For Tom DeLay, yesterday’s Texas Court of Appeals ruling reversing his conviction on money laundering charges (with its accompanying three year prison sentence) probably makes up for the former House Majority Leader’s Dancing with the Stars loss.  The acquittal marks another high-profile defeat for government prosecutors bringing criminal charges predicated on alleged election law violations.

Prosecutors alleged that DeLay participated in a scheme to exchange $190,000 in corporate contributions (which could not be used to influence state races in Texas) to a national Republican Party committee in return for seven contributions (totaling $190,000) to state candidates, made from the national party’s account that contained only funds from individual donors (which could be used in Texas races).  State prosecutors alleged this “money swap” was little more than a money laundering scheme to channel impermissible corporate dollars to state candidates, and the jury agreed.

In a 2-1 decision, the appeals court disagreed, holding that the State failed to prove that DeLay was involved in money laundering because each step in the series of transactions was legal.  According to the court, the original corporate contributions were lawfully deposited into an account not used for candidate contributions and, in fact, none of the corporate witnesses testified that they intended for their funds to be used in connection with a Texas campaign.  Moreover, DeLay’s alleged agreement with the Republican party committee to swap soft-money for hard-money did not turn the original corporate contributions into “dirty money,” the court held, because the agreement involved “two legal monetary transfers.”  Because the State failed to prove that the corporate contributions were procured by illegal means originally and that the money was illegal at the start of the transaction, the funds involved were not the proceeds of criminal activity.  Accordingly, the conviction was reversed.

Two somewhat contradictory lessons can be drawn here.  On the one hand, the case illustrates the difficulties prosecutors face in linking general criminal statutes to election laws.  Criminal statutes, such as money laundering laws, do not always match up easily with election laws, especially when transactions have been carefully orchestrated to avoid technical violations.  On the other hand, the prosecution itself (and the likelihood of appeal) highlight the potentially serious consequences political actors face when engineering transactions designed to circumvent election law prohibitions by exploiting supposed legal gray areas.  As for the prospects of this opening the door to more “money swaps” in the future, it is hard to tell.  By statute, which went into effect after these events took place, Congress barred national party committees from having non-federal accounts.  State parties, however, may still maintain such accounts, although they are more heavily regulated today than in 2002.  Conceivably, politicians, parties, and political committees might point to the DeLay decision as support for engineering future money swaps involving these state party accounts.  At present, however, the potential appeal of the DeLay decision and the absence of other court decisions supporting such swaps, makes this tactic fraught with risk.