SANCHEZ FIRES BACK AT GOV. PERRY

Tony Sanchez defended himself Thursday against accusations of
wrongdoing leveled by Gov. Rick Perry, saying his Republican
gubernatorial opponent "doesn't seem to have any limits. There are no
boundaries he won't cross."

In what Sanchez described as another untruth, Perry on Thursday
amplified a scathing TV campaign ad he launched this week, saying the
Democrat personally knew "drug money" once was held in a Laredo
savings and loan owned by Sanchez.

During an hourlong interview conducted at his request Thursday with
the San Antonio Express-News editorial board, the Laredo businessman
said the now-defunct Tesoro Savings and Loan in Laredo complied with
federal law in the early 1980s when it wired money to Panama from
accounts the IRS wanted Tesoro to freeze.

Under the law in question, the thrift founded by Sanchez and his
father could have been liable for treble damages in a lawsuit for
refusing to transfer the funds, Sanchez said.

In 1988, four years after the dispute involving Tesoro, the law
changed to give banks a liability shield in such cases, the Dallas
Morning News reported this week.

"We had no choice," Sanchez said. "We had to obey the law. Perry's
position is: Violate the law."

The Perry campaign said Thursday that Tesoro could have employed a
legal procedure known as "interpleading," which it had used in an
unrelated case, to refuse to transfer the money.

"Rule 22 of the Rules of Civil Procedure" would have provided legal
protection had Tesoro "chosen to fully cooperate with law
enforcement," the Perry campaign said.

"Tony Sanchez and his financial institution knew this was drug money,
and they made the decision to send it to Panama knowing it was going
to known drug dealers," Perry said.

"Lawyers can argue the fine points of the law. The people of the state
of Texas I think clearly see this was an issue of an individual making
a decision that was to his best interest, and that's the bottom line
with this entire issue," Perry said.

The Perry campaign, posting Tesoro-related sworn statements on the
Web, cites an IRS agent saying Morris White, then Tesoro president,
"stated it was his understanding that the money on deposit was linked
to drugs, and wanted to have no such money on deposit in his
institution."

White said recently the IRS official "was a little over-enthusiastic"
in interpreting what was a general statement against holding drug proceeds.

Perry's 30-second commercial, attempting to link Sanchez to drug money
and "Manuel Noriega's Panama," has torqued the governor's race more
than a month before the campaign season traditionally picks up speed
after Labor Day.

Sanchez, visiting newspapers to dispute the ad, said the spot debuted
now because Perry knows the race has tightened.

"Basically, we're tied," Sanchez said. "And I think Perry is seeing
that."

Neither campaign has shared internal voter polls, but the Perry
campaign insists its candidate is ahead. Sanchez, who has drummed
Perry with critical advertising since May, said he has sliced a
double-digit lead to less than 4 points.

Describing Tesoro's handling of funds from Mexican depositors, Sanchez
described the early 1980s as a period when Mexico was reeling from
economic chaos.

He said Tesoro was among many U.S. financial institutions that
benefited from Mexicans crossing the border to deposit savings.

"It was not uncommon at all to see people coming in with millions of
dollars in bags and suitcases and trunks and plastic bags and paper
bags," Sanchez said. "Today, if you bring $1 million, all kinds of
bells go off."

Sanchez, who was chairman of Tesoro's board, said he personally didn't
know the two money brokers who gradually deposited $25 million in Tesoro.

"The board of directors does not get involved in management, not then
and not now," he said.

Perry, noting the millions were deposited over only 17 months, told
reporters: "I served on a bank board before. If that kind of money
showed up in a little bank in Haskell, Texas, every buzzer and whistle
in the bank would have gone off."

Sanchez said the thrift closed some accounts that were frozen by
federal order, but did not have that choice with 68 other accounts.
Some $7 million from those accounts was wired to Panama.

A federal judge later ruled the thrift had "no duty independently to
assist the government; indeed, the bank's legal duty is to the
recorded owners of the accounts without speculating about any derived
interests or those supposed interests' creditors. Tesoro correctly did
not freeze these accounts."

Still, Perry said: "There is such a thing as doing what's right. He
had the opportunity to do what's right and he didn't."

Sanchez also took issue with a portion of the ad saying a newspaper
reported Tesoro laundered drug money.

"No newspaper ever said the institution laundered drug money," he said
Thursday.

In August 2001, in an article cited by the ad, the Dallas Morning News
quoted a former Tesoro officer's testimony that nearly $25 million was
"laundered" through Tesoro.

Asked if the ad's mention of Noriega, along with a photograph, seemed
racist, Sanchez said he hopes not.

"One of the fears that I've had in this campaign from the very
beginning is that someone would try to use this to polarize this
state," said Sanchez, adding that he might have been "na=EFve" in
thinking Tesoro would not be a campaign issue.

Perry said the "factual" ad hit "a raw nerve" with
Sanchez.

Sanchez said: "I don't think any good will come of it for either Rick
or me. I think it's ugly. People will view it as ugly. It's gross,
it's slanderous. People will view it for what it is. It's a lie. It's
completely fabricated."