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It’s the gift that, unfortunately, keeps on giving. A year before a Travis County grand jury indicted U.S. Rep. Tom DeLay, R-Sugar Land, for alleged criminal conspiracy in connection with some campaign contributions, eight corporations that gave money to a Republican political action committee founded by DeLay were indicted on related charges. By April of this year, indictments against four of the corporations were dismissed. Those four corporations — each charged with making an unlawful corporate political contribution, which is a third-degree felony — negotiated agreements with Travis County District Attorney Ronnie Earle that resulted in their dismissal. In return, the agreements call for the companies — Sears, Roebuck & Co., Cracker Barrel Old Country Store Inc., Questerra Corp. and Diversified Collection Services Inc. — to cooperate with the state of Texas in its prosecution and investigation related to the corporate contributions. By any general counsel’s book, obtaining the dismissal of a criminal indictment is an excellent result for a corporation. It’s a result that would usually allow the corporation to put the unpleasantness of a criminal indictment behind it and, hopefully, avoid problems with its stock price or shareholders. But since Sept. 28, when a Travis County grand jury issued an indictment naming DeLay and two political associates, the four corporations that thought they had moved on from a sticky situation find themselves back in the media spotlight and bit players in a political-legal fight. “The public relations is a significant part of the question for any company, but particularly a public company,” says Dallas white-collar criminal-defense attorney Michael McColloch, who has battled the Travis County District Attorney’s Office on several occasions. But, McColloch says, even if it’s unpalatable to a general counsel to approve a negotiated agreement, it’s sometimes for the best. “It’s almost a no-brainer where a rather trivial contribution can be made to a third-party charity and an indictment disappears. There’s almost no other advice you can give an in-house counsel in most cases,” says McColloch, of McColl & McColloch. Brian Wice, a criminal-defense lawyer in Houston, says it was a “sound tactical strategy” for the four corporations to come to an agreement with Earle’s office. But with that agreement, Wice says, there was the risk that they would be propelled back into the public eye if criminal charges are brought against DeLay, a powerful Republican politician. “Who would have known that Tom DeLay would have found himself in a district court in Travis County?” Wice says. The criminal charges against DeLay, John Colyandro, Jim Ellis and the eight corporations stem from Earle’s long-running investigation into complaints from Democratic candidates for the Texas House of Representatives in 2002 that corporate money was unlawfully directed to Republican candidates. In September 2004, the eight corporations — which also include Bacardi USA Inc., The Williams Companies Inc., Alliance for Quality Nursing Home Care Inc. and Westar Energy Inc. — were each indicted on charges of making an unlawful political contribution. But on Sept. 28, in State v. Colyandro, et al., a grand jury indictment charged DeLay, Colyandro and Ellis with criminal conspiracy to violate the Texas Election Code for allegedly unlawfully directing corporate funds to Republican Texas House candidates in 2002. Colyandro is the former executive director of the Texans for a Republican Majority Political Action Committee, which DeLay founded, and Ellis is DeLay’s chief fundraiser in Washington, D.C. Ellis and Colyandro have pleaded not guilty, and DeLay has denied the allegations and characterized the prosecution as politically motivated. The indictment alleged the three men agreed to send $190,000 in corporate funds contributed to TRMPAC to the Republican National Committee (RNC) and the Republican National State Election Committee (RNSEC) in Washington, D.C., with the agreement the two committees would send contributions to seven Republican candidates for state House seats. The indictment alleged the transfer of corporate funds violated Texas Election Code 253.003, 253.094 and 253.104. The indictment alleged Colyandro and TRMPAC accepted contributions from six corporations — including Diversified Collection Services, Sears, Questerra, The Williams Cos. and Bacardi — and delivered a check to the Republican National Committee for $190,000 that was drawn from the same bank account that accepted the corporate contributions. But after DeLay’s attorney filed a motion to quash the indictment, Earle’s office persuaded a different grand jury to issue a new indictment on Oct. 3. That one re-indicted DeLay, Colyandro and Ellis on the charge they conspired to violate the Texas Election Code in 2002, and it added two new charges related to money laundering. The new indictment does not include the names of the corporations; it alleges the $190,000 check was delivered to the RNC, which, along with the RNSEC, sent contributions to seven Republican candidates for the Texas House. The new indictment charges DeLay, Colyandro and Ellis with money laundering, a violation of Penal Code 34.02, and criminal conspiracy to engage in money laundering, a violation of Penal Code 15.02. DeLay stepped down as House majority leader in September, after the Sept. 28 indictment. EARLY STAGES The agreements reached by Sears, Diversified Collection Services, Questerra and Cracker Barrel are not identical, but contain similar provisions. In addition to requiring cooperation with the DA’s office’s investigation, each agreement requires the defendants to refrain from making any illegal corporate contributions in Texas or elsewhere. The agreements also call on the corporations to make a contribution to a nonpartisan group to financially support a program on the role of corporations in American democracy. According to the agreements, Cracker Barrel agreed to donate $50,000 to the Lyndon B. Johnson School of Public Affairs at the University of Texas, and Questerra agreed to unspecified donations to the LBJ School. Bobby R. Inman, a retired admiral in the U.S. Navy and the interim dean of the LBJ School, says the school has received a total of $200,000 in contributions from the corporations. Inman says the money will be used for a program in spring 2006 looking at “money and politics, looking at corporate, union, special interests, everybody who contributes and what the law says and how it will interact.” Sears, of Hoffman Estates, Ill., and Diversified Collection Services, of Livermore, Calif., reached an agreement in December 2004; the agreement for Cracker Barrel, of Lebanon, Tenn., was made in February, and Questerra reached an agreement in April. An attorney for Sears, Daniel Hagood, a partner in Dallas’ Fitzpatrick Hagood Smith & Uhl, declines comment, and a spokeswoman for Sears says the company will not comment beyond a written statement issued in December 2004. In that statement, Robert J. O’Leary, senior vice president of Sears public relations and government affairs, said, “We welcome this dismissal as an appropriate action on the part of the District Attorney’s office, as we have maintained all along that there was no illegal action on the part of the company in this matter.” David Gerger, of David Gerger & Associates in Houston, who represents Questerra, also declines comment, and a spokeswoman, Alison Von Puschendorf, says the company has no comment. “Charges are dismissed, and we don’t have anything else to say about it,” she says. Paul Coggins, a partner in Fish & Richardson in Dallas and a lawyer for Cracker Barrel, and Austin’s Michael Maguire, of the Law Offices of Michael Maguire, who represents Diversified Collection Services, each did not return two telephone calls seeking comment before press time. Charges against Bacardi USA, The Williams Companies, Alliance for Quality Nursing Home Care and Westar Energy are still pending. Rudy Magallanes, a spokesman for Earle, declines comment on those cases, other than to confirm they are pending. He also declines to say if anyone from the four corporations that reached agreements with the DA’s office would testify if the charges against DeLay, Ellis or Colyandro go to trial. The indictments allege Westar Energy made a $25,000 contribution that was not authorized by subchapter D of Chapter 253 of the Election Code, Bacardi made a $20,000 contribution, the Alliance for Quality Nursing Home Care made a $100,000 contribution and The Williams Companies made a $25,000 contribution. David Sheppard, a solo practitioner in Austin, says his client, Bacardi USA, of Miami, Fla., has not entered a plea to the charge but will fight it. “We’ve seen everything the DA tells us we did. We just can’t, for the life of us, figure out what we did wrong,” Sheppard says. “I think the only proper way to dispose of this case is a dismissal. We’d probably waive the letter of apology.” Sheppard says Bacardi made a “good-faith contribution to a political action committee.” Greg Waller, an attorney for Alliance for Quality Nursing Home Care, a group of 15 nursing home operators, says his client is not in negotiations with Earle’s office. “We are in the very early stages of our particular case. The only court proceedings to date are a few discovery-related matters,” says Waller, a partner in Andrews Kurth in Houston. “We are fully confident at the end of the day our position will be vindicated and the alliance will be found not guilty.” Waller’s partner, Lawrence Schreve of Houston, represents The Williams Companies, but Schreve did not return two telephone calls seeking comment. Kelly Swan, a spokesman for the Tulsa, Okla.-based company, declines comment. Martha Dickie, a partner in Austin’s Akin & Almanza who represents Topeka, Kan.-based Westar, did not return two telephone calls seeking comment. A corporate spokeswoman, Karla Olsen, says, “Nothing has changed since last year,” and declines further comment. While Magallanes declines to say if the DA’s office is negotiating agreements with the remaining four corporate defendants, that could happen. “In almost every case you have to consider the merits. Will we win it if we don’t run away?” says Bob Davis, a white-collar criminal-defense partner in Hughes & Luce in Dallas. “In this case, that’s kind of the correct question. What damage do you fear if you resist and decline a negotiated solution? It sounds like the price they [defendants] are paying is a pretty modest price.” Unless the corporation intends to litigate the criminal charge, it may be best to negotiate and move on, says Philip Hilder, a criminal-defense lawyer at Hilder & Associates in Houston. “Given the nature of this case, it’s going to result in a high profile, and the names of the companies, you can’t hide them — they are going to be front and center, and you will be exposed,” he says. “It’s better for the companies to move on and be in the witness status as opposed to the defendant’s status.”

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