Huffington Post…
WASHINGTON — Since announcing his run for the presidency, Texas Governor Rick Perry (R) has had to fend off allegations of crony capitalism . Such critiques have revealed the governor’s easy relationships with lobbyists , and his awarding campaign donors government contracts and influential positions on state boards. But Perry has also personally profited from these same relationships. His own deal making has helped him become a millionaire, and it has not gone unnoticed. In the late ’90s, federal law enforcement authorities investigated allegations that Perry had engaged in insider trading, sources involved in the inquiry tell The Huffington Post. On Jan. 24, 1996, Perry purchased 2,800 shares of stock in a company, Kinetic Concepts, Inc. , owned by a San Antonio businessman soon to be one of Perry’s top donors, James Leininger . It was great timing. Later that day, a group of investors bought up 2.2 million shares in the company, sending the price soaring and netting Perry a nice gain. On the day of the stock purchases, Perry had given a speech before a group founded by Leininger. Both Perry and Leininger later admitted talking on the day in question but denied discussing the stock. Perry would go on to sell his Kinetic Concepts stock — a total of more than 8,000 shares — a month later for a $38,000 profit. It took at least two years for an Austin attorney to uncover the suspicious trade. The attorney, who would only discuss the matter on condition of anonymity because he continues to have dealings with the U.S. Attorney’s Office, said he spoke with two sources who corroborated that Perry and Leininger had met on the day in question and that the donor had advised the politician on the stock purchase. “Perry bought immediately,” the attorney recalled. “I mean it was immediately. It was immediately after that that the transaction was announced and the stock went up considerably. My source was telling me that Leininger told [Perry] to go buy some stock.” “I was told that such a private conversation took place and in that private conversation, Leininger told him he needed to invest a little money,” the attorney added. The attorney took his findings to federal prosecutors. They met in an Austin ice cream parlor and he related what he knew. James William Blagg, who was the U.S. Attorney for Texas’ Western District at the time, confirmed there was an investigation into the Perry stock tip and that he deemed the allegation credible enough to pass to the FBI. “I received some information and supplied it to the FBI,” he told HuffPost. “That’s exactly what happened. That’s what I recall happening.” An FBI spokesperson did not return multiple calls seeking comment. The allegations may have had merit, Blagg recalled, but he questioned their provenance. They had come to him, he said, from strongly anti-Perry sources. The Austin attorney contradicts Blagg’s memory. He told HuffPost that one of his sources was getting information directly from the Perry camp. “The circumstances were so overwhelming that it made it very believable,” the attorney explained. “I didn’t doubt it. I certainly wouldn’t be talking to the U.S. Attorney’s Office if I thought it wasn’t credible. I still believe it to this day.” The problem, Blagg recalled, was that the information he received did not contain a smoking gun — an email exchange, a recorded conversation, anything that would have made the case airtight enough to indict a powerful Texas politician. Without documentation, insider-trading prosecutions become he said-she said affairs that are difficult to sell to a jury. Still, the tip merited enough interest to pass it up the chain. “I asked them [the FBI] to look into it,” Blagg said, “but nothing came of it.” After the news broke of the stock deal in 1998, both Perry and Leininger denied any wrongdoing. Perry told the Dallas Morning News : “There was never any conversation with Dr. Jim Leininger about his stock. There was talk about family and public policy, but not about the stock.” Mark Miner, Perry’s presidential campaign spokesman, responded to the allegations via email, telling HuffPost that the Securities and Exchange Commission had “reviewed the matter and dismissed it.” He added that the U.S. Attorney’s Office’s involvement was news to him. “I am not familiar with any other federal review,” Miner wrote, “and there was never action on these false accusations.” The episode was the closest Perry has come to serious legal jeopardy in connection with his controversial financial dealings with political cronies and top-tier donors. But the stock’s $38,000 payout was peanuts compared to Perry’s real estate transactions. * * * * * Perry’s business acumen wasn’t immediately apparent. He did not excel at Texas A&M. He flew beefed-up cargo planes in the Air Force before returning to his father’s farm in Haskell County. The hard work of farming did not interest Perry . “He never really had a job,” said Jim Hightower , the former Texas agriculture commissioner who lost his job to Perry in 1990. “It’s not like he’s a businessman.” In the year that he took over as agriculture commissioner, Perry’s net farm profits totaled $802 . “You’ve got a guy whose father went broke on a regular basis,” explained Peck Young , director of Austin Community College’s Center for Public Policy and Political Studies and a former political consultant. “Dry land farming — it’s a hard business to get rich on, easy to get broke on. The family was in financial straights. Then he got into politics.” Perhaps Perry’s most lavish pre-politics purchase was half an interest in 60 acres on the outskirts of Haskell County. The investment cost him $30,000. Perry shared the acreage with another couple, Tim and Paula Everett, who knew his wife, Anita, well. “We bought land so we could build a house on half of it and they could build a house on half of it,” Paula Everett told HuffPost. “I grew up with them. I went to elementary school and high school and college with Anita. Her dad was our family doctor.” Tim Everett said of Rick Perry: “He was like the rest of us here.” When Perry started out in the state legislature as a Democratic representative in the mid-’80s, his salary came to $7,200 a year. Anita Perry worked as a nurse. In 1985, the couple bought a house in Haskell for $95,000. Two years later, the Perrys had listed their total income at $45,000 . During one legislative session in Austin, Perry shared an apartment with three representatives. One roommate, former state Rep. Tom Uher, also a Democrat, recalled that Perry slept on the floor. Uher said he considered Perry to be nice but a “greenhorn.” Perry also liked to talk. “He was just a young, verbal guy,” Uher explained. “He didn’t show any wisdom or experience that he was one to listen to. To me, he never came across as having exceptional skills.” In the legislature, Perry and other like-minded fiscally conservative Democrats became known as “the pit bulls.” The title stuck, but their impact was limited. “He was no factor,” said Young. “I can tell you he was considered a non-player. He wasn’t a power. He didn’t have any say over legislation. The things he did touch were of no consequence to anybody.” Perry was elected agriculture commissioner in 1990. In his first decade holding state-wide office, he earned more than $2 million . In 2009, Perry listed his net worth at just over $1 million. As a government official with enormous hold on appointments and business interests across Texas, Perry created a one-man, public-private partnership where a key ex-staffer, along with donors and political allies, set up sweetheart deals. Pivotal appointments, government contracts and friendly legislation were soon to follow. At the center of it all were land transactions. A Perry friend and Austin businessman explained to HuffPost that there was nothing illegal going on. “It was friends giving him tips on something to buy,” he said. “It wasn’t like, ‘Here we’re going to set you up.’ And the deals were too small to accomplish something like that.” Miner, Perry’s campaign spokesman, doesn’t see the deals as anything close to crony capitalism. “As to the real estate transactions, all were above-board, arms-length, market-based transactions and fully disclosed on the Governor’s personal finance and tax forms,” he wrote in an email. But the Houston Chronicle reported that “almost everyone who steered Perry to his money-making deals has seen rewards. … Six received key state government appointments or jobs. Two benefited from government actions that had the potential to enhance their real estate holdings.” Young, the Austin Community College center director, said this type of transactional politics is nothing new in Texas. “The ethos here in Texas is you get into office and you’re stupid if you don’t get rich,” he explained. “[Perry] seemed to make an art form out of it. He managed to make it into a family business.” A few deals stick out. In 1993, Perry bought a nondescript piece of property in Austin for $122,000. The land would become essential to Dell Computer founder Michael Dell , who was building a home nearby. Perry later told the press that he had intended to build a home on the property. Two years later, Perry sold the nine acres to Dell for $465,000 . The Texas Tribune reported that Dell needed the land to “get access to important municipal sewage infrastructure.” News accounts noted that Tim Timmerman, an Austin real estate developer and Perry friend, had persuaded Perry to buy the land in the first place. Timmerman has since given close to $70,000 to Perry’s campaigns from 2000 to 2010, the Houston Chronicle reported , noting that Perry eventually appointed him to an influential board . Timmerman did not return multiple calls seeking comment. Mike Toomey , the lobbyist who would eventually work for Perry as his chief of staff and later become central in the HPV vaccine controversy , served as Perry’s power of attorney in the deal. Toomey did not return calls seeking comment. The Perry friend recalled encouraging Perry to buy the property he would later sell to Dell. Perry, he said, wasn’t so sure. The land was on the side of a hill. “I said I think it’s practically worthless,” the Perry friend explained, adding that it wasn’t “usable.” “But when Michael Dell wakes up and he’s planning his whole estate, he’ll want to buy it. His wife is going to demand that he buys that property.” Another long-time friend directed Perry to an even more lucrative deal. Republican Sen. Troy Fraser had known Perry since they were teenagers. They’d since followed each other’s careers closely. Perry had helped Fraser out when he first ran for the state legislature. So when Fraser took an interest in a resort community known as Horseshoe Bay , he purchased two adjoining lots — one for his family and one for Perry’s. Like the Everett deal, Fraser told HuffPost that the plan was for the two families to live next to each other. “We were going to build retirement properties,” he said. “That’s where we were going to retire — next to each other.” Only this time, instead putting down $30,000, Perry would have to invest 10 times that amount. Fraser told HuffPost that Perry liked the idea but said he just didn’t have the money to buy the property. Fraser said he did Perry a favor by purchasing it for him. “He didn’t have the $300,000 to buy the property,” Fraser said. “He wanted it.” “We had an agreement on the day that I bought the property,” Fraser said. “I loaned him $300,000 to buy the property.” In 2001, six months after the purchase, Fraser sold Perry the property for $300,000 plus interest. The Dallas Morning News hired an appraiser who judged the land to be actually worth $450,000. Perry never built that retirement home. Six years later, he sold the property for $1.15 million to Alan Moffatt , a British national who is the owner of an aviation firm (and was questioned on suspicious arms sales to Rwanda during the ’90s). The Morning News ‘ appraiser claimed the sale price was $350,000 above market value. Moffatt owned a home across the street from the Perry property. “He wanted to build another home,” explained Doug Jaffe, the resort’s developer. “I think the governor sold it too cheap. He did. I know he did.” Jaffe said Moffatt went through his real estate company to purchase Perry’s land. Prior to the sale, the governor’s office had cleared a $2.5 million grant to a separate, Jaffe-founded aircraft company. The Houston Chronicle noted that the money never made it to the company because it failed to meet “job-growth commitments.” Fraser insists the original deal was legitimate: “It was nothing more than a real estate transaction — two friends wanting to building houses next to each other.” The Perry friend agrees. He characterized the Horseshoe Bay transaction as “buddy to buddy,” and a lucky “inside deal.” * * * * * Due to renovation work and an arson of the governor’s mansion, the Perry family has resided in a rental mansion since 2007 , at a cost of $10,000 a month to taxpayers. Home items covered by public funds include a set of $1,000 drapes from Neiman Marcus, a $700 clothes rack, an $8,400 maintenance bill for the heated pool and other luxuries. The Perrys’ first two years in the rental property cost taxpayers $600,000 . During this time, Perry was busted for claiming a College Station property he owned as his principle residence in an effort to get a break on property taxes. Perry’s daughter lived on the property while attending Texas A&M. But her roommates paid rent to the family. For several years, Perry had failed to disclose his rental earnings with the Texas Ethics Commission as required. Nor did he disclose the loan that paid for the property. Perry had secured financing for the loan on the College Station, Texas, property through a subsidiary of Plains Capital Bank. James Huffines , a Perry mega-donor, is an executive with the bank. Perry had also appointed Huffines to the University of Texas Board of Regents. Huffines resigned the day a complaint about the rental property was filed with the Texas Ethics Commission. Huffines’ family has contributed $300,000 to various Perry campaigns. The Dallas Morning News reported that Huffines’ bank received roughly $88 million in federal bailout money in 2008. The financing for the College Station house suggests that Perry put no money down when he got the loan for the property. The house was valued at more than $200,000. The Texas Ethics Commission fined Perry $1,500 for the disclosure failures . Huffines did not return multiple calls to his home and office seeking comment. A few months after the Kinetic Concepts stock deal, Perry put his finances in a blind trust. Bill White, Houston’s former mayor who ran unsuccessfully against Perry in the 2010 governor’s race, helped uncover the College Station property controversy. He argued for more transparency from the governor and continues to do so. “We asked for Perry to support our proposed changes in ethics laws, including prompt online reporting of contributions to committees used to pay for travel and the expenses of his residence, as well as complete reporting of all income from assets which he knew about before they were placed in a blind trust,” White wrote in email to HuffPost. “Perry has not supported [these] changes.” Whatever controversy or potential controversy surrounded Perry’s dealings over the years, they did little to alter the universe of the players involved. The same year that Perry made his stock purchase, Leininger sold Perry’s campaign a plane at below-market value. Two years later, during the extremely tight race for lieutenant governor, Leininger secured a last-minute $1.1 million loan for the Perry campaign. After Perry’s razor-thin victory, his opponent John Sharp said : “I congratulate Leininger. He wanted to buy the reins of state government. And by God, he got them.” According to the nonpartisan watchdog group Texans for Public Justice, Leininger has given $239,000 to Perry’s campaign coffers between 2001 and 2009. Leininger did not return multiple calls seeking comment. But the Perry friend who spoke with HuffPost insists there’s nothing unethical about the relationship. “They are very, very tight,” he said. “Leininger’s not a guy who can do something shady. Perry’d take advantage of something like that.”
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Rick Perry Faced Federal Scrutiny For Insider Trading, Criticism For Land Deals
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