Trial lawyers prepare for war against Perry

Trial lawyers prepare for war against Perry
posted at 10:05 am on August 22, 2011 by Ed Morrissey

Texas has successfully implemented tort reform on the state level, saving businesses billions of dollars in the long run, and Rick Perry deserves a significant amount of credit for its conclusion. He pushed through a final 2003 reform act that made Texas a model for tort reform, the finale of a long effort to transform the state from a “golden goose” for trial lawyers to a pro-business model. Even trial lawyers admit that the state needed some reform, as Politico reports, but now plan to fight hard against a Perry nomination or candidacy:

John Coale, a former trial lawyer who has donated tens of thousands of dollars to Democrats over the years, agreed that Texas had once been the “golden goose” for plaintiffs’ attorneys.

“Now, the pendulum has swung in the other direction, where it’s a very bad place now,” Coale said.

“If Perry’s the nominee, the trial lawyers will come out of the woodwork to support Obama, where I don’t know that they would now,” he predicted. “Most of the guys I know don’t like [Obama], think he’s screwed up the economy or taken Bush’s bad economy and made it worse. But when your livelihood, your money’s on the line, it concentrates the mind.”

And they have the money to put up a fight, as Republicans know. The prospect of a Perry presidency could galvanize them, says Alexander Burns:

A general election pitting Barack Obama against Perry could turn otherwise apathetic trial lawyers into a phalanx of pro-Obama bundlers and super PAC donors.

“If this guy emerges, if he’s a serious candidate, if he doesn’t blow up in the next couple weeks, it’s going to motivate many in the plaintiffs’ bar to dig deeper to support President Obama,” said Sean Coffey, a former securities litigator who ran for attorney general of New York last year. “That will end up driving a lot of money to the Democratic side.”

Some attorneys don’t intend to wait and see how Perry fares in the GOP primaries.
Democratic Houston trial lawyer Steve Mostyn – who, along with his wife, Amber, donated nearly $9 million to Texas candidates and party committees in the 2010 cycle – said he’s in the process of forming “some federal PACs” to take on Perry. That will likely include a federal super PAC that could take in the kind of massive donations that are permitted in Texas.

Somehow, I think we’ll be seeing the trial lawyers raising this kind of money no matter who the Republicans nominate. It won’t just be for the presidential race, either. If Republicans take control of the Senate and the House next year, we can expect to see tort reform on the agenda, especially if they succeed in repealing ObamaCare. Tort reform in malpractice law will be one of the first goals for the GOP as a counter to Democratic demands for top-down government control of the health-insurance industry. The kind of tort reform put in place by Texas (and California) would save the health care industry over $100 billion in the next decade, and the federal government would account for nearly half of that total.

Meanwhile, the newly-launched Perry campaign took another broadside this weekend from … the Wall Street Journal? The conservative publication analyzed the Texas Emerging Technology Fund and its connection to Perry donors and political allies, and concludes that it gives off at least the appearance of “crony capitalism”:

The Emerging Technology Fund was created at Mr. Perry’s behest in 2005 to act as a kind of public-sector venture capital firm, largely to provide funding for tech start-ups in Texas. Since then, the fund has committed nearly $200 million of taxpayer money to fund 133 companies. Mr. Perry told a group of CEOs in May that the fund’s “strategic investments are what’s helping us keep groundbreaking innovations in the state.” The governor, together with the lieutenant governor and the speaker of the Texas House, enjoys ultimate decision-making power over the fund’s investments.

In 2009, when Mr. Nance submitted his application for a $4.5 million Emerging Technology Fund grant for Convergen, he and his partners had invested only $1,000 of their own money into their new company, according to documentation prepared by the governor’s office in February 2010. But over the years, Mr. Nance managed to invest a lot more than $1,000 in Mr. Perry. Texas Ethics Commission records show that Mr. Nance donated $75,000 to Mr. Perry’s campaigns between 2001 and 2006.

The regional panel that reviewed Convergen’s application turned down the company’s $4.5 million request when it presented its proposal on Oct. 7, 2009. But Mr. Nance appealed that decision directly to a statewide advisory committee (of which Mr. Nance was once a member) appointed by Mr. Perry. Just eight days later, on Oct. 15, a subcommittee unanimously recommended approval by the full statewide committee. On Oct. 29, the full advisory committee unanimously recommended the approval of Convergen’s application. When asked why the advisory committee felt comfortable recommending Convergen’s grant, Lucy Nashed, a spokesperson for Mr. Perry, said that the committee “thoroughly vetted the company.”

Another Perry supporter, Charles Tate, appears to have taken advantage of his position on the TETF in connection to another grantee, but it didn’t pan out well for him in the end — or for Texas taxpayers:

ThromboVision, Inc., a medical imaging company, was also the recipient of an award from the Emerging Technology Fund: It received $1.5 million in 2007. Charles Tate, a major Perry contributor, served as the chairman of a state committee that reviewed ThromboVision’s application for state funding, and Mr. Tate voted to give ThromboVision the public money. One month after ThromboVision received notification that it would receive a $1.5 million state grant in April 2007, Mr. Tate invested his own money in ThromboVision, according to the Dallas Morning News. The Texas paper later found that by 2010 Mr. Tate owned a total of 200,000 preferred shares in ThromboVision.

According to a Texas state auditor’s report, ThromboVision failed to submit required annual reports to the fund from 2008 through 2010, when the company went bankrupt. The report noted the tech fund’s managers were “unaware of ThromboVision, Inc.’s bankruptcy until after the bankruptcy had been reported in a newspaper.” ThromboVision’s bankruptcy filing revealed not only that Mr. Tate had been a preferred shareholder in ThromboVision, but so had prominent Perry supporter Charles Miller, who owned 250,000 preferred shares in the company and has donated $125,000 to the governor’s campaigns. Three phone calls and an email seeking Mr. Tate’s side of the story went unreturned.

The two appear to have lost a lot of money in Thrombo Vision, which might be an argument that they truly believed in the venture rather than sought to manipulate their positions for profit. However, as the leader of a government watchdog organization told the WSJ, the appearance of impropriety and the opportunities for mischief in these arrangements are precisely the reason why pork slush funds like the TETF should either not exist at all or be independent of the executive. The fund still has $140 million in cash to allocate in grants, which means that the opportunities for mischief continue to exist.

Perry will need to explain the performance of the TETF, but at least he won’t need to explain the opposition of the trial lawyers.