AUSTIN, Texas (AP) - A company that became a national leader in providing patrol cameras to police was built on the strength of a Texas contract obtained while two state lawmakers were shareholders in the firm-a possible violation of state ethics laws.
WatchGuard Video points with pride to the legislators who helped the company grow from a tiny startup into a government contracting powerhouse.
The two legislators who made early investments in the booming company said they never pulled strings on behalf of WatchGuard. But their actions might violate the state constitution and disclosure rules established by the Texas Ethics Commission.
"When the state representatives are involved, it appears like they're greasing the skids with the contract," said Texas ethics watchdog Fred Lewis, who has urged the Legislature to tighten conflict-of-interest laws. "I'm not saying that's what happened, but that's what it looks like."
The state constitution prohibits lawmakers from benefiting "directly or indirectly" from a state contract authorized by the Legislature, but it doesn't say what happens to lawmakers who violate the provision.
Company President Robert Vanman called WatchGuard "squeaky clean" and said he resented any suggestion that the contractor had engaged in "shady" dealings.
WatchGuard is best known for producing in-car video systems that record directly onto DVDs. It sells equipment to state and local police departments across the nation.
If WatchGuard is an industry leader, Vanman said, it's because of the company's products, not because of political influence.
But WatchGuard's own Web site touted the company's politically connected shareholders. A published company profile boasts that WatchGuard, based in the Dallas suburb of Plano, is "held by an influential shareholder group that includes three state representatives, a judge, and a number of distinguished entrepreneurs."
Vanman named the lawmakers: Republican Reps. Ken Paxton, Byron Cook and former Rep. Bob Griggs. WatchGuard's vice president of operations, Dennis Pirkle, is a part-time city judge and jail magistrate, according to company literature.
Cook and Paxton made early investments in WatchGuard, and Cook sat on the company's board. Founded in 2002, the company grew just as digital technology began to replace older-generation analog systems.
But it was the Texas Department of Public Safety contract in late 2006 that gave WatchGuard its biggest financial boost.
Eventually the entire fleet of trooper vehicles in Texas will use WatchGuard camera systems, bringing the company $10 million, Vanman said. WatchGuard also landed a smaller contract for the Texas Parks and Wildlife Department this year.
Both Paxton and Cook voted for the appropriations bills that provided the money used to purchase the WatchGuard systems, records show.
Paxton and Cook have previously disclosed ownership in Enforcement Video L.P., the registered company name for WatchGuard Video. But records show Paxton did not disclose his ownership in WatchGuard on his 2008 personal financial statement filed with the Texas Ethics Commission.
In April, WatchGuard said its net earnings increased 250 percent from the previous year after sales doubled two years in a row. About three months later, Paxton and Cook sold a piece of the company for an undisclosed profit, officials said.
Just how big a role the legislators played in WatchGuard before they cashed out much of their stake isn't clear.
Cook and Paxton, who still own a small share of the company, both described themselves as minor investors with no influence on the direction of the company.
"I didn't even know we had contracts with the state of Texas," Paxton said.
However, Vanman said Paxton was a personal friend and original investor whose ownership was "not insignificant." And Vanman said Cook, until a few months ago, was "very active on our board" and had been one of the company's largest investors, ranking third or fourth among about 30 individuals.
Lawmakers must disclose any company board positions to the ethics commission. Cook said he had served only on an informal company "advisory board" that met just once and didn't qualify as a decision-making board of directors.
He also downplayed the size of the Texas contract, saying $10 million was "like a flea on an elephant" in a state budget that involves tens of billions of dollars annually.
But Jennifer Peebles of Texas Watchdog, a nonpartisan group that promotes open government, said lawmakers should be required by law to disclose whether they invest in businesses holding state contracts.
Paxton said he would happily correct any disclosure failures, but he balked at Peebles' idea.
"I don't see why it would help taxpayers to know that," he said. "I don't have time to spend tracking every investment I make ... that's the whole point of being a passive investor."