In Defense of James Dickey

By Mark McCaig

“I encourage all Republicans to promote and strive for the truth each and every day. I hope this important race can focus on vision, goals, and facts, rather than mistruths for political expediency.”- Cindy Asche, Candidate for Republican Party of Texas State Chairman, April 12, 2018 (via Facebook)

Earlier today, I received an e-mail from the Cindy Asche campaign with the subject line “BREAKING NEWS: RPT Chairman Involved in Hedge Fund Fraud.” As an attorney, former SREC member, and interested observer of this race, I found this headline shocking to say the least.

In the text of the e-mail, Asche accuses her opponent, incumbent Republican Party of Texas State Chairman James Dickey, of “classic hedge fund fraud”, “knowing and blatant manipulation of investors for [his] own monetary gain”, and lacking honesty and integrity. In short, Asche attempts to paint a picture of Mr. Dickey that resembles Bernie Madoff and his ilk.

The basis of Ms. Asche’s allegations is a civil enforcement action brought by the Securities and Exchange Commission in 2004 against Dickey and a former business associate relating to a group of hedge funds that Dickey was involved in marketing. Even the SEC’s own complaint did not allege that Dickey got rich as a result of his alleged wrongdoing, making only $85,092 over a 19-month period for marketing efforts that the SEC acknowledged were targeted to sophisticated high net worth and institutional investors. At no time were any criminal charges brought against Mr. Dickey.

Dickey settled the matter in early 2006, whereby he did not admit or deny the allegations, agreed to pay back $35,000 over a 25-month period to an investor that lost money, and agreed not to engage in any violation of securities law. The settlement also contained a provision, required by SEC regulations for such settlements, that prohibits Dickey from making or permitting to be made any action or public statement denying any allegation made in the SEC’s complaint. The funds Dickey agreed to pay back were a disgorgement of a portion of the funds he made in connection with the hedge funds. He was not required to pay any fines or civil penalties.

My personal impression from reading some of the documents in the case file, including the SEC’s complaint against Dickey and his settlement, is that it was a flimsy case. All too often, overzealous Federal regulators pursue questionable enforcement actions against innocent individuals or based on technical violations of the law.

The SEC, in particular, had a notorious reputation for an overzealous enforcement staff at the time it filed the complaint against Dickey. In an article for National Review, Larry Kudlow described the SEC’s then-chairman, Bill Donaldson, as having “generally voted with the commission’s two Democrats and their frequent attempts to hogtie and re-regulate American business. He often followed the overzealous regulatory instincts of the SEC staff bureaucracy while opposing Republicans Paul Atkins and Cynthia Glassman.” When Donaldson stepped down as Chairman of the SEC, The New York Times reported he was leaving “after repeated criticism from his two fellow Republican members of the agency and from some business groups and administration officials who contended that his enforcement and policy decisions had been too heavy-handed.”

I suspect that Dickey was faced with a Hobson’s choice when given the opportunity to settle the matter with the SEC: he could pay a modest sum, not admit any wrongdoing, and make the matter go away, or he could incur financially ruinous legal bills (that would almost certainly be exponentially higher than what he would have to pay to settle) to fight the virtually unlimited resources of the Federal Government. I don’t think anybody can blame a father of a young family for choosing the first option.

Unfortunately, Mr. Dickey is legally unable to substantively address the allegations against him due to a provision in his settlement required by SEC regulations. Ms. Asche is unfairly exploiting this for her political advantage.

Again, it is important to note that at no time did Mr. Dickey ever admit to violating any law, nor did any court, judge or jury, ever find that Mr. Dickey violated any law, nor did Mr. Dickey ever have to pay any fine or civil penalty in connection with the allegations made against him.

As Ms. Asche noted in her Facebook post just last week, Republicans should strive for truth and avoid using mistruths for political expediency in the race for RPT Chairman.

I do not have a relationship with either of the candidates in this race. I cannot recall having ever met or communicated with Ms. Asche and I have only had very brief interactions with Mr. Dickey on a couple of occasions.

I have friends that are deeply committed to the success of the Party that are supporting each of the candidates. I agree with the statement that Ms. Asche made last week- a race that focuses on a vision forward for the Party is a good thing. I believe that an exchange of ideas about where our Party is, and ought to be, especially with what is shaping up to be a challenging election cycle, will only strengthen our Party.

Before receiving Ms. Asche’s e-mail, I was planning on voting for Mr. Dickey, largely as a result of two reasons:

• I support the work he has done to increase the transparency of Party operations.
• The Republican Party of Texas has undergone 2 leadership transitions in just over 3 years. With a tough election mere months away, I do not think a third leadership transition in as many years is in the best interest of the Party.

Ms. Asche’s decision to engage in the exact type of conduct she denounced last week only reinforces my decision to vote for Mr. Dickey. It is my hope that the candidates and their supporters will use this race as an opportunity to discuss ways to grow and strengthen the Republican Party. A State Convention marred by rancor and divisive conduct will not help elect Republicans in November.