Officials Indicted

AUSTIN–Two sitting and one former member of the State Board of

Education face criminal indictments over allegations that they

violated the Texas open meetings law, the Travis County attorney

confirmed Friday.

If convicted of the misdemeanor charge, board members David

Bradley, R-Beaumont, and Joe Bernal, D-San Antonio, and former

member Robert Offutt, R-San Antonio, face up to six months in jail,

a $500 fine, or both.

As members of the state board’s finance committee, the trio

helped direct investment decisions involving the $17.4 billion

Permanent School Fund. The allegations stem from an Aug. 30, 2000,

meeting at an Austin restaurant with three of their advisers, who

also face misdemeanor charges.

County Attorney Ken Oden said his 18-month investigation

continues. He said a Travis County grand jury, which indicted the

six Thursday, may bring additional indictments.

“The grand jury will continue to hear the evidence,” he said.

“Basically, my goal is to bring more accountability to the

management of those billions of dollars of public money that [was]

entrusted to that committee.”

Bradley has alleged that Oden, an elected Democrat, is playing

politics with the indictments. Phone calls to the other board

members were not returned Friday.

“I am disappointed that, after cooperating and waiting for the

county attorney, that he is now — two years later — pursuing a

false misdemeanor charge,” Bradley said Friday. “I am confident

that when the facts are told again, that I will be cleared of any

misdeeds.”

The three advisers also facing indictments — Russell Stein,

Brian Borowski and Joe Alderete — could not be reached for comment

Friday. Stein was working then as a hired financial consultant to

the board. Borowski and former San Antonio City Councilman Alderete

acted as informal advisers.

According to the indictments, the three advisers and three board

members — then a quorum of the state board’s finance committee —

participated in an illegal closed meeting at a downtown Austin

restaurant.

The indictments parallel earlier allegations in a report by the

bipartisan House General Investigating Committee. According to the

report, several Texas Education Agency employees witnessed one

board member dining with a financial adviser, while the other two

board members dined with other advisers at a nearby table.

Board members appeared to be reviewing documents related to the

hiring of Permanent School Fund money managers, the employees said.

The full finance committee reviewed money manager applications

later that day, and the full 15-member board eventually awarded

contracts based in part on committee recomendations.

State Rep. Pete Gallego, chairman of the House investigating

committee, said legislation vetoed by Republican Gov. Rick Perry

would have created a state board investment advisory committee and

mandated other reforms.

“This [grand jury action] underscores that there are problems at

the State Board of Education with respect to their handling of

certain investments, and it underscores that it was a gross error

of judgment on [Perry’s] part to veto legislation that would have

made some changes,” said Gallego, D-Alpine.

A Perry spokesman said the legislation, Senate Bill 512, had no

bearing on the allegations. The spokesman said Perry vetoed the

bill because of concerns about separation of power.

“The governor believes that state agencies, including the State

Board of Education, should abide by the state open meetings law

and, he has encouraged the State Board of Education to adopt a

strong ethics policy,” spokesman Ray Sullivan said.

The board’s handling of the Permanent School Fund investments,

which finance textbook purchases, has come under intense scrutiny

by lawmakers, the state auditor’s office and others in recent

years.

Despite questions about their own oversight, Bradley and Offutt

have led separate reform efforts that they claim brought more —

not less — transparency to the board’s investment practices. They

also raised competing allegations regarding fund oversight by Texas

Education Agency employees.

Peggy Venable, director of the conservative Texas Citizens for a

Sound Economy, said board critics want to distract attention from

the efforts of board members to protect the fund during a state

budget crunch.

“These efforts are being engineered by several legislators who

have been eyeing the $17 billion fund as a potential revenue source

to pay for their overspending,” Venable said.