Lawyers for Rep. Tom DeLay (R-Tex.) tried unsuccessfully in late September to head off felony criminal indictments against the then-majority leader on charges of violating Texas campaign law by signaling that DeLay might plead guilty to a misdemeanor, according to four sources familiar with the events.
The lawyers' principal aim was to try to preserve DeLay's leadership position under House Republican rules that bar lawmakers accused of felonies from holding such posts. DeLay was forced to step down as leader on Sept. 28 after the first of two grand jury indictments.
The last-minute negotiations between the lawyers and Texas prosecutor Ronnie Earle were arranged after DeLay made what Earle considered a seriously damaging admission about his fundraising activities during an Aug. 17 meeting with the prosecutor in Austin.
At that session, DeLay acknowledged that in 2002 he was informed about and expressed his support for transfers of $190,000 in mostly corporate funds from his Texas political action committee to an arm of the Republican National Committee in Washington and then back to Texas, according to the sources, who spoke on the condition that they not be named.
Those transfers are at the heart of the prosecutor's investigation of the alleged use of corporate funds in the 2002 Texas elections, in violation of state law. In the prosecutor's view, DeLay's admission put him in the middle of a conspiracy not only to violate that law but also to launder money.
As disclosed by sources involved with the case, the new details present a more complete picture of the sequence of events leading to the indictment of DeLay at the end of September. They reveal the unusual lengths to which DeLay and his lawyers were willing to go to avoid charges that would force him to leave his powerful post -- and how it was DeLay's own words that ultimately got him in trouble with the prosecutor.
The disclosures also show the potential weakness of the Travis County prosecutor's case. Sources said it is based so far almost entirely on DeLay's admissions to Earle and his subsequent statements in media interviews about the money transfers. To date, Earle has not gathered compelling testimony from other witnesses or found documents that portray DeLay as the mastermind of the $190,000 transfers, they added.
The plea talks foundered over a disagreement about the conditions under which DeLay might plead guilty. Dick DeGuerin, who was later appointed DeLay's lead defender, has since played down DeLay's admissions to Earle. He said that DeLay was not informed in advance of the first transfer of funds -- from Texas to Washington -- and that therefore any later awareness does not amount to involvement in a conspiracy.
Another DeLay lawyer, Bill White, confirmed that "we had authority to kick . . . around a bit" the idea of guilty pleas. But he emphasized that DeLay was negotiating with Earle out of duress. His lawyers were trying to figure out: "Is there any way around this so he does not have to give up the leadership?"
Earle declined to comment for this article.
A Texas PAC
The case had its origins in 2001, when DeLay helped create a political action committee called Texans for a Republican Majority. TRMPAC raised more than $500,000 before the 2002 elections from corporate donors such as Sears, Roebuck and Co., Bacardi USA Inc., and Cracker Barrel Old Country Store Inc.
Most of the money was spent to help get Republicans elected to the Texas House. DeLay's goal was to put the GOP in control of redrawing Texas congressional districts so more Republicans would be elected to the U.S. House.
DeLay sat on the committee's board, signed fundraising solicitations, participated in at least one conference call about its spending plans, telephoned potential contributors and appeared at fundraising events. But he was not involved in its day-to-day operations, according to the statements of those who were.
A key question has long been whether DeLay was aware of or involved in the committee's most controversial action -- its transfer of $190,000 from Texas to the Washington headquarters of the Republican National Committee in a check dated Sept. 13, 2002, and the committee's subsequent payment from a different bank account of $190,000 to seven Texas candidates several weeks later.
Earle has charged that the transfers amounted to money laundering, meant to circumvent the state's long-standing ban on the use of corporate funds for election purposes.
To prove that, he has lined up what several sources described as solid testimony supporting the indictment's claim that when DeLay fundraiser James W. Ellis gave the RNC a check drawn on TRMPAC's account, he also turned over to the RNC a list of the Texas candidates meant to receive the funds. Ellis has said he denies Earle's "version of the story."
The sources said they also expect witnesses to say that the TRMPAC check was sent to Washington with the dollar amount blank and inscribed with $190,000 only after RNC officials determined they would be able to send back that amount to Texas.
But the trail of evidence surrounding the transfers and other key acts, based on documents and testimony from key corporate donors, DeLay's associates and even his daughter Dani Ferro, a campaign aide of his, did not lead directly to DeLay's door, according to those familiar with the case.
William Ceverha, the group's treasurer, said in sworn testimony in a related civil trial, for example, that the transfers were accomplished by TRMPAC Director John Colyandro, fundraiser Ellis and the committee's accountant. He testified that the plans to send the money to Washington were discussed in a conference call with the committee advisory board. In an interview, he said he does not recall DeLay's participation in that call.
Colyandro's lawyer, Joseph A. Turner, has said that Colyandro would testify in the criminal trial that "DeLay did not have any knowledge of that transaction in advance."
An August Meeting
This picture of DeLay's remove from key events changed in August, when he met secretly with Earle for an hour and a half at the offices of Earle's public integrity unit in Austin. DeLay did not speak under oath at the meeting. He accepted Earle's request that the meeting would be transcribed by a court stenographer, and he was relaxed and garrulous, according to three sources familiar with the session.
Asked what his role was in creating TRMPAC, DeLay said it was his vision and his idea, the sources said. But he reiterated that he knew only in general terms about its day-to-day operations. DeLay said he was also generally aware of a plan to shift money between Texas and Washington. It called for pulling together $190,000, sending it up to Washington and getting the same amount sent back to Texas for state election campaigns.
According to matching accounts provided separately by the sources, DeLay was asked whether such a deal happened and responded yes. Asked if he knew beforehand that the deal was going to happen, DeLay said yes. Asked how he knew, DeLay said that his longtime political adviser, Ellis, came into his office, told him it was planned and asked DeLay what he thought. DeLay told Earle that he recalled saying, "Fine." He added that he knew it was corporate money but said it was fine because he thought it was legal.
Under Earle's reading of the relevant law, only one person involved in a conspiracy has to perform an overt act, such as turning over a check. Those who support or agree with the act -- even after the criminal activity is already under way -- are just as culpable. So Earle decided that DeLay's statements amounted to a moment of legal self-incrimination that made his link to the conspiracy clear. Earle decided he should present that evidence to the grand jury by Sept. 12, before the statute of limitations expired.
But after DeLay agreed to waive the statute of limitations for a month, Earle agreed to hold talks about the implications of DeLay's admission. That's why no mention was made of DeLay on Sept. 13, when the grand jury indicted Ellis and Colyandro for money laundering and conspiring to violate the state election law.
On Sept. 23, Ed Bethune, a retired FBI agent and former Arkansas congressman who oversees DeLay's legal defenses, met with Earle to discuss the possibility of DeLay pleading guilty to a lesser charge than Ellis, an idea that Earle was prepared to accept, according to the four sources. Earle said he wanted Ellis and DeLay to spend three to four months in jail if their appeals failed, an idea that DeLay's lawyers rejected. They then discussed letting a state jury decide the issue of punishment.
Asked for a comment, Jonathan D. Pauerstein, Ellis's lawyer, confirmed that Ellis's potential guilty plea was "a concept that was discussed" but added that it was "not something that anybody said they would do," because "there was never anything put on the table that would be worthy of consideration."
The principal reason the deal foundered was that DeLay's attorneys wanted to postpone his plea until after the Texas appellate courts had ruled on the validity of the state election law provisions at issue, the sources said. Under their proposal, if the courts agreed the law was invalid, then all charges would be dismissed and the promise of a plea forgotten. For the two years it might take to resolve the issue, DeLay would be able to keep his post.
Earle insisted instead that DeLay enter a plea with the court immediately. He was willing only to defer punishment until appeals related to the validity of the law were exhausted; striking any other deal would show undue favoritism to DeLay, several sources said he argued. But DeLay's defense team felt such a decision would gravely damage the majority leader's political standing.
"DeLay was at peace with not doing that. He is ready to fight about it," White said.
Earle said at the meeting that without a deal, he would have to present the case to the grand jury, and he warned that its members might indict DeLay on a felony. The following week, as promised, Earle presented his case to the grand jury and won a felony conspiracy indictment -- forcing DeLay to step down as majority leader. Within hours, however, Earle's aides informed him that DeLay's lawyers might convince a court that this crime was not included in the state election law in 2002.
Earle then decided that the best course would be to bring a new charge of money laundering, an offense that might require a higher standard of proof than conspiracy. But the old grand jurors could not be called back, and the only other grand jury empaneled in Travis County had just two days left to serve. Its members decided not only to vote against the proposed indictment but also to make their decision public.
DeLay, meanwhile, had decided to try to repair his reputation with a public defense, in which he accused Earle of "politics at its sleaziest" and gave his own account of the movement of funds between Washington and Texas.
"I knew about this after it happened, because Jim Ellis in passing said, 'Oh, by the way, we sent some money to . . . [an arm of the Republican National Committee]' and I said okay," DeLay said on the "Fox News Sunday" talk show Oct. 2. "That wasn't an approval. That was an acknowledgment" of what had happened. The meeting occurred, he said, in October 2002.
In a separate interview on Fox that week, DeLay conceded that "Jim Ellis would let me know how things were going, because I was interested in how things were going, and how much money they were raising."
Over the weekend of Oct. 1 and 2, Earle asked his staff to collect transcripts of everything DeLay had said publicly. Armed on Monday morning, Oct. 3, with what he considered these fresh admissions by DeLay of his knowledge of the deal, Earle persuaded a new grand jury at its first meeting to return two new indictments for money laundering and conspiracy.
For his part, DeLay has bluntly expressed regret over his handling of the matter even as he insists he did nothing wrong. He complained Oct. 4 on Rush Limbaugh's radio program that at his meeting with Earle, "I misspoke one sentence, and they have based all this on one sentence."