Friday, April 15, 2011

The Imperial Speakership and The Sharpstown Scandal, Part I

In 2010, the University of Texas Press published "The House Will Come to Order: How the Texas Speaker Became A Power in State and National Politics," a book I co-wrote with Dr. Patrick L. Cox. In this passage, we describe how Texas House Speaker Gus Mutscher became what many members saw as a high-handed dictator and how the expanded power of the office encouraged corruption.

One day, the Democrats threw a party and a wake broke out. Prior to elaborate inaugural ceremonies on January 18, 1971, a Democratic Victory Dinner featured local Austin wit Richard “Cactus” Pryor and Las Vegas lounge act Wayne Newton. Six inaugural balls showcased country performers such as Faron Young, Ray Price and Buck Owens from the popular syndicated “Hee Haw” television show and Jennie C. Riley who had a recent hit with the song “Harper Valley PTA.” Even as hillbilly bands hooted and hollered, however, the first notes of a dirge sounded.

As Sam Kinch, Jr. and Ben Proctor write in their account of the Sharpstown scandal, "Under a Cloud: Story of the Texas Stock Fraud Scandal," while Lt. Governor Ben Barnes strolled to his seat at the Victory Dinner, his administrative assistant Robert Spellings passed on the rumor that just re-elected Governor Preston Smith and House Speaker Gus Mutscher would be indicted the next day by a Houston grand jury investigating two bills pertaining to Frank Sharp, owner of the Sharpstown Bank and the National Bankers Life Insurance Company. Upon hearing the news, Barnes said later, “I had a hard time concentrating . . . on dinner and the festivities because I knew I was going to be a candidate for higher office in 1972.”

As news spread of an emerging political scandal spread the following day at the January 19 inauguration ceremonies, the mood of the crowd grew “smolderingly angry and hostile.” At the intersection of 6th Street and Congress Avenue, a “shouting, cursing, and threatening” crowd disrupted the inaugural parade by spitting and throwing fruits and bottles at the Texas A&M marching band and other performers.

In 1971-72, federal accusations and then a series of state charges were leveled against nearly two dozen active and former state officials. Texas voters witnessed an unprecedented turnover in political offices from the political fallout that became known simply as “Sharpstown.” Preston Smith, labeled an unindicted coconspirator in a bribery case, would lose his bid for reelection. Gus Mutscher, the incumbent speaker of the House of Representatives and two associates were indicted and convicted. And Ben Barnes, the lieutenant governor whom many saw as a possible successor to Lyndon Johnson in the White House, lost his gubernatorial bid. Half of the members of the Texas Legislature chose not to run or were voted out of office. Meanwhile, using the scandal as a springboard, liberal Democrats and outsider Republicans formed a common front advocating reform and gained a stronger foothold in the Legislature.

The scandal centered, initially, on charges that state officials had made highly profitable stock purchases financed by Houston businessman Frank Sharp in return for passing legislation benefiting Sharp and his bank. 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 speaker and state Attorney General Waggoner Carr, former state insurance commissioner John Osorio, Frank Sharp, and a number of other defendants.

Even more explosive, the court papers filed by the lawyers for the SEC alleged that Gov. Smith, state Democratic chairman and state banking board member Elmer Baum, House Speaker Gus Mutscher, Jr., Rep. Tommy Shannon of Fort Worth, Rush McGinty (an aide to Mutscher) and other major political figures not included in the SEC's suit had been bribed. The SEC argued that Sharp conspired to pay off lawmakers to pass a bill allowing Sharp’s bank to be insured by a state-chartered corporation rather than the more inquisitive, stricter Federal Deposit Insurance Corporation.

Sharp, the SEC said, made loans in excess of $600,000 from the Sharpstown State Bank to state officials. Those officials, in turn, used the money to buy National Bankers Life stock which would later be flipped at huge profits after Sharp artificially inflated the value of his company's stock. Gov. Smith, the SEC alleged, arranged to have Sharp's bank bills considered at a special legislative session in September 1969, with Mutscher and Shannon rushing the bills through the Legislature.

Smith later vetoed the bills after receiving advice from the state's top bank lawyers, but waited until he and Baum had cashed in on the bank loan-stock purchase deal. Authorities later estimated Mutscher made $105,000 in the initial stock purchase, which he promptly lost when he sold his stock too late and the Sharpstown bank went belly up. Gov. Smith and Democratic Chair Dr. Baum, an osteopath, were believed to have made $62,500 a piece. Bill Heatly of Paducah, the House Appropriations Committee chair, made almost $49,000, McGinty made about $45,000 and Shannon cashed in with close to $37,000.

Because of their high political profile, Barnes and Mutscher became the unwitting stars of the ensuing political drama. Born in 1932, Mutscher grew up in the tiny German community of William Penn in Washington County as “a farm boy in what could only be described as poverty-stricken circumstances,” authors Kinch and Procter note. Throughout his youth, Mutscher worked a variety of part-time jobs, driving a Coca-Cola truck, serving as an electrician’s helper and a J.C. Penney sales clerk, but he came into his own when he attended Blinn Junior College on a baseball scholarship. A star third baseman who would spend some time as a semi-professional, Mutscher won election as class president and class favorite before transferring to the University of Texas, where he received a degree in personnel management.

Mutscher landed a position as a field representative in the sales and marketing department at Borden’s Dairy. Working in Houston, he quickly acquired a reputation as a tireless and successful salesman. In 1959, the Harris County Chamber of Commerce and the Houston Merchants Association named him the outstanding young businessman of the year.

Mutscher ran for the state House in 1960 almost by impulse, defeating incumbent Sanford Schmidt of Shelby in an upset. Mutscher supported Jimmy Turman in his speakership race against Wade Spillman. Mutscher said he got some heat from that in conservative Washington County, since Turman was seen as a liberal, but he was rewarded for picking the winner and for his subsequent loyalty to later speakers Byron Tunnell and Ben Barnes. Mutscher won appointment as vice chair of the Appropriations Committee, and chair of both the Committee on Claims and Accounts and the Legislative Redistricting Committee, and served on the Legislative Budget Board and the Texas Legislative Council. Not known as a flamboyant or headline-seeking legislator, Mutscher rose, like his 19th-century predecessors, through sticking by the leadership team and performing the hard work on key committees.

In the mid-1960s, the United States Supreme Court ruled that its one-man, one-vote rule applied to state legislatures and that Texas had unconstitutionally drawn election districts to the disadvantage of African Americans. In 1965, Mutscher earned general praise for his evenhandedness on the always controversial House Redistricting Committee, an assignment that usually turns into political quicksand but won the Brenham representative good will with many members. If he was fair to most members, however, he didn’t shy away from using the chair to play hardball politics.

Anticipating that Ben Barnes would move up to lieutenant governor the next session, Mutscher drew new political boundaries to eliminate his chief rival for the speakership. The district of Gene Fondren of Taylor, in the words of a newspaper, had been “Mutscherized,” that is combined in a “floatorial” district with Bell County, which had a population four times Fondren’s home county of Williamson. Fondren wound up campaigning for re-election in a district that would force three incumbents to run for two seats. Fighting for his political life, Fondren dropped out of the speaker race.

Mutscher won the speakership in 1969 without opposition and the office grew as a power center. “Mutscher had converted the $400-a-month speakership into a full-time, year-round job and the House staff into a large and politically effective unit,” Kinch and Procter write. “By December 1971, when the House was not in session and, with few exceptions, not even functioning as a legislative body, Mutscher had 103 employees on the payroll. The total cost to the taxpayer for this operation was nearly four times as much as it had been seven years earlier before Barnes became speaker.”

During his speakership, the Legislature passed a minimum wage law, increased support for higher education and added to appropriations for mental health. The Texas Legislature also lowered the voting age to eighteen. One regressive scheme proposed by Barnes and Mutscher, taxing groceries, fizzled due to a widespread “housewives’” revolt.”

Aside from that controversy, Mutscher confronted heated opposition for his support of liberalized liquor laws. Although Prohibition ended in 1933, a complex web of state laws covering the sale and distribution of alcohol maintained a de facto prohibition in many parts of Texas. A non-bonding 1969 referendum indicated widespread support for repealing the state Constitution’s ban on open saloons which would in effect allow restaurants and bars to sell mixed drinks, otherwise known as “liquor by the drink.” This shift in attitudes stemmed from the increased urbanization of Texas culture and the decline in Baptist dominance in state politics.

In 1969 at Mutscher’s urging, the Legislature submitted to the voters a constitutional amendment legalizing the sale of mixed drinks. The measure won narrow approval in November 1970 due to heavy support in cities. The constitutional bar lifted, Mutscher persuaded the Legislature to authorize the sale of alcohol in restaurants in 1971. Local option elections in May of that year resulted in the public sale of mixed drinks in Texas for the first time since 1919. Getting the two-thirds vote in the House to submit a “wet” amendment to the voters proved difficult, however, because of the heavy representation of pro-dry rural districts in the House, according to Mutscher.

[W]hen we took the vote, we had to have 100 votes and I looked down at the board and it was an even 100 and . . . I said, “The gavel is coming down aye.” [Then I said] . . . “Get the sergeant[at-arms] here to lock the doors” . . . because I know from experience that a verification [of the vote] would have never stood up if you [didn’t] . . . I’m not being critical of my colleagues but some of them [are] going to have a sick mother or a sick child or [some other excuse to not vote again] . . . And I sure didn’t want to go through that fight a second time . . .

Some saw Mutscher’s approach to alcohol legislation as evidence of the influence of special interests over the speaker and his heavy-handed method of leadership. Mutscher’s position on conference committees deepened some members’ resentments. Under old House rules, House conference committees (empanelled to meet with Senate negotiators to resolve differences between the House and Senate versions of pending legislation) substantially rewrote laws. Rank-and-file House members could then only vote the entire, often substantially altered, conference bills up or down. In 1967, Speaker Barnes initiated new rules ending House negotiators’ ability to rewrite laws beyond provisions conflicting with the Senate version of bills. As lieutenant governor, Barnes instituted a similar rule limiting the power of Senate conference committees.

Mutscher, however, insisted on giving conferees a free hand in rewriting legislation. Bills written by conference committees often came up for a vote at the end of a session, giving members little time to read or debate proposed changes. This process greatly strengthened the ability of Mutscher-picked House conferees to change legislation with no possibility of dissent and, critics charged, to load up legislation with favors to political contributors. This was the case with the 1969 tax bill, according to former Rep. Bill Bass of Ben Wheeler in Van Zandt County. In a 2004 interview, Bass recalled that the tax bill that year gave expensive breaks to telephone vendors who had supported the speaker in past campaigns. As Bass recalls:

'. . . [T]he conference committee could rewrite the whole bill . . . [T]he favored creatures . . . who were on the conference committee were doing what the lieutenant governor and the speaker decided.

. . . They went off and rewrote the tax bill, tax breaks for telephone companies, whoever was favored . . . And when the bill came back from conference, we would vote on it in hours, two or three at the most, maybe 45 minutes, but I remember that in 1971 we moved to postpone consideration for 24 hours . . .

. . . And sure enough, when the voting board was lighting up, it looked like it might get postponed. Here came Jumbo Atwell, the chairman of the tax committee in that era, steaming towards us, fire in his eye. He was also a member of the Dallas delegation, elected at large. He had been drinking of course. Zan Holmes, one of the two black members, also from Dallas, said, 'Jumbo, we just wanted a chance to read the bill.' Jumbo replied, 'You goddamn nigger, you don’t need to read the goddamn bill.' [Laughs.] It’s sad, but that attitude wasn’t entirely gone. Zan just smiled and shrugged his shoulders, but he persisted in his vote and we postponed for 24 hours."


Michael Phillips has authored the following:

White Metropolis: Race, Ethnicity and Religion in Dallas, Texas, 1841-2001 (Austin:  University of Texas Press, 2006)

(with Patrick L. Cox) The House Will Come to Order: How the Texas Speaker Became a Power in State and National Politics. (Austin: University of Texas Press, 2010)

“Why Is Big Tex Still a White Cowboy? Race, Gender, and the ‘Other Texans’” in Walter Buenger and Arnoldo de LeĆ³n, eds., Beyond Texas Through Time: Breaking Away From Past Interpretations (College Station: Texas A&M Press, 2011)

“The Current is Stronger’: Images of Racial Oppression and Resistance in North Texas Black Art During the 1920s and 1930s ”  in Bruce A. Glasrud and Cary D. Wintz, eds., The Harlem Renaissance in the West: The New Negroes’ Western Experience (New York: Routledge, Taylor and Francis Group, 2011)

“Dallas, 1989-2011,” in Richardson Dilworth, ed. Cities in American Political History (Washington, D.C.: CQ Press, 2011)

(With John Anthony Moretta, Keith J. Volonto, Austin Allen, Doug Cantrell and Norwood Andrews), Keith J. Volonto and Michael Phillips. eds., The American Challenge: A New History of the United States, Volume I.   (Wheaton, Il.: Abigail Press, 2012).

(With John Anthony Moretta and Keith J. Volanto), Keith J. Volonto and Michael Phillips, eds., The American Challenge: A New History of the United States, Volume II. (Wheaton, Il.: Abigail Press, 2012).

(With John Anthony Moretta and Carl J. Luna), Imperial Presidents: The Rise of Executive Power from Roosevelt to Obama  (Wheaton, Il.: Abigail Press, 2013). 

“Texan by Color: The Racialization of the Lone Star State,” in David Cullen and Kyle Wilkison, eds., The Radical Origins of the Texas Right (College Station: University of Texas Press, 2013).

He is currently collaborating, with longtime journalist Betsy Friauf, on a history of African American culture, politics and black intellectuals in the Lone Star State called God Carved in Night: Black Intellectuals in Texas and the World They Made.

No comments: