Two groups, the Texas Association of Business and Texans for a Republican Majority PAC (TRMPAC), were indicted Thursday on state felony charges of illegally funneling and spending corporate campaign donations during the 2002 legislative races in the Lone Star State. TRMPAC was founded by House Majority Leader Tom DeLay (R-Texas) in 2001.

The organizations “worked together in a complicated scheme to circumvent the [Texas] election code by funneling massive amounts of secret corporate wealth into [state] elections,” said Travis County District Attorney Ronnie Earle in a statement.

Craig McDonald, director of Texans for Public Justice, a state watchdog group, was heartened by Earle’s announcement.

“This is step two in a process that could lead to more criminal indictments down the road,” said McDonald. A state grand jury indicted three political allies of DeLay and eight corporations last September for their role in the 2002 campaigns.

Thursday’s indictments allege that TAB aided 21 GOP candidates for the state House and two for the state Senate using corporate funds. Corporate funds cannot be used in Texas state races.

If the allegations against TAB are upheld, the organization could face fines of more than $2.5 million.

No officials at TAB were indicted on Thursday, although a number of them, including William Hammond, the organization’s president and CEO, were named repeatedly in the indictments.

TAB and its top officials have repeatedly denied any wrongdoing in the case, although Earle’s office said in a statement on Thursday that the D.A. began his probe after “TAB boasted that it had engaged in wholesale flaunting” of state election law following the 2002 elections.

According to the Austin-American Statesman, Hammond and TAB’s lawyer, Roy Minton of Minton, Burton, Foster & Collins, met with officials from the Travis County District Attorney’s office on Wednesday to try to dissuade prosecutors from indicting TAB or its officers. TAB and Hammond were unaware that the indictments had been issued against the organization at that time, the newspaper reported.

TAB and Minton did not return calls before press time.

TAB has also been the target of civil lawsuits by Texas state candidates who are seeking millions of dollars in damages for its actions during the 2001-02 elections cycle.

TRMPAC, for its part, was indicted on Thursday for improperly accepting $120,000 in corporate contributions from the Alliance for Quality Nursing Home Care and AT&T Corp. TRMPAC spent roughly $600,000 in corporate contributions on Texas state races during the 2001-02 cycle, although TRMPAC officials have insisted that they broke no state laws.

A Texas judge ruled in May that TRMPAC should have reported more than $532,000 in corporate contributions to state officials during the 2001-02 cycle, and the judge awarded in excess of $196,000 to five state Democratic candidates who have sued the group. TRMPAC is appealing that ruling. TRMPAC declared those donations to federal authorities but did not notify state officials.

Republicans gained control of the Texas House in 2002 for the first time since Reconstruction and quickly elected Tom Craddick, a close DeLay ally, as Speaker. Under heavy pressure from DeLay, and despite desperate attempts to block it by Lone Star State Democrats, the Texas Legislature pushed through a Congressional redistricting plan that caused four longtime Congressional Democrats to lose their seats in November 2004.

DeLay has neither been subpoenaed nor indicted during Earle’s probe, which has been under way since late 2002. But several of DeLay’s political allies — including Jim Ellis, executive director of DeLay’s federal leadership PAC, Americans for a Republican Majority PAC (ARMPAC) — were indicted last September on charges of violating Texas election law, and Democrats have been hopeful that the powerful Majority Leader would become personally ensnared in the case.

John Colyandro, former executive director of TRMPAC, and Warren Robold, a fundraiser for both TRMPAC and ARMPAC, were also indicted last year. Ellis and Colyandro have mounted legal challenges to the indictments, and the criminal trials in the case have been postponed as Texas courts determine whether Earle has sufficient grounds to bring the charges.

In the four indictments against TAB that were unsealed Thursday, the organization faces 128 counts of violating Texas election law, according to a statement released by Earle’s office.

This total includes: 83 counts of using “a series of mailers and television ads” to illegally funnel “large amounts of corporate money into the 2002 elections,”; 28 counts of “fraudulently soliciting money from corporations,” which were mainly insurance companies, for use in those campaigns; 14 counts of illegal campaign contributions by paying Hammond and other TAB employees while they were doing “political work for various political action committees” involved in the campaigns; and three counts of illegal expenditures, which totalled more than $1.3 million, for political ads and campaign communications.