Little-known Texas patron guided Bush policies on vouchers, tort reform

Introduction

Only three days after Texas Governor George W. Bush was inaugurated in 1995, he declared the state of the Texas judicial system to be an “emergency” situation, and pressed the legislature to hurriedly pass legislation that would make it harder for consumers to sue companies for defective products.

The lawmakers obliged, to the delight of business leaders in the state. Today, Texas tort laws are among the toughest in the country. As Bush seeks the presidency, Bush points to his early interest in the issue during his stump speech and in appearances before the nations top business executives.

Bush’s support of tort reform no doubt fits into his pro-business philosophy. But he didn’t decide to aggressively push the issue on his own. Pulling the strings behind the scenes on tort reform — as well as on other conservative issues that Bush has embraced — is a wealthy businessman and political operator who is little known outside the tightly knit Republican circles of Texas.

In Texas, though, Dr. James Leininger’s name is synonymous with political power. In a state where egos are huge, he plays the game quietly, rarely drawing attention to himself. Leininger has used his enormous wealth to create a conglomerate of a half-dozen influential foundations and think tanks. Their pro-business policy positions have become the basis of key state legislative initiatives, including tort reform and school vouchers. By placing some of the most well-connected Texans on the boards, Leininger has built a vast network of supporters who have benefited from his favors.

Leininger, 55, also has created numerous political action committees, which he has employed so effectively that he has been nicknamed the “Daddy Warbucks” of the Texas Republican Party. The largest single political donor in the state, Leininger helped to engineer the Republican takeover of the legislature and governor’s mansion. In the 1998 election cycle alone, Leininger and his family spent more than $4 million to finance think tanks and political campaigns, according to the Texas Freedom Network, a nonprofit group established to counter the religious right, and reports filed with the Federal Election Commission.

“He is a kingmaker. His infusion of money has helped to elect many statewide officials,” said Craig McDonald, director of Texans for Public Justice, a nonpartisan watchdog group based in Austin.

Bush’s ties to Leininger are strong. Leininger has given Bush’s campaigns $83,750 over the years. Though this places Leininger only 73 on the list of Bush’s all-time career patrons, the ranking belies the support that Leininger has given Bush over his political career through his various organizations. In 1992, while cutting his political teeth, Bush sat on the board of advisers of Leininger’s flagship think tank, the Texas Public Policy Foundation, which churns out conservative policy positions and is modeled after the influential Heritage Foundation in Washington. Bush also spoke at the foundations 10th anniversary event in January 1999. So it should come as no surprise that Bush has embraced Leininger’s two pet causes: tort reform and school vouchers.

Leininger declined repeated requests to be interviewed for this story.

A bootstrap biography

Though he didn’t make his money in oil, Leininger possesses a bootstrap biography like many of his fellow Texans. Born poor, he eventually became an emergency-room surgeon. He made his early fortune as founder of Kinetic Concepts Inc., which manufactures hospital beds that rotate patients to prevent bedsores. From that, he built a business empire with diverse interests. According to filings with the FEC, Leininger owns a real estate company, a business that makes Bible coloring books, a turkey mail-order firm and a dairy, and is part-owner of a San Antonio-based television news service syndicated statewide. Along with Bob Cone, another wealthy Republican donor, he owns ATX Technologies, which manufactures “smart” technology products such as the security and navigation communication tools inside automobiles. Leininger owns Winning Strategies, a political consulting firm. In addition, he holds a minority interest in the San Antonio Spurs pro basketball team.

Considering that hes worth $300 million, Leininger, a former Forbes 400 millionaire and a born-again Christian, lives modestly, driving a 12-year-old Jeep. He prefers to give much of his money to political causes. And Leininger’s supporters insist that his political activities are pursued for good-citizenship reasons. Jeff Judson, director of the Texas Public Policy Foundation, told the Center for Public Integrity, “The thing about Leininger is that none of his political interests helps his bottom line.”

Still, Leininger didn’t come to the issue of tort reform accidentally. Nor has the passage of tough laws hurt business. He had a financial stake in seeing a decline in the number of lawsuits filed against companies. A Center review found 60 suits filed against Leininger personally or against Kinetic Concepts. In 1997, Leininger sold 10 percent of his interest in the publicly traded company for $885 million to Richard Blum, the husband of Senator Dianne Feinstein, D-Calif. Leininger still retains a 33 percent stake.

Hospital accident report filed with the federal Food and Drug Administration linked the oscillating beds with patient injuries, saying the beds had thrown, crushed and strangled patients.

In 1988, after his company lost liability insurance, Leininger established his first political action committee, Texans for Justice, to push the tort reform movement. In 1989, he created the Texas Public Policy Foundation to create “intellectual capital in Texas.” Over the years, Leininger has given more than a million dollars to support the group. The foundation drives much of the policy agenda in Texas. Its numerous policy papers — on everything from the environment to teacher pay to transportation issues — often become the philosophical underpinnings of the Republican legislative agenda.

The tort reform issue

But it is the tort reform issue that is among the closest to Leininger’s heart. Texans for Justice, together with other Texas tort reform PACS, has pumped $4 million into Bush’s two gubernatorial campaigns, according to data collected by Texans for Public Justice. Their support paid off. Tort reform was a major theme of Bush’s 1994 campaign. One of Bush’s first actions was to propose a tort reform bill to the legislature as an “emergency measure.” The bill capped punitive-damages awards at $200,000 and increased the bond that plaintiffs post from $2,000 to $5,000, effectively discouraging poor people from filing lawsuits. Also, limits were placed on who could sue, who could be sued and where lawsuits could be filed. The bill limited the right to sue a “professional, “ such as a doctor or a lawyer.

Only three years earlier, Bush was an active board member of Leininger’s Texas Public Policy Foundation. In 1992, he sent a letter on the group’s behalf to Texas businessmen, condemning the “runaway tort system” that awarded huge punitive damages. Later, in 1998, while Bush was governor, he invited Judson, the foundations director, for breakfast at the governors mansion, along with Grover Norquist, director of the influential and conservative Americans for Tax Reform.

Director thanks Bush

In a thank-you note that Judson wrote to Bush on November 19, 1998, he noted that he and Norquist were pleased “that we left the meeting with some good action items to work on. I have no doubt of our success in these areas, which will ultimately be attributed to your leadership. I look forward to many more opportunities to work toward common goals.” Three months later, Judson wrote, “We will be releasing the good news on your tax proposals next Wednesday, and look forward to many more opportunities to complement your good work in the coming months.”

Judson says that nothing became of the November meeting and that there wasn’t as much collaboration as the letters imply. “We have taken the opportunity to criticize Bush as much as we compliment. It cuts both ways,” Judson said.

But the relationship seems to cut more favorably than not. Besides supporting Leininger’s position on tort reform, Bush has embraced his proposals for private school vouchers. In 1999, Bush vigorously supported voucher legislation that would have allowed children from 80 public school systems in the state’s six largest metropolitan areas to opt out of the public schools with taxpayer-backed tuition credits. Despite the millions of dollars that Leininger and friends poured into lobbying for vouchers, the idea tanked in the state legislature.

Vigorous support for vouchers

Though his efforts ultimately lost, Leininger pulled out all the stops a year earlier to get it passed. In the 1998 election cycle, Leininger and his family personally distributed $4.5 million in voucher lobbying and campaign donations. His PACs appealed to out-of-state donors for money to help defeat state politicians who opposed the voucher plan. The Center obtained a letter written by the director of one of Leininger’s voucher groups, Putting Children First, to a major Republican donor, Betsy DeVos, chair of the Michigan Republican State Committee and wife of the president of Amway Corp.

The January 1998 request was for $125,000 to target key Democrats in the state legislature who opposed voucher legislation. Putting Children First is just one of many activist groups that Leininger created or funded in his multimillion-dollar voucher effort. His campaign donations helped some pro-voucher Republicans win seats on the state education board.

Many voucher movement supporters also want to break up the powerful education unions. Leininger donated $250,000 to help proponents of California’s 1998 Proposition 226, which would have required unions to gain permission of members before running political ads. Other big donors to Proposition 226 included other Republican school-voucher advocates, including J. Patrick Rooney, the chief executive officer of the Indiana-based Golden Rule Insurance Co., and Wal-Mart heir John Walton.

Leininger got the idea of getting involved in vouchers from Rooney. Leininger and Walton set up the Children’s Educational Opportunity Foundation in Bentonville, Ark., with $2 million in seed money from Walton and Leininger. The education foundation is headed by two former officials of Leininger’s Texas Public Policy Foundation, and has grown to include 41 affiliates. According to its Web site, the foundation boasts a $50 million budget and has helped 50,000 students “ receive a good education” through privately funded voucher programs.

Leininger also gives to the mysterious Republican donation clearinghouse, Triad Management. Triad, the subject of a Senate investigation on the 1996 campaigns, is a for-profit corporation that matches large Republican donors with nonprofit groups and candidates who want to air political issue ads while protecting the identity of the donor. In 1996, Triad was responsible for more than $3 million in television advertising. Leininger lists himself as an employee of this group in Federal Election Commission filings, and gave $50,000 to the group in 1996.

The Wild West of Texas campaign finance

Leininger is not really an anomaly in Texas politics, where money flows freely and without apology. There are no caps on state election fund raising, allowing donors to give as much as they want to state candidates. “Leininger is the Texas breed of businessman,” said Greg Talley, a public relations consultant with McDonald and Associates in Austin who worked with Leininger to establish a voucher PAC several years ago. “These guys are elusive. They make their money and then they dabble in politics, dropping big chunks of cash on their causes. You see Leininger’s name in a lot of different places because he is so wealthy and so Republican.”

Adds Andrew Wheat, research director at Texans for Public Justice: “Everyone knows Leininger is moving massive amounts of money. A lot of people go to him with their hat in their hands looking for money. He is a bottomless pit of campaign donations.”

Leininger has used his wealth to build close relations with a network of well-connected politicos who have benefited from his help. For instance, he has put Republican luminaries on the boards of his companies and think tanks. Wendy Gramm, wife of Sen. Phil Gramm, R-Texas, received $25,000 a year on the board of Kinetic Concepts and now chairs the Texas Public Policy Foundation. Texas Republican Party Chairwoman Susan Weddington earned more than $25,000 in 1999 as a consultant to a Leininger-financed PAC. In 1995, she listed her employer as the Texas Public Policy Foundation.

Texas Lieutentant Governor Rick Perry — Leininger’s “boy,” says McDonald — earned $38,000 by trading stocks in Leininger’s companies. Leininger paid for Perrys $475,000 campaign plane, and also signed a $1.1 million loan to Perry’s campaign in the 11th hour of his tight 1998 race. Also, Perry, who becomes governor if Bush is elected president, is the chair of Leininger’s Children’s Educational Opportunity Foundation voucher group.

John Cornyn, Texas attorney general, took in $1 million in contributions from Texans for Lawsuit Reform, a Leininger PAC, and $96,000 in personal donations from Leininger. Cornyn also was the director of another Leininger PAC, Texans For Justice, before being elected to his current post. In another tight race, Leininger made a last-minute loan of $900,000 to the 1998 campaign of Carol Keeton Rylander to ensure success for her state comptroller bid.

The fruits of Leininger’s investments

McDonald attributes most of the Texas Republican Party’s rejuvenation to Leininger’s efforts. In the mid-1970s, the GOP claimed only one senator and two members of the House of Representatives and no statewide officeholders. Today, both senators, 13 of 30 members of Congress, and all 29 statewide elected officials are Republicans. Most of them, such as Perry and Cornyn, were financed by Leininger and handled by political consultant Karl Rove, who is now Bush’s chief strategist.

Tracing Leininger’s holdings and donations is difficult because he uses many think tanks, nonprofits, PACs and businesses as tools for his political funding. Leininger is known for establishing a PAC for one election cycle and closing it down after the election. For instance, the Texas Home School Coalition and the Entertainment PAC, which attempted to raise money for one cause or another, closed down after one election cycle.

There is overlap between Leininger’s for-profit and political entities. Texans for Government Integrity, a Leininger political action committee created in 1992, raised $103,000 in the last two months of the 1994 election cycle – with the entire amount coming from Leininger. From those funds, the group spent $93,287 on a direct mailing prepared by Focus Direct, Leininger’s for-profit direct-mailing company. Many of Leininger’s think tanks and business interests share office space in a building Leininger owns; these businesses do pay market rent, we were told. When the Center contacted CEO America, a Leininger voucher movement foundation, the call was routed to Mission City Properties, Leininger’s real estate outfit. The person who took the call also is the spokesperson for some of Leininger’s think tanks.

In the last two years, Leininger has donated $170,000 to Republican state accounts or committees like the State Victory Fund Committee and the Texas Freedom Fund, accounts that are dispersed to needy state Republicans or possibly to the presidential campaign. “He always starts out slow and then kicks into gear closer to the election,” Sam Smoot, director of the Texas Freedom Network, a nonprofit group that tracks the religious right, said of Leininger’s campaign donations.

According to the Texas analysts who have watched Leininger’s political forays for years, he will support Bush through the back channels of his PACs and through his think tanks while keeping his name out of the mix. And Leininger’s influence is sure to be felt all the way to the White House, if his protégé wins.

Leininger’s business interests

James Leininger’s empire in Texas began with a bed manufacturing company and has expanded to include real estate, a sports team and food processing plants. Dr. Leininger, an emergency room physician, purchased Kinetic Concepts Inc., which makes high-tech beds for immobile patients, in the late 1970s. He nursed the company through near-bankruptcy and began turning a profit a few years later. From this beginning, Leininger amassed the wealth that places him as one of the 100 wealthiest Texans. He sold a share of the company to Richard Blum, husband of Senator Dianne Feinstein, D-Calif., in 1997 for $885 million.

A look at some of Leininger’s other interests: Leininger co-owns Mission City Food Co., parent company of Promised Land Dairy and other food processing groups such as Sunday House smoked turkey. Leininger gives his companies Christian gospel-based names and the dairy, which makes ice cream and sells milk in glass bottles, has biblical verses emblazoned on the packaging. Leininger and his managers decided to close a Fredericksburg, Texas, plant of Sunday House, the largest producer of smoked turkey in the world, after employees voted to unionize. The plant burned down days later; the Bureau of Alcohol, Tobacco and Firearms determined the July 1999 blaze was accidental.

Beginner’s Bible. Leininger holds the trademark license to the Beginner’s Bible for children, and coloring books.

Focus Direct. Leininger bought the San Antonio-based printer and mail service firm, which undertakes conservative political mailings, in 1989.

Winning Strategies. With Dallas businessman Bob Reese, Leininger co-owns the political consulting company, which has a client list that includes the Christian Coalition. A deal with the city of Canton, in northeastern Texas, provided for $200,000 in tax subsidies for placing the business in the city. The city managers said they thought the group more commercial than political. However, a review of records by the Dallas Observer last year indicated that all of the clients were Republicans who were right of center. As part of the deal, Reese appealed to the Canton Economic Development Board to buy him a 24,000-square-foot metal building and lease it back to Reese for free for a few years. He requested that the city make some necessary repairs and pay for his electric and water bills as well. The city bought the building and made some repairs, at a $375,000 cost to taxpayers. Canton even kicked in a $3,000 insurance policy for the building. All of this benefited a consulting firm whose political clients call for less government assistance.

San Antonio Spurs. Leininger holds about 10 percent interest in the San Antonio professional basketball team. Leininger also is part-owner of Home Court America, a San Antonio basketball and recreational center.

Mission City Properties. Leininger owns a real-estate outfit that buys, rents and sells properties. Currently, many of Leininger’s think tanks and political action committees are housed in properties owned by Mission City.

Texas Network and Mission City Television. The TXN network, owned by Leininger, was an ambitious venture begun in January 1999 that cost Leininger more than $10 million of his own money and was headquartered in a Leininger-owned building. The network began as a statewide news service, to air in 18 of Texas’ 19 media markets. In September 1999, the network expanded its influence to an Internet-based newswire service and a radio broadcast. Due to lack of advertising revenue, TXN’s last broadcast was July 28. A side company, Mission City Television, produces videotapes and commercials, among other television products

Leininger’s think tanks and foundations:

• Children’s Educational Opportunity America (CEO America)
• CEO San Antonio
• Kinetic Concepts Foundation
• Texas Civil Justice League
• Texas Justice Foundation
• Texas Public Policy Foundation

PACs: (either founded or primarily funded by Leininger.)

• A+ PAC for Parental School Choice
• Covenant Foundation
• Entertainment PAC
• JCL Foundation
• KCI PAC
• Pathway Society
• Putting Children First
• Texans for Governmental Integrity
• Texans For Judicial Integrity
• Texans for Justice – first PAC established in 1988. (Leininger provided virtually all the seed money)
• Texans for School Choice
• Texas Conservative Academic Network
• Texas Home School Coalition PAC