- The Washington Times - Thursday, March 6, 2003

AUSTIN, Texas, March 6 (UPI) — A federal grand jury has indicted former Texas Attorney General Dan Morales on charges of misusing tobacco settlement money and campaign funds, federal authorities announced Thursday.

Morales, a former Democratic candidate for Texas governor, was charged with mail fraud, conspiracy, filing a false tax return, and making false statements on a loan application, U.S. Attorney Johnny Sutton said.

"This is a case of an elected official charged with abusing the public trust," Sutton said in a statement. "As Texas attorney general, Dan Morales had an obligation to the people of this state to be honest, loyal and fair."

Sutton also said Morales violated that trust by "back dating contracts, forging government records and converting campaign contributions for personal use."

Marc Murr, a Houston-area attorney and friend of Morales, was also indicted on mail fraud and conspiracy charges in one of two schemes outlined in a 12-count indictment, Sutton said.

Morales denied the charges and said he would turn himself into authorities Friday.

Each of the mail fraud charges and the conspiracy charge carries a punishment of up to five years in jail and a $250,000 fine. The most serious charge, lying on a loan application, carries a punishment of up to 30 years in jail and a $1 million fine.

Morales allegedly was unsuccessful in funneling millions of dollars to Murr from a $17.3 billion tobacco settlement and legal fees paid out in 1998, misrepresenting the extend of Murr's work.

After the settlement, five private attorneys Morales had hired to handle the tobacco lawsuit on a contingency basis charged that Murr had done no work on the case. Murr initially claimed $520 million for his part of the work but later abandoned it.

The five law firms hired to handle the lawsuit for the state received a total of $3.3 billion in fees for their work. They had put up $40 million of their own money to finance the lawsuit in return for 15 percent of any money collected by the state.

Morales said Texas could not have pursued the case without the contingency fee deal because of the heavyweight law firms employed by the major tobacco companies.

In the second alleged scheme, Morales was charged with using about $400,000 in campaign funds to make a down payment and pay for improvements on a $775,000 home he was purchasing in January 1998. He also allegedly made false statements in obtaining a $600,000 mortgage loan.

Morales was also charged with signing a 1998 income tax return reporting $40,000 in joint income when he knew it was not correct.

Morales was an unsuccessful candidate for the Democratic gubernatorial nomination last year, losing to Laredo businessman Tony Sanchez in a tough primary contest. Sanchez was defeated by Republican Gov. Rick Perry in the November general election.

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