Although the US Supreme Court has ruled that corporate contributions to candidates are not illegal, to my knowledge, the State of Texas has not yet accepted this premise. The city and Mayor John Cook used the “illegality” of corporate donations in the State of Texas to demand a criminal investigation of, and filed a lawsuit against Pastor Brown.
Section 253,091, of the Texas Election Code defines corporations as those organized under the Texas Business Corporation Act.
I am not a lawyer but as a businessman I’m somewhat familiar with how corporations are viewed by State and Federal entities. It can get a little confusing when “Inc.” or “Corp” is mixed in with “Ltd.” and “LLC.”. Simplified, an “Inc.” is a corporation that is treated by the State as distinct and separate from its owners. For purposes of taxes, a corporation pays taxes on its income and then the “owners” of the corporation pay taxes on the money they take out of the corporation. It is double taxation of the same income.
In other words, an “Inc.” stands on its own. Whereas a “LLC” is normally a sole-proprietor that has some of the protections of a corporation but none of the double taxation issues of a normal corporation. A “LLC” is just a way of protecting the assets of the individual owner without the liability of paying taxes twice on the same income.
Because of this, a “LLC” is treated as an individual by the State of Texas and therefore it can give campaign contributions to political candidates. But an “Inc.” is prohibited from giving campaign contributions to a candidate. Complicating this even further, a “LLC” can be owned by an individual or a corporation. If it is owned by an individual then a contribution from it is legal.
Section 253.094 clearly states that a corporation “may not make a political contribution”. The section adds that a “person who violates this section commits” a third-degree felony. Section 253.131 states that a candidate that accepts such a contribution in support of the candidate, then each other candidate in the ballot is potentially entitled to for damages, twice the value of the contribution and reasonable attorney’s fees.
While examining Steve Ortega’s 8-Day Campaign Contribution Report I came across a political contribution from Bain Construction to Steve Ortega on April 30, 2013 for $500. Bain Construction caught my eye because generally large-scale construction companies incorporate in order to protect themselves from liability. As discussed above, there are two obvious corporate designations; Inc. and LLC. In this case the contribution listed neither so I did some digging.
Something you would expect the El Paso Times to do, and they would have had it been any other candidate. But I digress.
As far as I can tell, there is one entity named Bain Construction owned by Scott C. Bain but registered as three different entities at the State of Texas and six at the County level. Examining the public record I was able to breakdown the various entities as follows.
Following the timeline of each entity’s registration at the County from 2004 until 2007 it appears that Bain Construction is owned by Bain Enterprises, LLC. But a wait a minute, isn’t a LLC allowed to give corporate contributions?
Not so fast, because of the complexity of the corporate taxes and liability umbrellas LLCs are not necessarily sole-proprietors, in fact they can be owned by other corporations.
In this case, Bain Enterprises, LLC., is registered with the State of Texas under a General Partner which happens to be Bain Construction, Inc. Although the numerous entities registered with the County includes three entities named Bain Construction owned by Scott C. Bain a following of the timeline seems to indicate that Bain Construction is owned by a corporation.
According to the records this is what I found.
Bain Construction, Inc. was registered with the County on July 31, 2003. Both Bain Construction, Inc. and Scott C. Bain are listed as “owners”. The State of Texas lists Scott C. Bain as the registered agent, President and Director. All use the same address in Horizon. On August 30, 2004, Bain Construction is added to the County assumed names database. One is “owned” by Scott C. Bain and the other is “owned” by Bain Enterprises, LTD. Bain Enterprises, LTD is listed as “not setup for Franchise Tax” by the State of Texas.
Finally, on September 27, 2007, Bain Construction is once again added to the County assumed name database with one “owned” by Scott C. Bain and the other “owned” by Bain Enterprises, LLC.
The Texas Comptroller lists Bain Enterprises, LLC. with Scott C. Bain as the registered agent and one General Partner named Bain Construction, Inc. All entities use the same address in Horizon.
Without actually looking at the check that was actually deposited by the Steve Ortega Campaign and subpoenaing the bank from where it was drafted to see if the account is held by an individual or a Texas Corporation, by reviewing its tax identification number, it is impossible to determine whether it, in fact is a corporate donation or not. Only law enforcement could make that determination. But don’t expect any investigation to be conducted because Steve Ortega is heir apparent.
As for the El Paso Times, had this allegation been made against any of the other mayoral candidates, not only would you be reading it as front-page news but you would also see editorial, after editorial demanding that an investigation be conducted. Bob Moore would have ordered reporters to investigate this and ambush the unfortunate candidate at the most inopportune moment in order to help his anointed golden-boy.
But, unlike the El Paso Times and although I am not a journalist, I wanted to give Steve Ortega an opportunity to respond to the allegation. So I sent him an email via his Facebook page. Unfortunately he does not provide a fax number or an email on his campaign website so I was forced to use Facebook to attempt to communicate with him. I realize that I did not give him much time to respond but as this is important to the community I did not feel I could withhold the information much longer. The following is the message I sent him. At about 1:00, right under the deadline I received an unsigned response from his campaign. I have reproduced it in its entirety following my message to his campaign.
Facebook message submitted at 11:45 pm, El Paso Time.
My name is Martin Paredes and I publish a blog at elpasonews.org. In reviewing the 8-day financial disclosure report for Steve Ortega I came across a campaign contribution in the amount of $500 made by Bain Construction on April 30, 2013. I realize that the contribution does not list the contributor as a corporation as defined by the State of Texas, but according to County and State records, Bain Construction appears to be owned by a Texas Corporation named Bain Construction, Inc. with the same address listed in the campaign disclosure form.
This appears to be a violation of the Texas prohibition against corporate contributions. I am doing a blog on this issue that I plan on publishing at about 1:00 pm today, El Paso time. I realize that this is very little time but because of the potential legal ramifications of this I consider this breaking news that needs to be published as soon as possible. Because of the implications of this I wanted to give the candidate an opportunity to respond to the allegations. If the candidate is unable to respond by the 1:00, I will publish my blog with a notice that I submitted a short-notice request for comment from Steve Ortega and that I am awaiting his response. If Steve Ortega chooses to respond I will publish his response as an addendum to the article. If Steve Ortega is able to respond before my publishing deadline I will include his response, in full, in my blog post.
Thank you for your kind attention to this matter.
Steve Ortega Campaign response received at approximately 1:00 pm.
Thanks for contacting our campaign; I appreciate the opportunity to respond. We reviewed that check before we deposited it. Some corporations are exempt and we relied on information from the company’s comptroller and an AG opinion for this particular check and the type of corporation it is. We discussed this with the Texas Ethics Commission this morning with their legal department, and we self-reported out of an abundance of caution. In accordance with guidance from the Texas Ethics Commission lawyer, we have also returned the money. The returned contribution will be noted on our next campaign finance report for the current period. Thanks again.”
In the end, the question remains, did Steve Ortega accept an illegal contribution or not? His campaign, if not himself under his direction, responded that they have returned the money. Although it appears that many individuals were contacted and an AG opinion was consulted ultimately the money was returned. But was there a violation of the law? We will probably never know.