Haley's Unholy Alliance

By Donna Ladd Wednesday, October 19, 2005 5:07 p.m. CDT

Photo by Jaro Vacek

Research by Ann Williams

When Haley Barbour was head of the Republican National Committee from 1993 to 1997, he loathed Medicare, the federal health-care program, and tried to gun it down in the GOP "Contract with America," which he helped write with Rep. Newt Gingrich.

By 2000, Barbour had returned to his high-stakes lobbyist job at Barbour Griffith & Rogers, and had dramatically flip-flopped on Medicare, then lobbying for more federal tax dollars to be directed into the program. Why the flip-flop? It was business, pure and simple. A lobbyist does what his clients want--and Barbour's most golden clients wanted more Medicare money in their coffers.

The Alliance for Quality Nursing Home Care Inc. was formed in 2000 as a corporate coalition of 14 of the country's largest for-profit nursing home companies to help ease the way for the corporate consolidation of the nursing-home industry.

To that end, the coalition opposed Medicare cuts and government regulation of nursing-home standards and consolidation, and, perhaps most vitally, wanted low caps on the lawsuit damages the companies had to pay for injuring nursing-home residents. The coalition was willing to pay top dollar to ensure the election of candidates who agreed with its agenda.

Enlisting the top-dollar aid of Barbour and his firm, the Alliance lobbied hard for its wish list to be fulfilled. It also directed impressive campaign donations to mostly Republican candidates around the country who would, in turn, honor the wishes of one of the country's most tenacious, and least understood, industries.

That resolve is how a check for $100,000 written three years ago this week ended up illegally funding Republican candidates for the Texas statehouse.

That's also how that canceled check ended as a primary exhibit in the case of State of Texas v. Thomas Dale Delay et al.

If He Had a Hammer

Unlike Mississippi, the state of Texas has long taken campaign-finance violations seriously, especially donations coming from outside the state to try to tell Texans what to do, and how to vote. A 100-year-old law, Subchapter D of Chapter 253 of the Texas Election Code, forbids corporations from giving money to Texas political action committees for anything other than administrative costs, such as rent, utilities and the like. Violation of Subchapter D is a felony, punishable by hefty fines and up to life in prison.

But if the indictments prove true, Rep. Tom Delay appears to have put considerable effort into circumventing that law. The former bug exterminator from Sugar Land, down near Houston, became majority leader of the U.S. House of Representatives by being better than anyone else at ruthless political maneuvering, helped along by his complicated web of political friends and family members including his own wife, Christine, and daughter, Danielle Ferro.

The 58-year-old Delay--often called "The Hammer"--has run a creative maze of schemes since the mid-1990s to get Republicans elected to office and "keep Republicans in lockstep," using "threats and incentives," as The Wall Street Journal characterized his style in June 2004. Along the way, he has pushed the envelope about as far as it would go ethically and legally--perhaps too far. He has been investigated five times and brought before the House Ethics Committee for his strong-arming of fellow members of Congress, trying to use donations to a children's charity for a donor cruise, rewarding check-writers with face time with GOP stars, and other irregularities.

But the most legally tenuous plot to date seems to be Delay's plan in 2002 to get more Republicans elected in Texas so that they would turn around and then redistrict the congressional lines in 2003 in order to get more Republicans elected to Congress from Texas--thus ensuring a GOP House and his seat at the head table as majority leader.

It is commonplace for elected officials to have their own political action committees (PACs), such as Delay's Americans for a Republican Majority, which he used to collect donations to help GOP candidates get elected to national office. But what prompted a grand jury of his home-state peers to indict him in September and again earlier this month on conspiracy and money laundering charges was his Texans for a Republican Majority Political Action Committee, known as TRMPAC.

According to the grand jury's indictments, Delay used the PAC to collect illegal corporate contributions (a third-degree felony) from January 2001 through the end of 2002 from corporations and then slip the money to 2002 candidates for the Texas statehouse (a first-degree felony). Much of the money was used to fund a last-minute campaign blitz--another violation of Texas law.

In return, the donors had a laundry list of demands--including tort reform and a blind eye to their consolidation plans.

High-Dollar Maneuvers

The nursing-home industry, with its heavy reliance on government payouts for profits, is ripe for exploitation. And stories about the internal workings of nursing-homes--unless they involve dozens of elderly left to die during a hurricane--aren't exactly sexy enough for front page news.

"What we have seen is these corporations evolve to trying to shield themselves from liability or from paying taxes in such a way to finagle the law in ways no one imagined just a few years ago," said Mississippi Rep. Jamie Franks, a lawyer and Democrat from Mooreville who is leading an effort to more closely monitor Mississippi's nursing home industry.

"It's amazing what high-dollar lawyers and high-dollar accountants can do." He added: "And high-dollar lobbyists. You can throw that in there, too."

What those high-dollar strategists did in 2000 was form the Alliance for Quality Nursing Home Care Inc., so that the industry giants--for-profit nursing homes that were members of the American Health Care Association--could pool their resources to overcome regulatory obstacles and limit lawsuit damages in as many states as possible and, ultimately, on the federal level in order to supersede state law.

The Alliance heavily lobbied the federal government to increase Medicare payments, rather than cut them, because for-profit nursing homes take more money from Medicare than Medicaid, which tends to sustain their competitors, the non-profit nursing homes.

In October 2002, the Alliance appears to have invested in Delay's scheme to pack the Texas statehouse (and thus Congress) writing a check for $100,000 to TRMPAC, dated Oct. 18 and signed by Alliance leader Stephen L. Guillard of Harborside Healthcare Corp. in Boston. On Oct. 21, Chris Winkle--then the chief executive of Mariner Health Care in Atlanta--met state Rep. Tom Craddick, R-Midland, for dinner at Anthony's near The Galleria in Houston. They talked about the need to limit liability in lawsuits against nursing homes; then Winkle presented Craddick with the check, which TRMPAC deposited two days later. On Oct. 24, the Alliance contributed another $300,000 to the Texas Association of Business, an employers' group that is now also under indictment in Texas for allegedly helping collect and launder illegal contributions.

After the 2002 election, in which 21 additional Republicans were elected to the Texas statehouse, Craddick became speaker of the Texas House of Representatives, and the Legislature quickly gave industry its desired "tort reform"--including $250,000 in non-economic damage caps and special provisions to shield nursing homes--that would become the model for industry efforts in other states, such as Mississippi in 2004 (which ended up compromising on $500,000 damage caps).

In Texas and Mississippi, the Alliance's goals were being met.

Blowing the Doors Off

Ironically, it was one of the alleged conspirators who exposed the scam. The Texas Association of Business, or TAB, could hardly contain its glee over its success, reporting in a newsletter to members that it "blew the doors off the Nov. 5 election, using an unprecedented show of muscle that featured political contributions and a massive voter education drive." And as
The Wall Street Journal reported, its president, Bill Hammond, a former Texas legislator, bragged to the media that the group had used corporate money to finance a $2 million advertising campaign backing Delay's slate of candidates.

Watchdog groups like Texans for Public Justice in Austin took notice and started following the money, ultimately finding that TRMPAC's tax return showed that it had raised $1.5 million to help with the state races--and that $600,000 had come from corporate donations. Travis County District Attorney Ronnie Earle started investigating TRMPAC's activities after Texans for Public Justice filed a complaint based on the revelations on the tax returns.

In 2004, the house that Delay built started imploding. In September 2004, the indictments began when a Travis County grand jury handed down 32 indictment counts against TRMPAC and TAB and their leaders, as well as against eight companies that had supplied corporate funds, including State Farm Insurance, AT&T, the Union Pacific Railroad and the Alliance for Quality Nursing Home Care. On May 25, 2005, District Judge Joe Hart ruled in a civil case brought by 2002 Democratic candidates against TRMPAC that the use of corporate funds had violated the Texas Election Code.

On Sept. 28, 2005, the grand jury indicted Tom Delay and associates Jim Ellis and John Colyandro for conspiracy in the illegal scheme, and then on Oct. 3, a different grand jury indicted Delay on two new charges of money laundering.

But many players close to TRMPAC and its corporate donors have not, so far, been badly injured by the scandal. Craddick is still speaker and has not been indicted and likely will not be, sources in Texas say, although the district attorney's investigation into participants is ongoing.

Other friends of TRMPAC and its donors, such as now-Gov. Haley Barbour--who lobbied for the Alliance until he left his hefty stock in Barbour Griffith & Rogers in a reversible blind trust so he could take over the governor's mansion in Mississippi--are distancing themselves from the beleaguered Alliance, if not from Delay. (Barbour was one of several prominent Republicans, such as Focus on the Family's James Dobson and former Sen. Jesse Helms, R-N.C., who provided a video tribute to Delay at a May 2, 2005, Washington "Hooray for Delay" dinner in May, complete with frosted white cakes with pink hammers on top.)

Jim Perry, the governor's policy director, said this week that he was not familiar with the details of Barbour's work for the Alliance, but knew that Barbour lobbied to "raise standards" of the nursing-home industry. Perry emphasized that Barbour worked for the Alliance before he was governor of Mississippi--thus, that work is not relevant to his leadership position today in the state. Besides, Perry said, Barbour could not be expected to know about everything his lobbying clients did on their own.

It is not in dispute, however, that Barbour was lobbying in his client's interest to block Medicare cuts at the same time that his client was presenting a $100,000 check to Craddick. (The $300,000 check from the Alliance to TAB followed a few days later.)

"So, ask Barbour, 'Did your client, Alliance, give $400,000 (to Republicans) without consulting you?'" suggested one advocate for nursing-home residents who asked not to be identified.

But Barbour did not return calls to answer detailed questions about his history with the Alliance or his plan for ensuring high standards in nursing homes. Loren Monroe, the current chief operating officer of Barbour Griffith & Rogers who took over the Alliance account when Barbour became governor, also did not return phone calls.

The Hill newspaper, a daily that covers the U.S. Congress, reported on April 6, 2005: "Mississippi Gov. Haley Barbour (R) was a highly effective advocate (for his nursing home clients), but since he ran for office in 2003 his firm's work for the alliance has remained strong. Monroe is 'exceptionally knowledgeable,' one person said."

Andrew Wheat, the research director of Texans for Public Justice, balks at the idea that Barbour was not privy to the Alliance's agenda--especially since his lobbying firm represented three of the corporate TRMPAC donors (the Alliance, Kindred Healthcare and Reliant Energy)--lobbying contracts worth $440,000 to Barbour Griffith & Rogers in 2002 alone. Barbour's clients gave more money to TRMPAC than any of the other 10 lobbying firms who were represented. He was CEO of Barbour Griffth & Rogers and representing the nursing homes when the Alliance was created in 2000.

"In 2001, Mr. Barbour told The New York Times, 'We don't represent issues that are inconsistent with what we believe in,'" Wheat said. "So, he may not be aware of what his client did in Austin, but it is hard to believe that he was not aware of his client's agenda. He was hired to advance his client's agenda."

Coming Home to Roost

The Alliance's agenda is one that is wreaking havoc in states like Texas, Arkansas and Mississippi, where its members control much of the nursing-home business and are now getting their way, thanks to a nationwide corporate realignment, consumer advocates say. The changes in the historically tightly regulated nursing-home industry are profound.

Franks points to the December 2004 sale of Mariner Health Care for $1.05 billion to National Senior Care, owned by New York real estate investor Harry Grunstein. He, in turn, sold Mariner's assets to cover the costs of the acquisition, reducing the worth and assets of Mariner to $12 million and, critics say, operating the nursing homes more like rental units. "It basically became a real-estate transaction rather than a group caring for vulnerable adults," Franks said. He added that, now, the nursing homes seem to be escaping accountability with these transfers. "There is no background check to find out whether they are financially solvent, or good corporate citizens. They simply transfer the license," he said.

Because it is the licensee that is regulated, the process of stripping that licensee of its assets is essentially a tricky end run, allowing the real-estate owners, such as Grunstein, to escape liability. This, combined with the increased "tort reform" damage caps sought by the Alliance, insulates the corporate owners from the regulatory safeguards that are meant to protect patients and the elderly. In turn, those licensees are now defaulting on money owed to vendors in states like Mississippi. And because assets are being ripped away from the nursing homes themselves, they end up with little to be sought in lawsuits brought by the vendors looking to be repaid.

One unpaid Mississippi vendor is the law firm Brunini, Grantham, Grower & Hewes in Jackson, which is suing Mariner for $951,915.17 in legal fees for defending the nursing homes. In the complaint, filed in Hinds County Chancery Court, Brunini describes Mariner's "leveraged buyout" scheme, which it alleges is "fraudulent."

Along with Rep. Percy Watson, D-Hattiesburg, Franks has scheduled legislative hearings this week (Wednesday, Oct. 19 at 1 p.m. in Room 113 of the State Capitol) with Mississippi Department of Health officials to examine these trends. Franks points to hearings in Arkansas, called by a Republican and a Democrat, that just concluded that the state has ended up with "no" regulatory power over these companies, due to their maneuvering. "This is not partisan," Franks said. "It's a consumer issue. It's about protecting vulnerable citizens and our tax dollars."

Franks, when interviewed by the Jackson Free Press, did not know that Barbour had lobbied for the Alliance before becoming governor. "I was not aware of that, but that would not surprise me," he said. "He came here as one of the highest paid lobbyists in Washington. He told us his interest was placed in a blind trust, but I'm not sure it's ended."

Franks said Barbour tends to represent his former lobbying interests, such as the huge tobacco companies. "He made sure that (tobacco) tax increase wouldn't happen. I don't know if that trust is so blind after all."

Indeed, many of Barbour's most visible policy initiatives thus far in Mississippi seem to run parallel to the interest of his recent lobbying clients--from his desire to move Mississippians from Medicaid to Medicare, to his support for "tort reform" measures that focus on low damage caps not only for medical malpractice, but for general business liability.

And notably, in 2004, Barbour vetoed a campaign-finance bill passed by the Legislature that would have closely mirrored the 100-year-old Texas law that the Alliance violated by forbidding corporate donations to political action committees.

Franks added that corporate greed seems to be determining the level of care in Mississippi nursing homes. "It's a shame when Wall Street dictates what happens on High Street," he said.

Donna Ladd is the editor-in-chief and co-founder of the Jackson Free Press, Mississippi's only alternative newsweekly. Visit "I'm Going from Jackson," her blog about politics, media and culture.

Correction: The print version of this story refers to Barbour's lobbying firm representing three of the corporate TRMPAC "owners" (the Alliance, Kindred Healthcare and Reliant Energy); it should read TRMPAC "donors." The typo has been corrected in this version.

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