LOOKING for loopholes?? 

Lawmakers pay wives with campaign donations

When ethics complaints were filed last year, state representatives reacted differently.

When ethics complaints were filed last year accusing state Reps. Rob Eissler, R-The Woodlands, and Carl Isett, R-Lubbock, of illegally paying their wives with campaign donations, they reacted differently.

Eissler admitted he was wrong, stopped paying his wife to run his legislative office and said he had agreed with the Texas Ethics Commission to pay back the $52,000 out of his pocket.

Isett chose to fight the complaint. He stopped paying his and his wife's accounting company to manage the campaign's books but began paying a separate company that she created in response to the ethics complaint. And he upped the amount, from $36,300 over the previous 2½ years to $39,158 last year, or half of every dollar he raised in 2007.

Critics say Isett is testing the legal limits in a way that could highlight a loophole — paying a spouse's company — for other lawmakers to use. 

Both men deny intentionally violating the law.

State law prohibits lawmakers or candidates from using political donations to pay themselves, their spouses or their dependent children. The intent is to prevent a legislator from living off campaign donors, who frequently are lobbyists representing clients. The law was passed in 1991 in response to a couple of senators who used campaign dollars to subsidize their family businesses.

Paying spouses for campaign services is rare, according to a review of recent campaign reports, but there's a growing trend of lawmakers using political donations for things unrelated to campaigning. Lawmakers without opponents are using their campaign cash to supplement their staff's salaries, pay for travel or living expenses in Austin, and lease planes or luxury cars used in their official duties.

Neither Eissler nor Isett drew opponents this year.

Eissler said he saw Speaker Tom Craddick paying his adult daughter six figures with campaign donations. He said he didn't realize that the law allows lawmakers to pay their adult children with campaign dollars but not their spouses and dependent children living in their household.

"I didn't understand the difference," Eissler said. "When I found out you can't do that, I stopped."

Isett criticizes the law as ambiguous. He denied that he's directing campaign funds to his wife to supplement his income from the U.S. Naval Reserve and the Texas House of Representatives. House members are paid $600 a month.

Isett, a certified public accountant, said he no longer has an accounting practice because of his deployment overseas for seven months in 2006 and his legislative workload. He has just become chairman of the powerful Sunset Advisory Commission, a joint House-Senate body that oversees state agencies and, by extension, any industries the agencies regulate.

As a CPA, Isett said he read the law differently than lawyers who specialize in campaign finance. The law refers to personal services, he said, and he thought his wife, trained as an accountant, was providing a professional service to the campaign and was not covered by that provision.

"As accountants we have a different understanding and frame of reference about what these words mean," said Isett, referring to Internal Revenue Service guidelines on professional services.

After hiring a lawyer to represent him before the Ethics Commission, Isett said, his wife created the company "to bring us back into compliance."

While the law forbids direct payments to lawmakers, a spouse or dependent children, it allows a lawmaker to reimburse a legislator's company for "actual expenditures" but not for a profit.

For example, a lawmaker who owns a printing company could reimburse his company for printing campaign materials, but he can't pay himself a profit.

The law says nothing about a spouse's company.

Isett said his wife, who works out of their home, has a successful business as a contract comptroller for several small companies. He said she charges his campaign the same rate she would other clients.

In addition to being a mother of seven, Cheri Isett also filled in for her husband as a legislator for the seven months in 2006 when he was deployed overseas.

Isett said his payments to his wife's company consumed half of his 2007 campaign fundraising because he raised only $77,200. He said he raised so little because he hasn't had a serious opponent in years.

Isett said his wife accounts for donations, writes thank-you notes to contributors, maintains a database of donors and files reports with the Ethics Commission. Through a spokesman, he said the 2007 payments to his wife's company jumped dramatically because of computer problems that required data to be re-entered and the expense of responding to the ethics complaints.

Isett also paid his oldest daughter about $9,000 from March 2004 through March 2006 for secretarial services, database management and a $3,756 commission for fundraising. She worked for the campaign for two years immediately after high school graduation.

Although Isett reported his daughter as a dependent child on his personal financial reports, he said she actually was living on her own and was not a dependent those two years.

Craig McDonald, executive director of Texans for Public Justice, a group that advocates tougher campaign finance laws, said it appears Isett might have found a loophole to use campaign money to help support his family.

"When you depend on the money from lobbyists to put food on your family's table, it's hard to say 'no' when they come looking for your vote," McDonald said. "What Isett has set up is merely a charade."

Tom "Smitty" Smith, a longtime advocate for tougher campaign finance laws with Public Citizen, agreed.

He said Isett was being "creative" in his legal interpretation while ignoring the intent of the law.

The Ethics Commission, which has spent a year considering the complaint against Isett, will probably resolve the case before the Legislature returns in 2009.

McDonald said allowing members to pay their spouses through a spouse-owned company could open the floodgates to lawmakers diverting their political donations. He likened it to last year's rent-to-own controversy.

Although state law forbids lawmakers from buying Austin homes with campaign dollars, several lawmakers claimed that their spouses owned the Austin homes and that they paid rent to their spouses with their campaign dollars.

A public uproar prompted the Legislature to outlaw that practice in 2007.

In the meantime, John Corbarruvias, a Democratic activist from Houston who had filed the ethics complaints, has filed a criminal complaint against Isett with the Travis County district attorney's office.

"We're aware of the situation," prosecutor Beverly Matthews said, "but at this time, we're unsure if we have venue."

If Travis County prosecutors don't have jurisdiction, the matter would be in the purview of prosecutors in Isett's home county of Lubbock.

Ethics officials, by law, cannot comment on specific cases without facing the threat of a $10,000 fine.

Isett complained that lawmakers have to interpret an ambiguous law and research the Ethics Commission's database with hundreds of legal opinions.

"You never know you might be doing something wrong," Isett said, "until someone files a complaint."

Yet neither Isett nor Eissler asked the Ethics Commission for advice, as the law allows, before they began paying their wives.

"If we're wrong, we'll pay the money back," Isett said. "We just want to put this behind us."

lcopelin@statesman.com  The Austin American-Statesman