Tit for tat?

How the Texas brothers who secretly funded attack ads against McCain have made millions managing state money under the Bush administration in Austin.

Published March 6, 2000 12:00PM (EST)

It's now been documented that Texas tycoons Sam and Charles Wyly, who emerged late last week as the secret financers of a television blitz attacking Sen. John McCain's environmental record, have put their wealth at the disposal of Gov. George W. Bush. In addition to buying those $2.5 million "independent expenditure" commercials, which aired in New York, California and Ohio under the sponsorship of the so-called "Republicans for Clean Air," Charles Wyly is a Bush Pioneer, which means he has raised at least $100,000 for the governor's presidential campaign. Moreover, since 1994 the brothers have given more than $200,000 to Bush's two gubernatorial campaigns.

Omitted in much of the uproar over the Wyly connection, however, is the little-noticed fact that a lot of public money has been entrusted to the care of the billionaire brothers by Bush appointees at the University of Texas since 1998.

That year, the university's financial managers invested $90 million with Maverick Capital Fund, a Dallas-based investment firm founded and controlled by the Wylys. In addition to a substantial share of whatever profits are earned from the investments, the deal awards the Wyly firm almost $1 million annually in fees.

That highly profitable transaction with the Wylys was made possible by the University of Texas Investment Management Company, known as UTIMCO, the financial arm of the state university system. Since the management of the university's assets was privatized by Bush and the Texas legislature in 1995 at the behest of another wealthy contributor and investment banker named Thomas O. Hicks, UTIMCO has been criticized in the Texas press for its secretive way of conducting business and for its seeming favoritism toward Republican contributors and friends of the UTIMCO board of directors.

The Wylys are not the only major Bush contributors and friends who have obtained control over a share of UTIMCO's estimated $12 billion in assets. Longtime Bush contributor Henry Kravis of Kohlberg Kravis Roberts was awarded a $50 million investment deal in 1996. Among the other Bush Pioneers connected with firms that have received millions in UTIMCO funds are Adele Hall of the Hallmark Card family and the Bass oil clan of Fort Worth.

Officials of UTIMCO and the University of Texas deny that political considerations play any role in their decisions about where to place the university's money (much of which derives from oil wells on West Texas land deeded to the schools by the legislature in the late 19th century). But the investment policies of UTIMCO have raised eyebrows even in Texas Republican circles, following the publication of investigative reports in the Houston Chronicle that first linked major party donors to firms that received UTIMCO investment deals.

Other news reports have connected last week's Wyly-funded advertising blast on Bush's behalf to the brothers' interest in Greenmountain.com, a new company that competes with electric utilities to provide "clean" energy to consumers in states where the industry has been deregulated. Environmental organizations have criticized the ads saying they contain misleading statements about the Texas governor's poor record on cleaning up air and water pollution in his home state.

Meanwhile, the McCain campaign has complained to the Federal Communications Commission about the ads, alleging that the Bush campaign may have illegally coordinated its activities with the Wylys' independent committee. The McCain complaint suggests that "Republicans for Clean Air" is merely a front that permits the brothers to evade federal limitations on individual contributions to Bush. Indeed, McCain himself went so far as to accuse Bush and the Wylys of trying to "hijack" Tuesday's primaries with the last-minute ad blitz.

Forbidding the misuse of so-called independent expenditures for that purpose has been a key objective of the campaign finance reforms advocated by the Arizona senator and his Democratic colleague Russ Feingold of Wisconsin.

In response to McCain's charges, Bush has said, "There is no connection between my campaign and this ad. We had no knowledge whatsoever that Sam Wyly was going to run this ad. There was no coordination." Wyly issued a similar denial, saying that the idea for the ads had come from his son, a college student.

But the consultants who put the Wyly ads on the air are also well-connected with the Bush camp. Texas Republican consultant Jeb Hensarling, who assisted the Wylys, is a former business partner of Bush Pioneers Chairman James B. Francis Jr., who in turn is a close friend and advisor to the governor. In addition, the firm that bought advertising time for the ads in hotly contested New York has worked for New York Gov. George Pataki, who serves as the chairman of the Bush campaign in the Empire State.

By Joe Conason

Joe Conason is the editor in chief of NationalMemo.com. To find out more about Joe Conason, visit the Creators Syndicate website at www.creators.com.

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