George P. Bush statements conflict with his attorneys’ claims on role with state-backed Pennybacker Fund

Texas Land Commissioner George P. Bush told Bloomberg News that Texas needs a new Attorney General “that is above reproach.” 

Bush has made integrity a campaign theme in challenging incumbent Ken Paxton, who was re-elected to a second term in 2018 despite state securities charges against him, filed by special prosecutors in 2015.

For Bush's part, his attorneys have challenged reporting by the Houston Daily in June that the Pennybacker Capital Fund, a private fund Bush helped launch, may have benefited from investments by the Texas Permanent School Fund, an agency he currently oversees.

The Houston Daily reported that Bush, son of former Florida Governor and Republican Presidential Candidate Jeb Bush, co-founded the Pennybacker Fund before running for Land Commissioner, and that the School Fund later invested in Pennybacker, providing as much as 15 percent of total funding for the Pennybacker Fund IV.  

Bush's attorneys at the Jackson Walker law firm said in a June 25 letter to a reporter at the Houston Daily that its report was misleading. The attorneys stated in the letter that "Mr. Bush was not a co-founder of Pennybacker.”

However, Bush’s LinkedIn page states he was "Co-founder/Partner" of Pennybacker Capital and worked there for five years and six months, from Jan. 2007 to June 2012.

An Aug. 2008 article in the Fort Worth Star-Telegram referred to Pennybacker as "George P. Bush's investment firm," reporting that it had recently changed its name from N3 Capital Partners and was moving its offices from Fort Worth to Austin.

"Pennybacker... said it closed on its inaugural investment fund in December and will invest $250 million in middle market real estate projects over the next four years," the article said.

A separate report in the Austin American-Statesman reported on the firm's move to offices in Austin's Chase Tower, identifying George P. Bush as "partner."

In the letter, Bush’s attorney, William McDonald, requested that Houston Daily make clear that the investment funds to Pennybacker were provided by the Texas Permanent School Fund, and that Bush's "Texas General Land Office is not, nor has it ever been, an investor in Pennybacker or its funds.”  

But one of Bush's duties as chief executive of the Texas General Land Office is to manage the $48.3 billion Texas Permanent School Fund, which provides funding for K-12 schools and colleges in Texas. A recent annual report by the Fund acknowledges it is administered by the General Land Office, which is credited with producing its financial statements.

"(The) Texas Permanent School Fund Land, Mineral Rights and Certain Real Assets Investments (are) managed by the School Land Board, which includes the elected Commissioner of the General Land Office (George P. Bush) and (is) administered by the General Land Office, under the guidance of the Commissioner of the General Land Office (George P. Bush)," it says.

Attorneys for Mr. Bush stated that he separated from Pennybacker in 2012 but that, "any remaining interest he held relating to Pennybacker or associated entities was subsequently transferred to a blind trust owned by Mr. Bush and his family.”  

Earlier reporting by Houston Daily did not include this information, though Mr. Bush’s holding of the asset in a blind trust was known to Pennybacker management and perhaps the Permanent School Fund.  

According to Mr. McDonald, "all members of Pennybacker’s management having personal relationships with Mr. Bush and the existence of the blind trust owned by Mr. Bush and his family were properly disclosed in connection with the investment.”

The attorneys’ letter claimed the Houston Daily report could also “mislead" readers to believe the Permanent School Fund may have been the largest investor in the $510 million Pennybacker Fund. According to the letter, "The TEA did not make the largest commitment to Pennybacker IV."

While Bush’s attorneys did not claim to represent the Pennybacker Fund, they also objected to reporting by Houston Daily on the fund’s involvement in an Austin real estate controversy that was previously reported in other media.  According to their letter, the reporting is “misleading” because proceedings in the case "were all dismissed in favor of the Pennybacker entities involved, absolving them from liability.”  

According to the letter, "all of the properties at issue were lawfully acquired by a Pennybacker-managed investment vehicle through a statutory public foreclosure auction process pursuant to which lenders sought to recover losses incurred from defaulting borrowers."  

While initial litigation in the case was dismissed, subsequent litigation claims Pennybacker engaged with other parties to obtain the properties unlawfully.  The new claims are pending in an Austin District Court. 

Paxton was elected to a second term in 2018 despite state securities charges against him that were filed by special prosecutors in 2015. He faces two other Republican challengers, U.S. Representative Louie Gohmert and former State Supreme Court justice Eva Guzman.  Former President Donald Trump endorsed Paxton in July.  

Despite Trump’s decision, Bush told Lone Star Politics in November, “I am the most effective spokesperson for the (former) president.”