The Texas Association of Business secretly financed its 2002 election effort largely with money from an insurance industry that was trying to fight tougher regulations at the Capitol, the Austin American-Statesman has determined after studying TAB's records.

The state's largest business organization has fought disclosing its corporate donors for almost three years, saying that would violate the companies' First Amendment rights. But among 20,000 pages of documents the business group has released, it left telltale clues that identify 18 corporations - 15 of them insurance companies - that helped finance a Republican takeover of the Legislature.

By disclosing almost two-thirds of its 30 or so corporate donors, TAB may have undercut its arguments to keep secret the other donors' names.

In 2002, insurance companies were besieged by irate ratepayers whose bills had gone up. The following spring, the Legislature approved an insurance bill that consumer groups said fell short of real reform. Lawmakers also passed a lawsuit bill that business and insurance groups had backed.

State law generally prohibits spending corporate or union money on campaign activities, but the association has argued that its mailers, which criticized Democrats and touted Republican candidates, did not advocate the election or defeat of any candidate because they avoided using words such as "support" or "oppose."

That argument has played out for almost three years as part of a grand jury investigation and at least three lawsuits that losing Democratic candidates filed against the business organization.

Last month, the Texas Supreme Court ordered that TAB must provide documents to the Democrats, but there was no requirement to disclose the corporations that contributed $1.7 million to send 4 million pieces of mail to voters in
24 pivotal legislative districts.

TAB blacked out the corporations' names and many other identifying marks but left untouched several pieces of information: original documents without the names blacked out, bank account numbers that could be compared to other checks or invoices, and some signatures left exposed.

TAB's lawyer, Andy Taylor, invited reporters to examine the pages, assuring them "nothing's there."

On Thursday, Taylor denied that TAB may have made a mistake in editing the documents, except in two or three instances when original checks or invoices were released without the corporate names adequately blacked out.

He said he had no choice but to follow the court order: "We had to give everything but the names. We didn't have the right to redact anything else."

Identities a surprise

Austin lawyer Buck Wood, who represents the Democrats suing TAB, said he will add those companies as defendants in the lawsuits.

"I was surprised there was information given to me to allow us to identify the donors," Wood said. "I think we'll get them all now."

Among the 18 identified corporate donors, only AT&T Corp., the National Federation of Independent Business and a small data company in the Rio Grande Valley are not involved directly in insurance matters. But those organizations also had an interest in controlling insurance costs and limiting lawsuits.

The insurance firms included giants such as United HealthCare, Cigna, Aetna, Humana, PacifiCare, Blue Cross of California, State Farm and Allstate.

The donations ranged from $100 to $300,000, with most of them at least $40,000 per company.

Officials with most of the corporations either declined to comment because of the threat of litigation or the criminal investigation or did not respond to inquiries from the American-Statesman.

Officials with Liberty Mutual Insurance Co., Allstate Insurance Co. and the business federation confirmed donating to TAB's voter effort. And they emphasized that the money was used to educate voters, not to campaign for candidates, which would be illegal.

"Our contribution to TAB was to help the business community, which we are major part of, publicize a pro-growth business agenda in Texas through a voter education project," Liberty Mutual spokesman Joe Cusolito said.

"We certainly wanted to educate voters on business issues that were important to us," Allstate spokesman Joe McCormick said. "If we wanted to contribute to a candidate, we'd do it through our PAC and not an effort like that."

Unlike the other TAB donors, which just donated money for the overall effort, NFIB designated its $1,000 for a mailer discussing the differences between Supreme Court candidate Dale Wainwright and his opponent.

"We believe we acted within all campaign finance laws," NFIB spokeswoman Nancy St. Pierre said.

Some companies, however, may have not understood the nuances of the ban on corporate money in connection with a campaign.

Allstate, for example, labeled its $20,000 donation as a "political contribution" on the check stub.

Raising larger sums

As TAB tried to elect a Republican majority in 2002, President Bill Hammond largely abandoned the traditional method of raising contributions from individuals and focused on tapping corporations because he said it was easier to raise corporate money in large sums.

Hammond found an insurance industry eager to contribute to his plan to help elect Republicans with money that would not be reported to the Texas Ethics Commission.

Homeowners and doctors were complaining of skyrocketing rates, regulators appeared to be cracking down, companies were threatening to leave the state, and candidates were promising to fix the insurance crisis.

Hammond was intent on increasing his association's influence at the Capitol through the voter education program, and its early success bred enthusiasm.
"Bill - Our first check in voter 'education.' Thought you would want to see it!!!" a TAB lobbyist wrote on a $40,000 check from Aetna.

After the 2002 election and a 2003 legislative session led by TAB-backed Republicans, the insurance industry fended off the harshest regulatory proposals. Industry critics say homeowners and doctors received little - if any - relief in rates.

"It's the insurance companies, not the consumers, the patients or even the doctors, that profit from tort reform," said Alex Winslow, executive director of Texas Watch, a consumer advocacy group.

Tom Bond, an Austin lawyer for many insurance companies, said the 2003 legislative session was "heavier than usual" for the insurance industry.
But
he said it is not unusual for the industry to participate in the political arena.

Bond, who said he did not participate in TAB's voter education program, said he has worked with the organization on various legislative issues.

"The talk at the time was that TAB was trying to provide an organized way for people to participate (in politics) instead of through their own associations," Bond said. "It was my impression they solicited the whole world, including the insurance firms."

As TAB faced criminal investigation and civil lawsuits, Taylor argued that his client, and its secret donors, have a First Amendment right to educate voters during the elections without disclosing the source of the money to the public.

TAB's critics accuse the organization of committing a felony by spending the corporate money and undermining the campaign disclosure laws.

Resisting disclosure

In November 2002, Travis County District Attorney Ronnie Earle, a Democrat, initiated his investigation within days of a Republican sweep at the polls after Hammond boasted about his organization's "unprecedented show of muscle."

Hammond wrote to TAB's members that they had "blown the doors off" the election by spending $2 million on pivotal legislative races.

TAB stymied Earle's investigation for a year by fighting attempts to turn over documents or have its leaders testify before the grand jury. Taylor took the fight to several appellate courts, including the state's top criminal and civil courts and the U.S. Supreme Court.

He lost on all counts. TAB turned over eight boxes of documents - without the donors' names - to the grand jury, and a couple of its staffers had to testify behind closed doors.

"I think we made it very clear to our donors that we respect their right to anonymity," Taylor said. "We have fought the good fight to protect their right to confidentiality."

On another front, the defeated Democratic candidates had sued the business association and won the right to force them to surrender documents - again without the names. The Texas Supreme Court ultimately upheld that order.

On Thursday, Taylor said TAB would continue to fight to protect the identities of a handful of corporate donors that remain a mystery.

"TAB has not and will not voluntarily disclose the name of our donors,"
he said. "We will continue to protect their identities."