August 8, 2018 District Attorney Nico LaHood Bexar County District Attorney s Office 101 W Nueva St, San Antonio, TX 78205 by Hand Delivery Attorney General Ken Paxton Texas Attorney General s Office 300 W. 15th Street Austin, TX 78701 by Hand Delivery District Attorney LaHood and Attorney General Paxton: This memorandum is a formal request that the Bexar County District Attorney s Office, itself or through a Special Prosecutor, and the Texas Attorney General s Office investigate and evaluate the propriety of filing charges against the San Antonio Professional Fire Fighters Association ( Fire Fighters Union ) and its president Chris Steele; the San Antonio Fire Fighters Political Action Committee ( Fire Fighters PAC ); as well as Texas Petition Strategies and its president John Hatch (together hereafter all referred to as The Parties ); and any related entity or party deemed to be culpable for unlawfully making and accepting prohibited expenditures and contributions under 253.003, 253.094, & 253.100 of the Texas Election Code and for the offense of Tampering with a Governmental Record under 37.10 of the Texas Penal Code.
Introduction Chris Steele has run the Fire Fighters Union for many years and is a savvy and experienced union boss and political operative. He also has the resulting direct decision-making authority involving the Fire Fighters PAC. John Hatch has participated in Texas political campaigns in every way imaginable for the last thirty years, including founding his own forprofit consulting business, Texas Petition Strategies in 2003. On July 17, 2018, the San Antonio Express News ran a story titled, Lack of Disclosure Puts Fire Union s Political Spending in Question. The story centered on the Fire Fighters Union s political efforts, including a petition campaign, to ensure that three proposed charter amendments that it endorses as part of its San Antonio First campaign appear on the November 2018 ballot. The Mayor and members of the City of San Antonio stringently oppose the three proposed charter amendments as not in the best interest of San Antonio s fiscal health. This has been a public and contentious campaign. The article revealed, that as part of the Union s support of the charter amendments, in the spring of 2018 a company called Texas Petition Strategies was paid approximately $500,000.00 to gather the signatures for the petition campaign. The article stated that it was unknown if the payments were made from the Union s Dues Account, where the mandatory dues are collected) or from its PAC Account (where voluntary contributions are collected for political purposes). The article highlighted the importance of the source of these funds, as the use of the Union s Dues Account to pay this political expenditure is prohibited by the Election Code and the use of funds from the PAC Account requires a mandatory disclosure a disclosure that was not stated by the PAC on its campaign-finance reports covering the months that the payments were made. 2
Original March 2018 Campaign-Finance Report filed 3/3/2018 Original April 2018 Campaign-Finance Report filed on 4/4/2018 Original May 2018 Campaign-Finance Report filed on 4/28/2018 3
On July 18, 2018, the San Antonio Express News ran a second story titled, Fire Union PAC Amends Reports, Documenting $504,000 Spent on Petition Campaign. This article stated that the Fire Fighters Union, clearly in response to the July 17 th article, had updated its campaign-finance reports and now stated that Texas Petition Strategies, the Buda firm hired by the union to gather signatures for three proposed amendments, donated $504,000 of work as an in-kind contribution. These reports amended filings for March, April and May of 2018. The amended filings added in-kind contributions, from Texas Petition Strategies, of $204,000, $100,000 and $206,000 respectively. Texas Petition Strategies is a well-known Texas business that collects petition signatures and operates for profit. When the paper inquired further, confusingly, Chris Steele then said that these were actually not in-kind contributions, that was an incorrect entry in the freshly amended reports, and the payments were actually from the Fire Fighters PAC Account to Texas Petition Strategies. The owner of Texas Petition Strategies, John Hatch, did not speak to the paper regarding the payments. Amended March 2018 Campaign-Finance Report filed on 7/17/2018 4
Amended April 2018 Campaign-Finance Report filed on 7/17/2018 5
Amended May 2018 Campaign-Finance Report 1 filed on 7/17/2018 A review of the Fire Fighters PAC s reports covering political activity from January through April by the article reveal, that without the disavowed in-kind contributions from Texas Petition Strategies, the PAC ended each month with balances between $123,605 and $157,335. Contributions to the PAC over the same period totaled $101,419 and PAC expenditures totaled $44,773. In other words, according their own disclosures, Chris Steele s claim that the payments to Texas Petition Strategies came from the Fire Fighters PAC could not be true. The PAC would not have had the available cash to pay the cost of Texas Petition Strategies work. 1 There was a second amended May 2018 Campaign-Finance Report filed by the PAC on 8/2/2018 that, inexplicably, goes back to the numbers stated in the original May 2018 Campaign-Finance Report. 6
But the Union Dues Account, full of mandatory payments from all of the members of the Union, likely did. When confronted with this fact, Steele then told the paper that the Union has a bunch of bank accounts, but the money can be transferred between the accounts. Steele, despite his experience in politics and as a longtime union boss, then stated that he did not know if the money that paid Texas Petition Strategies came from Union Dues Account or from the PAC Account and that he did not believe that it mattered. matter. But as everyone who deals in Texas politics knows, under Texas law it does, indeed, The Union, Chris Steele, Texas Petition Strategies, and Hatch violated the Texas Election Code and the Texas Penal Code 253.003, 253.094, & 253.100 of the Texas Election Code prohibit the Fire Fighters Union from making political expenditures or contributions if the source of the money is dues or fees that are a condition of membership in that labor organization. The law serves to protect union members from having their money, that they have to pay to be part of the Union, used for purposes they might not have intended. For this reason, in part, the Fire Fighters Union and Chris Steele run a PAC that the Fire Fighters may contribute to should they so choose. The Election Code also makes violation of this law a third-degree felony, as opposed to the misdemeanor violations of other subparts of the same section of the code. One can only infer that this is because this particular violation was deemed by the crafters of this law as much more serious and important to deter. The Texas Election Code very clearly identifies and sets out the elements of this crime as follows: 7
(a) A person may not knowingly make a political contribution in violation of this chapter. (b) A person may not knowingly accept a political contribution the person knows to have been made in violation of this chapter. (c) This section does not apply to a political contribution made or accepted in violation of Subchapter F. (d) Except as provided by Subsection (e), a person who violates this section commits an offense. An offense under this section is a Class A misdemeanor. (e) A violation of Subsection (a) or (b) is a felony of the third degree if the contribution is made in violation of Subchapter D. ( V.T.C.A., Election Code 253.091-104) Tex. Elec. Code Ann. 253.003 (West) (a) A corporation or labor organization may not make a political contribution that is not authorized by this subchapter. (b) A corporation or labor organization may not make a political contribution in connection with a recall election, including the circulation and submission of a petition to call an election. (c) A person who violates this section commits an offense. An offense under this section is a felony of the third degree. Tex. Elec. Code Ann. 253.094 (West) An officer, director, or other agent of a corporation or labor organization who commits an offense under this subchapter is punishable for the grade of offense applicable to the corporation or labor organization. Tex. Elec. Code Ann. 253.095 (West) (d) A corporation or labor organization may not make expenditures under this section for: (1) political consulting to support or oppose a candidate; (2) telephoning or telephone banks to communicate with the public; (3) brochures and direct mail supporting or opposing a candidate; (4) partisan voter registration and get-out-the-vote drives; (5) political fund-raising other than from its stockholders or members, as applicable, or the families of its stockholders or members; (6) voter identification efforts, voter lists, or voter databases that include persons other than its stockholders or members, as applicable, or the families of its stockholders or members; (7) polling designed to support or oppose a candidate other than of its stockholders or members, as applicable, or the families of its stockholders or members; or (8) recruiting candidates. 8
Tex. Elec. Code Ann. 253.100 (West) 2 Chris Steele, by and through the labor organization that he runs the Fire Fighters Union, admit they likely made political contributions and expenditures from their Union Dues Account. Logically, because the Fire Fighters PAC could not afford to do it. That means they used union dues to make a political expenditure and contribution to fund a petition signature campaign for legislation (the three proposed charter amendments) that the Fire Fighters PAC supports. And John Hatch and Texas Petition Strategies accepted a direct payment of union dues for their partisan political work. In these actions, the Parties acted individually, to aid one another, and in conspiracy with one another in a manner that violated the law. As discussed above, none of these individuals or organizations are new to this area of practice or the law that governs it. They have long operated under these rules and should know the importance of following them. This is showcased by their attempts to explain the source of the funds in a non-problematic way: first by omitting it from campaign-finance reports, second by filing a campaign-finance report stating that is was a donation of service, and third by claiming it came from the Fire Fighters PAC Account. All three explanations, had they been overlooked by the public or true, would avoid any criminal liability. In these attempts to not disclose violations of the Election Code, the Parties also may have violated the Penal Code by making false entries on at least six governmental records. Each of the campaign-finance reports pasted into this memo are, by law, governmental 2 253.100 authorizes certain limited expenditure activities by a union to finance the establishment or administration of a general purpose committee. But it expressly prohibits the kind of partisan political expenditures made by the Fire Fighters Union to Texas Petition Strategies. 253.101 then goes a step further to bar that general purpose committee from using funds given to it from a union s dues account for political expenditures or contributions (to avoid an end-run around the law). 9
records. Each contains a false entry, either an omission of the $504,000.00 or a false explanation of the source of the $504,000.00. The elements of the offense of Tampering with a Governmental Record under Texas law are set out in the statute, as follows: (a) A person commits an offense if he: (1) knowingly makes a false entry in, or false alteration of, a governmental record; (2) makes, presents, or uses any record, document, or thing with knowledge of its falsity and with intent that it be taken as a genuine governmental record; (3) intentionally destroys, conceals, removes, or otherwise impairs the verity, legibility, or availability of a governmental record; (4) possesses, sells, or offers to sell a governmental record or a blank governmental record form with intent that it be used unlawfully; (5) makes, presents, or uses a governmental record with knowledge of its falsity; or (6) possesses, sells, or offers to sell a governmental record or a blank governmental record form with knowledge that it was obtained unlawfully. (c)(1) Except as provided by Subdivisions (2), (3), and (4) and by Subsection (d), an offense under this section is a Class A misdemeanor unless the actor's intent is to defraud or harm another, in which event the offense is a state jail felony. Tex. Penal Code Ann. 37.10 (West) (2) Governmental record means: (A) anything belonging to, received by, or kept by government for information, including a court record; (B) anything required by law to be kept by others for information of government; Tex. Penal Code Ann. 37.01 (West) Reports regarding finances that are required to be filed with the Texas Ethics Commission as part of a campaign are considered by Texas courts to be governmental records. Cary v. State, 460 S.W.3d 731, 740 (Tex. App. 2015), aff'd, 507 S.W.3d 761 (Tex. Crim. App. 2016). In the context of the Tampering with Governmental Records statute, courts have construed intent to defraud as the intent to cause another to rely upon the falsity of a representation, such that the other person is induced to act or is induced to refrain from act- 10
ing. See Wingo v. State, 143 S.W.3d 178, 187 (Tex. App. San Antonio 2004), aff'd, 189 S.W.3d 270 (Tex. Crim. App. 2006) (citing 41 Tex. Jur. 3d Fraud and Deceit 9 (1998)); Martinez v. State, 6 S.W.3d 674, 678 (Tex. App. Corpus Christi 1999, no pet.) (finding sufficient evidence to support conviction for tampering with governmental records); see also State v. Gollihar, No. 04-07-00623-CR, 2008 WL 2602095, at *2 (Tex. App. San Antonio July 2, 2008) (mem. op., not designated for publication), aff'd on other grounds, No. PD-1086-08, 2010 WL 3700790 (Tex. Crim. App. Sept. 22, 2010); Christmann v. State, No. 08-04-00103-CR, 2005 WL 3214832, at *5 (Tex. App. El Paso 2005, no pet.) (not designated for publication). Chambers v. State, 523 S.W.3d 681, 690 (Tex. App. 2017), petition for discretionary review granted (Jan. 10, 2018). Here it appears from their own admissions, that the Parties may have committed this offense on at least six occasions. It follows that the only reason to do this would be intent to defraud the public. These reports are filed, with the intent that the public will rely on them and that their proposed amendments would be placed on the ballot and passed by the voters. These reports, even when amended, failed to disclose the prohibited payments from the Union Dues Account to Texas Petition Strategies. Investigating and Prosecuting the Violations of the Election Code Both the Bexar County District Attorney s Office, itself or through a special prosecutor, and the Texas Attorney General s Office are authorized by statute to initiate an investigation into the actions of the Parties in violation of the Election Code. The two agencies are also specifically authorized to work together to conduct the investigation. According to the Election Code 273.001, 273.001, and 273.002 (West): 11
(b) A district or county attorney having jurisdiction or the attorney general may conduct an investigation on the officer's own initiative to determine if criminal conduct occurred in connection with an election. (e) Not later than the 30th day after the date on which a county or district attorney begins an investigation under this section, the county or district attorney shall deliver notice of the investigation to the secretary of state. The notice must include a statement that a criminal investigation is being conducted and the date on which the election that is the subject of the investigation was held. The secretary of state may disclose information relating to a criminal investigation received under this subsection only if the county or district attorney has disclosed the information or would be required by law to disclose the information. Tex. Elec. Code Ann. 273.001 (West) For an election in which the attorney general is conducting an investigation, the attorney general may: (1) direct the county or district attorney serving a county in the territory covered by the election to conduct or assist the attorney general in conducting the investigation; or (2) direct the Department of Public Safety to assist in conducting the investigation. Tex. Elec. Code Ann. 273.002 (West) The Election Code also provides a very interesting path to gaining information about the check written to Texas Petition Strategies, as well as the conduct surrounding the hiring of that group, by the Fire Fighters Union. (a) A party to an offense under this code may be required to furnish evidence or testimony about the offense. (b) Evidence or testimony required to be furnished under this section, or information directly or indirectly derived from that evidence or testimony, may not be used against the party providing the evidence or testimony in a criminal case except for a prosecution of aggravated perjury or contempt. Tex. Elec. Code Ann. 1.019 (West) Conclusion The San Antonio Professional Fire Fighters Association (Fire Fighters Union) and its president, Chris Steel; the San Antonio Fire Fighters Political Action Committee (Fire Fighters PAC); as well as Texas Petition Strategies and its president, John Hatch, have admitted 12
that they made and accepted prohibited contributions and expenditures of half a million dollars in violation of 253.003, 253.094, & 253.100 of the Texas Election Code. As a result, they also may have conspired and acted to aid one another to Tamper with Governmental Records. The spirit of the Election Code is to ensure fair elections in Texas. High dollar prohibited contributions absolutely undermine this system and rob Texans of fair elections. It is the duty of the local District Attorney s Office and the Attorney General s Office to ensure that no campaign finance violations have occurred and that the Fire Fighters Union Dues Account is protected from being used to make unlawful political contributions and expenditures. It is respectfully requested that the Bexar County District Attorney s Office, itself or through a Special Prosecutor, and the Texas Attorney General s Office investigate these violations and make a determination about whether prosecution is appropriate. Respectfully Submitted, /S/ ALICIA O NEILL ALICIA DEVOY O NEILL TBN. 24040801 1207 South Shepherd Houston Texas 77019 713.523.7878 (phone) 713.523.7887 (fax) cc: Texas Secretary of State 13