Holy handouts

How taxpayers -- including you, if you hit the flea market in Canton -- are subsidizing the Christian right

The use of sales tax money to bankroll sports stadiums and other private projects has always been contentious. In Arlington, voters approved a half-cent sales levy eight years ago for a new stadium so the Texas Rangers wouldn't pack up and leave. Critics argue it ended up shifting wealth from residents to owners, including Gov. George W. Bush, whose $600,000 investment turned into $15 million when the club was sold last year.

Then in Hidalgo, on the banks of the Rio Grande, town fathers used sales tax money a few years ago to build a 12-foot-tall fiberglass statue dubbed "The World's Largest Killer Bee." Lawmakers in Austin thought the big bug so frivolous that they ordered the state to start keeping track of how these local subsidies are spent.

Since 1979, Texas has allowed towns and cities to levy special sales taxes to fuel their visions of economic progress, and local officials have backed everything from successful "seed" businesses to quick-buck operators. But nobody in the memory of the state bureaucrats who monitor the subsidies has ever done what the East Texas town of Canton did with its new one-half-cent sales tax levy last January.

They gave it to the Christian right.
The company that town fathers decided to subsidize with more than $200,000 of sales tax money--plus complete abatement of property taxes for three years--is called Winning Strategies Inc. Although its officers claim it's a marketing company, it has demonstrated over the past year that its primary mission is to run political campaigns for Christian-right candidates across Texas--which is no wonder, given the company's ownership.

The man behind Winning Strategies needs a taxpayer handout about as much as Dallas sports team investor and media mogul Tom Hicks.

Although Winning Strategies' public face is Republican activist and former Dallas businessman Bob Reese, insurance documents and other records in Canton city files show that the company's financial underwriter is Dr. James Leininger. The publicity-shy San Antonio hospital bed magnate has contributed millions to conservative politicians and right-wing organizations opposed to legalized abortion, public schools, and consumer lawsuits. Some call him the most politically influential man in Texas today.

The Canton Economic Development Corporation inked a deal last year with Winning Strategies that city officials believed would move Canton beyond its century-old calling as host to a huge flea market--the First Monday Trade Days--and into a bold, high-tech future.

What they actually received is a marketing company that does a certain amount of printing and phone-sales work for commercial clients, but that spends a lot of its time--at least 40 percent--working for religious-right candidates and issues such as using public tax money for religious and other private schools, the so-called voucher program.

"Political organization? As far as I know, it's a marketing company," says Canton City Manager Johnny Mallory, who is also president of the city's Economic Development Corporation. "Maybe they do a little election work in the fall."

Do they ever.
One need not go further than the company's Web site--www.winning-strategies.com--to see that Winning Strategies' soul is purely political.

Below its eagle-and-stars logo, which looks sort of like the post office's, the site announces: "Winning Strategies is a full service company designed to provide critical services for candidates and public policy groups...Our team of professionals can develop a winning message, design and print top notch materials complete with personalization, develop practical computer software and hardware solutions, and complete a professional phone program for our clients all under one roof."

There is not a single mention of the company being involved in commercial phone sales.

By design, the candidates using Winning Strategies' state-of-the-art campaign techniques are exclusively conservative Republicans. Reese, the company president, calls them "our market segment."

The organization was potent enough to elect a Republican majority to the Van Zandt County Commissioners Court for the first time this century. It was busy too this past fall with dozens of local contests in nearby counties and legislative races across the state.

"People don't understand why the city government has gotten behind one party," says Richard Ray, a Democrat and former county judge. "It's a Republican think tank, a campaign machine...Before the election, there were 50 people up there, and they were working practically round the clock."

So when you motor up Interstate 20, exit 65 miles east of Dallas at the Canton flea market, and plunk down $20 for a pre-owned waffle iron, you're donating a dime to Canton's economic development effort.

It, in turn, is passing it on to Reese, Leininger, and the furthest fringe of the GOP.

Call it welfare for the right.
Considering the avowed political philosophies of the people on the receiving end of your 10 cents, it's at the very least a case study in hypocrisy and extreme cynicism.

Robert Allen Reese Jr., a born-again Christian deep into the politics of the right, is the main reason Winning Strategies exists in Canton.

"I'm the predominant force behind the Winning Strategies business concept," the 46-year-old Reese explained in an interview with the Dallas Observer. (Beyond an initial telephone interview, he declined further requests for comment.) "I wanted the business located in this area...It would be a benefit to the community as well as Canton...In our wonderful society of free-market opportunity, it's still legal to set up profit-making ventures in any business area as long as you stay within the guidelines of the law."

A decade ago, Reese moved his wife, the former Connie McGatlin, and children from suburban Frisco to a 160-acre farm located 10 miles south of Canton near the picturesque crossroads of Martin's Mill. He renamed it Genesis Ranch, saying later it was a better place than the morally suspect suburbs to raise his nine children, all of whom have been home-schooled.

Polished, well-spoken, and affable, he's known around town for carting his big family around in a bus--on Sundays to the Lakeside Baptist Church. More recently he formed his own church, which meets at his ranch.

A Richardson High School graduate who received a two-year degree in 1972 from Parks College of Engineering and Aviation at St. Louis University, Reese had worked for years for his father-in-law's Dallas-based industrial-meter company, McGatlin Industries. He took over the company in the early 1980s, renamed it Inotek Technologies, and sold it nine years later for $3.1 million.

Reese dabbled in several other companies in the early 1990s and came to the attention of state GOP stalwarts in 1994. When Tom Pauken became state party chairman--ushering the conservative wing into power--Reese "showed up to do the transition," recalls Steve Hollern, a former Tarrant County GOP chair. According to one person who was there when Pauken and Reese met, Reese introduced himself as an efficiency expert. Pauken took an immediate liking to him and brought him along to Austin.

Reese garnered wider attention as a first-time political candidate in 1996, when he took on state Sen. David Cain, an incumbent Democrat and a lawyer in Dallas, in District 2. The 10-county district runs from central Dallas to Tyler and north to the Oklahoma border.

He ran as a social conservative--against gay rights, against abortion--and a fiscal one too, opposed to such things as providing public education to the children of undocumented workers. Reese told The Dallas Morning News he was for less government, less taxation, and against--yes--taxpayer support for sports arenas. "When residents see sports-figure salaries they're gonna say, 'Why should I fund an arena?' Let free enterprise work," the paper quoted him saying.

The campaign against Cain was bruising and expensive. Cain recalls spending more than $800,000 and estimates his opponent's expenditures at more than $1 million: numbers more in line with a U.S. House race than one for the state legislature.

From the start, Reese's campaign was a rallying point for social conservatives--including the nonpartisan, Bedford-based Texas Christian Coalition--who opened their checkbooks for one of their own. No one gave more than Dr. James Leininger, who individually contributed $150,000, Texas Ethics Commission records show. Immediate Leininger family members kicked in another $50,000.

He also gave to Reese through PACs. For example, Leininger gave $140,000 to the A+ PAC for Parental Choice--a group with only a handful of contributors. The A+ PAC in turn gave Reese $20,000.

When it was all over, Cain rode a thin, four-point margin to victory. Reese, politically energized and champing at the bit for a rematch, had to find something else to do.

The key to his future, it turns out, was located in San Antonio.

Corporate records show that Leininger formed Winning Strategies Inc. in August 1996. His associate, Thomas Lyles, is its registered agent and current vice president. Its corporate address was--and still is--a suite in one of Leininger's San Antonio office buildings, where dozens of Leininger enterprises and conservative public-policy groups are headquartered. Leininger did not respond to several telephone messages requesting an interview.

Although it is unclear what Winning Strategies was doing in its first 16 months, its name shows up in campaign disclosure reports as a "campaign research" outfit that did work for candidates funded by Leininger's A+ PAC in the 1996 election year.

It is Leininger's money and willingness to put it to work politically that drive Winning Strategies' story.

A former physician at Brooke Army Medical Center, the 54-year-old Leininger in the late 1970s bought a struggling business that produced high-tech hospital beds. His beds can rock or vibrate and thereby keep blood flowing in coma patients and others with serious illnesses. At $40,000 apiece, they made Leininger a rich man. In 1992, Leininger's Kinetic Concepts Inc. landed him on that ultimate of entrepreneur status lists, the Forbes 400. Net worth: $285 million.

According to the San Antonio Current, an alternative weekly, Leininger (pronounced with a hard "g") owns 13 office buildings through his Mission City Properties; a television news service--TXN (not to be confused with TXCN, the Belo Corp.'s Texas news channel, which began airing January 1)--that plans to air in 16 Texas cities beginning this month; a direct-mail firm named Focus Direct with $50 million in annual revenues; and smaller endeavors as diverse as a children's Bible publisher, Sunday House smoked turkeys, and the Promised Land Dairy.

(The dairy sells milk in thick, old-fashioned glass bottles under the Promised Land label, complete with Bible verses on the sides. According to Chris Garner, Southwest regional administrator for the Whole Foods grocery chain, the Floresville-based Promised Land supplies Whole Foods' house-brand bottled milk in Texas and several other states. So when Whole Foods advertises its "happy Jersey cows in South Texas"--in its Austin-Berkeley-environmentally correct shtick--they're talking about Leininger's herd. One of his pet political aims, it turns out, is fighting the Endangered Species Act.)

He also owns 10 percent of the San Antonio Spurs professional basketball franchise--an investment that perhaps educated him in the kinds of taxpayer goodies available to people holding out the carrot of "economic development" or major-league status.

It appears Leininger first found his way to political activism via the tort-reform movement. It was certainly in his interest to throw up a few more barriers to patients who might sue claiming injury from his hospital beds, which lawsuits allege can malfunction from time to time. In a pending case in Santa Ana, California, for instance, a patient claims he was harmed by inhaling silicon beads that leaked from a Kinetic Concepts therapeutic bed.

In 1988, Leininger started a political action committee, Texans for Justice, whose generous contributions to judicial candidates helped turn the Texas Supreme Court from a plaintiffs' paradise to a panel filled with pro-business conservatives. Leininger has since created a family of conservative think tanks and PACs, including the Texas Justice Foundation, a legal organization that has opposed applying federal environmental protection to several South Texas salamander species.

According to the Current's account, he and his family have contributed more than $125,000 to the Heidi Group, which issued a San Antonio "prayer calendar" containing daily entries such as "Pray that Reproductive Services would close." One day's entry named an abortion doctor and asked people to pray that he "see Jesus face to face," a phrase some people construed as incitement to murder, given the prevalence of clinic shootings.

In perhaps his most well-publicized move, he funded the Children's Educational Opportunity Foundation, which last year offered parents in the Edgewood School District, near San Antonio, $50 million to take their kids out of public schools and send them to private ones.

Like Reese, Leininger home-schooled all his kids.
In the last four years, the Houston Chronicle estimated, Leininger has given more than $1.5 million to political candidates and $3.2 million to nonprofits opposed to abortion, in favor of using tax money to fund Christian home-schooling, and other right-leaning causes.

If ever a campaign tool were identified with a cause, it's direct mail and telephone marketing and the constellation of groups in the New Right--the Christian Coalition, the Eagle Forum, the American Family Association, to name a few of the largest. Use of computerized lists seems especially well-suited to mobilizing the New Right's core constituents.

Leininger turned his San Antonio-based marketing company, Focus Direct, to the cause when he helped finance the election of three ultra-conservatives--Donna Ballard of the Woodlands, Randy Stevenson of Tyler, and Richard Watson of Gorman--to the state education board in 1994.

Leininger funded the candidates through direct contributions and a PAC, Texans for Governmental Integrity. They in turn hired his company, Focus Direct, which attacked their more moderate opponents in a last-minute mailing. The incumbents were lambasted as promoters of how-to instruction on oral and anal sex in the classroom. One of Focus Direct's pamphlets featured an inter-racial gay couple kissing.

During this time, Bob Reese was getting interested in direct marketing too.
In 1994, when he was advising the GOP's Pauken, Reese pushed the party to buy more than $150,000 worth of computer equipment and software so it could do its own telemarketing, two insiders say. Pauken and a second source recall that Reese pushed to beef up the party's in-house telephone fundraising.

In the summer of 1997, Pauken stepped down from the GOP chair post and Susan Weddington, the vice-chair, stepped in. During her first weeks in office, Reese was in party headquarters, interviewing new staff for the Weddington regime. Within a few months, he managed to end up with the party's telemarketing computers and software, two former party officials say.

"He paid fair market value for them, but Weddington was shutting down operations, and the executive committee wasn't even informed," recalls John Tello, a Rockwall accountant who, at the time, was on the state GOP's executive committee. Reese was then awarded a piece of the party's fundraising contract, says Tello, who adds that he was questioned by several members of the GOP board who were concerned about Reese's dealings with the party and the secrecy surrounding these moves.

"Reese got mad at me and ran one of his employees, Jeff Fisher, against me and got my position," Tello recalls. "I got run over by a tank." Since last summer, the two GOP committee people in District 2 are Reese's wife, Connie, and Fisher, who quit his job as executive director of the Texas Christian Coalition a year ago and moved to Canton to go to work for Reese.

Interestingly, corporate records in Austin show that Weddington, the current state GOP chair, preceded Reese as president of Winning Strategies. (Neither, however, has ever been listed as a director of the company. Directors' posts are held by Leininger's people in San Antonio: Lyles and Charles Staffel, state records show.)

In that same time period, in the late summer of 1997, Reese got busy making Winning Strategies what it is today: a welfare queen in pinstriped drag, a sucker of Canton's public teat.

On September 18, 1997, Reese introduced himself and his wife to the board of the Canton Economic Development Corporation.

Just a year earlier, Canton voters had approved a half-cent sales tax increase to pay for the economic development corporation and promote, in the broadest sense, business growth in Canton. Its board of directors was empowered to pick which job-producing projects it would favor with the sales tax dollars, which amount to roughly $495,000 a year.

Reese arrived as the first in line for a handout once the Canton Economic Development Board got down to the business of selecting projects.

He told the board--consisting of the city manager, two local bank presidents, a retired schoolteacher, a probation officer, and a real estate broker--that he was negotiating to acquire some telephone marketing equipment and form a "marketing-oriented business."

The minutes of that meeting, and several subsequent sessions in the board's ultra-fast-track consideration of the request, never mention the words "politics" or "candidates" or "Republicans."

At the first meeting, Reese got right down to brass tacks. He wanted the city to buy a 24,000-square-foot metal building--a former sewing factory near the center of town--and lease it back to him free for "two or three years." He said the building would need some repairs to its dirt parking lot and air conditioners that the city should pay for, and he said he'd like the city to pick up his electric and water bills too. He generously offered to pay his own phone bill.

Only six days later, Bob Alexander, the Canton board's executive director, was in front of the board at its next meeting pitching Reese's plan. Reese spoke too, explaining to the board how he anticipated employing 35 to 70 people in the first year and generating sales of "$2.5 million" by the end of three years.

Reese also introduced Bill Simpson--who was then making a name for himself in Dallas by videotaping the license plates of patrons to topless bars and sending word home to their wives--as his "operations manager." He mentioned in passing that "Dr. James Leininger of San Antonio" would be "a principal in funding the business," the minutes say.

On September 29, a mere 11 days after Reese made his first pitch, the board voted unanimously to buy the building at a cost to the city board of $315,000, contribute $60,000 in repairs, and lease the whole deal to Winning Strategies rent-free for three years. The city's board even took out and paid for insurance on the building, at a cost of $3,000 a year, according to a copy of the policy.

After the deal was closed in late December 1997, Winning Strategies was required to obtain a commercial liability insurance policy, and that document as much as anything confirms who is behind the company. The policy is issued to Mission City Management Inc. and Winning Strategies. Leininger is president and owner of Mission City, corporate records show. Lyles and Staffel are officers and directors.

Alexander, who did Canton's speedy research on the project, talks of the company in ways that are either evasive or totally naive. He says he thought at the time that Leininger was a "dentist in San Antonio."

"Now that we have reporters calling saying he's so-and-so, I don't think it really matters," Alexander says. "It's a financially stable company...I really don't think it would be proper to inquire into what someone does with their political money."

Alexander says he has it on Reese's assurance that only 40 percent of Winning Strategies' business is political. "They are a company that has political clients. The Republicans and Democrats are political organizations. The Heritage Foundation and those, to me those are political. This is a for-profit company, and to the best of my knowledge they have non-political clients." He says he has been in the "phone center," the boiler room where employees--many part-timers--work the lines, and he's heard people pitching commercial products.

He concedes that he saw intense political activity before the November election. "Brochures were stacked up in the print shop," he says.

Irene Patterson, an 80-year-old Canton woman who works part-time as a phone solicitor at Winning Strategies, says much of her work is for a commercial client. She sells estate-planning seminars. But on several occasions, she's done "educational work," as she puts it, and polled people about their thoughts on public schools and home-schooling. "They're doing some of that now," she said last week.

In reality, suggesting that Winning Strategies isn't a political organization--dedicated to furthering a political party and a cause--is laughable. The company is intensely political.

Besides having Fisher, the former Christian Coalition leader, on its payroll, Wyatt Roberts, president of the American Family Association's Texas chapter, is working for the company as a consultant, several GOP sources say. Last year he led the fight at the State Board of Education to divest the $46 million in Disney stock held by the Permanent School Fund because of complaints about the company's morals.

Bill Simpson, the Dallas political gadfly, is Winning Strategies' Dallas representative, according to his business card. A call to his Dallas number last week was transferred to Canton, where a company official said all employees were informed that only Reese could discuss the company with the Observer.

Last year, sources in Canton and in the GOP say, Winning Strategies worked for 30 to 40 political candidates--mostly in local and state legislative races. It was in local races that the company's impact was greatest.

Van Zandt County's five-member commissioners court shifted for the first time this century to a Republican majority when candidates managed by Winning Strategies won three of four contested seats.

"We had a good candidate for county judge, retired out of the Air Force with name identification. It was real shocking how badly he lost," recalls James Foreman, a retired electrician and union business manager who chairs the Van Zandt County Democratic party.

The candidate, Cary Hilliard, says his campaign and that of his Republican opponent couldn't have been more different.

In this rural county of 39,000 residents, office-seekers have traditionally sold themselves one-on-one. In the words of one local pol, "You'd stay for dinner and even a TV show. We had a county clerk who'd milk the cow on the way to the door."

Hilliard campaigned door-to-door for five months, and in the last six weeks of the race spent about $6,000 for newspaper ads.

Meanwhile, Rick Lawrence, his Republican opponent, put his campaign completely in the hands of Winning Strategies, his campaign finance reports show. From July through September, for instance, he gave the company $4,900 for "Van Zandt County campaign data collection; a photo session; 500 yard signs; layout, design, and printing of political cards; "voter info data files"; and even helium for his campaign balloons.

The next month he spent another $4,000 with the company, including rental of its "phone bank office and phones." Volunteers--including a group of home-schoolers and their kids--manned Winning Strategies' phones, several locals say.

"This was the first time in the county's history that an extensive amount of polling was used," Hilliard says. "For my polls, I went down to the barber shop. People told me I was doing great."

According to several Democratic officeholders, Reese's phone operators called people who were uncommitted as many as eight or 10 times by the end of the campaign.

What troubles candidates like Hilliard is "who paid for all this? I certainly couldn't have done it on my budget. Did Mr. Leininger pay for it?"

Hilliard says he spent about $16,000 for the race, and it appears his opponent spent roughly the same amount.

Winning Strategies is surely troubling in the way its structure blurs the lines between campaign contributors and those who spend the money. Leininger's well-established habit is to contribute lavish amounts of money to political candidates of a certain stripe. Yet Winning Strategies appears in campaign finance reports as a recipient of campaign expenditures.

How much is the real value of the company's services? Are they being offered at a deep discount? When do discounted services become in-kind contributions? These specifics can only be learned by auditing Winning Strategies' books, and Reese would not as much as confirm which candidates he worked for, let alone talk about what he did for them and what it cost.

"We understand the law and obey the law. I know it's a quaint thought," Reese responds. "We are very aware of ethics commission guidelines and stay within those guidelines."

Beyond the lack of accountability, Democrats in Van Zandt County are chafed by the thought that a portion of the sales taxes they pay at, say, the Canton Wal-Mart Supercenter out on Highway 243 helped underwrite their opponents' campaigns--by way of the generous deal Reese got from the Canton board.

"It's affecting us and politicians all over the state," says Ozelle Wilcoxson, a justice of the peace in Wills Point, a little town east of Canton.

Richard Ray, the lawyer and former Democratic county judge, says the company fanned out from Canton and got involved in county judge and commissioners races elsewhere in East Texas.

"There's no way a little county organization can counter it--we didn't have the manpower," Ray says.

He says Winning Strategies' work force was mobilized behind candidates. "If you drove through the parking lot, you could see the political bumper stickers," Ray says. And the front lawn sprouted a patch of candidate signs.

From his quaint law office in a restored Victorian house near the county's Depression-era courthouse, Ray says he can't believe "we're taking money away from the poor here and giving it to these people, who don't need it. It's crazy."

His office sits just across a wide creek bed from Winning Strategies, and in between are some of the sheds and buildings of the flea market, which got its start in Canton in the 1850s when county officials auctioned stray livestock on the first Monday of the month.

"We had an old-style Democratic Party down here, very conservative," Ray says. "It's a very conservative county. This group is a totally different agenda, even for the Republicans here."

Ray, whose family has lived in Van Zandt County for "five generations on either side," says the Canton development board should have known Reese had political aims. "He's been political from the moment he got here," Ray says. "He's not being very coy about it. If [City Manager] Johnny Mallory couldn't see this is political, he's blind.

"At first I thought this was just a base for Bob," he adds, referring to Reese's expected second run for Cain's seat in the year 2000. "Then you see it mushroom into this thing that is much more far-reaching than a senatorial thing."

Indeed, many of the GOP candidates in statewide races, including Gov. Bush, visited Winning Strategies last year, local Democrats say.

Meanwhile, Reese says he's far exceeded his employment projections. "We have 141 full- and part-time employees," he says, adding that payroll has topped $1 million.

"I don't know who's paying for it, but Bob's building a hell of an operation out there," says John Tello, the conservative former GOP committee member who says he visited the tightly secured building in November. "He's talking about putting in a TV studio and a graphics computer to produce TV ads...He's already run out of room."

Tello, who received a tour of the operation from Reese, carries on about the huge print shop and up-to-the-minute databanks. Winning Strategies' employees fanned out over the state's 254 counties for fresh voter lists--and pumped them into the company's computers, Tello says.

"Most of the time, 20 percent of your mailing is returned because the consultant has old lists. Reese learned that when he ran. He's a perfectionist," he adds. "It's a wonderful resource for conservatives. It's state-of-the-art...If Reese runs against Cain again, he could wallpaper the district with signs. They're his presses."

Tello's enthusiasm was blunted considerably when he was informed that Canton sales tax money is underwriting the business. "You're kidding," he said. "Bob told me he bought the building himself. Incredible...I don't think that's gonna help Bob at all when people hear about it."

It's easy to spot a Winning Strategies political mail-out once you've seen a few of them. They're apt to include a fuzzy, unflattering photo of the opposition, references to "the record," and an abundance of hot-button issues and political raw meat.

Typical was a mailer that went out this fall for Dan Flynn, who took on incumbent Democratic state Rep. Bob Glaze in the 5th District, which includes Canton. In bold type it accuses Glaze of being for "special rights for homosexuals," against "private property rights," and for "abortion surgery on children without parental notification."

Flynn, whose involvement in a messy corporate bankruptcy came to light during the campaign, lost badly.

Besides Flynn, Winning Strategies worked in East Texas for a group of Republican hopefuls in statehouse races, and used many of the same tactics.

"There were people calling voters suggesting I was very much in favor of same-sex marriages, that kind of stuff," says Mark Homer, a hamburger-stand owner in Paris who beat the Winning Strategies-coached candidate, Sue Fancher. Homer won 57 percent of the vote and believes he lost at least five percentage points because the other side "sent out a piece of mail a day for the last 10 days." Some of those were party mailings. Some were Winning Strategies'.

Although Reese won't discuss wins and losses in races Winning Strategies worked, other GOP operatives and political observers say it fared poorly in state house races, despite the GOP sweep behind Bush.

"Mail and phone work is a highly effective way you can target people who vote. My quarrel with what they're doing is not what they are doing, but the message they're using," says one GOP consultant. His analysis reflects the broader schism in the Republican party between religious conservatives and more traditional Republicans who aren't as concerned about issues like abortion.

"Winning Strategies tells candidates they can deliver the religious right. But their message doesn't unite a broader range of people," the consultant says.

"It makes sense they would focus on rural races, because they're easier to manipulate and there's a better base when you move out from the center of Dallas. In Oak Lawn and East Dallas, the Christian Coalition has no following. Out to Mesquite and Garland, they get a little stronger. By the time you get out to Canton, they're everywhere."

Winning Strategies was active over the past year in Northeast Tarrant County, and helped bump off a moderate or two in the Republican primary, one professional campaign consultant says.

Back in District 2, Democrats have so far done little to challenge the subsidies that are fueling their new nemesis.

"Obviously, it's right in the middle of my district," says Cain, saying the Legislature may revisit its approach to local economic development this session. "I believe in economic development, but never did I contemplate that public money would be used for partisan political purposes."

Craig Pinkley, director of finance for the Texas Department of Economic Development and an expert in the tax program being used in Canton, says there is almost no state oversight of how localities use their sales tax money, and few restrictions. Nowhere are political activities even mentioned in the law empowering these so-called "4B" corporations, the Development Corporation Act of 1979.

Pinkley says local opposition is the only thing that prevents misuse of the monies. "That's all there is to make sure it doesn't become a good ol' boy system."

In Canton, Ray, the lawyer and former Democratic officeholder, says the three projects Canton's economic development board has backed--Winning Strategies, a metal-building manufacturing company, and a hardware store--suggest that a Christian-right good ol' boy system is in place in his city. "I know the people, and they're all in the same circles," he says.

There are complaints, but there's nothing in the works that stands to slow down Reese, who is well-liked in Canton, and his high-tech operation.

"Some people just have their head in the sand and sort of think this will pass," says Hilliard, the former Van Zandt County commissioner. "Nobody knew what they were doing. It wasn't in the local papers. You have to be pretty politically astute to see what they were building.

"We know now it's a powerful thing.

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