PERRY USES DRUG-FUNDS ISSUE IN AD

AUSTIN - A new TV ad by Gov. Rick Perry that namedrops Manuel
Noriega while seeking to tie challenger Tony Sanchez to drug-money
laundering was denounced Sunday by Sanchez, who promised "an extremely
swift and very truthful response on the air."

"I am not going to let this lie stand," said Sanchez, a Democratic
Laredo businessman whose immense personal wealth already has allowed
him to unleash a television arsenal in the race.

Sanchez cast Perry's new ad, which is to begin airing today, as an
effort to deflect questions raised about his record and a sign that
the Republican's campaign is faltering.

Perry's camp stood by his record and the ad, which focuses on the
alleged laundering of nearly $25 million in drug money through
Sanchez's Tesoro Savings and Loan in Laredo two decades ago.

Sanchez repeatedly has said Tesoro officials didn't know the money was
suspected of being drug-related until notified by federal officials.

They cooperated with the government when told of a problem, he said,
and were cleared by a federal judge and three federal agencies.

Perry's ad, and the promised response ad, are an escalation of an
issue that has surfaced repeatedly in the race.

The federal government in 1984 suspected that two Mexican men had
laundered millions through Tesoro. On one day alone, Mardoqueo Alfaro
Margarino and Tomas Valles Corral flew in $5.1 million in cash for
deposit.

After the IRS put a hold on some Tesoro accounts, 68 accounts brokered
by the two men were closed by people identified as
accountholders.

About $7 million was wired to Panama.

The ad mentions former Panama strongman Noriega in making note of the
wired funds, said Perry spokesman Ray Sullivan.

"It does state, which no one disputes, that Mr. Sanchez's savings and
loan wired drug money from accounts at Tesoro to Panama, which was
then controlled by Manuel Noriega," Sullivan said Sunday.

To make its point, the ad focuses on a 1984 federal judge's decision
in a case involving an El Paso financial institution, the Austin
American-Statesman reported Sunday, but not on a 1988 ruling that
Tesoro acted properly in wiring the funds.

Sullivan said the 1984 ruling includes a reference to Tesoro. Suspect
funds were deposited in both institutions.

"We are in a very factual and proven way talking about Mr. Sanchez's
record and asking serious questions about that record and his
judgment," Sullivan said.

"There is no question that Mr. Sanchez's savings and loan was used to
launder drug money," he said.

Sanchez, repeating his allegations that Perry has favored large
campaign contributors, said:

"This big lie is used to divert people's attention away from the fact
that he's been caught lining his pockets with insurance money and
electric utility money. He's been caught red-handed, and the people of
Texas are starting to find out about it."