*This story has been updated throughout to include a response from the office of Attorney General Greg Abbott.
Democratic gubernatorial candidate Wendy Davis accused her Republican opponent Monday of using his power as attorney general to “orchestrate a cover-up” of misspending inside the Texas Enterprise Fund that, according to an audit, handed out taxpayer subsidies to businesses with little oversight.
A spokesman for Attorney General Greg Abbott dismissed the accusation as "political posturing" and provided new details about decisions made to withhold records related to grant recipients a decade ago.
Fueling the controversy are reports over the weekend about orders Abbott's office issued in 2004 and 2005, declaring that various Texas Enterprise Fund records be kept secret. Abbott’s office, in charge of ruling what government records must either be released or withheld, found that numerous “applications” for the grant money were exempt from state transparency laws.
But a damning new state audit found that many of the companies never submitted formal applications, raising questions about what records Abbott was seeking to block. Davis claims to have found the answer: She is accusing Abbott of declaring the records to be secret in order to hide what the audit turned up years later — a lack of oversight over millions of dollars in grant money.
“We need an independent investigation by appropriate state or federal authorities regarding the actions by the attorney general and the attempts to use the power of his office to cover up the transfer of millions of taxpayer dollars to companies whose applications he knew didn’t exist,” Davis said Monday at a news conference in Fort Worth.
Abbott spokesman Jerry Strickland said in a written statement that Davis' remarks amounted to "political posturing — or just ignoring the facts."
"The State Auditor's Office conducted a thorough audit investigation into the TEF and the State Auditor found absolutely no wrongdoing by the Attorney General's Office," Strickland said. "In fact, there are only two references to the Attorney General's Office in the entire audit — and those references refer to the Attorney General's efforts to recover money owed to the State by TEF grantees who failed to fulfill their obligations under the grant. The Attorney General's Office continues to aggressively pursue grantees who owe money to the State of Texas."
Strickland also released a letter from one of the companies, Vought Aircraft, which the company called an "application" for grant fund money. He said the law in 2003 did not require a "formal application" for grants from the Texas Enterprise Fund, so presumably the letter served as the Vought "application" that Abbott initially blocked from public release.
Strickland said provisions of the state's open records laws, approved years ago by state lawmakers, required Abbott to declare certain information to be secret.
"The Legislature — not the Attorney General — established the requirement that grantees' proprietary business information be withheld from disclosure," Strickland said. "That exception for proprietary business information dates back to 1973."
In several other instances, including four entities, the question of what precise materials Abbott's office ordered to be withheld remains "inconclusive," Strickland said. He said the office of attorney general was able to find the Vought letter because the company submitted it as part of its legal briefing when it asked the government to keep information in it under seal.
There are no such "application" letters in the file involving at least four other entities that sought enterprise fund money, he said.
"We do not have similar letters that were submitted as part of any briefing during the open records process," Strickland said. "It doesn't mean we didn't see it, we just don't have a record of it. We just don't have that in the file."
At her press conference Davis called for Abbott to hand over any documents that would shed light on what records his office blocked years ago, and she said he should give back more than $1 million in donations that, according to her campaign, were investors in the entities that received Texas Enterprise Fund money.
A recent audit found that the fund, long championed as a crucial job-creation tool by Gov. Rick Perry, was riddled with weak oversight policies, including more than $170 million awarded to recipients that never formally applied for the funds.
The Texas State Auditor’s report of the Texas Enterprise Fund describes a system in which many recipients of financial awards were decided outside of formal channels and were often not properly monitored to ensure they were delivering the number of jobs or the type of jobs they had promised.
The report suggests that the governor’s office was, at best, sloppy or, at worst, misleading in providing information to lawmakers and the public about how the program was run. A January 2013 biennial report on the program only reported the number of jobs that firms receiving incentives intended to create, and left out several other details, including that only 73 percent of those jobs had been created.
The governor’s office said the audit confirmed the funds had been allocated “in accordance with state law” and has been reauthorized by the Texas Legislature since its inception.
Reporter Aman Batheja contributed to this story.