 03-16-00019, 2016 WL 6946810 (Tex. App.—Austin Nov. 22, 2016).
Last week, the Attorney General’s office withdrew from the case, so the TEC is now represented only by Eric Nichols of Beck Redden LLP. There have been no other developments in this case since the Court of Appeals’ decision. While the interlocutory appeal was dismissed, Empower/Sullivan’s underlying claims for relief remain pending.
TEC’s authority under the Texas Constitution: Legislative or Executive Agency?
As noted above, Empower and Sullivan have argued that the TEC’s underlying theory that Empower Texans could morph into a PAC was frivolous (based on Sylvester), and asked the courts in two separate cases to order the TEC to reimburse the attorneys’ fees incurred in defending against that theory. Texas law allows a court to order a “state agency” to pay fees, expenses, and attorneys’ fees to an opposing party if the agency asserts a cause of action that is “frivolous, unreasonable, or without foundation.” Tex. Civ. Prac. & Rem. Code § 105.002. In order to be considered a “state agency” within the meaning of this provision, the agency must be “in the executive branch of state government.” Id. § 105.001(3).
The TEC claimed that it could not be liable for attorneys’ fees and expenses because it is not an executive branch agency but is in fact a legislative branch agency. The TEC is, in fact, established under the article of the Texas Constitution establishing the legislative branch. Tex. Const. art. III (the “Legislative Department”), § 24a. The TEC challenged the district court’s jurisdiction to hear several of Empower’s counterclaims, including this request for attorneys’ fees, arguing that the attorneys’ fees provision clearly did not apply since TEC is under the legislative branch.
Empower/Sullivan responded by arguing that the TEC was too cute by half: if the TEC is not an executive agency, then the TEC can have no authority to make rules, enforce laws, issue orders, or collect fines under the constitutional separation of powers. Empower added a claim requesting that if the court found the TEC was not a “state agency,” to find that it was a legislative agency as claimed by TEC, and order that it therefore had no enforcement authority.
The district judge granted the TEC’s plea to the jurisdiction, but did not explain a rationale as to any provision dismissed. Empower’s request for a declaratory judgment that TEC was an executive agency or, in the alternative, a legislative agency without enforcement authority, was dismissed; its request for attorneys’ fees for TEC’s allegedly frivolous theory was dismissed with prejudice. Order Granting TEC’s Plea to the Jurisdiction (November 28, 2016), in Tex. Ethics Com’n v. Empower Texans, Inc., et al., No. D-1-GN-15-004455 (345th Jud. Dist., Travis Cnty.).
Empower/Sullivan filed an interlocutory appeal on December 19, 2016; the case is pending in the Third Court of Appeals as No. 03-16-00872-CV and all district court actions are stayed pending a decision on the interlocutory appeal. Empower’s brief is due March 23, 2017. Note that these same issues (raised in the plea to the jurisdiction) are still potentially live in the case Empower initiated in the 54th District Court, although it is unclear if any action will be taken there pending this appeal.
This entry was posted in campaign finance, corporate speech, Empower Texans v TEC, nonprofit, separation of powers, Texas campaign finance, Texas constitutional law, Uncategorized on March 14, 2017 by admin.

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