in Houston, Texas

Watchguard CEO guards investors' reputation

Monday, Aug 10, 2009, 11:26AM CST
By Matt Pulle
Continued from page 1.



Vanman also offers a strident, if somewhat unusual, defense of Paxton and Cook. He says if anything, they deserve praise for supporting his company. After all, WatchGuard helps state patrol officers do their jobs.

"There is absolutely no conflict of interest," he says of their original investment. "What better type of company to invest in for somebody who is trying to serve the public interest than a company that is trying to serve the public?"

Vanman is quick to stick up for his investors, who he claims were smeared in the original AP story.

The budding entrepreneur met Paxton in church, who later introduced him to fellow Republican Byron Cook.

Both Paxton and Cook are smart, conservative lawmakers from North Texas. The boyish-looking Paxton is an attorney and graduate of the University of Virginia law school, while the the straight-laced Cook is a businessman and rancher. Both enjoyed key leadership spots in the state House.

Vanman described Paxton in particular as a "friend," but he declined to detail how close they are. For example, when asked merely if he had ever visited the state representative at his home, he said, "I'm not going to answer you."

Sometime around 2004 or 2005, Vanman says he presented a business plan to Cook and Paxton. They had no expectation, he says, that WatchGuard would be doing any business with Texas.

The two representatives soon decided to invest in WatchGuard, but just how much they owned of the company is something even Vanman can't seem to get straight. In an interview with the Associated Press, the company executive said that Paxton's ownership was "not insignificant." Of Cook, Vanman said he had been "one of the company's largest investors, ranking third or fourth among about 30 individuals."

But after the AP story raised the prospect that both Paxton and Cook violated state ethics laws, Vanman must have realized that his company's ties to sitting lawmakers were nothing to brag about.

Now he portrays those ties far differently. In two interviews with Texas Watchdog, he continually downplayed the House members' stake in his company saying, "this is not a major investment for any of these individuals."

And while Vanman told the Associated Press that Cook was "very active on our board," he again modified his story to Texas Watchdog. Now, Vanman says the GOP lawmaker sat on an advisory board only "for a short time."

Did Paxton and Cook violate the Texas constitution?

Last year, Paxton and Cook sold off much of their original investments, which Vanman says was the first chance they had to unload their shares. At that time, it had been two years since WatchGuard won its state contract.

Vanman says the state of Texas is one of Watchguard's biggest clients. Overall, he says his firm has won more "highway patrol contracts than every other company in the industry combined."

But it's the company contract with the state of Texas that seem to ensnare Cook and Paxton in an unlawful conflict of interest. The provision that would apply here is Article III, section 18, which prohibits "members of the Legislature from being interested, either directly or indirectly, in any contract with the State, or any county thereof, authorized by any law passed during the term for which he shall have been elected."

Paxton and Cook's financial stake in WatchGuard Video is potentially troubling, because they basically voted to pay for their company's contract with the state. In the 2005 legislative session, Cook cast a vote in favor of an appropriations bill that provided $866 million in funding to the Texas Department of Public Safety. Though Paxton voted against the final version of the measure, he voted for it in an earlier stage, helping ensure its ultimate passage.

Still, even if both legislators cast votes against all versions of the measure, the state constitution wouldn't absolve them. That's because the high law of Texas makes no mention of how individual legislators vote--all that it's concerned with is the actions of the body as a whole.

"Regardless of how the process occurred by which the contract was enacted, all we really want to know are two things," said Prof. Daniel Rodriguez, with the University of Texas at Austin law school. "Number one, was the legislation adopted during the period in which the legislator served in the legislature? And number two, do they benefit either directly or indirectly from this contract?"



We want a retraction! Um, retract that.

What do Paxton and Cook say about this? Cook never called us back over several weeks, and we kept missing Paxton, who returned our calls. Paxton did not respond to a list of questions e-mailed to his legislative account June 9.

But it appears that Paxton's aides can't get their facts straight about whether the original story in the Associated Press got its facts straight.

In December 2008, nearly two months after the Associated Press reported on the legislators' involvement with WatchGuard Video, Sheacy Reynolds Thompson, Paxton's chief of staff, e-mailed a select group of newspaper editors who ran the piece.

"The resulting AP story your paper may have published contained inaccuracies and misinformation," she wrote, declaring that Paxton actually voted against the appropriations bill that funded Watchguard's contract.

Thompson didn't mention that her boss voted for the earlier version of the bill. Nor did she explain what the constitution says about legislators who benefit from state contracts. Perhaps because of those omissions, Thompson quickly sent a follow-up email to those same editors the very next day: "Please disregard this email. Thank you, Sheacy."

Contact Matt Pulle at 713-980-9777 or matt@texaswatchdog.org. Jennifer Peebles and Suyun Hong contributed to this report. Video interviews by Suyun Hong.

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This investigative report by Texas Watchdog is licensed under a Creative Commons Attribution 3.0 United States License.

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