State paid legislator’s company $5.4 million
When state Rep. John Lujan won his seat in a special election last fall, he also inherited his predecessor’s spot on the legislative committee that oversees the Texas Alcoholic Beverage Commission — an agency that has a multimillion-dollar contract with Lujan’s software company.
The San Antonio Republican founded Sistema Technologies with several partners in 2002. The company landed a state contract in 2019 to set up online licensing services for the TABC and so far has been paid about $5.4 million for that work.
The state plans to spend millions more, despite a difficult rollout last year that generated thousands of complaints from licensees who were unable to use the system as planned.
Lujan called his ownership stake a potential conflict of interest but said he has not made
any decisions or votes as a committee member that relate to the TABC.
Sistema’s work was brought up in Lujan’s first and only meeting so far as a member of the House Licensing & Administrative Procedures Committee. The head of the commission testified, including an update on the online licensing service. And a lawyer representing businesses across the state with alcohol permits testified that the system was greatly improved from last year but that problems persisted.
Amy Harrison, a former TABC official who now consults for bars and restaurants, described the rollout last year of the online system as a serious problem.
“They released a system that was not tested,” Harrison said. “That’s the reality. The system was not tested before it was released, and it went live.”
Lujan left the room while the commissioner testified. A spokesman for his campaign said that was his way of recusing himself from the discussion. Lujan said he is unable to leave the committee until the new legislative session starts next year, after the Nov. 8 midterm elections. If re-elected, Lujan said he would ask for a new committee assignment and step down from Sistema, of which he owns a quarter, a spokesman said.
The TABC says the online system is a dramatic improvement from the previous paper system, and the commission is planning to request about $7 million more for the program, according to a draft legislative appropriations request.
“It’s going to be something that we’ve got to address and make sure that we’ve handled it properly,” Lujan said this week.
According to a 2007 nonbinding legal opinion issued by thenstate Attorney General Greg Abbott, while it’s OK for someone who holds a state contract to take office, it could be illegal if those contracts are renewed or modified by the Legislature — including by appropriations bills — while a lawmaker holds office. Lujan can avoid that situation by divesting from his company, as he said is his intention.
Lujan’s challenger in the midterm, Democrat Frank Ramirez, criticized Lujan for not publicly acknowledging the conflict earlier or more openly recusing himself.
“We should not have any elected officials in any capacity have government contracts with their private businesses,” Ramirez said. “It doesn’t inspire confidence in the process for me, and I’m sure that people who hear this news are not going to be inspired by it.”
Craig Murphy, Lujan’s campaign spokesman, said the denouncement amounted to a “Hail Mary” from a losing campaign and that Lujan has done everything that could be asked of him to avoid a conflict of interest on this issue.
Ramirez said he and his campaign are in touch with bars and restaurants in the San Antonio area that are still having issues with Sistema’s system, and he said even if Lujan did not vote, he thinks the House committee may not have been so open to continuing with Sistema if Lujan were not a member.
“If there’s a sitting member of this body, they should not benefit financially from anything that goes on in that body. That’s a conflict of interest,” Ramirez said. “This is a committee of his peers, right, and had this been any other company, I’m imagining, and this information was brought forward, questions would arise about whether this was a company we should continue working with, if this was a system we should keep paying into.”
At City Hall, “I have seen people get fired over this,” said Ramirez, who worked as a policy staffer at San Antonio City Hall before the campaign.