Two rival candidates have asked the city of Houston to block state Sen. John Whitmire from using $2.7 million in proceeds from stock sales to underwrite his campaign for mayor.
Already dominating in the fundraising race, Whitmire’s campaign unloaded thousands of stock shares over the summer, further boosting his finances ahead of the Nov. 7 election and a likely December runoff.
U.S. Rep. Sheila Jackson Lee and former Metro chair Gilbert Garcia said in a letter to the city Friday that those stock sales represent an end-run around the city’s campaign finance rules.
The two candidates paired up earlier this month in a letter alleging Whitmire’s transfer of millions of dollars from his state account to a local campaign account violated the law. In their latest letter, they asked City Attorney Arturo Michel to notify Whitmire he cannot use the proceeds from stocks purchased using state campaign funds.
“It’s yet another way to circumvent the city ordinances, to his advantage, and the amount is substantial,” Garcia said Friday.
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In their letter earlier this month, Jackson Lee and Garcia asked the city attorney’s office to investigate whether Whitmire violated Houston campaign finance rules by transferring donations that would have exceeded the city’s limits.
Whitmire has said he transferred money from his state to city account in compliance with the law, interpreting it as a cap on contributions from individual donors rather than capping the overall transfer. His leading contenders, however, argue there is no way for the public to know whether Whitmire was complying with the cap by setting aside money that exceeded donation limits. They called on Michel to launch an investigation.
Whitmire’s campaign finance reports do not break down how much of his reported $6.9 million in cash on hand is eligible for use in the mayor’s race.
“We keep track of that internally. We’re very aware of it. But still, the vast majority, almost all of it, is spendable,” campaign spokeswoman Sue Davis said.
On Friday, Garcia and Lee took exception to Whitmire’s use of stock sales to help fund his mayoral bid.
The pair said the stock sales represented an “investment gain” from the state campaign account rather than the type of “unexpended political contribution” that can be transferred to a local account under the city code.
“The investment proceeds which Mr. Whitmire intends to use are not permitted by the city of Houston ordinance because they are not ‘unexpended political contributions,’” the pair said in the latest letter.
Lee and Garcia urged Michel to intervene to stop Whitmire from spending the money on the race.
“The other 16 candidates, all of us are being harmed, because we can’t compete with the amount of money he’s spending on his campaign,” Garcia said. “At a minimum, there should be far better transparency and disclosure of this money.”
Davis said the letter was based on a misreading of the law. She said Whitmire’s campaign has never attempted to claim the stock sales are “unexpended political contributions,” language she said applies to candidates who are closing down their campaign accounts.
“There is nothing on the local or state level that prohibits the use of investment returns in a campaign,” she said. “If a campaign account generates revenue, there is no problem using those funds. These are not contributions.”
See here for the background, and here for my look at the 30-day finance reports for Mayoral candidates. A copy if the letter is included in this story. I believe the Whitmire campaign when they say they’ve tracked the money in question and that they believe they’re in the clear. They say their situation is the same as Mayor Turner’s was in 2015. Turner certainly had a lot of money raised under state law, and that was at a time when city candidates were barred from doing any fundraising outside of a set period, which has since been struck down. I don’t remember him selling a bunch of stock – I may go back to the finance reports of the time to check – and as we know the lawsuit filed to challenge what Turner was doing with his campaign cash never got to a hearing. So legally speaking, this is still an open question. I’m nowhere knowledgeable enough to hazard a guess about that.
What I will say is what I said in that previous entry, which is that I don’t understand why it took so long for anyone to make this complaint. Whitmire’s had a multi-million dollar finance account forever. He announced his candidacy in 2021, and everyone talked about how much money he’d have to spend on his campaign from day one. Why wait until he has already spent a crapton of money running a bazillion ads before trying to stop him from spending all that money? He’s already run the ads! If the city takes up this complaint (which won’t be tomorrow, if they do it at all) and if this can get before a judge and get a temporary restraining order (since Whitmire surely won’t just accept such an admonition from the city, which implies taking it to court, which also won’t be tomorrow, maybe not this week even if a complaint is filed quickly), that money has been spent and those ads have been run. How much relief would that be? And that assumes that you do get relief in the courts. If you don’t, if it turns out that the judges agree with the Whitmire position, wouldn’t it be better to be sure about that before now?
I guess I can understand some amount of waiting before complaining about this. You don’t want to complain about this as one of your first campaign actions – it will define your candidacy, not in a good way, and it might impinge on your ability to fundraise. You might also have some amount of confidence early on that you can raise enough to make it all not matter so much. I don’t know at what point Lee and Garcia should have figured out it was time to change strategy, and I don’t know at what point they did figure it out. I’m just saying it should have been before now.