Rick Perry Faced Federal Scrutiny For Insider Trading, Criticism For Land Deals
WASHINGTON -- Since announcing his run for the presidency, Texas Governor Rick Perry (R) has had to fend off allegations of crony capitalism. Such critiques have revealed the governor's easy relationships with lobbyists, and his awarding campaign donors government contracts and influential positions on state boards. But Perry has also personally profited from these same relationships. His own deal making has helped him become a millionaire, and it has not gone unnoticed.
In the late '90s, federal law enforcement authorities investigated allegations that Perry had engaged in insider trading, sources involved in the inquiry tell The Huffington Post.
On Jan. 24, 1996, Perry purchased 2,800 shares of stock in a company, Kinetic Concepts, Inc., owned by a San Antonio businessman soon to be one of Perry's top donors, James Leininger. It was great timing. Later that day, a group of investors bought up 2.2 million shares in the company, sending the price soaring and netting Perry a nice gain.
On the day of the stock purchases, Perry had given a speech before a group founded by Leininger. Both Perry and Leininger later admitted talking on the day in question but denied discussing the stock. Perry would go on to sell his Kinetic Concepts stock -- a total of more than 8,000 shares -- a month later for a $38,000 profit.
It took at least two years for an Austin attorney to uncover the suspicious trade. The attorney, who would only discuss the matter on condition of anonymity because he continues to have dealings with the U.S. Attorney's Office, said he spoke with two sources who corroborated that Perry and Leininger had met on the day in question and that the donor had advised the politician on the stock purchase.
"Perry bought immediately," the attorney recalled. "I mean it was immediately. It was immediately after that that the transaction was announced and the stock went up considerably. My source was telling me that Leininger told [Perry] to go buy some stock."
"I was told that such a private conversation took place and in that private conversation, Leininger told him he needed to invest a little money," the attorney added.
The attorney took his findings to federal prosecutors. They met in an Austin ice cream parlor and he related what he knew.
James William Blagg, who was the U.S. Attorney for Texas' Western District at the time, confirmed there was an investigation into the Perry stock tip and that he deemed the allegation credible enough to pass to the FBI. "I received some information and supplied it to the FBI," he told HuffPost. "That's exactly what happened. That's what I recall happening."
An FBI spokesperson did not return multiple calls seeking comment.
The allegations may have had merit, Blagg recalled, but he questioned their provenance. They had come to him, he said, from strongly anti-Perry sources.
The Austin attorney contradicts Blagg's memory. He told HuffPost that one of his sources was getting information directly from the Perry camp. "The circumstances were so overwhelming that it made it very believable," the attorney explained. "I didn't doubt it. I certainly wouldn't be talking to the U.S. Attorney's Office if I thought it wasn't credible. I still believe it to this day."
The problem, Blagg recalled, was that the information he received did not contain a smoking gun -- an email exchange, a recorded conversation, anything that would have made the case airtight enough to indict a powerful Texas politician. Without documentation, insider-trading prosecutions become he said-she said affairs that are difficult to sell to a jury. Still, the tip merited enough interest to pass it up the chain. "I asked them [the FBI] to look into it," Blagg said, "but nothing came of it."
After the news broke of the stock deal in 1998, both Perry and Leininger denied any wrongdoing. Perry told the Dallas Morning News: "There was never any conversation with Dr. Jim Leininger about his stock. There was talk about family and public policy, but not about the stock."
Mark Miner, Perry's presidential campaign spokesman, responded to the allegations via email, telling HuffPost that the Securities and Exchange Commission had "reviewed the matter and dismissed it." He added that the U.S. Attorney's Office's involvement was news to him.
"I am not familiar with any other federal review," Miner wrote, "and there was never action on these false accusations."
The episode was the closest Perry has come to serious legal jeopardy in connection with his controversial financial dealings with political cronies and top-tier donors. But the stock's $38,000 payout was peanuts compared to Perry's real estate transactions.
Perry's business acumen wasn't immediately apparent. He did not excel at Texas A&M. He flew beefed-up cargo planes in the Air Force before returning to his father's farm in Haskell County. The hard work of farming did not interest Perry. "He never really had a job," said Jim Hightower, the former Texas agriculture commissioner who lost his job to Perry in 1990. "It's not like he's a businessman."
In the year that he took over as agriculture commissioner, Perry's net farm profits totaled $802.
"You've got a guy whose father went broke on a regular basis," explained Peck Young, director of Austin Community College's Center for Public Policy and Political Studies and a former political consultant. "Dry land farming -- it's a hard business to get rich on, easy to get broke on. The family was in financial straights. Then he got into politics."
Perhaps Perry's most lavish pre-politics purchase was half an interest in 60 acres on the outskirts of Haskell County. The investment cost him $30,000. Perry shared the acreage with another couple, Tim and Paula Everett, who knew his wife, Anita, well.
"We bought land so we could build a house on half of it and they could build a house on half of it," Paula Everett told HuffPost. "I grew up with them. I went to elementary school and high school and college with Anita. Her dad was our family doctor." Tim Everett said of Rick Perry: "He was like the rest of us here."
When Perry started out in the state legislature as a Democratic representative in the mid-'80s, his salary came to $7,200 a year. Anita Perry worked as a nurse. In 1985, the couple bought a house in Haskell for $95,000. Two years later, the Perrys had listed their total income at $45,000.
During one legislative session in Austin, Perry shared an apartment with three representatives. One roommate, former state Rep. Tom Uher, also a Democrat, recalled that Perry slept on the floor. Uher said he considered Perry to be nice but a "greenhorn."
Perry also liked to talk. "He was just a young, verbal guy," Uher explained. "He didn't show any wisdom or experience that he was one to listen to. To me, he never came across as having exceptional skills."
In the legislature, Perry and other like-minded fiscally conservative Democrats became known as "the pit bulls." The title stuck, but their impact was limited. "He was no factor," said Young. "I can tell you he was considered a non-player. He wasn't a power. He didn't have any say over legislation. The things he did touch were of no consequence to anybody."
As a government official with enormous hold on appointments and business interests across Texas, Perry created a one-man, public-private partnership where a key ex-staffer, along with donors and political allies, set up sweetheart deals. Pivotal appointments, government contracts and friendly legislation were soon to follow.
At the center of it all were land transactions.
A Perry friend and Austin businessman explained to HuffPost that there was nothing illegal going on. "It was friends giving him tips on something to buy," he said. "It wasn't like, 'Here we're going to set you up.' And the deals were too small to accomplish something like that."
Miner, Perry's campaign spokesman, doesn't see the deals as anything close to crony capitalism. "As to the real estate transactions, all were above-board, arms-length, market-based transactions and fully disclosed on the Governor's personal finance and tax forms," he wrote in an email.
But the Houston Chronicle reported that "almost everyone who steered Perry to his money-making deals has seen rewards. ... Six received key state government appointments or jobs. Two benefited from government actions that had the potential to enhance their real estate holdings."
Young, the Austin Community College center director, said this type of transactional politics is nothing new in Texas. "The ethos here in Texas is you get into office and you're stupid if you don't get rich," he explained. "[Perry] seemed to make an art form out of it. He managed to make it into a family business."