(Ben)Barnes, Democrats think they're close to Senate control

BOSTON — On the opening night of the Democratic National Convention, more than 250 well-dressed people strayed from the convention, enjoying bubbly drinks and appetizers such as tablespoon-sized shrimp salads at a party hosted by former Texas Lt. Gov. Ben Barnes.

The Monday event, in a museum featuring works by Matisse, Manet and John Singer Sargent, was festive, but with a purpose — like dozens of semi-social occasions unrolling like a shadow convention to the on-camera doings in the FleetCenter.

It's part of what organizers call "donor maintenance," basically efforts to reward big campaign givers with parties, campaign strategy sessions and passes to exclusive late-night events such as post-speech parties with presidential nominee John Kerry and running mate John Edwards.

Barnes, a Kerry adviser and veteran political fund-raiser, said he scheduled his event to remind potential donors about the Democratic Senate Campaign Committee, which seeks to help Democrats recapture a majority in the U.S. Senate, where the GOP now has a two-vote majority.

"I would like to see the Democrats control" the Senate, he said, calling the result "very important to Texas," which is represented by Republican Sens. Kay Bailey Hutchison and John Cornyn.

"When it comes time to get bipartisan help, it's very important we have people who can go to these Democrats and say: 'Listen, we need help in Texas.'"

New Jersey Sen. Jon Corzine, the committee chairman, urged donations of $25,000.

"We're an inch away" from a majority, he told party guests. "We are absolutely in the begging mode right now."

The committee recently boasted of out-raising its Republican counterpart halfway through this year, though the GOP has $19 million stockpiled compared to $13.5 million by the Democrats.

Since January 2003, each committee has raised around $50 million in preparation for the fall Senate races.

Nineteen seats held by Democrats and 15 held by Republicans are on the ballot, but only one in four races is thought to be competitive.

Charlie Cook, a Washington analyst, gives Democrats a 30 percent to 40 percent chance of overtaking the GOP.

Cook rates 14 seats as at least leaning Democratic and 12 tilting Republican. Cook lists five seats held by Democrats and three belonging to a Republicans as tossups. They include the seat held by Democratic Minority Leader Tom Daschle of South Dakota and the one to be vacated by Edwards in North Carolina.

Other tossups, Cook says, are in Florida, South Carolina, Louisiana, Colorado, Oklahoma and Alaska.

"If the election were held today," Democrats would "be at 52 seats," said a campaign committee spokeswoman.

Cara Morris said Democrats like their chances of winning Republican-held seats in Colorado, Alaska, Oklahoma and Illinois, where convention keynoter Barack Obama, a state senator, doesn't have a Republican opponent in November.

Not so fast, counters the National Republican Senatorial Committee, whose spokesman stresses that five open seats are in the GOP-favorable South —including Louisiana, Florida, South Carolina and Georgia, where Democrat in-name-only Zell Miller is stepping down.

"We are in good shape to be able to strengthen our majority this cycle rather than just defend it," Dan Allen said.

Barnes, 66, says he has attended every Democratic convention since John F. Kennedy chose Lyndon B. Johnson as his running mate in 1960.

Sen. Rodney Ellis of Houston calls Barnes the Texas "godfather of fund-raising and strategizing."

Beaumont lawyer Wayne Reaud dubs him "the last of the old lions" among Texas Democrats tracing to Johnson and Sam Rayburn, the onetime House speaker.

Barnes, a government consultant with offices in Austin, Chicago and Washington, said: "I'm just an enthusiastic participant" who considers as personal friends Corzine, Daschle and Kerry, whom he got to know during summer vacations in Nantucket.

The fading redhead, whose tenure in public office ran aground in 1972 in the wake of the Sharpstown State Bank scandal, predicts Democratic gains in Texas, where Republicans have held all 29 statewide elected offices for nearly a decade.

Barnes said he doesn't blame convention organizers for putting Texas delegates at a hotel near Logan Airport and in seats not front and center at the convention.

He also conceded Texas voters will not favor Kerry over former Gov. George W. Bush, though "if George Bush was not a Texan, I'd say we had a shot to carry Texas" for Kerry "this year."

Barnes plans to finalize plans soon for an autobiography tentatively titled "When Texans Rode Fast Horses: From LBJ to George W. Bush, Power and Repentance in Texas Politics."

He disavows another run for office, but said: "I'm going to speak out more. People are going to think I'm running."

Here is some good dirt about Barnes' association with the Sharpstown scandal (probably the biggest political scandal in Texas history) in the '70s. He's not a credible witness.

SHARPSTOWN STOCK-FRAUD SCANDAL. Texas went through one of its traditional and periodic governmental scandals in 1971-72, when federal accusations and then a series of state charges were leveled against nearly two dozen state officials and former state officials. Before normalcy returned, Texas politics had taken a slight shift to the left and had undergone a thorough housecleaning: the incumbent governor was labeled an unindicted coconspirator in a bribery case and lost his bid for reelection; the incumbent speaker of the House of Representatives and two associates were convicted felons; a popular three-term attorney general lost his job; an aggressive lieutenant governor's career was shattered; and half of the legislature was either intimidated out or voted out of office. The scandal centered, initially, on charges that state officials had made profitable quick-turnover bank-financed stock purchases in return for the passage of legislation desired by the financier, Houston businessman Frank W. Sharp. By the time the stock fraud scandal died down, state officials also had been charged with numerous other offenses-including nepotism and use of state-owned stamps to buy a pickup truck.

In the 1972 electoral aftermath, incumbent Democrats were the big losers, although at the top level of officialdom it was a matter of conservative Democrats being replaced by less conservative Democrats. Using the scandal as a springboard, less conservative Democrats and Republicans carried the "reform" battle cry and also gained a stronger foothold in the legislature. Democrats, defensively, charged that the whole scandal atmosphere in Texas was a national Republican plot, originated in the Nixon administration's Department of Justice. But before the smoke cleared, Will Wilson, an ex-Democratic Texas attorney general, by then one of the top Texas Republicans in the federal government, was hounded from his position as chief of the criminal division of the Department of Justice because of his own business dealings with Sharp.

The political tumult that was to become known as the Sharpstown stock fraud scandal started out meekly, though symbolically, on the day Texas Democrats were gathering in Austin to celebrate their 1970 election victories and inaugurate their top officials. Attorneys for the United States Securities and Exchange Commission, late in the afternoon of January 18, 1971, filed a lawsuit in Dallas federal court alleging stock fraud against former Democratic state attorney general Waggoner Carr, former state insurance commissioner John Osorio, Frank Sharp, and a number of other defendants. The civil suit also was filed against Sharp's corporations, including the Sharpstown State Bank and National Bankers Life Insurance Corporation. But it was deep down in the supporting material of the suit that the SEC lawyers hid the political bombshells. There it was alleged that Governor Preston Smith, state Democratic chairman and state banking board member Elmer Baum, House Speaker Gus Mutscher, Jr., Representative Tommy Shannon of Fort Worth, Rush McGinty (an aide to Mutscher), and others-none of them charged in the SEC's suit-had, in effect, been bribed. The plot, according to the SEC, was hatched by Sharp himself, who wanted passage of new state bank deposit insurance legislation that would benefit his own financial empire. The SEC said the scheme was for Sharp to grant more than $600,000 in loans from Sharpstown State Bank to the state officials, with the money then used to buy National Bankers Life stock, which would later be resold at huge profits as Sharp artificially inflated the value of his insurance company's stock. The quarter-of-a-million-dollar profits were, in fact, made. But they weren't arranged by Sharp, the SEC said, until after Governor Smith made it possible for Sharp's bank bills to be considered at a special legislative session in September 1969, and Mutscher and Shannon then hurriedly pushed the bills through the legislature. (Smith later vetoed the bills on the advice of the state's top bank law experts, but not until he and Baum had made their profits on the bank loan-stock purchase deal.)

The state officials denied all the charges, asserting that they had obtained the bank loans and made the stock purchases purely as business transactions unrelated to the passage of Sharp's bank bills. But as the spring of 1971 droned into summer, political pressure mounted on Smith, Baum, Mutscher, and Shannon-even on Lieutenant Governor Ben Barnes, who had been connected in several tangential ways to Frank Sharp, his companies, and the bank bills. By the fall of 1971, when Mutscher and his associates were indicted, the politics of 1972 had begun to take shape. Incumbents moved as far away as possible, politically, from the "old system" and the current state leaders. New candidates came forward, some of them literally with no governmental experience, under a "throw the rascals out" banner.

Mutscher, Shannon, and McGinty were tried in Abilene, on a change of venue from Austin because of adverse pretrial publicity, in February and March 1972. The indictment charged the three men with conspiracy to accept a bribe from Sharp, and District Attorney R. O. (Bob) Smith of Austin said during the trial that Governor Smith was an unindicted coconspirator. Prosecutors acknowledged from the start that the case would be based entirely on circumstantial evidence, which produced legal technicalities inexplicable to laymen. But the jury needed only 140 minutes on March 15, 1972, after exposure to hundreds of pounds and hours of evidence, to find the Mutscher group guilty. The next day, at the request of the defendants, Judge J. Neil Daniel assessed punishment at five years' probation.

The conviction of the Abilene Three dramatically advanced the momentum of the "reform" movement, coming less than three months before primary elections, at which more legislative seats were contested than in any year since World War II.^qv (Redistricting decisions by the federal courts added to the high percentage of electoral challenges, but the Sharpstown scandal generally was credited as the main factor.) In statewide races "reform" candidates also dominated. The Democratic governor's race saw two newcomers-liberal legislator Frances (Sissy) Farenthold of Corpus Christi and conservative rancher-banker Dolph Briscoe of Uvalde-run far ahead of Governor Smith, who was seeking a third term as governor, and Lieutenant Governor Barnes, whose seemingly inexorable rise to political prominence was ended when his reputation was tainted by the scandal. Briscoe defeated Farenthold in the runoff and later was elected governor; but Republican candidate Henry Grover of Houston and Raza Unida Party^qv candidate Ramsey Muñiz of Waco drew enough votes to make Briscoe Texas's first "minority" governor. For the state's second top executive branch job, voters chose moderate Houston newspaper executive William P. Hobby, Jr., over seven other Democratic candidates as lieutenant governor-also on a "reform" theme. Reform-minded moderate Democrat John Luke Hill of Houston, a former secretary of state, left a successful private law practice to defeat the popular three-term attorney general, Crawford C. Martin,^qv who had been criticized for his handling of the stock fraud scandal and for his own relationship with Frank Sharp. The Democratic primary and the general election of 1972 also produced a striking change in the legislature's membership, including a half-new House roster and a higher-than-normal turnover in the Senate. Most of the newcomers were committed to "reform" in some fashion, regardless of their ideological persuasion. The voters simultaneously indicated that their confidence in the legislature had been restored to some extent, because they approved in November 1972 an amendment allowing the legislature to sit as a constitutional convention in 1974. The convention failed by three votes on July 30, 1974, to approve a proposed new constitution for the voters to consider (see CONSTITUTIONAL CONVENTION OF 1974).

The final impact of the stock fraud scandal on Texas politics occurred during the regular session of the legislature in 1973. The lawmakers, led by new House Speaker Marion Price Daniel, Jr.,^qv of Liberty, a moderate and son of a former governor, with active support from Attorney General Hill and Lieutenant Governor Hobby and with verbal encouragement from Governor Briscoe, passed a series of far-reaching reform laws. Among other subjects, the legislation required state officials to disclose their sources of income, forced candidates to make public more details about their campaign finances, opened up most governmental records to citizen scrutiny, expanded the requirement for open meetings of governmental policy-making agencies, and imposed new disclosure regulations on paid lobbyists.

BIBLIOGRAPHY: Charles Deaton, The Year They Threw the Rascals Out (Austin: Shoal Creek, 1973). Sam Kinch, Jr., and Ben Procter, Texas under a Cloud (Austin: Jenkins, 1972). Vertical Files, Barker Texas History Center, University of Texas at Austin. Tracy D. Wooten, "The Sharpstown Incident and Its Impact on the Political Careers of Preston Smith, Gus Mutscher and Ben Barnes," Touchstone 5 (1986).

Sam Kinch, Jr.

Recommended citation:: "SHARPSTOWN STOCK-FRAUD SCANDAL." The Handbook of Texas Online. <http://www.tsha.utexas.edu/ha ndbook/online/articles/view/SS/mqs1.html> [Accessed Wed Sep 8 23:21:34 US/Central 2004 ].

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