The Front

Justice Delay-ed

Three associates of U.S. House of Representatives Majority Leader Tom DeLay, R-Texas, and eight corporations including Sears Roebuck & Company and Cracker Barrel Old Country Store were indicted in September on charges of illegally funneling corporate money into Texas House of Representatives races.

The developments in Texas were followed by the U.S. House of Representatives in October issuing a rare admonishment to DeLay, in connection with multiple incidents of misconduct.

Pointing to the growing number of scandals surrounding the powerful House leader, DeLay’s opponents called on him to step down at least from his leadership position.

DeLay, known as “The Hammer,” showed no sign of doing so.

September Indictments

In the September criminal case, 32 indictments were handed down by a Travis County grand jury that for more than a year had been investigating Texans for a Republican Majority Political Action Committee (TRMPAC), which was created by DeLay to secure control of the Texas House of Representatives and gerrymander the state to ensure a Republican majority in the Texas congressional delegation [see “DeLay, Inc. on the Brink,” Multinational Monitor, April 2004].

TRMPAC spent more than $1.5 million, much of it raised from corporate sources. It is illegal for corporations to spend money to directly influence elections, but under Texas state law they can give money to defray the administrative costs of PACs.

DeLay dismissed the charges as politically motivated.

The state charged that TRMPAC gave $190,000 in soft money to a committee controlled by the Republican National Committee, which then funneled the money back as hard money to six state House races in Texas.

James Ellis, a top DeLay aide and one of the committee’s officers, was charged with money laundering. An indictment alleges that it was Ellis who presented a check and a list stating where the money should be redirected to the Republican National Committee.

The committee’s executive director, John Colyandro, was charged with illegally accepting corporate contributions.

The PAC’s fundraiser, Warren Robold, was charged in nine indictments with soliciting and receiving illegal corporate contributions.

The grand jury indicted eight companies, accusing them of making illegal contributions to the committee, ranging from $25,000 to $100,000. They are: Sears, Bacardi USA, Westar Energy, Cracker Barrel Old Country Store, Williams Companies, the Questerra Corporation, Diversified Collection Services and Alliance for Quality Nursing Home Care.

Leaders of three Texas campaign reform groups called on Texas House Speaker Tom Craddick to relinquish his leadership post.

The groups also urged the Travis County District Attorney to aggressively prosecute the alleged lawbreakers and pursue the many other allegations of illegal activity in the 2002 Texas legislative elections.

“The dark cloud over Tom Craddick’s speakership just got darker,” says Craig McDonald, director of Texans for Public Justice. “These indictments are likely just the tip of the iceberg. The lawlessness in the 2002 elections, which resulted in Tom Craddick’s election as Speaker and Tom DeLay’s gerrymandering, appears to have been widespread and coordinated among several politicians and PACs. In light of the criminal indictments, Tom Craddick, who was near the center of TRMPAC’s operations, should step down as speaker until the legal system gets to the bottom of what happened in 2002.”

October Surprise

Soon after the Texas indictments were handed down, the U.S. House of Representatives Ethics Committee admonished DeLay for misconduct in connection with two incidents related to the TRMPAC scandal.

The committee criticized DeLay for holding a golf resort fundraiser in June 2002, just as a House-Senate conference committee was starting efforts to work out details of a far-reaching energy bill.

Stated the committee in its letter of admonishment: “One of the communications between organizers of the fundraiser that you provided to us — an e-mail of May 30, 2002 from Mr. Maloney to Mr. Perkins that notes the legislative interests of each of the attendees — includes a specific reference to the conference. That legislation was of critical importance to the attendees.” The letter notes that DeLay was in position to influence the outcome of the conference, in part by determining which members would participate on the committee.

The committee also admonished DeLay for asking the Federal Aviation Administration to help track down Texas House Democrats, who refused to participate in a state legislative session in an attempt to deny a quorum needed to change Congressional districting.

Separately, in September, the ethics committee had criticized DeLay for having offered to Nick Smith, an outgoing Member of Congress, that he would endorse Smith’s son for the seat in exchange for Smith voting with the Republican majority on the close and controversial Medicare bill.

DeLay claimed to find redemption in the House Ethics Committee’s actions. “While the allegations were dismissed, I accept the Committee’s guidance,” he said. DeLay’s reference to dismissal relates to the decision of the committee not to conduct a formal investigation that could have led to harsher penalties.

“The Committee was forced to complete its work in a highly divisive atmosphere fostered by politically motivated individuals and entities who have attempted to tamper with and influence the congressional ethics process for partisan gain. For years, Democrats have hurled relentless personal attacks at me, hoping to tie my h ands and smear my name. All have fallen short, not because of insufficient venom, but because of insufficient merit.”

But opponents inside and outside of government said the swirl of corruption surrounding DeLay should lead to his removal.

“The ethical cloud that has been hanging over the Capitol has burst,” says House Minority Leader Nancy Pelosi, D-California.

“This is a pattern of unethical behavior by a man determined to win at any cost. The record has demonstrated that he will abuse power whenever he deems necessary.”

“Mr. DeLay has proven himself to be ethically unfit to lead his party,” says Pelosi, calling on Republicans to remove DeLay from his leadership position.

“The ethics committee report lays out a sordid story of money for access,” says Tom Fitton, president of Judicial Watch, a conservative group that focuses on government corruption.

“Mr. Delay has repeatedly abused the public trust, and this extraordinary ethics committee rebuke raises the question as to whether he should remain in Congress. Judicial Watch has already called on Mr. Delay to step down as Majority Leader. He ought to consider retiring to private life.”

Public Citizen noted that it has filed complaints not only with the Ethics Committee but with the Department of Justice regarding the energy lobby meeting, and particularly DeLay’s dealings with Westar Energy. The Department of Justice complaint is still pending.

In the complaints, Public Citizen pointed to internal e-mails among Westar executives suggesting that DeLay and other House Republicans wanted a series of campaign contributions from the executives and the company itself so they could win “a seat at the table” to secure legislation that Westar favored. Central to this scheme was having Westar contribute in 2002 $25,000 to TRMPAC.

“Congress and the Republican Party should end the taint of corruption that comes with having Tom DeLay as their leader,” said Public Citizen in a statement after the House admonishment was issued, “and Mr. DeLay should recognize the damage he has wrought to the institution and immediately resign his leadership post. If he does not respect the integrity of the House to step down on his own, his colleagues should force him to do so.”

Flu Profiteers

Panic struck across the United States in the wake of the October announcement that the Emeryville, California-based Chiron Corporation would not be able to deliver its promised supply of flu vaccine.

Seniors and others stood in long lines in an attempt to get access to the vaccine.

With one of only two vaccine makers not able to supply their product on the U.S. market, opportunistic vaccine distributors (not Aventis, the other flu vaccine maker for the U.S. market) moved to capitalize on the crisis by charging wildly inflated prices.

A number of states responded by filing lawsuits against purported price gougers, and U.S. Secretary of Health and Human Services (HHS) Tommy Thompson joined the fray, denouncing vaccine profiteers and encouraging the state lawsuits.

The price-gouging phenomena appears to be widespread. More than 55 percent of hospital pharmacy directors reported in an October survey by the American Society of Health-System Pharmacists (ASHP) that they had been contacted by opportunistic vendors offering to sell flu vaccine at highly inflated prices. More than 80 percent of the hospital pharmacy directors reported being offered the vaccine at more than four times the original market value, and nearly 20 percent have been offered the vaccine at $800 or more per 10-dose vial (more than 10 times the original market value of $63 to $85 per vial).

“The information we’ve uncovered — namely, that certain distributors are attempting to take financial advantage of the current national shortage of flu vaccine — is extremely troubling,” says ASHP President Mark Woods.

As the horror stories of price gouging hit the media, Florida Attorney General Charlie Crist announced the filing of a lawsuit against Fort Lauderdale-based ASAP Meds, doing business as Meds-Stat, for violations of Florida’s consumer protection law. Kansas and Texas filed similar suits.

According to Crist’s office, following the announcement of the vaccine shortage, Meds-Stat sold vials of flu vaccines to a Kansas City pharmacy at a rate of $900 per vial.

“This behavior is totally unacceptable raw exploitation,” said Crist in announcing the filing of the lawsuit. “While millions of Americans will be forced to do without vaccines this year, some businesses are attempting to take advantage of children, the elderly and the frail by unfair and unconscionable business acts. Preying on the fears of the consuming public is not a description of good corporate citizens.”

According to the Florida complaint, Meds-Stat had engaged in pricing abuse relating to other drugs in short supply.

“Defendant would seek information relating to shortages of various essential pharmaceuticals and attempt to buy up as much of the product as possible,” the state’s complaint alleged. “Salespersons, on a continuing basis, would be provided with inventory sheets naming specific pharmaceuticals that could be sold and a minimum price at which the sale could take place. Salespersons were then instructed to charge as much for the particular drug as possible, with bonuses being provided to those who had made the most profit. There was, therefore, no set and specific markup on pharmaceuticals being sold by the defendants.”

The state alleged that in cases of drug shortages, Meds-Stat sought to buy up and hoard the product, not releasing it until “they could sell the drug for the maximum profit. To this nd, certain drugs were not listed for sale, even though these pharmaceuticals were, in fact, in the defendants’ inventory. Consumers seeking to purchase the drug would falsely be informed that the company did not have said pharmaceuticals in stock.”

Meds-Stat leveraged its selling power by calling potential buyers, such as hospitals or pharmacies, and asking to speak to someone other than their potential buyer, the state claimed. The idea, according to Florida’s allegations, was to find a representative who did not know the average market price of the drug in question.

HHS Secretary Tommy Thompson lent strong support to the suit in Florida and other state suits.

“Price gouging is simply an abuse of our nation’s most vulnerable citizens who need the flu vaccine the most,” Thompson said.

HHS filed a brief in support of the Florida claim. In the brief, the agency asserted that not only would consumers paying extra for vaccines be hurt, but that price gouging would divert products from those who needed it most. “Because of the fixed reimbursement rate from Medicare and the exorbitant rates charged by price gougers, substantially fewer Medicare beneficiaries in at-risk populations are likely to be vaccinated.” The consequences could be dire: the Centers for Disease Control estimates 36,000 people in the United States die from influenza-related deaths per year; “these numbers could increase if at-risk populations are not vaccinated because of the lack of vaccine availability through established sources and distribution channels,” the HHS brief contended.

For its part, Meds-Stat said the lawsuit was the result of a misunderstanding.

Meds-Stat was only able to sell vials of vaccine that the company itself had to pay exorbitant amounts for, said company CEO A.E. Raney in an open letter. “Regrettably, the attorney general filed a lawsuit against us without first checking the facts and erroneously accused us of acquiring the Fluzone [vaccine] at prices ranging from $85-$90; when it fact it cost us as much as $610.00 per vial. We wish the attorney general would have contacted us first to obtain the true facts and avoid this lawsuit, and other claims it has unfortunately caused.”

With legal pressure mounting, Meds-Stat quickly moved to resolve the case, though it “continues to assert it did nothing wrong and that the allegations in the attorney general’s complaint are wholly without merit,” according to Raney.

Under the terms of an agreement reached with Florida, Meds-Stat agreed to turn over its inventory of flu vaccines to the State of Florida and to cease buying or selling flu vaccines. According to Crist’s office, the agreement does not affect the ongoing lawsuit that alleges unconscionable pricing of vaccines.

— Robert Weissman