Sept. 8 (Bloomberg) -- A Texas political group set up by U.S. House Majority Leader Tom DeLay was charged by a grand jury with accepting illegal corporate donations during 2002 elections that helped Republicans take over the state legislature.

The indictment charges DeLay's political action committee, Texans for a Republican Majority, with accepting $100,000 from the Alliance for Quality Nursing Home Care, an organization of nursing home providers, and $20,000 from AT&T Corp. The state grand jury also charged the Texas Association of Business, an Austin-based group, with illegally donating to legislative races.

DeLay, who was rebuked three times last year by the House ethics committee and has been the subject of media reports that he accepted lobbyist-sponsored trips, wasn't charged with any wrongdoing by the grand jury.

Travis County District Attorney Ronald Earle said in a statement that the indictments show that DeLay's PAC and the business group ``worked together in a complicated scheme to circumvent the election code by funneling massive amounts of secret corporate wealth into elections.''

DeLay's PAC raised money to help Republicans capture control of the legislature for the first time since Reconstruction. At DeLay's urging, the new Republican majority then redrew the congressional district lines without waiting for the next U.S. Census, costing Democrats six House seats.

DeLay Cooperated

DeLay spokesman Kevin Madden said the indictment of the PAC is ``limited to a political organization and does not affect Mr. DeLay.'' Madden said DeLay voluntarily spoke with the district attorney's office last month about the inquiry and told them his role in the PAC was limited to serving on its advisory board and appearing at fund raisers.

Democratic National Committee spokesman Josh Earnest called on DeLay to step down as majority leader. ``With all that is facing this country, our Congress and our nation can't afford the distraction of an ethically challenged majority leader,'' Earnest said.

AT&T spokesman Jim Byrnes did not immediately respond to a request for comment.

Unmasking Donors

The Texas Association of Business was charged with taking in more than $1 million in donations from corporations that it spent on the 2002 campaign, including $300,000 apiece from AT&T and the nursing home operators group.

The business group was indicted on 128 felony counts, each carrying a maximum penalty of a $20,000 fine. ``Our investigation has unmasked the corporate donors, many of which are not even Texas companies,'' Earle said in his statement. ``This use of over $1 million of secret money in many local Texas races was improper, illegal and unprecedented.''

A lawyer for the business group, Roy Minton, told the Associated Press that no laws were violated and that the organization was just exercising its First Amendment right to ``inform the public of the conduct of our elected officials and the conduct of candidates for public office.''

Corporate contributions are banned in Texas. In September, DeLay associate Jim Ellis and two other men were indicted.

``The criminal charges are piling up,'' said Craig McDonald, executive director of Texans for Public Justice, an Austin-based group that has called for a special prosecutor to investigate DeLay, whose district includes Houston. ``They are circling tighter around Delay.''

`Loyal Base'

Alan Chartock, professor emeritus of political communication at the State University of New York at Albany, said the charges are a blow to the Republicans running the federal government.

``This is terrible news for the already-reeling Republican Party, on top of the abysmal administration performance in Hurricane Katrina,'' Chartock said.

David Primo, who teaches political science at the University of Rochester in New York, disagreed, saying that DeLay is safe unless he is indicted.

``DeLay has a very loyal base of supporters inside Congress, within his district and across the country,'' Primo said. ``As long as he is not directly implicated in questionable activities, he can still emerge relatively unscathed. But if any fingers are definitively pointed at him, this could pose a huge political problem for the GOP.''

To contact the reporter on this story: Jonathan D. Salant in Washington jsalant@bloomberg.net.

Last Updated: September 8, 2005 20:18 EDT