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A Texan's Race Could Lead to the F.C.C.

August 17, 2004 By STEPHEN LABATON

WASHINGTON, Aug. 14 - Becky Armendariz Klein is widely expected to lose her bid for Congress in Texas. But that has not stopped executives and lawyers from the nation's largest telephone and energy companies from pouring money into her campaign.

Indeed, some of her strongest supporters expect her to fail.

Running as a Republican in a heavily Democratic district in Texas against a five-term incumbent, Ms. Klein, 39, has received more in donations and fund-raising help from the telecommunications and power industries than any other rookie candidate in the nation.

Why is Ms. Klein such a draw? Because administration officials have said that in the event of a second Bush administration she would be considered by the president, whom she served as a senior policy adviser when he was governor of Texas, as a candidate to be the next head of the Federal Communications Commission. And even if that does not work out, she is expected to receive a seat on the Federal Energy Regulatory Commission, should a vacancy occur. Her husband is a senior official at the Pentagon.

Ms. Klein, who stepped down in January as chairwoman of the Texas Public Utility Commission, is challenging Lloyd Doggett, a Democratic member of Congress since 1995 in a newly created Congressional district, the 25th, which snakes 350 miles from the southern end of Austin to the Texas-Mexico border town of McAllen. As of June 30, the latest filing by the campaign with the Federal Election Commission, Ms. Klein had raised about $450,000, less than half of the more than $1.1 million raised by Mr. Doggett.

But much of her money has come from a highly motivated group of executives from companies - many of them ones she once regulated as head of the utility commission - that are investing not so much in her current Congressional campaign as in the right to be considered Friends of Becky.

"Washington is all about relationships and her relationships are far, wide and deep," said a senior executive at a large telephone company who is a supporter and spoke only if not identified. "Washington is also about getting in early - that's the way the game is played."

"She's not going to win the race," the executive added.

Other supporters said that contributing to her campaign was a no-lose proposition; if she beats the odds to win, they would also be happy, if surprised. But they acknowledged that as a first-term member of Congress, Ms. Klein would have less power to affect their interests than if she was appointed to a top regulatory job as they expected.

Gene Kimmelman, a former Democratic Senate aide who is now a senior director at Consumers Union, put the matter more succinctly: "Clearly, the companies are investing in the future. This is an interesting story about how Washington works."

According to Federal Election Commission filings, donations have come from executives, lawyers, Washington lobbyists and political action committees of the biggest telecommunications and utility companies. They have come from Democrats, like Kevin Joseph, a consultant and former top aide to Senator Ernest F. Hollings of South Carolina; Republicans, including Richard E. Wiley, a former F.C.C. chairman and now a top telecommunications lawyer; and people at the F.C.C., like Kathleen Q. Abernathy, a Republican commissioner, and Christopher Libertelli, a senior legal adviser to the current head of the commission.

Six lawyers and telecommunications executives who have contributed to her campaign or helped raise money said that they did not expect her to beat Mr. Doggett. But they said they were supporting her both because they liked her and because they believed that she was likely to become a top regulator in a second Bush administration.

Ms. Klein, who says she expects to win the Congressional race, dismisses any suggestions that the donations are coming in to curry favor with her should she be appointed to a top regulatory job.

"It's pure speculation," she said. "I don't think that's the reason at all." She said that she was receiving significant contributions from executives at a number of companies she once regulated because they had come to know her and found her to be honest and fair. Some of the money has come from executives and political action committees of the companies she ruled against.

Among the executives and lawyers who have donated to her campaign are those from Verizon, BellSouth, Qwest Communications, Time Warner, AT&T, Allegiance Telecom, Covad, Qualcomm, IntelSat, American Electric Power, Centerpoint Energy, Exelon, TXU and Teco Energy.

"The reason they've told me that they support me is that they appreciated that I had integrity," Ms. Klein said. "Even though we disagreed, it was harmonious."

Ms. Klein has been trying to overcome the fact that the district is heavily Democratic by emphasizing her Hispanic heritage - the district is 70 percent Hispanic. Last month, she was quoted in The San Antonio Express-News as saying, "There's a good portion of this district which has never voted for a gringo monolingual congressman before." The campaign later apologized for the comment.

But political experts said she would have a hard time, and as proof, pointed to the fact that Mr. Doggett received over 60 percent of the vote against a Hispanic candidate in the Democratic primary this year.

"She's clearly the underdog, and Doggett is clearly the favorite," said Amy Walter, an editor who follows House races for The Cook Political Report, a nonpartisan magazine that tracks campaigns.

Ms. Klein has highlighted her regulatory background in public appearances and she appeared to be laying the groundwork for her candidacy from the Public Utility Commission.

After she announced her resignation from the commission, she used the agency's e-mail system to solicit at least one company for assistance in her campaign. "Here's the latest with what I'm doing, as of last Friday!" she wrote to an executive of one company a few days after stepping down last January in an e-mail message with a Public Utility Commission return address. A document announcing her candidacy was attached. She asked in the e-mail message whether the company "can throw a fundraiser :-)" .

Ms. Klein said in an interview last week that she never used the e-mail system to seek fund-raising help. "I never sent any such thing," she said. A few days later, Scott Stripling, her campaign manager, called to clarify by saying she had "no recollection" of sending any such e-mail message. But a copy of the message was provided by a Washington telecommunications lawyer not connected with any political campaign on the condition that the message's recipient not be identified. (According to election records, the recipient had not contributed to the campaign as of June 30.)

As head of the Public Utility Commission, Ms. Klein was viewed as a pragmatist and a moderate and her decisions often infuriated some of the same executives who are now leading her fund-raising efforts. She particularly troubled the regional Bells by refusing to endorse positions that were favorable to their business, including SBC Communications, one of the most important political players in its home state of Texas.

Yet executives at SBC Communications have been among her strongest financial supporters and the company's political action committees have contributed $10,000, the maximum amount allowable. Two weeks ago, one of SBC's top state lobbyists, John Montford, was a host at a fund-raiser for her at the San Antonio Country Club.

"We know her well,'' said Dave Pacholczyk, a spokesman at SBC. "In our past dealings we found her to be credible and hard working. We respect her."

As of June 30, Edward E. Whitacre Jr., the company's chairman and chief executive, had contributed $500 to the Klein campaign.

But the company had different views of Ms. Klein two years ago, when it announced disappointing earnings. Mr. Whitacre, for instance, blamed Ms. Klein's policy decisions for causing 11,000 company layoffs.

Mr. Whitacre complained that Texas and other states had been setting wholesale phone rates, which rivals pay to SBC to use its networks, at prices that were artificially low to foster competition.

"Under this pricing scheme, a century of regulatory policy has been turned on its head," Mr. Whitacre complained at the time, according to a Sept. 27, 2002, article in The Dallas Morning News. "Instead of subsidizing prices for average consumers, we now subsidize competitors who, in turn, siphon revenues out of the market."

Ms. Klein responded that the layoffs had been caused by other business factors and not by regulatory decisions.

That dispute was only one of several between SBC and Ms. Klein. The company went around the regulators to the state legislature to change a rule Ms. Klein supported that imposed a 30-day waiting period on SBC before it could try to win back customers that took their business to smaller phone rivals.

"I can tell you any number of issues where she's went against us," said James Ellis, general counsel of SBC, and a $1,000 contributor to Ms. Klein's campaign. "What stands out about her is that she's a hard worker and she takes the time to understand the issues. She really tried to do what she thought was in the public interest."

Mr. Ellis said that he had heard speculation that Ms. Klein could lead the commission, but that did not matter.

"This is a person who excels at whatever she does," he said. "I'd be very happy with Becky at the F.C.C."

http://www.nytimes.com/2004/08/17/business/17texas.html?ex=1093744173&ei=1&e...

Copyright 2004 The New York Times Company

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