Former State Board of Education member Rene Nunez encouraged four current board members to extend the contract with the company managing the state's $25 billion Permanent School Fund, according to a voicemail message obtained by The Texas Tribune — despite a state law that prohibits former members from trying to influence official action for two years after they leave office.
Republican Charlie Garza of El Paso defeated Nunez, a Democrat who served 22 years on SBOE, in November. Five months later, just before the board’s close April 15 decision to renew the $560,000 contract without taking new bids, Nunez placed calls to his former colleagues asking them to consider the cost of going through a new proposal process. State law prohibits former board members from lobbying current members on any official action on behalf of "any person in connection with any matter" before the board if the former member has been out of office for less than two years.
The issue is whether his phone call constituted lobbying as defined by the law. In an interview with the Tribune, Nunez insisted he did nothing wrong. "How can I be violating anything? I'm a former board member. I'm just giving them my opinion," he said.
The night before the vote, first-term board member Michael Soto, D-San Antonio, received a voicemail message from Nunez telling him how expensive an "RFP" — a request for proposal — from other potential investment consultants would be and suggesting that it would be cheaper to renew the contract with NEPC, a Cambridge, Mass.-based investment consulting firm, without shopping for other offers. (Listen to the message here.)
On the message, which the Tribune obtained through an open records request, Nunez said NEPC is "doing a good job." He continued:
"It's going to be a crazy vote … but I think that you and [Democratic members Lawrence] Allen [of Fresno] and [Mary Helen] Berlanga [of Corpus Christi] should consider the cost that's involved in doing an RFP. The economy is moving along well, and there's a lot of unknowns that are coming up and I don't believe the cost is worth doing an RFP for a new consultant."
Nunez told the Tribune he was not on NEPC's payroll and had not been in contact with the company before his phone call or the vote. (NEPC did not return a phone call seeking comment). But under the relevant statute, whether a former member is receiving compensation does not matter, said veteran Austin ethics lawyer Ed Shack.
"[The statute] is intended to be very broad," he said. "This is a very hard two-year period."
Strictly read, there is nothing in the statute that indicates compensation is required for the lobbying ban to apply, said Jack Gullahorn, who is general counsel of the Professional Advocacy Association of Texas, a lobbyist trade association — especially when the section covering Nunez's activities is compared with the one below it, which prohibits outright former members from receiving payment in exchange for lobbying current members at any point after they serve. In Gullahorn's view, the Legislature chose to put words in the second section requiring compensation and left them out of the first, "which could create the assumption that [the omission] was intentional."
But he also added that, as written, the statute raises a public policy question of "whether we want to discourage people from being good public servants" by potentially punishing former board members or agency employees from passing along knowledge to their successors.
Violating the statute is a Class A Misdemeanor, which carries a fine of up to $4,000 and a sentence of up to one year in prison.
Nunez told the Tribune he was "shocked" to hear he could have broken the law. "I didn't contact them to tell them how to vote. I'm just a former board member who cares about the Permanent School Fund," he said, adding, "After 22 years, you just can't walk away. I don't know what to say."
Susan Oswalt, who oversees the Travis County District Attorney's Public Integrity Unit, said her office had become "aware" of the situation through an anonymous tip but could not comment on whether it would investigate, though she said it was "certainly something that I am going to bring in front of my boss."
Nunez said he called Soto — and Berlanga, Allen and board member Mavis Knight, D-Dallas — because he did not want to see the board go through a lengthy proposal process that would hurt the fund by delaying investment decisions. Knight and Soto ultimately voted against the contract renewal; Allen and Berlanga voted in favor.
Nunez served as chair of the board's Permanent School Fund committee from 1996 to 1997 and again from 2007 to 2008. In the summer of 2008, while he was chair, the committee voted to drop consultant RV Kuhns after members questioned its recommendation to diversify the fund’s holdings into real estate and whether it had grown too close to the staff of the Texas Education Agency. A year later, after much heated debate, the board awarded the contract to NEPC, despite some members’ objections that it was the highest-priced proposal of the three they had received.
"I didn't want to see the board go through that again," Nunez said. "The PSF is very dear to me and the students of Texas. … I want to see that it does well for the future children."
On the voicemail message, Nunez claimed that current SBOE members Pat Hardy, R-Weatherford, and Bob Craig, R-Lubbock, were resisting the renewal of NEPC’s contract because of residual bitterness from that earlier fight.
Another Republican member, David Bradley, of Beaumont, voted in favor of extending NEPC's contract. While he had not heard that Nunez had contacted some members beforehand, he said he was "thrilled" that he had. He said he didn't believe Nunez had violated any ethics rules and that the dispute over whether to extend the contract was due to a "power struggle" on the board.
"There's nothing wrong with the current vendor. They do excellent work. ... Over the last year, we have outperformed all of the other Texas public funds," he said. "I think they need to be given some credit."