May 8, 2002

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Dicey Accounting:
Cornynís Federal, State PACs
Choreograph Expenditures

Since U.S. Senate candidate John Cornyn first filed federal campaign disclosures last September, his federal campaign and his state Attorney General campaign fund have made at least 16 same-day political expenditures benefiting common recipients.

Such closely coordinated political expenditures propel Cornynís senate campaign into troubled waters. Federal elections law prohibits direct transfers of state campaign funds to federal campaigns (though the law permits transfers of state campaign funds to party PACs that benefit federal candidates)1.  The Cornyn campaign told the Austin American-Statesman last month that $3.3 million remains in his state attorney general fund.2

Cornyn's Same-Day Campaign Expenditures
 Date  Check Recipient State PAC
Federal PAC
12/21/01 Lockart Atchley & Assoc.
12/20/01 Jennifer Lustina
12/12/01 Olsen-Delisi
12/12/01 Hill Research Assoc.
12/10/01 Karen Nicholson
11/28/01 Jennifer Lustina
11/28/01 Karen Nicholson
11/20/01 US Postal Service
11/20/01 Lockart Atchley & Assoc.
11/01/01 Lockart Atchley & Assoc.
10/29/01 Jennifer Lustina
10/29/01 Karen Nicholson
10/12/01 Olsen-Delisi
10/04/01 Lockart Atchley & Assoc.
9/28/01 Jennifer Lustina
9/28/01 Karen Nicholson

While federal law permits federal and state campaigns to jointly use common facilities and personnel, this requires complex accounting to assure that state campaign expenditures do not illegally benefit a federal campaign.3  (As a practical rather than a legal matter, virtually any Cornyn promotion benefits both the state and federal personas of this politician.)

Cornynís most recent state attorney general cam-paign report covers the second half of 2001. Comparing that disclosure with the reports that Cornynís U.S. Senate campaign filed with federal regulators reveals that six individuals or entities received 16 same-day payments from both campaigns.

These dual paymentsótotaling $125,368óoccurred from September 2001 through the end of the year. Dual payment recipients include the U.S. Postal Service, Cornynís senate campaign staff and his accounting and political consulting firms.

Overall, Cornynís federal senate campaign paid for 59 percent of the $125,368 in common expenditures. The joint payments that Cornyn campaign manager Jennifer Lustina received on four occasions totaled $17,639, with the federal campaign paying 73 percent. In contrast, the state campaign covered 76 percent of the $14,324 in postal payments that the two campaigns made on November 20, 2001.

Cornynís accountants themselves, Lockart Atchley & Associates, billed the federal campaign for 58 percent of their simultaneous payments, deriving the remaining 42 percent from accounting work ostensibly done for the state campaign.

The single biggest beneficiary of these coordinated political expenditures is the political consulting firm Olsen & Delisi, formerly owned by Bush strategist Karl Rove. In two same-day payments, Olsen-Delisi received a total of $40,740 from Cornynís federal and state PACs. During the same period, it received $11,038 on October 22, 2001 from the Republican National State Elections Committee.

Cornyn's Coordinated Expenditure Totals
Recipient  Total Federal
Olsen-Delisi (campaign consultants)
Lockart Atchley & Assoc. (CPAs)
Jennifer Lustina (campaign manager)
US Postal Service
Karen Nicholson
Hill Research Assoc.

This firm has close ties to Cornyn. For months after he bought Roveís firm, Ted Delisi (son of state Rep. Dianne White Delisi) simultaneously ran the firm and collected a state paycheck as the attorney generalís chief spokesperson.4  The Attorney Generalís Office also employed Cornyn campaign manager Jennifer Lustina briefly as ďDirector of Strategic Planning.Ē

Since mounting his Senate campaign, Cornynís state campaign fund has paid $51,063 to people and businesses that also work for his Senate bid.  The law makes clear that those state expenditures may not be used to promote Cornynís senate bid. Nonetheless, legal loopholes would allow Cornyn to transfer some or all of the $3.3 million that re-main in his state campaign fund to a Republican committee that could turn around and spend that money on ads or other expenditures that benefit his U.S. Senate race. ē

1 Federal Elections Campaign Act, 11 CFR 110.3(d).
2 ďCornynís Campaign Lost Funds in Market,Ē Austin American-Statesman, April 12, 2002.
3 See, for example, ďFederal Election Commission Advisory Opinion No. 1994-37,Ē
4 One time Cornyn Deputy Press Secretary Andrea Horton also did a stint at Delisiís firm before moving on to the National Republican Congressional Committee.

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Texans for Public Justice is a non-partisan, non-profit policy & research organization
 which tracks the influence of money in politics.

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