[Senate Report 105-167]
[From the U.S. Government Publishing Office]
105th Congress Rept. 105-167
SENATE
2d Session Vol. 5
_______________________________________________________________________
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION
WITH 1996 FEDERAL ELECTION CAMPAIGNS
__________
FINAL REPORT
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
Volume 5 of 6
March 10, 1998.--Ordered to be printed
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996
FEDERAL ELECTION CAMPAIGNS--VOLUME 5
105th Congress Rept. 105-167
SENATE
2d Session Vol. 5
_______________________________________________________________________
INVESTIGATION OF ILLEGAL OR
IMPROPER ACTIVITIES IN CONNECTION
WITH 1996 FEDERAL ELECTION
CAMPAIGNS
__________
FINAL REPORT
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
Volume 5 of 6
March 10, 1998.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
SUSAN COLLINS, Maine JOHN GLENN, Ohio
SAM BROWNBACK, Kansas CARL LEVIN, Michigan
PETE V. DOMENICI, New Mexico JOSEPH I. LIEBERMAN, Connecticut
THAD COCHRAN, Mississippi DANIEL K. AKAKA, Hawaii
DON NICKLES, Oklahoma RICHARD J. DURBIN, Illinois
ARLEN SPECTER, Pennsylvania ROBERT G. TORRICELLI, New Jersey
BOB SMITH, New Hampshire MAX CLELAND, Georgia
ROBERT F. BENNETT, Utah
Hannah S. Sistare, Staff Director and Chief Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
MAJORITY STAFF
Michael J. Madigan, Chief Counsel
J. Mark Tipps, Deputy Chief Counsel
Donald T. Bucklin, Senior Counsel
Harold Damelin, Senior Counsel
Harry S. Mattice, Jr., Senior Counsel
John H. Cobb, Staff Director/Counsel
K. Lee Blalack, Counsel
Michael Bopp, Counsel
James A. Brown, Counsel
Brian Connelly, Counsel
Christopher Ford, Counsel
Allison Hayward, Counsel
Matthew Herrington, Counsel
Margaret Hickey, Counsel
Dave Kully, Counsel
Jeffrey Kupfer, Counsel
John Loesch, Counsel
William ``Bill'' Outhier, Counsel
Glynna Parde, Counsel
Phil Perry, Counsel
Gus Puryear, Counsel
Mary Kathryn (``Katie'') Quinn, Counsel
Paul Robinson, Counsel
John S. Shaw, Counsel
David Hickey, Investigator
Stephen J. Scott, Investigator
Matthew Tallmer, Investigator
Darla Cassell, Office Manager
Mary D. Robertson, Office Manager
Kenneth Feng, GAO Detailee
Mark Kallal, Legal Assistant
John W. M. Claud, Legal Assistant
Mike Marshall, Legal Assistant
Michael Tavernier, Legal Assistant
Michael Vahle, Legal Assistant
Amy Alderson, Staff Assistant
Kim Bejeck, Executive Assistant
Deborah Collier, Executive Assistant
Daniel Donovan, Staff Assistant
Leanne Durm, Staff Assistant
Michele Espinoza, Executive Assistant
Cheryl Ethridge-Morton, Executive Assistant
Heather Freeman, Staff Assistant
John Gilboy, Staff Assistant
Janat Montag, Executive Assistant
Kathryn O'Connor, Executive Assistant
Wayne Parris, Staff Assistant
Jason Parrott, Staff Assistant
Sahand Sarshar, Staff Assistant
Jerome Sikorski, Archivist
Loesje Troglia, Executive Assistant
Sandra Wiseman, Executive Assistant
GOVERNMENT AFFAIRS COMMITTEE STAFF
Frederick S. Ansell, Chief Counsel
Richard A. Hertling, Senior Counsel
Curtis M. Silvers, Professional Staff Member
Paul S. Clark, Communications Director
Michal S. Prosser, Chief Clerk
Matthew Peterson, Assistant Clerk
Christopher W. Lamond, Systems Administrator
Steve Diamond, Senator Susan Collins
Jim Rowland, Senator Sam Brownback
Brian Benczkowski, Senator Pete V. Domenici
Michael Loesch, Senator Thad Cochran
Barbara Olson, Senator Don Nickles
William J. Morley, Senator Arlen Specter
Rick Valentine, Senator Bob Smith
Bill Triplett, Senator Robert F. Bennett
MINORITY STAFF
Alan Baron, Minority Chief Counsel
Pamela Marple, Deputy Chief Counsel
David McKean, Deputy Chief Counsel
Jeffrey Robbins, Deputy Chief Counsel
Alan Edelman, Counsel
Jonathan Frenkel, Counsel
Jim Lamb, Counsel
Deborah Lehrich, Counsel
Cassandra Lentchner, Counsel
Dianne Pickersgill, Counsel
Lisa Rosenberg, Counsel
Kevin Simpson, Counsel
Howard Sklamberg, Counsel
Beth Stein, Counsel
David Cahn, Assistant Counsel
Sarah Des Pres, Assistant Counsel
Peter Rosenberg, Assistant Counsel
Larry Gurwin, Investigator
Jim Jordan, Press Secretary
Holly Koerber, Clerk
Bill McDaniel, Investigator
Jay Youngclaus, Investigator
Caroline Badinelli, Staff Assistant
Ann Metler, Research Assistant
Jessica Robinson, Staff Assistant
Rachael Sullivan, Staff Assistant
Nichole Veatch, Staff Assistant
Linda Gustitus, Governmental Affairs Committee, Senator Levin
Elise Bean, Governmental Affairs Committee, Senator Levin
Laurie Rubenstein, Governmental Affairs Committee, Senator Lieberman
Nanci Langly, Governmental Affairs Committee, Senator Akaka
Marianne Upton, Governmental Affairs Committee, Senator Durbin
Matthew Tanielian, Governmental Affairs Committee, Senator Torricelli
Bill Johnstone, Governmental Affairs Committee, Senator Cleland
FBI DETAIL
Anne Asbury, Investigator
Jerome Campane, Investigator-FBI Detail Leader
Becky Chan, Investigator
Jeffrey Harris, Investigator
Steven Hendershot, Investigator
James Kunkel, Investigator
Kelli Sligh, Investigator
Vo ``Ben'' Tran, Investigator
C O N T E N T S
----------
Page
Chapter:
1. Preface................................................... 1
2. Procedural Background and Overview........................ 5
3. Summary of Findings....................................... 31
4. The Thirst for Money...................................... 51
5. The White House Controlled the DNC and Improperly
Coordinated the Activities of the DNC and Clinton/Gore '96. 105
6. The DNC Dismantled Its System for Vetting Contributions... 167
7. DNC Fundraising in the White House: Coffees, Overnights,
and Other Events........................................... 191
8. Fundraising Calls from the White House.................... 499
9. White House Vetting of Individuals with Access to the
President.................................................. 751
10. Johnny Chung and the White House ``Subway''.............. 781
11. The Contribution of Yogesh Gandhi........................ 917
12. Ted Sioeng, His Family, and His Business Interests....... 961
13. John Huang's Years at Lippo.............................. 1117
14. John Huang at Commerce................................... 1153
15. John Huang Moves from Commerce to the DNC................ 1653
16. John Huang's Illegal Fundraising at the DNC.............. 1689
17. The Hsi Lai Temple Fundraiser and Maria Hsia............. 1749
18. The China Connection: Summary of Committee's Findings
Relating to the Efforts of the People's Republic of China
to Influence U.S. Policies and Elections................... 2499
19. Charlie Trie's and Ng Lap Seng's Laundered Contributions
to the DNC................................................. 2517
20. Charlie Trie's Contributions to the Presidential Legal
Expense Trust.............................................. 2711
21. The Saga of Roger Tamraz................................. 2905
22. DNC Efforts to Raise Money in the Indian Gaming Community 3071
23. The Hudson, Wisconsin Casino Proposal.................... 3165
24. The Cheyenne and Arapaho Tribes: Their Quest for the Fort
Reno Lands................................................. 3547
25. The Offer of R. Warren Meddoff........................... 3623
26. White House, DNC and Clinton-Gore Campaign Fundraising
Efforts Involving the International Brotherhood of
Teamsters.................................................. 3655
27. Compliance by Nonprofit Groups with Committee Subpoenas.. 3833
28. Role of Nonprofit Groups in the 1996 Elections........... 3993
29. Allegations Relating to the National Policy Forum........ 4195
30. White House Document Production.......................... 4277
31. DNC Document Production.................................. 4425
32. Campaign Finance Reform Issues Brought to the Forefront
by the Special Investigation............................... 4459
33. Recommendations.......................................... 4503
Additional Views
34. Additional Views of Chairman Fred Thompson............... 4511
35. Additional Views of Senator Susan Collins................ 4535
36. Additional Views of Senator Arlen Specter................ 4539
37. Additional Views of Senator Robert Bennett............... 4545
Minority Views
38. Additional Views of Senators Glenn, Levin, Lieberman,
Akaka, Durbin, Torricelli and Cleland...................... 4557
39. Additional Views of Senator Glenn........................ 9507
40. Additional Views of Senator Levin........................ 9511
41. Additional Views of Senator Lieberman.................... 9525
42. Additional Views of Senator Akaka........................ 9559
43. Additional Views of Senator Durbin....................... 9565
44. Additional Views of Senator Torricelli................... 9571
MINORITY VIEWS OF SENATORS GLENN, LEVIN, LIEBERMAN, AKAKA, DURBIN,
TORRICELLI AND CLELAND
Table of Contents
Page
Foreword......................................................... 4559
Executive Summary................................................ 4561
Part 1 Foreign Influence........................................ 4577
Chapter 1: Overview and Legal Analysis........................... 4577
Findings..................................................... 4577
Overview of Following Chapters............................... 4577
Legal Analysis............................................... 4579
Chapter 2: The China Plan........................................ 4619
Findings..................................................... 4620
Introduction................................................. 4621
The Committee's Investigation................................ 4623
Background................................................... 4623
The China Plan............................................... 4625
Events Leading up to the China Plan...................... 4625
Information about the China Plan......................... 4626
Implementation of the China Plan......................... 4627
Legal Activities......................................... 4627
Illegal Activities....................................... 4628
Individuals Under Investigation and the China Plan....... 4628
Ted Sioeng............................................... 4629
John Huang and Maria Hsia................................ 4630
The Riadys............................................... 4630
Intermediaries: Relation to the Committee's Public
Investigation.......................................... 4631
Political Contributions to Federal Elections............. 4632
Political Contributions: Relation to the Committee's
Public Investigation................................... 4633
Information not Pursued by the Committee..................... 4633
Conclusion................................................... 4634
Chapter 3: The National Policy Forum............................. 4657
Findings..................................................... 4657
Introduction................................................. 4657
Haley Barbour................................................ 4659
Ambrous Young................................................ 4659
Origin Of the National Policy Forum.......................... 4660
The Barbour-Baroody Split................................... 4661
Funding the NPF.............................................. 4661
Baroody Resigns.............................................. 4662
The NPF Under John Bolton.................................... 4663
Barbour Solicits Ambrous Young............................... 4665
The Loan Transaction......................................... 4666
Funding the Contract With America............................ 4668
The Trip to Hong Kong........................................ 4669
The Trip to China............................................ 4670
The Default.................................................. 4670
Other Foreign Contributions.................................. 4671
Conclusion................................................... 4672
Chapter 4: John Huang............................................ 4788
Findings..................................................... 4788
Huang's Early Career......................................... 4789
Background on the Lippo Group................................ 4790
Huang's Activities on Behalf of the Lippo Group.............. 4791
Political Contributions.................................. 4792
Huang's Tenure at the Department of Commerce................. 4794
Huang's Appointment...................................... 4794
Huang's Role at Commerce................................. 4796
Huang's Security Clearance and Access to Classified
Information............................................ 4798
Granting of Top Secret Clearance......................... 4799
Huang's Access to Classified Information................. 4800
Huang's Use of the Stephens Office....................... 4802
Huang's Post-Commerce Clearance.......................... 4803
No Evidence of Espionage................................. 4806
Evidence of Solicitations of Contributions............... 4808
Hiring Huang to Work at the DNC.............................. 4811
Huang's Understanding of Applicable Law.................. 4813
Huang's Fundraisers...................................... 4814
February 1996 Hay Adams APALC Events, Washington, D.C.... 4814
May 13, 1996 Sheraton Carlton Event, Washington, D.C..... 4816
July 22, 1996 Century Plaza Hotel Event, Los Angeles..... 4816
July 30, 1996 Jefferson Hotel Event, Washington, D.C..... 4817
Other Huang Activities................................... 4818
Hsi Lai Temple Event..................................... 4818
The Vice President and the Temple Event.................. 4819
John Huang and the Temple Event.......................... 4831
John H. K. Lee and the Cheong Am America Contribution.... 4832
June 18, 1996, DNC Coffee at the White House............. 4836
Rawlein Soberano......................................... 4838
The DNC's Supervision of Huang........................... 4839
Conclusion................................................... 4840
Chapter 5: Charlie Trie.......................................... 5270
Findings..................................................... 5270
Background................................................... 5271
Trie's DNC Contributions and Fundraising..................... 5272
Trie's DNC Contributions................................. 5272
Trie's DNC Fundraising................................... 5274
Chu and Wang Contributions................................... 5275
DNC Awareness of Trie's Activities........................... 5276
Trie's Fundraising for the Presidential Legal Expense Trust.. 5277
Trie's March 21, 1996 Meeting with Cardozo............... 5278
Investigation into the Contributions..................... 5279
The Trust's Decision to Reject the Contributions......... 5281
The Trust's Change in Accounting Procedures.............. 5282
Foreign Funds............................................ 5283
Analysis................................................. 5284
Trie's Access to White House and DNC Events.................. 5285
Trie's Commission Appointment................................ 5287
Trie and Wang Jun at the White House......................... 5289
Wang Jun's Invitation to the White House Coffee.......... 5290
Role of Ernest Green..................................... 5291
Analysis................................................. 5292
Trie and China............................................... 5293
Chapter 6: Michael Kojima........................................ 5413
Findings..................................................... 5413
Contribution History......................................... 5415
Kojima's Access to the White House and Other Perks........... 5415
The Bush White House and Fundraising......................... 5418
GOP Claimed No Duty to Investigate........................... 5423
Foreign Funds................................................ 5425
Failure to Conduct a Federal Investigation................... 5427
Conclusion................................................... 5428
Chapter 7: Ted Sioeng............................................ 5573
Findings..................................................... 5573
Ted Sioeng's Background...................................... 5573
Sioeng's Connections to China................................ 5574
The ``China Plan'' and Ted Sioeng............................ 5576
The Sioeng Family's Contributions to Matt Fong in April 1995. 5576
The Source of Sioeng's April 1995 Contributions to Fong...... 5578
Fong Arranges for Sioeng to Meet Speaker Gingrich............ 5578
The Sioeng Family's Contributions to the National Policy
Forum...................................................... 5579
The Sioeng Family's Contribution to Matt Fong in December
1995....................................................... 5580
Jessica Elnitiarta's Contributions to the DNC................ 5581
The Hay Adams Fundraiser................................. 5581
Hsi Lai Buddhist Temple Event............................ 5582
Sheraton Carlton Hotel Event............................. 5582
Century City Event and Subsequent $50,000 Contribution... 5583
Conclusion................................................... 5584
Chapter 8: Jay Kim............................................... 5683
Findings..................................................... 5683
The Korea Traders' Club...................................... 5683
Kim's Contribution From His Own Business in 1992............. 5684
The Kim's Acceptance of Corporate Funds...................... 5684
Acceptance of Funds From Foreign Nationals................... 5685
Alleged Violations During the Federal Investigation.......... 5686
The Conviction of Kim's Former Campaign Treasurer............ 5686
Possible Election Law Violations During the 1996 Cycle....... 5687
Kim's Commitment to Compliance With U.S. Election Laws....... 5688
The Kims' Book Deal.......................................... 5689
Conclusion................................................... 5690
Part 2 Independent Groups....................................... 5926
Chapter 9: Overview and Legal Analysis........................... 5926
Findings..................................................... 5926
Overview of Following Chapters............................... 5926
1996 Election-Related Activities......................... 5927
Legal Analysis............................................... 5928
Categories of Independent Groups......................... 5929
Disclosure............................................... 5930
Coordination............................................. 5930
Circumvention............................................ 5933
Third Party Contributions................................ 5934
Violations of Tax Law.................................... 5934
Chapter 10: The Republican Party and Independent Groups.......... 5967
Findings..................................................... 5967
Introduction................................................. 5967
RNC Ties to Independent Groups............................... 5969
Coalition Plans.......................................... 5969
Coordination during the 1996 Election Cycle.............. 5973
RNC Funding of Independent Groups........................ 5974
RNC Funding Schemes in the 1996 Election Cycle........... 5975
RNC Contributions and Fundraising Help in 1996........... 5976
Circumventing Campaign Finance Laws...................... 5978
The RNC's Front Organizations................................ 5979
The National Policy Forum................................ 5980
Coalition for Our Children's Future...................... 5981
Fronts For Conservative Donors............................... 5981
CCF's Attack Ads......................................... 5981
Triad's Attack Ads....................................... 5982
Triad's Donors........................................... 5982
Conclusion................................................... 5983
Chapter 11: Americans for Tax Reform............................. 6034
Findings..................................................... 6034
Background................................................... 6034
Grover Norquist.............................................. 6035
The $4.6 Million October Surprise............................ 6037
ATR Televised Attack Ads..................................... 6041
ATR Candidate Advocacy....................................... 6043
ATR: Coordinated Efforts in 1996 to Elect Republicans To
Office..................................................... 6048
RNC-Directed Contributions to ATR............................ 6050
ATR and RNC's Refusal to Cooperate........................... 6051
Possible Civil, Criminal, and Tax Law Violations............. 6052
Circumvention............................................ 6052
Coordination............................................. 6053
Disclosure............................................... 6053
Tax Laws................................................. 6054
Conclusion................................................... 6055
Chapter 12: Triad and Related Organizations...................... 6289
Findings..................................................... 6289
Introduction................................................. 6290
Background................................................... 6290
The Committee's Investigation of Triad....................... 6291
The Political Operation of Triad Management.................. 6293
Triad is Not a Business.................................. 6293
Robert Cone's Financial Support of Triad................. 6293
Corporate Contributions by Triad......................... 6294
Triad and Political Action Committees.................... 6297
The Advertising Campaign..................................... 6301
Creation of Citizens for Reform and Citizens for the
Republic............................................... 6301
Improper Coordination of Triad's Advertising with
Political Candidates................................... 6303
No Comparison Between Triad and the AFL-CIO.............. 6306
Financing the Advertising Campaign....................... 6307
The Trusts Behind Triad.................................. 6308
Economic Education Trust................................. 6309
Triad's Impact on the 1996 Elections..................... 6312
Advertising by Other Triad Contributors.................. 6312
Conclusion................................................... 6313
Chapter 13: Coalition for Our Children's Future.................. 6771
Findings..................................................... 6771
Background................................................... 6771
RNC Ties to CCF.............................................. 6772
CCF's 1995 Advertising Campaign.......................... 6774
CCF and its Exempt Organization Status................... 6775
CCF 1996 Advertising for Republican Candidates............... 6777
The Secret Trust and CCF's 1996 Election Advertising......... 6780
Did CCF's Secret Contributor Fund Triad Attack Ads?...... 6781
Conclusion................................................... 6782
Chapter 14: Christian Coalition.................................. 6934
Finding...................................................... 6934
Background................................................... 6934
Pat Robertson and Ralph Reed................................. 6935
Voter Guides Before the 1996 Election Cycle.................. 6937
Distortion of Candidates' Positions on Issues................ 6937
Voter Guides in the 1996 Election Cycle...................... 6938
Coalition Officials Endorsed Candidates...................... 6941
Coalition Ties to the Republican Party....................... 6944
Coalition Activity in State Elections........................ 6947
FEC Action................................................... 6949
Conclusion................................................... 6951
Chapter 15: Other Independent Groups............................. 7051
Seniors Organizations........................................ 7051
Term Limits Groups as Fronts for GOP Donors.................. 7053
Nonprofit Groups Linked to Presidential Candidates........... 7055
Conclusion................................................... 7055
Chapter 16: The Democratic Party and Independent Groups.......... 7062
Findings..................................................... 7062
Chapter 17: Warren Meddoff....................................... 7064
Findings..................................................... 7064
Warren Meddoff............................................... 7064
Meddoff and the October 1996 Fundraiser...................... 7065
Ickes Conversations With Meddoff............................. 7066
No Evidence of Illegal Coordination.......................... 7067
Ickes's Alleged Direction to Meddoff to Shred the Fax........ 7068
Meddoff's Credibility........................................ 7068
The DNC'S Refusal of the Contribution Offer.................. 7071
Fundraising on Federal Property.............................. 7072
Conclusion................................................... 7073
Chapter 18: Teamsters............................................ 7102
Findings..................................................... 7102
Teamster Contributions....................................... 7102
Martin Davis's Initial Contacts With DNC Officials....... 7103
Judith Vasquez's Contribution to Vote Now '96............ 7104
Teamsters' Contributions................................. 7105
Sullivan's Role.............................................. 7106
Proposed Contribution to Unity '96........................... 7107
DCCC Executive Director Rejected the Proposal............ 7107
DCCC Chairman Rejected the Proposal...................... 7108
DSCC Deputy Executive Director Rejected the Proposal..... 7108
DSCC Chairman Rejected the Proposal...................... 7109
The Proposal and Unity '96............................... 7109
Conclusion................................................... 7109
Chapter 19: Other Independent Groups............................. 7235
Findings..................................................... 7235
Overview..................................................... 7235
The DNC and Independent Groups............................... 7236
Activities of Independent Groups............................. 7237
The AFL-CIO.............................................. 7237
Vote Now '96............................................. 7238
Citizen Action........................................... 7239
National Council of Senior Citizens...................... 7239
Conclusion................................................... 7239
Part 3 Contribution Laundering/Third Party Transfers............ 7241
Chapter 20: Overview and Legal Analysis.......................... 7241
Finding...................................................... 7241
Overview of Following Chapters............................... 7241
Legal Analysis............................................... 7242
Chapter 21: Contributions to the Democratic Party................ 7244
Findings..................................................... 7244
Keshi Zhan, Yue Chu, and Xiping Wang......................... 7246
Pauline Kanchanalak.......................................... 7248
Yogesh Gandhi................................................ 7249
Hsi Lai Temple Monastics..................................... 7253
Arief and Soraya Wiaridinata................................. 7256
The Lum Family............................................... 7257
Conclusion................................................... 7258
Chapter 22: Contributions to the Republican Party................ 7372
Findings..................................................... 7372
Michael Kojima............................................... 7372
Aqua Leisure Industries, Inc................................. 7375
Empire Sanitary Landfill, Inc................................ 7377
Deluca Liquor and Wine, Ltd.................................. 7378
Conclusion................................................... 7379
Part 4 Soft Money and Issue Advocacy............................ 7515
Chapter 23: Systemic Problems of the Campaign Finance System..... 7515
Findings..................................................... 7515
Introduction................................................. 7515
Soft Money................................................... 7516
Background on Soft Money................................. 7516
Soft Money Finds a Way into Federal Elections............ 7517
Soft Money Creates the Appearance of Corruption and
Undermines Public Financing............................ 7519
Disclosure of Soft Money................................. 7520
Issue Advocacy............................................... 7521
Background on Issue Ads.................................. 7522
Proposals for Reform......................................... 7524
Kassebaum-Baker/Mondale.................................. 7525
League of Women Voters................................... 7525
Common Cause............................................. 7526
Campaign Reform Project.................................. 7526
Public Campaign.......................................... 7526
Disclosure Only.......................................... 7526
Conclusion................................................... 7526
Part 5 Fundraising and Political Activities of the National
Parties and Administrations.................................... 7540
Chapter 24: Overview and Legal Analysis.......................... 7540
Finding...................................................... 7540
Overview of Following Chapters............................... 7540
Legal Analysis............................................... 7541
Taking Official Action in Exchange for a Contribution.... 7541
Use of Federal Property.................................. 7542
Use of Federal Employees................................. 7544
Spending Limits, Coordination and Issue Advocacy......... 7546
Chapter 25: DNC and RNC Fundraising Practices and Problems....... 7595
Findings..................................................... 7595
Introduction................................................. 7596
Structure of the National Parties............................ 7598
The Democratic National Committee........................ 7598
The Republican National Committee........................ 7599
Fundraising Drives........................................... 7600
Soliciting Contributions..................................... 7600
Training Fundraisers..................................... 7601
The DNC's Training Procedures and Problems............... 7601
The RNC's Training Procedures and Problems............... 7602
Contribution Compliance.................................. 7602
The DNC's Contribution Compliance and Problems........... 7602
The RNC's Contribution Compliance and Problems........... 7603
Telephone Solicitations from Federal Property............ 7605
Organizing Fundraisers and Other Events...................... 7605
DNC Events and Contributor Services...................... 7605
RNC Events and Contributor Services...................... 7606
Spending Party Funds......................................... 7607
DNC'S Splitting Contributions Between Hard and Soft Money
Accounts................................................... 7608
Conclusion................................................... 7609
Chapter 26: Telephone Solicitations From Federal Property........ 7773
Findings..................................................... 7773
Presidential Telephone Calls................................. 7773
Richard Jenrette......................................... 7774
Vice Presidential Telephone Calls............................ 7776
Purpose of the Phone Calls............................... 7777
Raising Soft Money....................................... 7780
DNC Splitting Contributions Between Hard and Soft Money
Accounts............................................... 7781
Applicability of the Pendleton Act....................... 7783
The Contributors......................................... 7783
Payment for the Phone Calls.............................. 7783
Payment for the Thank-You Notes.......................... 7784
No Other Costs to the Government......................... 7784
Republican Phone Calls....................................... 7785
Conclusion................................................... 7786
Chapter 27: White House Coffees and Overnights................... 7956
Findings..................................................... 7956
DNC Coffees at the White House............................... 7956
The Coffees and Fundraising.............................. 7957
The Coffees as DNC Events................................ 7959
The Law and Precedent.................................... 7960
White House Overnights....................................... 7960
Conclusion................................................... 7961
Chapter 28: Republican Use of Federal Property and Contributor
Access......................................................... 7968
Findings..................................................... 7968
Major Contributor Access to Elected Officials................ 7968
Republican Eagles........................................ 7968
Team 100................................................. 7970
Other Republican Events and Meetings for Contributions... 7972
Use of Federal Property For Fundraising...................... 7975
Political Appointments Awarded to Republican Contributors.... 7977
Conclusion................................................... 7978
Chapter 29: Democratic Contributor Access to the White House..... 8057
Findings..................................................... 8057
Introduction................................................. 8057
The Secret Service........................................... 8058
The White House Office of Political Affairs.................. 8059
The National Security Council................................ 8060
Previous NSC Procedures.................................. 8061
Current NSC Procedures................................... 8062
Other Issues............................................. 8063
Conclusion................................................... 8065
Chapter 30: Roger Tamraz......................................... 8095
Findings..................................................... 8095
Overview..................................................... 8095
1970-1990: Tamraz's Business Ventures, Dealings With the CIA
and Political Contributions................................ 8096
Business Ventures........................................ 8096
Reported Contacts with the CIA........................... 8097
RNC's Recommendation for a Reagan Administration Position 8097
Tamraz Leaves Lebanon after Embezzlement Charges......... 8098
1994-1995: The Commerce Department........................... 8098
1995: The Caspian Sea Pipeline............................... 8099
U.S. Policy on the Caspian Sea Pipeline.................. 8099
May-June 1995: Meetings with Executive Branch Officials.. 8100
Bob of the CIA........................................... 8101
July-October 1995: Contributions to the Democratic Party..... 8103
Contribution History..................................... 8103
The DNC's Acceptance of Tamraz's Contributions........... 8103
September 1995: Request For an Official Meeting With the Vice
President.................................................. 8104
Tamraz's Attendance at DNC Events............................ 8105
Summary of Events........................................ 8105
Fowler's Role............................................ 8105
No Effect on Policy...................................... 8107
April 1996: Department of Energy Official Talks to Heslin.... 8107
Tamraz's Attendance at March 27 and April 1, 1996 DNC
Events................................................. 8107
Follow-Up on the Pipeline Project........................ 8108
The Request within the Department of Energy.............. 8109
Carter's Call to Heslin.................................. 8110
Heslin's Testimony....................................... 8110
Carter's Testimony....................................... 8110
The Department of Energy Responds to the Request for
Information Conclusions................................ 8111
Conclusion: Access Still for Sale in 1997.................... 8113
Chapter 31: Other Contributor Access Issues...................... 8250
Findings..................................................... 8250
Johnny Chung................................................. 8250
Political Contributions.................................. 8251
Access to Administration Officials....................... 8251
Link Between Contributions and Visits.................... 8252
Williams's Handling of Chung's $50,000 DNC Contribution.. 8253
The Pendleton Act........................................ 8255
The Hatch Act............................................ 8256
Other Individuals............................................ 8256
Jorge Cabrera............................................ 8256
Grigori Loutchansky...................................... 8257
Wang Jun................................................. 8258
Yung Soo Yoo............................................. 8259
Michael Kojima........................................... 8260
Conclusion................................................... 8260
Chapter 32: Coordination Among the Democratic National Committee
and the Clinton/Gore Campaign and the White House.............. 8281
Findings..................................................... 8282
Introduction and Summary..................................... 8282
The Origin of the DNC's Issue Ads Campaign................... 8282
The DNC and Rules Governing Issue Ads........................ 8283
The DNC Adhered to the Legal Rules Governing Issue Ads....... 8285
The Clinton Campaign and the DNC Campaign.................... 8286
The Legality of Coordination Among the Clinton Campaign,
White House and DNC........................................ 8286
The President's Role in the Making of DNC Issue Ads...... 8286
Ickes's Role in Coordinating with the DNC................ 8287
Conclusion................................................... 8290
Chapter 33: Coordination Between the Republican National
Committee and the Dole for President Campaign.................. 8294
Findings..................................................... 8294
Introduction................................................. 8294
The Origin of the Pro-Dole Issue Ads......................... 8295
Dole for President and the Dole/RNC Campaign................. 8296
The Substance of Dole/RNC Issue Ads.......................... 8297
The Dole/RNC ``Issue Ads'' and Presidential Battleground
States..................................................... 8299
Dole/RNC Issue Ads and Soft Money............................ 8300
Coordination of Fundraising and Political Efforts............ 8301
Dole for President and the RNC Impeded the Committee's
Investigation.............................................. 8302
Conclusion................................................... 8303
Part 6 Allegations of Quid Pro Quos............................. 8368
Chapter 34: Overview and Legal Analysis.......................... 8368
Legal Analysis............................................... 8368
Overview of Following Chapters............................... 8369
Chapter 35: Hudson Casino........................................ 8371
Findings..................................................... 8371
Overview..................................................... 8372
Secretary Babbitt's Remarks to Lobbyist Eckstein............. 8372
Eckstein's Affidavit..................................... 8372
Secretary Babbitt's Letter to Senator McCain............. 8373
Eckstein's Deposition.................................... 8373
Secretary Babbitt's Letter to Chairman Thompson.......... 8374
Secretary Babbitt's Hearing Testimony.................... 8374
Eckstein's Allegations....................................... 8376
Eckstein's Interpretation.................................... 8378
Secretary Babbitt and Lobbyists for the Opposing Tribes...... 8378
Role of the White House...................................... 8379
Lobbyist Contacts with Harold Ickes...................... 8379
White House Requested Status Report from Interior........ 8380
White House Requested Second Status Report from Interior. 8381
White House and Interior Confer on Response to
Congressional Inquiry.................................. 8382
Other Interior and White House Contacts.................. 8382
Eckstein's Access to Interior Officials...................... 8383
Eckstein's Telephone Contacts with Secretary Babbitt..... 8383
The Tribal Applicants' May 1995 Meeting with Interior
Officials.............................................. 8384
Eckstein's July 14 Meeting with Secretary Babbitt........ 8384
The Merits of Interior's Decision on the Hudson Application.. 8385
The Hudson Casino and the Surrounding Community.......... 8385
The Surrounding Communities Opposed the Hudson Casino
Proposal............................................... 8386
Interior Staff Recommended Denial........................ 8387
The Administrative Record................................ 8388
Allegations of Timing and Political Pressure............. 8389
Interior's Final Decision-Maker Acted on the Merits...... 8390
Conclusion................................................... 8390
Chapter 36: Tobacco and the 1996 Election Cycle.................. 8511
Findings..................................................... 8511
The Tobacco Industry's Political Contributions During the
1996 Election Cycle........................................ 8511
Republican Assistance to Tobacco Companies................... 8512
Haley Barbour Assisted Tobacco............................... 8513
Tobacco Settlement and the $50 Billion Tobacco Tax Credit.... 8514
Haley Barbour and Kenneth Kies............................... 8515
Conclusion................................................... 8517
Chapter 37: Cheyenne-Arapaho Tribes of Oklahoma.................. 8539
Findings..................................................... 8539
Overview..................................................... 8539
The Battle Over the Closure of the Fort Reno ARS............. 8540
The Tribes Increase Their Political Activities............... 8543
The Tribes' Contribution to the DNC.......................... 8545
The White House Luncheon..................................... 8547
The President's Birthday Fundraiser.......................... 8552
The Tribes Continue Their Lobbying Efforts................... 8553
The Tribes' Dealings with Mike Copperthite, Nathan Landow,
and Peter Knight........................................... 8554
The Tribes' Dealings with Cody Shearer and Terry Lenzner..... 8560
The Tribes' Contribution is Returned......................... 8561
Conclusion................................................... 8562
Part 7 Investigation Process.................................... 8680
Chapter 38: Laying the Groundwork................................ 8680
Findings..................................................... 8680
Introduction................................................. 8680
Initial Floor Statements By Chairman Thompson and Senator
Glenn...................................................... 8681
Organizational Meeting....................................... 8683
A. Budget................................................ 8683
B. Scope................................................. 8685
C. Process............................................... 8686
D. Termination Date...................................... 8686
First Public Debate On Issuance of Subpoenas................. 8687
Alternative Resolution, S. Res. 61........................... 8687
Rules Committee Appearances.................................. 8687
Final Floor Debate........................................... 8689
The Majority Impeded a Fair Investigation.................... 8689
A. Subpoenas............................................. 8690
B. Consideration of Grants of Immunity................... 8690
C. Interviews............................................ 8691
D. Hearings.............................................. 8692
Conclusion................................................... 8693
Chapter 39: Democratic Compliance Issues......................... 8710
Finding...................................................... 8711
DNC Cooperation and Compliance............................... 8711
Attorney-Client Privilege Issue.......................... 8712
Late Production of Certain Files......................... 8713
Conclusion................................................... 8713
Chapter 40: Republican Compliance Issues......................... 8775
Findings..................................................... 8775
Introduction................................................. 8775
The First Subpoenas.......................................... 8776
RNC Compliance Issues........................................ 8777
Triad Compliance Issues...................................... 8779
The NPF Order................................................ 8780
NPF Compliance Issues........................................ 8780
ATR Compliance Issues........................................ 8782
Conclusion................................................... 8785
Chapter 41: The Breakdown of Compliance.......................... 8938
Finding...................................................... 8938
Introduction................................................. 8938
Organizations Suggested for Subpoena by the Minority......... 8941
Tax-Exempt Groups Linked to Presidential Campaigns........... 8941
Republican Exchange Satellite Network and Lamar Alexander 8941
Better America Foundation and Bob Dole................... 8942
The American Cause and Pat Buchanan...................... 8943
Other Tax-Exempt Groups...................................... 8943
Citizens Against Government Waste........................ 8943
The Heritage Foundation.................................. 8944
The Coalition: Americans Working for Real Change......... 8944
American Defense Institute/American Defense Foundation... 8945
Citizens for a Sound Economy............................. 8945
Women for Tax Reform..................................... 8946
National Right to Life Committee......................... 8946
The Christian Coalition.................................. 8946
Private Corporations Linked to Contribution Laundering....... 8947
DeLuca Liquor & Wine and Empire Landfill, Danella Inc./
USA Waste Services of Eastern Pennsylvania............. 8947
Organizations Suggested for Subpoena by the Majority......... 8947
National Council of Senior Citizens...................... 8948
Citizen Action........................................... 8949
National Education Association........................... 8949
Vote Now '96............................................. 8950
Campaign to Defeat Proposition 209....................... 8950
The Sierra Club.......................................... 8950
Democratic Leadership Council............................ 8951
EMILY'S List............................................. 8951
National Committee for an Effective Congress............. 8951
American Trial Lawyers Association....................... 8951
Americans United for Separation of Church and State...... 8951
Conclusion................................................... 8952
Chapter 42: White House Tapes.................................... 9331
Findings..................................................... 9331
Overview..................................................... 9331
Video and Audio Taping in the White House.................... 9332
The White House Communications Agency........................ 9333
Videotape Procedures for Coffees............................. 9334
The Initial Failure to Identify Responsive Videotapes........ 9335
White House Definition of Document........................... 9337
White House Search Procedures................................ 9339
White House Responses to Committee Inquiries About Videotapes 9340
Notifying the Department of Justice of the Existence of
Responsive Videotapes...................................... 9344
Deputy White House Counsel and the Videotapes................ 9345
Allegations Concerning Alteration of the Videotapes.......... 9345
Other Production Issues...................................... 9346
The Presidential ``Diary''............................... 9346
WAVE Records Relating to Mr. Wu.......................... 9347
Lisa Berg documents...................................... 9348
Conclusion................................................... 9349
Part 8 Minority Recommendations................................. 9394
Part 9 Response to Majority Report.............................. 9399
Senator Glenn's Additional Views................................. 9507
Senator Levin's Additional Views................................. 9511
Senator Lieberman's Additional Views............................. 9525
Senator Akaka's Additional Views................................. 9559
Senator Durbin's Additional Views................................ 9565
Senator Torricelli's Additional Views............................ 9571
PART 2 INDEPENDENT GROUPS
Chapter 12: Triad
Triad Management, Inc., is a for-profit corporation owned
by Republican fundraiser Carolyn Malenick. Malenick
incorporated Triad in the spring of 1996 but appears to have
operated the business as an unincorporated entity since at
least early 1995. Triad holds itself out as a consulting
business that provides advice to conservative donors about how
to maximize their political contributions. Triad oversaw
advertising in 26 campaigns for the House of Representatives
and three Senate races. Triad's spending may have affected the
outcome of some elections. Because Triad is an unusual
corporation directly involved in federal campaigns, the
Committee investigated its work. Despite the refusal by Triad
and its lawyers to comply fully with the Committee's subpoenas
for both documents and testimony, the Minority developed
substantial evidence of wrongdoing by Triad.
Based on the evidence before the Committee, we make the
following findings with respect to Triad and the two non-profit
organizations that it established:
findings
(1) The evidence before the Committee suggests that Triad
exists for the sole purpose of influencing federal elections.
Triad is not a political consulting business: it issues no
invoices, charges no fees, and makes no profit. It is a
corporate shell funded by a few wealthy conservative Republican
activists.
(2) Triad used a variety of improper and possibly illegal
tactics to help Republican candidates win election in 1996
including the following:
(A) Triad provided free services to Republican
campaigns in possible violation of the federal
prohibition against direct corporate contributions to
candidates. These services included raising funds for
candidates, providing consulting advice on fundraising
and political strategy, and providing staff to assist
candidates,
(B) The evidence before the Committee suggests that
Triad was involved in a scheme to direct funds from
supporters who could not legally give more money
directly to candidates, through political action
committees (``PACs''), and back to candidates. Triad
obtained from Republican candidates names of supporters
who had already made the maximum permissible
contributions and solicited those supporters for
contributions to a network of conservative PACs. In
many instances, the PACs then made contributions to the
same candidates.
(C) Triad operated two non-profit organizations--
Citizens for Reform and Citizens for the Republic
Education Fund--as allegedly nonpartisan social welfare
organizations under 501(c)(4) of the tax code and used
these organizations to broadcast over $3 million in
televised ads on behalf of Republican candidates in 29
House and Senate races. Using these organizations as
the named sponsors of the ads provided the appearance
of nonpartisan sponsorship of what was in fact a
partisan effort conducted by Triad. Neither
organization has a staff or an office, and both are
controlled by Triad. Over half of the advertising
campaign was paid for and controlled by the Economic
Education Trust, an organization which appears to be
financed by a small number of conservative Republicans.
introduction
Triad Management, Inc. (``Triad'') is a corporation which
appears to exist primarily to make contributions to
conservative Republican candidates in an attempt to help them
win election to Congress. Triad claims to be a legitimate
business, but this is mainly so that it can evade the
disclosure and contribution limits of the campaign finance
laws. Triad also created and ran two other shell companies--
Citizens for Reform and Citizens for the Republic Education
Fund (``Citizens for the Republic'')--for the sole purpose of
funneling millions of dollars into political advertising. Even
more troubling is that Triad's nonprofits were, in turn,
largely funded by money from two trusts: the Personal Trust and
the Economic Education Trust. The Minority believes that these
two trusts were controlled by a very small number of wealthy
individuals who sought to keep their identity unknown. The
facts suggest that these individuals spent millions of dollars
to affect over two dozen federal elections despite operating
completely outside of federal election laws.
In the 1996 elections, Triad operated in 26 campaigns for
the House of Representatives and three Senate races. Triad's
spending alone appears to have changed the outcome of some of
those elections. In Kansas, where Triad was particularly
active, it may have changed the results in four of six federal
races, including a Senate race where the Republican candidate
received significant support from Triad.
Most disturbing, Triad is poised to become a model for
future elections. A fundamental premise of the 1976 campaign
law is that voters are entitled to know who is funding
candidates' campaigns. As the Supreme Court noted in upholding
that law: ``[D]isclosure requirements deter actual corruption
and avoid the appearance of corruption by exposing large
contributors to the light of publicity. This exposure may
discourage those who would use money for improper purposes.''
1 The ability of wealthy contributors to finance
million-dollar advertising blitzes without disclosing their
identity to voters fundamentally undermines the spirit and
letter of current campaign finance laws.
---------------------------------------------------------------------------
Footnotes appear at end of chapter 12.
---------------------------------------------------------------------------
background
Carolyn Malenick, the sole owner of Triad, is a graduate of
Jerry Falwell's Liberty University, and press reports have
indicated that she has remained personally close to Falwell and
his family.2 Malenick appears to have spent her
entire professional career in conservative Republican politics,
primarily in the fundraising arena. Malenick initially worked
for the ``conservative direct mail king'' Richard
Viguerie.3 Subsequently, she raised funds for Oliver
North's Freedom Alliance, a nonprofit organization founded by
North in the wake of the Iran-Contra scandal that has been
criticized for raising millions of dollars in undisclosed
funding for North's political activities.4 Malenick
went on to raise funds for North's losing 1994 bid for U.S.
Senate.5 Malenick is also a member of the Council
for National Policy, an organization of ultra-conservative
political activists who work to further their agenda within the
Republican Party.6
According to Malenick's public statements, she personally
conceived the idea for Triad and started the business from her
home, most likely in 1995.7 The stated purpose of
Triad is to provide advice to maximize the effectiveness of
contributions from conservatives.8 In 1996, Malenick
incorporated Triad and established an office on Capitol
Hill.9 Triad is ostensibly a political consulting
firm that simply works for contributors rather than candidates.
Purportedly, Triad generates income from yearly subscription
fees for a fax service, percentage fees for contributions made
at Triad's advice, and management fees for overseeing the two
nonprofits it created, Citizens for Reform and Citizens for the
Republic.10 Triad then employs consultants to
determine which candidates have the best chance of winning and
are thus deserving of financial support from Triad's
clients.11
the committee's investigation of triad
On April 9, 1997, the Committee initiated its investigation
of Triad and its linked entities, Citizens for Reform and
Citizens for the Republic, by issuing subpoenas requiring
production of documents to the Committee. Virtually no
substantive documents were produced for three months, until
July. Further, documents which would ordinarily be retained in
the course of business, including scripts and invoices for
advertising by one of the nonprofit shells, were not produced
and appear not to exist. A February 22, 1997, memo from
Malenick to her employees refers to the completion of the
``cleaning'' of computer hard drives.12 The memo is
dated less than two weeks prior to publication of a Washington
Post article on the subject of Triad and the shell
companies.13
After delays in document production and protracted refusals
to consent to voluntary interviews or depositions, on July 11,
Chairman Thompson signed deposition subpoenas for 11
individuals associated with Triad.14 On September 8,
after only two-and-a-half depositions of people with knowledge
of the events under investigation had been completed, the
Committee received a letter from Triad's counsel.15
He wrote: ``[f]rom press accounts, our clients have been
substantially more cooperative that other organizations.
Accordingly, we will not permit additional depositions . . .''
16 Not only was the assertion of cooperation dubious
at best, but counsel set forth no valid basis for Triad's
obstruction. In a traditional litigation setting, such a
refusal to appear and answer pursuant to subpoena would likely
result in a finding of contempt and sanctions against these
individuals.17
At the time Triad employees and consultants defied the
personal subpoenas issued by the Committee, ten individuals--
including all senior-level decision-makers--were under personal
subpoenas to appear and answer questions. Also refusing to
appear for deposition was Triad attorney Mark Braden. Braden is
a former general counsel to the Republican National Committee
who advised Triad throughout the period in which it carried out
many of its apparently illegal activities. Although three
individuals subsequently appeared for deposition, none answered
any substantive questions. Carolyn Malenick herself, for
example, eventually appeared for deposition and then refused to
answer any substantive questions posed by Committee
staff.18 Prior to the blanket refusal to appear, the
Committee had already established that Triad had made
significant corporate contributions to Republican candidates;
found evidence of illegal earmarking of political action
committee contributions; found evidence that Triad coordinated
its advertising campaign with Republican candidates; and found
evidence that the nonprofit shells had no independent existence
apart from Triad.
Malenick and her backers and associates joined officials
from the RNC and other pro-Republican groups as the only
individuals to blatantly defy deposition subpoenas issued by
the Committee. No individuals associated with Democratic
entities who received personal subpoenas to appear before this
Committee and answer questions either refused entirely to
appear, or issued a blanket refusal to answer.19
Yet, no order was ever issued to enforce the subpoenas or to
hold Triad, its employees, officers, and directors in contempt
of the Senate.
Not only were the Committee's subpoenas not enforced, the
Majority reneged on its commitment to allow three days of
hearing time on the subject of abuses by Republican
organizations, including Triad, despite overwhelming evidence
that these groups had engaged in improper, and likely illegal,
conduct. Further, in possibly the most telling failure of this
investigation, no subpoena was issued for records of the
Economic Education Trust, a secret entity that provided over
half of the funding for Triad's advertising campaign. As a
result, the identity of the figures behind the Economic
Education Trust and the amount of money they spent funding
secret advertising campaigns through groups like Triad in the
1996 election remains unconfirmed.
Two Republican members of the Senate had links to Triad.
One Senator received the benefit of more Triad advertising
dollars than any other candidate in 1996. He also had several
meetings with Malenick and Triad staff, and his campaign was
involved in receipt of PAC contributions involving Triad.
Another Senator appeared in a Triad marketing video that was
intended to help Triad raise funds for federal candidates. The
video was filmed in his Senate office, possibly violating
prohibitions on the use of Senate offices for fundraising and
commercial purposes. In late 1997, a spokesman for that Senator
said the video was a mistake.20
Despite the obstruction by Triad and its lawyers, and
despite the lack of enforcement by the Committee, the Minority
developed substantial evidence of wrongdoing by Triad and its
nonprofit shell organizations. The evidence shows that Triad
carried out an audacious plan to pour millions of dollars in
contributions into Republican campaigns nationwide without
disclosing the amount or source of those contributions.
the political operation of triad management
Triad is not a business
The Committee's investigation has shown that Triad is not a
business in the conventional sense, because it charges no fees
and generates no profit. Triad did not produce a single client
bill or invoice to the Committee, nor were any marketing
materials produced which mentioned fees or discussed a fee
structure.21 Neither the bookkeeper nor the finance
director of Triad could tell the Committee how Triad billed its
clients. While Triad finance director Meredith O'Rourke
recalled seeing a sheet of paper with a fee structure on it,
she could not recall if fees were paid on a monthly, weekly, or
yearly basis.22 She could not explain how fees were
calculated and could only say that clients were paying for
``advice'' but could not recall the ``specifics'' of
it.23 Triad bookkeeper Anna Evans, when asked about
the fee structure, said she could not state how clients were
billed or on what basis. Asked about whether clients were
billed for travel by Triad staff, she responded, ``I'm not
involved in agreements that are reached between Carolyn and the
clients.'' 24
In telephone interviews, a number of people who confirmed
that they contributed to PACs at the advice of Triad made no
mention of paying fees.25 At least one individual,
Floyd Coates, stated that he did not pay Triad for the
contribution advice he received.26 Another person
who made contributions at Triad's advice stated he had learned
of Triad from his friend Robert Cone and that he regarded
Malenick as the organization's executive
secretary.27
Robert Cone's financial support of triad
The evidence shows that at least through the second half of
1995, and into 1996, Triad was largely a vehicle for a single
conservative activist, Robert Cone. According to Triad
bookkeeper Evans, money was given to Triad from a single
principal donor ``so it could proceed with its work.''
28 Bank records show that between June 1995 and
January 1996, Triad received a total of $196,000 in
deposits.29 Of this total, Cone provided $175,000,
or 89 percent of Triad's funding.30 Through the end
of 1995, Cone's payments were made in increments of
approximately $25,000 per month.31 During this
period, Triad received only $1,376 from sources other than Cone
or fellow conservative Lorena Jaeb.32 Between
January and September 1996, Triad received a total of $1.1
million. Of this amount, at least $150,000 was received from
Robert Cone, while $900,000 was received from unknown sources
in wire transfers of $50,000 or more. Only $17,000 is known to
have come from non-Cone sources.33 The total amounts
received by Triad from Cone may be even larger. Asked to
estimate the cumulative amounts received from its principal
donor, Triad bookkeeper Evans estimated that Triad had received
between $600,000 and $700,000 from this source, while one of
the two nonprofits received $900,000, and the other received
between $400,000 and $500,000.34
Cone, a businessman based in Elverson, Pennsylvania, is a
well known social conservative who backs anti-abortion
causes.35 However, it was not until the last few
years that he began devoting large sums of money to political
causes. Cone, who together with his brother, Edward, formerly
owned Graco Children's Products, initially made political
contributions to a number of candidates who supported tort
reform shortly after Graco was sued in a series of product
liability cases.36 In 1996, Cone created a state-
level political action committee in Pennsylvania, which has
come under media scrutiny because he is the committee's only
contributor.37 It was reported as early as October
1996 that Cone along with Malenick visited staff in a
Republican Senator's office to promote Triad.38 Cone
also appears in Triad's marketing video and attended a
presentation of the results of a national poll commissioned by
Triad he attended.39
While Triad holds itself out as a for-profit consulting
business, the evidence before the Committee indicates that it
charges no fees and is primarily funded by Cone. As discussed
below, Triad's business activities were confined to activities
designed to affect the outcome of federal
elections.40 In effect, Cone used Triad as a vehicle
to provide in-kind contributions to Republican candidates
nationwide, contributions that in many instances he would have
been prohibited from making himself, as he had already reached
his personal annual contribution limit with contributions to
PACs and to individual candidates.41 Because Triad's
sole purpose is to influence the election of conservative
Republican candidates, legally it should publicly disclose its
activity to the Federal Election Commission, like any other
political party or political action committee that exists to
influence federal elections.42
Corporate contributions by Triad
As a corporation, Triad is prohibited from making
contributions to the campaigns of political
candidates.43 When providing services to campaigns,
corporations such as Triad are required to charge commercially
reasonable rates. Any failure to charge such market rates can
result in the services being deemed illegal ``in-kind''
corporate campaign contributions.44 Triad,
generously funded by Cone and others, apparently never charged
fees. Instead, Triad provided political consulting services to
numerous Republican campaigns free of charge. Triad raised
funds for candidates from PACs and from individuals and advised
candidates on fundraising and on matters of political strategy,
often sending consultants to meet with candidates and observe
the campaign structure. These free services would appear to
constitute illegal corporate contributions from Triad to the
campaigns.
While Triad publicly claimed to act as a consultant only to
contributors, its activities were, in fact, more broadly based.
From Triad's offices, Malenick provided advice to candidates on
subjects as varied as raising funds from PACs, to where to live
if elected.45 Triad finance director Meredith
O'Rourke, who was based in Triad's Washington office throughout
1996 and shared an office with Malenick, testified that
Malenick spoke to dozens of Republican candidates in 1996 and
that she herself frequently spoke to candidates about
fundraising, polling, and how their campaigns were going in
general.46 Robert Riley, Jr., son of a successful
candidate for the House of Representatives in 1996, told a
Committee investigator that he was initially put in touch with
Malenick as a person who could secure financial support from
PACs for his father.47 Representative John Thune of
South Dakota, when asked about Malenick's receipt of a check
from his campaign committee, explained that he had traveled to
Washington, and Malenick had spent a couple of days showing him
around and introducing him to people.48
Triad also made in-kind contributions to candidates in the
form of advice from experienced political consultant Carlos
Rodriguez. Prior to becoming a consultant for Triad, Rodriguez
was known primarily for his work on behalf of California
Republicans. In one incident, while he was working for
Republican State Assembly candidate Curt Pringle, he was
reportedly responsible for posting uniformed guards outside
Orange County, California, polling places to discourage Latino
voters.49 Through November 1996, Rodriguez traveled
the country assessing the chances of various conservative
Republican candidates and offering advice to candidates and
campaigns along the way. Paid $20,000 a month by Triad,
Rodriguez wrote reports of his visits to at least 53
congressional districts and campaigns.50 At the same
time, Rodriguez advised the campaigns on issues from the hiring
of particular consultants, to the utility of phone banks, to
the effectiveness of advertising, and how to develop
fundraising plans.51 The assessments performed by
Rodriguez also document the high level of personal contact
between candidates and Triad. Many reports indicate a personal
meeting with the candidate, or, at a minimum, a meeting with
senior campaign staff. Many reports were also executed just
prior to the final decision-making period on advertising buys
in September and early October. In addition to these visits,
according to Triad's attorneys, Triad may have actually funded
visits to as many as 250 Republican campaigns during
1996.52 Thus, there is no doubt that candidates were
aware of Triad's activities, and in most cases at least appear
to have welcomed the activity.
The ostensible purpose of the Triad campaign site visits
was for Triad to assess each candidate's viability and thus
determine if the campaign was deserving of Triad-generated
financial support. Triad also used the site visits as occasions
to give strategic advice on such issues as selection of
vendors, and advisability of polling, mailings, and phone
banks.
For example, Rodriguez strongly encouraged the campaign of
Jay Mathis, a House candidate in Texas, to engage a phone bank
operation.53 Another site visit report by Rodriguez
described the particulars of his campaign-consulting
activities: ``I gave them a plan to work out with regards to
fundraising, establishing specific goals and programs to meet
those objectives.'' 54 In the case of Christian
Leinbach, a House candidate from a Pennsylvania district near
Robert Cone, Rodriguez wrote: ``I have suggested to Christian
Leinbach specific steps that need to be taken regarding his
fundraising. I have asked the campaign chairman to inform me if
Christian Leinbach does what he has been told he needs to do.''
55
In other instances, Rodriguez advised campaigns to hire
vendors with whom Triad, or at least Rodriguez, already had
relationships. For example, in the report on Jim Ryun, a House
candidate in Kansas, Rodriguez wrote that the bad points about
the campaign included the lack of a campaign structure. He
noted that he had recommended Chris Wilson of Fabrizio &
McLaughlin as ``they are already doing Snowbarger next door and
Todd Tiahrt's reelect and as such have a good knowledge of the
state.'' 56 Fabrizio and McLaughlin also worked
directly for Triad in 1996 and had previously worked with
Rodriguez on the 1994 campaign of Indiana Representative David
McIntosh.57 Wilson was also Rodriguez's choice for
Steve Stockman's House campaign in Texas: ``Should [the
existing pollster] not be ready to go into the field, I have
suggested in very strong terms to Steve Stockman that he
consider replacing [him] with Chris Wilson from Fabrizio
McLaughlin who has intimate knowledge of Texas and Stockman's
own district.'' 58 For House candidate Mark Sharpe
of Florida, Rodriguez recommended his own former partner David
Gilliard as a paid consultant: ``In addition I recommended . .
. that Gilliard do their advocacy direct mail to add punch to
their campaign.'' 59
Triad also provided staff to assist directly at least one
candidate in raising funds. O'Rourke testified that on two
occasions she went to the National Republican Congressional
Committee to assist a member of the House of Representatives
who was a candidate for the Senate in ``dialing for dollars.''
60 Although Triad counsel Mark Braden has publicly
insisted that O'Rourke was not acting as an employee of Triad
when she assisted that candidate,61 O'Rourke (with
Braden present) testified that Malenick arranged her initial
meeting with that candidate:
Q: The first time you met with [the Senate candidate]
was at the NRCC and I think you said Carolyn [Malenick]
had set it up, is that correct?
A: Correct.62
In addition to providing advice and fundraising assistance
to candidates, Triad worked to raise funds for individual
candidates.63 One common means that Triad used to
solicit contributions was a sophisticated system of fax
messaging that could simultaneously send information to many
persons. The faxes, written by Malenick, were sent to
conservative Republicans and contained general information on a
number of campaigns. Triad also used its fax system to urge
support or defeat for particular candidates. For example, a
November 15 fax discussing run-off elections exhorts:
``Stockman needs our help and we must answer the call.''
64 A July 18 fax, sent just before the Kansas
primary, claims: ``The election of Brownback will send shock
waves through the Republican national convention! Sheila Frahm
must be defeated.'' 65 By expressly advocating the
election and defeat of candidates, these faxes by Triad appear
to be illegal corporate contributions to the
campaigns.66 While no witness could tell the
Committee how many people received the faxes, one fax alert
notes that ``over 160 businessmen and women have been added to
the Fax Alert in the last 18 months.'' 67 In one fax
sent shortly before the November 5 election, entitled ``TOP
TIER RACES IN NEED OF CASH $$,'' Triad solicited contributions
for 26 candidates.68 Of the 26 candidates, 19 also
benefitted from advertising, mail, or telephone attacks on
their opponents from Triad's affiliated organizations, Citizens
for Reform or Citizens for the Republic. Essentially, Triad
acted as a volunteer fundraising consultant for Republican
campaigns, illegally facilitating contributions to the
candidates.69
These services--the solicitation of contributions, visits
to and assessment of campaigns, general advice, introductions
to PAC funding sources, and express advocacy on behalf of
specific candidates--summarize the day-to-day activities of
Triad up to September 1996. While these activities do not
significantly differ from the day-to-day business of other
political consultants, Triad's activities are fundamentally
problematic because Triad was not paid by the candidates but
was largely financed by a single individual. Triad's
activities, therefore, appear to have constituted illegal
corporate contributions from Triad to the candidates it
assisted.
Triad and political action committees
Triad also worked to generate contributions to conservative
political action committees. Moreover, PACs for which Triad
solicited contributions frequently gave to candidates who had
received contributions from the same PAC contributors. If these
contributions were merely coincidental, no violation of federal
law occurred. However, if either the contributor or Triad
suggested or implied to anyone at the PAC that contributions
should be made to a particular candidate, and the contributor
had also made the maximum contribution to the candidate, the
contribution is considered illegally ``earmarked.''
70
The pattern of candidate contributions made by PACs
receiving Triad-solicited contributions suggests that
earmarking did occur. An examination of the public records of
approximately ten conservative political action committees
shows that on a number of occasions multiple PACs received
checks from the same individual within a matter of days. All of
the PACs receiving the contributions then made contributions to
one candidate within days of one another. In most cases the
individual contributor had already made the maximum permissible
contribution (``maxed-out'') to the candidate benefitting from
the PAC contribution.
One example of this pattern is the contribution of Robert
Riley, Jr., an Alabama lawyer and the son of congressional
candidate Robert Riley. Between May 9 and May 23,1996, Riley,
Jr. made four contributions to PACs, which appear on an internal Triad
PAC list.71 Between May 23 and May 29, the same four PACs
made contributions to the Riley campaign, two of the PACs within 48
hours of reporting receipt of the Riley contribution.72 On
June 4, Riley, Sr. won the Republican primary. On November 14, the
newly elected Representative Riley was quoted in a Triad fax stating,
``Triad came to our aid in crucial times when we were desperately in
need of funds.'' 73
Another series of contributions was made by John and Ruth
Stauffer. Between July 5 and July 29, the Stauffers made
contributions to seven PACs. Between July 12 and July 29, all
seven PACs contributed to the Senatorial campaign of the
Stauffer's son-in-law. At least one of the checks delivered
stated, ``c/o Triad.'' 74 Shortly after winning the
August 6 primary, the same candidate sent Triad a personally
signed thank-you note which read, ``I cannot even begin to
thank Triad enough for its help in my Senate primary
campaign.'' 75
In her deposition, O'Rourke confirmed that Triad was in
regular contact with individuals who worked for the PACs
receiving the Riley and Stauffer contributions. O'Rourke
testified that either she or Malenick was in contact with
people at the Faith Family and Freedom PAC, the Conservative
Victory Committee, the Eagle Forum, the Conservative Campaign
Fund, Citizens United, the Republican National Coalition for
Life, the Madison Project, and the Sacramento-based Citizens
Allied for Free Enterprise and Americans for Free
Enterprise.76
Malenick had long-term relationships with many of the
people in charge of making the PACs' contributions. Peter
Flaherty, who is responsible for making contributions for the
Conservative Campaign Fund, testified that he had known
Malenick for a number of years. 77 The relationship
with Flaherty is particularly important as he not only oversees
the Conservative Campaign Fund, which made a number of
questionable contributions, but also acts as spokesperson for
one of the nonprofit organizations created by Triad, Citizens
for Reform.78 David Gilliard, the contact for
Citizens Allied for Free Enterprise, is also a director of the
second Triad shell, Citizens for the Republic.79 In
addition, Gilliard produced mailings for Citizens for Reform
and is the former business partner of Carlos
Rodriguez.80 Rodriguez himself worked for the 1994
election campaign of Representative David McIntosh, who is
associated with the Faith, Family and Freedom PAC.81
All of the PACs identified above as well as additional
political action committees implicated in patterns of
suspicious contributions appear on an internal Triad list along
with names and telephone numbers of contacts at each
organization.82
The Committee found evidence that Triad was involved in
each step of the contribution process, from the time a PAC
contribution was solicited from a contributor to the time the
PAC contributed to a candidate. Robert Riley, Jr. told a
Committee investigator that he made his contributions on the
advice of Malenick and that Malenick had held the checks for a
period of time before they were cashed by the
PACs.83 Riley also told the agent that when the
campaign received the contributions from the PACs, the checks
were received not from the PACs themselves, but from
Triad.84 O'Rourke confirmed that, on occasion, she
personally delivered checks to PACs; that she always called a
PAC to let it know that a Triad-solicited check would be
arriving; and that as a general matter people at the PACs knew
when checks they received were the result of Triad
involvement.85
Documents produced to the Committee, along with the
testimony of O'Rourke, also established that Triad had a
regular pattern of soliciting Republican candidates for names
of their supporters who had already contributed the maximum
amounts to their campaigns permitted by law, so that the
supporters could be solicited by Triad for PAC contributions.
O'Rourke confirmed that, on multiple occasions, she solicited
names from Republican candidates and campaign staff of
supporters who might be good ``potential Triad clients.''
86 Candidates who provided names of such potential
contributors included the Senate candidate who received
contributions from the Stauffers, Representative Riley, and
Representative Gutknecht.87 Carlos Rodriguez's
reports also reflect this pattern. In the campaign report of
Texas House candidate Pete Sessions, Rodriguez states: ``[b]oth
Sessions and [the campaign manager] clearly understood the
Triad concept and will have a list of their maxed out donors
for our inspection as soon as there is a call from
Washington.'' 88 In another Texas campaign report,
Rodriguez notes, ``Ed Merritt has a number of maxed out donors
who might want to be introduced to Triad. Towards that end, I
have recommended over the telephone to Meredith O'Rourke that
we check their receptance.'' 89
Triad's pattern of soliciting candidates for the names of
maxed-out contributors was so well-established that Triad used
standard ``phrases'' approved by counsel. A June 13, 1996, memo
from O'Rourke to Triad counsel Mark Braden queries, ``Is this
phrase okay for candidates to use to refer potential clients to
Triad? `There is a business in Washington--whose clients are
donors to conservative causes and campaigns. Call them.' ''
90 Handwriting in the top corner of the memo
indicates that on June 13 ``Braden OK'd quotes.'' 91
Reports of visits to the campaigns by Rodriguez also routinely
note that O'Rourke should get in touch with the campaign
staffer in charge of fundraising after his visit. For example,
in the report on the Rick Hill campaign for the House in
Montana, Rodriguez notes, ``I have advised Betty Hill (the wife
of the candidate and an accomplished campaigner herself) that
she should be receiving a call from Meredith [O'Rourke] in the
days to come to discuss possible Triad clients [who] might be
able to help.'' 92
The public disclosure records of the PACs that appear on
Triad's internal list also indicate that Triad's network of
contributors had relationships with one another and with
Malenick through membership in the Council for National Policy.
For example, the public records for a Sacramento-based PAC,
Citizens Allied for Free Enterprise, which is administered by
David Gilliard, show a number of contributions by Council for
National Policy Members.93 The PAC, established in
November 1995, received a total of 21 contributions. Nine
contributors were members of Robert Cone's family, while four
additional contributors were, like Cone and Malenick, members
of the Council for National Policy.94
Besides the Riley and Stauffer incidents, other
contribution records reveal a pattern whereby contributions
found their way from supporters of particular candidates
through PACs associated with Triad to the candidates the
contributors supported. The records show:
Steve Stockman received three $5,000 contributions
from PACs on Triad's internal list. All three PACs received
$5,000 contributions from Richard Eckburg. Eckburg also made a
$1,000 contribution to Stockman.95
Foster Freiss of Wyoming made a $4,000
contribution to Peter Flaherty's Conservative Campaign Fund on
November 1, 1996. On the same day, the Conservative Campaign
Fund made a $4,000 contribution to Ray Clatworthy, a Senate
candidate in Delaware. The Conservative Campaign Fund made no
other contributions in the amount of $4,000. Freiss also
contributed directly to Clatworthy. On October 31, Freiss made
a $25,000 contribution to Citizens for Reform, for which
Flaherty was spokesman. Citizens for Reform spent $18,000 on
advertising for Clatworthy.96
Peter Cloeren of Orange, Texas, made a
contribution to Texas House candidate Brian Babin in September
1996. On October 14, Cloeren made a $5,000 contribution to
Citizens United. On the same day, Citizens United made a $5,000
contribution to Babin. On October 1, Cloeren made a $20,000
contribution to Triad-affiliated Citizens for Reform. Citizens
for Reform spent an unknown amount on television commercials
attacking Babin opponent Jim Turner.97
Lorena Jaeb of Florida contributed $20,000 to
Triad in 1995. On April 22, 1996, she made a contribution of
$2,500 to Citizens United. On April 28, Citizens United made a
$2,500 contribution to Representative J.C. Watts of Oklahoma.
Jaeb also made a $1,000 contribution to the Watts campaign.
Representative Watts was quoted in a Triad fax stating, ``My
thanks to TRIAD's clients who had the backbone to answer the
call--putting their money where their mouths were. . .''
98
Meredith O'Rourke and Peter Flaherty, the only individuals
with knowledge who answered any substantive questions in
deposition, refused to answer questions on the subject of
specific PAC contributions. Asked about the Riley
contributions, O'Rourke responded, ``I don't think I want to
answer that question.'' Triad counsel Mark Braden then added,
``No, we're not going to answer any questions in regards to Bob
Riley, Jr.'' 99 Asked whether any ``clients'' of
Triad made contributions to Riley's PAC, the Conservative
Campaign Fund, Flaherty responded, ``It's none of your
business.'' 100 While a spokesperson for another
candidate has insisted that O'Rourke obtained names from that
candidate's public FEC reports, O'Rourke testified that she
received the names directly from a campaign staff
member.101 Asked about the Stauffers, O'Rourke
confirmed that she knew them, but when asked if she had gotten
their names from a specific Senate candidate, she was
instructed by her attorney, Mark Braden, not to
answer.102 Among the questions that Malenick refused
to answer was, ``Did Triad ever make suggestions to any
political action committee relating to the candidates that the
committee intended to contribute to? '' 103
Triad has tried to make the case publicly that these
situations are simply coincidences that occur in any campaign
where a candidate receives funds from individuals and PACs with
similar ideology. However, the Committee is aware of no other
situation where an entity acted as an intermediary, soliciting
candidates for potential contributors, and directing the flow
of the contributions from contributors to multiple PACs on the
one hand, while being involved in the subsequent distribution
of the PAC funds on the other. It strains credulity that
Malenick repeatedly accomplished each of these steps without
ever implying to the candidate, the contributor, or the PAC
representative that a particular candidate might be a good
selection for a particular PAC contribution. While, according
to Robert Riley, Jr., Malenick told him she could not guarantee
that his father would benefit from his PAC contributions,
evidence gathered by the Committee strongly suggests that
Malenick made implied representations that particular
contributions should go to particular candidates, thus
illegally earmarking contributions for particular
candidates.104
the advertising campaign
The primary means by which Triad assisted in the election
of conservative candidates was by overseeing millions of
dollars' worth of advertising placed by two nonprofit
organizations, Citizens for Reform and Citizens for the
Republic. The advertising funded through these groups cost
between $3 and $4 million and aired in 26 House and three
Senate races.105 The sole purpose of the advertising
was to influence voters in favor of conservative Republican
candidates in those races.
Creation of Citizens for Reform and Citizens for the Republic
Like other organizations that aired advertising in the 1996
campaign, Triad took advantage of a series of court cases
decided as recently as 1996. The cases hold that if a political
advertisement or other communication (such as a mailing or
telephone call) is paid for by an individual or corporation
that is not a candidate or a political party, and the
advertisement does not use words that expressly advocate the
election or defeat of a candidate (such as ``vote for,''
``elect,'' or ``defeat''), then the advertiser is exempt from
the campaign-finance laws.106 The ad may be paid for
with corporate or union funds, and neither the source of the
funds nor the cost of the advertisement need be publicly
disclosed. However, if groups preparing such advertising
campaigns consult with or collude with candidates or campaigns,
then the cost of the advertisements will be viewed as a
contribution from the organization to the
campaign.107
In the 1996 election cycle, the use of ``issue advocacy''
advertising exploded, and many groups began airing
advertisements that were unmistakably political advertising
clearly favoring one candidate over another and intending to
influence the views of potential voters.108 The
majority of groups that aired such advertisements, produced
mailings, and made telephonecalls in 1996 were well-established
membership organizations committed to particular issues. Such groups
included the AFL-CIO, the U.S. Chamber of Commerce, the Christian
Coalition, and the Sierra Club.
In contrast to these groups, Triad conceived of the idea,
apparently in early 1996, of creating two nonprofit
corporations--Citizens for Reform and Citizens for the
Republic--solely for the purpose of airing advertisements
without disclosing their sources of funding. The two groups
were incorporated on May 5 and June 20, 1996, respectively,
within weeks of Triad itself.109 In post-election
marketing material, Citizens for the Republic boasted that it
had ``no endowed chairs, no fellowship programs, no committees
and no departments.'' 110 In fact, neither Citizens
for Reform nor Citizens for the Republic had committees,
programs, or chairs. They had no chairs of any sort, nor desks,
offices, staff, or even telephones. Instead, Citizens for
Reform and Citizens for the Republic each consists of a set of
articles of incorporation, a post office box, and a bank
account. Neither organization has ever engaged in any service
or activity other than paying for the production and airing of
political advertising. They are justifiably characterized as
shell companies created as mechanisms for funding million-
dollar political advertising campaigns and to create of a
patina of credibility for the advertisements.
In 1996, both Citizens for Reform and Citizens for the
Republic claimed to be tax-exempt ``social welfare
organizations'' pursuant to section 501(c)(4) of the U.S. tax
code, with a public purpose: respectively, to ``develop greater
participation on a non-partisan basis, in the debate on the
size, scope, growth and responsibility of government'' and to
focus on ``public policy issues concerning the American
worker.'' Despite holding themselves out as social welfare
organizations throughout the election, and despite the fact
that Citizens for the Republic obtained IRS approval, both
organizations apparently now have conceded that they do not fit
the requirements of section 501(c)(4) status but are instead
political organizations governed by section 527, the same IRS
section that applies to the Democratic National Committee and
the Republican National Committee.111 While a
501(c)(4) organization may lobby and may even engage in
campaign activities, such activities may not be the primary
activity of the organization. Yet, campaign activity was not
just the primary but the exclusive activity of both Citizens
for Reform and Citizens for the Republic. While counsel Mark
Braden claimed that the change of tax status was ``just a
question of what forms you file,'' in fact Citizens for Reform
and Citizens for the Republic have conceded that they exist to
influence the outcome of elections, coming perilously close to
an admission that they are subject to the disclosure
requirements and contribution limits of the campaign-finance
laws.112
Carolyn Malenick has insisted that Citizens for Reform and
Citizens for the Republic are independent organizations that
Triad simply ``manages.'' In fact, the organizations were
created at Malenick's instigation and have always essentially
been run by Triad. In his deposition, Citizens for Reform
director Peter Flaherty was able to recall that he discussed
the creation of a nonprofit organization with Malenick between
one and ten times prior to incorporating Citizens for Reform,
but he insisted he could not recall any single discussion or
the specifics of any discussion.113 Triad's role in
the creation of Citizens for the Republic is even more clear,
in that it was incorporated by Triad's law firm, and Rodriguez,
Malenick, and O'Rourke were all appointed as either officers or
directors of the organization.114
Triad was also responsible for all financial arrangements
of both organizations from their creation. In July 1996,
Citizens for the Republic paid for a series of ``test
advertisements'' in a variety of congressional districts. All
funding for this campaign originated with Triad, which simply
made transfers into Citizens for the Republic's bank
account.115 In fact, while Flaherty insisted under
oath that he signed all checks for Citizens for Reform, bank
records show that financial transactions for both Citizens for
Reform and Citizens for the Republic consisted only of wire
transfers that were handled exclusively by Triad bookkeeper
Anna Evans.116
On September 27, 1996, six weeks prior to the election,
Malenick on behalf of Triad entered into a formal consulting
agreement with both Citizens for Reform and Citizens for the
Republic. The consulting agreements granted to Triad carte
blanche authority to act on behalf of both organizations. The
agreements gave all authority for decision-making and hiring of
consultants to Triad--destroying any semblance of separation
between Triad and the two other organizations. The consulting
agreements read in part:
TRIAD will be free to decide the means by which it
will provide the Services. To the extent that TRIAD
requires assistance in providing the Services, it shall
be responsible for hiring the necessary individuals or
firms. All work done by TRIAD and its agents servants
and employees and all employment and other contracts
made by TRIAD in the performance of this agreement
shall be as principal and not as agent of [either
organization].'' 117
Prior to execution of its agreement, Citizens for Reform did
not even have a bank account. Yet, between the time an account
was opened on October 11 and the November 5 election, Citizens
for Reform received 12 deposits totaling $1.79
million.118 Of these funds, $1.69 million was spent
by November 7.119 Between October 1 and November 15,
Citizens for the Republic received eight deposits totaling
$1.84 million while spending $1.68 million.120 Funds
were also freely transferred between accounts held by Citizens
for Reform, Citizens for the Republic, and Triad.121
In December 1996, Citizens for Reform received $127 in deposits
and spent only $17.122
While Citizens for Reform and Citizens for the Republic
each had a spokesperson, neither person appears to have played
a substantive role in the advertising campaign. Lyn Nofziger,
spokesperson and director of Citizens for the Republic, refused
to answer questions at his deposition but has stated publicly
that ``Malenick handled most of the work.'' 123 This
statement is certainly supported by the documents produced to
the Committee, since Nofziger's name appears on only official
documents bearing his signature, talking points for a single
meeting, and his letter of resignation dated April 3, 1997, one
week prior to the issuance of subpoenas by this
Committee.124 Peter Flaherty confirmed that, despite
his title as director, he viewed Malenick as the person in
charge of fundraising, retaining vendors, and deciding on the
content and placement of advertising for Citizens for
Reform.125
The fact that the Citizens for Reform and Citizens for the
Republic advertising was financed by so few deposits so close
to the election suggests that a handful of wealthy contributors
were financing the huge political advertising campaign. The
creation of the companies allowed these contributors to
contribute enormous sums of money without public disclosure.
Contributors were also free to use corporate funds, which they
could not otherwise legally contribute to candidates. Besides
protection from disclosure, the Triad companies also offered
contributors another huge advantage: control of the substance,
timing, and location of advertising. Triad essentially allowed
contributors to launder funds through these entities for their
own political purposes.
Improper coordination of Triad's advertising with political candidates
Citizens for Reform and Citizens for the Republic spent a
combined total of between $3 million and $4 million on
advertising in 29 races.126 The total amount remains
unknown, because the documents produced to the Committee
contain inexplicable gaps. It appears that Citizens for Reform
and Citizens for the Republic spent money for television,
radio, mail, and telephone calls in three Senate and 26 House
races. The Senate races were in Kansas, Arkansas, and Delaware,
while House races included four in Texas, three in Kansas,
three in California, two each in Pennsylvania and Oklahoma, and
one each in Minnesota, Hawaii, Montana, South Dakota,
Washington, Oregon, Ohio, Illinois, Tennessee, Arkansas, New
York, and North Carolina. Of the 29 Republican candidates who
benefitted from advertising ``managed'' by Triad, 22 are known
to have received campaign visits from Carlos Rodriguez, while
at least three others spoke personally to
Malenick.127
Like other groups running so-called issue advertisements in
the 1996 campaign, Triad carefully avoided the words ``vote
for,'' ``support,'' or ``defeat,'' in the advertisements it
funded, but otherwise attacked the positions, ideology, and,
frequently, the character of candidates. The advertising
created by Triad focused on no single set of issues. It more
closely resembled negative attack advertising aired by an
opposing candidate. The candidates benefitting from the
advertising were the same candidates for whom Triad had
solicited contributions and advised on campaign and fundraising
strategy.
When a candidate and an organization exchange information,
and the organization subsequently spends funds to encourage
voters to support the candidate, it raises questions about
whether the expenditures were undertaken in coordination with
the candidate, thereby making the advertising expenditures a
disguised contribution to the campaign. One court has said that
organizations may legally have contact with candidates, but
noted that the level of contact and coordination was important
and that the ``government has an interest in unearthing
disguised contributions,'' and ``the FEC is free to investigate
any instance in which it thinks the inquiry (between
representatives of a corporation and a campaign) has become
collaboration.'' 128 The Committee's investigation
of Triad has shown that representatives of Triad and its shell
corporations had contact with the campaigns that went far
beyond the making of inquiries, and that Triad and campaign
representatives collaborated on plans, strategies, and the
needs of the campaigns. Both the content of the advertising and
the determination of where to air advertising was clearly
influenced by Rodriguez's conversations with the candidates and
the campaigns.
For example, Rodriguez visited the campaign of Rick Hill, a
Republican running against Democrat Bill Yellowtail for
Montana's at-large seat in the House of Representatives. In a
report dated September 24, 1996, Rodriguez wrote that the
number-one item the Hill campaign needs is a ``3rd party to
`expose' Yellowtail.'' 129 Rodriguez also noted that
three ``key issues--anti Yellowtail'' are ``wife beating,''
``robbery of camera store in college,'' and Yellowtail's record
as a ``deadbeat dad.'' 130
On October 22, Citizens for Reform commenced a $109,500
television advertising campaign attacking
Yellowtail.131 The television advertisement exactly
followed the issues laid out in Rodriguez's report, with the
announcer intoning:
Who is Bill Yellowtail? He preaches family values but
took a swing at his wife. And Yellowtail's response? He
only slapped her. But ``her nose was not broken.'' He
talks law and order . . . but is himself a convicted
felon. And though he talks about protecting children,
Yellowtail failed to make his own child support
payments--then voted against child support enforcement.
Call Bill Yellowtail. Tell him to support family
values.132
Although polling in September showed Yellowtail ahead by three
points, on November 5, Rick Hill won by a margin of 52 to
43.133
In other cases Rodriguez made no secret of the fact that he
was using information gained in the audits to determine where
Triad would run advertising and what it would say. On September
25, after visiting the South Dakota campaign of Republican
House candidate John Thune, Rodriguez wrote, ``This campaign is
well on its way to winning. If there is anything we can do to
help it would probably be in the area of 501(c)(4) education
with regards to the liberal tendencies of his opponent.''
134 The report also noted Democrat Steve Weiland's
``union ties'' as a key issue in the race.135
Citizens for Reform subsequently spent $21,000 on television
advertisements focusing on Weiland's support for organized
labor.136
On September 3, Rodriguez noted in a report on the Texas
campaign of Steve Stockman: ``. . . we ought to place Steve
Stockman among the top ten races for TRIAD to watch. We should
also give some very serious thought to the possibility of
engaging in an educational effort to bring into focus what
Steve Stockman has done for the district and to expose some of
the shortcomings that his Democratic opponent brings to this
campaign.''137 In the two weeks before the election,
both Citizens for Reform and Citizens for the Republic aired
advertisements totaling $142,000 attacking Stockman opponent
Nick Lampson.138 One advertisement stated:
Can we trust Nick Lampson? As Jefferson County tax
assessor, Lampson was criticized as inefficient and
disorganized by the county auditor. . . . And the
Houston Chronicle reported that Lampson was accused of
Medicare fraud by a home health care worker from his
family business. Call and tell Nick Lampson to support
ethics in government.139
Other excerpts from Rodriguez's reports demonstrate how
Triad's extreme conservatism led it to spend money to target
even moderate Republicans. For example, Sue Wittig, who ran
against Representative Maurice Hinchey in New York state during
the Republican primary, benefitted from $111,000 in television
and radio advertising placed by Triad through Citizens for
Reform.140 On September 29 Rodriguez wrote:
During the entire primary season, we have encountered
Republican women who represented the more moderate to
liberal philosophy in the Republican party. We have
been successful, in most cases, in defeating those
Republican women. Here is an opportunity for TRIAD
clients to play a leading role in helping elect a
conservative woman to show that conservative women have
a better chance of winning than liberal
women.141
In a two-week period, Triad spent $111,000 for Wittig--not much
less than the $141,000 the Wittig campaign itself spent in the
same period.142
These advertisements were the functional equivalent of
campaign ads. The ads were run in specific districts. Faxes
sent by Triad indicate that the timing of the ads was carefully
planned for when advertising was likely to have its greatest
impact on voters.143 The advertisements seldom if
ever dealt with ``issues'' but were instead attacks motivated
by partisan intent. Asked about the ads run by Citizens for
Reform attacking Democratic candidate Yellowtail, Peter
Flaherty of Citizens for Reform reportedly stated: ``If more
wife beaters are out there as public figures, we are going to
expose them, and they better watch out.'' 144 Asked
whether his group would attack any Republican wife beaters who
might turn up, Flaherty said ``Its not up to us to do the job
of people who have a liberal ideology.'' 145 Even
Lyn Nofziger, spokesperson for Citizens for the Republic, has
said that it is ``outrageous'' that groups like this can ``go
and run political ads and call them educational.''
146
Given the level of coordination with the campaigns and the
content of the ads, Triad's advertising expenditures
constituted disguised contributions to the candidates. Triad
collaborated with campaigns to determine what issues and
strategies would most benefit the candidates. Because Rodriguez
was among those refusing to answer questions at his deposition,
the Committee was not able to expand on the documentary
evidence concerning the extent to which the advertising
campaign was discussed with the campaigns and candidates. While
campaigns may not have been familiar with the names Citizens
for Reform and Citizens for the Republic when the Triad-managed
advertising appeared in their districts, it seems highly
unlikely that neither candidates nor campaigns ever anticipated
or discussed potential advertising campaigns in the course of
consultations with Rodriguez.
No comparison between Triad and the AFL-CIO
Malenick has repeatedly asserted that Triad--through
Citizens for Reform and Citizens for the Republic--was simply
trying to respond to the issue advertising effort launched by
the AFL-CIO in March 1995. However, the advertising aired by
Triad rarely mentioned labor as an issue. Further, the majority
of races where Triad aired advertising were not in districts
where the AFL-CIO was active. In fact, of 26 House races in
which Triad advertised, only ten were targets of the AFL-CIO.
Triad also spent over $800,000 on advertising in three Senate
races even though the AFL-CIO was not active in any Senate
race. Of the six House races where Triad spent over $100,000 on
advertising, the AFL-CIO was active in only one district. The
evidence suggests that two criteria that appear to have
determined where Triad ran advertising were whether a
conservative Republican candidate was running in the district
and whether one of Triad's contributors wanted advertising
aired in that particular district.
Additionally, while Triad ran a covert advertising campaign
through unknown groups funded by secret contributors, the AFL-
CIO campaign was publicly announced in 1995 along with the 25
freshman House races the AFL-CIO intended to target. Unlike
Triad, the AFL-CIO is a bona-fide membership organization whose
member unions are backed by millions of American workers, most
of whom support the labor federation's public policy positions.
Hence, advertising paid for by unions is an open and legal
attempt to promote the interests and views of union members. In
contrast, Triad received funds from people who went to
extraordinary lengths to conceal their identity and purpose
from voters.
Financing the advertising campaign
When the Minority began the Committee's investigation into
Triad Management, it already suspected that Robert Cone was a
major source of Triad financing. Press reports had linked him
to Malenick and had noted Cone's increased financial
involvement with political organizations.147 As the
Committee's investigation progressed, it became increasingly
clear that whoever was funding Triad and the shell companies
was also playing a role in determining the content and the
location of advertising prepared by Triad. The investigation
clearly showed that Triad and both Citizens for Reform and
Citizens for the Republic were largely financed by a single
backer, and that neither Citizens for the Republic nor Citizens
for Reform had done anything other than create and air
advertising with direction from that backer.
As the Minority became more convinced that understanding
the role of Triad's backers was essential to the investigation,
resistance from several quarters to the investigation began to
build. Nevertheless, in August, the members of the Committee
agreed that an in camera review of the funding sources of Triad
was warranted.148 On August 20, the Committee also
issued a bank subpoena requiring production of financial
records of Triad, Citizens for Reform and Citizens for the
Republic. The subpoena permitted the attorneys for the parties
only to redact certain depositor information from the records
produced to the Committee.149 Informed of the
decision to perform an in camera review of Triad's records, and
the issuance of the bank subpoena, on September 8 attorneys for
Triad notified the Committee that they would not submit to an
in camera review and would not produce subpoenaed witnesses for
depositions.150
On August 21, attorneys for Triad were notified of the bank
subpoena, provided a copy of the subpoena, and informed that
records needed to be produced to the Committee within two
weeks.151 The Committee subpoena stated that the
bank holding the records ``shall permit'' representatives of
the organizations to make redactions, and that representatives
of the organization ``may'' remove certain information from the
records.152
In early September, records including account statements
and expenditure records were produced to the Committee by the
bank. The bank records for Triad, Citizens for Reform, and
Citizens for the Republic showed that:
Citizens for the Republic was entirely
financed by Triad from its creation through September
1996;
Citizens for Reform had no bank account
until less than one month prior to the 1996 election;
both nonprofit organizations received fewer
than a dozen deposits of large amounts of money;
between $1 million and $2 million dollars
passed through the accounts of both Citizens for Reform
and Citizens for the Republic in the weeks around the
1996 election, while the accounts were virtually
inactive in other months; and
money was freely transferred among the three
entities.
However, in its September production, the bank did not
provide the account deposit records for any of the
organizations under subpoena. On September 30, six weeks after
the bank subpoena was served, Minority Chief Counsel sent an
inquiry to the bank holding Triad's records, noting that these
records had not been produced and requesting production. The
letter specifically noted that the subpoena required that
attorneys for the account holders be offered the opportunity to
redact information. Two weeks later, the Committee received
from the bank unredacted account deposit records identifying
contributors to Triad, Citizens for Reform and Citizens for the
Republic.153 The records had been sent without
redactions, presumably because the bank had determined that it
had provided Triad's attorneys with sufficient opportunities to
redact the records during the eight weeks between service of
the subpoena and production.154 At the same time,
attorneys for Coalition for Our Children's Future, who had been
similarly notified of issuance of an identical subpoena for the
bank records of their client, produced records which redacted
the identity of depositors to the account as permitted by the
subpoena.
It is unclear why Triad's attorneys failed to exercise
their option to redact their client's records, leading to the
production of records identifying contributors. The
circumstances of the production and the history of Triad's non-
cooperation with the Committee support the inference that
Triad's counsel declined to take steps to redact the subpoenaed
bank records based on the incorrect assumption that the bank
would not produce the unredacted records. Seen in this light,
the failure of Triad's counsel to redact the records was
consistent with a general course of conduct in seeking to
obstruct the Committee's investigation of Triad's activities.
When Triad attorney Mark Braden learned that the bank had
produced the records without redactions, he demanded the
immediate return of the records. Braden offered no explanation
of why he did not exercise his option to redact the documents.
He not only failed to redact the documents by the September 2
deadline, but also failed to redact them at any point in the
six weeks prior to the October 16 production by the bank. The
Minority retained its copy of the documents because, as Senator
Glenn has explained, the records are relevant to the
investigation and were properly received pursuant to a valid
Committee subpoena.155
The trusts behind Triad
When the Committee received the unredacted documents
identifying contributors to Triad and the shell companies, it
became clear why Triad and its attorneys had been so anxious to
prevent the records from coming to light. The documents contain
further proof that Triad was used as a tool to evade the
contribution limits and disclosure provisions of the campaign
finance laws. Most notably, the bank records revealed that yet
another layer of dummy organizations existed behind Triad. Two
secret trusts together contributed $2.34 million to Citizens
for Reform and Citizens for the Republic, over 83 percent of
the total money received by the organizations. The trusts
appear to have given the funds with the specific intent that
the trusts' existence never come to light. In fact, Triad's
attorneys have publicly confirmed that Triad entered into
written agreements to keep the identity of funding sources
secret.156
The first trust, identified in bank records only as
``Personal Trust,'' contributed $600,000 to Citizens for Reform
and Citizens for the Republic from an account at CoreStates
Bank in Philadelphia.157 Based on the testimony of
Triad bookkeeper Evans that Triad's backer provided hundreds of
thousands of dollars to the two nonprofits, the Minority
believes that the Personal Trust is, in all probability,
controlled by Robert Cone. The trust's account is at the same
bank where Robert Cone's brother Edward, who also contributed
$300,000 to Citizens for the Republic and $100,000 to Citizens
for Reform, has a personal account, and the wire transfers from
the Personal Trust to Citizens for Reform and Citizens for the
Republic began at the same time that Robert Cone stopped making
contributions to Triad from his personal account. The only
public statement Robert Cone has ever made on the subject of
Triad is, ``I'm not confirming or denying anything at the
moment.'' 158
Economic Education Trust
Still unresolved by the Committee is the identity of the
backer or backers of the Economic Education Trust. This Trust
provided $1.79 million to the Triad nonprofits in October 1996.
Evidence suggests that these funds were given to Triad's two
nonprofits with the contingency that the trust's own consultant
oversee the advertising campaign, including selection of where
ads would air. Even without the benefit of a subpoena for the
financial records of the Economic Education Trust,
circumstantial evidence developed by the Minority suggests that
the trust was financed in whole or in part by Charles and David
Koch of Wichita, Kansas. The Koch brothers control Koch
Industries, an oil company with revenues of about $30 billion
per year. It is believed to be the second-largest privately-
held company in the United States. The Committee's evidence of
the Koch brothers' involvement includes:
Many of the candidates who benefitted from
attack ads run by Triad also received campaign
contributions from Charles Koch, David Koch, and/or
their company's political action
committee.159
The Koch brothers have a history of
channeling money through nonprofit organizations in
order to advance their political interests, including
think tanks and term-limits groups.160 In
1996, a term-limits group with possible Koch funding
ran attack ads under the guise of ``issue advocacy''
(See Chapter 15). Some of the candidates attacked by
the term-limits group were also targeted by
Triad.161
A disproportionate amount of the money spent
on the attack ads by Triad and by a second group,
Coalition for Our Children's Future, benefitted
candidates in states where Koch Industries does
significant business, most notably Kansas, where the
company is headquartered; Minnesota, where Koch
Industries owns a major oil refinery; and Arkansas,
Louisiana, and Oklahoma, where Koch Industries has
refineries and pipelines.162
Koch Industries gave at least $2,000
directly to Triad in October 1996.163
Koch Industries has refused to say whether it funded the
Triad-controlled tax-exempts or any other organizations that
ran attack ads in 1996. A September 30, 1997, letter to Koch
Industries Chairman Charles Koch from the Committee's Minority
Chief Counsel, produced no response.164 Questions
from journalists have been met with ``no comment.'' After the
Minority learned of the existence of the Economic Education
Trust, Senator Glenn, the ranking Minority member, asked
Chairman Thompson to issue a subpoena to the Riggs National
Bank of Washington, D.C., where the Trust maintained the
account from which money was wired to the Triad organizations.
On November 24, Senator Glenn renewed his request for issuance
of the subpoena. No subpoena was issued.
Whoever is behind the trust played an active role in the
crafting of the Triad advertising campaign, as well as
advertising aired through other organizations. Evidence
strongly suggests that the trust was also the ``secret
contributor'' that required a confidentialityagreement from
Coalition for Our Children's Future, a nonprofit group that also ran
ads attacking Democrats (see Chapter 13).
The trust appears to have hired its own vendors to handle
its advertising campaigns. Documents produced by Triad show
that Triad's eight most heavily-funded races were handled by a
New York-based consultant named Dick Dresner, of the political
consulting firm Dresner Wickers & Associates. The amount
contributed to the Triad groups by the Economic Education Trust
roughly corresponds to the amount spent on the production and
airing of the eight projects overseen by Dresner.165
Documents produced to the Committee indicate that Dresner was
not retained by Triad, but by a major contributor who
controlled the Dresner portion of the advertising. The evidence
includes:
An October 22 memorandum from Malenick to
Dresner stating, ``the market buys that are being
handled by Dresner Wickers & Associates were pre-
determined before TRIAD was contracted to oversee the
projects end.'' 166
An October 24 memorandum from Triad
administrator Kathleen McCann to Peter Flaherty noting
that ``based on a client's request, additional vendors
have been used to run ads through Citizens for Reform
in . . . [the 1st, 2nd, and 3rd districts of Kansas and
Montana at large];'' 167
An October 28 memorandum from Triad
bookkeeper Anna Evans to Dick Dresner's assistant
Joanne Banks noting, ``After my conversation with you
this morning, I spoke with [redacted]. He has requested
that to get the media time bought, to separate the
media time amounts from production and retainer and
other costs. Carolyn and Mr. Braden have agreed to
this;'' 168
A January 21 memorandum from Evans to Banks
stating, ``Has Mr. Dresner never informed you of his
agreement of a 12% and not 15% commission that he made
directly with Triad's client, who preferred using DW&A
as a vendor. Let me assure you that this arrangement of
vendor selection was an exception, and plans do not
call for a repeat;'' 169 and
A February 7 memorandum from Evans to Banks
stating, ``The commission taken based on these
affidavits is at 15% instead of the originally agreed
12%. The agreement was requested by CFTR and agreed
upon by DW&A through an intermediary.'' 170
Dresner, Malenick, and Braden all either refused to appear
for deposition or to answer questions. The Committee's
understanding of the arrangements is, therefore, less than
complete. However, Dresner also played a role in advertising
prepared for Coalition for Our Children's Future (``CCF''). On
September 18, 1997, the Committee deposed Denis Calabrese, a
political consultant who oversaw the CCF ad campaign. Calabrese
testified that in mid-1996, he was retained by an individual he
refused to name, who was a representative for an organization
he refused to name, for the purpose of overseeing an issue
advertising campaign consisting of political
advertisements.171 Calabrese testified that as part
of his duties he hired a number of other political consultants
to act as vendors including Dresner, and Dresner's Triad
subcontractors James Farwell and Steve Sandler.172
He testified that he initially met Dresner at a meeting with
the anonymous donor representative and that he attended
meetings with a variety of organizations, including CCF and
Triad, in order to determine if they were ``appropriate
vehicles'' for the issue ad campaign.173 He also
testified he oversaw a second ad campaign for the anonymous
donor through another organization which was not
Triad.174
Although he failed to appear for a sworn deposition, in a
January 1998 roundtable discussion, Dick Dresner admitted that
he helped to coordinate a number of issue advertising campaigns
in the 1996 election cycle. Dresner said that ``many of the
people he worked with were most concerned with remaining
anonymous, while still having a major impact on federal
elections.'' 175 Dresner confirmed that ``his
wealthy clients set up a series of foundations, trusts and
other ``shells'' to pump money into subterranean issue-ad
campaigns. `They use three or four or five or six different
ways so they aren't discovered.' '' 176 He went on
to note that ``his clients seemed to have success with that
tactic, and most have remained anonymous even now: `Even if
their names came up once or twice, the extent of their
activities is underestimated.' '' 177
Other evidence besides the involvement of the same
consultants suggests that the donor behind the Economic
Education Trust whose identity has been concealed from the
Committee funded not only the Triad advertising campaign but
also the CCF advertising campaign. In addition:
Both Triad and CCF representatives confirmed
that both organizations executed written
confidentiality agreements with a secret
contributor.178
An unnamed former employee of CCF stated in
a news article that the entity that funded the CCF
advertising campaign was a trust.179
The funds for the CCF ad campaign were wired
from an account at Riggs Bank in Washington, D.C., the
same bank where the Economic Education Trust has an
account.180
Barry Bennett, executive director of CCF
stated that the confidentiality agreement was drafted
by former RNC General Counsel Benjamin Ginsberg.
Ginsberg was also consulted on the substance of CCF
advertising, and represents both Dick Dresner and James
Farwell, both of whom failed to appear for deposition
on any of the numerous dates offered to
them.181
Triad's impact on the 1996 elections
While it is impossible to know the full extent of the
Economic Education Trust's advertising campaign absent a full
investigation, the election results in Kansas (the home state
of the Koch brothers) suggest that Dresner was correct in
noting that his clients had been successful in their attempts
to covertly influence the outcome of particular federal races.
Triad advertising aired in four of six federal races in Kansas.
Two were for open House seats, the third was held by a
vulnerable freshman Republican, and the fourth was an open
Senate seat in which a bitter and disruptive Republican primary
battle had been waged.
Using television advertising, mailings, telephone calls,
and radio ads all prepared under the supervision of Dick
Dresner, Triad spent over $1 million on the four races:
$420,000 in television advertising in the Senate race between
Republican Representative Sam Brownback and Democrat Jill
Docking; $287,000 on television and radio advertising and phone
calls in the race between Republican Vince Snowbarger and
Democrat Judy Hancock; $131,000 on phones, mail, and television
advertising benefitting freshman Republican Representative Todd
Tiahrt in his campaign against Randy Rathbun; and $133,000 on
television, radio, phones, and mail in the race between
Republican Jim Ryun and Democrat John Freidan.182
Triad's two-week spending spree on behalf of the Republican
Senate candidate totaled almost a quarter of the amount the
candidate spent on his own campaign throughout
1996.183 Triad's two weeks of spending on behalf of
Vince Snowbarger totaled over half of what he himself spent in
1996.184 Republican candidates were victorious in
all four races. Representative Tiahrt was re-elected by a
margin of less than two percentage points. Vince Snowbarger and
Jim Ryun were elected by margins of less than five
points.185
Advertising by other Triad contributors
Although the multimillion-dollar advertising campaigns
appear to have been funded largely by Cone and the Koch
families, the Committee also found evidence that smaller
contributors made contributions with the intent of financing
advertising campaigns that targeted specific candidates. For
example, California agribusinessman Dan Gerawan contributed
$50,000 to Citizens for Reform. In the primary, Gerawan had
funded a publicly disclosed advertising campaign attacking one
of the candidates in the 20th Congressional District in
California for supporting the Legal Services Corporation, a
government-funded agency that provides legal services to the
indigent. In the general election, Citizens for Reform aired an
advertisement attacking Representative Calvin Dooley's views on
the Legal Services Corporation.186 After the
election, Gerawan admitted he paid for the ads.187
Although the Minority requested a subpoena for Gerawan's
deposition, no subpoena was ever issued.
The Committee also found evidence suggesting a direct link
between a Triad-sponsored advertising campaign and eight checks
totaling $11,500 received by Citizens for Reform on a single
day in October 1996. The checks, among the lowest contributions
received by either nonprofit, all came from people or
businesses based in the 6th District of Pennsylvania, where
Republican Christian Leinbach was challenging Representative
Tim Holden.188 Seven of the eight families who
contributed to Triad had already made the maximum permissible
contribution to Leinbach's campaign.189 On September
11, Carlos Rodriguez had written a report of the Leinbach
campaign complaining: ``the problems with the campaign became
obvious once I visited the campaign headquarters. Leinbach has
been unwilling to make the fund raising calls necessary. . . .
We should wait for marked improvements on the part of the
candidate and the consultant before providing them with any
financial assistance.'' 190 Yet less than a month
later, Citizens for Reform funded a $17,000 radio campaign
against Leinbach's opponent.191 Presumably, the
funds received from Leinbach's supporters were used to pay for
advertising in a campaign to which Triad consultants were
unwilling to devote existing resources.
Conclusion
In the end, Triad succeeded in pouring millions of dollars
into televised advertisements designed to attack particular
candidates in hotly-contested races, while concealing the
identities of the individuals and companies that provided the
monies. Triad's secrecy about its sources of funding, which is
one of the principal benefits it offers its contributors, was
accomplished through several means, including its disingenuous
incorporation as a for-profit business and the establishment of
sham nonprofit corporations. This secretiveness undermines our
system of campaign-finance laws. If, as the Minority strongly
believes, Triad violated campaign-finance laws, it has done so
with impunity. If, as Triad contends, its activities fell
within the limits of the law, then the disclosure requirements
of the campaign-finance laws have proven to be so easily
circumvented by individuals with wealth that they are
essentially meaningless. Triad is important not just for the
ways it bent or broke existing laws, but for the pattern it has
established for future groups, which will take comfort in
Triad's successful defiance of this Committee.
footnotes
\1\ Buckley v. Valeo, 426 U.S. 1, 9 (1976).
\2\ Roll Call, 12/4/97.
\3\ Roll Call, 12/4/97: Austin-American Statesman, 8/16/95.
\4\ Roll Call, 12/4/97: U.S. News and World Report, 6/6/94.
\5\ Roll Call, 12/4/97.
\6\ See Council for National Policy Unofficial Information Page,
http://apocalypse. berkshire.net/ifas/cnp/index/html.
\7\ Roll Call, 12/4/97.
\8\ National Journal, 9/28/96.
\9\ Triad records of incorporation TR1 1-5: Anna Evans deposition,
8/19/97, p. 20.
\10\ The Hill, 10/8/97.
\11\ Roll Call, 12/4/97.
\12\ Memorandum from Carolyn Malenick to Triad employees, 2/22/97,
TR 20 5.
\13\ Washington Post, 3/9/97.
\14\ Committee subpoenas 247-257 for: Cleta Mitchell, Lyn Nofziger,
Carlos Rodriguez, David Gilliard, Padraic Buckley, Kenneth Boehm, Peter
Flaherty, Meredith O'Rourke, Carolyn Malenick, Mark Braden, Anna Evans.
See also subpoena number 346 for Kathleen McCann, 375 for Richard
Dresner, and 377 for James Farwell.
\15\ Letter from Richard Hauser to Majority Chief Counsel and
Minority Chief Counsel, 9/8/97. Those deposed at that point were Peter
Flaherty and Anna Evans. The deposition of Meredith O'Rourke had been
adjourned but not completed. Two other directors of Citizens for
Reform, Kenneth Boehm and Padraic Buckley, had also been deposed to
establish they had almost no role in the organization.
\16\ Letter from Richard Hauser to Committee staff, 9/8/97.
\17\ See 18 U.S.C. sections 1503, 1505.
\18\ Carolyn Malenick deposition, 9/16/97.
\19\ Three subpoenas for deposition for individuals involved in the
AFL-CIO advertising campaign were issued in September but never taken.
Contrary to public statements, these individuals only refused to appear
on the date contained in the subpoena because they were given short
notice and had conflicts. The Majority staff never contacted these
individuals to reschedule deposition dates. See Committee subpoenas
399-401; letter to Committee staff from counsel for the AFL-CIO, 9/22/
97. Another individual affiliated with the AFL-CIO did appear pursuant
to a deposition subpoena. Deposition of Geoffrey Garin, 9/5/97. See
Chapter 39 of this Minority Report.
\20\ Associated Press, 11/4/97.
\21\ The only invoices produced were for ``fees'' Triad charged the
shell companies, Citizens for Reform and Citizens for the Republic. TR
8 26, CR 13 1956.
\22\ Meredith O'Rourke deposition, 9/3/97, pp. 30-33.
\23\ Meredith O'Rourke deposition, 9/3/97, pp. 30-33.
\24\ Anna Evans deposition, 8/19/97, pp. 45-46.
\25\ Staff interviews with PAC contributors, 5/97.
\26\ Staff interviews with PAC contributors, 5/97.
\27\ Staff interviews with PAC contributors, 5/97.
\28\ Anna Evans deposition, 8/19/97, p. 175.
\29\ Bank statements of Crestar account of Triad Management, 5/31/
95-1/31/96.
\30\ Deposit records of Crestar bank account of Triad Management.
\31\ Deposit records of Crestar bank account of Triad Management.
\32\ See financial records of Crestar account of Triad Management.
\33\ See financial records of Crestar accounts of Triad Management
and Triad Management, Inc.
\34\ Anna Evans deposition, 8/19/97, p. 177.
\35\ Morning Call, 10/3/93.
\36\ Boston Globe, 8/23/96.
\37\ Morning Call, 10/3/93.
\38\ National Journal, 9/28/96.
\39\ James McLaughlin deposition, 9/17/97, p. 16.
\40\ See 2 U.S.C. sections 433 and 434.
\41\ See 2 U.S.C. section 441 (a)(3); see also FEC public
disclosure records for federal contributions of Robert Cone.
Contribution records are available at www.tray.com.
\42\ See 2 U.S.C. sections 433 and 434.
\43\ 2 U.S.C. section 441b.
\44\ 11 C.F.R. section 116.1 (a)(c).
\45\ Meredith O'Rourke deposition, 9/3/97, p. 53: staff interview
with Robert Riley, Jr., 9/16/97; Rapid City Journal, 9/20/97.
\46\ Meredith O'Rourke deposition, 9/3/97, pp. 46, 50.
\47\ Staff interview with Robert Riley, Jr., 9/16/97.
\48\ Rapid City Journal, 9/20/97.
\49\ Los Angeles Times, 11/12/97.
\50\ Triad invoices, TR 8 35; TR 8 112-114.
\51\ See Rodriguez reports identified in footnotes 52-58, infra.
\52\ Minneapolis Star Tribune, 10/29/97.
\53\ Report of Jay Mathis campaign, TR 15 1170-1172.
\54\ Report of Vince Snowbarger campaign, TR 15 1206-1207.
\55\ Report of Christian Leinbach campaign, TR 15 1163-1166.
\56\ Report of Jim Ryun campaign, TR 15 1197-1199.
\57\ James McLaughlin deposition, 9/17/97, pp. 13-14.
\58\ Report of Steve Stockman campaign, TR 15 1210-1212.
\59\ Report of Mark Sharpe campaign, TR 15 1186-1188.
\60\ Meredith O'Rourke deposition, 9/3/97, p. 95.
\61\ ``My understanding of what happened is Meredith [O'Rourke]
asked Carolyn [Malenick] whether she could go over and help [the Senate
candidate] dial for dollars.'' Washington Post, 12/12/97; ``O'Rourke
was simply doing a favor for Brownback, not on Triad's time.'' Kansas
City Star, 12/5/97.
\62\ Meredith O'Rourke, deposition, 9/3/97, pp. 94-95.
\63\ Triad solicitation TR 10 146-147: Rapid City Journal, 9/20/97.
\64\ Triad 10 0079-10 0081.
\65\ `` '96 Primary Alert'' Triad Fax Alert 7/18/97, TR 10 218.
\66\ Massachusetts Citizens for Life v. FEC, 479 U.S. 238 (1986),
Faucher v. FEC, 928 F. 2d 468 (1st Cir. 1991), Maine Right to Life v.
FEC, 98 F. 3d 1 (1st Cir. 1997), 11 C.F.R. section 114.4.
\67\ Triad ``fax alert,'' 10/10/96, TR 10 160-161.
\68\ Triad fax solicitation, TR 10 146-147.
\69\ Federal election law severely limits the volunteer activities
that corporations may engage in, and limits the group of people that
corporations may solicit for contributions to political campaigns to a
restricted class of officers and executive employees. In a corporation
like Triad the restricted class Triad could properly solicit would
consist only of Carolyn Malenick herself. See 11 C.F.R. section
114.2(f); 114.1(e)(2).
\70\ 2 U.S.C. section 441a(a)(8): 11 C.F.R. section 110.6.
\71\ Triad internal PAC list, TR 15 105-1052.
\72\ FEC public disclosure reports of: Robert Riley, Jr.,
Conservative Campaign Fund, Americans For Free Enterprise, Citizens
Allied for Free Enterprise, and Faith, Family, and Freedom. See also
Wall Street Journal, 4/10/97.
\73\ Triad ``fax alert,'' 11/14/96, TR 10 83.
\74\ Kansas City Star, 5/2/97: FEC Public Disclosure records of
John and Ruth Stauffer.
\75\ Handwritten note to Triad, TR 15 678.
\76\ Meredith O'Rourke deposition, 9/9/97, pp. 60-77.
\77\ Peter Flaherty deposition, 8/22/97, p. 13.
\78\ Peter Flaherty deposition, 8/22/97, pp. 11, 15.
\79\ Citizens for the Republic Education Fund Unanimous Consent in
Lieu of Meeting, CREF 1 4-8.
\80\ Triad invoices from Gilliard and Associates, CREF 13 1934.
\81\ James McLaughlin deposition, 9/17/97, p. 13: records of
incorporation for Huckaby, Rodriguez, Gilliard, Inc.
\82\ Triad internal PAC list, TR 15 1050-1052.
\83\ Staff interview with Robert Riley, Jr., 9/16/97.
\84\ Staff interview with Robert Riley, Jr., 9/16/97.
\85\ Meredith O'Rourke deposition, 9/9/97, pp. 66, 72.
\86\ Meredith O'Rourke deposition, 9/9/97, pp. 51, 53, 90.
\87\ Minneapolis Star Tribune, 10/29/97.
\88\ Report of Pete Sessions campaign, TR 15 1176.
\89\ Report of Ed Merritt campaign, TR 15 1183-1185.
\90\ Memo from Meredith O'Rourke to Mark Braden, 6/13/96, TR 15
1054.
\91\ Memo from Meredith O'Rourke to Mark Braden, 6/13/96, TR 15
1054.
\92\ Report of Rick Hill campaign, TR 15 1143-1145.
\93\ In addition to acting as administrator of the PAC and director
of Citizens for the Republic, Gilliard was also a paid consultant of
California candidate Linda Wilde. Wilde benefitted from $100,000 in
mailings and $25,000 in phone calls against Representative George Brown
funded by Citizens for Reform, over half the amount Wilde spent on her
own campaign throughout 1996. Wilde also received $6,000 of $21,000
raised by Citizens Allied for Free Enterprise (``CAFE''). No other
candidate received more than $1,000. See FEC disclosure reports of
CAFE. In addition to working directly for Wilde, the PAC and Citizens
for the Republic, Gilliard was also a paid vendor of Citizens for the
Republic, and produced at least $75,000 worth of mailings in
Representative Randy Tate's Washington district.
\94\ Disclosure reports for Citizens Allied for Free Enterprise;
see also http://apocalypse. berkshire.net/ifas/cnp/
index.html.
\95\ FEC public disclosure records of Richard Eckburg, available at
www.tray.com.
\96\ FEC disclosure records of Foster Freiss and the Conservative
Campaign Fund available at www.tray.com: deposit records of Citizens
for Reform.
\97\ FEC disclosure records of Peter Cloeren available at
www.tray.com; bank deposit records of Citizens for Reform.
\98\ FEC disclosure records of Lorena Jaeb and Citizens United
available at www.tray.com.
\99\ Meredith O'Rourke deposition, 9/3/97, p. 102.
\100\ Peter Flaherty deposition, 8/22/97, p. 13.
\101\ Kansas City Star, 5/5/97: Meredith O'Rourke deposition, 9/3/
97, pp. 91-92.
\102\ Meredith O'Rourke deposition, 9/3/97, pp. 99-100.
\103\ Carolyn Malenick deposition, 9/16/97, p. 20.
\104\ A disclaimer such as that contained in letters from Triad to
the PACs does not negate fact. Massachusetts Citizens for Life, 479
U.S. 238, 249 (1986).
\105\ Committee list of races where Citizens for Reform and
Citizens for the Republic were active and the amounts spent.
\106\ Faucher v. FEC, 928 F. 2d 468 (1st Cir. 1991); 743 F. Supp 64
(1990); FEC v. Christian Action Network, 92 F.3d 1178 (4th Cir. 1996),
894 F. Supp 946 (S.D.Va. 1995); Maine Right to Life v. FEC, 98 F.3d 1
(1st Cir. 1997).
\107\ Clifton v. FEC, 114 F.3d 1309 (1st Cir. 1997); see also
Chapter 20: Legal Analysis and Overview.
\108\ Annenberg Public Policy Center, ``Issue Advocacy Advertising
During the 1996 Campaign: A Catalog,'' Report Series No. 16, 9/16/97,
p. 7.
\109\ Certificate of Incorporation for Citizens for the Republic,
CREF 1 32: Articles of Incorporation for Citizens for Reform, CR 1 61-
64.
\110\ Citizens for the Republic marketing brochure, CREF 1 100.
\111\ Citizens for Reform stated in its application for (c)(4)
status that it had not spent and did not plan to ``spend any money
attempting to influence'' an election. IRS Form 1024, item 15, 6/7/96.
This may be a false statement in violation of 26 U.S.C. Sec. 7206.
\112\ Roll Call, 10/20/97.
\113\ Peter Flaherty deposition, 8/22/97, pp. 19-21.
\114\ Incorporation documents of Citizens for the Republic, CREF 1
13-14, 33-35.
\115\ The Citizens for the Republic bank account received $302,548
in deposits in July and spent $273,114. All the deposits into the
account were made by transfer from Triad's account at the same bank.
See bank records of Crestar accounts held by Citizens for the Republic
and Triad Management, Inc.
\116\ For example, Evans would generate an invoice for ``management
fees due to Triad from either Citizens for Reform or Citizens for the
Republic.'' The invoices (the only ones Triad ever seems to have
issued) are printed on Triad letterhead, are addressed to the
respective groups in care of Triad, then seek payment made to Triad--
all at the same address. To actually pay Triad's bill, Evans would
simply make a bank transfer from one account to another. Invoices from
Triad to Citizens for Reform and Citizens for the Republic, TR 8 26, TR
8 22.
\117\ Consulting agreements between Triad and Citizens for Reform
and Citizens for the Republic, CREF 1 94-95; CR 1 38-39.
\118\ October and November 1996 bank statements of Citizens for
Reform.
\119\ October and November 1996 bank statements of Citizens for
Reform.
\120\ October and November 1996 bank statements of Crestar bank
accounts of Citizens for the Republic.
\121\ See note 113 infra; see also bank statements of Citizens for
Reform and Citizens for the Republic for October and November 1996.
\122\ December 1996 bank statement of Crestar Bank accounts of
Citizens for the Republic.
\123\ Los Angeles Times, 5/5/97.
\124\ Documents bearing signature of Lyn Nofziger, CREF 1 56, 66,
94-95.
\125\ Peter Flaherty deposition, 8/22/97, pp. 54, 62, 70, 83.
\126\ Committee list of races where Triad was active.
\127\ Meredith O'Rourke deposition, 9/3/97, pp. 46, 87; See
Appendix C for reports of Rodriguez visits.
\128\ Clifton v. FEC, 114 F.3d at 1309, 1316-19 (1st Cir. 1997).
\129\ Report of Rick Hill campaign, TR 15 1143-1145.
\130\ Report of Rick Hill campaign, TR 15 1143-1145.
\131\ Invoice for Yellowtail advertising, CR 13 1179.
\132\ Script of Yellowtail advertisement, CR 13 0713.
\133\ Congressional Quarterly 1996 Election Results: report of Rick
Hill campaign, TR 15 1143-1145.
\134\ Report of John Thune campaign, TR 15 1141-1142.
\135\ Report of John Thune campaign, TR 15 1141-1142.
\136\ Invoice showing funds spent for Thune by Citizens for the
Republic, CREF 13 0512.
\137\ Report of Steve Stockman campaign, TR 15 1210-1212.
\138\ Invoices showing funds spent by Citizens for Reform and
Citizens for the Republic, CREF 13 512, CR 13 1272.
\139\ Videotape advertisement produced by Citizens for the
Republic.
\140\ Invoice showing funds spent for Wittig race, CR 13 12792.
\141\ Report of Sue Wittig campaign, TR 15 1136-1139.
\142\ FEC disclosure reports of Friends of Sue Wittig.
\143\ Triad fax alert ``The Time for Battle Is Now,'' 9/27/97, TR
10 191.
\144\ Los Angeles Times, 5/5/97.
\145\ Los Angeles Times, 5/5/97.
\146\ Annenberg Public Policy Center, ``Issue Advocacy Advertising
During the 1996 Campaign: A Catalog,'' Report Series No. 16, 9/16/97,
p. 5.
\147\ National Journal, 9/28/96; Boston Globe, 8/23/96.
\148\ Letter of 8/27/97 from Majority and Minority Chief Counsels
to Triad Counsel Richard Hauser.
\149\ Subpoena of 8/21/97 to Crestar Bank.
\150\ Letter from Richard to Hauser to Alna Baron and Michael
Madigan, 9/8/97.
\151\ Letter of 8/22/97 from Minority Staff Counsel to Mark Braden.
\152\ Subpoena of 8/21/97 to Crestar Bank.
\153\ Staff also followed up with the bank holding the Triad
records leaving two voice mail messages seeking to determine when
records would be produced. At the same time, the bank holding records
of Coalition for Our Children's Future, which had received an identical
subpoena for records that had not yet been produced, was contacted for
the same purpose. Letter from Minority Chief Counsel to Crestar General
Counsel John Clark, 10/30/97.
\154\ Committee staff reviewed such records when they were
received. Documents revealed the existence of a second account held by
Triad which was clearly covered in the subpoena. Records for this
account were also requested and were forwarded without redactions.
\155\ Letter of 11/24/97 from Senator Glenn to Senator Thompson.
\156\ New York Times, 10/24/97.
\157\ Wire transfer receipts of Crestar Bank accounts of Citizens
for Reform and Citizens for the Republic.
\158\ Associated Press, 10/29/97.
\159\ FEC public disclosure records for Charles Koch, David Koch
and Koch Industries PAC.
\160\ National Journal 5/16/97: Lewis Charles and the Center for
Public Integrity, The Buying of the President. New York: Avon Books,
1996, p. 127.
\161\ Roll Call 1/26/98.
\162\ Wichita Business Journal 10/24/97: Minneapolis Star Tribune,
10/29/97.
\163\ Deposit records of Crestar account of Triad Management, Inc.,
10/29/96.
\164\ 9/30/97 Letter from Minority Chief Counsel to Charles Koch.
\165\ The eight races were: Brownback v. Docking (Kansas Senate);
Hutchinson v. Bryant (Arkansas Senate); Hill v. Yellowtail (Montana
House); three Kansas House races: Snowbarger v. Hancock; Tiahrt v.
Rathbun; and Ryun v. Freidan; Brown v. Wilde (California House); and
Coburn v. Johnson (Oklahoma House). Invoices for Dresner Wickers &
Assoc., CR 13 1751, 1755, 1759, 1179, 1017; CREF 13 0009, 0150.
\166\ 10/22/96 Memo from Malenick to Dresner, CR 13 1748-49.
\167\ Memo from Triad staff to Peter Flaherty 10/24/96, CR 13 1659.
\168\ Memo from Triad bookkeeper Anna Evans to Dresner Wickers
staff Joanne Banks, 10/28/96, CR 13 1780.
\169\ Memo from Evans to Banks, 1/21/97, CR 13 1819.
\170\ Memo from Evans to Banks, 2/7/97, CREF 13 0308.
\171\ Denis Calabrese deposition, 9/18/97, pp. 10-12.
\172\ Denis Calabrese deposition, 9/18/97, pp. 41-44.
\173\ Denis Calabrese deposition, 9/18/97, pp. 44, 18-19, 35-37,
11.
\174\ Denis Calabrese deposition, 9/18/97, pp. 18-19.
\175\ Roll Call, 2/2/98.
\176\ Roll Call, 2/2/98.
\177\ Roll Call, 2/2/98.
\178\ New York Times, 10/24/97: Minneapolis Star Tribune, 10/29/97.
\179\ Minneapolis Star Tribune, 10/29/97.
\180\ Wire transfer records for deposits received by Coalition for
Our Children's Future, Citizens for Reform, and Citizens for the
Republic.
\181\ Minneapolis Star Tribune, 10/29/97: Letter to Benjamin
Ginsberg 11/5/97.
\182\ Invoices from Dresner Wickers to Triad, CREF 13 9, 150; CR 13
1017, 1735.
\183\ FEC disclosure report of Sam Brownback for U.S. Senate.
Senator Brownback's 1996 spending totaled $2.2. million.
\184\ FEC disclosure report for Snowbarger for Congress.
Snowbarger's spending totaled $443,000.
\185\Congressional Quarterly, 1996 Election Results, 11/9/96 pp.
3250-57.
\186\ Cox News Service, 7/11/97.
\187\ Cox News Service, 7/11/97.
\188\ Deposit records of Crestar account of Citizens for Reform.
\189\ FEC public disclosure reports for Robert Harris, Gaspari,
Gensemer, Duquette, Weaber, Doblin, available at www.tray.com.
\190\ Campaign Report of Christian Leinbach, TR15 1163-1166.
\191\ Committee list of races where Triad was active.
PART 2 INDEPENDENT GROUPS
Chapter 13: Coalition for Our Children's Future
Coalition for Our Children's Future (``CCF'') is a
nonprofit, tax-exempt organization under section 501(c)(4) of
the tax code, created in mid-1995. Between its 1995 creation
and the November 1996 election, CCF spent over $5 million
dollars on advertising in targeted Congressional districts.
Based on the evidence before the Committee, we make the
following findings with regard to CCF:
findings
(1) Haley Barbour and others associated with the RNC
created Coalition for Our Children's Future (``CCF''), as a
purportedly nonpartisan, tax-exempt social welfare organization
under 501(c)(4) of the tax code and used CCF to carry out issue
advocacy campaigns on behalf of Republican candidates and
against Democratic candidates in 1995 and the first part of
1996.
(2) The evidence before the Committee suggests that several
Republican candidates solicited contributions for CCF from
their own supporters and coordinated with CCF to secure issue
ads that they believed would help their candidacy.
(3) The evidence before the Committee suggests that in
October 1996, CCF funded televised ads attacking Democratic
candidates with money donated by a contributor who obtained a
confidentiality agreement and oversaw development of the ads.
Based on the evidence before the Committee, it is likely that
this contributor was the Economic Education Trust, the same
entity that funded and perhaps controlled the development and
placement of ads through two tax-exempt organizations operated
by Triad.
background
Coalition for Our Children's Future is a nonprofit
organization pursuant to section 501(c)(4) of the Internal
Revenue Code. As a 501(c)(4) organization, CCF may engage in
lobbying and other direct political activities so long as
direct political activity is not the organization's primary
activity. In fact, CCF, which was incorporated in June 1995,
was conceived and operated as a political organization.
Essentially, in 1995 and early 1996, CCF operated as a shadow
campaign for the Republican National Committee (``RNC''),
airing advertising in support of the Republican Balanced Budget
and Medicare legislation at the same time the Democratic
National Committee (``DNC'') was airing advertising on the same
subjects. The idea for CCF appears to have been conceived
within the RNC, and people who either worked for, or with, the
RNC controlled decision-making by CCF throughout 1995 and 1996.
In the one-year period between September 1995 and October 1996,
CCF spent over $5 million on advertising.1 CCF has
never engaged in any activity other than the creation and
airing of advertising. CCF has no grassroots support but exists
largely as a project of Republican fundraising consultants
Odell Roper & Simms.
---------------------------------------------------------------------------
Footnotes appear at end of chapter 13.
---------------------------------------------------------------------------
In 1995 alone, CCF spent $3.18 million on advertisements
supporting the Republican positions on the Balanced Budget
Amendment and Medicare. 2 Even after the demise of
the Republican Balanced Budget legislation prior to the
government shut-down in 1995, CCF continued to air advertising
in key congressional races. In several instances, advertising
appears to have been aired at the request of particular members
of Congress or their staff, and paid for with funds raised by
those members.
In mid-1996, representatives of CCF were approached by a
``secret'' contributor who required that CCF execute a
confidentiality agreement before making a contribution. CCF
witnesses testified that the purpose of the contribution was to
fund an advertising campaign in the weeks before the 1996
election. CCF witnesses uniformly refused to disclose the
identity of this secret contributor, or even the amount of the
contribution, although they were appearing before the Committee
pursuant to subpoena. Despite repeated Minority requests, the
Committee never issued an order compelling witnesses to reveal
this information.
rnc ties to ccf
Documents produced to the Committee and the testimony of
various witnesses indicate that Haley Barbour, then-chairman of
the RNC, together with his close aide Donald Fierce, who held
the title director of strategic planning, were instrumental in
the creation of Coalition for Our Children's Future. The
purpose of CCF was to raise funds from corporate interests to
fund a media campaign in support of Republican legislation on
the balanced budget and Medicare reform.3 Barbour
had publicly insisted that he would not commit RNC funds to
advertising in support of the legislation, preferring to
conserve the party's resources for the 1996
election.4 Instead, the RNC simply created CCF to
pay for an advertising campaign with undisclosed corporate
funds. This allowed the RNC to respond to Democratic
advertising while conserving hard money and permitting business
interests, including tobacco companies, to fund the advertising
free from public scrutiny.
A memo produced to the Committee by the RNC, and written by
RNC staffer Barry Bennett, makes clear the RNC's involvement in
creating CCF and other similar groups.5 The undated
memo states:
We have three options on placing a USA Today ad.
First the Coalition for Our Children's Future can place
the ad. The resources and legal structure are in place.
The name sounds a little goofy. The existence of such a
structure does give us limited protection from a press
attack. Second, we can formalize the Committee to Save
Medicare. It will take a few days lead time to file the
corporate paperwork. If the Seniors Coalition joins the
board this entity will have appropriate
cover.6
Bennett subsequently left the RNC to become CCF's executive
director and oversee the CCF advertising campaign. Besides
Bennett, the RNC also turned to other consultants and to staff
to get CCF up and running. Documents produced to the Committee
reflect that the RNC also hired its own fundraising firm, then
known as Odell Roper & Simms (``ORS''), to oversee the creation
of and fundraising for CCF. The RNC produced an unsigned copy
of a contract dated May 1, 1995 from Robert Odell to Haley
Barbour.7 The cover memo, directed to Barbour,
states: ``per our conversation Saturday,'' ``Re: Agreement for
Coalition for America's Future,'' which Odell conceded was the
same organization that became Coalition for Our Children's
Future.8 ORS, known primarily for direct mail
fundraising, also worked directly for the RNC and the Dole
presidential campaign, and Odell also personally handled
fundraising for the RNC's annual ``Republican Gala''
fundraiser.9
Barry Bennett testified that he was working for Chuck
Greener in the RNC's communications office when he was
approached by the RNC's Donald Fierce about working for
CCF.10 Two of the individuals who ultimately acted
as directors of the organization, Gary Andres and Dirk Van
Dongen, also testified that Fierce had asked them to join the
board.11 The third director, Deborah Steelman, was
asked by Barbour to join the Board.12 Van Dongen
also testified that it was his general understanding that the
RNC was overseeing the creation of CCF.13 The media
vendor retained by CCF was Greg Stevens & Co., which, like ORS,
also worked directly for the RNC.14 Thus, the RNC
turned to its own fundraising and media consultants, and a
member of its own staff to run CCF, and to individuals
personally chosen by high-ranking RNC officials to sit on the
board of CCF.
Asked about the May 1, 1995 contract produced by the RNC,
Odell testified that, while he had no reason to believe that
such conversations did not occur, he was unable to recall ever
seeing the document, did not recall having the conversation
referenced in the cover memo with Barbour, and did not recall
any discussions of entering into a contract with the RNC for
CCF.15 Odell did concede that throughout the spring
of 1995 he was in regular contact with officials at the RNC,
including Barbour, Fierce, and Greener, as often as two or
three times a day.16 Sarah Fehrer, Odell's assistant
who was responsible for the administrative start-up of CCF,
testified that she received telephone calls from Barbour and
his assistant Kirk Blalock who were making ``general
inquiries'' about ``how things were going.'' 17 She
testified that on at least one occasion Barbour personally
called her, ``not [about the] creation, just in general once we
got going with the project.'' 18 While Odell
confirmed that a contract for the provision of services from
ORS to CCF probably existed, no contract was produced to the
Committee.19
In late May 1995, a few weeks after the date of the
contract sent from Odell to Barbour, CCF was incorporated by
attorneys for ORS.20 Documents produced to the
Committee indicate that CCF may have already had a name before
it was incorporated. A March 13, 1995 memo, produced by the
RNC, is directed to the ``Coalition to Save Our Children's
Future Media and Message Working Group.'' The memo, written on
Americans for Tax Reform letterhead, contains a series of
``messages'' built around the theme of ``preserving the
American dream for our children.'' 21 The RNC also
produced a number of other documents reflecting an active role
in CCF. The documents include a memo dated May 23 to Barbour
and Odell from Barbour's former law partner, Ed Rogers,
discussing a plan to contact Republican Governors to host
meetings for Barbour with potential CCF
contributors.22 Odell testified he could not recall
seeing this document, although he is certain he did if it was
directed to him.23 The memo, which bears Barbour's
handwritten ``Good'' across the top, also appears to have been
forwarded by Barbour to Fierce and Greener. Questions about
these documents were never posed to Barbour, Greener, or Fierce
because, although the Minority requested subpoenas for all
three, no subpoenas were issued.24
The RNC also produced two 1995 agendas for ``Coalition
Meetings'' on July 17 and 19 of 1995 that clearly demonstrate
RNC control and direction of CCF's creation.25 The
two agendas, one on ORS letterhead and the other on CCF
letterhead, include references to fundraising and
organizational plans such as:
A. Structure:
1. Coalition Board
2. Coalition Advisory List
3. 501(c)(4) status
B. Organization (Staff/RNC):
1. Roles/Authority/Responsibility
2. Schedule coordination.26
The second agenda also contains a reference under the heading
``Administration:'' ``approval of updated Coalition briefing
materials? Haley's approval.'' 27 The agendas also
discuss fundraising plans for CCF, including redirecting
tobacco company contributions from Dole's Better America
Foundation to CCF, and calls by House Speaker Newt Gingrich to
Merck Pharmaceutical company.28 Speaker Gingrich and
Haley Barbour also attended fundraising events for CCF in the
summer of 1995.29 Other documents produced by the
RNC include a fax from Sarah Fehrer to Greener about a June 2,
1995 meeting with representatives of five tobacco companies,
andfundraising material provided by Odell to Philip Anschutz
that was copied to Greener.30
CCF's 1995 Advertising Campaign
After a very active fundraising campaign through the summer
of 1995, CCF commenced its advertising campaign. Between August
and December 1995, CCF funded four waves of advertising
totaling at least $3.18 million.31 The
advertisements aired during this period include a Medicare
advertisement featuring one Senator, a Balanced Budget ad
featuring a second Senator, an advertisement entitled ``Meet
Priscilla,'' which focused on the federal debt and the need for
a balanced budget for the future, and a fourth advertisement
urging support for the Republican Medicare plan.32
Consistent with the plan outlined in Bennett's earlier memo
referencing the creation of a second group, the Save Medicare
Project, under the auspices of the Seniors Coalition, Bennett
testified that both the Medicare ad featuring the Senator and
the second Medicare ad were paid for by Coalition for Our
Children's Future but aired with a disclaimer that they were
paid for by ``the Seniors Coalition: Save Medicare Project.''
33 Bennett testified that he worked with staff at
Greg Stevens & Co, (``Stevens & Co.''). to create the
advertisements, and that CCF paid for the media time rather
than contributing the money directly to the Seniors Coalition
in order to maintain control over the advertising.34
Bennett also testified that it was Greg Stevens's idea to have
a seniors group air the Medicare advertising.35
Most decision-making with regard to advertising appears to
have been handled by Stevens & Co. According to Bennett,
Stevens & Co. staff was responsible for recruiting both
Senators to appear in the CCF advertisements, and Stevens,
together with Barry Bennett, made the decisions regarding where
advertising would air.36 Bennett also testified that
together with Stevens & Co. he prepared another advertisement
that he could recall only as ``screaming granny'' which aired
in the spring of 1996.37 This advertisement appears
to have been financed by two wire transfers from CCF to the
Seniors Coalition totaling $140,000.38 A memo
produced by a Stevens & Co. employee contains a list of media
markets where CCF's 1995 advertising aired. The memo shows that
ads were targeted to air in particular congressional districts,
many of which were the districts of vulnerable Republican
freshman.39
Essentially, at least at its creation, CCF was largely a
front for the RNC's advertising in support of the balanced
budget and Medicare package. Gary Andres, who served as
president and a director of CCF, testified that the RNC's
Donald Fierce told him the initial purpose of CCF was to run
advertisements in support of the Republican Balanced Budget
plan.40 The purpose of creating an entity like CCF
is three-fold. First, paying for advertising through a
nonprofit organization permits the conservation of the party's
hard dollars. Had advertising created by CCF been aired by the
RNC itself, in 1995 it would have had to have been paid for
with a combination of hard and soft dollars.41 DNC
advertising aired during this period on these same subjects was
funded partially with hard money. Running the advertising
through a nonprofit front also allows the party to offer
contributors freedom from public disclosure while still earning
the contributors goodwill with members of Congress and party
officials. And finally, running advertising through an
apparently autonomous organization also lends more credibility
to the message. As RNC Coalition Director Curt Anderson
explained in the Coalition Building Manual used by the RNC in
the 1996 election cycle, ``Always remember, `What we say about
ourselves is suspect, but what others say about us is
credible.' '' 42
CCF and its Exempt Organization Status
In September 1995, four months after it was incorporated,
Coalition for Our Children's Future applied for tax-exempt
status, claiming to be a social welfare organization pursuant
to section 501(c)(4) of the tax code.43 While a
501(c)(4) organization is permitted to lobby, the primary
purpose of the organization must be to promote social welfare
rather than directly or indirectly participate in political
campaigns.44 Despite this limitation on political
activity, as a result of carefully crafted application papers
and follow-up responses to the Internal Revenue Service
(``IRS''), on July 30, 1996 CCF was approved by the IRS as a
501 (c)(4) organization. The approval of CCF for this status
points to inherent problems in the application process for
section 501(c)(4) status, and shows how organizations may
easily disguise their true nature from the IRS. CCF concealed
information about its ties to political candidates, parties and
consultants and concealed the partisan nature of its
advertising from the IRS.
In the September 1995 application, CCF stated that its
purpose was to produce non-partisan educational material about
budget deficits and Medicare reform. It listed the only
employee of the corporation as Executive Director Barry Bennett
and placed a great deal of emphasis on the appoint of directors
Gary Andres, Deborah Steelman and Dirk Van Donegan. No mention
is made in the application of the Odell fundraising firm even
though CCF was essentially run out of ORS's offices. According
to the testimony of ORS employee Sarah Fehrer, in the first
half of 1995, she handled tasks including ordering stationary
and a phone line for CCF; that the CCF phone line rang at her
desk; that she believed ORS also rented a post office box for
CCF; and that she retrieved mail for CCF.45 Fehrer
also testified that ORS established a separate fundraising
office for CCF in the ORS building for a short period in
1995.46 The application makes no mention of the fact
that Barbour and Speaker Gingrich were actively raising funds
for CCF, or that Senator Dole and Speaker Gingrich were
honorary co-chairs of CCF.47
Barry Bennett testified that he worked for CCF only
periodically when advertising buys were being
prepared.48 When he was not working for CCF, Bennett
worked for Representative Frank Cremeans, an Ohio
Republican.49 Many documents produced to the
Committee bear the fax line of Congressman Cremeans's office,
and Fehrer testified that she contacted Bennett at that office
when she could not reach him at the CCF office he
maintained.50 Bennett also testified that he first
learned that he was the executive director of the organization
when he received his business cards and that he regarded Odell
as having the authority for all financial decisions pertaining
to CCF.51
The three CCF directors also testified that they played no
role in the organization. Steelman, Van Donegan, and Andres
each testified that from the time they signed paperwork
becoming directors of the organization in July 1995 until the
end of 1996, they did not recall attending a board meeting or a
CCF meeting of any sort, never saw proposed advertising for the
organization, and never spoke to representatives of
CCF.52 None of the three ever personally met Barry
Bennett until 1997, and none of the three was aware of ORS's
role in running CCF.53 Andres, who was ostensibly
the president as well as a director of CCF, additionally
testified that he thought that someone had just designated him
president, and that he never discussed becoming president with
anyone.54 When shown the Articles of Incorporation
of CCF that provide taht ``the President shall be the CEO of
the Corporation and shall in general supervise and conduct the
daily affairs of the Corporation,'' Andres testified that he
had never seen the document before.55 When asked
what he understood his role in CCF to be, he testified that the
RNC's Donald Fierce ``never really went into that in any detail
. . . he just said there would be a board--and we didn't really
need to go into it.'' 56
In November 1995, CCF received a follow-up inquiry from the
IRS seeking additional information about current CCF
advertising, about CCF's relationship to its media consultants,
and about its proposed ``programs.'' CCF responded on December
19, 1995, stating that the only written agreements into which
CCF had entered were with its law firm, accounting firm, and
auditors. Thus, CCF once again failed to inform the IRS that it
retained ORS, a political fundraising firm also employed by the
RNC and political campaigns, to administer and raise funds for
the organization, and that Robert Odell exercised decision-
making authority for the organization. While the follow-up
response forwarded tapes of additional CCF advertising, it did
not include a memo dated one day earlier outlining 48 media
markets where advertising buys had been placed and which
coincided with politically vulnerable Republican districts. The
response also contained a biography of Barry Bennett which
noted that prior to CCF he had worked for Representative
Cremeans. The biography omitted Bennett's brief tenure at the
RNC in 1995, and also failed to mention that in the three
months between the filing of the application and the response,
Bennett had once again been working for Representative
Cremeans.
The ability of CCF to obtain section 501(c)(4) status
despite the fact that it was created by the RNC, run by
political consultants, and existed to air targeted political
advertising at least partially in response to DNC advertising,
highlights the deficiencies of the section 501(c)(4) process.
The application process completely failed to discover that CCF
was essentially a name and a bank account through which
corporate funds were sent for the purpose of airing targeted
political advertising. The organization has never had a staff
of its own, has no defining ideology, and is financed not by
people who believe in CCF's cause, but by large corporate
contributors solicited by Republican Party fundraisers or
Republican Party leaders
In 1996, CCF also made contributions to other Republican
groups, including a $10,000 contribution to Americans for Tax
Reform in August 1996, a $150,000 contribution to the National
Right to Life Committee in October 1996, and the $140,000
transferred to the Seniors Coalition.57 That CCF was
able to form and operate under the guise of a social welfare
organization points to fundamental flaws in the tax-exempt
application process and the campaign-finance laws that allow
groups like CCF to evade public disclosure requirements by
using artfully worded political advertisements.
ccf 1996 advertising for republican candidates
In December 1995, CCF aired an advertisement that featured
clips of President Clinton talking about his plan to balance
the budget. The advertisement ran:
Voice over: You've heard a lot of talk from Bill
Clinton about balancing the budget. CLINTON: ``I would
present a five year plan to balance the budget . . . we
could do it in seven years . . . I think we can reach
it in 9 years . . . balance the budget in 10 years . .
. I think we could reach it in 8 years . . . so we're
between 7 and 9 now. . . . 7, 9, 10, 8, 5'' Voice over:
No more double talk. Balance the budget.58
Produced by Stevens & Co., the advertisement was almost
identical to an advertisement produced by Stevens & Co. and
aired by the RNC.59 A memo from a Stevens staffer to
Sarah Fehrer of the Odell fundraising firm specifically notes:
``The spot which ran [last week] was an edited version of
Clinton spot the RNC ran last month which shows various clips
of Clinton commenting on the balanced budget. (10 years, 7
years, 9 years, etc . . .)'' 60 Hence, Stevens & Co.
produced two virtually identical advertisements aired almost
back to back by the RNC and CCF, at the same time that CCF was
filing its response to the IRS seeking status as a social
welfare organization not primarily engaged in political
activity.
Documents suggest that in January 1996, CCF also aired the
Clinton advertisement in a few districts at the request of
particular Republican candidates.Apparently, from the time it
began its advertising campaign, CCF expected that Republican members of
Congress would make such requests. In a September 5, 1995 memo to
Coalition Leaders, Barry Bennett stated:
Our members need to feel that someone is protecting
them during this struggle. It is vitally important that
we go up soon after their return . . . . Undoubtedly
many will call in the coming week and ask for broadcast
in their districts. Those that are not covered might be
motivated to make a few solicitations to raise the
funds for airing these spot in their
districts.61
No evidence indicates that members of Congress raised funds
for the September Medicare advertisements that were ultimately
aired, although CCF did receive $500,000 from the National
Republican Congressional Committee on September
15.62 In January 1996, however, evidence suggests
that at least four members of Congress or their staff actively
worked to secure CCF advertising in their districts.
Documents show that in late December 1995, Alex Ray of
Chesapeake Media--Representative Bill McCollum's media person
63--was working with CCF to put together a $30,800
advertising buy in Representative McCollum's Orlando, Florida
district.64 A December 27 memo from Ray to David
Bennett, the ORS staffer responsible for administering CCF,
notes, ``I just hope Bill raises another $280.'' 65
In another memo to Bennett two days later, Ray exclaims, ``I
think its over. Bill McCollum raised another $1,000 yesterday
and the check is in the mail to Doyle's [Congressman McCollum's
administrative assistant 66] home as is the $5,000.
. . . This should cover the shortages the Coalition advanced
towards the buy.'' 67 In a third memo to David
Bennett upon completion of the buy, Ray noted, ``Every adult in
central Florida should have seen your spot 3.5 times over the
five day period.'' 68 Although Barry Bennett
initially testified that he had no knowledge of any member of
Congress raising funds to air CCF advertising in his or her
district, when he was shown the memos, he admitted that he had
spoken to McCollum staffer Doyle because they ``wanted to
either donate or raise money I think, for--to run the ad, one
of our ads in Orlando or something like that.'' 69
Documents produced by CCF also indicate that Representative
Jim Kolbe of Arizona raised money for CCF to air ads in his
district. A letter dated January 18, 1996, to Barry Bennett
from Representative Kolbe's campaign manager Tori Hellon
states:
I am sending $9,750 today so that you can begin the
buys. Three of our contributors are out of town and
will return this weekend. I will send the balance of
$12,000 on Monday. I have not heard back on the
availability of RNC funds to be added to this money in
order to increase our exposure. I hope you were
successful in your efforts to secure additional
funding.70
A note handwritten at the bottom adds: ``Please fax a copy of
the buy immediately so our contributors can know when the ads
will run.'' 71 Invoices produced to the Committee by
CCF indicate that CCF made a $12,000 television buy in Tucson,
Arizona for January 25 to 31.72 Asked about the
letter, Bennett testified that he recalled having a
conversation with Kolbe's campaign manager ``about how to go
about raising money and what kind of money the coalition could
take.'' He testified that he did not recall ever seeing the
letter from the campaign manager.73
CCF documents also indicate similar contacts with
Representative Van Hilleary of Tennessee. A printout of a
January 12 telephone message for Barry Bennett from
Representative Hilleary reads, ``We really need the info on
your bye [sic] in Nashville for the ad. When and how much?''
74 Documents indicate that CCF funded a $20,000
television buy in Nashville between January 6 and 12,
1996.75 Asked about the message, David Bennett, an
ORS staffer, testified that he retrieved it and immediately
forwarded it to Barry Bennett. Barry Bennett initially
testified that he had never spoken to a Member of Congress on
the subject of CCF, but later recalled having spoken to
Representative Hilleary.76 Documents also reflect
that Representative Joe Barton of Texas was soliciting
contributions for CCF in December and January 1996. At least
one of the contributors, to whom Barton sent a solicitation on
CCF letterhead, Louis Beecherl, contributed directly to
Barton's campaign at about the same time he received the
solicitation.77
By directing their personal supporters to contribute to
CCF, these Republican candidates appear to have been engaged in
an attempt to circumvent contribution limits to their own
campaigns. Republican Party organizations also appear to have
been involved in this effort to run ads with the Republican
message in congressional districts during this period. On
January 19, CCF received an $85,000 contribution from the
National Republican Senatorial Committee.78 The
coordination of the fundraising and strategy for airing CCF
advertisements between the candidates, the Republican Party,
and CCF appears to make the cost of the advertising corporate
contributions from CCF to these candidates. Creation of a
supposedly nonprofit organization in the anticipation that it
will be contacted by Members of Congress anxious for the
organization's advertising dollars shows that undisclosed funds
from nonprofits are used to influence particular races with the
full knowledge and cooperation of the candidates who benefit
from this advertising.
THE SECRET TRUST AND CCF's 1996 ELECTION ADVERTISING
In the summer of 1996, Robert Odell, of Odell, Roper and
Simms, was approached by Denis Calabrese, a political
consultant he knew from previous work.79 In
conversations with Odell and his partner John Simms, Calabrese
inquired whether CCF would be interested in receiving a
contribution for an advertising campaign.80
Calabrese testified that before approaching CCF, he had been
retained by an individual he refused to identify to the
Committee who represented an organization he refused to
identify, to oversee an advertising campaign in the weeks prior
to the 1996 election.81 Sometime in late August of
early September 1996, the secret contributor provided funds to
CCF that were used to run advertisements in several parts of
the country in the weeks prior to the 1996
election.82 At the request of the contributor, the
campaign was overseen by Calabrese, and the contributor
required that a confidentiality agreement be executed by CCF
prior to making the contribution.83 Amazingly, ORS
never informed the CCF's board of directors of the impending
advertising campaign, the confidentiality agreement, the source
of the funding, or the relationship with
Calabrese.84 In fact, when questioned in early 1997
by reporters about those ads, at least one director, Deborah
Steelman, stated that she thought that the organization had
disbanded.85
Advertising funded through CCF in the weeks prior to the
election included at least $280,000 in television advertising
in the Louisiana Senate race between Democrat Mary Landrieu and
Republican Woody Jenkins, $81,000 in advertising and $51,000 in
phone calls and mail in the Louisiana House race between
Cooksey and Thompson, an unknown amount for advertising and
$28,500 on phone calls in a California House race between
Democrat Representative Cal Dooley and Republican Trice Harvey,
$35,000 on television advertising and $37,000 on telephone
calls and mailings in the Oklahoma House race between
Republican Tom Coburn and Democrat Glen Johnson, and $35,000 on
radio advertisements and $89,000 on mail and telephone calls in
seven Minnesota state legislative races.86
Calabrese testified that in addition to overseeing the
advertising campaign for CCF, he also oversaw an advertising
campaign financed by the same contributor through a second
organization that he refused to name.87 In addition
to these two organizations, Calabrese testified that he also
attended meetings with other organizations including Triad (See
Chapter 12) in order to determine if they were ``appropriate
vehicles'' for ad campaigns.88 Calabrese almost
completely controlled the advertising campaign funded through
CCF. While CCF required that all advertising be approved by
counsel, and ORS staff provided bookkeeping services and acted
as a liaison with counsel, Calabrese testified that he hired
vendors, determined where ads would run, and had general
oversight for the ad campaign. He also testified that he began
hiring vendors and getting the advertisements started prior to
the time a final decision was made by the secret contributor to
contribute to CCF.89 Among the vendors hired for the
advertising campaigns of CCF and the unknown organization were
Dick Dresner, James Farwell, and Steve Sandler, consultants who
also worked on the Triad advertising campaign.90
Did CCF's secret contributor fund triad attack ads?
The fact that the three political consultants, two of whom
are relatively unknown in Washington, D.C., worked on both the
Triad and CCF advertising campaigns suggests that the two ad
campaigns were funded by the same contributor, and that the
contributor, not CCF or Triad, hired the consultants. Bank
records show that a portion of Triad's advertising campaign
roughly equivalent to the advertising handled by these
consultants was provided by a secret entity know as the
Economic Education Trust. The identity of the persons behind
this trust, and even the existence of the trust itself, was
disclosed to the Committee when Triad's attorneys failed to
redact bank records which were produced to the Committee.
Evidence also suggests that the Economic Education Trust funded
the CCF ad campaign.
Evidence includes the public statement by an unnamed CCF
employee that the organization that provided the funding for
the ad campaign was a trust.91 Bank records produced
by CCF also show that the money for the CCF ad campaign was
wired to CCF from a branch of Riggs Bank in Washington D.C.,
the same bank where the Economic Education Trust has an
account.92 Witnesses for CCF admitted that CCF had
entered into an agreement to keep the identity of the
contributor secret, but refused to produce a copy of the
agreement. Barry Bennett stated publicly that this agreement
was drafted by former RNC General Counsel Benjamin
Ginsberg.93 Documents produced by CCF indicate that
counsel for CCF was also in contact with Ginsberg on the
subject of the CCF advertising campaign.94 Ginsberg
also represented Dresner and Farwell before the Committee, both
of whom failed to appear for deposition despite multiple
attempts to schedule dates with Ginsberg. Moreover, the
Committee learned that when the Economic Education Trust opened
its account at Riggs bank, the address provided was in care of
Ben Ginsburg.
In addition, although he failed to appear for a sworn
deposition, Dick Dresner admitted that he helped to coordinate
a number of issue advertising campaigns in the 1996 election
cycle during a January 1998 meeting of political consultants.
Dresner said that ``many of the people he worked with were most
concerned with remaining anonymous, while still having a major
impact on federal elections.'' 95 Dresner confirmed
that ``his wealthy clients set up a series of foundations,
trusts and other `shells' to pump money into subterranean
issue-ad campaigns. `They use three or four or five or six
different ways so they aren't discovered,' '' Dresner
said.96 He went on to note that ``his clients seemed
to have success with that tactic, and most have remained
anonymous even now: `Even if their names came up once or twice,
the extent of their activities is underestimated.' ''
97
Despite two requests from Senator Glenn, no subpoena was
ever issued for the financial records of the Economic Education
Trust. Such a subpoena might have permitted the Committee to
determine whether or not the trust funded the CCF and Triad
advertising campaigns. Even without the benefit of a subpoena,
circumstantial evidence developed by the Minority suggests that
the trust was financed in whole or in part by Charles and David
Koch, controlling shareholders of Koch Industries, a giant oil
company (see Chapter 12). The Koch brothers have a history of
channeling money through nonprofit organizations, including
think tanks and term-limits groups, in order to advance their
political interests.98 In 1996, a term-limits group
with possible Koch funding ran attack ads aimed at some of the
same candidates who were also targeted by Coalition for Our
Children's Future.99 Some of the states in which CCF
advertising was targeted are also states where Koch has
financial interests. In Louisiana and Oklahoma, Koch has
pipelines and oil contracts.100 In Minnesota, where
Calabrese testified CCF funded mailings in an attempt to win a
Republican majority in the state legislature, Koch owns a huge
refinery.101 Some of the candidates who benefited
from attack ads run by CCF also received campaign contributions
from Charles Koch, David Koch, and/or their company's political
action committee.102
Assuming that the Economic Education Trust was behind the
CCF ad campaign, the trust, through Triad and CCF, funneled at
least $2.5 million into ads designed to aid candidates in
states where the Kochs have significant business interests. The
trust also took calculated steps to prevent public disclosure
of its existence and its activities. One of the questions that
remains unanswered at the close of this investigation is how
many other groups did the Economic Education Trust run
advertising dollars through? Calabrese testified that the
secret contributor funded an advertising campaign through at
least one organization in addition to CCF and Triad. Given the
remaining questions about the extent of the Economic Education
Trust's activities, and lacking even definitive knowledge of
who funded the CCF advertising campaign, this investigation has
failed in its purpose, to expose illegal and improper
activities in the 1996 campaign.
CONCLUSION
CCF sets a dangerous precedent for future elections. In
1995 and 1996, advertising through CCF allowed the RNC to
conserve hard dollars while responding to Democratic-funded
advertising. CCF also provided candidates an avenue to fund
advertising in their districts with contributions from
supporters who may have made the maximum contribution to their
campaigns. Finally, CCF permitted a still unknown entity to
control a high dollar political advertising campaign through
CCF for still unknown purposes.
CCF remains in existence today. Robert Odell testified that
in January 1997, he had a meeting with Haley Barbour, Donald
Fierce and Dirk Van Dongen to discuss keeping the organization
alive for future issue campaigns.103 Subsequently,
the board of CCF was reconstituted to include Barbour, Fierce,
Odell, and Van Dongen.104 While Van Dongen and,
reportedly, Fierce have since resigned, so far as this
Committee is aware, Odell and Barbour remain active members of
the Coalition for Our Children's Future. Like other
organizations in the 1996 election, CCF provides a model for
groups and individuals interested in influencing the political
process free from disclosure and free from restrictions on how
much they can spend to do so.
FOOTNOTES
\1\ CCF Profit and Loss sheet for 5/30/95-12/31/96, CCF 213-215.
\2\ CCF disclosure of expenditures to Greg Stevens & Co., CCF Form
990, CCF 162-185, pp. 182-83.
\3\ Washington Times, 8/7/95.
\4\ Washington Post, 4/30/95; Washington Times, 12/7/95.
\5\ Barry Bennett deposition, 9/11/97, p. 228.
\6\ Memorandum regarding Placing Medicare Anniversary Newspaper Ad,
R 061653.
\7\ Contract and Cover Memo from ORS to Haley Barbour, 5/1/97, R
61612-61616.
\8\ Contract and Cover Memo from Odell Roper & Simms to Haley
Barbour, 5/1/97, R 61612-61616.
\9\ Robert Odell deposition, 9/5/97, pp. 31, 41.
\10\ Barry Bennett deposition, 9/15/97, pp. 5-7.
\11\ Gary Andres deposition, 8/18/97, p. 6: Dirk Van Dongen
deposition, 9/4/97, p. 5.
\12\ Deborah Steelman deposition, 8/25/97, pp. 6-7.
\13\ Dirk Van Dongen deposition, 9/4/97, p. 6.
\14\ The Hotline, 10/28/94: The Hotline, 11/17/95: The Hotline, 1/
6/95.
\15\ Robert Odell deposition, 9/5/97, pp. 35-37.
\16\ Robert Odell deposition, 9/5/97, pp. 39-40.
\17\ Sarah Fehrer deposition, 8/21/97, p. 18.
\18\ Sarah Fehrer deposition, 8/21/97, pp.18-19.
\19\ Robert Odell deposition, 9/5/97, p. 37. Lawyers for CCF have
claimed that the contract is not covered in the Committee subpoena
which calls for all documents referring or relating to payments over
$5,000 by CCF and all documents referring or relating to formation and
establishment of CCF. See Committee subpoena 73.
\20\ CCF Articles of Incorporation and Unanimous Consent in Lieu of
Initial Meeting, CCF 004-009 and 031-032.
\21\ Memo from Americans for Tax Reform to CCF Media and Message
Working Group, 3/13/95, R 27449.
\22\ Memo from Ed Rogers to Haley Barbour and Bob Odell re CCF
fundraising with Republican Governors, 5/23/95, R 061609.
\23\ Robert Odell deposition, 9/5/97, pp. 57-58.
\24\ Barbour appeared for deposition on the subject of the Ambrous
Young loan to the National Policy Forum earlier in the investigation
but was not subsequently recalled.
\25\ Agendas for CCF meetings of 7/17/95 and 7/19/95, R 61650-652
and 656-658.
\26\ Agenda for CCF meeting of 7/17/95, R 61650-652.
\27\ Agenda of 7/19/95 CCF Meeting, R 61656-658.
\28\ Agendas of 7/17/95 and 7/19/95, R 061650-652 and 656-658.
\29\ Washington Times, 8/7/95: Agenda for Gingrich travel, CCF 260.
\30\ 6/5/95 fax to Chuck Greener from Sarah Fehrer, R 61602-03: 7/
20/95 fax to Chuck Greener from Sarah Fehrer, R 61654, R 5178.
\31\ Memo from Spring Thompson of Greg Stevens to Sarah Fehrer, 12/
18/95, CCF 574-77.
\32\ Memo from Spring Thompson of Greg Stevens to Sarah Fehrer, 12/
18/95, CCF 574-77.
\33\ Barry Bennett deposition, 9/11/97, pp. 253-56: Memorandum from
Spring Thompson of Greg Stevens to Sarah Fehrer, 12/18/95, CCF 574-77.
\34\ Barry Bennett deposition, 9/11/97, pp. 253-256.
\35\ Barry Bennett deposition, Volume II, 9/15/97, pp. 24-25.
\36\ Barry Bennett deposition, 9/11/97 p. 64: Barry Bennett
deposition, Volume II, 9/15/97, pp. 27, 29-30.
\37\ Barry Bennett deposition, 9/11/97, p. 110.
\38\ CCF 1995 IRS Form 990, CCF 162-185, p. 180.
\39\ Memorandum from Spring Thompson of Greg Stevens to Sarah
Fehrer, 12/18/95, CCF 574-77.
\40\ Gary Andres deposition, 8/18/97, p. 6.
\41\ FEC Advisory Opinion 1995-25.
\42\ Coalition Building Manual authored by RNC coalitions director
Curt Anderson, Exhibit 2367M: R 1824.
\43\ CCF Application for Exempt Status, 9/12/95, CCF 69-118.
\44\ Internal Revenue Service Publication 557, Tax Exempt Status
for Your Organization, p. 43.
\45\ CCF IRS Application for Exempt Status, 9/12/95, CCF 69-118.
\46\ Sarah Fehrer deposition, 8/21/97, pp. 32-33, 49, 52.
\47\ CCF IRS Application for Exempt Status, 9/12/95, CCF 69-118.
\48\ Barry Bennett deposition, Volume II, 9/15/97, pp. 20-21.
\49\ Barry Bennett deposition, 9/11/97, pp. 9-11.
\50\ Draft advertising and wire transfer authorizations with
Cremeans fax line at top, CCF 529, 312, 314, 316, 335, 326: Sarah
Fehrer deposition, 8/18/97, pp. 57-58.
\51\ Barry Bennett deposition, 8/18/97, p. 37.
\52\ Gary Andres deposition, 11/18/97, pp. 16-18: Dirk Van Dongen
deposition, 9/4/97, pp. 13-23: Deborah Steelman deposition, 11/25/97,
p. 41.
\53\ Gary Andres deposition, 11/18/97, pp. 24: Dirk Van Dongen
deposition, 9/4/97 pp. 12-14: Deborah Steelman deposition, 11/25/97,
pp. 13, 22.
\54\ Gary Andres deposition, 8/1/8/97, p. 15.
\55\ CCF Articles of Incorporation, CCF 22-23: Gary Andres
deposition, 8/18/97, p. 15.
\56\ Gary Andres deposition, 8/18/97, p. 15.
\57\ Checks and wire transfers from CCF to the National Right to
Life, Americans for Tax Reform and IYDU, CCF 594, 423, 384.
\58\ Draft ``Go Along'' script, CCF 499.
\59\ Videotapes produced to the Committee by CCF: The Hotline, 11/
17/95.
\60\ Memo from Spring Thompson of Greg Stevens to Sarah Fehrer, 12/
18/95, CCF 574-77.
\61\ Memo to Coalition Leaders from Barry Bennett, 9/5/95, CCF 512-
513.
\62\ Wire transfer receipt for $500,000 from the National
Republican Congressional Committee to CCF, CCF 230.
\63\ Barry Bennett deposition, 9/11/97, p. 272.
\64\ Memo from Alex Ray to David Bennett, CCF 561-563.
\65\ Memo from Alex Ray to David Bennett, CCF 550.
\66\ David Bennett deposition, 9/6/97, p. 118.
\67\ Memo from Alex Ray to David Bennett, CCF 561-563.
\68\ Memo from Alex Ray to David Bennett, CCF 554.
\69\ Barry Bennett deposition, 9/11/97, pp. 116-17, 271.
\70\ Letter to Barry Bennett from Tori Hellon of Kolbe '96, 1/18/
96, CCF 231-232.
\71\ Letter to Barry Bennett from Kolbe '96, 1/18/96, CCF 231-232.
\72\ Invoice to CCF from National Media, CCF 359.
\73\ Barry Bennett deposition, 9/11/97, pp. 277-78.
\74\ Message for Barry Bennett from Representative Van Hilleary, 1/
12/96, CCF 549.
\75\ Invoice to CCF from National Media, CCF 352.
\76\ Barry Bennett deposition, 9/11/97, pp. 117, 123.
\77\ Memo from Congressman Barton to Louis Beecherl, 12/22/95, CCF
559. FEC public disclosure contribution records of Louis Beecherl.
\78\ Letter and check to CCF from the NRSC, CCF 233-234.
\79\ Robert Odell deposition, 9/5/97, pp. 131-32. Odell testified
that ORS had previously raised funds for Americans for Fair Taxation, a
Texas-based group in which Calabrese was involved.
\80\ John Simms deposition, 9/10/97, pp. 40-44.
\81\ Denis Calabrese deposition, 9/18/95, pp. 13-15.
\82\ John Simms deposition, 9/10/97, pp. 41-43, 49.
\83\ John Simms deposition, 9/10/97, p. 48.
\84\ Barry Bennett has insisted that he was also not aware of the
advertising campaign but in fact, he signed authorizations for wire
transfers of the funds for this advertising, signed the confidentiality
agreement with the secret contributor and, according to documents
produced to the Committee, was consulted by CCF counsel on matters
related to the advertising campaign. John Simms deposition, 9/10/97 p.
48, CCF 386, 401.
\85\ Deborah Steelman deposition, 8/25/97, p. 42.
\86\ Invoices from Dresner Wickers & Assoc., the Farwell Group,
Sandler & Innocenzi, and Omni Information, and Total Media Resources,
CCF 400, 413, 402, 419, 467.
\87\ Denis Calabrese deposition, 9/18/97, pp. 18-19.
\88\ Denis Calabrese deposition, 9/18/97, pp. 44, 18-19, 35-37, 11.
Although Calabrese testified that he did not believe the secret
contributor gave money to Triad, he stated that he did not have
knowledge of everything the secret contributor did in 1996.
\89\ Denis Calabrese deposition, 9/18/97, pp. 54-55, 65.
\90\ Invoices from Dresner Wickers & Assoc., the Farwell Group,
Sandler & Innocenzi, and Omni Information, and Total Media Resources,
CCF 400, 413, 402, 419, 467.
\91\ Minneapolis Star Tribune, 10/29/97.
\92\ Records for Crestar accounts of Citizens for Reform, Citizens
for the Republic; Riggs Bank records of accord of Coalition for Our
Children's Future.
\93\ Minneapolis Star Tribune, 10/29/97: Letter to Benjamin
Ginsberg 11/5/97.
\94\ Bill for counsel's services in reviewing CCF ads, CCF 421.
\95\ Roll Call, 2/2/98.
\96\ Roll Call, 2/2/98.
\97\ Roll Call, 2/2/98.
\98\ National Journal 5/16/97: Lewis Charles and the Center for
Public Integrity, The Buying of the President. New York: Avon Books,
1996, p. 127.
\99\ Roll Call, 1/26/98.
\100\ Wichita Business Journal, 10/24/97: Minneapolis Star Tribune,
10/29/97.
\101\ Denis Calabrese deposition, 9/18/97, p. 125-26.
\102\ FEC public disclosure records for Charles Koch, David Koch
and Koch Industries PAC.
\103\ Bob Odell Deposition, 9/5/97, pp. 199-200, 208.
\104\ Unanimous Consent in Lieu of Meeting 1/29/97, CCF 46-47.
PART 2 INDEPENDENT GROUPS
Chapter 14: Christian Coalition
Although the Christian Coalition (``Coalition'') holds
itself out as a nonpartisan, ``social welfare'' organization,
compelling evidence suggests that the Coalition functions
primarily as a political committee by endorsing and supporting
Republican candidates on the local, state, and federal levels.
The Coalition has admitted spending at least $22 million on
1996 federal races and distributing about 45 million voter
guides to churches on the Sunday before election day. The
information before the Committee indicates that these voter
guides were manipulated to advance Republican candidates. The
Federal Election Commission, in an ongoing federal lawsuit,
alleges that for three election cycles, the Coalition has
illegally coordinated its efforts with Republicans.
finding
Although the Christian Coalition has applied for status as
a 501(c)(4) organization and claims to be a nonpartisan, social
welfare organization, the evidence before the Committee
suggests that the Christian Coalition is a partisan political
organization operating in support of Republican Party
candidates. The evidence of partisan activity includes:
spending at least $22 million on the 1996 elections;
distributing 45 million voter guides manipulated to favor
Republican candidates; and endorsing Republican candidates at
organization meetings.
background
The Christian Coalition (``Coalition'') came to the
Committee's attention for several reasons. First, in July 1996,
the Federal Election Commission (``FEC'') filed suit against
the Coalition alleging that the Coalition had coordinated
expenditures during the 1990, 1992 and 1994 election cycles
with Republican House, Senate and Presidential candidates and
their campaigns in violation of federal election
law.1 That suit is ongoing. Second, the Internal
Revenue Service continued for a seventh year to delay making a
final decision regarding the Coalition's application for tax-
exempt status as a social welfare organization. Third, numerous
Democratic candidates complained publicly that, in the 1994 and
1996 cycles, the Coalition had distorted their positions on
issues in order to favor their Republican opponents, suggesting
that the Coalition was not educating voters on candidate
positions, but playing a partisan role in federal elections.
On March 3, 1997, the Minority requested that a Committee
subpoena be issued to the Christian Coalition for the
production of documents. The Majority, however, declined to
include the Coalition in the group of subpoenas issued in March
1997.2 After significant effort by the Minority, the
Coalition was included in a group of Committee subpoenas issued
on July 30.3 However, in response to the July 30
subpoena, the Coalition produced only a few documents, thereby
significantly restricting the Committee's ability to
investigate possible abuses. The Coalition then joined 25 other
nonprofit groups in refusing to comply with Committee
subpoenas. Among the defiant entities were the National Right
to Life Committee, Citizens Against Government Waste, Citizen
Action, and the AFL-CIO. The groups objected to the subpoenas
on the ground that they ``pose[d] a substantial threat to free
speech, free association and privacy rights and the rights of
other parties to have confidential communications with them.''
4 The subpoena directed to the Coalition, however,
did not seek membership or donor lists, but sought only to
discover if the Coalition had violated campaign laws by
coordinating with candidates or parties. Investigation of the
Coalition was also hindered by the Majority's refusal to issue
deposition subpoenas to key Coalition personnel who could have
provided indispensable insight into Coalition activities.
---------------------------------------------------------------------------
Footnotes appear at the end of chapter 14.
---------------------------------------------------------------------------
Despite these obstacles, the Minority was able to pursue
its investigation by reviewing FEC documents, federal court
records, a limited number of Christian Coalition and RNC
documents and publications, and by conducting interviews.
Although severely restricted by the lack of cooperation by the
Coalition, the RNC and the Dole campaign, the Minority was able
to uncover much improper and possibly illegal campaign activity
by the Coalition.
The evidence before the Committee indicates that the
Coalition functions primarily as a partisan political
committee, rather than a social welfare organization, because
it endorses and supports Republican candidates on the local,
state, and federal levels. The Coalition's election-related
activities range from the distortion of candidate positions and
the manipulation of issues in Coalition voter guides, to the
outright endorsement of candidates at caucus meetings. The
actions of the Coalition indicate that its major purpose is the
election of Republican candidates to public office, and the
Coalition should therefore be required to register with the FEC
as a political committee subject to the FEC's reporting and
disclosure requirements, in conformance with federal election
law. While the investigation focused on the 1996 campaign, it
is critical to place the Coalition's activities in the context
of nearly a decade of partisan political activity.
pat robertson and ralph reed
The Christian Coalition was established in 1989. The
president and founder of the Coalition is the Rev. Marion G.
(``Pat'') Robertson. The executive director from 1989 until
1997 was Ralph Reed. Both men have ongoing close ties to the
Republican Party. In 1988, Robertson campaigned to win the
Republican nomination for the presidency.5
Ultimately, the Republican nomination was won by Vice President
George Bush, who went on to win the general election in
November. At Bush's inauguration in January 1989, Robertson
first met Reed, then a young Republican activist.
Reed had a great deal of political experience.6
While attending college, he was elected chairman of the College
Republican National Committee, part of the Republican National
Committee (``RNC''). He worked closely with Grover Norquist,
director of the National College Republican Committee, who went
on to become a GOP activist in his own right as president of
Americans for Tax Reform.7 From 1982 to 1984, Reed
worked directly for the RNC. In 1984, Reed was active in voter
registration efforts for Republican Senator Jesse Helms of
North Carolina, and was a founding member of a political-
training group for young conservatives, Students for America.
Reed also worked on Georgia Republican Matt Mattingly's
successful Senate campaign, later serving in Washington as a
summer intern in Mattingly's office. In 1988, he worked on Jack
Kemp's presidential campaign.
At their January 1989 meeting, Robertson discussed with
Reed his plans for the creation of a new political
organization.8 Robertson saw a political vacuum
being created on the religious right as the Rev. Jerry
Falwell's Moral Majority lost influence. Impressed with Reed's
experience and his perspective on ``building bridges'' within
the Republican Party, Robertson asked Reed to join him in
constructing the new organization. Although Reed initially
declined because he was pursing a doctorate degree at Emory
University, he reconsidered and accepted Robertson's offer to
work for him on the new venture, the Christian Coalition.
In the summer of 1990, officials of the National
Republican Senatorial Committee (``NRSC''), a division of the
RNC, apparently requested a meeting with the Coalition and
offered to contribute start-up funds.9 The NRSC
provided the Coalition with about $64,000 in seed money. The
Coalition also purchased a mailing list and office equipment
from Robertson's presidential campaign.10
In spite of Reed's Republican political experience,
Robertson's ties to the Republican Party, and the infusion of
start-up funds from the RNC, the Coalition did not organize
itself as a political committee under federal law. Instead, it
applied for 501(c)(4) tax-exempt status as a ``social welfare
organization.'' Such organizations are defined as:
Civic leagues or organizations not organized for
profit but operated exclusively for the promotion of
social welfare . . . the net earnings of which are
devoted exclusively to charitable, educational, or
recreational purposes.11
While contributions to 501(c)(4) organizations are not tax
deductible, such organizations are exempt from paying taxes. In
addition, there are few restrictions on the entity's freedom to
lobby or influence legislation.12 An organization
which has 501(c)(4) status also may engage in campaign
activities, so long as its primary activities promote social
welfare and its activities are nonpartisan.13 The
evidence indicates, however, that the Coalition has engaged
primarily in partisan campaign activities in disregard of the
tax code's restrictions on section 501(c)(4) organizations.
christian coalition voter guides
Much of the controversy concerning the Coalition's
election-related activity has centered on the printing and
distribution of so-called voter guides. The voter guides
typically list five to ten issues and reflect the opposing
candidates' positions as either ``supports'' or ``opposes.''
Among issues frequently listed are ``Balanced Budget
Amendment,'' ``Term Limits For Congress,'' ``Homosexuals in the
Military,'' and ``Repeal of the Federal Firearm Ban.''
14 The voter guides are distributed in selected
Christian churches the weekend prior to an election and seek to
provide information that the targeted voters will rely upon in
casting their ballots.15 The evidence indicates that
the Coalition often manipulates and distorts the candidates'
positions, thereby providing the voters with incomplete or
inaccurate information concerning the candidates.
The Committee's subpoena required the Christian Coalition
to produce its voter guides for the 1996 campaign. Even though
these guides were widely distributed in numerous states and
districts nationally, the Coalition maintained that the guides
were privileged under the First Amendment--a patently absurd
proposition.16 Despite this obstruction by the
Coalition, the Minority was able to obtain a number of voter
guides distributed in elections around the country.
Voter guides before 1996 election cycle
The use and misuse of information included in the voter
guides and the manipulation of issues to frame positions to
favor the Coalition's preferred candidate over another
candidate were reported by Larry Sabato, a professor at the
University of Virginia, and Glenn Simpson, an investigative
journalist, in their 1996 book, Dirty Little Secrets: The
Persistence of Corruption in American Politics. Sabato and
Simpson reviewed approximately 200 voter guides distributed to
churches and others by the Coalition in 1994 and concluded that
the guides ``give every appearance of having been designed with
the explicit intention of influencing voter decisions in favor
of Republicans.'' 17 The authors based their
conclusion on the following observations:
There was distortion of issues in the voter
guides. This distortion was illustrated by a surprising
lack of agreement between the positions of Republicans
and Democrats on issues mentioned in the Coalition
voter guides. In 73 percent of the Senate race voter
guides and 74 percent of the House race voter guides
reviewed by the authors, the nominees were shown to
agree on nothing, which is unusual, even for candidates
from different parties. The authors concluded, ``The
reason candidates were portrayed as being in almost
total conflict was that the coalition manipulated the
content of the guides, changing the issues from race to
race.'' 18 This form of distortion was
designed to create a stark contrast between Democratic
and Republican candidates.
There was selective placement of issues in
the voter guides. In almost every voter guide examined
in the study, the first issue the Coalition listed was
``Raising Federal Income Taxes,'' while the last was
often ``term limits,'' issues that do not have an
obvious religious component. The authors observed that,
``A longstanding dictum of marketing science holds that
in printed messages, the first thing and the last thing
in a list are the ones best remembered.'' Theauthors
further observed that Republican candidates were almost always listed
as opposed to raising income taxes and supporting term limits, while
Democrats were almost always portrayed as having the opposite
position.19
Supporting Simpson and Sabato's conclusions, many
candidates for federal office have complained about the
distortion of their positions as portrayed in the Coalition's
voter guides. The distortions cover a wide variety of issues,
but were often tied to the key issues in an individual race.
Candidate complaints have ranged from the distortion of issues
through the use of inflammatory language to the outright
misrepresentation of a candidate's position on such issues as
the proposed balanced budget amendment to the Constitution.
A compelling example of Coalition
distortions occurred in the 10th Congressional District
in Indiana. The Coalition's 1994 voter guide indicates
that Democratic Representative Andy Jacobs opposed a
balanced budget amendment, while his opponent favored
it. However, Representative Jacobs was a supporter of a
balanced budget amendment and has stated, ``I
personally started that [balanced budget] movement back
in 1976.'' The voter guide also listed him as giving
``no response'' on the term limits for Congress issue,
thereby giving the false impression that he had
responded to the other questions. According to
Representative Jacobs, he had not responded to any
portion of the Coalition's questionnaire.20
In Texas, Representative Martin Frost was
not only a victim of distortions of his record, but
issues of interest to Coalition members that he
supported were omitted from the Coalition's 1994 voter
guide. Frost noted, ``I voted in favor of a
constitutional amendment requiring a balanced federal
budget, and yet the guide falsely states that I opposed
a balanced budget constitutional amendment . . . I have
consistently voted in favor of voluntary school prayer
and in favor of the right of parents to home-school
their children, and yet those votes are not even
mentioned in the guide.'' 21
Another example is the 1994 Senate race in
Virginia between the Democratic incumbent Charles Robb
and Oliver North. The Coalition's voter guide stated
that Senator Robb favored banning ownership of legal
firearms. According to Senator Robb, ``I have not
attempted to ban the ownership of legal firearms at
all. I did vote to change the law with respect to some
combat assault weapons, and the law would then require
that those particular weapons not be owned, produced,
whatever the case may be. But nothing that is legal
have I voted to ban.'' 22
Richard Fisher, a Democratic candidate for
the Senate in Texas, has stated that a 1994 Coalition
voter guide correctly listed his opposition to
educational vouchers and his support of abortion
rights. However, although he had repeatedly stated his
support for term limits, a balanced budget and a line-
item veto for the President, the guide reflected
Fisher's answers to those questions as ``no response.''
23
In her book analyzing the 1996 elections, Elizabeth Drew
wrote: ``[T]he idea that the Coalition didn't prefer particular
candidates was a fiction. It had a clear preference in most of
the competitive races; the voter guides left no doubt as to the
preferred candidate. The guides have been found to vary from
district to district or state to state in the issues they
raised, enabling preferred candidates to get high scores.''
24
Voter guides used during the 1996 election cycle
In 1996, the Coalition admitted spending at least $22
million on the elections and working to distribute about 45
million voter guides in churches on the Sunday before election
day.25 A review of Coalition voter guides for many
of the 1996 federal races indicates that much of what was
reported earlier concerning Coalition abuses in the 1994
elections applied to the 1996 races. For example, rather than
providing a complete list of issue positions for each candidate
so that voters understood the candidates' positions on each
issue, different issues often appeared in voter guides in House
and Senate races in the same state. Issues appeared to have
been changed in an effort to favor the Coalition's preferred
candidate. Examples involving the 1996 voter guides include the
following.
In Georgia, in the Senate and 8th
Congressional District races, ``Abortion on Demand''
was an issue listed in the Coalition's voter guides.
However, that issue was replaced in Coalition voter
guides for the 2nd, 4th, 10th, and 11th District races
with the issue ``Banning Partial Birth Abortion'' and
``Taxpayer Funding of Abortion.'' 26 The
voter guides thus failed to provide a consistent list
of issues to educate the voting public about where
Georgia candidates stood on issues of concern; the
voter guides instead appeared to alter the issues
presented in order to present a favorable image of
particular candidates in a particular race.
In several Coalition voter guides
distributed in Iowa, a question concerning a balanced
budget amendment to the Constitution was included for
the presidential and congressional candidates, but did
not appear in the guide for the U.S. Senate race. A
possible reason the issue was omitted from the Senate
voter guide is that Democratic Senator Tom Harkin had
supported a balanced budget amendment, voted for it,
and sent the Coalition a letter stating his position on
that issue. Apparently, the Coalition chose not to
inform Iowa voters of Senator Harkin's
position.27
Voter guides for the 1996 presidential race
included the issue ``Banning Partial Birth Abortion.''
The guide stated that President Clinton ``Opposes'' the
ban. However, the President had repeatedly stated that
he supports such a ban, provided that it includes an
exception to protect the life and health of the
woman.28
In Alaska, as well in some other states, the
issue of firearms was included in the Coalition voter
guide. In the Coalition questionnaire candidates were
questioned about repeal of the federal ban on semi-
automatic firearms. However, the Coalition
recharacterized the issue in its voter guides, using
imprecise and inflammatory language such as ``Repeal of
the Federal Firearm Ban'' on the voter guide for the
at-large congressional race. The issue was phrased in
the voter guide to give the impression that the federal
government had banned ownership of
firearms.29
In Massachusetts, in the 4th, 6th, 7th, 8th,
and 9th Congressional Districts, candidates' positions
on ``Homosexuals in the Military'' were listed in the
Coalition's voter guides, but that issue was replaced
in the 10th District voter guide with ``Federal
Government Control of Health Care.'' Again, it is
unclear why the same issues were not included in all
districts so that voters could compare candidates'
positions, but instead issues were changed, apparently
to favor one candidate over another. Also in
Massachusetts, modifying language concerning the
balanced budget issue was included in the voter guide
regarding Representative Joe Kennedy. The guide stated
that Representative Kennedy opposed the ``Balanced
Budget Amendment With Tax Limitations.'' Other voter
guides reported the issue as ``Balanced Budget
Amendment.'' Apparently, the modifying language ``With
Tax Limitations'' was included so that the Coalition
could report that Representative Kennedy opposed the
amendment, even though he was on record as supporting a
balanced budget amendment.30
In a 1996 California Congressional race,
Walter Stoermer, a former Christian Coalition official
in California, admitted that the Coalition had
misrepresented in its voter guides the abortion views
of a Republican candidate to make him more acceptable
to pro-life voters in comparison to the Democratic
candidate. Stoermer said that the 1996 Coalition voter
guides portrayed Republican Representative Sonny Bono
as against abortion when he actually supported abortion
rights.31
The evidence indicates that Coalition voter guides have
also been used in Republican primaries to promote candidates
favored by the Coalition. Below are examples from Republican
primaries in which the Coalition appeared to be favoring a
particular candidate rather than simply educating the
electorate about the candidates' positions.
On November 27, 1995, Norma Paulus, a
candidate for the Senate in Oregon's Republican
primary, wrote to Ralph Reed complaining that the
Coalition was attempting to hide its support for
another candidate and to manipulate ``well-meaning
church-goers seeking impartial advice'' by publishing
an unfair and inaccurate account of her positions in a
voter guide. Paulus wrote, ``For you to suggest that my
positions are other than those stated in this letter is
a lie. . . [I]t is outrageous and totally irresponsible
of you to bear false witness in this manner.'' Paulus
demanded, but did not receive, a
retraction.32
In 1997, Virginia State Senator Kenneth
Stolle finished third in a Republican primary race for
Attorney General. Senator Stolle, a conservative
Republican, characterized the portrayal of his
positions in the Coalition voter guide as ``inaccurate
and misleading.'' 33 For instance, Senator
Stolle's opponents, Mark Early and Jerry Kilgore,
reportedly were listed in the Coalition voter guide as
opposing off-track betting parlors, while Senator
Stolle was listed as a supporter. Stolle, however,
claimed to have introduced legislation to eliminate or
restrict off-track betting. Senator Stolle said that
the issue was not included in the Coalition's
questionnaire sent to the candidates.
Finally, in an ``open letter'' to the
Coalition's Pat Robertson and Ralph Reed, Republican
Senator Arlen Specter of Pennsylvania alleged that the
Christian Coalition had excluded him from a forum of
GOP presidential contenders because he supports
abortion rights:
You deny the most basic American rights--the right to
speak out and the right to be heard as you seek to
dominate the political process and dictate the
Republican nominee for president for 1996. . . . Who
are you to impose a litmus test and exclude someone
because he is the only pro-choice candidate challenging
the Republican platform which denies women their
consitutional right to choose? . . . Even in repressive
Communist China, dissenting views are permitted at the
World Conference on Women.34
Senator Specter was later invited to address the
Coalition's state and national leadership, but not the general
session at which the other candidates were invited to speak.
Senator Specter responded, ``I'm entitled to equal treatment.''
35
The study performed of the Coalition's 1994 voter guides
together with the evidence obtained regarding the Coalition's
1996 voter guides indicate that the Coalition uses its voter
guides, not to educate the electorate about the positions held
by all candidates in a race, but rather to persuade the
electorate to support particular candidates that the Coalition
favors. In the vast majority of cases, these candidates have
been from the Republican Party and from its most conservative
wing.
coalition officials endorsed candidates
The Coalition engaged in openly partisan activity at its
1995 ``Road to Victory''conference in Washington, D.C. The
annual Coalition conference features appearances by invited Republican
national political candidates who address the attendees regarding
issues of importance to Coalition supporters. At ``breakout'' sessions
at the meeting, state caucus groups convene to discuss local Coalition
issues. Although the Coalition claims not to endorse candidates,
specific Republican candidates were endorsed during state caucus
meetings at the 1995 conference, according to press reports. There were
also discussions of ``stealth'' tactics to be used to identify
supporters and gain control of local Republican parties.
One example of the Coalition endorsing a candidate occurred
during the South Carolina State Caucus meeting in 1995. Roberta
Combs, director of the South Carolina Christian Coalition,
stated that Democratic Representative John Spratt ``needs to
go.'' Combs then introduced Republican candidate Larry Bingham,
and commented, ``He's going to be our next congressman in the
5th District.'' Bingham stated, ``Larry Bingham will score 100
on your scorecard. . . I need your help. I need your support.
Roberta has given me her personal support. . . . With your
help, we can defeat John Spratt.'' Combs seemed aware that
these activities were questionable; she twice demanded that any
reporters leave the room.36
Similarly, at the Louisiana State Caucus meeting, Louisiana
State Coalition Director Sally Campbell openly endorsed the
gubernatorial candidacy of Republican State Senator Mike
Foster. Campbell told attendees that Senator Foster promised
her that if elected, he would call a special session of the
legislature to mandate a ballot initiative against gambling.
Reportedly, Senator Foster told Campbell that he could not be
elected without the Coalition's help. The national Christian
Coalition, as noted above, claims that it does not endorse
candidates. To avoid that ban, Campbell suggested that
Coalition activists endorse candidates, but ensure that every
time an endorsement appeared in print, the caveat ``Affiliation
given for identification purposes only'' be
included.37
In addition to supporting candidates, in at least one state
caucus meeting at the 1995 Road to Victory conference,
Coalition members surreptitiously engaged in political
activities. Arizona Coalition Field Director Nathan Sproul
reportedly urged attendees at the Arizona Caucus meeting to
become precinct committee chairs in the Republican Party, but
cautioned them not to disclose to anyone that the Coalition was
behind the effort. Sproul advised the attendees that the
Coalition needed precinct committee chairs to elect delegates
to the Republican National Convention.38
At the 1996 ``Road To Victory'' Conference, candidates were
again endorsed at individual state caucus meetings:
Representative David Funderburk (R-N.C.) and
his wife Betty appeared at the North Carolina Caucus
meeting and appealed for help in his re-election bid.
At the meeting, Representative Funderburk commented,
``I wouldn't be a member of Congress if it weren't for
the work the Christian Coalition had done for me.''
State Coalition Chairman Sim DiLapp advised Funderburk,
``We want to do what we can for you.'' 39
In the Texas Caucus meeting, Texas Coalition
State Director Jeff Fisher discussed races for the
state board of education and noted that one of the
candidates, Rich Neill, was present in the room. Fisher
advised the attendees to ``forget the top of the
ticket,'' and focus on developing a ``farm team of
lower office holders.'' Fisher asserted, ``The Rich
Neills at the bottom of the ticket are going to run for
statewide offices in the future.'' 40
In the California caucus meeting, California
Coalition Chairwoman Sara DiVito Hardman cited a state
legislative race in Santa Ana where ``we got our guy
elected'' by distributing 30,000 voter guides. Hardman
noted that state caucus attendance was down and
attributed it to attendance at the Republican National
Convention in San Diego in August.41
South Carolina Coalition Director Roberta
Combs commented in the South Carolina Caucus meeting on
the state's U.S. Senators, Republican Strom Thurman and
Democrat Ernest Hollings, stating, ``Thurmond is good,
Hollings is trouble.'' Combs stated that Senator
Hollings ``voted wrong'' on recent bills concerning gay
rights and abortion restrictions.42
Ralph Reed apparently also used the Road of Victory conference
to encourage general support for Republican candidates in the
1996 elections. Reed told the press at the conference:
If the Republicans hold both houses of Congress, or
gain seats in either chamber, regardless of what
happens in the presidential race, it will be a major
statement that the religious conservative movement has
arrived as a permanent and institutionally stronger
player that can win victory down the ballot even when
the presidential race remains uphill.'' 43
Most recently, at the 1997 Road to Victory conference held
in Atlanta in September 1997, Pat Robertson, chairman of the
Coalition, made remarks which cast doubt on the Coalition's
position that it does not engage in activities to elect
candidates. In addressing about 100 members of the Coalition's
state branches, Robertson made clear his comments were not
intended for the general public, ``This is sort of speaking in
the family. . . . If there's any press here, would you please
shoot yourself? Leave. Do something.'' 44 Robertson
spoke in detail about the need for the Coalition to increase
precinct-level political efforts and suggested that the
Coalition imitate Tammany Hall and other successful political
machines. Robertson also commented on the Coalition's part in
the Republican Party's congressional victories and control of
Congress, and asserted his expectations that the Republican
leaders would listen to his agenda. In discussing the
Republican presidential nominee in the year 2000, Robertson
said, ``We have absolutely no effectiveness when the primary
comes. None whatsoever. Because we have split our votes among
four or five people and the other guy wins. . . . So we need to
come together on somebody.'' 45 In an apparent
reference to Vice President Gore, Robertson derided him as
``ozone Al,'' and said that ``I don't think at this time and
juncture the Democrats are going to be able to take the White
House unless we throw it away.'' He also asserted the Coalition
has the ``possibility'' of selecting the next U.S.
president.46 By his own words, Robertson confimed
that the Coalition seeks to influence elections and establish
itself as a powerful political organization, and that its goal
is to elect Republicans, not Democrats.
Finally, there is considerable evidence that the Coalition
expressed a preference for and worked to ensure the nomination
of Senator Dole to be the Republican Party's presidential
nominee in 1996. The media reported that in January 1996, Ralph
Reed was ``encourag[ing] county and state coalition officers to
back [Senator] Dole'' for the Republican
nomination.47 In March 1996, Michael McHardy,
general manager of religious radio station KSIV in St. Louis,
Missouri, resigned from the advisory board of the state
Christian Coalition. He cited Coalition support for Senator
Dole as a reason for his resignation, stating, ``On the
national level, they have been working to get Bob Dole
elected.'' Showing any candidate preference, he said, ran
counter to the Coalition's stated purpose--``to promote certain
issues on a local level and to issue objective scorecards
showing each candidate's stances on those issues.'' McHardy
cited a ``puff piece'' on Senator Dole that appeared in the
Coalition's Christian American magazine in late
February.48 Documentation obtained by the Committee
reveals that the magazine contacted the Dole campaign just
before a series of crucial primaries to prepare a ``full length
cover article on Senator Dole'' for the February
edition.49 Later, according to one election analyst,
``Reed's support for Dole would turn out to be crucial in South
Carolina, where Dole dutifully attended a rally laid on by
Reed, and wrapped up the nomination.'' 50 In June
1996, Robertson stated, ``The Christian Coalition, without it
probably Bob Dole wouldn't be the nominee.'' 51
The evidence indicates that the Coalition is attempting to
influence the election of Republican candidates to public
office and is seeking to further its political goals by
building a political organization at the precinct level--
activities indicative of a political party, not a social
welfare organization. These activities demonstrate that the
Coalition functions primarily as a political committee and its
major purpose is the nomination and election of Republican
candidates to public office.
coalition ties to the republican party
The Committee obtained a number of RNC documents which
reveal close ties between the Coalition and the Republican
Party, providing further evidence of the Coalition's partisan
nature. Despite Coalition assertions that it qualifies as a
social welfare organization, the documents confirm that the
Coalition works closely with the Republican Party.
For example, during the 1996 election cycle, the RNC
supplied Republican candidates with a 29-page ``Coalition
Building Manual,'' advising them on how to work with nonparty
organizations to win election.52 The manual provided
a list of specific organizations that ``have been the most
active in encouraging their constituents to support Republican
candidates.'' 53 The list includes the Christian
Coalition, which is described as a group which conducted ``some
of the most effective and hard-hitting mail and phone programs
last cycle.'' 54
A memorandum dated April 23, 1996, to RNC chairman Haley
Barbour from RNC political director and head of campaign
operations Curt Anderson indicates that the RNC routinely
identified sympathetic outside groups and instructed its
candidates to develop formal coalition plans with them,
including the Christian Coalition.55 The memorandum
states:
Every [RNC] Regional Field Representative is in the
process of putting together the definitive list of the
5 top reachable coalition groups in each state, and
their approximate size . . . . [Redacted] will be on
this list for most states, as will the [redacted], and
[National Right to Life]. Christian Coalition will make
the list in about \1/2\ of the states.
At virtually all of our field meetings we have put
together day long meetings in which we bring the
decision makers from the biggest coalition groups. We
generally spend an hour with each of them comparing
notes on races. . . .
While it has always been true that our coalition
groups need direction on how they can best effect the
outcome of elections, many of the larger groups are
becoming increasingly sophisticated in their approach
and they employ competent professionals who know how to
make things happen.56
Another internal RNC memorandum discussing ``Outreach,
Auxiliaries, Coalitions,'' identified ``five coalition
organizations that have distinguished themselves and we have to
pay special attention to,'' including the Christian
Coalition.57
Still another internal RNC memorandum, dated March 4, 1996,
to Barbour from Anderson, placed the Coalition leadership at
the heart of the Republican Party's strategy for victory in
1996.58 In response to a request from Barbour,
Anderson developed a list of persons who should be included in
a select Republican leadership coalition of outside groups.
Anderson recommended that Ralph Reed, the Coalition's executive
director, and Chuck Cunningham, the Coalition's director of
voter education be included, because they represent a group
``that actually [has] troops in the field,'' and ``they can
motivate, activate, and deliver.'' 59 About 40
individuals were apparently evaluated by Barbour and other top
RNC officials for inclusion in this select group; Ralph Reed
was one of only two individuals who received unanimous
support.60 When Congressman Bill Paxon, head of the
National Republican Congressional Committee (``NRCC'), was
asked to ``list the most important people or groups behind the
Republicans' effort to maintain control of the House'' in 1996,
he too listed the Christian Coalition.61
This evidence indicates that the RNC deliberately planned
to work with independent groups to affect the outcome of the
1996 elections, and that the Christian Coalition was an
integral part of this effort. The Minority attempted to clarify
these documents by taking the deposition of Anderson and others
named in them, but no one from the RNC or Coalition provided
any interview or deposition on these matters.62
Additional documents reveal that, during the 1996 election
cycle, high-ranking officials of the RNC and the Christian
Coalition had an ongoing working relationship. A December 15,
1995, internal RNC memorandum to Anderson from Jack St. Martin,
RNC director of coalitions, discussed ``Coalition Activities
Week of Dec. 15.'' St. Martin commented on his ``constructive''
meeting with Coalition Director of Voter Education Chuck
Cunningham and National Field Director D.J. Gribbon, at which
he ``reassured'' them the RNC would ``work with them.''
63 (St. Martin recently resigned his RNC position
and joined the Christian Coalition.64)
A memorandum dated September 6, 1995, from St. Martin to
RNC Chairman Haley Barbour concerned an upcoming speech by
Barbour to the Coalition.65 St. Martin advised
Barbour to thank the Coalition for its contribution to the
Republican victories in 1994. He suggested that Barbour tell
the Coalition that ``it is not simply a special interest group,
but a vital part of the Republican base.'' Finally, St. Martin
recommended that Barbour encourage Coalition members ``to run
for national delegate slots.''
A memorandum to Anderson dated March 6, 1996, entitled,
``Coalitions,'' categorized various outside groups according to
their issues of concern and apparently discussed how the RNC
could work with them.66 The first entry states:
``Family issues/Christian Coalition/Eagle Forum/Pro-Life
groups/in-state PACS. In this community alone there are
probably two dozen different organizations. What we ask them to
do would be very different than what we ask pro-gun groups to
do.'' This memorandum is additional evidence that the RNC was
indeed asking groups like the Coalition to take actions on
behalf of Republicans in connection with the 1996 elections.
In addition to RNC-Coalition communications, Drew and
others have described ongoing communications and meetings
between the Christian Coalition and the Dole
campaign.67 Drew writes:
``Scott has an ongoing relationship with Ralph,'' a
Dole adviser said. According to Scott Reed, the two men
talked once a week throughout the summer and fall [of
1996].68
One series of communications took place around the Coalition's
1996 annual conference in which Reed allegedly sent written
memoranda and spoke with Scott Reed, Dole campaign manager, and
Paul Manafort, a key strategist in the Dole campaign,
recommending that Senator Dole address the conference. After
Senator Dole spoke to the conference, Ralph Reed reportedly
sent Scott Reed another memorandum congratulating the Dole
campaign on improving poll numbers and recommending ``that Dole
appear at an evangelical college in the South or a battleground
Midwestern state. He specifically recommended Wheaton College
in Illinois, Hillsdale College in Michigan, and several other
schools. He then called Manafort.'' 69 None of these
memoranda, however, was produced to the Committee. In fact,
neither the Dole campaign nor the Christian Coalition produced
a single memorandum exchanged between the two organizations
during the whole of the 1996 election cycle.
Besides describing routine Coalition communications with
the RNC and Dole campaign, Drew describes routine contacts
between Ralph Reed and other key players in the Republican
Party:
The relentlessly cheerful [Congressman] Bill Paxon
[head of the NRCC] by mid-September was still
predicting that the Republicans would pick up twenty
House seats. In the course of our phone conversation,
Paxon told me he had to ring off because Ralph Reed was
waiting to see him. Then Paxon tried to pass it off as
a once-a-year-or-so friendly visit. In fact, Reed told
me later, he talked to Paxon during the election ``a
couple of times a month.''
Ralph Reed also kept in touch with several of the
consultants who worked with the Republican leadership
and on congressional campaigns. His pollster, Vern
Kennedy, also polled for Republican Jeff Sessions's
campaign for the Alabama Senate seat. Others Reed kept
in touch with were Frank Luntz, the thirty-three-year-
old Republican pollster, and Joe Gaylord, the political
consultant and close adviser to Newt
Gingrich.70
The Coalition also regularly attended weekly meetings held
throughout 1996 at the headquarters of Americans for Tax
Reform, attended by 50-70 conservative activists, Republican
Party representatives, and candidates. 71 Drew
writes that these meetings often served as strategy sessions
for the 1996 elections on behalf of Republicans, recounting,
for example, group discussions of candidates and specific House
and Senate races, and instances in which Republican candidates
made formal presentations at the meetings and requested support
for their election efforts. These meetings are described in
more detail in Chapter 11 on Americans for Tax Reform.
Still other Republican Party connections during the 1996
election cycle emerged during the Republican National
Convention, held August 12 to 15, 1996, in San Diego. Just
before the convention, the media reported that Amway
Corporation had donated $1.3 million to the nonprofit San Diego
Convention and Visitors Bureau (ConVis) which, in turn, had
paid the money to the Family Channel to broadcast gavel-to-
gavel, ``unfiltered'' coverage of the Republican
Convention.72 The Family Channel is controlled by
Pat Robertson.73 After the Democratic National
Committee filed an FEC complaint charging Amway with laundering
an illegal corporate contribution to the Republican Party
through ConVis, the plan was abandoned. The $1.3 million was
repaid to Amway, and the RNC instead used taxpayer funds to pay
for five nights of air time on the Family Channel.74
This convention coverage was not the first time that
Robertson's network carried programming favoring the Republican
Party; in 1990, the Family Channel aired programming from the
American Citizens'' Television, an effort associated with GOPAC
and House Speaker Newt Gingrich.75
The Coalition's actions to support Republican candidates
and the Republican Party in the 1996 elections was not a new
development. As recounted in the FEC complaint against the
Coalition described below, the Coalition has been helping
Republican candidates in the last three election cycles. For
example, the Coalition is alleged to have provided direct
financial assistance to Senator Jesse Helms (R-NC). A $14,000
Coalition check payable to ``Christian Coalition of North
Carolina'' is dated October 30, 1990.76 On the check
is the notation ``GOTV Calls State Project G/L 5710,'' an
apparent reference to a ``get out the vote'' telephone bank
operation. The FEC complaint alleged that the Coalition acted
in concert with Helms's re-election campaign, and ``made
expenditures directly and/or through its state affiliate to
make approximately 29,800 telephone calls as part of a get-out-
the-vote telephone bank operation in connection with the
November 1990 general election in North Carolina.''
77
Rather than provide direct financial assistance, the
Coalition ``rented'' a mailing list of 36,000 of its supporters
to Republican candidate Oliver North's campaign during his 1994
Senate race in Virginia against Senator Chuck Robb. North
allegedly paid $5,131 for the list in the spring of 1994.
Coalition communications director Arne Owens acknowledged the
incident but asserted that the list was rented at fair market
value. 78
In 1992, the Coalition apparently received a donation
``earmarked'' for the Bush presidential campaign. On July 23,
1992, John Wolfe, a business executive, wrote to Pat Robertson
that ``a very good friend of mine [Lyn Nofziger] tells me your
group is very supportive of President Bush and that you will be
doing a massive distribution of literature on his behalf.''
Wolfe wrote that he was advised that ``you could use some
financial help with that project for the President and
therefore, on the recommendation of Lyn, I am pleased to send
you a contribution of $60,000.'' Enclosed with the letter was a
personal check in that amount dated July 23, 1992. In an August
3, 1996, interview, Nofziger acknowledged that he had known
Wolfe for 30 years and recalled discussing the issue with
him.79
coalition activity in state elections
Although the Committee's mandate focused on the 1996
federal election, the Coalition's activities in state elections
are relevant because they show a continuing pattern of partisan
political activity. In 1991, Virginia Beach Republican Kenneth
Stolle was supported by the Christian Coalition in his state
Senate campaign against incumbent Democrat Moody Stallings.
According to Judy Liebert, the Coalition's former chief
financial officer, the Coalition mailed thousands of Stolle
campaign letters from its headquarters.80 The
Coalition advised that the local Republican committee paid
$4,742 for the mailing. In defending itself, the Coalition
pointed out that state elections are not under the jurisdiction
of the Federal Election Commission, and that state election law
allows unlimited corporate contributions to state candidates.
The Coalition asserted that it ``simply functioned as a
lettershop.'' 81
Despite its claims that it ``simply functioned as a
lettershop,'' the Coalition appears to have provided financial
assistance as well. A Coalition check in the amount of $25,000
made payable to the 2nd District Republican Committee is dated
November 12, 1991, one week after the Stolle-Stallings
election. 82 Reportedly, a factor in Stallings's
defeat was a ``blitz'' of negative television advertisements in
the final week of the campaign--bought by the 2nd District
Republican Committee. Had the Stolle campaign purchased the
ads, it would have been required to report the contributors.
Interestingly, Pat Robertson's son, Gordon Robertson, was the
2nd District Republican chairman at the time, and he refused to
reveal the source of the money. A state police investigation of
the matter ensued, after which the Norfolk commonwealth's
attorney determined that the party was not required to reveal
the source of the ad money. The $25,000 was characterized by a
Coalition spokesman as a ``one-time'' contribution for
``general party-building purposes.'' 83
Similar to the ``rental'' of a Coalition voter list to
Oliver North's 1994 U.S. Senate campaign was the ``sale'' of a
voter list to a Republican candidate in a Florida state race. A
presentation at the 1993 Coalition ``Road to Victory''
conference by Max Karrer, Coalition state coordinator for North
Florida, revealed how the Christian Coalition of Florida
assisted a Republican candidate in winning a seat in the state
legislature. According to Karrer, the Coalition used
computerized membership lists of conservative churches to build
a Christian voter data base. The list was then sold to the
conservative candidate for five dollars. Karrer stated, ``We
were not allowed to give them away, so we charged him five
dollars; but we printed labels for him of the Christian voters,
which enabled him to put out direct mailings to the Christian
voter, that he would not necessarily do to the general public.
. . . You want to talk about stealth campaigns; it was quietly
done, and they didn't realize they were in trouble until it was
too late.'' Commenting on the Coalition's influence among
candidates, Karrer stated, ``When someone wants to run for
office, they come to the Christian Coalition. . . . It gives
you . . . tremendous lobbying power with the legislator because
they think you have this huge bloc of votes that you can swing,
though you can't necessarily.'' 84
Distortion of candidates'' positions in Coalition voter
guides is not limited to federal elections. A Florida state
circuit court barred the Seminole County Christian Coalition
from distributing copies of its voter guide before the October
4, 1994 runoff election for the Seminole County
Commission.85 Adrienne Perry, Democratic candidate
for Seminole County Commission District 2, had alleged in a
lawsuit that the voter guide misrepresented her views on
homosexual marriage. Perry claimed that her support for
allowing homosexual partners to be included on health plans was
misrepresented in the guide as a blanket approval of legalizing
homosexual marriages. The Circuit Court judge ruled that the
Coalition questionnaire sent to Perry and other candidates and
the resulting voter guide did not allow for a ``moderate
view.'' The judge stated, ``It's either one way or another, and
that's misleading. It doesn't represent Ms. Perry's position.''
86
Candidate endorsement also continues within local Coalition
circles. In August 1997, Virginia State Delegate Jay Katzen, a
Fauquier County Republican invited by the Coalition to lead a
political training session in Fairfax County, urged members to
work against Democratic gubernatorial candidate Don Beyer.
Reportedly, Katzen referred to Beyer as a ``dangerous
opponent,'' but praised Republican Governor George Allen and
James Gilmore, Beyer's Republican opponent. ``Don Beyer has
promised. . .to reverse everything that you elected me and
George Allen and Jim Gilmore to achieve,'' Katzen told the
Coalition activists. Mark Rozell, a political scientist at
American University who wrote a book about the religious right,
commented, ``Jay Katzen's remarks should put to rest the
argument about whether the ChristianCoalition is really an arm
of the Republican Party. . . . This is so explicit, it's incredible.''
87
fec action
In complaints filed with the FEC since February 1992, the
Democratic Party of Virginia, and later the Democratic National
Committee, alleged improper political activity by the
Coalition. 88 These complaints led to an FEC
investigation and subsequent suit against the Coalition in
federal court. On July 30, 1996, the FEC, by affirmative vote
of four of its members (two Democratic appointees joined by two
Republican appointees), filed suit against the Coalition,
alleging the organization improperly provided aid to Republican
candidates.89
The FEC complaint alleged, ``During the campaign periods
prior to the 1990, 1992 and 1994 federal elections, [the]
Christian Coalition made expenditures, directly from its
corporate treasury and/or through its subordinate state
affiliates, to influence the election of candidates for federal
office.'' 90 Referencing examples of the Coalition's
work with prominent Republican candidates such as former
President George Bush, Senator Jesse Helms, former Senate
candidate Oliver North and House Speaker Newt Gingrich, the FEC
alleged that the Coalition spent money on voter guides and
other get-out-the-vote efforts in conjunction with particular
candidates'' campaigns and engaged in expressly advocating the
election or defeat of specific candidates. The complaint
further stated that the Coalition consulted with candidates''
campaigns before making the improper expenditures, which are
considered ``in-kind contributions.'' 91
Corporations are prohibited by law from making contributions
from corporate treasury funds to federal
elections.92 However, corporations may legally
engage in such activity through a separate, segregated
political committee fund, subject to federal election law
registration and reporting requirements.93
The FEC complaint consists of three causes of
action.94 The first cause of action alleges
violations of law for Coalition actions on behalf of the
following candidates or campaigns:
Bush/Quayle campaign--The Coalition made
expenditures for voter identification and get-out-the-
vote efforts and for the preparation and distribution
of approximately 28 million voter guides in connection
with the 1992 election for president and vice president
of the United States.95
Jesse Helms--The Coalition made expenditures
directly and/or through its state affiliate to produce
and distribute approximately 750,000 voter guides in
connection with Senator Helms's November 1990 general
election campaign and additionally made expenditures to
make approximately 29,800 telephone calls as part of a
get-out-the-vote telephone bank operation in connection
with the November 1990 general election in North
Carolina.96
Oliver North for U.S. Senate Committee,
Inc.--The Coalition made expenditures directly and/or
through its state affiliate to produce and distribute
approximately 1,750,000 voter guides in connection with
the 1994 general election campaign in Virginia and
additionally made expenditures for voter identification
and get-out-the-vote efforts in connection with the
1994 general election campaign in
Virginia.97
Inglis for Congress Committee--The Coalition
made expenditures directly and/or through its state
affiliates for voter identification and get-out-the-
vote efforts in connection with the 1992 general
election in the Fourth District of South Carolina and
also made expenditures to produce and distribute
approximately 240,000 voter guides in connection with
this election.98
J.S. Hayworth for Congress--The Coalition
made expenditures directly and/or through its state
affiliates for voter identification and get-out-the-
vote efforts in connection with the 1994 general
election in the Sixth District of Arizona and also made
expenditures to produce and distribute approximately
200,000 voter guides in connection with this
election.99
The second cause of action concerns the National Republican
Senatorial Committee, ``a national party committee dedicated to
the election of Republican candidates to the United States
Senate.'' The FEC alleged that ``[d]uring 1990, [the] Christian
Coalition, acting in coordination, cooperation, and/or
consultation with the NRSC, made expenditures directly and
through its state affiliates to produce and distribute between
five and ten million voter guides in seven states in connection
with the November 1990 federal elections for the United States
Senate.'' 100
The third FEC cause of action alleges that ``[The]
Christian Coalition made corporate expenditures directly and/or
through its state affiliates for public communications
expressly advocating the election or defeat of clearly
identified candidates for federal office.'' It states that, for
example, the ``Christian Coalition, through its subordinate
state affiliate in Montana, made expenditures in excess of $250
during a calendar year for a two day conference open to the
public held during January 1992. At this conference, Dr. Ralph
Reed expressly advocated the defeat of United States
Representative Pat Williams. Thus, the conference costs were
independent expenditures by Christian Coalition in opposition
to the candidacy of Representative Pat Williams.'' It states
that, in addition, the Coalition may have violated 2 U.S.C.
Section 434(c) by failing to report the costs of the conference
as an independent expenditure in opposition to the candidacy of
Representative Pat Williams.101
Additionally, the third cause of action alleges that during
1994, the Coalition made expenditures in excess of $250 during
a calendar year for the preparation and distribution of a
direct mail package entitled ``Reclaim America'' which included
a scorecard and a cover letter signed by Pat Robertson. In the
letter, Robertson asserted that the enclosed scorecard would be
an important tool for affecting the outcome of the upcoming
elections: ``This SCORECARD will give America's Christian
voters the facts they will need to distinguish between GOOD and
MISGUIDED Congressmen.'' The scorecard listed and characterized
many issues voted on in the Senate and House in 1993 and 1994.
Each Member's votes were reflected as a ``-'' or a ``+'',
followed by percentages. The scorecard stated: ``A score of
100% means the Congressman supported Christian Coalition
position on every vote. A score of 0% means the Congressman
never supported a Christian Coalition position.'' The FEC
alleged that the mailed package together constituted express
advocacy of ``clearly identified candidates for federal
office,'' and constituted unreported independent expenditures,
in violation of the law.102
Finally, the third cause of action alleges that prior to
the July 9, 1994 primary election in Georgia, the Coalition,
through its subordinate state affiliate in Georgia, made
expenditures in excess of $250 during a calendar year for the
preparation and distribution of a combination Congressional
Scorecard and cover letter, which stated in part: ``The only
incumbent Congressman who has a Primary election is Congressman
Newt Gingrich--a Christian Coalition 100 percenter.'' The FEC
alleged that the mailing constituted express advocacy of the
re-election of Gingrich, constituting unreported independent
expenditures in violation of the law.103
The FEC asked the court to declare that the Christian
Coalition violated 2 U.S.C. Section 441b and 434(c). The FEC
further asked the court to enjoin the Christian Coalition from
making similar corporate contributions and expenditures in
violation of 2 U.S.C. Section 441b; and to enjoin the Christian
Coalition from violating 2 U.S.C. Section 434(c) by failing to
report its independent expenditures. Additionally, the FEC
asked the court to assess an appropriate civil penalty against
the Christian Coalition for each violation found by the Court
to have been committed by the Corporation, not to exceed the
greater of $5,000 or the amount of the expenditure involved in
the violation, and to grant such other relief as may be
appropriate.104 The FEC suit is ongoing.
conclusion
The evidence shows that the Christian Coalition is closely
tied to the Republican Party and functions as a partisan
political committee. The Coalition has been led by persons with
close ties to the Republican Party, received about $64,000 in
start-up funds from the National Republican Senatorial
Committee, and is repeatedly identified in RNC documents as ``a
vital part of the Republican base.'' Former Coalition officials
have confirmed that the organization is closely aligned with
the Republican Party and explained how the Coalition constructs
its voter guides to favor the candidates the Coalition prefers.
The fact that the two FEC Republican commissioners joined with
their two Democratic counterparts in deciding to file suit
against the Coalition supports the conclusion that the
Coalition does indeed engage in election activity promoting
specific Republican candidates.
The ongoing pattern of distortion of candidates'' positions
as stated in Coalition voter guides and the above-cited
examples of candidate endorsements provide evidence that the
Coalition does not seek merely to inform and educate voters,
but instead functions to elect specific Republican candidates
to offices at all levels of government. Another disturbing
tactic employed by the Coalition is the distribution of voter
guides in selected churches the weekend prior to an election,
thus making it difficult for candidates to correct any
distortions of their positions. The fact that voter guides did
not address the same issues in the same manner for each
district, but instead attempted to portray the Coalition's
favored candidate in the most favorable light, amounted to
candidate endorsement, not simply informing and educating the
voter.
The Coalition voter guides also failed to list positions on
all surveyed issues for all candidates, thereby precluding the
voter from a full understanding of the candidates' views on
each issue. As discussed earlier, issues portrayed in the voter
guides were reduced to sparsely worded ``sound bites,'' which
condensed complex political issues into simple phrases, without
explaining the varying degrees of difference among candidates'
positions. Apparently, the Coalition does not wish to fully
inform its constituents of the candidates' positions,
preferring instead to slant voter guide issues in an effort to
elect the Republican candidate preferred by the Coalition. In
the Minority's view, such tactics are employed because the
Coalition fears that fully informed voters may not support the
Coalition's candidates.
The evidence indicates that the Coalition is a partisan
Republican political committee, whose primary activity and
major purpose is the election of Republican candidates to
public office, and should not be granted IRS section 501(c)(4)
``social welfare organization'' tax exempt status. It is time
for the IRS to reach a final decision on this matter. In
addition, the FEC should continue its civil enforcement action
to require the Coalition to stop making prohibited corporate
contributions to federal candidates and to report independent
expenditures to the FEC. More, the Coalition ought to register
with the FEC as the political committee it is.
footnotes
\1\ FEC v. Christian Coalition, Civil Action No. 96-1781 (U.S.D.C.
District of Columbia), 7/30/96 (hereinafter ``FEC Complaint'); FEC
Statement of Reasons, Commissioner Aikens and Elliot, 1/24/96.
\2\ Letter from Senator Glenn to Chairman Thompson concerning 11
Minority-drafted subpoenas, 3/3/97.
\3\ Committee Subpoena to Christian Coalition, 7/30/97.
\4\ Letter from Christian Coalition, et al, to Committee re: Joint
Statement of General Objections to Subpoenas, 9/3/97.
\5\ Sabato, Larry J. and Glenn R. Simpson. Dirty Little Secrets:
The Persistence of Corruption in American Politics. New York: Times
Books, 1996, pp. 109-110.
\6\ Sabato & Simpson, pp. 109-10; see also Drew, Elizabeth.
Whatever It Takes. United States: Penguin Books USA Inc., 1997, pp. 24-
25.
\7\ See Chapter 11 on Americans for Tax Reform.
\8\ Sabato & Simpson, pp. 110-111. See also Drew, p. 24.
\9\ Ralph Reed's dictated response to Christian Coalition Chief
Financial Officer Judy Liebert, re: monies received from the NRSC in
1991.
\10\ Sabato & Simpson, p. 111.
\11\. CRS Report, 95-421A, Comparison of 501(c)(3) and 501(C4)
Organizations, 3/24/95, p. 2; 26 U.S.C. 501(c)(4). See also Chapter 9.
\12\ CRS Report, 95-421A, p. 1; see Chapter 9.
\13\ See Chapter 9.
\14\ See ``Voter Guides In The 1996 Elections'' section of this
chapter.
\15\ Church & State, July/August 1996.
\16\ The Christian Coalition's Specific Objections To Schedule A,
p. 5.
\17\ Sabato & Simpson, p. 134.
\18\ Sabato & Simpson, p. 134.
\19\ Sabato & Simpson, p. 135.
\20\ Church & State, 11/94.
\21\ Ft.Worth Star-Telegram, 11/5/94.
\22\ Richmond Times Dispatch, 11/3/94.
\23\ Ft.Worth Star-Telegram, 11/5/94.
\24\ Drew, p. 26.
\25\ Gannett News Service, 11/8/96; Roll Call, 12/12/96; Drew, p.
160.
\26\ 1996 Christian Coalition Voter Guides--Georgia.
\27\ 1996 Christian Coalition Voter Guides--Iowa; Letter from
Senator Harkin to Christian Coalition Director of Voter Education Chuck
Cunningham, 4/25/96.
\28\ 1996 Christian Coalition Voter Guide for Presidential Race.
\29\ 1996 Christian Coalition Voter Guides--Alaska.
\30\ 1996 Christian Coalition Voter Guides--Massachusetts. In
Mississippi, the same modifying language concerning the balanced budget
issue that appeared in the Coalition's Massachusetts guide concerning
Representative Joe Kennedy, was used by the Coalition in two
congressional district voter guides, but not in the remaining three
district guides. 1996 Christian Coalition Voter Guides--Mississippi.
\31\ Riverside (CA) Press Enterprise, 11/2/96. The guide indicated
that Representative Bono supported a ban on partial-birth abortions,
and that his opponent had not responded to the Coalition's survey.
According to Stoermer, Representative Bono's responses to other
abortion-related questions in the Coalition's questionnaire indicated
that he supported abortion in some circumstances. For example, Stoermer
indicated that Representative Bono did not answer questions about
whether he supported Roe v. Wade, the landmark U.S. Supreme Court
decision giving women the right to seek an abortion, or the right to
abortion on demand during the first trimester of pregnancy.
Representative Bono had also voted for an amendment in August 1995 that
would have prevented states from denying the use of Medicaid funds for
abortions, except in cases where the pregnancy would endanger the
mother's life. Riverside (CA) Press Enterprise, 11/2/96.
Stoermer had resigned in a dispute with the Coalition over the
exclusion of a third party candidate from the same Coalition voter
guide. Information concerning American Independent Party candidate
Donald Cochran, who was also running against Representative Bono, was
excluded from the voter guide. The California Christian Coalition had
blocked Stoermer from including Cochran in the voter guide because of a
national policy to feature only viable candidates. Stoermer said
neither Representative Bono nor his Democratic candidate could claim to
represent family values because both had been divorced and supported
abortion rights, while Cochran had never been divorced and opposed
abortion. When Cochran ran against Democrat Steve Clute in 1994, he
captured 6.4 percent of all ballots cast in the race. Press Enterprise,
10/9/96.
\32\ Letter from Norma Paulus to Ralph Reed, 11/27/95.
\33\ Norfolk Virginian-Pilot, 8/4/97.
\34\Ethnic Newswatch, Baltimore Jewish Times, 9/15/95; Associated
Press, 9/6/95.
\35\ Ethnic Newswatch, 9/15/95; Associated Press, 9/6/95.
\36\ Church & State, 10/95, p. 8.
\37\ Church & State, 10/95, p. 9. Campbell also made a television
commercial on Foster's behalf, in her capacity as Louisiana Coalition
Director; but the ad was allegedly pulled when the national Coalition
office learned of it.
\38\ Church & State, 10/95, p. 9. Apparently Coalition officials
were concerned about media scrutiny, as guards were posted at the doors
to remove anyone not personally approved by the caucus leader.
\39\ Church & State, 10/96, p. 9.
\40\ Church & State, 10/96, p. 9.
\41\ Church & State, 10/96, p. 9.
\42\ Church & State, 10/96, p. 9.
\43\ Washington Post, 9/13/96, p. 20.
\44\ New York Times, 9/18/97.
\45\ Washington Post, 9/18/97.
\46\ New York Times, 9/18/97; Washington Post, 9/18/97.
\47\ Washington Post, 9/13/96, p. 20.
\48\ St. Louis Post-Dispatch, 3/20/96.
\49\ Dole Campaign Memorandum from Judy Haynes to Jill Hansen, 12/
14/95.
\50\ Drew, p. 23.
51 Associated Press, 7/7/96.
52 See Chapter 10; Exhibit 2367: Coalition Building
Manual, authored by Curt Anderson, R01821-49.
53 Exhibit 2367, at R01841.
54 Ibid. at Exhibit 2367, at R01847.
55 Exhibit 2363: memorandum dated 4/23/96 from RNC
political director and head of campaign operations Curt Anderson to RNC
chairman Haley Barbour, regarding ``Nuttle's Coalition Plan,'' R06060-
62.
56 Exhibit 2363.
57 Exhibit 2353: undated internal RNC memorandum from
``Blaise'' to ``Pat,'' regarding ``Outreach, Auxiliaries, Coalitions,''
R51299-30.
58 Exhibit 2365: memorandum dated 3/4/96 from RNC
political director and head of campaign operations Curt Anderson to RNC
chairman Haley Barbour, regarding ``Group of 12, or Council of Trent,
or Whatever,'' R006050.
59 Exhibit 2365.
60 Hearing exhibit 2366: untitled and undated document
tallying support for, opposition to and comments by RNC officials on
proposed members in a coalition of independent group leaders, R021559-
60.
61 Drew, p. 14.
62 For example, in early August 1997, Anderson, through
his attorney, indicated he would voluntarily appear for a deposition.
Subsequently, he changed his mind, and at the request of the Minority,
the Majority issued a Subpoena with a September 18 return date.
Anderson could not be located immediately and the subpoena was served
on September 19, one day after the return date. Anderson's attorney
claimed the subpoena was invalid, and the Majority refused the
Minority's request to issue a second subpoena to Anderson. See also
Part 7.
63 Memorandum from RNC coalitions director Jack St.
Martin to RNC political director and head of campaign operations Curt
Anderson, 12/15/95.
64 U.S. Newswire, 11/20/97.
65 Memorandum from RNC coalitions director Jack St.
Martin to RNC Chairman Barbour, 9/6/95.
66 Hearing exhibit 2362: memorandum from ``Hopper'' to
RNC political director and head of campaign operations Curt Anderson,
with a copy to RNC coalitions director Jack St. Martin, 3/6/96,
regarding ``Coalitions,'' R056245.
67 See, for example, Drew, pp. 14, 105-7, 160-62;
Associated Press, 7/7/96 (Robertson and Reed met with Dole for 40
minutes on 6/27/96.).
68 Drew, p. 106.
69 Drew, pp. 161-62.
70 Drew, pp. 164-65.
71 See Drew, p. 6.
72 See, for example, San Diego Union-Tribune, 8/9/96, p.
B1.
73 See, for example, San Diego Union-Tribune, 8/9/96, p.
B1.
74 San Diego Union-Tribune, 8/14/96, p. B1; Los Angeles
Times, 8/13/96, p. A18; Newsday 8/8/96, p. B4.
75 Boston Globe, 11/22/96, p. A1; The Village Voice, 8/
6/96, p. 23; Washington Post, 1/7/97, p. A1.
76 $14,000 Christian Coalition check to Christian
Coalition of North Carolina, 10/30/90.
77 FEC Complaint.
78 AP/Baltimore Sun, 6/5/97; Universal Lists Billing
invoice #1010, 3/23/94.
79 Washington Post, 8/4/96; Associated Press, 8/3/96.
80 Norfolk Virginian-Pilot, 8/4/97.
81 Norfolk Virginian-Pilot, 8/1/97.
82 Christian Coalition $25,000 check to the Second
District Republican Committee, 11/12/91.
83 Norfolk Virginian-Pilot, 7/27/97.
84 Freedom Writer, April 1994.
85 Orlando Sentinel, 9/17/94.
86 Orlando Sentinel, 9/29/94.
87 Washington Post, 9/28/97.
88 FEC Complaint, p. 2.
89 FEC Complaint, p. 5. At the time of the vote, one
position on the Commission was vacant, and another member was not
present. An earlier vote to require the Coalition to
register as a political committee did not pass, as it was opposed by
the two Republican appointees. They contended that within the meaning
of the law, the Coalition's ``major purpose'' was not the election or
defeat of a federal candidate. FEC Statement of Reasons, Commissioners
Aikens & Elliot, 1/24/96, pp. 1, 6.
90 FEC Complaint, p. 6.
91 FEC Complaint, pp. 5-12.
92 FEC Complaint, p. 5; 2 U.S.C. Sec. 441b.
93 FEC ``Statement of Reasons,'' Commissioners Thomas,
McGarry, & McDonald, 7/30/96, p.2.
94 FEC Complaint, pp. 6-10.
95 FEC Complaint, p. 7.
96 FEC Complaint, pp. 7-8.
97 FEC Complaint, p. 8.
98 FEC Complaint, p. 9.
99 FEC Complaint, p. 9-10.
100 FEC Complaint, p. 10.
101 FEC Complaint, pp. 10-11.
102 FEC Complaint, pp. 11-12.
103 FEC Complaint, p. 12.
104 FEC Complaint, pp. 12-13.
PART 2 INDEPENDENT GROUPS
Chapter 15: Other Republican Groups
The Committee's investigation of independent groups focused
mainly on a handful of organizations that played an active role
in the 1996 election cycle, and the results of this
investigation are summarized in earlier chapters of the
Minority Report. This chapter includes brief examinations of
other nonprofit groups with ties to the Republican National
Committee, Republican donors, and Republican presidential
candidates.
Although these groups were not investigated in depth, the
Committee did receive some documents, pursuant to subpoenas,
from nonprofit organizations connected to the presidential
candidates. Some of the organizations discussed in this chapter
are also mentioned in documents provided to the Committee by
the Republican National Committee.
seniors organizations
Documents produced to the Committee by the Republican
National Committee reveal that the RNC closely coordinated with
a number of ostensibly nonpartisan organizations during the
1996 election cycle, including senior citizens' organizations.
For example, on March 20, 1996, two RNC officials sent a memo
regarding the party's ties to senior citizens' organizations.
One portion of the memo discusses a ``Senior Republican Network
Conference'' scheduled for June 8. According to the memo, one
of the goals of the conference was ``Establishment of good
relationships with major conservative senior groups: 60 Plus,
United Seniors, and Seniors Coalition. Explore ways in which we
can work together during the campaign.'' 1
---------------------------------------------------------------------------
Footnotes appear at end of chapter 15.
---------------------------------------------------------------------------
Ten days later, the Seniors Coalition was mentioned in a
follow-up memo. According to this memo, the Seniors Coalition
was ``very interested in sponsorship of our [Republican]
conference. They offered to help take on some financial
obligations as well. They asked us to determine where they
think they should do their next poll (Kellyanne has done
research in CA & FL on how Medicare and senior issues are
playing). They indicated a willingness to give us some input
into the questions asked as well.'' 2
The Seniors Coalition, which apparently coordinated with
the RNC, disseminated a press release during the presidential
campaign which appears to have been aimed at assisting
Republican candidate Bob Dole. On March 11--the day before the
Florida primary--the organization announced the results of a
survey of Florida senior citizens. The press release was
headlined: ``Florida seniors reject Clinton's leadership, lack
of optimism about the future according to poll conducted by the
Seniors Coalition.'' The lead sentence read: ``A new poll of
seniors in Florida may spell trouble for the White House.''
3
A careful reading of the press release makes clear that the
Florida seniors who responded to the survey were much more
favorably disposed to Clinton than the headline and lead
sentence suggested. For example, 39 percent said that Clinton
best represents the concerns of senior citizens, compared with
38 percent for Dole. An equal percentage of respondents--44
percent--favored Clinton and Dole. Since the margin of error
was plus or minus 4.7 percent, it is possible that Clinton was
actually favored by Florida seniors.
Another group mentioned in RNC memos, the United Seniors
Association, was also active during the 1996 campaign. The
organization ``spent $3 million on a direct mail and media
campaign to rebut Democratic and union Medicare claims,''
according to a study of issue advocacy in 1996. ``The targeted
states were Oklahoma, Iowa, Nebraska, Kentucky, Washington
state, Arizona and Wisconsin.'' 4
The Seniors Coalition and the United Seniors Association
are both registered with the Internal Revenue Service as tax-
exempt, 501(c)(4) ``social welfare'' organizations, and they
have portrayed themselves as bona fide grassroots
organizations--conservative versions of the American
Association of Retired Persons. However, several critics have
characterized them as organizations that serve mainly to enrich
professional fundraisers. In the early 1990s, for example,
these groups were criticized by then-Representative Andy Jacobs
(Ind.), the Democratic chairman of the Subcommittee on Social
Security of the House Ways and Means Committee as well as the
committee's ranking Republican, Jim Bunning (Ky.). ``The motive
of these groups,'' said Representative Bunting, ``is to raise
money.'' 5
The Seniors Coalition was founded by Dan C. Alexander, Jr.,
who had been convicted of extortion in 1987 and sentenced to 12
years in prison (he served 51 months).6 Alexander
worked closely with Richard Viguerie, a prominent direct-mail
fundraiser who has founded and/or worked for several seniors
groups, including the Seniors Coalition, the United Seniors
Association, and 60 Plus.
In late 1992, Alexander was forced out of the Seniors
Coalition after the board found evidence of financial
irregularities.7 A new CEO was installed
8 and the group improved its image. After the mid-
term elections of 1994, Republican congressmen invited
officials of the Seniors Coalition to testify before
congressional committees.9 When, in 1995, House
Speaker Newt Gingrich announced the Republicans'' Medicare
reform policy, he did so at a conference sponsored by the
Seniors Coalition.10
But the Seniors Coalition's growing visibility was not
entirely appreciated by several mainstream seniors
organizations. At a May 1994 press conference, representatives
of the American Association of Retired Persons and the National
Council of Senior Citizens sharply criticized the Seniors
Coalition and two other conservative groups: the United Seniors
Association and the American Council for Health Care Reform.
According to these critics, the conservative seniors groups,
including the Seniors Coalition, did not accurately portray
political issues, but instead sent false and misleading
``fright mail'' to seniors. For example, a mass mailing by the
Seniors Coalition made the unsubstantiated claim that ``Bill
Clinton plans . . . less medical treatment for seniors''
because he believes that ``if more seniors die at a younger
age, then there will be less overall spending on health care.''
11
The Seniors Coalition's credibility suffered a further
setback in January 1996, when the Virginia Supreme Court ruled
that the ouster of Dan Alexander was invalid.12
After the ruling, allies of his regained control of the
organization.13 Alexander's return prompted several
executives and lobbyists to resign from the
organization.14 Even in the eyes of some
Republicans, the Seniors Coalition was not a credible
organization. For example, James E. Miller, a Washington lawyer
who had worked with the Seniors Coalition in the past, told the
National Journal: ``The Republicans can't possibly want to
associate themselves with the group at this point.''
15
But other Republicans were willing to work with the Seniors
Coalition. Steven D. Symms, a former Republican Senator from
Idaho, was appointed chairman of the Seniors Coalition's board
of advisers.16 Stan Parris, a former Republican
Representative from Virginia, became chairman of the
coalition's congressional affairs committee.17
During the 1996 campaign, as noted above, the RNC worked
closely with the Seniors Coalition, in spite of its background
involving criminal activities and despite the coalition's
claims to be a nonpartisan social welfare organization.
term-limits groups as fronts for gop donors
Since the 1980s, several political activists have called
for limits on the number of terms that elected officials can
serve in office. Some of the individuals and groups who favor
term limits are nonpartisan. Others, however, use the term-
limits issue as a partisan weapon, despite claiming to be
nonpartisan organizations. Two groups in this category are U.S.
Term Limits and an affiliated organization called Americans for
Limited Terms.
These groups were not subjects of the Commitee's
investigation. They are mentioned here because the Committee
learned that they may have been backed by conservative donors
who financed groups that were investigated by the Committee. If
these organizations conducted partisan political activity, even
while claiming to be nonpartisan, tax-exempt groups, they
served as ways for GOP donors to support Republican candidates
without adhering to the disclosure requirements or contribution
limits of the federal election laws. In such cases, the donors
and the term-limits groups exploited the ``issue advocacy''
loophole in order to circumvent the election laws and the
groups themselves may have violated their tax-exempt status.
(U.S. Term Limits and Americans for Limited Terms are both tax-
exempt, ``social welfare'' organizations, under section
501(c)(4) of the tax code.)
U.S. Term Limits, which was founded in 1992,18
asks federal candidates to sign a pledge promising that they
will vote to limit House members to three two-year terms, and
Senate members to two six-year terms.19
Americans for Limited Terms, which was established in 1994,
conducts purported ``issue advocacy'' campaigns targeted at
candidates who refuse to sign the U.S. Term Limits pledge.
There are other links between the two organizations: They share
a website on the Internet20 and they use the same
advertising agency.21 Moreover, a number of
activists have been connected to both groups: ALT's founders
include Howard Rich,22 the president of
USTL,23 and Paul Farago, a former USTL board
member.24
Although Americans for Limited Terms claims to be
nonpartisan, most of its targets are Democratic candidates.
During the 1994 election, according to the Wall Street Journal,
ALT waged a ``$1.3 million mail and media campaign aimed
primarily at Democrats. In only a handful of cases--Maryland
and Rhode Island, for example--are Republican incumbents
targeted.'' Nearly one fourth of that money--$300,000--was
spent attacking Speaker Tom Foley.25 In their book
Dirty Little Secrets, Larry Sabato and Glenn Simpson noted that
``ALT focused mainly on Democrats, despite the fact that many
Republicans running were term limits opponents.'' 26
In their view, ``It would be difficult to construe ALT's
activities as anything other than direct campaign
expenditures.'' 27 In 1996, according to the Kansas
City Star, ALT spent $1.8 million ``in campaigns in Wisconsin,
Texas, Illinois, North Carolina, Virginia, New Hampshire and
Kansas, aiding chiefly Republicans.'' 28
Americans for Limited Terms does not identify any of its
financial backers.29 U.S. Term Limits reveals some
of its larger donors, but does not provide complete
information.30 Despite the secrecy of these
organizations, some information about their donors and
fundraisers has emerged in the press, and it comes as no
surprise that many of them are leading contributors to
Republican candidates.
In November 1994, the Wall Street Journal reported that ALT
and other term-limits organizations have received funding from
individuals who also gave to GOPAC, the ``leadership PAC'' of
House Speaker Newt Gingrich.31 For example, ALT
donors Fred Sacher and K. Tucker Anderson had given more than
$350,000 to GOPAC.32 Sacher, a California
businessman, has been a major donor to conservative causes over
the years. Anderson, a portfolio manager in New York, gave
``tens of thousands of dollars'' to GOPAC, according to the
Journal.33
Both term-limits groups may have ties to oil executives
Charles and David Koch who, as noted in earlier chapters of the
Minority Report, are likely to have financed Triad and
Coalition for Our Children's Future. U.S. Term Limits is a
successor organization to Citizens for Congressional Reform, a
term-limits group that was funded by the Koch
brothers.34 When CCR's ties to the Kochs were
publicized in the early 1990s, the organization disbanded and
its assets--including its mailing list--were acquired by
USTL.35 Several key figures in these pro-GOP term-
limits groups have ties to the Cato Institute, a Libertarian
think tank that has received millions of dollars from the Koch
brothers over the years.
Howard Rich, the president of USTL and a co-
founder of ALT, served on Cato's board of
directors.36 (Rich is also a friend of Charles
Koch.37)
Ed Crane, Cato's president, has served on USTL's
board.38
K. Tucker Anderson, a major donor to ALT, has
served on Cato's board. 39
U.S. Term Limits has denied that the organization received
any money from the Kochs, according to a September 1996 press
report.40 Because Americans for Limited Terms
refuses to disclose its donors, this leaves open the
possibility that the Kochs provided funding to ALT.
Although it is not possible to identify the financial
backers of Americans for Limited Terms, its extensive
involvement in political campaigns demonstrates how easy it is
for donors to assist the candidates of their choice by
contributing to ``nonpartisan'' organizations involved in
purported ``issue advocacy'' activities.
nonprofit groups linked to presidential candidates
During the 1996 election cycle, three Republican
presidential candidates may have used nonprofit organizations
as shadow campaign vehicles. Two of the organizations were
registered with the Internal Revenue Service as a tax-exempt
``social welfare'' organization, pursuant to section 501(c)(4)
of the tax code. In exchange for this privileged status, such
organizations are supposed to be nonpartisan and may not engage
in political activity as their primary activity. One of the
organizations was a 501(c)(3) charitable organization, which is
allowed to receive tax-deductible contributions and is subject
to even tighter curbs on political activity.
The three groups in question were:
the Better American Foundation,41
a 501(c)(4) established in 1993 by then-Senator Bob
Dole and disbanded in June 1995, just as Senator Dole
was starting his official campaign organization;
the Republican Exchange Satellite
Network,42 a 501(c)(4) affiliated with
former Governor Lamar Alexander of Tennessee; and
the American Cause,43 a 501(c)(3)
established by Patrick Buchanan in 1993.
In spite of their tax-exempt status, these three groups
allegedly assisted the candidates by providing staff, paying
for travel expenses, scheduling media events, conducting
polling and issue research, and engaging in other activities
normally associated with campaigns.44 If these
allegations are true, the three nonprofits were almost entirely
political in nature and, thus, may have violated their tax
status and the federal election laws, since none of them
registered with the Federal Election Commission as a political
organization.
conclusion
The evidence before the Committee shows that a myriad of
tax-exempt organizations assisted Republican candidates during
the 1996 election cycle, serving variously as tools of
Republican candidates, conduits for Republican donors, and
money-making operations for conservative fundraisers. One thing
they all had in common is that they violated the spirit--and,
in some cases, probably the letter--of the federal tax and
election laws.
If these de facto political organizations are not brought
under control, they will be used even more extensively in
future elections. It is possible, for example, that a single
wealthy donor could influence the outcome of dozens of
congressional races by channeling millions of dollars through
tax-exempt organizations. If large donors are allowed to
operate on that scale--and with no disclosure and no
accountability--the campaign finance laws will be meaningless.
footnotes
\1\ Memo on RNC letterhead (Office of the Co-Chairman) from Howard
and Phil to Judy, re Seniors Update, 3/20/96. R 33746-33758.
The Minority staff believes that ``Howard'' is Howard Leach, who
was the RNC's finance chairman at the time the memo was written.
``Judy'' is probably Judy Hughes, who was chief of staff to Evelyn
McPhail, who was co-chairman of the RNC. ``Phil'' has not been
identified.
\2\ Memo on RNC letterhead (Office of the Co-Chairman) from Howard
& Phil to Evelyn and Judy re Seniors Program, 3/30/96. R 033746.
\3\ Seniors Coalition press release dated 3/11/96.
\4\ Annenberg Public Policy Center of the University of
Pennsylvania: ``Issue Advocacy Advertising During the 1996 Campaign: A
Catalogue,'' September 16, 1997, citing Washington Times, 11/4/96.
\5\ New York Times, 11/12/92.
\6\ New York Times, 11/12/92.
\7\ Los Angeles Times, 4/2/96.
\8\ National Journal, 1/27/96.
\9\ Molly Ivins column in Sacramento Bee, 8/26/95 (citing reporting
by Jim Drinkard of Associated Press).
\10\ Los Angeles Times, 4/2/96.
\11\ Des Moines Register, 5/27/94.
\12\ Los Angeles Times, 4/2/96.
\13\ Los Angeles Times, 4/2/96.
\14\ National Journal, 1/27/96.
\15\ National Journal, 1/27/96.
\16\ Idaho Statesman, 3/9/96.
\17\ National Journal, 1/27/96.
\18\ Omaha World Herald, 9/16/96.
\19\ Associated Press, 8/2/96.
\20\ Kansas City Star, 5/5/97.
\21\ Kansas City Star, 5/5/97.
\22\ Kansas City Star, 5/5/97.
\23\ Roll Call, 9/22/94.
\24\ Kansas City Star, 5/5/97.
\25\ Wall Street Journal, 11/4/94.
\26\ Sabato, Larry J. and Glenn R. Simpson. Dirty Little Secrets:
The Persistence of Corruption in American Politics. New York: Times
Books, 1996, p. 144, citing Wall Street Journal, 11/4/94.
\27\ Sabato/Simpson, p. 144.
\28\ Kansas City Star, 5/5/97.
\29\ Kansas City Star, 5/5/97. (On 12/4/97, a Committee staff
member telephoned Steve Merican, the president of ALT, and he confirmed
that the organization does not disclose its donors.)
\30\ Kansas City Star, 5/5/97.
\31\ Wall Street Journal, 11/4/94.
\32\ Sabato/Simpson, footnote on p. 372.
\33\ Wall Street Journal, 11/4/94.
\34\ Los Angeles Times, 10/31/92; Wall Street Journal, 8/25/83.
\35\ Wall Street Journal, 8/25/93.
\36\ Wall Street Journal, 11/4/94.
\37\ Seattle Times, 11/1/92.
\38\ Wall Street Journal, 8/25/93.
\39\ Wall Street Journal, 11/4/94.
\40\ Omaha World Herald, 9/16/96.
\41\ Washington Post, 6/21/95, p. A1; Associated Press, 5/25/95 and
11/5/94.
\42\ Associated Press, 6/21/95.
\43\ Associated Press, 2/21/97 and 4/10/97.
\44\ See, for example, Congressional Quarterly, 2/22/97.
PART 2 INDEPENDENT GROUPS
Chapter 16: Overview of Democratic Independent Groups
Federal election and tax laws attempt to ensure that groups
registered as tax-exempt independent organizations are truly
independent from partisan electioneering. To do so, several
laws prohibit these organizations from (1) conducting ``issue
advocacy'' if the advocacy is, in reality, nothing more than
support for political candidates and (2) coordinating their
activities with political committees or candidates (See Chapter
9). The Minority's investigation of independent groups
associated with the Republican Party, as discussed in Chapters
10-15 of this Report, focused on whether specific organizations
violated these laws. The evidence shows that many of them
clearly circumvented the law and some appear to have violated
it. Several pro-Republican organizations closely coordinated
their activities with the Republican Party, and some were
directly funded by the Republican National Committee. In 1996
alone, the RNC gave nearly $6 million to supposedly
``nonpartisan'' groups. Two tax-exempt organizations were even
established by the RNC.
The Committee found no evidence that there was this level
of coordination on the Democratic side. There was nothing in
the files of the Democratic National Committee to compare with
RNC memoranda showing close coordination with pro-Republican
groups. Regarding issue advocacy, the Committee received little
evidence supporting allegations that pro-Democratic independent
groups conducted issue advocacy campaigns that served as
nothing more than partisan electioneering. The evidence also
shows that independent groups received very little money from
the DNC. In all of 1996, the DNC contributed less than $185,000
to independent groups, a tiny fraction of the RNC's
contributions to such groups. Of course, the Committee does not
have a full picture of what happened during the 1996 election
cycle, since many subpoenaed groups--both pro-Democratic and
pro-Republican--refused to cooperate with the investigation.
The following chapters explore the Committee's
investigation of independent groups associated with the
Democratic Party. The first two chapters discuss the
Committee's public investigation of these groups, which was
limited to exploring allegations that Harold Ickes, former
chief of staff in the White House, directed a potential
contribution to groups including Defeat 209 and Vote Now '96
and allegations that two DNC officials directed a potential
$100,000 contribution to the re-election campaign of former
Teamsters President Ron Carey's. The last chapter summarizes
allegations against a variety of other independent groups
traditionally associated with the Democratic Party.
FINDINGS
(1) During the 1996 election cycle, several independent
groups spent millions of dollars to promote Democratic issues
and possibly Democratic candidates through issue advocacy, and
voter education and registration.
(2) The evidence before the Committee, however, suggests
that the Democratic Party did not play a central role in
financing, or coordinating with, these groups.
PART 2 INDEPENDENT GROUPS
Chapter 17: R. Warren Meddoff
Shortly before the 1996 election, Florida businessman
Warren Meddoff approached President Clinton at a Florida
fundraiser concerning a possible $5 million donation to the
President's campaign from Meddoff's associate, William Morgan.
Meddoff told Ickes that Morgan wanted to make at least some of
his contributions tax deductible, and Ickes prepared a memo
suggesting some possible tax-exempt and tax deductible
recipients. After sending the memo to Meddoff, Ickes received
word that a DNC background check of Meddoff and his associate
raised serious questions and that it would be better for the
DNC to decline Meddoff's offer of contributions. Ickes and
Meddoff dispute what happened next. Meddoff testified that
Ickes told him to ``shred'' the memo; Ickes testified that he
merely told Meddoff that the memo ``was inoperative.''
Based on the evidence before the Committee, we make the
following findings regarding these events:
FINDINGS
(1) There is no evidence before the Committee suggesting
that Harold Ickes or any DNC official acted illegally in their
dealings with Warren Meddoff. Current law does not prohibit a
federal government employee or party official from directing
contributions to tax-exempt organizations.
(2) It would have been more prudent, as Ickes himself
testified, for Ickes to have immediately referred Meddoff to
the DNC. Meddoff sought suggestions on how to make a tax-
deductible contribution that would help President Clinton's
campaign. The Committee does not have sufficient evidence to
determine whether the organizations recommended by Ickes were
actually engaged in any partisan political activities. Ickes's
opinion that a contribution to such groups would benefit the
President's campaign does not establish that these
organizations were engaged in any activities that would have
been inconsistent with their tax-exempt status.
(3) The DNC acted appropriately by checking the backgrounds
of Meddoff and his associate and ultimately refusing their
proposed contribution.
(4) Meddoff is not a credible witness. His explanation to
the Committee of two past proposals on behalf of two different
persons to contribute $5 million to the Republican Party in one
case and the Democratic Party in the other case; his admission
of involvement in conduct that appears to be an attempt to
bribe a federal official; his apparent threats to his former
employer and a DNC fundraiser; and the fact that he never met
the person on whose behalf he was allegedly making a $5 million
contribution to help President Clinton, cast significant doubt
on his credibility.
WARREN MEDDOFF
Warren Meddoff, described as a ``businessman'' in published
news reports, has worked at a commodities trading firm, at a
car dealership as a business manager, and as a real estate
broker at three different companies.1 From 1983 to
1988, Meddoff also served as a member of the executive
committee for the Republican Party in Broward County,
Florida.2 During that same time period, Meddoff
registered to run for the Florida State House as a Republican,
but later withdrew his candidacy.3 Meddoff testified
that he started his own company in 1989, called R. Warren
Meddoff, P.A., located in Fort Lauderdale, Florida.4
Meddoff described his work as a consultant with ``areas of
involvement in real estate, investment development and
brokerage, and in consulting on financial matters under
contract with several foreign governments, those governments
having been Bulgaria, Romania, the Ukraine, Tajikstan, and
Moldova.''5 In October 1996, Meddoff was hired as an
export manager by Bukkehave, Inc., a wholly owned subsidiary of
a Danish corporation.6
---------------------------------------------------------------------------
Footnotes appear at end of chapter 17.
---------------------------------------------------------------------------
Since 1989, Meddoff has also had business dealings with an
individual named William Morgan.7 These business
dealings involve gold-backed bearer bonds issued by Germany's
Weimar Republic before World War II.8 Meddoff has
sought, so far unsuccessfully, to ``utilize and develop'' these
bonds as a source of income.9 Meddoff claims that
Morgan, unlike himself, has been able to ``close transactions''
involving these bonds, 10 but Morgan is a
``mysterious character whose stories don't always quite add
up,'' according to Vanity Fair.11 Despite dealing
with him for more than five years, speaking with him up to five
to ten times a day and entering into contracts with him,
Meddoff testified that he has never met Morgan.12
Morgan did not pay Meddoff for his representation, and Meddoff
said he has never made any money from his association with
Morgan. Meddoff claims that he has never checked into Morgan's
background or net worth.13 The little information
the Committee could garner about Morgan invited considerable
skepticism about Medoff's claims that Morgan is frequently at
the center of multi-million dollar business deals. The
Committee learned that Morgan operates a business out of a
house which he does not own, that properties he does own have
had two IRS liens against them, and that he defaulted on a
personal note in 1988 and was unable to even afford an attorney
at that time.14
MEDOFF AND THE OCTOBER 1996 FUNDRAISER
On October 22, 1996, according to Meddoff's testimony,
Meddoff was sent by his employer, Bukkehave, to a Democratic
fundraiser held at the Biltmore Hotel in Coral Gables, Florida.
His primary purpose in attending was to assist a client of
Bukkehave, Catholic Relief Services, in making humanitarian
flights to Cuba to assist victims of a recent hurricane
there.15 Administration policy at that time did not
permit direct flights to Cuba and Meddoff was tasked to seek
administration support for the charity's proposed relief
flights.16 Meddoff said he spoke with Morgan earlier
that day about his forthcoming attendance at the fundraiser
that night.17 According to news reports, however,
Morgan has said that Meddoff was the one who originally
proposed that Morgan propose a contribution.18
During that conversation, Morgan asked Meddoff to inform the
President that he wished to make a contribution of $5 million
to President Clinton.19 At the fundraiser, Meddoff
handed President Clinton a business card on which he had
written, ``I have an associate that is interested in donating
$5 million to your campaign.''20 The President took
the card, asked for another one for his staff, and indicated
that someone would get back to him.21 According to
Meddoff, at ``no time did the President discuss contributions
or funds'' during this conversation.22
Instead, during their conversation, which Meddoff said
lasted between two to five minutes, the President and Meddoff
discussed the aid flights to Cuba that his employer's client
wished to undertake. When Meddoff told the President that
Catholic Relief Services and the Catholic diocese wanted his
support for those flights, the President, according to Meddoff,
responded, ``I've made the decision . . . Tell the people
they'll be able to fly.''23 The White House had
formally announced that morning, before the President had left
Washington for Florida, that Catholic Charities would be
permitted to fly relief supplies to Cuba.24 Meddoff
testified that he did not believe that the President's decision
had ``anything to do with me.''25 In addition,
Meddoff testified in his deposition that Bukkehave's interest
in the aid flights was ``a humanitarian issue, not one of going
out for remuneration or trying to get some sort of financial
benefit from it.''26
ICKES'S CONVERSATIONS WITH MEDDOFF
After the Florida fundraiser, the President asked Harold
Ickes, White House deputy chief of staff, to contact Meddoff
concerning the proposed contribution. Pursuant to this
direction from the President, Ickes had a telephone
conversation with Meddoff on October 26 in which they discussed
the possible $5 million contribution.27 These
contributions were to come from the proceeds of a business deal
to be completed by November 1 from which Morgan expected to
realize over $300 million.28 Meddoff explained that
Morgan, in addition to the proposed $5 million donation, was
contemplating additional donations over a period of time that
would total over $50 million.29 Meddoff said he told
Ickes that the funds were not the product of any criminal
activity and originated from within the United States, but that
he did not describe the specific nature of Morgan's pending
transaction. Meddoff said he did convey to Ickes, however, that
Morgan wished to get a tax benefit out of the contribution in
order to reduce his anticipated tax liability on the pending
deal.30 When asked during his deposition how Morgan
anticipated making a tax-deductible donation to a political
campaign, Meddoff testified ``he [Morgan] sometimes has a
misconception of the reality of our legal system and what works
and what doesn't work.''31 During this and
subsequent conversations with Ickes, Meddoff said that he
``never relayed on a request'' for anything in connection with
the proposed contributions.32
During one of these conversations, according to Meddoff,
Ickes asked whether Morgan would also be willing to make a non-
tax-deductible donation to the DNC.33 Meddoff says
that, after consulting with Morgan, he informed Ickes that
Morgan was willing to make such a contribution once the funds
became available to him.34
On October 29, according to Meddoff, Ickes telephoned
Meddoff from Air Force One and said, ``We have an immediate
need for $1.5 million within the next 24 hours. Do you think
you could get it to us?''35 After consulting with
Morgan, Meddoff said he told Ickes that a contribution within
24 hours would not be possible, but that Morgan was expecting
to receive some of his money within 48 hours and a contribution
could be effected within that time frame.36 Meddoff
says he requested information on where to send the funds and
how to do so.37 Medoff says that Ickes told him that
he would be sending information on ``501(c)(3)'s (charitable,
tax-exempt organizations) that were friendly to the President's
campaign and supported the same areas, and . . . also what
would be a non-tax-favorable contribution to the Democratic
National Committee.''38 Ickes, for his part, does
not remember this conversation with the same level of detail,
but confirmed in his deposition that he called Meddoff from Air
Force One, discussed Morgan's desire to make a tax-deductible
contribution to assist President Clinton, and promised to
provide him with information about entities to which such
contributions could be made.39 Ickes also testified
that, immediately after speaking with Meddoff, he called Eric
Berman, head of research at the DNC, and asked him to check the
background of both Meddoff and Morgan.40
On October 31, according to the testimony of both Ickes and
Meddoff, Meddoff received a fax from Ickes providing
information concerning the following four groups, along with
proposed contribution amounts: (i) National Coalition of Black
Voter Participation ($40,000); (ii) Defeat 209 ($250,000);
(iii) Vote Now '96 ($250,000); and (iv) Democratic National
Committee ($500,000).41 Meddoff testified that he
forwarded this fax to Morgan on the assumption that Morgan
would share the information with his attorneys and accountants
in order to make the ultimate decisions about which
organizations would receive the contributions.42
Ultimately, as explained in more detail below, Morgan made none
of the suggested contributions.
NO EVIDENCE OF ILLEGAL COORDINATION
Ickes has testified that with hindsight, it would have been
better if he had not sent the fax, but that he did not believe
that he did anything improper. In his deposition he stated:
I'm confident I did nothing illegal . . . it would
have been the better part of discretion for me to have
handed this whole thing off to the professional
fundraisers [at] the DNC to handle, but given the press
of time, given the fact that the President asked me to
take care of this and he didn't say that I had to make
the call, but given the press of time and given the
fact that if this money was going to be forthcoming and
if it was going to be used for the election, it had to
get done quickly, and I knew that I could get it done
quickly or that I would get it done quickly. [With] 20/
20 hindsight, I should have handed it off to the
DNC.43
The Committee agrees that Ickes would have been well-
advised to refrain from providing such information to a
potential contributor in order to avoid any appearance of
improper coordination. Nevertheless, the simple fact that Ickes
identified non-profit groups in response to a desire from a
potential contributor to make a tax-deductible contribution
does not establish that improper coordination has occurred.
There is no evidence, for example, that Ickes or the groups
proposed that the contributions be spent in coordination with
the White House or DNC officials.
ICKES'S ALLEGED DIRECTION TO MEDDOFF TO SHRED THE FAX
Meddoff has testified that on the afternoon of October 31,
the same day that Meddoff received the fax from Ickes
identifying the tax-exempt groups to whom contributions could
be made, Ickes called Meddoff concerning the fax.44
During this conversation, according to Meddoff, Ickes explained
the fax he had sent that morning had been sent ``in error'' and
asked him to shred it.45 Ickes, for his part, has
denied that he told Meddoff to shred the fax. Ickes testified
in his deposition, ``My recollection is that I called Meddoff
and told him . . . that the memo was inoperative . . . I have
no recollection of saying that I would shred a memo. I find it
inconceivable that I would use that kind of language to
somebody--with somebody that I knew, much less that I had no
idea who I was talking about.''46
At the hearing, Senator Nickles indicated that Ickes had
covered up his actions in light of the fact that the White
House had been unable to locate an original copy of the
memorandum faxed to Meddoff. In response, Ickes pointed out
that he had voluntarily produced to the Committee the identical
information:
I have never seen the original of the document,
Senator, of the memo. Newsweek did fax that memo or I
received a copy of the memo from Newsweek. That was in
my files. That was turned over. That is the document
that you are referring to here, number one.
Number two is, every--virtually every pertinent
aspect and piece of information that is in the typed
memo is also contained in my handwritten notes, which
were turned over to the Committee.47
Ickes did not have a copy of the original because he had
dictated it from Air Force One to the White House, which then
faxed it to Meddoff. Ickes had only his handwritten notes which
he kept and produced to the Committee. The fact that Ickes kept
these handwritten notes in his files belies the contention that
he either sought to hide the contents of the memo from the
Committee or even that he asked Meddoff to shred the memo in
the first place.48
MEDDOFF'S CREDIBILITY
Meddoff's dramatic account of having been instructed by
Ickes to shred a document made an issue of his credibility. The
evidence before the Committee raises serious doubts about
Meddoff's credibility. Moreover, the evidence strongly suggests
that Meddoff had a personal interest in appearing before the
Committee--his desire to damage his former employer, Bukkehave,
Inc.
Meddoff was fired from his job at Bukkehave in July
1997.49 Meddoff was terminated for numerous
violations of company policy for which he had been warned,
including misuse of company credit cards, mis-allocation of
resources, habitual tardiness, failing in his duties, and
making negative comments about the company and its
officers.50 On September 10, 1997, (the day before
Meddoff was originally scheduled to testify before the
Committee), he sent an e-mail to Christian Haar, the CEO at
Bukkehave, stating:
The problem with betraying someone's trust and
friendship is that the individual that you betrayed
will never forgive the betrayal. Tomorrow you and your
company will come under international scrutiny and
scorn. Prepare to face the [w]rath of an entire
country[,] foreigner. I am sure that the President and
Vice President, let alone Chrysler, will thank you for
the trouble that you have caused and will be caused due
to your personal actions.51
This e-mail presented a disturbing picture of a hidden agenda
behind Meddoff's testimony. In light of these facts, the
Committee has serious questions about the extent to which
Meddoff's animosity toward his former employer may have colored
his hearing testimony.
Meddoff's character was further tarnished in light of
information concerning a previous episode wherein Meddoff spun
a fanciful scenario proposing a huge political contribution on
behalf of a client to be funded by a not-yet-complete
transaction. In February 1995--a year and a half before Meddoff
gave President Clinton his business card at the Biltmore Hotel
fundraiser--he sent a letter to Senator Dole offering to donate
$5 million to help the Republican Party win the 1996
presidential election.52
In the letter, Meddoff explained that he was representing
an entity called Jelico Investments, Inc. in connection with a
project on behalf of the government of Bulgaria that involved
the exchange of pre-1940 gold-backed German bonds. According to
Meddoff, his client told him to make the offer of a $5 million
contribution to the RNC to Senate Majority Leader Dole and
House Speaker Newt Gingrich in order to influence the U.S.
Government to ``take a hands-off position'' on the transaction
so that the deal could go through.53 Meddoff's
client ``felt that if both parties were cognizant of the fact
that there was a possibility of such large term donations made
to them, that the U.S. Government would take a hands-off
position and not involve itself one way or the other.''
54 By Meddoff's own account, his actions on behalf
of his client in this matter sought to influence public policy
in exchange for a promised contribution. During the hearing,
Senator Levin made the following observation about the
potential seriousness of Meddoff's overture to Dole:
So you now write the White House and Senator Dole
saying you have been notified that U.S. Government
employees are interfering with the transaction. You
believe that if that interference is removed, it would
facilitate that transaction, and you are offering both
of them $5 million from the proceeds of that
transaction. That comes very, very close, Mr. Meddoff,
to being the offer of a bribe.55
The contribution was never made, Meddoff claims, because the
German bond deal fell through.56
In February of 1996, Meddoff wrote a letter on his own
behalf to President Clinton with an exceedingly familiar
ring.57 Meddoff's letter related that he was
prepared to make a substantial contribution to President
Clinton and asked for a meeting with the president during his
upcoming visit to Washington with his family in
April.58 In his deposition, Meddoff testified that
he was involved at that time in a transaction to sell 493,000
``historical documents,'' i.e. the gold-backed
bonds.59 Meddoff anticipated closing on the contract
in mid-March, at which time he would realize over $350 million
in profit.60 Unsurprisingly, Meddoff testified that
this deal fell through and the proposed contribution, like the
other proposed contributions from his clients that were
supposed to be funded from such deals, was never
made.61 President Clinton never responded to the
February letter.62
Meddoff's claims to have represented two different clients
who each independently sought to use him to advance identical
promises of a $5 million political contribution from the
proceeds of a pending transaction involving gold-backed bonds
strains any reasonable notion of credibility.63 The
fact that Meddoff himself proposed a similar contribution,
contingent on the outcome of a wildly lucrative business deal,
raises additional doubts about the true purpose of these
proposed contributions and Meddoff's actual motives. The
proposed transactions based on the value of ``historical
documents'' also raise suspicion given that many experts
consider such ``deals'' to constitute nothing more than
``securities, mail and wire fraud.'' 64
Evidence also indicates that, according to Morgan, Meddoff
sent him a falsified memo in the summer of 1996 which was
designed to look as if it came from then-White House Chief of
Staff Leon Panetta.65 Reportedly written on what
looks like official White House stationery, the memo, dated
February 8, 1996, purports to advise Meddoff about how one of
his Weimar bond deals should be handled.66
These doubts are underscored by Meddoff's threats to a
Democratic fundraiser concerning his allegations about Ickes.
In November, about a week after Ickes allegedly asked him to
shred the memo, Meddoff related his story about the alleged
direction by Ickes to shred the faxed memorandum to a cousin
who worked for Newsweek. At the time, Meddoff claims he told
Newsweek that his information could be used for background
purposes, but he withheld permission to use his
name.67 In January 1997, Mitchell Berger, a Florida
Democratic fundraiser with ties to Vice President Gore,
solicited a $25,000 contribution related to the presidential
inauguration from Meddoff's employer, the Bukkehave company.
When Meddoff, accompanied by the Danish CEO of Bukkehave's
parent company, traveled to Washington to present the check,
Meddoff claims that Berger told him that, due to a policy
change in the administration, the contribution could not be
accepted since Bukkehave was a U.S. subsidiary of a foreign
corporation and Bukkehave's CEO was a foreign
national.68 According to Meddoff, Berger's rebuff
made him ``contemptuous of the disdain that individuals would
have for corporations or individuals that are prepared to make
donations of that type.'' 69 In response, Meddoff
threatened to go public with his allegations concerning Ickes.
``I had informed him that, as he well knew, since he had seen
the documents from Mr. Ickes, he was aware that I had provided
it to certain people within the media for research purposes;
that they had from other sources confirmed it and that they
were prepared to print it. I said to Mitchell, `You know this
is all going to come out,' and he says, `We don't care. Take
your best shot.' 70 Meddoff subsequently authorized
Newsweek to use his name and the story was published in
February.71 Meddoff's attempt to pressure Berger
into accepting a political contribution from his employer by
threatening to ``go public'' with his claims about Icke's
alleged direction to shred the memorandum reveal another
potential motivation for Meddoff to embellish the circumstances
of his conversations with Ickes and cast further doubt on his
credibility.
the dnc's refusal of the contribution offer
The same day that he sent the memorandum identifying tax-
exempt organizations to Meddoff, Ickes referred Meddoff's
possible contribution to the DNC. A DNC official then contacted
Meddoff. Meddoff informed the DNC that ``what Mr. Morgan was
looking for at that time was a letter designating the fact that
he was supporting the President and the President was thanking
him.'' 72 Meddoff did receive a letter from DNC
Chairman Donald Fowler, stating:
Please accept my deep appreciation for the
substantial financial support you have offered the
Democratic Party. Your support will help advance
President Clinton's agenda for the American people in
the 21st Century. We look forward to working with you
in the future. Best regards. Don Fowler.73
This letter was not what Morgan wanted, however, because ``the
letter did not specify that Mr. Morgan was making contributions
or the fact that it was done in support of the President.''
Morgan also ``wanted language to the effect that if there was
anything that could be done in the future, to please notify
them.'' 74 Since the letter did not contain what
Morgan was looking for, Meddoff edited the letter to include
the changes that Morgan was looking for and faxed it back to
Fowler.75 Meddoff called DNC Finance Director
Richard Sullivan three times on October 31 alone, to get the
letter he was seeking for Morgan.76 Sullivan never
returned Meddoff's phone calls.77
The DNC looked into Meddoff and Morgan and found, among
other things, that Meddoff had sued the government of Romania
and various Romanian government officials for
fraud.78 Meddoff later told Newsweek that the ``DNC
was being so careful and that they weren't circumventing
anywhere to get large donations. . . . They weren't
circumventing laws. They weren't cutting any corners. They were
being very careful in my case, the DNC, to do everything
properly and to make sure it was done properly.'' 79
Meddoff spoke to Fowler three to five times.80
In his deposition, Fowler testified that he told Meddoff that
unless they could find someone to validate the appropriateness
of the contribution, it would not be accepted, and he asked for
references. Meddoff replied, ``[Y]es, here are a few numbers
that you can call, but if they answer something about the CIA,
don't be surprised.'' 81 Fowler did not follow up
with Meddoff any further, and he told Sandler to tell Ickes
that the DNC was not going to take the money.82 When
Sandler told Ickes that the contribution was not going to be
pursued by the DNC, Ickes concurred with the
decision.83 Fowler and Sullivan cut off
communications with Meddoff on October 31.84 In May
of 1997, despite stories that had appeared in the press
concerning Meddoff's proposed campaign contributions,
Republican Majority Leader Trent Lott sent a letter to Meddoff
thanking him for his contribution of $2,500 to the Republican
Presidential Roundtable and soliciting additional
contributions.85
fundraising on federal property
The discussions between Ickes and Meddoff also raised the
issue of whether Ickes's phone calls to Meddoff from Air Force
One and the White House were illegal or improper instances of
fundraising on government property. While Ickes's brief
involvement with a potential contributor before passing
responsibility to DNC officials raised concerns, the
Committee's investigation showed that Ickes did not initially
solicit Meddoff for funds. When Meddoff spoke to Ickes for the
first time, he made it clear that there was ``absolutely no
doubt whatsoever'' that Morgan wanted to make a
contribution.86 Ickes's conversations with Meddoff
at this point merely concerned the timing and form of the
proposed contribution that Meddoff's associate was already
willing to make. Given these circumstances, it is difficult to
characterize Ickes's initial discussions with Meddoff as a
solicitation.
According to Meddoff, however, during one of their
subsequent discussions, Ickes asked Meddoff whether his
associate would be willing to make a non-tax-deductible
donation to the DNC. After Meddoff informed Ickes that this
would be possible, Ickes sent information to Meddoff concerning
the DNC's bank account and suggested a contribution amount of
$500,000. While some allege that Ickes solicited a contribution
to the DNC, as discussed in other sections of this report,
there is considerable doubt as to whether a telephone call from
federal property to someone not on federal property concerning
soft money contributions constitutes an illegal solicitation
within the meaning of the Pendleton Act.
An additional threshold issue is whether the phone line
that was used by Ickes was a DNC line or a government line. The
administration took great pains to provide separate lines of
communication on Air Force One, paid for by the DNC, for
communications related to the campaign. WHCA Commander Simmons
testified in his deposition about a separate communication
system, called INMARSAT, that was installed on Air Force One in
the late summer or early fall of the 1996
campaign.87 One of the advantages of the INMARSAT
system was that it was capable of generating detailed billing
records to separate political calls from official
calls.88 Simmons testified that these efforts to
separate political and officials costs were unprecedented.
``[T]his administration has gone through more pain than anyone,
and I give a historical reference because I have people who
have been here through several administrations. It's never been
done, where they tried to break down and draw a demarcation
line and say this is political and this is offical.''
89 The Committee's investigation was unable to
conclusively establish which lines were utilized by Ickes in
his communications with Meddoff.
conclusion
While the Minority agrees with Ickes's statement that the
``better part of discretion'' would have been for him to have
promptly passed the Meddoff matter to the DNC, the Committee
found no evidence of illegal coordination between the DNC and
the non-profit groups to which Ickes referred Meddoff. The only
remaining issue of importance is the truth of Meddoff's
allegation that Ickes directed him to ``shred'' the memo
listing the tax-exempt groups. Significantly, Ickes's notes
upon which the fax were based that Ickes had maintained in his
files and a copy of the fax itself that was provided to Ickes
by a news organization, were voluntarily produced to the
Committee by Ickes without the necessity of a subpoena. It is
difficult to reconcile Ickes's cooperativeness with the
Committee and his candid acknowledgement about drafting and
sending the fax with Meddoff's claim. Most importantly, the
evidence before the Committee raises grave doubts about
Meddoff's credibility given the mysterious nature of his
business dealings and associates, his apparent personal agenda
in appearing before the Committee, and his apparent attempt at
bribery in connection with a previous proposed contribution.
Finally, the DNC, for its part, acted appropriately when it
checked Meddoff's and Morgan's backgrounds and, rejected
Meddoff's offer.
footnotes
\1\ R. Warren Meddoff deposition, 8/19/97, pp. 8-10.
\2\ R. Warren Meddoff deposition, 8/19/97, p. 15.
\3\ R. Warren Meddoff deposition, 8/19/97, pp. 15-16.
\4\ R. Warren Meddoff deposition, 8/19/97, p. 7.
\5\ R. Warren Meddoff deposition, 8/19/97, p. 7.
\6\ R. Warren Meddoff deposition, 8/19/97, p. 6.
\7\ R. Warren Meddoff deposition, 8/19/97, p. 11.
\8\ R. Warren Meddoff deposition, 8/19/97, p. 11.
\9\ R. Warren Meddoff deposition, 8/19/97, p. 11.
\10\ R. Warren Meddoff deposition, 8/19/97, p. 12.
\11\ Exhibit 2014M: Article regarding Harold Ickes which details
Ickes' communications with Meddoff, Vanity Fair, 9/97; R. Warren
Meddoff, 9/19/97 Hrg., p. 29.
\12\ R. Warren Meddoff, 9/19/97 Hrg., p. 27; R. Warren Meddoff
deposition, 8/18/97, p. 13.
\13\ R. Warren Meddoff, 9/19/97 Hrg., pp. 117, 119, 126. Senator
Glenn likened this to the movie, ``The Sting'' (a popular early 1970s
film about an elaborate con game). Senator Glenn, 9/19/97 Hrg., pp.
119, 126.
\14\ R. Warren Meddoff, 9/19/97 Hrg., pp. 71-72, 118.
\15\ R. Warren Meddoff deposition, 8/19/97, p. 23.
\16\ R. Warren Meddoff deposition, 8/19/97, p. 23.
\17\ R. Warren Meddoff deposition, 8/19/97, p. 28.
\18\ Dallas Morning News, 2/4/97.
\19\ R. Warren Meddoff deposition, 8/19/97, p. 28.
\20\ R. Warren Meddoff deposition, 8/19/97, p. 9.
\21\ R. Warren Meddoff, 9/19/97 Hrg., pp. 7-8. There is a videotape
of this fundraiser, but Meddoff does not appear on the tape, despite a
few erroneous press accounts that state that the tape shows President
Clinton ``being handed a business card by R. Warren Meddoff.'' See,
e.g., New York Times, 10/15/97.
\22\ R. Warren Meddoff, 9/19/97 Hrg., pp. 41-42; R. Warren Meddoff
deposition, 8/18/97, pp. 30, 129.
\23\ R. Warren Meddoff deposition, 8/18/97, p. 129-30.
\24\ Exhibit 2016M: Newspaper article regarding U.S. aid flights to
Cuba, Reuters North American Wire, 10/22/96; see also R. Warren
Meddoff, 9/19/97 Hrg., p. 41.
\25\ R. Warren Meddoff, 9/19/97 Hrg., p. 41.
\26\ R. Warren Meddoff deposition, 8/19/97, p. 133.
\27\ R. Warren Meddoff, 9/19/97 Hrg., pp. 8-11.
\28\ R. Warren Meddoff, 9/19/97 Hrg., p. 38; R. Warren Meddoff
deposition, 8/18/97, p. 53.
\29\ R. Warren Meddoff deposition, 8/19/97, pp. 44-45.
\30\ R. Warren Meddoff, 9/19/97 Hrg., pp. 9-11; R. Warren Meddoff
deposition, 8/18/97, p. 53.
\31\ R. Warren Meddoff deposition, 8/19/97, pp. 127-128.
\32\ R. Warren Meddoff deposition, 8/19/97, p. 38.
\33\ R. Warren Meddoff deposition, 8/19/97, pp. 50, 161.
\34\ R. Warren Meddoff deposition, 8/19/97, pp. 50, 161.
\35\ R. Warren Meddoff deposition, 8/19/97, p. 41.
\36\ R. Warren Meddoff deposition, 8/19/97, p. 41.
\37\ R. Warren Meddoff deposition, 8/19/97, pp. 41, 135-136.
\38\ R. Warren Meddoff deposition, 8/19/97, p. 50.
\39\ Harold Ickes deposition, 6/27/97, pp. 40-42.
\40\ Harold Ickes deposition, 6/27/97, p. 40.
\41\ Exhibit 929: Fax from R. Warren Meddoff to Harold Ickes, 10/
31/96; Harold Ickes deposition, 6/27/97, p. 46.
\42\ R. Warren Meddoff, 9/19/97 Hrg., p. 152.
\43\ Harold Ickes deposition, 6/27/97, pp. 57-58.
\44\ R. Warren Meddoff, 9/19/97 Hrg., pp. 16-17.
\45\ R. Warren Meddoff, 9/19/97 Hrg., pp. 16-17.
\46\ Harold Ickes deposition, 6/27/97, pp. 42-43.
\47\ Harold Ickes, 10/8/97 Hrg., pp. 132-33; see also pp. 142-43.
Ickes also testified at the hearings on October 8, 1997 that Meddoff
told him that he thought Ickes was being a scapegoat: ``Mr. Meddoff,
shortly before he testified, called my attorney, Mr. Bennett, and
explained to him that he thought that Harold Ickes was being a
scapegoat and he was getting a raw deal and on and on and on.'' Harold
Ickes, 10/8/97 Hrg., p. 101.
\48\ Also supporting his contention, Ickes produced to the
Committee a copy of the memorandum that he had in his files. Exhibit
929: Fax from R. Warren Meddoff to Harold Ickes, 10/31/96.
\49\ R. Warren Meddoff, 9/19/97 Hrg., pp. 25-27; R. Warren Meddoff
deposition, 8/18/97, p. 6. The Associated Press obtained a copy of this
deposition prior to Meddoff testifying at the hearing. See, e.g.,
Capital Times, 9/19/97.
\50\ Senator Torricelli, 9/19/97 Hrg., p. 75.
\51\ Exhibit 2066M: E-mail from R. Warren Meddoff to Christian
Haar, 9/10/97.
\52\ Exhibit 2010M. The letter reads:
Dear Senator Dole:
This firm is currently representing an American
entity in a transaction with and for the Republic of
Bulgaria. Upon completion of this transaction we and
our client are committing to the donation of
$5,000,000 to help the Republican Party during the
1996 Presidential election.
The transaction we are involved in deals with
the exchange of Pre-1940 Gold Backed German
Government External Loan Documents for the
forgiveness of Sovereign debt and hard currency.
Upon completion at its fullest extent this
transaction could provide the Republic of Bulgaria
with a credit against debt of $700,000,000 and hard
currency in excess of $2,000,000,000. According to
the stated policy of the U.S. Government this, would
solidify market reforms and lead to enhanced U.S.
security interests in the region.
You have been previously notified of individual
government employees interfering in this
transaction, contrary to policy. We thank you for
the courtesy exhibited to the Bulgarian delegation
during the President's visit of last week. We
appreciate your attention to this matter and keep
your informed as to our progress.
Sincerely yours,
R. Warren Meddoff, P.A.
\53\ R. Warren Meddoff, 9/19/97 Hrg., pp. 35-36; R. Warren Meddoff
deposition, 8/18/97, p. 144-146.
\54\ R. Warren Meddoff, 9/19/97 Hrg., pp. 35-36; R. Warren Meddoff
deposition, 8/18/97, p. 144-146.
\55\ Senator Levin, 9/19/97 Hrg., p. 93.
\56\ R. Warren Meddoff, 9/19/97 Hrg., p. 35.
\57\ Exhibit 2005M. The letter reads:
Dear Mr. President:
This letter is to advise you that I am
considering a large donation to the Democratic
National Committee to assist you in the forth coming
[sic] Presidential election this fall. Please have
your staff contact my offices to coordinate
presentation of this donation to you in person
during my families [sic] Washington visit scheduled
between April 3 and the 12th.
You have made great strides and accomplished
under very difficult circumstances, particularly in
the area of foreign affairs. I strongly support your
efforts in spite of having been a life time
supporter of the Republican Party. During my last
visit to the White House, I had the pleasure and
honor of observing your representation of our nation
during the State visit of President Yeltsin.
I look forward to your response and wish you
success in your future endeavors as President. Thank
you for your kind consideration of this matter.
Sincerely yours,
R. Warren Meddoff
\58\ R. Warren Meddoff deposition, 8/19/97, pp. 16-17.
\59\ R. Warren Meddoff deposition, 8/19/97, p. 17.
\60\ R. Warren Meddoff deposition, 8/19/97, p. 17.
\61\ R. Warren Meddoff deposition, 8/19/97, p. 18.
\62\ R. Warren Meddoff, 9/19/97 Hrg., pp. 38-39.
\63\ R. Warren Meddoff, 9/19/97 Hrg., pp. 67, 87-93.
\64\ Dallas Observer, 1/1-7/98.
\65\ Dallas Observer, 1/1-7/98.
\66\ Dallas Observer, 1/1-7/98.
\67\ R. Warren Meddoff, 9/19/97 Hrg., pp. 80, 86.
\68\ R. Warren Meddoff, 9/19/97 Hrg., p. 23; see also R. Warren
Meddoff deposition, 8/18/97, p. 81.
\69\ R. Warren Meddoff deposition, 8/19/97, p. 154.
\70\ R. Warren Meddoff, 9/19/97 Hrg., p. 24.
\71\ R. Warren Meddoff, 9/19/97 Hrg., p. 86; see Newsweek, 2/10/97.
\72\ R. Warren Meddoff deposition, 8/18/97, p. 56; R. Warren
Meddoff, 9/19/97 Hrg., pp. 14-15, 99, 101.
\73\ Exhibit 931: fax from Don Fowler to Warren Meddoff, 10/31/96;
Exhibit 2008M: fax from Don Fowler to Warren Meddoff, 10/31/96.
\74\ R. Warren Meddoff, 9/19/97 Hrg., pp. 15, 101.
\75\ R. Warren Meddoff, 9/19/97 Hrg., pp. 46-47; R. Warren Meddoff
deposition, 8/18/97, p. 60.
\76\ R. Warren Meddoff, 9/19/97 Hrg., pp. 49-50. Exhibit 2007M:
Richard Sullivan's 10/31/96 call sheet, which states:
Warren Metalf (sic) 12:20 p.m. Received letter.
Did not spell his name right. Also, letter did not
fulfill his requests.
Warren Meddoff. 3:30 p.m. Wants to know about
revised letter he should be receiving.
Warren Meddoff 4:35 p.m. Tomorrow morning needs
to speak with you right away. Still needs that
letter.
The next day, November 1st, Meddoff called Mr. Sullivan yet again
and left a message stating: ``Plz call re: people who has (sic) a
request for POTUS.'' Exhibit 2009M: Richard Sullivan call sheet with
memorandum of call from Warren Meddoff, 11/1/96; R. Warren Meddoff, 9/
19/97 Hrg., pp. 50-51.
\77\ R. Warren Meddoff, 9/19/97 Hrg., p. 51.
\78\ Exhibit 933: fax from Eric Berman/Dan Fee/Rick Hess to Harold
Ickes/Jessica Fitzgerald regarding Meddoff, Morgan, Valduz and
Bukkehave, 11/25/96.
\79\ R. Warren Meddoff, 9/19/97 Hrg., p. 102.
\80\ R. Warren Meddoff deposition, 8/18/97, p. 56.
\81\ Donald L. Fowler deposition, 5/21/97, pp. 332-33; see R.
Warren Meddoff, 9/19/97 Hrg., p. 48. Meddoff did not have a specific
recollection of telling Fowler not to be deterred if someone mentioned
the CIA, but he said that he might have mentioned the CIA and suggested
to Fowler that a reference might have raised his contact with the CIA,
because he has had contact with that agency. R. Warren Meddoff, 9/19/97
Hrg., pp. 112-13.
\82\ Donald L. Fowler deposition, 5/21/97, p. 333; see R. Warren
Meddoff, 9/19/97 Hrg., p. 48.
\83\ Donald L. Fowler deposition, 5/21/97, p. 335; see R. Warren
Meddoff, 9/19/97 Hrg., p. 48.
\84\ R. Warren Meddoff deposition, 8/18/97, p. 70.
\85\ Exhibit 2065M: Letter from Majority Leader Trent Lott to R.
Warren Meddoff thanking him for his $2,500 contribution to the
Republican Presidential Roundtable, 5/15/97.
\86\ R. Warren Meddoff, 9/19/97 Hrg., p. 44; R. Warren Meddoff
deposition, 8/18/97, p. 133.
\87\ Col. Joseph J. Simmons IV deposition, 10/16/97, p. 134.
\88\ Col. Joseph J. Simmons IV deposition, 10/16/97, p. 134.
\89\ Col. Joseph J. Simmons IV deposition, 10/16/97, pp. 134-135.
PART 2 INDEPENDENT GROUPS
Chapter 18: Teamsters
During the reelection campaign of International Brotherhood
of Teamsters President Ron Carey, consultants to the campaign,
including Carey's campaign manager and Martin Davis, launched a
contribution-swapping scheme to help raise money for the Carey
campaign. As these consultants have acknowledged in court
proceedings, they illegally asked a number of groups to donate
money to Carey's campaign in exchange for donations to those
groups from the Teamsters. As a small part of this scheme,
Davis sought the help of DNC officials in locating wealthy
individuals willing to give money to Carey's campaign and
promised greater Teamsters donations to the Democratic state
parties in return. Evidence gathered by the Committee suggests
that DNC officials took little action in response to this
request, but that they did make an ultimately unsuccessful
effort at directing to the Carey campaign the donation of an
individual who sought to donate to the DNC, but whose foreign
citizenship made her ineligible to make that donation.
Findings
(1) The evidence before the Committee indicates that the
DNC's efforts at finding a donor for the Carey campaign were
limited to exploring the legality of a possible donation from
one individual to the Carey campaign, but that donation did not
ultimately occur because the potential donor was not eligible,
under labor laws and Teamsters'' rules, to contribute to the
Carey campaign.
(2) Nevertheless, Martin Davis's comments to DNC officials
should have led them to suspect that Davis was improperly
seeking to influence the use of Teamsters funds to benefit the
Carey campaign. DNC officials should have immediately refused
to take any action in response to Davis's request.
Teamster Contributions
Martin Davis, a consultant for the reelection campaign of
Teamster's president Ron Carey, pleaded guilty to participating
in an illegal scheme to funnel money from the Teamsters union
treasury to the Carey campaign. In his plea agreement, Davis
stated, under oath, that he told ``individuals, including a
former official of the Clinton Campaign '96 Re-election
Committee and the Democratic National Committee, that I wanted
to help the DNC with the fundraising from labor groups,
including the Teamsters'' and that he ``wanted to help raise
more money from the Teamsters than they originally
anticipated.'' 1 Jere Nash, who was running Carey's
campaign and who also pleaded guilty to participating in the
illegal scheme, stated under oath that Davis told him that he
had spoken to ``a representative of the Clinton-Gore campaign''
and had told this representative that he (Davis) would help
raise large amounts of money from the Teamsters ``in exchange
for'' the DNC finding donors for the Carey
campaign.2
---------------------------------------------------------------------------
Footnotes appear at end of chapter 18.
---------------------------------------------------------------------------
Martin Davis's initial contacts with DNC officials
Martin Davis was the part-owner and president of a company
called the November Group, which provided direct mail services
for organizations and political candidates. He was also a
consultant for Ron Carey's campaign to be re-elected president
of the International Brotherhood of Teamsters. In May or June
of 1996, Davis contacted Terry McAuliffe, Clinton campaign
finance chairman. At the time, McAuliffe was helping to raise
money for the Clinton campaign and the DNC, and he maintained
an office at Clinton campaign headquarters.3
McAuliffe had known Davis since approximately 1984.4
Davis told McAuliffe that he wanted to help raise a half-
million dollars from labor unions for the DNC.5
McAuliffe does not recall Davis specifically asking for
assistance in raising money for the Carey campaign,6
but conceded that Davis might have said something in the nature
of, ``Terry, I'd love it if you could help me. I am running Ron
Carey's campaign.'' 7 However, McAuliffe also
testified that he saw no connection between Davis's offer to
raise money for the DNC from labor and his suggestion that
McAuliffe's help in raising money for the Carey campaign would
be welcome.8 McAuliffe said he thanked Davis for his
willingness to assist in raising funds from organized labor and
referred him to Laura Hartigan, who was serving as the Clinton
campaign finance director. McAuliffe explained to Davis that
Hartigan could put him in touch with the appropriate people at
the DNC.9 McAuliffe then brought Davis into
Hartigan's office,10 where Davis told Hartigan that
he wanted to be the ``point person'' to coordinate raising
labor funds for the DNC.11 McAuliffe testified that
he never spoke with Davis again concerning this subject
12 and did not pursue it further.13
In response to this contact, Hartigan told Davis that she
would speak to someone at the DNC.14 Shortly after
that meeting, Hartigan called DNC Finance Director Richard
Sullivan to tell him that Davis would be calling regarding his
desire to raise labor money for the DNC.15 Hartigan
did not ask Sullivan to do anything other than talk to
Davis.16
Davis then contacted Sullivan directly and indicated that
he was working to raise money from the Teamsters and asked
whether the DNC could be helpful in raising money for the Carey
campaign.17 Sullivan took no immediate action to
pursue this request.18 In fact, Sullivan testified
that he was indifferent to Davis's request, in part because he
was confident that labor would support the DNC regardless of
whether the party found a donor for the Carey campaign:
I had no doubt whatsoever that the IBT would support
the DNC. It had done so in the past, on the merits of
labor issues, and there was no reason whatsoever to
believe that would change in 1996. In that sense, Davis
wasn't offering much. The IBT was already a DNC
supporter. Others were already actively working to
raise money from it. Thus, we didn't need Davis to
devise ways to entice the IBT as an ally.19
There is no evidence that anyone suggested to Sullivan that
Davis's help in raising money for the DNC from the Teamsters
was conditioned upon or was a quid pro quo for the DNC's
assistance in raising money for Carey.20 Indeed, it
was Sullivan's impression that Davis wanted to help the DNC
regardless of whether the DNC was helpful in finding support
for the Carey campaign.21 Similarly, it was never
Hartigan's understanding that Davis was suggesting some sort of
quid pro quo or a nexus between raising money for Carey and
raising funds for the DNC.22 Rather, it was her
feeling that labor was going to donate to the DNC anyway, and
Davis was not needed to get money from the labor
unions.23
Judith Vasquez's contribution to Vote Now '96
On June 9, 1996, a DNC fundraising event was held at the
home of investment banker Richard Blum in Northern
California.24 In late June or early July 1996, Mark
Thomann became the California DNC director and one of his first
responsibilities was to collect the outstanding contribution
commitments from the Blum event.25 One of the
pledges that had not been collected was a $100,000 commitment
by Judith Vazquez, the chairman and CEO of Duvaz Pacific, a
Philippine company, to Vote '96, a tax-exempt get-out-the-vote
organization.26
When Sullivan asked Thomann about the commitments, Thomann
told him that a Philippine woman (i.e., Vazquez) was interested
in contributing, but that Thomann and attorneys for Vasquez had
determined that, as a foreign national, she was prohibited from
contributing to the DNC.27 The hosts of the
fundraiser had not known until shortly before the event that
Vazquez was not a U.S. resident and therefore not able to
contribute to the DNC.28 Because she had traveled
all the way from the Philippines, she was allowed to attend the
fundraiser without making a contribution.29 Through
her counsel, Vasquez inquired about the legality of making an
``in-kind'' contribution to the DNC by underwriting a future
fundraiser. Thomann researched this possibility by consulting
the DNC's general counsel's office and the FEC, both of whom
advised him that even in-kind contributions from foreign
nationals were prohibited.30
Several days later, knowing that Thomann was continuing to
consult with attorneys for Vazquez to see ``what other support
she might offer,'' Sullivan said he had asked Thomann if
Vazquez would consider making a contribution to the Carey
campaign, if such a contribution was appropriate.31
Sullivan said he did not direct Thomann to solicit the
contribution, but rather asked him to determine whether such a
contribution would be legal.32 Sullivan explained to
Thomann that any contribution to the Carey campaign had to be
from an individual, and that the individual could not be an
employer.33
According to Thomann, Sullivan asked if the contribution
for Vote '96 had been sent, and when he responded that it had
not, Sullivan told him that there was ``a change in direction''
for the contribution.34 Thomann testified that
Sullivan did not tell him why Vazquez was to be asked to
contribute to the Carey campaign.35 Sullivan
testified that he does not recall whether he ever told Davis he
thought he could get Vazquez or another individual to
contribute to the Carey campaign, but acknowledges that he may
have told Davis that he was having a conversation with
Thomann.36
A few days after the call from Sullivan, Thomann was
contacted by Nathaniel Charney, an attorney for the Teamsters,
regarding the possible contribution from Vazquez.37
Thomann felt that Charney was pressuring him to secure this
contribution immediately, which made him
uncomfortable.38 It was ultimately determined that
because Vazquez was an employer, she could not contribute to
the Carey campaign.39 At that point, Thomann told
Charney that Vazquez could not make a contribution and that he
was ``recusing'' himself from the process.40
According to Thomann, Charney was disappointed and continued to
pressure him.41
Thomann also informed Sullivan of his conclusion that
Vazquez could not contribute, because she had employees, and
that he was stepping out of the process.42 According
to Thomann, Sullivan exerted ``absolutely no pressure'' on him
to come up with the contribution.43 Thomann
testified that Sullivan did not ask him to find another donor,
or to find another way to get a contribution to the Carey
campaign.44 Thomann also testified that Sullivan
never raised the issue with Thomann again.45
Sullivan testified that he subsequently told Davis that the DNC
was not going to be able to refer a contributor to the Carey
campaign.46 Vazquez ultimately donated $100,000 to
Vote '96.47
Teamsters' contributions
In early June, Hartigan was asked by Davis for information
on how the Teamsters could make contributions to certain
Democratic state parties. Hartigan obtained information from
the DNC about contributions that could be legally made and
forwarded that information to Davis in a memorandum dated June
12, 1996.48 Davis forwarded the memorandum to
Teamsters headquarters.49 A June 21 memorandum from
Bill Hamilton, the Teamsters'' director of government affairs,
to Greg Mullenholz, the individual responsible for processing
contribution requests made to the Teamsters, asked Mullenholz
to have contribution checks issued to certain state Democratic
parties.50 The parties listed correspond to the
parties listed in the June 12 Hartigan memorandum.
That same month, the Teamsters gave $236,000 to state
Democratic parties. A DNC record of Directed-Donor Checks
Received to-Date lists several contributions received on June
26, 1996 credited to McAuliffe: a $25,000 contribution from the
Teamsters to the Illinois Democratic Party, a $25,000
contribution from the Teamsters to the California Democratic
Party, and $5,000 from the Teamsters DRIVE Political Fund to
the states listed on the two memoranda.51 Mullenholz
testified that these contributions were made in response to the
Hartigan memorandum.52
During this same period of time, Davis continued in his
unsuccessful efforts to get Sullivan to locate a contributor to
Carey's re-election campaign. Overall, Davis placed roughly 30
calls to Sullivan concerning finding a donor for TCFU, but
Sullivan spoke to Davis on only approximately two or three
occasions.53 In July or August, Sullivan and Davis
had a conversation, during which Davis again said he hoped he
could be helpful in raising labor money for the DNC and that
the DNC would find a contributor for the Carey
campaign.54
Sullivan testified that he told Davis that it was unlikely
that he would be able to find someone to contribute to
Carey.55 He gave Davis two tickets to Clinton's
birthday party at Radio City Music Hall on August 19 as a
``consolation.'' 56 Sullivan testified that he was
unaware of anyone else from the DNC soliciting anyone else for
a contribution to the Carey campaign.57
Sullivan also testified that he discussed Davis's request
with others at the DNC, but he did not ask them to take any
action.58 According to Sullivan, Marvin Rosen, the
DNC's finance chairman, discouraged the plan but told him to
see whether the White House had heard anything about
it.59 Sullivan testified that he did not contact the
White House,60 and there is no evidence that anyone
at the White House was contacted by Sullivan or by anyone else
regarding this issue.
In August, in response to several telephone calls from
Davis seeking a list of state parties to which the Teamsters
could contribute, Hartigan asked Sullivan to compile such a
list.61 The DNC provided the information to Hartigan
and on August 10, she forwarded to Davis a memorandum under
Sullivan's name listing the state parties and seeking
approximately $1 million in contributions.62 Davis
sent the memo to Bill Hamilton, the political director for the
Teamsters, with a cover memo stating that he would let Hamilton
know when the DNC had ``fulfilled their
commitment.''63 Hartigan testified, however, that
she was not aware of any commitments the DNC made to the
Teamsters or Ron Carey.64 In September and October,
the Teamsters contributed to state parties and some of the
contributions correlated with the requests made in the
memorandum.
Sullivan's role
Some members of the Committee suggested that Sullivan may
have perjured himself in his September 5, 1997 deposition when
he disavowed any knowledge of a person named Judith
Vazquez.65 They point to Sullivan's notes, which
contain the name Judith Vazquez,66 and Mark
Thomann's deposition testimony that it was his understanding
from his conversations with Sullivan that Sullivan knew who
Vazquez was.
At the hearing, Sullivan did not dispute Thomann's
testimony regarding Vazquez, but explained that, at his
deposition, he had not recalled that name or remembered who she
was.67 ``I don't deny that I knew about Judith
Vazquez at the time I talked to Mark Thomann. A year-and-a-half
later, I didn't remember who she was.'' 68 At his
deposition, despite not having recognized Vazquez's name,
Sullivan was forthcoming about all of the relevant
circumstances surrounding the transaction being examined by the
Committee, including the fact that he had had a conversation
with Thomann about a potential donor to Carey's
campaign,69 that Thomann was working with this
potential donor's lawyers to determine the legality of the
proposed contributions,70 and that the potential
donor was a female with interests in the
Philippines.71 At the hearing, refreshed with his
notes and other testimony, Sullivan remembered that the donor's
name was Vazquez.72 When Sullivan's deposition and
hearing testimony is viewed in its entirety, given his
testimony on the underlying facts of what happened, Sullivan's
failure to recall the specific name of the donor does not
appear to have been an attempt to mislead the Committee. This
is reinforced by Sullivan's testimony where he recounted the
events surrounding this donor.
Some members of the Committee also questioned whether
Richard Sullivan may have perjured himself in his September 5,
1997 deposition when he testified that he did not do anything
specific to raise money for Ron Carey and did not ask anyone to
try to raise money for Carey.73 It was suggested
that this testimony was an attempt to mislead the Committee and
was contradicted by Thomann's deposition and hearing testimony
detailing his conversations with Sullivan.74
However, a complete reading of Sullivan's deposition sheds
doubt on these allegations.75 Sullivan testified
about specific conversations with Thomann, but simply disagreed
with his questioners at both the deposition and in the hearing
that his request of Thomann to look into the legality of
Vazquez's potential contribution to the Carey campaign was, in
fact, an attempt to raise money for Carey. Sullivan testified
that Thomann ``responded back that [Vasquez's contribution
would not be] legal, and I said fine. So I did not ask Mark to
ask her to contribute.'' 76 For his part, Thomann
agreed with this characterization, testifying at the hearing
that he had no knowledge of ``any DNC official ever
solicit[ing] a contribution that was made to the Ron Carey
Presidential campaign or the Teamsters for a Corruption-Free
Union.'' 77 Again, in light of the fact that
Sullivan voluntarily provided the details of his involvement in
the proposed Vazquez contribution, the questioned statements do
not appear to have been an attempt to mislead the Committee.
Proposed contribution to unity '96
In October 1996--several months after the possible Vazquez
contribution to the Teamsters was determined to be
inappropriate--Martin Davis and Terry McAuliffe discussed the
possibility of locating an individual willing to donate
$100,000 to the Carey campaign in exchange for a $500,000
contribution by the Teamsters to Unity '96,78 a
joint fundraising effort by the DNC, DSCC, and DCCC to raise
money for the 1996 elections.79 McAuliffe was one of
the persons behind the creation of Unity '96 and raised funds
for it, but played no role in the actual administration of the
project.80 Each Unity '96 official who was
subsequently informed about Davis's request to secure a
contributor for the Carey campaign in order to facilitate a
contribution to Unity '96 rejected the suggestion out of hand
and did not pursue the possibility.
DCCC executive director rejected the proposal
McAuliffe discussed the possibility of locating a
contributor for Carey's campaign with Matt Angle, the executive
director of the Democratic Congressional Campaign Committee
(``DCCC'').81 Angle is also involved in the
fundraising efforts of the DCCC.82 Around October,
Angle initiated a discussion with McAuliffe concerning
fundraising. In the course of the conversation, McAuliffe asked
if they knew anyone who could or would write a check to Carey.
He said that if Unity '96 could get someone to donate to the
Carey campaign, donations might come from the Teamsters to
Unity '96. Specific amounts were not discussed, nor was it
suggested that a smaller donation to the Carey campaign might
result in a larger Teamsters donation to Unity
'96.83
Angle testified that he was dismissive of the idea and told
McAuliffe that he would not take the idea to the chairman of
the DCCC, Rep. Martin Frost (D-Tex.).84 Angle
testified in his deposition that the idea did not make sense
for two reasons. First, the DCCC had made it a practice not to
get involved in internal union politics.85 Second,
it was convoluted, in that the DCCC wanted to find donors for
Unity '96, not some other entity.86 He knew it was
not something that Frost would be interested in.87
He did not consider the idea seriously enough to begin to think
about whether it would be legal or not.88 McAuliffe
accepted Angle's response and told him to let him know if he
heard anything.89 McAuliffe did not bring the
subject up with Angle again.90
DCCC chairman rejected the proposal
Angle mentioned the conversation with McAuliffe to Frost
that same day and told him that the DCCC was not interested in
the idea. Angle said that Frost was also dismissive of the
idea, for reasons Angle believed were similar to his own. In
fact, Frost wanted to be sure that Angle had made it clear that
the DCCC was not interested in the idea.91 Frost did
not ask how much money was involved. Angle is not aware of
Frost making telephone calls to any contributors or to anyone
at the Teamsters concerning the idea.92
DSCC deputy executive director rejected the proposal
McAuliffe also brought up the idea in October at a Unity
'96 meeting attended by Rita Lewis, the deputy executive
director of the DSCC and a director of Unity '96.93
McAuliffe said that if Unity '96 were able to find money for
Carey's campaign, the Teamsters would be more likely to give to
Unity '96. It was not Lewis's understanding that a contribution
by the Teamsters to Unity '96 was conditional upon efforts to
find a donor for Carey's campaign, but, rather, that Unity '96
would be more likely to receive a contribution if Carey were
helped.94 She characterized it as more of a
statement of fact than a proposal.95 McAuliffe did
not indicate the genesis of this idea.96 Lewis does
not recall McAuliffe mentioning the amount of the contribution
that Unity '96 might receive from the Teamsters.97
Lewis dismissed the idea as something Unity '96 could not
do because of political disagreements the DSCC was having with
the Teamsters.98 She does not recall anyone else
reacting to McAuliffe's comment,99 nor does she
recall anyone being given an assignment in relation to the
comments made by McAuliffe. She never discussed implementing
the plan with anyone.100 Lewis, who regularly
attended Unity '96 meetings, remembers this subject coming up
only that once.101 Because they did not pursue the
idea, they did not assess the legality of it.102
DSCC chairman rejected the proposal
In mid-October, Lewis and Senator Bob Kerrey of Nebraska,
who is the chairman of the DSCC, were discussing the Teamsters
campaign contributions and an upcoming vote relating to the
Federal Express labor dispute, and Lewis brought up the idea
that McAuliffe had mentioned.103 According to Lewis,
Senator Kerrey dismissed the idea at that meeting because he
believed the Teamsters faced more critical
issues.104
Senator Kerrey called Bernard Rapoport, a major Democratic
contributor who is one of his close friends and
advisors,105 and according to Rapoport, said, ``I
want your opinion on something.'' 106 Rapoport
testified that Kerry then explained how the DNC 107
would benefit from raising funds for the Carey campaign and
asked Rapoport what he thought.108 Rapoport said,
``It's a bad idea.'' 109 According to Rapoport, both
he 110 and Senator Kerrey said they did not like the
idea, and that was the end of the conversation.111
Rapoport testified that their discussion of this topic lasted
no more than a minute-and-a-half to two minutes.112
That was the only conversation Rapoport had with Senator Kerrey
concerning Carey's campaign.113 There is no evidence
that the Senator made any efforts to find a contributor for
Carey's campaign.114
The Proposal and Unity '96
Ultimately, the Teamsters did not contribute to Unity
'96.115 Other unions and union PACs did contribute
to the effort.116 Hamilton, the Teamsters' political
director, had decided against donating to Unity '96 because of
the recent votes of Democratic senators on labor
issues.117 An October 23, 1996 memorandum from
Hamilton to Carey states that Hamilton has ``stopped all
contributions to the Democratic Senate Campaign Committee
because of the disappointing performance of Senate Democratic
leaders, especially Democratic Leader Tom Daschle, on the Fed
Ex vote two weeks ago just before they adjourned.''
118
conclusion
During the last election cycle, DNC officials discussed
attempting to find a contributor to the Carey campaign, and
undertook a few limited efforts in that regard. There was no
evidence presented to the Committee, however, that a
contribution swap ever occurred. Although Davis has suggested
that his proposal to raise money for the DNC was a quid pro
quo, all of the Democratic Party officials involved deny any
contribution swap and the evidence indicates that no swap
occurred. The Teamsters made initial contributions to State
Democratic Parties, but stopped after anti-labor votes by
Senate Democrats.
footnotes
\1\ United States v. Martin Davis and Michael Ansara , 9/18/97, pp.
25-26.
\2\ United States v. Jere Nash , 9/18/97, p. 23.
\3\ Terrence R. McAuliffe deposition, 9/18/97, pp. 7-11.
\4\ Terrence R. McAuliffe deposition, 9/18/97, p. 51.
\5\ Terrence R. McAuliffe deposition, 9/18/97, pp. 59, 63.
\6\ Terrence R. McAuliffe deposition, 9/18/97, p. 62.
\7\ Terrence R. McAuliffe deposition, 9/18/97, p. 62.
\8\ Terrence R. McAuliffe deposition, 9/18/97, p. 81.
\9\ Terrence R. McAuliffe deposition, 9/18/97, p. 59.
\10\ Laura Hartigan deposition, 9/16/97, pp. 11-12.
\11\ Laura Hartigan deposition, 9/16/97, p. 13.
\12\ Terrence R. McAuliffe deposition, 9/18/97, p. 60.
\13\ Terrence R. McAuliffe deposition, 9/18/97, pp. 88-89.
\14\ Laura Hartigan deposition, 9/16/97, p. 13.
\15\ Statement of Richard Sullivan, 10/9/97, p. 3; Laura Hartigan
deposition, 9/16/97, p. 13.
\16\ Laura Hartigan deposition, 9/16/97, p. 13.
\17\ Statement of Richard Sullivan, 10/9/97, p. 4.
\18\ Statement of Richard Sullivan, 10/9/97, p. 5.
\19\ Richard Sullivan, 10/9/97 Hrg., p. 91.
\20\ Richard Sullivan, 10/9/97 Hrg., pp. 90-91.
\21\ Statement of Richard Sullivan, 10/9/97, p. 4; see also Richard
Sullivan, 10/9/97 Hrg., pp 144, 178-81.
\22\ Laura Hartigan deposition, 9/16/97, p. 24.
\23\ Laura Hartigan deposition, 9/16/97, p. 20.
\24\ Exhibit 1401.
\25\ Mark Thomann, 10/9/97 Hrg., p. 7; Richard Sullivan, 10/9/97
Hrg., p. 127.
\26\ Mark Thomann, 10/9/97 Hrg., pp. 9 & 122.
\27\ Statement of Richard Sullivan, 10/9/97, p. 7; Richard
Sullivan, Hrg., 10/9/97 Hrg., p. 128.
\28\ Exhibit 1415: Statement of Richard Blum.
\29\ Exhibit 1415: Statement of Richard Blum.
\30\ Richard Sullivan, 10/9/97 Hrg., p. 95.
\31\ Statement of Richard Sullivan, 10/9/97, p. 8.
\32\ Mark Thomann, 10/9/97 Hrg., p. 38.
\33\ Mark Thomann deposition, 9/23/97, p. 38.
\34\ Mark Thomann, 10/9/97 Hrg., pp. 9, 72-73; Mark Thomann
deposition, 9/23/97, p. 38. Sullivan does not recall using the phrase
``change of direction.'' Richard Sullivan, 10/9/97 Hrg., p. 129.
\35\ Mark Thomann, 10/9/97 Hrg., p. 16, 61-62.
\36\ Mark Thomann, 10/9/97 Hrg., p. 132.
\37\ Mark Thomann, 10/9/97 Hrg., pp. 17-18.
\38\ Mark Thomann, 10/9/97 Hrg., pp. 29, 75.
\39\ Mark Thomann, 10/9/97 Hrg., p. 41.
\40\ Mark Thomann, 10/9/97 Hrg., pp. 22-24.
\41\ Mark Thomann, 10/9/97 Hrg., p. 41.
\42\ Mark Thomann, 10/9/97 Hrg., p. 25.
\43\ Mark Thomann, 10/9/97 Hrg., p. 25.
\44\ Mark Thomann, 10/9/97 Hrg., p. 42; Mark Thomann deposition, 9/
23/97, p. 49; Richard Sullivan, 10/9/97 Hrg., p. 146.
\45\ Mark Thomann, 10/9/97 Hrg., pp. 42-43
\46\ Richard Sullivan, 10/9/97 Hrg., p. 146.
\47\ Exhibit 1409.
\48\ Exhibit 1422.
\49\ Exhibit 1422.
\50\ S 004820-004823.
\51\ Exhibit 15 to Terrence R. McAuliffe deposition, 9/18/97;
Terrence R. McAuliffe deposition, 9/18/97, p. 112.
\52\ Gregory C. Mullenholz deposition, 9/15/97, pp. 99-100.
\53\ Richard Sullivan, 10/9/97 Hrg., p. 113.
\54\ Statement of Richard Sullivan, 10/9/97, p. 6; Richard
Sullivan, 10/9/97 Hrg., p. 136; Laura Hartigan deposition, 9/16/97, pp.
20-21.
\55\ Statement of Richard Sullivan, 10/9/97, p. 6; Richard
Sullivan, 10/9/97 Hrg., p. 139.
\56\ Statement of Richard Sullivan, 10/9/97, pp. 6-7.
\57\ Richard Sullivan deposition, 9/5/97, pp. 118-119.
\58\ Richard Sullivan, 10/9/97 Hrg., pp. 144-45.
\59\ Richard Sullivan deposition, 9/5/97, pp. 181-82.
\60\ Richard Sullivan deposition, 9/5/97, pp. 183-184, 197.
\61\ Laura Hartigan deposition, 9/16/97, p. 92.
\62\ Exhibit 1423.
\63\ Exhibit 1423.
\64\ Laura Hartigan deposition, 9/16/97, p. 104.
\65\ Robert F. Bauer, 10/9/97 Hrg., p. 126.
\66\ Exhibit 1420: Richard Sullivan's notes regarding Vazquez.
\67\ Richard Sullivan, 10/9/97 Hrg., pp. 125-26.
\68\ Richard Sullivan, 10/9/97 Hrg., p. 126.
\69\ Richard Sullivan deposition, 9/5/97, pp. 95-96.
\70\ Richard Sullivan deposition, 9/5/97, p. 119.
\71\ Richard Sullivan, 10/9/97 Hrg., pp. 126, 148-49; Richard
Sullivan deposition, 9/5/97, p. 134.
\72\ Richard Sullivan, 10/9/97 Hrg., p. 149.
\73\ Senator Specter, 10/9/97 Hrg., p. 170.
\74\ Richard Sullivan, 10/9/97 Hrg., p. 171; Exhibit 1419.
\75\ Richard Sullivan, 10/9/97 Hrg., pp. 170-73.
\76\ Richard Sullivan, 10/9/97 Hrg., p. 173.
\77\ Mark Thomann, 10/9/97 Hrg., pp. 47-48.
\78\ According to Davis, it was McAuliffe that first approached him
to ask if he would attempt to raise $500,000 for Unity '96. Davis plea,
p. 27.
\79\ Matthew H. Angle deposition, 10/28/97, p. 26.
\80\ Matthew H. Angle deposition, 10/28/97, p. 27, 33; Rita M.
Lewis deposition, 10/27/97, pp. 9, 13.
\81\ Matthew H. Angle deposition, 10/28/97, p. 9.
\82\ Matthew H. Angle deposition, 10/28/97, p. 9.
\83\ Matthew H. Angle deposition, 10/28/97, pp. 43-45, 47, 52.
\84\ Matthew H. Angle deposition, 10/28/97, p. 45. Angle did not
recall McAuliffe asking him to take the idea to Frost. Matthew H. Angle
deposition, 10/28/97, p. 45.
\85\ Matthew H. Angle deposition, 10/28/97, p. 46.
\86\ Matthew H. Angle deposition, 10/28/97, p. 46-47, 51-52.
\87\ Matthew H. Angle deposition, 10/28/97, pp. 46-47.
\88\ Matthew H. Angle deposition, 10/28/97, pp. 64-65. In an
October 22, 1997 Washington Times article Michael Tucker, a spokesman
for the DSCC and Senator Kerrey, said that the idea was dismissed
``largely because it was so impractical.'' He also stated: ``It would
have been illegal, and that was part of the reason for not acting--for
dismissing it.''
\89\ Matthew H. Angle deposition, 10/28/97, p. 46.
\90\ Matthew H. Angle deposition, 10/28/97, p. 49.
\91\ Matthew H. Angle deposition, 10/28/97, pp. 50-53.
\92\ Matthew H. Angle deposition, 10/28/97, p. 67.
\93\ Rita M. Lewis deposition, 10/27/97, p. 6.
\94\ Rita M. Lewis deposition, 10/27/97, pp. 15-18, 22-23.
\95\ Rita M. Lewis deposition, 10/27/97, p. 55.
\96\ Rita M. Lewis deposition, 10/27/97, p. 57.
\97\ Rita M. Lewis deposition, 10/27/97, p. 29.
\98\ Rita M. Lewis deposition, 10/27/97, pp. 17, 54-55.
\99\ Rita M. Lewis deposition, 10/27/97, p. 17.
\100\ Rita M. Lewis deposition, 10/27/97, pp. 18, 58.
\101\ Rita M. Lewis deposition, 10/27/97, pp. 15, 50-51.
\102\ Rita M. Lewis deposition, 10/27/97, pp. 18, 24-25.
\103\ Rita M. Lewis deposition, 10/27/97, pp. 18-21.
\104\ Rita M. Lewis deposition, 10/27/97, pp. 18-21.
\105\ Rita M. Lewis deposition, 10/27/97, p. 53; Bernard Rapoport
deposition, 10/20/97, p. 77.
\106\ Bernard Rapoport deposition, 10/20/97, p. 35.
\107\ According to Rapoport, Kerrey did not mention Unity '96.
Bernard Rapoport deposition, 10/20/97, p. 49.
\108\ Bernard Rapoport deposition, 10/20/97, pp. 35, 48-49.
\109\ Bernard Rapoport deposition, 10/20/97, p. 89.
\110\ Bernard Rapoport deposition, 10/20/97, pp. 44 & 83-84.
\111\ Bernard Rapoport deposition, 10/20/97, p. 35.
\112\ Bernard Rapoport deposition, 10/20/97, p. 78.
\113\ Bernard Rapoport deposition, 10/20/97, pp. 39, 66.
\114\ See, e.g., Matthew H. Angle deposition, 10/28/97, pp. 46, 62;
Rita Lewis deposition, 10/27/97, pp. 18-21.
\115\ Rita M. Lewis deposition, 10/27/97, p. 41.
\116\ Rita M. Lewis deposition, 10/27/97, pp. 41-42
\117\ U.S. v. Nash, 9/18/97, p. 24.
\118\ S 004920. The memorandum continues, ``I was asked as recently
as yesterday by Sen. Kerrey, chairman of the DSCC, to reconsider. He
asked for $500,000; I said no.'' While the Majority might attempt to
connect this request by Kerrey--and the amount he requested--to the
alleged contribution swap scheme, there is no evidence to support this.
In fact, Lewis testified that Kerrey routinely called PAC contributors
and national contributors to ask them to give money to the DSCC. Rita
M. Lewis deposition, 10/27/97, p. 29. According to Lewis, the DSCC
solicited the Teamsters for a large contribution because they knew that
the Teamsters had funds readily available. Rita M. Lewis deposition,
10/27/97, p. 29.
PART 2 INDEPENDENT GROUPS
Chapter 19: The Democratic Party and Other Independent Groups
During the 1996 federal election cycle, there were
allegations that ostensibly independent, tax-exempt groups
engaged in improper or illegal partisan political activity. The
alleged activity ranged from broadcasting issue ads that in
reality were candidate ads, to closely coordinating with one of
the national political parties. Unfortunately, the vast
majority of allegations against independent groups remain
unexplored by the Committee because subpoenas issued to most of
these groups were not complied with or enforced. Despite these
and other limitations, allegations regarding groups
traditionally associated with the Republican Party are
addressed in Chapters 10-15. Allegations regarding groups
traditionally associated with the Democratic Party, and that
were explored in public hearings, are addressed in Chapters 17-
18. This chapter addresses, to the extent possible based on
evidence submitted to the Committee, allegations regarding
certain other groups traditionally associated with the
Democratic Party.
findings
(1) During the 1996 election cycle, several independent
groups spent millions of dollars to promote Democratic issues
and possibly Democratic candidates through ``issue advocacy,''
voter education and voter registration.
(2) The Committee, however, uncovered no evidence that the
Democratic Party played a central role in contributing to, or
coordinating with, these groups. The Democratic National
Committee contributed only $185,000 to such groups in 1996,
compared to over $5 million the Republican National Committee
contributed to conservative groups in the last half of 1996
alone.
overview
In 1997, the Annenberg Public Policy Center, a nonpartisan
organization, published a report analyzing issue advocacy ads
broadcast during the 1996 federal elections. The report found
that political candidates and their committees spent $400
million to broadcast candidate ads and that parties and other
outside groups discussed in the study spent between $135 and
$150 million to broadcast ``issue ads.'' The report noted that
the independent and other outside groups claimed that because
their ads focused on advocating ``issues,'' not candidates,
there was no obligation to report the ad campaigns to the
Federal Election Commission as independent
expenditures.1
---------------------------------------------------------------------------
Footnotes appear at end of chapter 19.
---------------------------------------------------------------------------
The Annenberg report made the following comment about the
role of these issue ads in the 1996 elections:
This report catalogues one of the most intriguing and
thorny new practices to come onto the political scene
in many years--the heavy uses of so-called ``issue
advocacy'' advertising by political parties, labor
unions, trade associations and business, ideological
and single-issue groups during the last campaign . . .
This is unprecedented and represents an important
change in the culture of campaigns.2
The Minority agrees that the increased use of issue
advocacy has changed the culture of campaign financing in the
1990s, as has the increased coordination and financial support
between certain independent groups and the national political
parties. As a result, with a few exceptions, the Minority
actively supported a series of Committee subpoenas issued to 30
independent groups from April to July of 1997.3 The
subpoenaed entities ranged from conservative groups such as
Americans for Tax Reform, the Christian Coalition, and Triad
Management to pro-Democratic groups such as Vote Now '96, the
Teamsters and the AFL-CIO. The subpoenas requested that these
entities provide information about their issue ads and other
voter education activities, as well as their coordination with
the national parties.
The Minority hoped to conduct a thorough investigation of
these groups in order to understand their effect on the
campaign finance system and to determine whether they avoided
or violated current election and tax laws. Such an
investigation would have assisted in providing guidelines for
meaningful enforcement of campaign finance laws and regulations
and could have led to proposals for new legislation.
Unfortunately, a thorough investigation of these activities
eluded the Committee because subpoenas to the groups were, in
large part, not complied with or enforced. The breakdown in
compliance is explained in detail in Chapter 41 of this
Minority Report.
In addition, with very limited exceptions noted earlier in
this part of the Minority Report, the Committee did not hold
public hearings focused on the activities of these groups. With
these limitations in mind, this chapter contains a summary of
the information obtained regarding the activities of certain
independent groups associated with the Democratic Party.
the dnc and independent groups
In 1996, the Democratic National Committee (``DNC'')
contributed a total of $184,500 to several independent, tax-
exempt groups. The two largest recipients were the National
Coalition of Black Voter Participation, which received
$117,000, and the African American Institute, which received
$20,000.4 Neither of these organizations was
subpoenaed by the Committee and there were no allegations that
they conducted improper partisan electioneering on behalf of
the Democratic Party.
The Committee did examine other potential contacts the DNC
may have had with independent groups. The Committee subpoenaed
the DNC and required it to produce, among other things, all
documents regarding contact with a variety of named independent
groups. Despite a large production of documents, the Committee
obtained no evidence that the DNC was involved in establishing,
structuring, or controlling any independent group.
Therefore, unlike the evidence demonstrating that the RNC
contributed nearly $6 million dollars to independent groups and
documents showing that RNC officials founded, structured or
financed allegedly independent groups, the Committee obtained
no evidence that the DNC engaged in similar activities.
Unfortunately, this disparity between the RNC and DNC
relationships with independent groups was not explored by the
Committee.
The Committee did explore, however, allegations that White
House and DNC officials directed contributions to certain
independent groups. These allegations were the subject of
public hearings where the Committee received testimony about
Warren Medoff's contact with Harold Ickes, and DNC officials'
contact with Ron Carey's campaign for reelection as president
of the Teamsters. There were also hearings where testimony was
received on Vote Now '96. Additional allegations against
independent groups traditionally associated with the Democratic
Party are summarized below.
activities of independent groups
The AFL-CIO
Federal election law permits unions to establish political
action committees (``PACs'') and the PACs, in turn, are
permitted to make contributions to candidates. Direct
contributions by a union to a candidate or to the federal
account of a political party, however, are prohibited in
federal elections. This prohibition not only includes cash
contributions, it prohibits unions from paying for ``express
advocacy'' expenditures out of their general treasuries. Labor
organizations, including the AFL-CIO, aired television
advertisements during the 1996 elections, but maintain that
they properly avoided this prohibition by airing issue ads that
did not expressly advocate the election or defeat of specific
candidates.5 This legal distinction is discussed at
length in Chapter 9 of this Minority Report.
The allegations against the AFL-CIO were (1) that by
spending a substantial amount of money on issue ads and other
advocacy activities in 1996, the organization had an
impermissible effect on the 1996 federal elections, and (2)
that the organization improperly proposed that it coordinate
its issue ads with the Democratic Party.
With the caveat that the Committee did not conduct a public
investigation of the issue advocacy conducted by any
independent group, the evidence the Committee received does not
support the allegation that the AFL-CIO's expenditures ran
afoul of legal prohibitions. Of the $35 million reportedly
spent by the AFL-CIO during the last election cycle, an
estimated $25 million went into paid media, and the remainder
went into direct mail and related organizing activities. The
AFL-CIO sent coordinators to 102 congressional districts, where
they engaged in a combination of paid advertising, mail and
get-out-the-vote activities. The AFL-CIO also ran issue-
advocacy ads in a total of 44 of congressional districts where,
ultimately, the GOP won 29 races and the Democrats won
15.6
The Committee investigated the second allegation--that the
AFL-CIO impermissibly proposed coordinating its issue ads with
the Democratic Party. That allegation arose during the
deposition of Richard Morris, an outside political consultant
who advised the president during the 1996 campaign. Morris
claimed that during a meeting held at the White House sometime
in 1996, an AFL-CIO media consultant proposed that they
coordinate union advertising with the Clinton
campaign.7 Following Morris' deposition, the
Committee deposed several officials who Morris claimed were
present during that meeting. Those officials, who included
former White House Chief of Staff Leon Panetta and former White
House Communications Director George Stephanopoulos, testified
that they did not recall any discussion of coordination and
that coordination did not occur.8 The Committee
received no further evidence to support Morris' assertion that
coordination was proposed, and Morris himself testified that no
coordination actually occurred.9
It is apparent that the Committee's investigation of the
AFL-CIO's activities, like the investigations of other
independent groups, was not complete. The AFL-CIO was
subpoenaed by the Committee in late May 1997, but objected to
the subpoena in August after unsuccessfully attempting to
narrow its scope. Several other independent groups also
objected to subpoenas they received from the Committee, some
stating that they agreed with the AFL-CIO's objections. These
objections to the subpoena and the Committee's responses are
detailed in Chapter 41 of this Minority Report.
Vote Now '96
The Committee discovered evidence that DNC officials and at
least one White House official directed contributions to Vote
Now '96, an independent tax-exempt organization that does not
broadcast issue ads, but attempts to register new voters in
minority areas. DNC officials allegedly directed contributions
to Vote Now '96, including contributions from people who could
not legally give to the DNC. The DNC apparently considered Vote
Now '96 an organization worthy of contributions because most
new minority voters tend to identify with the Democratic Party.
Among the allegations involving Vote Now '96 were:
DNC Finance Chairman Marvin Rosen steered a
$100,000 contribution from Judith Vasquez, a donor who
was not legally permitted to give to the DNC or the Ron
Carey campaign to Vote Now '96.10
DNC donor Yah Lin (``Charlie Trie'')
contributed $3,000 to Vote Now '96, and as with several
of his political contributions, the source of the funds
could not be determined.
After a fundraising event at the Hay-Adams
Hotel in Washington, D.C., DNC fundraiser John Huang
indicated to DNC General Counsel Joseph Sandler that
two of the contributions that had been made to the DNC
were from individuals whose green card status had been
approved but were not yet issued. The DNC returned the
contributions and the same individuals later
contributed to Vote Now '96.11
In response to a request from businessman
Warren Meddoff for recommendations on tax-deductible
organizations, White House deputy chief of staff Harold
Ickes suggested that Meddoff's associate contribute to
Vote Now '96. This allegation is discussed in detail in
Chapter 17.
In the fall of 1996, Vance Opperman, a major
contributor to the Democratic Party, offered to
contribute $100,000 to the DNC. Mark Thomann, a DNC
fundraiser was instructed by Richard Sullivan that even
though he could legally contribute to the DNC, he
should direct Opperman's contribution to Vote Now
'96.12
Based on these allegations, it appears that DNC officials
and one White House official steered contributions they could
not--or did not want to--accept to Vote Now '96. The practice
of steering contributions to an independent group leads to
obvious questions regarding the reason for such activities,
such as, was an attempt being made to conceal the true identity
of the contributor or to evade the law. The legality of this
activity, however, depends upon whether the contributions to
Vote Now '96 served as nothing more than contributions to the
DNC and were made to circumvent election law restrictions. In
order to become de facto party contributions, the DNC must have
in some way controlled or coordinated the contribution and the
way Vote Now '96 expended its funds. Unlike the evidence
establishing that the RNC controlled and coordinated with the
National Policy Forum, Americans for Tax Reform, Coalition for
Children's Future and other groups, there was no evidence
presented to the Committee that the DNC coordinated or
controlled the activities of Vote Now '96, which fully complied
with this Committee's subpoena by producing documents and
witnesses to the Committee.
Citizen Action
Citizen Action is a 501(c)(4) tax-exempt consumer advocacy
group which spent $7 million on televised ads, direct mail, and
telephone operations during the 1996 election
cycle.13 It was targeted for a subpoena primarly due
to its alleged involvement in a contribution ``swap'' scheme
devised by consultants to Ron Carey's campaign to be reelected
president of the International Brotherhood of Teamsters.
However, beyond issuing a document subpoena, the Committee did
not investigate the group's activities. A criminal information
filed against Ron Carey's campaign consultants in the Southern
District of New York details the allegations against Citizen
Action. There is no evidence of any connection between the
activities of Citizen Action and the activities of the DNC and
Clinton campaign. These matters are further discussed in
Chapter 17.
National Council of Senior Citizens
Another entity apparently involved in the allegations
concerning Ron Carey's campaign consultants was the National
Council of Senior Citizens (``NCSC''). Federal prosecutors
alleged in a criminal information against these consultants
that the consultants arranged for the Teamsters to contribute
$85,000 to the NCSC, which then sent the same amount to the
November Group. Part of the NCSC money paid to the November
Group was allegedly funneled by Davis into the Carey campaign
in order to finance Carey's direct mail campaign. Beyond
issuing a subpoena, the Committee did not explore these serious
allegations.14
conclusion
As the 1997 Annenberg study points out, both pro-Republican
and pro-Democratic groups conducted costly and partisan issue
advocacy campaigns during the 1996 federal elections. Although
the Minority believes that such issue advocacy campaigns as
well as independent group coordination with both national
parties merit further investigation, the Committee did not
receive evidence that the groups summarized above engaged in
any improper issue advocacy or illegal coordination with the
Democratic Party. For a list of independent groups subpoenaed
by the Committee, see Chapters 40 and 41 of this Minority
Report.
footnotes
\1\ The Annenberg Center for Public Policy, 9/16/97, ``Issue
Advocacy During the 1996 Campaign: A Catalogue.''
\2\ Annenberg, p. 3.
\3\ The Minority believes that the Majority targeted certain
independent groups solely on the basis that they were pro-Democratic.
\4\ According to FEC records, in 1996, the DNC gave $117,500 to the
National Coalition of Black Voter Participation; $20,000 to the African
American Institute; $10,000 to the Stonewall Gay and Lesbian Club;
$10,000 to the Congressional Black Caucus; and $4,000 to the Hispanic
Caucus.
\5\ Annenberg, p. 5.
\6\ Annenberg, p. 10.
\7\ Richard Morris deposition, 8/20/97, p. 217.
\8\ Leon Panetta deposition, 8/29/97, p. 190; and George
Stephanopoulos deposition, 9/6/97, p. 98.
\9\ Richard Morris deposition, 8/20/97, p. 217.
\10\ Mark Thomann deposition, 9/23/97, pp. 24-29.
\11\ New York Times, 9/29/97.
\12\ Mark Thomann deposition, 9/23/97, p. 63.
\13\ Annenberg, p. 18.
\14\ See United States v. Davis, U.S.D.C, S.D.N.Y.
PART 3 CONTRIBUTION LAUNDERING/THIRD-PARTY TRANSFERS
Chapter 20: Overview and Legal Analysis
FINDING
A number of individuals in both the Republican and
Democratic parties made contributions to candidates for federal
office and political parties through persons who were eligible
to contribute, in apparent violation of the Federal Election
Campaign Act.
OVERVIEW OF FOLLOWING CHAPTERS
The Federal Election Campaign Act (``FECA'') mandates
public disclosure of campaign contributors and their
contributions, a requirement which the Supreme Court has upheld
as a constitutional means to deter corruption, inform voters
and detect violations of law.1 Section 441f of Title
2 of the U.S. Code provides:
---------------------------------------------------------------------------
Footnotes appear at end of chapter 20.
No person shall make a contribution in the name of
another person or knowingly permit his name to be used
to effect such a contribution, and no person shall
knowingly accept a contribution made by one person in
---------------------------------------------------------------------------
the name of another person.2
This provision creates three separate prohibitions: (1) it
prohibits a contributor from disguising a contribution by using
another person as a conduit; (2) it prohibits anyone from
knowingly agreeing to serve as a conduit; and (3) it prohibits
campaign organizations and candidates from knowingly accepting
a conduit contribution. These prohibitions help guarantee that
persons barred from making campaign contributions do not evade
the applicable legal restrictions by making contributions in
the name of another, and help prevent persons from
circumventing the public disclosure requirements by offering
their money in someone else's name rather than their own.
The Committee investigated a number of allegations that
contributions made to political parties or candidate committees
were paid for by hidden donors. As the following chapters
demonstrate, the investigation gathered convincing evidence
that, during the 1996 election cycle, a number of individuals
laundered funds through third parties when making contributions
to Republicans and Democrats. In some cases, the laundered
funds came from abroad; in others the laundered funds were
American dollars. Some contributions were for $1,000; one went
as high as $500,000. The evidence shows that unpaid fundraisers
for both parties, such as Charlie Trie and Simon Fireman,
participated in contribution laundering schemes.
The following chapters describe a variety of contribution
laundering schemes. The evidence includes three companies,
Aqua-Leisure Industries, Empire Sanitary Landfill, and DeLuca
Liquor and Wine, which appear to have laundered corporate funds
through employees to make more than $275,000 in contributions
to the Republican Party. One company, owned by Simon Fireman,
vice chairman of finance for the Dole for President campaign,
laundered corporate funds through a secret Hong Kong trust
before supplying cash to company employees who wrote checks
made out to the campaigns Fireman selected. Also examined is
the Hsi Lai Buddhist Temple which appears to have reimbursed
temple monastics and supporters for contributions totalling
$65,000 to the Democratic National Committee. Contributions
orchestrated by a family of Democratic Party supporters, the
Lums, and their subsequent criminal convictions are examined,
as well as $253,500 in contributions to the DNC which Pauline
Kanchanalak held out as her personal contributions when, in
fact, the funds were provided by her mother-in-law, Praitun
Kanchanalak (who was also eligible to contribute). The chapters
also examine contributions from two apparently insolvent
individuals, Yogesh Gandhi, who gave $325,000 to the DNC, and
Michael Kojima, who in 1992 gave $500,000 to the Republican
Party, both of which were apparently financed with foreign
funds from Japan. Democratic Party contributions totalling
about $425,000 by the Wiriandinatas may have originally derived
from abroad, but appear to be legal because they were personal
funds and no foreign national participated in the contribution
decisions. Additional information about possible conduit
contributions from foreign funds is discussed in Part 1 of this
Minority Report which focuses on foreign influence in the last
election cycle.
The Committee received no evidence that any candidate or
party employee, other than Simon Fireman, Representative Jay
Kim of California, and possibly John Huang, knowingly solicited
or accepted a laundered contribution. The evidence also shows
that, in some instances, fundraisers or party officials had
warning signs that particular contributions were suspect. In
too many cases involving large sums of money, these warning
signs were ignored and inadequate procedures were used to
verify the contributor and the contribution, resulting in
improper or illegal contributions entering the campaign finance
system.
The basic principle underlying the prohibition on
contributions in the name of another is that campaign
contributions must be accurately disclosed to the public. For
that reason, the prohibition applies even if the underlying
contribution would have been legal, but for the fact that it
was disguised as the contribution of another.
Establishing violations of section 441f often involves
determining the source of funds used for a contribution,
ownership of those funds, and whether the funds were provided
to the contributor of record for the purpose of making a
disguised contribution. These determinations are sometimes
straightforward and can be established through the testimony of
the conduit or through bank records documenting the movement of
funds from a third party to the contributor of record to the
campaign organization. Other times, these determinations are
difficult, particularly if the contributor insists that no
third party was involved or that the funds used for the
contribution were validly obtained.
For example, an American citizen or legal resident who
earns money working abroad, or receives money from a foreign
national or foreign corporation in a business transaction, may
be able to establish that the money was personal income which
can be lawfully used for a campaign contribution. Similarly, an
American citizen or legal resident who makes a campaign
contribution with money received from a family member who is a
foreign national, may be able to demonstrate that the money was
a personal gift, the family member played no role in the
contribution decision, and the contribution was in compliance
with the law. In contrast, while an American citizen or legal
resident can establish personal ownership of funds provided
from abroad and use those funds for a campaign contribution,
U.S. subsidiaries of foreign corporations are completely barred
from using foreign money to pay for a corporate
contribution.3 The FEC requires U.S. subsidiaries to
be able to ``demonstrate through a reasonable accounting method
that it has sufficient funds in its account, other than funds
given or loaned by its foreign national parent,'' to pay for
its campaign contributions.4 In contrast, U.S.
corporations that are not subsidiaries of foreign companies may
use foreign funds to finance their campaign contributions, so
long as they are not acting as conduits for another.
One significant problem with the current wording of section
441f severely limits its usefulness. As currently worded, each
of the section's prohibitions rely on the word
``contribution.'' Because ``contribution'' is defined in 2
U.S.C. 431(8) in terms of hard money contributions, section
441f's prohibition on contributions in the name of another may
not apply to any of the soft money conduit contributions
examined by this Committee. Until corrective legislation is
enacted, it is not clear that individuals who make soft money
contributions through conduits could be successfully prosecuted
or fined under the current law despite the fact that such
actions violate the intent of existing law.
footnotes
\1\ Buckley v. Valeo, 424 U.S. 1, 66-67 (1976).
\2\ U.S.C. Sec. 441f.
\3\ FEC Advisory Opinion 1992-16.
\4\ Ibid. See also, legal analysis of foreign contributions in Part
1, supra.
PART 3 CONTRIBUTION LAUNDERING/THIRD-PARTY TRANSFERS
Chapter 21: Contributions to the Democratic Party
A major focus of the Committee's investigation was the
allegation that the Democratic National Committee (``DNC'')
received contributions during the 1996 election cycle that were
paid for by someone other than the contributor of record and
possibly with foreign funds. The Committee examined a number of
these alleged contributions, including those from Keshi Zhan,
Yue Chu and Xiping Wang; Pauline Kanchanalak; Yogesh Gandhi;
Arief and Soroya Wiriadinata; the Lum family; and persons
associated with the Hsi Lai Temple branch of the Fokuangshan
Buddhist sect. In each case, the Committee attempted to
determine whether the contributions made in the names of these
individuals were paid for by another, and whether DNC officials
knew or should have known of any misconduct.
findings
(1) The evidence before the Committee shows that a number
of individuals made contributions to the DNC or Democratic
organizations in the name of others. Some of these were hard
(restricted) money contributions, in which case they may be
improper or illegal; some of these were soft (unrestricted)
money contributions, in which case they may be technically
legal, but result in inaccurate contribution records at the
FEC. Among those whose activities the Committee investigated
are:
(A) Charlie Trie/Ng Lap Seng (``Wu''): Trie and Wu
used Keshi Zahn to arrange to have two legal permanent
residents, Yue Chu and Xiping Wang, contribute $28,000
in hard (restricted) money to Democratic campaign
organizations and reimbursed them. There is no evidence
before the Committee to suggest that either Chu or Wang
understood that their actions potentially violated
campaign finance laws. Trie and Wu also used Zahn to
make a $12,500 hard (restricted) money contribution to
the DNC.
(B) Pauline Kanchanalak: Kanchanalak used her mother-
in-law's money to fund $253,500 in contributions to the
DNC, $26,000 of which was hard (restricted) money.
Although both Pauline Kanchanalak and her mother-in-law
Praitun Kanchanalak were legal permanent residents of
the U.S. and each, therefore, lawfully could make
contributions in her own name, the $26,000 contribution
of her mother-in-law's money in Kanchanalak's name
appears to violate Section 441f.
(C) Yogesh Gandhi: Gandhi, a legal permanent
resident, appears to have used an associate's foreign-
source money to fund a $325,000 contribution in soft
(unrestricted) money in connection with a DNC
fundraiser. Gandhi's bank records reveal that he would
not have been able to make that contribution without
significant wire transfers from Yoshio Tanaka, a
Japanese national who attended a DNC fundraiser with
Gandhi. Evidence before the Committee supports the
conclusion that Tanaka transferred the money to fund
Gandhi's contribution.
(D) Arief and Soraya Wiriadinata: The Wiriadinatas,
at one time legal permanent residents, made
contributions of over $425,000 to the DNC, $20,000 of
which appears to be hard (restricted) money
contributions. The contributions were made in checks
drawn on bank accounts funded with overseas transfers
from Soraya Wiriadinata's father. In light of
representations from Soraya Wiriadinata that her father
transferred Soraya's own money, the evidence before the
Committee does not establish that the $20,000 in hard
money contributions came from another.
(2) The evidence before the Committee does not support a
finding that any DNC official knowingly solicited or accepted
contributions given in the name of another.
Hsi Lai Temple event
On April 29, 1996, Vice President Gore attended a DNC-
sponsored and John Huang-organized event at the Hsi Lai Temple
in Hacienda Heights, California. Vice President Gore's briefing
papers for the event described it as an outreach event with
members of the Asian-American community, but much controversy
has arisen regarding allegations that the DNC improperly used a
religious institution to host a fundraising event and that the
Temple funneled money through its monastics to the DNC.
Based on the evidence before the Committee, we make the
following findings regarding the event at the Hsi Lai Temple:
(3) From the perspective of Vice President Gore and DNC
officals, the Hsi Lai Temple event was not a fundraiser. There
is no evidence before the Committee that Vice President Gore
knew that contributions were solicited or received in relation
to the Temple event. The information received by the Vice
President regarding the event described it as an opportunity
for the Vice President to meet with members of the local Asian-
American community. John Huang assured DNC Finance Director
Richard Sullivan that the event was not a fundraiser, but
instead would involve community outreach. Moreover, the event
had none of the features of a fundraiser: no tickets were taken
or sold at the door; the speakers did not solicit donations;
and many of those who attended did not contribute to the DNC.
(4) John Huang and Maria Hsia used Vice President Gore's
appearance at the Temple to raise money for the DNC. Although
the event itself was not a fundraiser, Huang and Hsia,
unbeknownst to DNC officials or the Vice President, used it as
an opportunity to raise money for the DNC. Both before and
after the event, they suggested to Temple officials that they
collect contributions in connection with the Temple event.
Their efforts eventually yielded $65,000 in contributions from
persons associated with the Temple.
(5) There is no evidence before the Committee to suggest
that the money donated in connection with the Hsi Lai Temple
event was foreign in origin.
(6) Many of the donations made in connection with the Hsi
Lai Temple event appear to have violated federal campaign laws
prohibiting contributions in the name of another. The Temple
reimbursed the monastic donors for their contributions. There
is evidence to suggest that most of those writing the checks
did not understand that they were potentially violating federal
election law. Nevertheless, there appears to be little doubt
that most, if not all, wrote the checks to the DNC only because
the Temple asked them to do so and with the understanding that
they would not fund the contributions themselves.
(7) There is no evidence before the Committee that any DNC
official knew that contributions made by Hsi Lai Temple
monastics were of questionable legality.
keshi zhan, yue chu and xiping wang
The Committee examined several contributions made by three
persons, Keshi Zhan, Yue Chu and Xiping Wang, associated with
Charlie Trie and Ng Lap Seng (also known as Wu), Trie's Macao-
based business associate.1 All three appear to have
been reimbursed by Trie and Wu for contributions made to the
DNC in 1996. The DNC has returned all contributions made by
Zhan, Chu and Wang.2
---------------------------------------------------------------------------
Footnotes appear at end of chapter 21.
---------------------------------------------------------------------------
Keshi Zhan is a legal permanent resident of the United
States and eligible to make campaign contributions. She is a
local government employee, but apparently has also worked on
occasion for Trie and Wu.3 In February 1996, in
connection with a DNC fundraiser at the Hay Adams Hotel in
Washington, D.C., co-chaired by Trie, Zhan made a hard money
contribution of $12,500 to the DNC. Bank records produced to
the Committee show that Zhan wrote a check to herself for
$12,500 drawn from a bank account controlled by Trie and Wu,
and deposited that check into her personal bank account on the
same day that she wrote the $12,500 check to the DNC. Committee
investigator Jerry Campane testified before the Committee that
it was his conclusion that the check from Trie and Wu's account
was a reimbursement of her contribution.4
Yue Chu and Xiping Wang are two women who were born in
China and are now legal permanent residents who have lived in
the U.S. for several years.5 They are related by
marriage.6 Chu's husband, Ming Chen, is employed by
Wu in a restaurant in Beijing.7 Chu and Wang
testified before the Committee on July 29, 1997, pursuant to a
grant of immunity from prosecution.8 In sum, Chu and
Wang testified that they contributed a total of $27,000 to the
Democratic Party at the request of Chu's husband and Zhan and
were later reimbursed.
Chu testified that she first met Zhan in 1991, when Zhan
was a classmate of Chu's husband at the University of the
District of Columbia. Chu and Zhan became friends.9
On November 14, 1995, Zhan asked Chu to write a check for
$2,000 to the Democratic Senatorial Campaign Committee. She
also asked Chu to write a $1,000 check to Zhan herself. The
next day, Zhan repaid Chu with a check for $3,000. Chu
testified that it was her understanding at the time that Zhan
wanted Chu to lend her some money, and she did not ask Zhan the
reason. She also testified that she did not know what the
initials ``DSCC'' stood for at the time she wrote the $2,000
check, and that she did not know that this check represented a
political contribution.10
In February 1996, Chu's husband, Ming Chen, returned to the
U.S. from China for the Chinese New Year holidays. According to
Chu, her husband said that his boss, Wu, wanted to visit the
White House and needed $25,000 to ``buy a ticket.''
11 Chu testified that they had sufficient funds to
provide only $20,000, and asked Chen's cousin, Xiping Wang, for
the remaining $5,000. Wang provided a check in that
amount.12
On February 19, 1996, Chu gave Zhan two checks which were
blank except for her signature. Zhan made out both checks to
the DNC, in the amounts of $12,500 and $7,500. Chu testified
that she did not know what the initials ``DNC''
meant.13 At the time she gave Zhan the two checks,
Chu was given two checks from Zhan in identical amounts. Chu
stated that this seemed unusual to her, but that she did not
ask any questions at the time. She indicated that her primary
consideration at the time was that her husband's boss needed
help to buy a ticket and she had been asked to provide that
help.14 Chu testified that she did not know whose
money was used to reimburse her.15 She also
testified that although she had once met Trie, she only knew of
him as a business associate of Wu.16
On January 28, 1998, the Department of Justice indicted
Trie for conspiring to defraud the DNC and FEC, in part, by
``channel[ing] foreign money to the DNC through the use of
straw or conduit contributions'; ``conceal[ing] the source of
the money contributed by reimbursing conduits in cash and using
multiple bank accounts;'' and ``caus[ing] the DNC tofile false
campaign finance reports with the FEC.'' 17 The Zhan
contribution appears to be identified in the Trie indictment as an
illegal conduit contribution; the Chu and Wang contributions are not
included, presumably due to the Committee's decision to grant both
women immunity from prosecution.18
The evidence before the Committee is convincing that Zhan,
Chu and Wang were used as conduits for contributions financed
by Trie and Wu, in connection with a fundraiser co-chaired by
Trie and attended by Wu as Trie's guest. The evidence suggests
that while Chu and Wang may have been unaware of their
participation in a contribution conduit scheme, Trie, Wu and
Zhan appear to have been aware of the legal prohibition against
contributions by foreign nationals. The Committee's
investigation found no evidence that, at the time of the
contributions, anyone at the DNC knew or had reason to know
that the Zahn, Chu and Wang contributions were being financed
by Trie and Wu.19 Zhan, Chu and Wang were legal
permanent residents eligible to make campaign contributions,
and their checks were drawn on local U.S. banks in amounts that
were substantial, but not so large as to trigger special
inquiry. Neither the DNC nor the White House had access to or
were aware of the bank records demonstrating the
reimbursements.20 The Trie indictment does not cite
any facts suggesting that anyone at the DNC or the White House
was aware of Trie's misconduct with respect to these or any
other conduit contributions.21
In addition to the Zhan contribution, the Trie indictment
identifies a number of other conduit contributions involving
Trie, in particular in connection with an August 1996 Radio
City Music Hall fundraiser in New York celebrating President
Clinton's 50th birthday.22 The indictment charges
that $200,000 in funds from abroad were wired transferred into
a bank account belonging to Trie who then solicited and
reimbursed two conduit contributions to the DNC totaling
$20,000.23 The indictment charges that $80,000 was
also transferred from the Trie account to a California bank
account, which Trie's business associate then used to solicit
and reimburse five conduit contributions to the DNC totaling
$40,000.24 While the Committee did not obtain
independent evidence on these conduit contributions, the
charges in the indictment provide additional reason to believe
that Trie was involved in a number of conduit contributions to
the DNC utilizing foreign funds. Trie's activities are
discussed more fully in Chapter 5 of this Minority Report.
pauline kanchanalak
Born in Thailand, Pauline Kanchanalak is a legal permanent
resident of the United States.25 She earned graduate
degrees from the University of Pittsburgh and Stanford and, in
the 1980s, married Chupong ``Jeb'' Kanchanalak, the son of a
prominent, wealthy Thai family residing in the United States
since the 1950s.26
Kanchanalak and her husband began a consulting business
known as Ban Chang International (``BCI'') in the early 1990s.
This company sought to develop joint ventures between U.S. and
Thai companies and to establish franchises of U.S. companies in
Thailand. Jeb Kanchanalak served as managing director of BCI's
Thailand operations, while Pauline managed the company's U.S.
operations. Pauline Kanchanalak is also the Washington
representative of a Thai conglomerate, the Ban Chang Group. In
1992, a group of Thai corporations--with the support of the
Thai government--established an umbrella group called the U.S.-
Thailand Business Council to promote trade with the United
States. Jeb Kanchanalak was named executive director of the
Thailand branch of the council. In 1994, the U.S. branch of the
council was established.27 The president of the U.S.
branch was Karl D. Jackson, a Republican foreign policy
expert.28 Pauline Kanchanalak also was active in the
U.S. branch of the council.
FEC records list Kanchanalak as having contributed $1,000
to the DNC in 1993, $62,500 in 1994 and nothing until 1996 when
she contributed $190,000 for a three-year total of $253,500.
All but $26,000 were soft money donations.29
Kanchanalak's contributions brought her status as a DNC
managing trustee and wide-ranging access to the White House and
the President.30 A summary document of U.S. Secret
Service WAVE records shows that in the nearly four-year period
between January 20, 1993, and November 30, 1996, Kanchanalak
visited the White House 26 times, including ten visits at which
the President was present. These visits included such events as
DNC trustees'' receptions, lunches, dinners, and coffees; a
presidential radio address; and a meeting of the U.S.-Thai
Business Council.31 At one coffee, she was permitted
to bring as her guests a group of visiting Thai
businessmen.32
After press reports raised questions about Kanchanalak's
contributions, the head of the DNC's managing trustee program,
Ari Swiller, contacted her. In a memorandum dated November 20,
1996, Swiller describes the substance of his conversation with
Kanchanalak.33 According to Swiller's memorandum,
``she stated that she had not made any contributions to the DNC
and that all contributions came from her mother-in-law, Praitun
Kanchanalak.'' 34 The memorandum states:
Pauline explained that this was an arrangement she
made with Vic Raiser during the 1992 campaign. I asked
her if she ever discussed that arrangement with anyone
other than Mr. Raiser, specifically Richard Sullivan,
Lauren Supina, John Huang or me. She clearly stated
that she never indicated that contributions from P.
Kanchanalak were not from her.35
Under this alleged arrangement between Kanchanalak and Raiser,
the DNC's 1992 finance chair, she was credited with
contributions made by ``P. Kanchanalak,'' even though the
contributions were financed with funds belonging to her mother-
in-law, Praitun Kanchanalak. Praitun Kanchanalak is a legal
permanent resident who is also eligible to contribute.
A Committee review of the contribution checks credited to
Kanchanalak confirms that they were each signed ``P.
Kanchanalak.'' No evidence before the Committee indicates that
DNC personnel during the 1996 election cycle were aware of
Kanchanalak's alleged arrangement. Kanchanalak told Swiller
that she had never discussed the arrangement with anyone other
than Raiser. She also stated to him that she had never
indicated that contributions from ``P. Kanchanalak'' were not
from her. Moreover, there was no reason for DNC officials in
1996 to suspect that these contributions were not her own,
since, by then, Pauline Kanchanalak was a wealthy international
businesswoman and a DNC managing trustee with a history of
contributions. In addition, separate contributions had been
received from, and credited to, Pauline's mother-in-law,
Praitun Kanchanalak. In light of these facts, there would have
been no reason to suspect that Pauline's contributions
represented funds from Praitun.
While questions were raised at the hearing regarding
whether Kanchanalak or her mother-in-law used foreign funds for
the contributions, there is no evidence that foreign nationals
directed the contributions. Moreover, their status as legal
permanent residents permits them to use their personal funds
for campaign contributions, even if earned abroad.
Additionally, as $227,500 of the $253,500 in contributions were
soft money donations, it is unclear that these contributions
were made in violation of 2 USC 441f's prohibition against
contributions in the name of another. Nonetheless, the DNC has
returned all the contributions to Praitun Kanchanalak.
yogesh gandhi
In May 1996, Yogesh K. Gandhi made a $325,000 contribution
to the DNC in order to attend an Asian American fundraising
event at which President Clinton would be present. The evidence
before the Committee suggests that Gandhi paid for the
contribution with funds provided by a Japanese national. DNC
records identifying Trie as the ``solicitor'' of the
contribution and Huang as the ``DNC contact.'' 36
Gandhi, born Yogesh Kothari, is a distant relative of
Mahatma Gandhi.37 In 1983, Kothari changed his name
to Gandhi, moved to the United States, and became a legal
permanent resident. He is eligible to make campaign
contributions. He established the Gandhi Memorial International
Foundation purportedly to promote the ideas of Mahatma Gandhi.
An immediate descendant of Mahatma Gandhi, however, has
publicly stated that Yogesh Gandhi is a ``scam artist''
interested primarily in enriching himself.38
The Gandhi Memorial International Foundation periodically
presents the Mahatma Gandhi World Peace Award to prominent
individuals. Past recipients have included Ronald Reagan,
Corazon Aquino, and Mikhail Gorbachev. In 1987, the award was
given to Ryochi Sasakawa, a controversial, wealthy Japanese
businessman who was jailed for suspected war crimes by the
Americans after World War II and has been accused of links to
organized crime and extreme rightists. One year after receiving
the Gandhi award, Sasakawa donated $500,000 to the Gandhi
Foundation.39
In 1995, the foundation gave the Gandhi award to Hogen
Fukunaga, a Japanese multimillionaire who runs a controversial
religious organization in Japan and faces multiple legal
problems in Japan from people claiming to have been defrauded
by his organization.40 Press reports indicate that
Fukunaga has taken part in a number of highly publicized events
arranged by Yogesh Gandhi, including an audience with Pope John
Paul II, a meeting with Mother Teresa and participation in a
United Nations conference in Turkey. These events were
apparently funded by a Japanese associate of both Gandhi and
Fukunaga named Yoshio Tanaka. Tanaka is a businessman who is
apparently involved in unknown business ventures with Gandhi
and who brought Gandhi together with Fukunaga.41
In late September 1995, Gandhi sent letters to President
and Mrs. Clinton inviting them to attend an October 2, 1995
ceremony celebrating the 125th anniversary of Mahatma Gandhi's
birth, at which time the Gandhi Foundation's World Peace Award
would be presented to Fukunaga.42 The White House
declined the invitation. On November 12, Gandhi wrote again to
the President asking for 30 minutes of his time for
presentation of the gift of a leather-bound collection of the
writings of Mohandas Gandhi.43 This gift was
declined by the White House on January 3, 1996.44
On February 5, 1996, Gandhi wrote to the President once
again, this time informing him that he had been selected as the
recipient of the 1996 Mahatma Gandhi World Peace
Award.45 In a separate letter the same day, Gandhi
wrote seeking a date to present the award.46 In
response, the White House scheduling office sent out a routine
internal inquiry seeking opinions on whether or not the
President should accept the award.47 Ann Eder of the
White House Office of Public Liaison testified in a deposition
that she believed preliminary information was obtained on
Gandhi and his foundation indicating that the foundation was
not reputable.48 The White House staff also located
an article discussing the presentation of the award to the
controversial Sasakawa.49 On April 17, 1996, the
scheduling office wrote to inform Gandhi that the President
would not be able to accept the foundation's
award.50
Having been turned down three times in his efforts to gain
a meeting with the President, Gandhi took a new approach.
According to an interview Gandhi provided to Committee
staff,51 a friend of his from Houston alerted him to
an Asian-American fundraising event that would be taking place
in Washington, D.C. at which the President would be present.
Gandhi told Committee staff that on the day of the event, May
13, 1996, Charlie Trie visited him at his hotel in Washington
and suggested a contribution of $500,000 for Gandhi and 25
other individuals to attend the DNC fundraiser at the Sheraton
Carlton Hotel. According to Gandhi, he negotiated with Trie and
ultimately gave Trie a check drawn on his personal account for
$325,000 in exchange for 26 tickets to the event.
Gandhi's contribution represented tickets to a fundraising
dinner for 13 couples. Among the guests Gandhi brought to the
dinner were Fukunaga and Tanaka. Although Gandhi said that his
attendance at the dinner was not for the purpose of giving the
Gandhi award to the President, Fukunaga told the media that he
made the trip to Washington specifically for that
purpose.52 The entire $325,000 was attributed to a
soft money account.53
According to Gandhi, during the dinner he approached
individuals about presenting theaward to the President. Gandhi
claims that he contacted Secret Service agents present at the dinner
and that they set up the award presentation.54 According to
a deposition provided by the DNC general counsel, the persons
responsible for allowing the presentation to be made were then White
House Chief of Personnel Craig Livingstone, who was handling advance
duties for the event, and John Huang.55 The presentation was
apparently hastily arranged in a room near the dinner area and lasted
only a few minutes. The award was presented to President Clinton by
Gandhi and Fukunaga. Soon thereafter, photographs of Fukunaga and
Gandhi with the President appeared on Fukunaga's Internet
website.56
DNC general counsel Joseph Sandler testified at a
deposition that, five months after the event, when he asked
Huang about the Gandhi contribution, Huang told him that Gandhi
had been referred to him by an Indian American activist, who
indicated that Gandhi was interested in attending a DNC event
with the President and presenting the President with an
award.57 Gandhi stated in his interview that he
never met or spoke with Huang until the dinner
itself.58
DNC finance director Richard Sullivan testified at a
deposition that after the May 1996 event, he asked Huang about
the Gandhi check, and Huang told him he wanted to have DNC
general counsel Sandler look into it.59 Sandler
testified that Huang did not bring the check to him for
review.60 According to Sullivan, Huang held the
check for as long as six days. It is unclear whether Huang held
the check in order to evaluate Gandhi's eligibility to
contribute, or because Gandhi had asked him to hold the check
until additional funds were transferred into the account to
cover the $325,000 check.61
Several months later, in October 1996, newspaper articles
began reporting that Gandhi appeared to be insolvent. One
article published on October 23, reported an outstanding tax
lien, revocation of Gandhi's driving license for failure to pay
traffic fines, unpaid bills, and a divorce petition in which
Gandhi claimed pauper status to avoid paying a filing
fee.62 The article reported in particular that in
August 1996, three months after the DNC fundraiser, Gandhi
appeared in small claims court in Contra Costa, California, in
connection with a suit filed by former employees of the
foundation seeking back wages and testified under oath that he
had no American bank accounts or other assets, lived overseas
the majority of his time, and obtained ``all of his funds from
a family trust in India.''63
Following publication of these articles, DNC General
Counsel Sandler made efforts to obtain a copy of the transcript
of the court proceedings in which Gandhi allegedly stated that
he lacked assets. On October 25, Sandler instructed DNC staff
to prepare a return check to Gandhi. Sandler testified at his
deposition that he decided to wait, however, until he had
received and reviewed the court transcript before returning the
funds. According to Sandler, after he received and reviewed the
transcript, and after Gandhi failed to produce additional
information regarding his contribution, Sandler ordered the
return of the contribution. The return was made on November 6,
1996, about two weeks after the press allegations
surfaced.64
During an interview with Committee staff about these
events,65 Gandhi made contradictory statements and
also contradicted information he was identified as having
provided to the media. For example, he told the staff that the
funds for his contribution had come from a wire transfer from a
personal friend after the event. He also stated that he had
asked the DNC to hold his check until he had made sure that the
funds were available. Upon further questioning, he seemed to
retract those statements and indicated that he had received a
series of wire transfers for $500,000 around the time of the
event. When asked about statements in press accounts that his
funds had come from a joint venture which had become
profitable,66 Gandhi characterized those funds as an
``advance'' on a business deal which had fallen through due to
adverse publicity surrounding his DNC contribution.
The Committee subsequently subpoenaed Gandhi's bank account
records. The bank records show that, in May 1996, the same
month as the DNC fundraiser, Gandhi received two wire transfers
of $500,000 and $250,000 through Citibank in New York, from
Japanese businessman Yoshio Tanaka. Absent these transfers,
Gandhi's account did not have sufficient funds to cover the
$325,000 check to the DNC. Tanaka was one of Gandhi's guests at
the fundraiser. Given Tanaka's past history of making regular
wire transfers of similar sums to Gandhi, presumably in
connection with Gandhi and Fukunaga's appearance with
international figures, it is a logical inference that these
wire transfers were intended to repay Gandhi for obtaining the
tickets to the fundraising event at which President Clinton was
present.
No evidence before the Committee indicates that anyone from
the DNC, with the possible exception of Huang, had any
knowledge that the Gandhi contribution was financed by another
person and possibly utilized foreign funds. After press
accounts questioned Gandhi's financial viability, the DNC
obtained the relevant court transcript and returned his money
in full.67 On the other hand, the evidence indicates
that, prior to accepting Gandhi's contribution initially, DNC
personnel failed to obtain apparently readily available
information raising concerns about Gandhi and his foundation,
and never determined that the White House had prior dealings
with him. Given the size of this contribution and how little
was known about Gandhi, a more careful evaluation of his
contribution should have been conducted. For additional
discussion of this topic see Chapters 4 and 5 of this Minority
Report.
hsi lai temple monastics
The Hsi Lai Temple in Hacienda Heights, California, is the
largest U.S. branch of the Fokuangshan Buddhist Order, a
Taiwan-based Buddhist sect founded and led by the Venerable
Master Hsing Yun (``Master'' or ``Hsing Yun'). According to its
literature, the Hsi Lai Temple is the largest Buddhist
monastery in the Western Hemisphere. It was built in 1988 to
further ``humanistic Buddhism'' and to serve ``as a spiritual
and cultural center for those interested in learning more about
Buddhism and Chinese culture.''68 During the 1996
election cycle, the Temple abbess was Suh Jen Wu; her assistant
was Man-Ho Shih; and the Temple bookkeeper was Yi Chu.
On April 29, 1996, Vice President Gore attended a DNC-
sponsored event at the Temple.69 This event had been
organized by Maria Hsia, a long-time Democratic activist and
fundraiser, and a devotee of the Hsi Lai Temple.70
John Huang was the DNC fundraiser in charge of organizing the
event. DNC records attributed a total of $159,000 in
contributions to this event,71 of which $65,000 was
contributed in the form of personal checks by monastics from or
devotees associated with the Temple.72 Each of the
monastics who contributed to the DNC in connection with this
event received a check from the Temple for the full amount of
his or her contribution.73
On September 4, 1997, pursuant to a grant of immunity from
criminal prosecution, the Committee received testimony
concerning the event from three monastics, the Venerable Man-Ho
Shih, assistant to the Temple Abbess; Venerable Yi Chu, the
Temple bookkeeper; and Venerable Man Ya Shih, abbess of a Texas
temple who attended the event while visiting the Hsi Lai Temple
for a seminar with the Master.74 Man-Ho testified
that $45,000 in contributions was raised prior to the date of
the event as a result of calls placed by monastics to devotees
of the Temple.75 She further testified that on the
day after the event she received a telephone call from Maria
Hsia informing her that John Huang needed to raise additional
money in connection with the event to enable him to report
total contributions of $100,000.76 Because she
believed the Temple's abbess was already aware of this need,
Man-Ho spoke with the Temple's bookkeeper, Yi Chu, about
raising the additional funds.77
Yi Chu testified that she approached a number of monastics
at the Temple that day and asked those who had their checkbooks
if they would be willing to donate $5,000. She said that no one
refused. She said that she ultimately received checks from 11
people totaling $55,000.78 These checks were made
out to the DNC and were provided to John Huang.79
Yi Chu further testified that she wrote checks totaling
$10,000 to three individuals--two monastics and one devotee--
who had made contributions prior to the event in order to
reimburse them for their contributions. In addition, she stated
that she wrote reimbursement checks to each of the 11 monastics
who contributed after the event.80 The Temple thus
reimbursed a total of $65,000 in contributions, all of which
were hard money contributions. The reimbursements were all made
from the Temple's general expense account.81
The evidence before the Committee on whether the Temple and
its monastics knowingly participated in a conduit contribution
scheme is mixed. Some monastics apparently were unaware that
the $5,000 checks they were asked to write were for campaign
contributions; Yi Chu testified that the name of the Temple's
security system is ``DNC'' which may have caused some
confusion,82 and Yi Chu herself did not know that
the DNC was a political party.83 Temple officials
also contend that ``reimbursement'' is a misnomer for the
transfer of funds. They explain that the Temple's lifestyle is
a communal one in which members view themselves as members of
one large family. Members often give to the Temple what is
theirs and they receive from the Temple as they need
it.84 In such a lifestyle the line between what
constitutes the personal property of the monastics and what
constitutes the property of the Temple is not as clearly
delineated as it is elsewhere in American society. This concept
was explained in the joint opening statement of the monastics
who testified before the Committee:
For instance, individual monastics often share what
assets they personally have accumulated with the temple
and consider the temple to be their home and provider.
Often, monastics will bring and contribute to the
temple funds which they have access to or that belong
to them from their lay relationships (i.e.,
inheritances or cash savings accumulated prior to their
joining the monastery). While monastics may contribute
their own funds to the temple, at the same time funds
for their living expenses or for some worthy cause will
be provided by the temple. All this is part of the
Buddhist tradition[al] custom of helping one another in
time of need. Thus, as a consequence[], what Americans
call ``reimbursements'' is simply the way by which the
temple helps its monastics to meet living expenses or
to perform good deeds.85
The testimony indicated that the Temple regularly
``reimbursed'' monastics for a wide variety of expenses,
including medical expenses, educational expenses, expenses
incurred in visiting family, and charitable
donations.86 Moreover, in an interview with
Committee staff, Master Hsing Yun indicated that, in his view,
contributions made in connection with a visit to the Temple by
the Vice President of the United States were not an effort to
promote the reelection of a particular candidate, but rather
were a way of expressing gratitude to the United States for all
the assistance it has provided to Taiwan over the
years.87
On the other hand, the evidence indicates that at least
some Temple officials were conscious of possible wrongdoing. Yi
Chu, the Temple bookkeeper, testified that she knew the Temple
could not contribute directly, in its own name, which is why
she had to go through the process of finding individuals to
write checks.88 She and Man-Ho testified that once
the controversy over the event became public, they destroyed
certain documents and altered others. Among the documents Man-
Ho destroyed was a list of those individuals who had
contributed money prior to the Temple event.89 The
alteration of documents involved Yi Chu's adding the words
``futien account'' to the bottom of the reimbursement checks
supplied by the Temple, after those checks had already been
cashed.90 This alteration was significant, because
the checks were drawn on the Temple's general expense
account,91 not the special account used by the
Temple to manage its monastics' personal funds or ``futien
accounts.'' If the monastics had been reimbursed from their
futien or personal accounts, it would have been clear that the
money they were contributing was their own. By adding the words
``futien account'' to the reimbursement checks after the fact--
suggesting that the reimbursements were made with each
monastic's personal funds rather than with the Temple's funds--
Yi Chu seemed to demonstrate an understanding that using the
Temple's funds was improper.
Yi Chu's explanation for her action was that she was
concerned about the press reports concerning the Temple event
and was worried that negative publicity would hurt the Temple's
reputation.92 She stated that she did not want to
embarrass the Vice President or her friend Maria
Hsia.93 She and Man-Ho each testified that they took
their respective actions entirely on their own and were not
instructed to do so by Maria Hsia, John Huang, or anyone else.
Yi Chu and Man-Ho have also indicated that the April 1996
event was not the only time that the Temple had asked its
monastics to make campaign contributions. Man-Ho stated in her
deposition that the practice dated back to at least 1993, when
Hsia asked her whether any of the Temple's devotees would like
to support a fundraiser at which Vice President Gore would be
appearing.94 She indicated that three Temple
devotees contributed a total of $5,000 in connection with that
event, for which the Temple reimbursed them. In 1996, the
Temple asked its supporters to make contributions not only at
the April event, but also for DNC fundraisers in Washington and
Los Angeles,95 a fundraiser for Representative
Patrick Kennedy of Rhode Island,96 and for an event
featuring Hillary Rodham Clinton. She indicated that, in each
case, Hsia requested these contributions, and in each case the
Temple reimbursed its supporters who made
contributions.97
On February 18, 1998, the Department of Justice indicted
Hsia for conspiring with the Temple, from 1993 to 1996, to
reimburse persons associated with the Temple for making
requested campaign contributions. Hsia denies the charges. The
indictment does not allege any facts indicating that foreign
money was involved in the contributions. The indictment also
does not allege any facts indicating the DNC, White House or
John Huang was aware of the conduit contributions.98
Section 441f states that ``[n]o person shall make a
contribution in the name of another person or knowingly permit
his name to be used to effect such a contribution.'' The
evidence before the Committee suggests that the donations made
by the Temple's monastics and devotees appear to have violated
this prohibition, although many of the persons writing the
checks apparently did not understand that they were making
campaign contributions or that they were potentially violating
federal election law. Nevertheless, the evidence suggests that
there was little doubt that most, if not all of them, wrote
checks only because the Temple asked them to do so and did so
with an expectation of reimbursement similar to many other
expenditures they might make. There is no evidence before the
Committee that the Temple used any foreign funds to reimburse
the contributions.99 There is also no evidence
before the Committee that Vice President Gore or any DNC
official knew that the contributions made by persons associated
with the Temple were of questionable legality. The DNC has
returned all contributions made by persons associated with the
Temple.
arief and soraya wiriadinata
Arief and Soraya Wiriadinata were born in Indonesia, became
legal permanent residents of the United States, and resided in
the United States until December 1995.100 Arief
attended graduate school in the U.S. in architectural
engineering and operated a landscape architecture business. He
also was a joint owner of a computer business named Geo-Tech in
Indonesia, a business which he had hoped to develop in the
United States. Arief's wife, Soraya, is the daughter of Hashim
Ning, a wealthy Indonesian businessman who was a friend and
business partner of Mochtar Riady.101
Arief and Soraya Wiriadinata voluntarily consented to be
interviewed by Committee staff. Their interview took place on
June 24, 1997.
In the interview, Arief stated that he and his wife made
all of their campaign contributions through John Huang whom
they first met when Huang visited Soraya's father in the
hospital during the summer of 1995.102 Arief
indicated that Huang encouraged the Wiriadinatas to support the
Democratic Party at that time, although it does not appear that
Huang directly solicited a specific contribution. Arief stated
in the interview that a few months later, in October of 1995,
during a visit to Indonesia, he informed Ning that he intended
to contribute money to the Democratic Party. He indicated that
he thought these contributions would help him build
relationships that would facilitate his business efforts in the
United States.103
On November 2, 1995, the Wiriadinatas opened two bank
accounts--one in each of their names--at First Union Bank.
Three days later, Soraya's father wired $250,000 from an
account under his control to Soroya's account. Two days after
that, he wired another $250,000 to Arief's account. From
November 1995 until December 1996, Soraya made 11 contributions
from her account totaling $226,000. During the same time
period, Arief made ten contributions from his account totaling
$201,000. With the exception of $2,000 contributed to the
congressional campaign of Rep. Jesse Jackson, Jr. (D-Ill.), all
of the Wiriadinatas's contributions were to the DNC and
provided both hard and soft money.104 Many of these
contributions were made after the Wiriadinatas left the United
States and returned to Indonesia in December 1995.
Soraya stated in her Committee staff interview that the
$500,000 wired to the two accounts was her own
money.105 She described it as her portion of the
family's wealth, which her father, an experienced investor, had
been managing for her. She also stated that following her
father's death her brother took on the task of managing her
money. According to an FBI detailee to the Committee who has
worked and lived within Asian communities, such a practice is
not unusual within Asian families.106 No evidence
has been presented to the Committee which contradicts Soraya's
characterization of the money in the accounts as her personal
funds. In addition, the Wiriadinatas voluntarily cooperated
with the Committee investigation and have no history of
wrongdoing. If the money wired to the accounts did, in fact,
belong to Soraya, the Wiriadinatas' contributions would not
appear to violate the prohibition against contributions in the
name of another.
Moreover, as long as the Wiriadinatas were legal permanent
residents, they were eligible to contribute and the prohibition
against foreign contributions did not apply to them. Once the
Wiriadinatas travelled to Indonesia, the law suggests they
endangered their immigration status but it is unclear whether
or at what point they may have lost their permanent resident
status and eligibility to contribute. During their interview,
the Wiriadinatas said that they travelled to Indonesia in
December 1995 due to Ning's illness and remained at the request
of her family after Ning's death, but had ``always planned on
returning to the United States after a year or
two.''107 Under federal immigration law and its
implementing regulations,108 legal permanent
residents who travel abroad may retain their legal permanent
resident status so long as they ``departed from the United
States with the intention of returning'' and the visit abroad
was ``temporary'' or, if protracted, the length of time was due
to ``reasons beyond the alien's control and for which the alien
was not responsible.''109 These determinations are
to be made by immigration officials on a case-by-case basis
when a person claiming permanent resident status seeks to
return to the United States.110 No specific period
abroad automatically causes legal permanent residents to lose
their immigration status, although after six months,
immigration officials typically question individuals claiming
to be returning legal permanent residents.111
Despite the fact that it is unclear if and when the
Wiriadinatas may have lost their permanent legal resident
status, the DNC chose to return all of the funds they
contributed.112
the lum family
In May 1997, Nora and Gene Lum, and their daughter, Trisha,
pleaded guilty to laundering contributions to Democratic
campaigns in 1994 and 1995.113 Nora and Gene Lum
pleaded guilty to making $50,000 in illegal conduit
contributions, primarily through employees and board members of
their Oklahoma-based company, Dynamic Energy
Resources.114 Trisha Lum pleaded guilty to making an
illegal conduit contribution of $10,000 to the Democratic
Congressional Campaign Committee.115 These
contributions, which were primarily from the 1994 election
cycle, demonstrate that contribution laundering is not a new
practice in the 1996 election cycle.
Nora and Gene Lum are Asian Americans who, in 1992, moved
from Hawaii to Los Angeles and launched the Asian Pacific
American Advisory Council (``Council''), a group seeking to
increase support for Democratic candidates among Asian
Americans in Southern California.116 In addition,
the Lums personally contributed to Democratic candidates, with
the bulk of their contributions directed to the 1994 re-
election campaign of Senator Edward Kennedy of Massachusetts,
and an unsuccessful bid for an Oklahoma congressional seat made
by their business partner and co-owner of Dynamic Energy,
Stuart Price.
Beginning in 1994 and continuing for about a year, the Lums
began to use their personal funds and funds from Dynamic Energy
to make conduit contributions.117 Between May 1994
and April 1995, the Lums funneled approximately $50,000 in
conduit contributions into several Democratic campaigns,
primarily through company employees. Their daughter Trisha
served as a conduit for a $10,000 donation to the Democratic
Congressional Campaign Committee, a division of the DNC,
financed with funds from her mother. In August 1997, Michael
Brown, son of the late Secretary of Commerce Ron Brown, a
friend of the Lums, and acting president of Dynamic Energy,
pleaded guilty to participating in the Lums' conduit
scheme.118 After initially donating $1,000 to the
1994 reelection campaign of Senator Kennedy, Brown admitted
receiving another $5,000 from Nora Lum. Brown then used those
funds to make another $1,000 contribution to the Kennedy
campaign in his own name (reaching the $2,000 legal limit on
individual contributions), and used the remaining $4,000 to
reimburse others who made contributions under their
names.119
The Justice Department obtained the convictions of the Lum
family and Michael Brown in 1997.120 To date, the
Justice Department has apparently found no evidence that the
DNC, Senator Kennedy, Stuart Price, or any other candidate or
campaign organization was aware of the Lums' conduit scheme or
knowingly accepted a laundered contribution. The evidence
indicates that as soon as the allegations against the Lums
became known, Democratic party officials and the Kennedy and
Price campaigns returned all relevant
contributions.121
conclusion
The evidence before the Committee confirms that the DNC
received a number of contributions during the 1996 election
cycle that were paid for by someone other than the contributor
of record, and that at least of some of these contributions may
have utilized foreign funds. The evidence did not establish
that the DNC knew or should have known of this misconduct. The
example of the Lums shows that conduit contributions were not a
new practice in the 1996 election cycle.
footnotes
\1\ For more information on Trie and Wu, see Chapter 5: Charlie
Trie, supra.
\2\ See Exhibit 62: DNC In-Depth Contribution Review, DNC 0134-145.
\3\ See Washington Post, 12/18/96.
\4\ Jerry Campane, 7/29/97 Hrg., pp. 71-72.
\5\ Hrg., 7/29/97, p. 150.
\6\ Hrg., 7/29/97, pp. 126-127, 140-141.
\7\ Hrg., 7/29/97, pp. 127-128.
\8\ Hrg., 7/29/97, pp. 125-126.
\9\ Hrg., 7/29/97, p. 128; Yue Chu deposition, 7/9/97, pp. 18-19.
\10\ Hrg., 7/29/97, pp. 130-133.
\11\ Hrg., 7/29/97, pp. 134-135; Xiping Wang deposition, 7/9/97,
pp. 10-16.
\12\ Hrg., 7/29/97, pp. 134-135; Xiping Wang deposition, 7/9/97,
pp. 10-16.
\13\ Yue Chu deposition, 7/9/97, pp. 36-37; Hrg., 7/29/97, p. 137.
\14\ Hrg., 7/29/97, pp. 137-140.
\15\ Hrg., 7/29/97, pp. 138-140, 143. See Exhibit 211: $12,500
check from Keshi Zhan to Ming Chen, 2/19/97; Exhibit 212: $7,500 check
from Keshi Zhan to Ming Chen, 2/19/97.
\16\ Hrg., 7/29/97, pp. 129-130.
\17\ United States v. Yah Lin ``Charlie'' Trie and Yuan Pei
``Antonio'' Pan, Criminal Case No. 98-0029 (U.S. District Court for the
District of Columbia), 1/28/98 (hereinafter referred to as the ``Trie
indictment''), ``Manner and Means of the Conspiracy,'' paragraph 15
(c), (d), (i).
\18\ Trie indictment, ``Overt Acts,'' paragraph 34.
\19\ Jerry Campane, 7/29/97 Hrg., pp. 64-65, 93.
\20\ Jerry Campane, 7/29/97 Hrg., p. 93.
\21\ Trie indictment, ``The Conspiracy,'' paragraph 14.
\22\ See Part 1, Chapter 5: Charlie Trie, for more information.
\23\ Trie indictment, ``Overt Acts,'' paragraphs 43-45, 52.
\24\ Trie indictment, ``Overt Acts,'' paragraphs 48-51. See also
Los Angeles Times, 12/7/97.
\25\ Washington Post, 7/13/97.
\26\ Washington Post, 1/27/97; Clark Wallace deposition, 8/27/97,
pp. 92-93.
\27\ Clark Wallace deposition, 8/27/97, pp. 6-14.
\28\ Jackson served in the Bush Administration as the National
Security Council's chief Asian expert. In 1992, he became Vice
President Quayle's national security adviser. In August 1993, Jackson
and Quayle announced formation of FX Strategic Advisors, Inc., a
consultancy service for foreign-exchange traders and U.S. companies
looking to invest abroad. See Los Angeles Times, 10/10/94; Financial
Times, 9/6/93; Business Times, 6/28/94. Jackson testified before the
Committee on 9/16/97.
\29\ See FEC records and www.tray.com/cgi-win/allindiv.exe.
\30\ UST 2013.
\31\ EOP002958; EOP002959.
\32\ Richard Sullivan deposition, 6/4/97, pp. 125-127.
\33\ Memorandum dated 11/20/6, by Ari Swiller, head of the DNC's
managing trustee program, DNC1143379.
\34\ Ibid.
\35\ Ibid.
\36\ DNC Check Tracking Form, 5/28/96, DNC0829404
\37\ See Los Angeles Times, 10/23/96.
\38\ See Los Angeles Times, 10/23/96.
\39\ Los Angeles Times, 11/2/96 and 10/23/96; EOP 005431.
\40\ Los Angeles Times, 11/2/96.
\41\ Los Angeles Times, 11/2/96.
\42\ EOP 003666 and 003667.
\43\ EOP 003344.
\44\ EOP 003345.
\45\ EOP 005431.
\46\ EOP 005430.
\47\ EOP 008846.
\48\ Eder deposition, 5/28/97, pp. 200-205.
\49\ EOP 4717, October 14, 1987 UPI article.
\50\ EOP 003399.
\51\ Staff interview with Yogesh Gandhi, 3/24/97. Gandhi had
originally agreed to provide a deposition, but at the beginning of the
deposition asserted his constitutional rights under the Fifth Amendment
and refused to provide sworn testimony. He consented to an unsworn,
untranscribed interview.
\52\ L.A. Times 11/2/96.
\53\ See FEC filings.
\54\ Staff interview with Yogesh Gandhi, 3/24/97.
\55\ Joe Sandler deposition, 5/15/97, p. 110.
\56\ Los Angeles Times, 11/2/96.
\57\ Joseph Sandler deposition, 5/15/97, pp. 107-11.
\58\ Staff interview with Yogesh Gandhi, 3/24/97.
\59\ Richard Sullivan deposition, 6/5/97, pp. 34-35.
\60\ Joseph Sandler, 9/10/97 Hrg., p. 13.
\61\ Staff interview with Yogesh Gandhi, 3/24/97.
\62\ Los Angeles Times, 10/23/96.
\63\ Los Angeles Times, 10/23/96.
\64\ Joe Sandler deposition, 5/15/97, pp. 113-116.
\65\ Staff interview with Yogesh Gandhi, 3/24/97.
\66\ See Los Angeles Times, 10/23/96.
\67\ Because the $325,000 contribution was attributed entirely to a
soft money account, section 441f's prohibition on contributions in the
name of another may not apply. See Chapter 20: Overview and Legal
Analysis.
\68\ Hsi Lai Temple Literature, 000860-000865, 861.
\69\ For a discussion of the event itself and the Vice President's
role in it, see Part 1's chapter on John Huang, supra.
\70\ See Howard Hom deposition, 8/27/97.
\71\ DNC document # D 0000974-977.
\72\ Yi Chu, 9/4/97 Hrg., p. 74.
\73\ Yi Chu, 9/4/97 Hrg., p. 44.
\74\ Man Ya Shih deposition, 8/20/97, pp. 13-14, 28-29.
\75\ Man-Ho Shih, 9/4/97 Hrg., p. 31.
\76\ Man-Ho Shih, 9/4/97 Hrg., p. 41.
\77\ Man-Ho Shih, 9/4/97 Hrg., pp. 41-42.
\78\ Buddhist nuns, 9/4/97 Hrg., pp.43-45, 160-163.
\79\ Yi Chu, 9/4/97 Hrg., pp. 46-48.
\80\ Yi Chu, 9/4/97 Hrg., p. 44.
\81\Yi Chu, 9/4/97 Hrg., p. 47.
\82\Yi Chu deposition, 8/7/97, p. 78.
\83\ Yi Chu deposition, 8/7/97, p. 77.
\84\ Monastics of the Fokuangshan Order do not take a vow of
poverty. Although many monastics do turn their wealth over to the sect,
they are not required to do so. Monastics generally receive a monthly
allowance from their Temple based upon their seniority and
responsibilities. Indeed, monastics are allowed to maintain personal
checking accounts at commercial banks. Some also maintain futien
accounts with their individual temple. Such futien accounts are managed
by the Temple on behalf of the monastic. The money from these futien
accounts is typically held in a common account owned by the Temple.
Buddhist nuns, 9/4/97 Hrg., pp. 45, 49-51.
\85\ Buddhist nuns opening statement, 9/4/97 Hrg., p. 195.
\86\ Man-Ho Shih, 9/4/97 Hrg., pp. 56-57.
\87\ Statement of the Venerable Master Hsing Yun presented during
his interview with Committee investigators, 6/17/97.
\88\ Yi Chu deposition, 8/7/97, p. 31.
\89\ Man-Ho Shih, 9/4/97 Hrg., pp. 34-35.
\90\ Yi Chu, 9/4/97 Hrg., p. 64.
\91\ Yi Chu, 9/4/97 Hrg., pp. 47, 74.
\92\ Yi Chu, 9/4/97 Hrg., p.65; Man-Ho Shih deposition, 8/6/97, pp.
155-58; Exhibit 706.
\93\ Yi Chu, 9/4/97 Hrg., p. 65.
\94\ Man-Ho Shih deposition, 8/6/97, pp. 74-84.
\95\ Man-Ho Shih deposition, 8/6/97, pp. 196, 202.
\96\ Man-Ho Shih deposition, 8/6/97, p. 206.
\97\ Man-Ho Shih deposition, 8/6/97, pp. 206-213.
\98\ U.S. v. Maria Hsia, (Criminal Case No.____, D.D.C. 12/18/95).
\99\ Yi Chu, 9/4/97 Hrg., pp. 52 (Glenn), 99, (Lieberman), 107
(Durbin), 163 (Nickles).
\100\ Staff interview of Wiriadinatas, 6/24/97.
\101\ Staff interview of Wiriadinatas, 6/24/97.
\102\ Staff interview of Wiriadinatas, 6/24/97.
\103\ Staff interview of Wiriadinatas, 6/24/97.
\104\ Staff interview of Wiriadinatas, 6/24/97.
\105\ Staff interview of Wiriadinatas, 6/24/97.
\106\ Staff interview of Wiriadinatas, 6/24/97.
\107\ Staff interview of Wiriadinatas, 6/24/97.
\108\ 8 USC 1104; 22 CFR 42.22.
\109\ 22 CFR 42.22(a).
\110\ 22 CFR 42.22(a).
\111\ See 8 USC 1101(a)(13)(C).
\112\ See FEC filings.
\113\United States v. Nora and Gene Lum, Criminal Case No. 97-0207
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97.
\114\ United States v. Nora and Gene Lum, Criminal Case No. 97-0207
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97; see also Los Angeles Times, 6/30/97.
\115\ United States v. Nora and Gene Lum, Criminal Case No. 97-0207
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97; see also Los Angeles Times, 6/30/97; Los Angeles
Times, 5/22/97.
\116\ See Los Angeles Times, 6/05/97; and see also Chicago Tribune,
12/16/97.
\117\ See Los Angeles Times, 5/22/97.
\118\ United States v. Michael A. Brown, Plea Agreement, (D.D.C.),
8/26/97.
\119\ United States v. Michael A. Brown, Plea Agreement, (D.D.C.),
8/26/97; see also Washington Post, 8/29/97.
\120\ United States v. Nora and Gene Lum, Criminal Case No. 97-0207
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97; see also Washington Post, 2/7/96.
\121\ See FEC filings. See also Los Angeles Times, 6/5/97.
PART 3 CONTRIBUTION LAUNDERING/THIRD-PARTY TRANSFERS
Chapter 22: Contributions to the Republican Party
While the Committee spent much time and effort
investigating allegations of laundered contributions to the
DNC, it spent little time investigating similar allegations
with respect to contributions to the Dole for President
campaign, the RNC, and other Republican campaign organizations.
The Committee allocated three hours on one Friday morning to
hearing testimony concerning the admitted laundering scheme of
Simon Fireman and Aqua Leisure Industries. That testimony
established the DNC was not the only campaign organization
which received laundered contributions during the 1996 election
cycle. The Dole for President campaign and other GOP
organizations received more than $250,000 in confirmed
instances of contribution laundering during the same time
period. Moreover, in 1992--four years before the
``unprecedented'' activities which became the focus of this
Committee's investigative efforts--the RNC received $500,000 in
laundered foreign funds from an individual whose case bears
many similarities to those for which the DNC has been
criticized.
findings
(1) Simon Fireman, as a national vice chairman of the Dole
for President campaign, used his company, Aqua Leisure
Industries, Inc., to reimburse contributions to several
Republican Party organizations made in the name of employees of
Aqua Leisure. Over $100,000 in contributions made by employees
of Aqua Leisure to the Bush-Quayle campaign, the RNC, and the
Dole for President campaign were actually corporate
contributions from Aqua Leisure. Fireman was convicted for his
offenses.
(2) Empire Sanitary Landfill, Inc. reimbursed its employees
for over $110,000 in contributions the employees made to the
Dole for President campaign and other Republican campaigns.
Empire was convicted for its offenses.
(3) DeLuca Liquor & Wine, Ltd. reimbursed five of its
employees for $10,000 in contributions the employees and their
spouses made to the Dole for President campaign.
(4) There is no evidence before the Committee that anyone
in the Dole for President campaign, the Bush-Quayle campaign or
the RNC, other than Simon Fireman, knew about the above
activities.
michael kojima
A complete description of the case of Michael Kojima and
his contributions to the RNC is provided in Part 1, Chapter 6.
This discussion will focus solely on his $500,000 contribution
to the Republican Senate-House Dinner Committee and the
evidence which suggests that contribution represented laundered
foreign funds.
On April 28, 1992, Kojima attended a gala RNC fundraiser
known as the President's Dinner. As a result of having
contributed $500,000 to the Dinner Committee, Kojima and his
wife sat at the head table with President and Mrs. Bush for the
Dinner.1 In addition, Kojima brought 23 guests with
him to the Dinner.2 Kojima's $500,000 contribution
was paid for with three checks--two from a company called IMB,
of which Kojima was president, and one from Kojima's personal
account.3
---------------------------------------------------------------------------
Footnotes appear at end of chapter 22.
---------------------------------------------------------------------------
At the time Kojima made his $500,000 contribution to the
RNC, however, he was an individual in deep debt and with few
apparent assets. As president of a partnership known as 2M
Management, he had defaulted on a $655,000 loan in
1989.4 His subsequent business venture, IMB, was
suspended for nonpayment of taxes in 1992.5 Indeed,
a 1992 Washington Post article reported that Kojima had ``a
string of bad debt claims totaling more than $1 million from
previous business ventures.''6 The New York Times
reported that one creditor's attorney ``thought Mr. Kojima had
no assets,'' while another creditor's attorney, after learning
of the Kojima contribution, said his `blood began to boil'. . .
since Mr. Kojima had declared bankruptcy to avoid paying his
debts.'' 7
In addition to his business debts, Kojima was also in deep
personal debt at the time of his contribution, owing hundreds
of thousands of dollars in child support to two former wives.
One former wife had been searching for Kojima for five years to
pay $700 per month in court-ordered child support. The other
former wife told the Los Angeles Times that she had ``given up
searching for the purportedly poverty-stricken Kojima--until he
showed up with the President.'' 8 Within a month
after learning of Kojima's $500,000 contribution to the RNC,
the Los Angeles County District Attorney issued an arrest
warrant for Kojima for nonpayment of child support. In
announcing the warrant, the District Attorney labeled Kojima
``America's most wanted deadbeat dad.'' 9
How then did such an individual come up with $500,000 to
contribute in order to sit at a table with the President of the
United States? Material initially uncovered by CBS News in July
1997 reveals that Kojima's guests at the President's Dinner
included ten Japanese citizens who had flown in from Tokyo just
for the Dinner. Three of these ten were Japanese businessmen
who admitted that they had paid Kojima significant sums of
money in order to attend the President's Dinner. Shuuichi
Nakagawa told CBS News that he had attended the dinner as a
Kojima guest and that Kojima had asked him for hundreds of
thousands of dollars in return. Takashi Kimoto, a real estate
company owner, stated that he ``knows his money went to the
GOP'' [emphasis in original].10
CBS News also released a document apparently provided by
one or more of the Japanese businessmen. Printed in English and
Japanese, the English version appears on IMB letterhead and is
entitled ``Receipt.'' It is addressed to Tsunekasu Teramoto, a
person known to have worked with Kojima and IMB. 11
The next line of the document is the word ``Participant:''
followed by a blank line. The text states, ``Your Participation
for 1992 President's Dinner will be the minimum requirement of
donation at one Hundred Seventy-Five Thousand (US $175,000)
U.S. Dollars.'' The document instructs the money to be remitted
to IMB, providing the location and number of IMB's bank
account. The account number provided is the same account number
that appears on the two IMB checks providing $400,000 to the
Republican Dinner Committee. Below the remittance instructions
is a blank signature line under which is typed ``Michael
Kojima, Co-Chairman.'' If authentic, the document suggests that
Kojima was using his status as a Co-Chairman of the President's
Dinner to obtain huge sums of money from foreign sources in
exchange for arranging attendance at the dinner.
The admissions of the Japanese businessmen, their
attendance at the President's Dinner, and the English/Japanese
receipt bearing IMB's specific bank account number, when
combined with Kojima's history of indebtedness and apparent
lack of assets, provide strong evidence that Kojima's $500,000
contribution to the RNC represented a laundered contribution of
foreign funds.
The Minority found no evidence that the RNC knew at the
time it accepted Kojima's contribution that it represented
laundered funds. There is evidence, however, that concerns
about Kojima's source of funds were brought to the attention of
RNC officials prior to the date of the President's Dinner and
that these concerns were sufficient to lead RNC officials to
question Kojima about his contribution. A memorandum written by
two fundraisers for the Dinner four days before the Dinner
itself stated:
Chuck Babcock of the Washington Post has called numerous
times, over the past two days, regarding the donations of Mr.
Kojima. Mr. Kojima is listed as one of the largest donors to
The Dinner in the FEC report which was filed on April 15. . . .
Babcock has been unable to find out any information
regarding Mr. Kojima which raised his interest. . . .
He had the Post's Los Angeles bureau check Secretary of
State documents in California and found the only reference to a
``Michael Kojima'' one who was a chef who owned, at one time, a
series of restaurants.
His further research indicated that the address listed as
the headquarters of International Marketing Bureau was also the
address of one of the restaurants owned by the Michael Kojima
he could find. . . .
His specific concerns . . . ``How do you know whether these
checks come from the assets of his corporation or whether they
are the result of laundered money?''
This question raised our concerns to the point where we
placed a call to Mr. Kojima and asked him about his business.
Mr. Kojima, in a phone conversation with Rich and Betsy
said:
(1) His business is ``international marketing'';
(2) He has clients in ``various countries''
including: The USA, Japan, Hong Kong and Israel;
(3) He is involved in ``organizing consortiums'' for
``national projects'' such as airports and
telecommunications systems. . . .
(4) We specifically asked him the source of funds
which are represented by the checks he has sent. He was
asked if they were from corporate proceeds or ``from
individuals who had chosen to donate to The Dinner.''
His specific answer was that the checks were
``corporate assets, my own corporation assets.''
We feel much more comfortable now, having spoken to Mr.
Kojima:
--That we have taken reasonable steps to ensure the
funds he has sent to The Dinner are from a legitimate
source;
--That he understood the nature of our concerns; and,
--That he answered our questions with no hint of
evasion.'' 12
In light of the questions put to Kojima by the Dinner
personnel and the assurances received from him, the evidence
does not support the conclusion that the RNC accepted Kojima's
contribution with the knowledge that it represented laundered
funds. However, in light of subsequent evidence, the RNC's
failure to return the $215,000 it still retains from the Kojima
contribution is disturbing. Particularly in light of the
evidence presented in this Minority Report that foreign funds
were the source of Kojima's contribution, the RNC should
immediately return the $215,000 it received from Kojima.
aqua leisure industries, inc.
Aqua Leisure Industries, Inc., based in Avon,
Massachusetts, was founded by Simon Fireman in 1970. Over the
years, Fireman built Aqua Leisure, a relatively small company,
into one of the largest distributors of aquatic sports
equipment in the world. In October 1996, Fireman pleaded guilty
to eleven counts of a federal criminal information charging him
with a scheme to funnel over $120,000 in illegal corporate
contributions from Aqua Leisure to the Bush-Quayle campaign,
the RNC, the Dole for President campaign, and other campaigns.
At the same time, his company pleaded guilty to seventy counts
in connection with the scheme. One month later, Carol A.
Nichols, Fireman's executive assistant, pleaded guilty to one
count of conspiracy in connection with the same
scheme.13
Fireman has been active in politics since the Carter
administration. Originally a liberal Democrat, he changed party
affiliation early in the administration of Ronald Reagan.
Fireman had been named to several presidential trade committees
by both Presidents Carter and Reagan. 14 He was also
appointed to the board of directors of the Export-Import Bank
by Presidents Reagan and Bush. 15
In late 1991 and early 1992, Fireman and Nichols provided
approximately $21,000 to Aqua Leisure employees in order for
them to make contributions to the Bush-Quayle
campaign.16 Nichols told Committee investigators
that she believed Fireman had hoped to be appointed to a
prominent position within the Bush administration and that he
had therefore made commitments to raise money for the 1992
Bush-Quayle campaign committees.17 According
toNichols, when Fireman found it difficult to raise the money he had
promised, he devised the scheme to solicit employees of Aqua Leisure
and to reimburse them for their contributions.18 Fireman and
Nichols decided upon which employees to solicit and then Nichols made
the actual solicitation.19 Once an employee agreed to
contribute, Nichols collected a personal check from the employee and
reimbursed the employee with cash from an account controlled by
Fireman.20 In addition to soliciting Aqua Leisure employees,
Fireman loaned money from Aqua Leisure to an outside individual who
gave that money to his own set of contributors to make contributions to
the Bush-Quayle campaign.21
A similar pattern of soliciting and reimbursing Aqua
Leisure employees was followed in subsequent years as Fireman
funneled Aqua Leisure funds to several other campaign
organizations, including $24,000 to the RNC in 1992, $6,000 to
the ``Citizens for Joe Kennedy Committee'' in 1993, and $69,000
to the Dole for President campaign in 1995.22 With
respect to the contributions to the Dole campaign, Fireman once
again loaned money to an outside individual in order to
facilitate contributions from a set of contributors known to
this individual.23
At the time of the contributions to the Dole campaign,
Fireman was a national vice chairman of Dole's campaign finance
committee. Again, Nichols told Committee investigators that she
believed Fireman's motive for contributing to the Dole campaign
was a desire to obtain a position in a future Dole
administration.24 This belief was confirmed by the
criminal information, which stated that ``one goal and
objective, among others, of Simon C. Fireman's secret scheme to
funnel money to the presidential campaign of Robert Dole was to
obtain for Simon C. Fireman a position with the United States
government.'' 25
What makes Fireman's activities particularly egregious is
that he not only laundered illegal corporate contributions, but
that those contributions represented foreign funds. In
approximately 1985, Fireman formed a trust known as Rickwood
Ltd. in Hong Kong. The purpose of this trust was to make
certain expenditures for the benefit of Fireman that Fireman
wished to conceal.26 According to the criminal
information, the Rickwood trust maintained a bank account in
the U.S. and received wire transfers of funds from Hong
Kong.27 These funds came from a Hong Kong company
known as Greyland Trading Company, which had been acquired by
Fireman in 1988.28 All of the money used to
reimburse contributors came from the bank account of the
Rickwood trust,29 and was withdrawn in such a manner
as to avoid detection and reporting by the bank where the
account was maintained.30
The U.S. Attorney for the District of Massachusetts has
noted that there is no evidence to suggest that any of the
candidates or campaigns who received these laundered
contributions were aware of Fireman's scheme. Shortly after
questions about Fireman's contributions first arose, the Dole
campaign accepted his resignation from its finance committee.
In addition, the campaign placed all donations involving Mr.
Fireman into an escrow account pending the outcome of a federal
inquiry. After Fireman pleaded guilty, the campaign turned
those contributions over to the U.S. Treasury.31
In connection with his guilty plea, Fireman agreed to pay a
total of $6 million in fines. At the time, that represented the
largest fine ever levied for a violation of campaign finance
laws.32 That record would soon be eclipsed, however,
by another illegal corporate contributor to the Dole campaign,
Empire Sanitary Landfill.
EMPIRE SANITARY LANDFILL, INC.
Empire Sanitary Landfill, Inc., a solid waste transfer,
disposal and landfill business located in Scranton,
Pennsylvania, is another company which has admitted to
illegally funneling corporate contributions through its
employees and their relatives during the 1996 federal election
campaign.
On October 7, 1997, Empire agreed to plead guilty to a 40-
count federal criminal information filed by the United States
Attorney for the Middle District of Pennsylvania.33
According to the criminal information, Empire's former upper
management made campaign contributions themselves and solicited
such contributions from numerous Empire employees, family
members, and business associates.34 They then used
corporate funds to reimburse themselves and those they had
solicited.35 In connection with this scheme, $80,000
in laundered corporate contributions was provided to the Dole
for President campaign.36
In addition to its contributions to the Dole campaign,
Empire also admitted to funneling contributions to nine other
political campaigns, including $10,000 to the ``Arlen Specter
'96'' campaign, $6,000 to the ``Santorum '94'' campaign,
$10,000 to the ``Haytian-U.S. Senate '94'' campaign, $3,000 to
the ``Fox for Congress'' campaign, $1,000 to the ``Paxon for
Congress'' campaign, $5,000 to the ``Duhaime for Senate''
campaign, $3,000 to the ``Pallone for Congress'' campaign,
$1,000 to the ``Friends of Max Baucus'' campaign, and $10,000
to the ``Clinton/Gore '96 Primary Committee.'' In announcing
Empire's plea agreement, the U.S. Attorney noted that there was
no evidence to suggest that any of the candidates or campaigns
knew of the illegality of the contributions.37
Simultaneous to the announcement of Empire's plea
agreement, the U.S. Attorney also announced that a federal
grand jury sitting in Scranton, Pennsylvania had returned a
140-count indictment charging six individuals with a variety of
criminal offenses arising out of Empire's illegal
contributions.38 These individuals included several
former officers and owners of Empire, as well as business
associates of Empire and a Pennsylvania state representative in
whose district Empire did business. The indictment provides the
details of the government's theory as to how Empire's
contributions were laundered.
According to the indictment, in April 1995, Empire's former
president and its former assistant secretary were invited to
become members of the New Jersey Steering Committee, a
fundraising arm of the Dole for President
campaign.39 A Steering Committee luncheon was
scheduled for April 29, 1995.40 Prior to that
luncheon, the Empire officials and others solicited numerous
Empire employees, as well as their own friends and families in
an effort to raise funds for the Dole campaign.41
The donors were instructed to issue personal
checks.42 At the Steering Committee luncheon the
Empire officials turned over a large envelope containing
approximately $80,000 in contributions to officials of the Dole
campaign.43
The indictment further charges that Empire issued
approximately nine corporate checks directly reimbursing
approximately twenty individuals a total of
$20,000.44 In addition, the indictment charges that
one of Empire's officials issued approximately 34 personal
checks reimbursing 53 individuals a total of
$58,000.45 This official was then issued an Empire
corporate check for the $58,000, as well as for $2,000 in
contributions he and a friend had made.46
The contributions to the other campaigns followed a similar
pattern. In connection with a fundraising event attended by one
or more officials of Empire, employees of Empire and others
were solicited to make contributions. These individuals were
instructed to write personal checks and were then reimbursed
either directly by Empire or indirectly through one of Empire's
officials.
It should be noted that the defendants charged by the
indictment have pleaded not guilty to all counts and a trial
has not yet taken place. Empire has pleaded guilty to its role
in these activities. In connection with its plea, Empire agreed
to pay a fine of $8 million, the largest penalty ever for a
campaign finance violation.47
DELUCA LIQUOR & WINE, LTD.
DeLuca Liquor & Wine, Ltd. (``DeLuca''), located in Las
Vegas, is one of the largest distributors of liquor, wine, and
beer in Nevada. In 1995, the company, acting through its vice
president for operations, funneled $10,000 in corporate
contributions to the Dole for President campaign through five
of its employees and their spouses.
Between May 19 and 22, 1995, five DeLuca employees and
their spouses each made $1,000 contributions to the Dole for
President campaign. At least two of those contributors later
admitted that they had been given money by DeLuca to make the
contributions.48 According to the Kansas City Star,
Ray Norvell, DeLuca's vice president in charge of its Nevada
operations, ``acknowledged that he knew federal law prohibited
corporate contributions, so he boosted his workers'' pay to
help them donate.'' 49 The Star quoted Norvell as
saying, ``I give them $5,000 extra salary to give to political
campaigns and also to charities. We are prepaying it,
basically, in front.'' 50 Approximately seven or
eight DeLuca employees received this ``contribution
allowance,'' according to Norvell.51
While stressing to the Star that DeLuca did not reimburse
its employees for political contributions, Norvell
``acknowledged that he asked `a few' of his employees to
contribute, using the portion of their salaries designated for
political and charitable contributions.'' 52 One of
the contributors, Michelle McIntire, whose husband Dale works
for DeLuca, stated that she would not have contributed to the
Dole campaign if DeLuca had not paid for the
donation.53 The Star quoted McIntire as saying,
``they gave us the money. That was something that the company
wanted him [Dale] to do, and so that's what we did.''
54 Dale McIntire also admitted to making his
contribution using money from DeLuca; however, he would not say
how the company compensated him.55 Of the other
eight DeLuca employees who contributed, three denied that the
company had compensated them and five either refused to discuss
the matter or stated they did not remember.56
Documents produced to the Committee by DeLuca and the Dole
for President campaign, pursuant to subpoena confirm this
scheme. At the same time, these documents indicate that those
employees who contributed to the Dole campaign were given money
specifically for those donations and not as part of some
general ``contribution allowance.'' The DeLuca documents show
that on May 18, 1995, five checks for $2,000 each were issued
to the following DeLuca employees: Ray E. Norvell, Kenneth W.
Leslie, Dale McIntire, James P. O'Connor, and Bruce
Kobrin.57 The corporate payment stub attached to the
check for Norvell actually included the notation ``Campaign--
Dole.'' 58
Records produced by Dole for President show that on May 19,
1995, Norvell, McIntire, Kobrin, and each of their wives wrote
checks for $1,000 to the Dole campaign.59 On May 22,
1995, Leslie, O'Connor, and both of their wives also wrote
checks for $1,000 each to ``Dole for President.'' 60
Thus, within two business days of DeLuca's payments of $10,000
to five of its employees, the same dollar figure had been
contributed to Dole's presidential campaign by those employees
and their wives.
The Minority is aware of no evidence that the Dole campaign
had any knowledge of the DeLuca scheme. It is troubling,
however, that the Dole campaign has never returned the
contributions of the DeLuca employees, despite the fact that
information detailing the scheme has been public since at least
September 1996. Indeed, a Dole campaign spokesperson
acknowledged at that time that an FEC investigation might be
warranted.61 In light of the public admissions of
DeLuca's vice president and the supporting documentation
uncovered by the Committee, the Dole campaign should
immediately refund these contributions.
CONCLUSION
The preceding examples of illegally laundered contributions
making their way into Republican campaign coffers, apparently
without the knowledge of the campaign organizations involved,
provides much-needed perspective to the allegations that have
been raised concerning laundered contributions to Democratic
candidates and organizations. As was the case with Kojima,
Fireman, DeLuca, and Empire Landfill, illegal conduct on the
part of fundraisers for the party does not necessarily mean
that the recipients of such funds are complicit in a scheme to
violate campaign finance laws. Instead, as past experience has
shown, both Republicans and Democratic party organizations or
campaigns can find that they have been victimized by
overzealous or unscrupulous fundraisers. Campaigns are likely
to continue to encounter such difficulties so long as the
political system's demand for money continues to rise
unchecked.
Footnotes
\1\ Toronto Star, 10/11/92.
\2\ Memorandum from Betsy Ekonomou to Michael Kojima, 4/20/92.
\3\ Check from Michael Kojima to President's Dinner Trust, 3/6/92 ;
Check from Michael Kojima to President's Dinner Trust, 3/16/92
\4\ Letter to Michael Kojima from Lippo Group Bank of Trade, 3/3/
87; Lippo Group Bank of Trade Credit Proposal for Michael Kojima, 4/9/
87; Lippo Group Bank of Trade Promissory Note, 4/14/87; Lippo Group
Bank of Trade memorandum from James Riady to Richard Chen, 8/8/89.
\5\ State of California Secretary of State Certification, 5/20/97.
\6\ Washington Post, 5/8/92.
\7\ New York Times, 5/9/92.
\8\ Los Angeles Times, 5/9/92.
\9\ New York Times, 10/11/92; Los Angeles Times, 10/11/92; New York
Times, 10/18/92; and Daily News, 10/15/96, Dallas Morning News, 10/11/
92.
\10\ CBS News Story Script, 7/7/97. CBS News has reprinted several
photographs of Kojima's guests at the President's Dinner on its website
www.eveningnews.com/moneytrail2.html.
While Kojima's guest list for the dinner has not been produced to
the Committee, Kimoto's name does appear in a State Department document
summarizing a 3/19/92 meeting between Kojima and the U.S. ambassador to
Japan. The document lists Kimoto as a participant at the invitation of
Kojima, thereby providing evidence that the two were engaged in
business dealings in the month before the President's dinner. State
Department Memorandum of Conversation, 3/19/92.
\11\ IMB letterhead receipt. Teramoto, for example, attended
meetings with Kojima and U.S. embassy personnel, and is listed on
embassy documents summarizing the meetings. State Department Memorandum
of Conversation, 3/19/92.
His name also appears in correspondence between Mr. and Mrs. Kojima
and Harvard University, including a 3/10/92 letter from Mrs. Kojima
which describes Teramoto as Kojima's ``Japan agent.'' Letter to Leonard
Houseman from Chiey Nomura, 3/10/92.
\12\ Memorandum to Senator Howard Baker from Betsy Ekonomou, 4/24/
92. This memorandum is referenced in the Court decision, 858 F.Supp.
243, 245, footnote 5, and is available in the public file associated
with the 1992 court case.
\13\ New York Times, 7/11/96; Kansas City Star, 11/5/96; Plea
agreement letter re: Aqua Leisure to John Pappalardo from the
Massachusetts District U.S. Attorney, 6/26/96; Plea agreement letter
re: Simon Fireman to Thomas Dwyer from the Massachusetts District U.S.
Attorney, 6/26/96.
\14\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\15\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\16\ Hrg.,7/25/97, p. 10; Information, United States of America v.
Simon C. Fireman, Carol A. Nichols, and Aqua Leisure Industries, Inc.,
United States District Court for the District of Massachusetts.
\17\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\18\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\19\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\20\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\21\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, pp. 8-9.
\22\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, pp. 5-6.
\23\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, pp. 8-9.
\24\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
\25\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, p. 4.
\26\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, p. 8.
\27\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, p. 8.
\28\ Memorandum of Interview of Carol Nichols, 7/22/97. See also,
Notes to Financial Statements, Aqua Leisure Industries, Inc., 12/31/94.
\29\ Memorandum of Interview of Carol Nichols, 7/22/97;
Information, United States of America v. Simon C. Fireman, Carol A.
Nichols, and Aqua Leisure Industries, Inc., United States District
Court for the District of Massachusetts, 10.
\30\ Information, United States of America v. Simon C. Fireman,
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States
District Court for the District of Massachusetts, pp. 10-11.
\31\ New York Times, 7/11/97.
\32\ New York Times, 7/11/97.
\33\ Plea Agreement, United States of America v. Empire Sanitary
Landfill, Inc., United States District Court for the Middle District of
Pennsylvania.
\34\ Plea Agreement, United States of America v. Empire Sanitary
Landfill, Inc., United States District Court for the Middle District of
Pennsylvania, p. 3.
\35\ Plea Agreement, United States of America v. Empire Sanitary
Landfill, Inc., United States District Court for the Middle District of
Pennsylvania, p. 3.
\36\ Plea Agreement, United States of America v. Empire Sanitary
Landfill, Inc., United States District Court for the Middle District of
Pennsylvania., p. 5.
\37\ Press Release, David M. Barasch, U.S. Attorney, U.S.
Department of Justice, 10/8/97.
\38\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini , United States District Court for the Middle
District of Pennsylvania.
\39\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 9.
\40\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 9.
\41\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 9.
\42\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 9.
\43\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 10.
\44\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 10.
\45\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 10.
\46\ Indictment, United States of America v. Renato P. Mariani,
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio
and Frank Serafini, United States District Court for the Middle
District of Pennsylvania, p. 10.
\47\ Plea Agreement, United States of America v. Empire Sanitary
Landfill, Inc., United States District Court for the Middle District of
Pennsylvania; Pittsburgh Post-Gazette,10/22/97.
\48\ Kansas City Star, 9/29/96.
\49\ Kansas City Star, 9/29/96.
\50\ Kansas City Star, 9/29/96.
\51\ Kansas City Star, 9/29/96.
\52\ Kansas City Star, 9/29/96.
\53\ Kansas City Star, 9/29/96.
\54\ Kansas City Star, 9/29/96.
\55\ Kansas City Star, 9/29/96.
\56\ Kansas City Star, 9/29/96.
\57\ Copies of canceled checks and bank statements produced by
DeLuca Liquor & Wine, Ltd, DEL-0002, 0004, 0014, 0019, and 0022.
\58\ Copy of payment stub for a DeLuca check made out to Ray E.
Norvell in the amount of $2,000, 5/18/95, DEL-0003.
\59\ Copies of canceled checks and donor records produced by Dole
for President, DFP-2132, 2141, 2144, 2153, 2156, and 2159.
\60\ Copies of canceled checks and donor records produced by Dole
for President, DFP-2135, 2138, 2147, and 2150.
\61\ Combined News Services, Newsday, 9/30/96.
PART 4 SOFT MONEY AND ISSUE ADVOCACY
Chapter 23: Systemic Problems of the Campaign Finance System
The Committee's investigation into campaign financing
during the 1996 election cycle exposed a system in crisis, with
most problems stemming not from activities that are illegal
under current law, but from those that are legal. Soft, or
unrestricted and unregulated, money is a relatively new legal
loophole in the campaign financing system. Since 1988, however,
it has become the crux of many of the current problems
uncovered by the Committee, including the offers of access for
large contributions and the use of party-run issue ads on
behalf of candidates.
Based on the evidence before the Committee, we make the
following findings with respect to the role of soft money in
the federal campaign finance system:
findings
(1) The most insidious problem with the campaign finance
system involved soft (unrestricted) money raised by both
parties. The soft money loophole, though legal, led to a
meltdown of the campaign finance system that was designed to
keep corporate, union and large individual contributions from
influencing the electoral process.
(2) The vast majority of issue ads identified specific
candidates and functioned as campaign ads.
(3) Both parties went to significant lengths to raise soft
money, including offering access to party leaders, elected
officials, and exclusive locations on federal property in
exchange for large contributions. Both parties used issue ads,
which were effectively indistinguishable from candidate ads and
which--unlike candidate ads--can be paid for in part with soft
(unrestricted) money, to support their candidates.
introduction
The Committee investigation into campaign financing during
the 1996 election cycle exposed a system in crisis, with most
of the problems stemming, not from activities that are illegal
under the current law, but from activities that are legal.
For four days in September 1997, the Committee heard from
respected experts who argued the case for campaign finance
reform and presented recommendations to remedy the problems
that plagued the 1996 election cycle.1 The witnesses
were virtually unanimous in declaring that the current campaign
finance system is broken, that the problems are bipartisan, and
that there are solutions available if both parties are willing
to tackle the problem.
The witnesses included former Vice President Walter Mondale
and former Senator Nancy Kassebaum Baker, as well as former
Chairman of the Federal Election Commission (``FEC'') Trevor
Potter and representatives from the Brookings Institution,
American Enterprise Institute, Common Cause, the Campaign
Reform Project, League of Women Voters, Cato Institute,
Committee for the Study of the American Electorate, Public
Campaign, Brennan Center for Justice, and professors of law and
economics from the University of Virginia, Rutgers University
and Colby College. The witnesses' views ranged from those who
support unlimited private money to finance campaigns to those
who advocate public funding of elections on the ground that
only removal of private money from elections will fix the
system. Most, however, supported an incremental approach to
reform falling somewhere between the two poles. With few
exceptions, the witnesses advocated a soft money ban and
curtailment of so-called issue advocacy advertisements as
critical steps to reform. Thomas Mann of the Brookings
Institution testified that if the system of unlimited soft
money and unregulated issue advocacy is not reformed soon,
``[I]t could become much worse. I could imagine a scenario in
the next presidential election in which we will look back
fondly on the experience of 1996.'' 2
soft money
Soft money is a relatively new phenomenon in campaign
financing, not having been raised in large amounts until the
1988 election cycle. Since then, however, it has become the
crux of many of the problems with the current campaign finance
system, including the drive to raise vast sums of money, the
appearance of party leaders trading favors for contributions,
and the appearance of wealthy individuals buying access to
elected officials. Most of the witnesses agreed with the
sentiment of former Vice President Walter Mondale who
testified: ``The work of this Committee, as difficult as it has
been, has established a record that is available for every
American that demonstrates that at the heart of this crisis in
American democracy lies this new phenomenon called soft
money.'' 3
Background on soft money
Because entities with large concentrations of wealth long
have been recognized as having the potential to corrupt the
federal election process, the law has prohibited corporations
and labor unions from contributing to federal candidates for
most of the 20th century.4 Contributions from
individuals likewise have been capped by law in order to
prevent the corruption or appearance of corruption of the
electoral process.5 Soft money contributions provide
corporations, labor unions, and wealthy individuals with a way
around those legal restrictions.
---------------------------------------------------------------------------
Footnotes appear at end of chapter 23.
---------------------------------------------------------------------------
Soft money has been defined as ``contributions to political
parties'' ``non-federal accounts'' that fall outside the legal,
``hard money'' limits on contributions to federal candidates.''
6 The justification for allowing soft money
contributions was to permit parties to spend money on state
elections and so-called ``party building'' activities. The
campaign finance hearings have demonstrated that this loophole
is now being used by both parties to spend huge sums of soft
money to support or defeat federal candidates.
In the late 1970s, after the passage of the current
campaign finance laws, soft money did not exist. Former Vice
President Mondale, who was on the national ticket in the 1976,
1980, and 1984 presidential elections, recalled that soft money
at that time was used for the limited purposes of local voter
registration.7 Mondale recalled that ``during that
period . . . the federal campaign regulations worked and . . .
worked quite well.'' Mondale indicated that he believed former
President Ford shared his views, which would explain why former
President Ford also supports a soft money ban.8
The reason soft money was not widely used until roughly a
decade ago 9 is due in part to the fact that the
current campaign finance system, including provisions for
raising and spending soft money, evolved piecemeal out of
numerous judicial decisions and agency rulings that
fundamentally altered the campaign finance system originally
envisioned by Congress. The law was patched together from,
among other things, the 1976 Buckley decision which struck down
spending limits that were part of the original campaign finance
system; 10 the 1978 FEC Advisory Opinion that gave
political parties the option of spending soft money when a
federal race coincided with a state race; 11 and
recent federal court decisions that have expanded the use of
so-called issue advocacy ads.12 As Mondale noted,
``what we have here is a new phenomenon, never contemplated or
adopted into law by the Congress.'' 13
Both parties have raised and spent increasing amounts of
soft money with every election cycle. In 1992, the first year
that parties reported their soft money contributions, FEC
records indicate that the total soft money raised by both
parties was $89 million. By 1994, that figure reached nearly
$107 million. In 1996, the amount of soft money raised by both
parties more than doubled to $262 million.14 FEC
figures also indicate that the Republican Party has
consistently raised more soft money than the Democratic Party.
In 1992, Republicans raised $15 million more than Democrats; in
1994, Republicans raised $13 million more; and in 1996,
Republicans out raised Democrats by $14 million.15
If Congress does not act, those amounts are likely to continue
to increase during the 1998 and 2000 election cycles.
FEC records also show that, while the Republican Party wins
the overall race for soft money, in many instances both parties
benefit from soft money contributions by the same donor. In
1996, for example, corporations such as RJR Nabisco, AT&T, and
Walt Disney were among the top contributors to both parties. In
the words of Common Cause President Ann McBride, ``[S]oft money
is not about ideology. . . . It is about making sure `whoever
wins, my special interest has a place at the table'. . . . It
is about gaining access and influence.'' 16
Soft money finds a way into federal elections
``When Congress amended the Federal Election Campaign Act
in 1979 to promote party-building, its purpose was not to allow
national party committees to receive unlimitedcontributions or
to accept corporate and labor funds,'' according to Colby College
Professor Anthony Corrado.17 Nevertheless, party leaders and
candidates on both sides of the aisle over the years have devised
numerous ways for millions of dollars in corporate and union money to
be spent influencing federal elections. The most blatant use of soft
money for federal purposes involves issue advocacy. Additionally, soft
money is funneled through state parties, congressional campaign
committees, and leadership political action committees (``PACs''),
where its use for federal election activity becomes difficult to trace.
Political parties have a constitutional right to inform the
public of their positions on issues. However, in 1996, both
parties ran televised advertising which they characterized as
educating the public on issues, but which struck many viewers
as actually promoting the election of each party's candidates.
These televised ads were paid for, in part, with soft money.
The issue ads run in 1995 and 1996 by the Democratic
National Committee (``DNC'') were ``focused on the Republican
Congress's role in the government shutdown, the future of
Medicare, the strength of the economy and the reduction of
crime in America,'' according to the Annenberg Public Policy
Center.18 Although these ads discussed pending
legislative issues, many were designed to and did help
President Clinton's re-election efforts.19 The
Annenberg study noted that the Republican National Committee
(``RNC'') similarly engaged in a calculated effort to use soft
money ``before the Republican convention for ads that helped
Bob Dole's campaign.''20 Former RNC Chairman Haley
Barbour, who was involved in spending soft money on ads that
told Bob Dole's life story, told the press: ``The law allows
the party to do advertising on the issues. The Democrats have
already spent money doing it. It does not have to be
independent, and it can be candidate-specific. I can mention
Bob Dole. But I can't say, `Vote for Dole.' ''21
When national political parties use soft money to pay for
federal campaign activities such as the ads described above,
they are required by law to spend a percentage of hard money as
well.22 In presidential election years, national
parties must spend a ratio of 65 percent hard money to 35
percent soft. State parties are also required to spend a
combination of hard and soft money when paying for certain
activities such as issue advocacy ads, but are often permitted
by state law to use a greater proportion of soft money than the
national parties. In 1996, both parties ``took advantage of the
more soft money favorable state party allocation formulas [by]
transferring large sums to state party committees and
encouraging state parties to pay for expenses so that more soft
money could be used for their costs,'' according to
Corrado.23 These transfers meant that more corporate
and union money was used to pay for advertising when the ads
were paid for by the state, rather than the national,
parties.24
Like the national party committees, the parties' national
senatorial and congressional campaign committees raise and
spend soft money in ways that render prohibitions on corporate
and union contributions virtually meaningless. Senatorial and
congressional campaign committees are intended, as their names
imply, to help elect United States Senators and
Representatives. In 1996, the National Republican Senatorial
Committee raised over $29 million in soft money, compared with
$14 million raised by the Democratic Senatorial Campaign
Committee. The National Republican Congressional Committee
raised $18.5 million in soft money, while the Democratic
Congressional Campaign Committee raised $12
million.25 The amounts of soft money raised by the
House and Senate committees increased dramatically over
previous years, demonstrating the greater importance of soft
money in the last election cycle.26 Like soft money
raised by the DNC and RNC, soft money raised by the House and
Senate committees was spent on activities such as issue
advocacy.27
Another indication that soft money is infiltrating federal
elections is that it was raised and spent by at least one
federal officeholder's ``leadership PAC.'' Leadership PACs are
established by a Member of Congress to help elect federal
candidates. In 1996, the media reported that a leadership PAC,
Americans for a Republican Majority, had raised at least
$175,000 in corporate money.28 Most of this money
was reported to have come from tobacco interests and was spent
in Virginia, although at least $12,000 in corporate money was
reportedly transferred to the state party's hard money
account.29 A newspaper editorial noted, ``[E]veryone
knows that using [soft] money to defray overhead increases the
non-corporate funds . . . available to help Congressional
candidates and secure [the leadership PAC Member's] place on
the House leadership ladder.''30 When a federal
officeholder raises large sums of corporate money for a
leadership PAC, it seems evident that such funds may inure to
the benefit of a federal candidate, rather than for party
building or state election activities.
Soft money creates appearance of corruption and undermines public
financing
Burt Neuborne of the nonpartisan Brennan Center testified
that, ``[T]he democratic process is eroded by the desperate
search for money.''31 The raising and spending of
tremendous amounts of soft money, in particular, destroys the
basic tenet of the campaign finance law, which is to deter
corruption and the appearance of corruption. Additionally, the
search for soft money undermines the system of presidential
public funding, which was originally put in place so that
presidential candidates could rise above the fundraising fray.
The Supreme Court upheld the campaign finance law's
contribution limits, in part, by holding that there is
legitimate cause for concern from ``the appearance of
corruption stemming from public awareness of the opportunities
for abuse inherent in a regime of large individual financial
contributions.''32 The Court went on to say that,
``Congress could legitimately conclude that the avoidance of
the appearance of improper influence `is also critical . . . if
confidence in the system of representative government is not be
eroded to a disastrous extent.' ''33
Roger Tamraz, a contributor to both parties, proudly
extolled the virtues of soft money as the means for providing
him with access to the White House.34 Videotapes of
Presidents Clinton and Reagan thanking supporters at the White
House suggest special access for big donors. Offers of access
are commonly used as an incentive to obtain large
contributions. For example, individuals who raised or donated
$250,000 for the 1997 RNC Annual Gala were promised, among
other things, ``Breakfast and Photo Opportunity with Senate
Majority Leader Trent Lott and Speaker of the House Newt
Gingrich on May 13, 1997; Luncheon with Republican Senate and
House Leadership and the Republican Senate and House Committee
Chairmen of your choice.''35
The appearance of corruption, in which large contributions
appear to be traded for access to government officials or
favored treatement, and the resulting loss of public confidence
in government are two of the most serious consequences of the
soft money system. Less apparent, but nearly as insidious, is
the time elected officials must spend raising soft money.
Former Vice President Mondale testified that, ``[I]t is the
most degrading and humiliating thing that can happen to a
public officer to have to spend a substantial chunk of his or
her time pleading for money in this kind of way. . . . That is
one of the most powerful arguments for repeal of the soft money
loophole.''36 Evidence that President Clinton, Vice
President Gore, and House Speaker Newt Gingrich made
fundraising telephone calls should concern the American public,
not because of where the calls originated (on or off federal
property), but because the three most powerful elected
officials in the country were spending time fundraising rather
than focusing on national policy.
In addition to the corrupting influence of soft money,
another reason to stem its flow is that it undermines the
presidential public financing system. The campaign finance law
provides for full public funding of the general presidential
election. The law was enacted to prevent even the appearance of
corruption that results when presidential candidates have to
raise money from private sources. To qualify for public funds,
the candidates must agree to spending limits and must swear,
under penalty of perjury, not to accept contributions during
the general election. In 1996, each major party nominee
received $62 million in federal funds, yet each spent countless
hours fundraising. Scott Reed, the campaign manager for Dole
for President, acknowledged that part of the Republican
strategy in 1996 included fundraising to help defray the cost
of issue ads that would help Bob Dole. In Campaign For
President '96, Reed was quoted as saying, ``We went out in
April and May and raised $25 million for the party, of which
about $17, $18, or $19 million was put into party building ads,
which were Bob Dole in nature.''37 Tony Fabrizio, a
Dole pollster, echoed Reed's statement, saying, ``We were
coming off a primary where we were flat broke. . . . We had a
candidate who was very sensitive to not having all of the money
potentially available to him post-convention. So to say that
[fundraising] wasn't a driving factor, especially since we put
him out on the road to raise $25 or $30 million for the party,
would be unfair.''38
Disclosure of soft money
Disclosure is a bedrock of the campaign finance system. The
soft money system, however, gives parties a way to make large
contributions and expenditures almost impossible to trace. One
way soft money is hidden from public scrutiny is by
transferring the funds from the national parties to the state
parties. According to one expert who testified at the hearings:
Overall, the Democratic committees in 1996
transferred over $64 million in soft money to state
parties, or almost nine times more than in 1992. The
Republican committees transferred $50 million in soft
money to state parties, or almost 10 times more than
1992. These transfers also serve to further obscure the
already inadequate disclosure requirements imposed on
national party committees. Because the committees are
only required to report the amounts transferred to
other committees, they do not have to account for how
these funds were ultimately spent. That responsibility
rests with state parties, and most state disclosure
laws are so inadequate that it is impossible to
determine how the funds were expended. By transferring
large sums to the state or local level, national
parties can avoid effective disclosure.39
In addition to hiding soft money by funneling it through
state parties, the RNC has avoided public scrutiny of its soft
money expenditures by funneling money through tax-exempt
organizations. (See Chapter 10.) One such organization that
worked in coordination with the RNC to spend soft money is
Americans for Tax Reform (``ATR'). (See Chapter 11.) In October
1996, the RNC gave $4.6 million to ATR. Immediately after the
contribution was made, ATR used the funds to pay for a direct
mail campaign that aided Republican candidates in 150
congressional districts. Evidence suggests that the RNC
coordinated with ATR on how the money would be spent. This
coordination may result in a violation of federal election law;
it also illustrates how soft money expenditures are hidden from
public scrutiny and used to influence federal elections.
issue advocacy
At the Committee hearings, Daniel Ortiz, a professor of law
at the University of Virginia, summarized what many of the
campaign finance experts had to say about issue advocacy:
In the last election cycle, so-called issue advocacy
became one of the most prominent and controversial
weapons in the federal campaigns. It provided an easy
way for individuals, political committees,
corporations, and unions to spend money to influence
elections without any regulatory control. Its impact
cannot be exaggerated. To anyone interested in campaign
finance reform, issue advocacy is the 800-pound
gorilla. Without taming it, campaign finance reform, no
matter how thoroughly it addresses public funding, soft
money, PAC spending, or any other perceived problems,
will come to naught. Issue advocacy represents a huge,
gaping loophole of last resort.40
As used in 1996, many televised ads were characterized as
issue ads but appeared to function as attack ads on candidates.
By claiming the ads to be discussions of issues, the ad
sponsors were able to evade federal election law contribution
limits and disclosure requirements applicable to candidate ads.
In addition to providing a way for unlimited and undisclosed
amounts of corporate and union money to influence elections,
the so-called issue ads took control of the election out of the
hands of the candidates and put it in the hands of the ad
sponsors. Finally, since no disclosure laws apply, issue ads
run by unknown organizations leave the public in the dark in
terms of knowing who is financing candidate attack ads.
Background on issue ads
Issue ads are, by definition, supposed to be discussions of
issues rather than candidates. In the leading case of Buckley
v. Valeo, the Supreme Court held that ads which discuss issues
are outside the scope of federal election laws, which apply
only to ``communications that in express terms advocate the
election or defeat of a clearly identified candidate for
federal office.'' 41 A footnote to the opinion gives
examples of terms of express advocacy, such as `vote for,'
`elect,' `support,' `cast your ballot for,' `Smith for
Congress,' `vote against,' `defeat,' `reject.' '' These phrases
have become known as the Buckley ``magic words,'' providing a
bright line test for when an ad is clearly subject to federal
election laws. Ads that do not contain any of the Buckley magic
words are often claimed to be issue ads outside the limitations
of the campaign finance laws.
Many of the witnesses testifying before the Committee
indicated that many of the so-called issue ads functioned as
candidate ads. Burt Neuborne of the nonpartisan Brennan Center
testified:
What we have now is a group of very sophisticated
people tiptoeing up to the line and laughing at the
process because what they are doing is--they know they
are engaged in election speech. Everybody else knows
that they are engaged in election speech, but somehow
we all have to pretend as though they are involved in
educational speech.42
The most comprehensive study to date of issue ads during
the 1996 election cycle is the Annenberg Public Policy Center's
Issue Advocacy During the 1996 Campaign: A Catalog. The
Annenberg study examined ads broadcast by the political parties
and at least two dozen groups, estimated to have spent between
$135 and $150 million on issue advertising. 43 The
Annenberg study found an even split between ads that generally
favored Democrats or Democratic issues and those that favored
Republicans or Republican issues. In addition to representing
both sides of the aisle, issue ads were determined to be ``the
highest in pure attack'' compared to presidential candidate ads
and free air time speeches.44 The study also
determined that almost 90 percent of these ads named a specific
candidate.45
The 1996 election cycle saw numerous groups from across the
political spectrum broadcasting issue ads. The groups included
the political parties, unions, corporations and tax-exempt
organizations.
Both political parties spent millions of dollars on issue
advocacy in the 1996 election cycle. Party ads which referred
to the presidential candidates garnered the most publicity, but
the parties did not limit their issue ad activity to
presidential candidates. The National Republican Congressional
Committee was by far the most active party committee to engage
in issue advertising outside of the presidential arena,
conducting a $10 million issue ad campaign for the benefit of
Republican House freshmen.
The AFL-CIO was one of the leaders in airing issue advocacy
ads during the 1996 election cycle. Early in the year it
announced its plans to spend $35 million to counter the
Republican ``Contract with America.'' 46 Ultimately,
the union spent about $25 million on media advertising in 44
congressional districts. The majority of the ads attacked
Republican House freshmen who won office in 1994.
Tax-exempt organizations were also active in televising ads
that named candidates, but claimed to be issue discussions.
Some of these organizations were newly established in 1996.
Viewers of union ads at least knew who was paying for the ads.
The same was not true of issue ads paid for by new or unknown
tax-exempt organizations, which enable a corporation or wealthy
individual to remain out of view behind the sponsoring
organization. Norman Ornstein noted: ``There seems to be little
doubt that at least a few of these organizations were set up
just to run those ads. . . .[I]t is clear most of these ads . .
. were directly intended and targeted to influence elections,
and in many, many cases, to blur the lines as to where they
were coming from.'' 47 See, for example, Chapters
11, 12 and 13 of this Report discussing Americans for Tax
Reform, Citizens for Reform, Citizens for the Republic
Education Fund, and the Coalition for Our Childrens Future, all
of which ran televised ads attacking candidates by name close
in time to the 1996 elections, but none of which admitted to
sponsoring candidate ads subject to federal election laws.
One of the issue ads discussed at the Committee hearings
was aired against Bill Yellowtail, a Democratic congressional
candidate in Montana, and was paid for by Citizens for Reform,
a tax-exempt organization controlled by Triad Management
Services. (See Chapter 12.) The ad asks: ``Who is Bill
Yellowtail? He preaches family values, but he took a swing at
his wife. And Yellowtail's explanation? He `only slapped her.'
But her nose was broken.'' This is the kind of personal attack
ad that candidates shy away from producing themselves, but that
they might quietly welcome if it is paid for by an outside
group with which the candidate claims no association.
Ann McBride, executive director of Common Cause, testified:
What is happening with issue ads is fundamentally
altering the electoral system in this country. This is
beyond the corruption issues. And what you will have is
a situation if this continues where candidates are bit
players in their own campaigns and where the American
people in looking at the debate will not know what
these candidates stand for because their voices will be
muted by all of these interest groups for and against.
. .[W]e are really, if we allow this, altering our
basic electoral system in a way that is quite dangerous
. . . for our democracy.48
This situation is detrimental to candidates who often lack
the time or money to respond to attack ads. In addition,
because the candidates are in the dark about who is attacking
them, they cannot discredit the ad by exposing the individual
or corporation behind it. In one case described in Chapter 12
of this Report, Representative Calvin Dooley of California
faced televised attack ads paid for by the Triad-run, tax-
exempt organization Citizens for Reform (``CFR''). After the
election, Dan Gerawan, a California farmer, admitted to a
newspaper that he had provided CFR with the funds to pay for
the ads. If he had not made this admission to the media, the
public and Dooley may not have learned who paid for the
ad.49 The ads attacked Dooley for spending taxpayer
money on ``radical lawyers,'' referring to Dooley's support of
the Legal Services Corporation (``LSC'). Gerawan allegedly
opposes the LSC after facing a lawsuit brought by indigent
plaintiffs represented by LSC lawyers. While Dooley won re-
election in spite of the ads, he was forced to spend his
campaign resources combating, not his opponent in the election,
but a relatively unknown and unforeseen enemy. 50
Issue ads have accelerated since the 1996 elections. For
example, in 1997, the RNC provided $750,000 in funds to pay for
televised ads in a special election in New York's 13th
Congressional District. 51 The RNC characterized the
ads were issue ads, even though they attacked the Democratic
candidate by name and mirrored campaign ads broadcast by the
Republican candidate. Apparently, neither the DNC nor the
Democratic candidate was able to respond to the attacks. The
Republican candidate won handily, despite earlier polls
indicating a close race. In 1998, the media reported that a new
group called Americans for Job Security plans to spend $100
million in corporate funds over the next five years on a
variety of issue ads. 52
proposals for reform
The campaign finance experts that testified before the
Committee have highlighted closing the soft money and issue
advocacy loopholes as key steps to meaningful campaign finance
reform:
Soft money . . . is the most pressing issue facing
the political system at this time--Professor Anthony
Corrado 53
It is imperative that we close the major loopholes
that make a mockery of [the] law. In particular, the
soft money and sham issue advocacy loopholes were
exploded on a massive scale.--Becky Cain, President,
League of Women Voters 54
The question we asked ourselves was: ``Do we really
want to be part of a system and perpetuate a system in
which the only way you can get representation is to buy
it?'' Once we got the question right, the answer was
easy. No, we do not want to be any part of it.--Douglas
Berman, President, Campaign Reform Project
55
[A]ll of these rivers and oceans of money are
swamping this system. They are discouraging good people
from seeking or holding office. They are converting our
most important public officers from officers into
essentially fund-raisers, and the spectacle of this
massive amount of money being raised is causing an
appalling diminution of public trust in the system.''--
Former Vice President Walter Mondale 56
[I]t is this nexus of soft money and issue advocacy
which is poisoning the system that you value.''--Norman
Ornstein, Fellow, American Enterprise Institute
57
Many of the experts who testified provided concrete
legislative proposals ranging from eliminating all contribution
limits to enacting a system of public funding. While there are
some differences of opinion in the reform community, many of
the specific proposals outlined below contain similar
recommendations, especially regarding the containment of soft
money and issue advocacy.
Kassebaum-Baker/Mondale
Former Vice President Walter Mondale and former Senator
Nancy Kassebaum-Baker have joined together in an effort to
stimulate public support for campaign finance reform.
Kassebaum-Baker and Mondale strongly believe that reform is
imperative to restoring public confidence in the electoral
system. Their efforts have secured the support of three former
presidents for campaign finance reform: Ford, Carter, and Bush.
The foundation of the Kassebaum-Baker/Mondale reform model
is a soft money ban that would prohibit corporations and labor
unions from contributing to the parties and would cap the
amount individuals could give to the parties. In addition, they
would close the issue advocacy loophole. Although they make no
specific recommendations as to how to achieve this, they
believe that ``clever scripting'' should not be a way to evade
the campaign finance restrictions. In addition, they support
disclosure of sources of money and amounts spent for all
campaign activity masquerading as issue advocacy.
The former elected officials also recommend strengthening
the Federal Election Commission by providing adequate funding
and limiting commissioners to one term. In addition, they
acknowledge the importance of immediate disclosure of all last-
minute contributions.
League of Women Voters
A number of witnesses who testified over the four days of
hearings backed a proposal sponsored by the League of Women
Voters. In addition to Becky Cain, the League's president,
supporters of the proposal included Thomas Mann of the
Brookings Institution, Norman Ornstein of the American
Enterprise Institute, and Professor Anthony Corrado of Colby
College. The highlights of the league's proposal include a soft
money ban. The proposal would, however, raise the hard money
limits by doubling the current $25,000 annual hard money limit,
thereby permitting individuals to give a maximum $25,000 to
multiple candidates and $25,000 to the parties.
The proposal also recommends that any advertisement using a
candidate's name or likeness within a set number of days of an
election (proposals range from 60 to 90) be considered a
candidate ad that falls under the campaign finance law's
restrictions. This proposal would not preclude the ads from
being run, but would ensure that such ads would be paid for
using only disclosed, regulated money. The League proposal also
suggests strengthening the Federal Election Commission's
enforcement powers and improving disclosure by requiring
mandatory electronic filing of campaign finance reports. The
League would attempt to decrease the cost of campaigns by
providing that, in exchange for the licenses they receive to
broadcast over the public airways, television broadcasters
provide candidates with a certain amount of free air time. To
encourage participation, the League would also provide a tax
credit for in-state donors who contribute $100 or less to a
campaign.
Common Cause
Common Cause President Ann McBride and Vice President Don
Simon also testified before the Committee. Common Cause has
been an outspoken advocate of S. 25, the McCain-Feingold
campaign finance reform bill. Another witness, Professor Burt
Neuborne of the Brennan Center, is also a proponent of S. 25.
At the time of the hearings, none of the witnesses knew what
the final version of S. 25 to be voted on by the Senate would
contain, but all supported the bill's broad framework which
included a soft money ban, a method to close the issue advocacy
loophole, and improved disclosure. Common Cause also advocated
voluntary spending limits for candidates, and would provide
incentives such as reduced television costs to candidates who
choose to limit their financial activity.
Campaign Reform Project
The Campaign Reform Project, which was represented at the
hearings by Douglas Berman, has called for a ban of soft money,
and also supports electronic filing of campaign contributions.
The group represents members of the business community who
support a soft money ban.
Public Campaign
Ellen Miller is the executive director of Public Campaign,
which advocates ``clean money'' or public financing of
elections. Common Cause and the League of Women Voters also
support public funding as an ultimate goal, but indicated that
they do not see it as a feasible option in the immediate
future. By definition, soft money would be banned under a
public funding system. In addition, issue ads would have to be
controlled so that private money would not come into the system
through that devise. And, like other reform proponents, Public
Campaign supports a stronger Federal Election Commission to
ensure the campaign finance law is enforced.
Disclosure only
Edward Crane and Roger Pilon represented the libertarian
Cato Institute. The Cato Institute takes the position that any
limits on contributions or other regulation of the political
system violate the First Amendment and are unconstitutional. In
addition to proposing the removal of all limits on
contributions, the Cato Institute also stands for the
proposition that the FEC should be abolished. According to
Crane and Pilon, the government should in no way be involved in
regulating the political process. The Cato Institute does
support disclosure of contributions.
conclusion
The Committee investigation has built a strong case for the
need to close the soft money and issue advocacy loopholes.
Until these loopholes are closed, the bulk of the problems
plaguing the campaign finance system will be, not illegal
conduct, but conduct that is legally permitted by the federal
election laws.
footnotes
\1\ Committee Hearings on September 23, 24, 25 and 30, 1997.
\2\ Thomas Mann, 9/24/97 Hrg., p. 32.
\3\ Vice President Mondale, 9/30/97 Hrg., p. 11.
\4\ ``It has been policy and law in this country for 90 years that
corporate money, aggregations of wealth in corporations are banned from
Federal elections. The Supreme Court has repeatedly upheld that ban as
serving compelling public purposes.'' Donald Simon, 9/24/97 Hrg., p.
70.
\5\ Buckley v. Valeo, 424 U.S. 1 (1976).
\6\ Rosenberg, Lisa. A Bag of Tricks: Loopholes in the Campaign
Finance System. Washington, D.C.: Center for Responsive Politics, 1996,
p. 3.
\7\ Vice President Mondale, 9/30/97 Hrg., p. 115.
\8\ Vice President Mondale, 9/30/97 Hrg., p. 114.
\9\ Because reporting by parties of soft money contributions was
not required by the FEC until 1992, anecdotal evidence is the primary
resource available for the claim of soft money's slow growth during the
1980s.
\10\ Buckley v. Valeo, 424 U.S. 1 (1976).
\11\ FEC Advisory Opinion 1978-10, Allocation Costs for Voter
Registration.
\12\ See, for example, FEC v. Christian Action Network, 92 F.3d
1178 (4th Cir. 1996).
\13\ Vice President Mondale, 9/30/97 Hrg., pp. 17-18. Chairman
Thompson agreed with Mondale, noting: ``Since Congress last acted in
this area, things have happened around and outside of Congress that
have totally changed the system, and we have a totally different system
today, as I see it, without Congress having acted. So I would think, if
for no other reason, as a matter of congressional prerogative that the
laws of this land should be basically addressed by the Congress of the
United States; that we would want to take a look at it.'' 9/30/97 Hrg.,
p. 15.
\14\ See Appendix A: National Party Non-Federal Activity. Source:
Federal Election Commission. In 1996, the Republican Party's national
committees raised about $138 million, while the Democratic Party's
national committees raised about $124 million.
\15\ See Appendix A. The Republican Party also raises more hard
money than the Democratic Party. In 1996, for example, FEC records
indicate that Republicans raised $416 million in hard money, compared
to $221 million raised by Democrats.
\16\ Ann McBride, 9/24/97 Hrg., p. 38.
\17\ Anthony Corrado, 9/25/97 Hrg., p. 4.
\18\ Issue Advocacy Advertising During the 1996 Campaign: A
Catalog, The Annenberg Public Policy Center, 1997, p.32.
\19\ See Chapter 32.
\20\ Annenberg Study, p. 53. See also Chapter 33.
\21\ Washington Times, 3/5/96. This statement is in sharp contrast
to Barbour's testimony before this Committee, in which he claimed that
the RNC did not use soft money to help federal candidates: ``These non-
federal monies, funds, could not be and were not spent for federal
election purposes.'' Barbour, 7/24/97 Hrg. p. 126. See also Barbour
deposition, 7/19/97, p. 86, in which Barbour stated, ``The RNSEC [The
RNC's soft money account] may not pay for any Federal campaign
activities.'
\22\ FEC Advisory Opinion 1995-25.
\23\ Anthony Corrado, 9/25/97 Hrg., p. 7.
\24\ See The Clinton Ad Campaign Run Through the DNC/The Dole Ad
Campaign Run Through the RNC, Common Cause, 10/97.
\25\ See FEC records.
\26\ See Appendix A.
\27\ Experts agree that soft money into the House and Senate
campaign committees stretches to the limit the credibility of the
argument that the money is being used only for party building and not
to elect federal candidates. In his testimony, Professor Corrado said,
``[W]hat you had was this expanding universe of activities that could
fall under this hard/soft money rule, and they applied it to the
national committees to the point where...the Senate and congressional
campaign committees, which the average voter would think basically deal
with federal elections, since they are designed to elect federal
officials, actually use soft money now because of the non-Federal
portion of their activities.'' Anthony Corrado, 9/25/97 Hrg., p. 65.
\28\ Roll Call, 2/22/96.
\29\ Roll Call, 2/22/96.
\30\ Roll Call, 2/22/96.
\31\ Burt Neuborne, 9/25/97 Hrg., p. 151.
\32\ Buckley at 27.
\33\ Buckley at 27 (citations omitted).
\34\ Roger Tamraz, 9/18/97 Hrg., pp. 81-86.
\35\ Exhibit 1070-M.
\36\ Vice President Mondale, 9/30/97 Hrg., p. 20.
\37\ Campaign for President: The Managers Look at '96, Harvard
Institute of Politics: Boston, 1996, p. 117.
\38\ Campaign for President, p. 117.
\39\ Anthony Corrado, 9/25/97 Hrg., pp. 7-8. See also, for example,
Roll Call, 10/27/97 (In 1997, RNC gave about $660,000, the NRSC
$375,000 and the NRCC $1.2 million, to Virginia Republican Party and
Republican candidates, often without disclosure.).
\40\ Daniel Ortiz, 9/25/97 Hrg., p. 11.
\41\ Buckley at 44.
\42\ Burt Neuborne, 9/25/97 Hrg., p. 136.
\43\ Annenberg, p. 3.
\44\ Annenberg, p. 8.
\45\ Annenberg, p. 7.
\46\ Rosenberg, p. 11.
\47\ Norman Ornstein, 9/24/97 Hrg., p. 42.
\48\ Ann McBride, 9/24/97 Hrg., p. 33.
\49\ The Committee attempted to interview Gerawan, but he refused
to provide a voluntary interview. The Majority refused to issue a
deposition subpoena to Gerawan.
\50\ The Minority had planned to call Representative Dooley as a
witness to testify about the way in which the CFR issue ads affected
his campaign, but the Majority declined to permit the Minority to
present testimony on Triad and Dooley never testified.
\51\ See New York Times, 11/5/97.
\52\ Roll Call, 1/15/98. The new group is allegedly ``run by David
Carney, a former campaign consultant to GOP presidential candidate Bob
Dole and Representative Vito Fossella of New York.'' The article cites
documents in which the group's officials state that the group ``already
have $7 million committed this year and plan to spend 85 percent of
their money directly on communications.''
\53\ 9/25/97 Hrg., p. 3.
\54\ 9/24/97 Hrg., p. 150.
\55\ 9/24/97 Hrg., p. 146.
\56\ 9/30/97 Hrg., p. 12.
\57\ 9/24/97 Hrg., p. 75.
PART 5 FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES
AND ADMINISTRATIONS
Chapter 24: Overview and Legal Analysis
OVERVIEW OF FOLLOWING CHAPTERS
During the 1996 election cycle, spending by candidates,
their campaign committees, political parties, other political
committees and persons making independent expenditures totaled
a record-breaking $2.7 billion.1 Of that amount, the
Democratic and Republican Parties together spent almost $900
million, or one-third of the total.2 The two
presidential candidates, President Clinton and Senator Dole,
together spent about $232 million, or almost 10 percent of the
total.3
---------------------------------------------------------------------------
Footnotes appear at end of chapter 24.
---------------------------------------------------------------------------
One of the primary objectives of the Committee's
investigation was to investigate allegations of improper and
illegal activities associated with fundraising undertaken both
parties to finance this campaign spending. The allegations
examined include the alleged misuse of federal property and
federal employees to raise funds, the sale of access to top
government officials in exchange for campaign contributions,
and the circumvention of campaign spending restrictions through
such devices as issue advocacy and coordination between the
parties and their presidential nominees.
The following chapters will show that the evidence amassed
during the Committee's investigation establishes that both
political parties engaged in questionable fundraising
practices. Both parties scheduled events at government
buildings and promised access to top government officials as
enticements for donors to attend fundraising activities or make
contributions. Both parties used their presidential candidates
to raise millions of dollars in soft money donations in
addition to the $150 million provided in public financing for
presidential campaigns.4 Both parties worked with
their candidates to design and broadcast so-called issue ads
intended to help their candidates' election
efforts.5
Some Members of the Committee charged during the hearings
that these fundraising practices were clearly illegal. Others
suggested that the federal election laws contain so many
ambiguities, and the constitutional protections afforded
political speech and association are so sweeping, that the
tactics complained of either did not clearly violate the law or
could not be legally restricted. The proceedings before the
Committee repeatedly document confusion over the legal
restrictions that apply to fundraising, unsettled legal
questions, and provisions which would benefit from clarifying
or strengthening legislation.
During the proceedings, many Committee Members expressed
the conclusion that, whether or not fundraising practices used
during the 1996 election cycle were illegal, a number of
individuals involved exhibited poor judgment and the conduct
that occurred created an appearance of corruption of the
political process or misuse of federal resources. Offers of
meetings with the President, the Speaker of the House, the
Senate Majority Leader, or House or Senate committee chairs in
exchange for political contributions created the appearance
that access to our elected officials was for sale. Allowing
large contributors to stay overnight in the Lincoln bedroom
created the appearance that the White House was a campaign
prize. Raising and spending millions of soft dollars to air
issue ads designed to affect the presidential race undermines
the law providing for public funding of presidential elections.
The activities of 1996 make clear the need for reform.
LEGAL ANALYSIS
The campaign fundraising practices examined in the
following chapters invoke a number of different federal laws,
including federal criminal law restrictions on taking official
action in exchange for money; federal property restrictions,
primarily in the Pendleton Act, on using government resources
for campaign purposes; federal personnel law restrictions,
primarily in the Hatch Act, on employees participating in
campaign activities; and federal election law restrictions on
spending and coordination.
While some of the campaign restrictions set out in these
laws are clear, other provisions provide insufficient guidance
on what conduct is lawful, while ambiguities or limitations in
other provisions may hinder criminal prosecutions and civil
enforcement actions in this area. Many of these provisions
would benefit from legislation strengthening and clarifying
intended prohibitions on fundraising practices in federal
elections.
Taking official action in exchange for a contribution
A number of the allegations investigated by the Committee
involve suggestions that government officials took action
during the 1996 election cycle to obtain or reward a campaign
contribution. The alleged actions cover a range of activity,
from providing a meeting between a contributor and a federal
official, to advancing the contributor's private business
interests, to obtaining a change in U.S. policy requested by
the contributor.6
Several longstanding federal criminal statutes bar
government personnel from taking official action in exchange
for contributions. For example, the federal bribery statute, 18
U.S.C. Sec. 201, bars ``public officials'' from taking or
promising to take official acts in exchange for ``anything of
value,'' including a campaign contribution.7 The
federal extortion statutes, 18 U.S.C. Sec. 872 and Sec. 1951,
bar public officials from soliciting funds through a threat of
violence, under color of official right, or by causing a victim
to fear economic harm if the funds are not
provided.8 A provision in the Hatch Act, 18 U.S.C.
Sec. 600, bars public officials from promising any government
benefit in exchange for ``support of or opposition to any
candidate or any political party.'' 9 Each of these
provisions has its own requirements for proving a quid pro quo
relationship between the action taken and the campaign
contribution.10
The law is also clear that to establish a criminal
violation, a public official must do more than simply arrange
or attend a meeting with a contributor. In a recent letter to
the House Judiciary Committee, Attorney General Janet Reno
summarized the court decisions holding that public officials
who grant access, but nothing more, to contributors do not
violate federal law:
The courts . . . have held that . . . access in
exchange for political contributions is not an
``official act'' that can provide the basis for a
bribery or extortion prosecution. [Legal citations
omitted.] Indeed one court has focussed on the
constitutional right to ``petition the Government for a
redress of grievances'' guaranteed by the First
Amendment in refusing to find that alleged gifts
provided in hopes of access to an elected public
official could amount to a scheme to defraud the public
of the official's honest services . . . . To the extent
that the allegations . . . suggest simply a decision by
an elected politician to provide access to political
contributors, we conclude that no federal violation is
suggested.11
These court decisions mean that fundraising activities that
promise access to a government official in exchange for a
campaign contribution, but nothing more, do not constitute
bribery, extortion or any other violation of federal criminal
law. In addition, the cases suggest that the courts would
strike down as unconstitutional any law which attempted to go
farther, and bar contributors from gaining access to public
officials, solely due to their contributor status.
While current law provides that candidates who agree to
meet personally with contributors solely due to their
contributions have not committed an illegal act, the
circumstances surrounding particular meetings may nevertheless
create an appearance of favoritism or impropriety.
Use of federal property
A second set of issues involves the use of federal property
in connection with campaign fundraising, including using
government telephones to contact contributors or inviting
contributors to attend events in government buildings.
The key federal statute is a provision of the Pendleton
Act, 18 U.S.C. Sec. 607, which states:
It shall be unlawful for any person to solicit or
receive any contribution within the meaning of section
301(8) of the Federal Election Campaign Act of 1971 in
any room or building occupied in the discharge of
official duties by any [federal employee] or in any
navy yard, fort or arsenal.
While this provision seems to impose a broad prohibition
against soliciting campaign contributions on federal property,
its wording and interpretation by the courts have limited its
scope.
First, the statute is limited on its face to contributions
as defined by section 301(8) of FECA. This definition is a
narrow one. It encompasses only ``hard money'' contributions in
connection with a federal election; it does not include, for
example, donations in connection with state or local elections,
generic party-building activities, or issue
advocacy.12
A second limitation turns upon case law interpreting where
a campaign solicitation takes place within the meaning of
section 607. The key case is a ninety-year-old Supreme Court
decision, United States v. Thayer, 209 U.S. 39 (1908), which
holds that section 607 is violated by a letter which is written
and mailed from outside a federal workplace, and delivered to
an individual in a federal office. The Supreme Court held, in
an opinion written by Justice Oliver Wendell Holmes, Jr., that
``the solicitation was in the place where the letter was
received,'' rather than where the letter was written or
sent.13 By analogy, a telephone call or fax message
soliciting a campaign contribution takes place where the call
or fax is received, rather than where it originated. This
analysis suggests that a telephone call or fax from a
government building to a private location would not violate
section 607, since the solicitation would occur outside of a
federal workplace. This interpretation makes sense in light of
the original intent of the Pendleton Act, which was to protect
federal employees from being pressured to make campaign
contributions while at work.14
Federal prosecutions are in line with this interpretation
of the statute. In a recent report, the American Law Division
of the Congressional Research Service stated it was unable to
find any criminal prosecution under section 607 of a campaign
solicitation made by mail or telephone from a federal building
to a non-federal building:
In more than 100 years since its enactment . . . the
law appears to have been neither specifically construed
by any court nor applied in any prosecution to cover
one who solicits a campaign contribution from a federal
building by letter or telephone to persons who are not
located themselves in a federal building.15
[original emphasis]
A third limitation on section 607 is an exception created
for residential and ``mixed-use'' areas of the White House.
Because these areas of the White House serve as the President's
personal home, the Department of Justice has long held that
they must be treated differently than federal office space. In
this context, the Department has held that campaign
solicitations made from telephones in the residential and
mixed-use areas of the White House, as well as fundraising
events held in such areas, do not violate section 607, because
the activities do not take place in a ``room or building
occupied in the discharge of official duties.'' 16
These three limitations on the scope of section 607--that
it does not apply to soft money donations, solicitations
directed outside federal buildings, and White House residential
and mixed-use areas--make this provision inapplicable to a
number of fundraising incidents before the Committee, such as
the telephone solicitations made by the President and Vice
President and the White House coffees. These legal limitations
are also a primary reason that the Attorney General declined to
appoint an independent counsel to investigate allegations that
campaign fundraising calls placed by President Clinton or Vice
President Gore violated federal law.17
A second federal statute affecting the use of federal
property in connection withcampaign fundraising is 18 U.S.C.
Sec. 641, which bars conversion of government property to personal use.
The provision prohibits a person from ``knowingly convert[ing] to his
use or the use of another . . . anything of value of the United
States.'' This provision also has several limitations. First, federal
regulations permit incidental use of federal property for otherwise
lawful personal purposes, and the Justice Department has determined
that, under these regulations, occasional use of a federal telephone or
fax machine for a campaign purpose would not amount to a Federal
crime.18 Second, under 5 U.S.C. Sec. 7324(b)(1) and 5 C.F.R.
734.503(a), the White House is explicitly authorized to use federal
property for political activity if there is no cost to the
government.19 Third, the Justice Department has determined
that events which take place in the residential and mixed-use areas of
the White House, such as the White House coffees and Lincoln bedroom
overnights, cannot, as a matter of law, result in criminal conversion,
since these areas are provided to the President explicitly for his
personal use.20
A third statute of interest concerns the use of
appropriated funds. While no specific federal statute expressly
prohibits spending federal funds for partisan campaign
purposes, 31 U.S.C. Sec. 1301(a) states that monies
appropriated by Congress may be spent only for the purposes for
which they were appropriated.21 The Comptroller
General has interpreted this statute to allow agencies to spend
federal funds to further agency objectives but not to carry out
``a propaganda effort designed to aid a political party or
candidate.'' 22 In evaluating a particular
expenditure, the Comptroller General defers to an agency
determination that an expenditure was ``in connection with
official duties,'' ensuring only that there was ``a reasonable
basis'' for the agency determination. The Comptroller General
has also evaluated expenditures by determining whether they
were ``so devoid of any connection with official functions or
so political in nature that [the expenditures] are not in
furtherance of purposes for which Government funds were
appropriated.'' 23 Violations of 31 U.S.C.
Sec. 1301(a) are punishable only with administrative or civil
penalties such as the recovery of misused funds or removal of a
federal employee from office.24
The proceedings before the Committee suggest that many
persons thought federal law barred all use of federal propery
for campaign purposes, with no exceptions or limitations.
However, federal law does not presently impose this type of
absolute ban, and legislation would be required to achieve that
result.
Use of federal employees
Another set of issues involves the use of federal personnel
in connection with campaign fundraising, including to solicit
contributions, attend fundraising events in a government
building, or engage in other campaign activities.
The key federal statute is the Hatch Act, 5 U.S.C.
Sec. 7321 et seq., which generally permits covered federal
employees to engage in voluntary partisan political activities
while away from work, but restricts most partisan ``political
activity'' while an employee is on duty, in uniform, or in a
government building or vehicle.25 Section 7323
imposes a few restrictions that apply at all times to federal
employees, whether on duty or off. Two of these across-the-
board restrictions are that covered federal employees may not
``knowingly solicit, accept, or receive a political
contribution from any person,'' 26 and they are
prohibited from using their ``official authority or influence
for the purpose of interfering with or affecting the result of
an election.'' 27
The Hatch Act contains a number of exceptions and
limitations. First, the Act does not apply to federal employees
in the legislative or judicial branches, including
Congressional staff.28 Second, it does not apply to
the President or Vice President.29 Third, its
prohibition on partisan political activity while on duty does
not apply to certain White House personnel paid from
appropriations for the Executive Office of the President, or to
certain federal officials appointed by the President with the
advice and consent of the Senate such as members of the
Cabinet.30 These excepted persons are nevertheless
subject to the Hatch Act's ban on soliciting or accepting
contributions, whether on duty or off.31 The Hatch
Act further requires that political activity performed by a
Hatch Act-exempt person while on duty, in uniform or in a
government building or vehicle, must either incur no cost to
the government or its cost must be reimbursed in accordance
with federal regulations.32
Together, the exceptions to the Hatch Act mean that a
limited number of high-ranking federal officials and White
House personnel may legally engage in a wide range of political
activities while in a federal building, during working hours,
using federal property, so long as the activity does not
involve soliciting or accepting contributions and either incurs
no cost to the government or the cost is
reimbursed.33 The President, Vice President, Members
of Congress and Congressional staff are not subject to any
Hatch Act restrictions.
A key legal issue is distinguishing between ``political
activity'' and ``official activity.'' Many White House
employees paid by the Executive Office of the President
(``EOP'') may, as discussed above, engage in either activity,
but must ensure that political activity costs are reimbursed.
Non-EOP White House staff are essentially barred from engaging
in any political activity while working. Hatch Act regulations
and opinions prepared by the Department of Jusice's Office of
Legal Counsel (``OLC'') for the Carter Administration in 1977
and re-stated by the OLC for the Reagan Administration in 1982
provide basic guidelines for distinguishing between
``political'' and ``official'' activity. Hatch Act regulations
state that, ``[p]olitical activity means an activity directed
toward the success or failure of a political party, candidate
for partisan political office, or partisan political group.''
34 The OLC defines an activity as ``political'' if
its primary purpose involves the President's role as a
candidate or as leader of his political party, such as by
appearing at party functions, fundraising, or campaigning for
specific candidates.35 Hatch Act regulations do not
define ``official'' activity, while OLC opinions indicate that
an activity is ``official'' if it relates to the President's
policies, programs or legislative agenda, even if it concerns
matters on which opinion is politically divided.36
Travel, appearances, and actions taken by the President and
Vice President to ``present, explain, and secure public support
for the Administration's measures'' are considered official
activities.37 By analogy, staff support of the
President and Vice President's policies, legislative agenda,
programs and initiatives would also be reasonably classified as
``official'' activity.
Another key legal issue involves determining the costs
associated with political activities. Hatch Act regulations
state that certain political activity costs do not have to be
reimbursed if they are costs that the government has already
incurred for official purposes.38 Examples of
political activities that are not considered to incur cost to
the government because the government has already paid the
expense for other official purposes include: local phone calls,
the use of office space and employee salaries.39
Examples of political activities which do incur costs to the
government include: faxing, copying, and long-distance
telephone calls.
These rules are difficult to apply and, in practice, have
been applied at times in surprising ways. One key example
involves the Office of Political Affairs (``OPA'), an office
within the White House first established in 1981 by President
Reagan.40 Since its inception, OPA has served as a
liaison between the President and White House staff, and the
President's political party and various campaign
efforts.41 OPA performs a number of election-related
activities that would appear to meet the definition of
``political.'' However, in 1991, C. Boyden Gray, counsel to
President Bush, stated in a memorandum explaining Hatch Act
restrictions on White House staff that, ``It is important to
understand that . . . the official responsibilities that
customarily have been performed by the Office of Political
Affairs constitute ``official'' and not ``political''
activities, and the restraints cited here therefore do not in
general affect activities and office maintenance or other costs
undertaken or incurred in the discharge of such
responsibilities.'' 42 The memorandum cites no
regulation, OLC opinion or other legal authority in support of
its determination. A 1994 memorandum on Hatch Act restrictions
prepared by Lloyd Cutler, special counsel to President Clinton,
follows the precedent set under President Bush.43
Violations of these Hatch Act provisions are punishable
only with administrative or civil penalties such as the removal
of a federal employee from office.44
The proceedings before the Committee indicate that many
persons thought federal law barred federal employees from
engaging in any campaign activity during work hours. In fact,
current law explicitly permits the President, Vice President,
Members of Congress, Congressional staff, and a limited number
of federal officials and White House personnel, to engage in a
wide range of partisan political activities while on duty or in
a federal building or vehicle. One key exception is the broad
ban placed on executive branch personnel, other than the
President and Vice President, from soliciting or accepting
campaign contributions.
Spending limits, coordination and issue advocacy
A fourth set of issues involves federal election law
requirements regarding contribution and spending limits, and
coordination between a party and its candidates.
Federal election laws impose a variety of contribution and
spending limits on federal campaigns. Contribution limits apply
to all federal candidates, including those running for the
House, Senate and Presidency. These limits include, for example
with respect to an individual, a $25,000 annual overall limit;
$20,000 annual limit on contributions to a national political
party; and a $1,000 limit on contributions to a specific
federal candidate each election. Parties are limited in the
amount of direct contributions they can make to federal
candidates. In addition to direct contributions, political
parties are allowed under 2 U.S.C. Sec. 441a(d) to make a
limited amount of coordinated expenditures in connection with a
federal candidate's general election.45 Statutory
formulas set the maximum amount of section 441a(d) coordinated
expenditures that a party can make with respect to a House,
Senate or Presidential candidate. In 1996, each party was
limited to spending $12 million on section 441a(d) coordinated
expenditures made in connection with its presidential
candidate's general election.46
In addition to contribution limits, federal election laws
also impose spending limits on presidential candidates who
accept public financing.47 These spending limits are
permitted because candidates must voluntarily agree to accept
them in exchange for public financing.48 In 1996,
each presidential candidate who accepted public financing
agreed to limit expenditures in connection with the primaries
to $37 million and in connection with the general election to
$74 million.49
A key legal issue is whether coordinated efforts between
candidates and parties are lawful, and whether this
coordination, particularly with respect to issue advocacy, was
used unlawfully in the 1996 elections to circumvent federal
contribution and spending limits.
The Federal Election Campaign Act (``FECA'') and its
implementing regulations contain a number of provisions
indicating that coordination between a party and its candidates
is expected and appropriate. Permitted candidate-party
coordinated activities include voter registration drives, get-
out-the-vote efforts, generic advertising, joint fundraising
events, and the development and distribution of campaign
materials such as sample ballots, slate cards, brochures,
bumper stickers and yard signs.50 Each of these
activities is typically coordinated between a party and its
candidates, pursuant to the role that political parties
traditionally play in support of their tickets. With respect to
a party's coordinated expenditures under 2 U.S.C. Sec. 441a(d),
the FEC has held explicitly that, ``consultation or
coordination with the candidate is permissible.'' 51
Attorney General Janet Reno recently stated in a letter to
the Senate Judiciary Committee:
FECA does not prohibit the coordination of
fundraising or expenditures between a party and its
candidates for office. Indeed, the [FEC], the body
charged by Congress with primary responsibility for
interpreting and enforcing the FECA, has historically
assumed coordination between a candidate and his or her
political party.52 [original emphasis]
The FEC made that assumption explicit in a 1988 FEC Advisory
Opinion stating that a party's ``coordination with candidates
is presumed.'' 53 Moreover, the recent Supreme Court
case, Colorado Republican Federal Campaign Committee v. FEC,
116 S. Ct. 2309 (1996), examining party-candidate coordination,
contains no hint that such coordination is unlawful, holding
instead that, in addition to coordinated expenditures, parties
have a constitutional right to make independent expenditures
and must be given an opportunity to demonstrate that a
particular party expenditure was independently made. Some
Justices suggested, in dicta, that parties should be able to
make unlimited coordinated expenditures with their
candidates.54
With respect to presidential candidates in particular, FECA
currently permits a presidential candidate to ``designate the
national committee of [his or her] political party as [his or
her] principal campaign committee.'' 55 If President
Clinton or Senator Dole had exercised that option, their
candidacies would have been not only coordinated with their
respective political parties, but the party and the candidate
committees would have merged into one entity. This option is
additional proof that federal election law contemplates
coordination between presidential candidates and their parties
as both lawful and appropriate.
The close relationship envisioned in FECA between
candidates and their parties is in sharp contrast to the arms-
length relationship envisioned between candidates and nonparty
groups like corporations or unions. For example, 2 U.S.C.
Sec. 441b(a) prohibits direct corporate and union contributions
to candidates. The Supreme Court has repeatedly upheld federal
election law provisions erecting barriers between candidates
and nonparty entities like corporations and unions; no similar
case law separates candidates from their parties.56
While coordination between parties and candidates is
clearly lawful under FECA in many respects, questions have
arisen as to whether their coordination on activities such as
raising soft money and broadcasting issue ads constitute a FECA
violation.
It is beyond question that raising soft money and
broadcasting issue ads are not, in themselves, unlawful. FEC
regulations currently allow political parties to raise and
spend soft money, and have established an elaborate system for
allocating and disclosing federal versus non-federal
funds.57 Candidates are permitted to help their
parties raise funds.58 The courts have repeatedly
upheld the right of persons to engage in issue advocacy outside
the scope of federal election laws, even when those ads mention
candidates and are broadcast close in time to a federal
election day.59
The specific issues that some have posed are: (1) whether a
candidate's extensive involvement in party efforts to finance,
develop and place issue ads converts such ads into candidate
ads that should have been counted against party or candidate
contribution and spending limits; and (2) whether some of the
ads that parties labelled as issue ads were really candidate
ads that should have been counted against the party's section
441a(d) limit on coordinated expenditures. In particular, some
have asked whether, due to the involvement of President
Clinton, Senator Dole and their campaigns in party-sponsored
issue ads, the cost of those ads--which totaled $44 million for
the DNC and $24 million for the RNC--should be counted against
each party's $12 million limit on coordinated expenditures or
each candidate's spending limits of $37 million during the
primaries and $74 million during the general election.
The answer to these questions turns, in part, on the legal
test for distinguishing between candidate and issue ads. In
Buckley v. Valeo, the Supreme Court upheld disclosure
requirements for expenditures by independent groups on
communications that ``expressly advocate the election or defeat
of a clearly identified candidate'' and activities coordinated
with a ``candidate or his agent.'' 60 In a footnote,
the Court offered specific examples of express advocacy, which
have come to be known as the Buckley ``magic words.'' The
footnote listed: `` `vote for,' `elect,' `support,' `cast your
ballot for,' `Smith for Congress,' `vote against,' `defeat,'
`reject.' '' 61 A decade later, the Supreme Court
reaffirmed the Buckley approach, holding that ``a finding of
`express advocacy' depend[s] upon the use of language such as
`vote for,' `elect,' `support,' etc.'' 62
Lower courts and the FEC have since elaborated on the
Buckley standard. In FEC v. Furgatch, the Ninth Circuit held
that ``the short list of words included in the Supreme Court's
opinion in Buckley does not exhaust the capacity of the English
language to expressly advocate the election or defeat of a
candidate.'' 63 The court accordingly adopted a
standard for express advocacy that included not only Buckley's
magic words, but also communications expressing an unmistakable
and unambiguous message to vote for or against a clearly
identified candidate, without using the Buckley magic
words.64 The FEC subsequently adopted a regulatory
standard based in part on the Furgatch ruling.65
Two circuits have recently rejected the FEC's Furgatch-
inspired approach. The First and Fourth Circuits have
determined that a communication cannot constitute express
advocacy under FECA unless it contains Buckley's magic words or
other explicit language urging the election or defeat of a
candidate.66 The First Circuit took this position
despite affirming its lower court's decision which described
the FEC regulation as ``a very reasonable attempt . . . drawn
quite narrowly to deal with only the `unmistakable' and
`unambiguous' cases.'' 67 The Supreme Court has yet
to resolve this split among the circuits.
While the circuits have split on the precise contours of
the Buckley standard, all of the courts that have reviewed
issue or candidate ads under FECA have based their
determinations on the content of the ad in question. No court
has looked behind an ad's content to determine, for example,
the intent of the ad's sponsors, the persons who participated
in financing, developing or placing the ad, or the ad's
intended or actual impact on a particular election. Thus, there
is presently no legal authority which supports the proposition
that the extent of a candidate's involvement could convert an
ad from issue advocacy into candidate advocacy, particularly in
the context of an ad sponsored by a political party.
Testimony was received by the Committee from several legal
experts, including the FEC's general counsel Lawrence Noble,
that issue ads sponsored by an independent group and
coordinated with a candidate should be treated as a coordinated
expenditure and candidate contribution, if the ad conveys an
``electioneering message'' benefiting the
candidate.68 Former FEC Chairman Trevor Potter
testified that ``whether it is express advocacy, or issue
advocacy, or anything else, it is relevant to ask in the case
of a nonparty organization whether the spending . . . was, in
fact, directed and controlled by the candidate.'' 69
However, Noble and Potter both testified that a different legal
analysis should apply to coordination involving only a party
and its candidates, due to the longstanding legal presumption
that party-candidate coordination is permissible and
appropriate.70 In 1995, the FEC did just that. Asked
how party issue ads should be treated, the FEC focused on the
ad's content, rather than on any party-candidate coordination.
It determined that party ads which address ``national
legislative activity'' and do not include an ``electioneering
message'' promoting a particular candidate result in generic
voter drive or administrative costs to the party payable with a
mix of federal and nonfederal money--no party contribution to a
candidate resulted.71 In reaching this decision, the
FEC analyzed the content of the ad, not who was involved in
preparing it, or what the party hoped its effect would be on an
election.
The Attorney General stated in her recent letter to the
Senate Judiciary Committee, not only that party-candidate
coordination does not violate FEC as a general principle, but
also that party-candidate coordination on a party's issue ads
do not, as a matter of law, violate FECA.72 She
wrote:
With respect to coordinated media advertisements by
political parties (an area that has received much
attention of late), the proper characterization of a
particular expenditure depends not on the degree of
coordination, but rather on the content of the message.
. . .
We recognize that there are allegations that both
presidential candidates and both national political
parties engaged in a concerted effort to take full
advantage of every funding option available to them
under the law, to craft advertisements that took
advantage of the lesser regulation applicable to
legislative issue advertising, and to raise large
quantities of soft political funding to finance these
venture. However, at the present time, we lack specific
and credible evidence suggesting that these activities
violated the FECA.73
Coordination between parties and candidates has long been
an accepted part of federal election law and campaign
financing. Presidential candidates are considered the leaders
of their parties.74 Party-candidate coordination
does not, in and of itself, violate FECA. Party-candidate
coordination on party ads which expressly advocate the election
of the candidate must comply with the party's limits on 441a(d)
coordinated expenditures for that candidate. Party-candidate
coordination on party ads that contain only a generic voter
drive or issue message do not, under FEC rulings, have to be
attributed to a particular candidate--even if a candidate was
involved in financing, developing or placing the ad; those
party ads must instead comply with FEC allocation requirements
for hard and soft money. Each of these areas would benefit from
clarifying or strengthening legislation. Closing the soft money
loophole, strengthening and clarifying the definition of
express advocacy, and imposing disclosure requirements on issue
ads that name candidates or appear close in time to elections
are all possible legislative remedies to problems posed in this
area.75
footnotes
\1\ See FEC filings; see also, for example, Washington Post, 2/9/
97. The $2.7 billion total does not include spending by independent
groups that did not file with the FEC. The Washington Post estimated
additional spending by independent groups on the 1996 federal elections
at $70 million. Washington Post, 2/9/97.
\2\ See FEC filings. The Democratic Party spent about $336 million,
and the Republican Party spent about $558 million during the 1996
election cycle.
\3\ See FEC filings; see also, for example, Washington Post, 3/31/
97.
\4\ The Democratic Party's national campaign committees raised
about $124 million in soft money, while the Republican Party's national
campaign committees raised about $138 million. See FEC filings; see
also, for example, Washington Post, 2/9/97, and 3/17/97. Compared to
the previous presidential election cycle in 1992, the two parties
raised three times as much soft money during the 1996 election cycle.
\5\ The DNC spent about $44 million on issue ads, while the RNC
spent about $24 million on issue ads. See FEC filings; see also, for
example, Annenberg Public Policy Center, ``Issue Advocacy Advertising
During the 1996 Campaign: A Catalog,'' Report Series No. 16, 9/16/97,
pp. 32, 53.
\6\ See, for example, Letter from House Judiciary Committee
Republican Members to Attorney General Reno, requesting appointment of
an independent counsel to investigate possible violations of law in
connection with the 1996 presidential campaign, 9/4/97.
\7\ See discussion of this provision, for example, in Congressional
Research Service Report No. IB97045, 8/12/97, pp. 5-6.
\8\ See discussion of these provisions, for example, in letter from
Attorney General Reno to House Judiciary Committee Chairman Henry Hyde
of New York, 10/3/97, p. 7; and Congressional Research Service Report
No. IB97045, 8/12/97, p. 6.
\9\ See discussion of this provision, for example, in letter from
Attorney General Reno to House Judiciary Committee Chairman Henry Hyde
of New York, 10/3/97, pp. 5-6.
\10\ See, for example, Congressional Research Service Report No.
IB97045, 8/12/97, pp. 5-6.
\11\ Letter from Attorney General Reno to House Judiciary Committee
Chairman Henry Hyde of New York, 10/3/97, p. 4.
\12\ Letter from Attorney General Reno to House Judiciary Committee
Chairman Henry Hyde of New York, 10/3/97, p. 5; and Congressional
Research Service Report No. IB97045, 8/12/97, p. 6.
\13\ 209 U.S. at 44.
\14\ See, for example, the Senate Ethics Manual (9/96), which
states: ``The criminal prohibition at section 607 was originally
intended and was historically construed to prohibit anyone from
soliciting contributions from federal clerks or employees while such
persons were in a federal building. In interpretations of this
provision, the focus of the prohibition has been directed to the
location of the individual from whom a contribution was requested,
rather than the location from which the solicitation had originated.''
See also United States v. Burleson, 127 F.Supp. 400 (E.D. Tenn. 1954)
(campaign solicitation of federal employees while at a contractor
worksite did not occur in a federal building and so did not result in a
violation).
\15\ Congressional Research Service Report No. IB97045, 8/12/97, p.
7; see also memorandum dated 3/6/97, by Jack Maskell, legislative
attorney, American Law Division, Congressional Research Service,
``Soliciting Campaign Contributions in a Federal Building: 18 U.S.C.
607.''
\16\ 3 Op. Off. Legal Counsel 31, 38-45 (1979); see also
Congressional Research Service Report No. IB97045, 8/12/97, p. 7.
\17\ See, for example, Letter to Senate Judiciary Committee
Chairman Orrin Hatch of Utah from Attorney General Reno, 4/17/97, pp.
4-5; see also statement by Senator Levin, Congressional Record, 10/1/
97, p. S10277-82.
\18\ See Letter to Senate Judiciary Committee Chairman Orrin Hatch
of Utah from Attorney General Reno, 4/14/97, p. 5 (citing 5 C.F.R.
2635.704 and 41 C.F.R. 201-21.601).
\19\ See discussion below.
\20\ See Letter from Attorney General Reno to House Judiciary
Committee Chairman Henry Hyde of New York, 10/3/97, p. 5.
\21\ See Congressional Research Service Report No. IB97045, 8/12/
97, pp. 8-9.
\22\ U.S. General Accounting Office, Principles of Federal
Appropriations Law (7/91), p. 4-2, cited in memorandum dated 9/6/96 by
Jack Maskell, legislative attorney, American Law Division,
Congressional Research Service, ``Use of Federal Appropriations for
Non-Official, Political Campaign Purposes,'' pp. 3-4.
\23\ Decision of Comptroller General, B-147578, 11/8/62, p. 5,
cited in memorandum dated 9/6/96 by Jack Maskell, legislative attorney,
American Law Division, Congressional Research Service, ``Use of Federal
Appropriations for Non-Official, Political Campaign Purposes,'' p. 4.
\24\ Memorandum by Jack Maskell, legislative attorney, American Law
Division, Congressional Research Service, ``Use of Federal
Appropriations for Non-Official, Political Campaign Purposes,'' 9/6/96,
p. 7.
\25\ 5 U.S.C. Sec. 7324(a); see also Congressional Research Service
Report No. IB97045, 8/12/97, p. 8.
26 5 U.S.C. Sec. 7323(a)(2). Section 7323(a)(2) makes an
exception for the solicitation of contributions in a few limited
instances involving employee organizations, not relevant here. See also
5 C.F.R. 734.101(b) which defines accepting a contribution as taking
``possession . . . officially on behalf of a candidate, a campaign, a
political party, or a partisan political group, but does not include
ministerial activities which precede or follow this official act.'' 18
U.S.C. Sec. 607(b) allows Congressional staff to accept contributions
in a federal building if the contribution is forwarded within seven
days to the appropriate campaign committee.
27 5 U.S.C. Sec. 7323(a)(1).
28 5 U.S.C. Sec. 7323.
29 5 U.S.C. Sec. 7323 (Hatch Act applies to ``any
individual, other than the President and the Vice President, employed
or holding office in . . . an Executive agency'').
30 5 U.S.C. Sec. 7324(b)(2)(B)(i); see 5 CFR 734.502;
Congressional Research Service Report No. IB97045, 8/12/97, p. 8.
31 5 U.S.C. Sec. 7323(a)(2); see Congressional Research
Service Report No. IB97045, 8/12/97, p. 8.
32 5 U.S.C. Sec. 7324(b); 5 C.F.R. 734.503; see
Congressional Research Service Report No. IB97045, 8/12/97, p. 8.
33 See, for example, 5 C.F.R. 734.503, Example 3: ``The
head of an executive department may hold a partisan `political' meeting
or host a reception which is not a fundraiser in his conference room
during normal business hours.''
34 5 C.F.R. 734.101.
35 6 Off. Legal Counsel 214, 217 (1982).
36 6 Off. Legal Counsel 214, 217 (1982).
37 6 Off. Legal Counsel 214, 217 (1982).
38 5 C.F.R. 734.503.
39 5 C.F.R. 734.503.
40 Kathryn Dunn Tenpas, ``Institutionalized Politics:
The White House Office of Political Affairs,'' Presidential Studies
Quarterly (Spring 1996).
41 For the first twelve years under President Reagan and
President Bush, OPA staff members served as liaisons to the Republican
national, state and local party organizations; coordinated activities
with the congressional campaign committees; did political outreach to
targeted constituency groups; worked to obtain appointments to federal
positions and offices for political supporters; provided assistance to
candidates in mid-term elections; and helped plan the president's re-
election campaign. Kathryn Dunn Tenpas, ``Institutionalized Politics:
The White House Office of Political Affairs,'' Presidential Studies
Quarterly (Spring 1996) p. 512. OPA staff under President Clinton
engaged in similar activities. See also Harold Ickes, 10/7/97 Hrg. pp
85-90.
42 Memorandum to All White House Staff from C. Boyden
Gray, Counsel to the President, re ``Political Activity,'' 11/27/91, p.
4, n. 3.
43 Memorandum to All White House Staff from L. Cutler &
C. Mills re: Political Activity, 4/6/94, p. 2, n. 2.
44 See Memorandum by Jack Maskell, legislative attorney,
American Law Division, Congressional Research Service, ``Use of Federal
Appropriations for Non-Official, Political Campaign Purposes,'' 9/6/96,
p. 7.
45 The constitutionality of section 441a(d)'s limits on
coordinated expenditures by parties was questioned by several Supreme
Court Justices in Colorado Republican Federal Campaign Committee v.
FEC, 116 S. Ct. 2309 (1996), but no ruling was made by the Court on
that issue. In Buckley v. Valeo, 424 US 1, 47 (1976), in dicta, the
Supreme Court analogized coordinated expenditures to contributions
which it held could be constitutionally limited; in the Colorado case,
in dicta, some Justices analogized coordinated expenditures to direct
spending by candidates which Buckley held cannot constitutionally be
limited.
46 2 U.S.C. Sec. 441a(d)(2).
47 2 U.S.C. Sec. 441a(b).
48 RNC v. FEC, 616 F.2d 1 (2d Cir) (en banc), aff'd
mem., 445 U.S. 955 (1980) One presidential candidate during 1996, Steve
Forbes, declined to accept public financing and was not subject to
spending limits.
49 See 2 U.S.C. Sec. 441a(c), and 11 C.F.R.
9035.1(a)(1).
50 See, for example, 2 U.S.C. Sec. 431(9)(B)(iv) and
(viii) and 11 C.F.R. 102.17 (joint fundraising by parties and
candidates, and allocating associated expenses).
51 FEC Advisory Opinion 1984-15.
52 Letter to Senate Judiciary Committee Chairman Orrin
Hatch of Utah from Attorney General Reno, 4/14/97, pp. 6-7.
53 FEC Advisory Opinion 1988-22.
54 See, for example, opinion by Justice Kennedy; see
also footnote 45, supra.
55 2 U.S.C. Sec. 432(e)(3)(A)(i); 11 C.F.R.
102.12(c)(1).
56 See, for example, FEC v. Massachusetts Citizens for
Life, 479 U.S 238 (1986); Austin v. Michigan State Chamber of Commerce,
494 U.S. 652 (1990); see also legal analysis in part 2 on independent
groups, supra.
57 See 11 C.F.R. 106.5. In a letter dated 6/4/97,
President Clinton petitioned the FEC to change these regulations and
prohibit parties from raising and spending soft money.
58 See 11 C.F.R. 102.17 (joint fundraising by parties
and candidates, and allocating associated expenses).
59 See, for example, FEC v. Christian Action Network,
110 F.3d 1049 (4th Cir 1997).
60 424 U.S 1, 80 (1976) The Court reached this ruling
with respect to ``individuals and groups that are not candidates or
political committees.'' 424 U.S. at 80.
61 424 U.S. at 44 n.52
62 FEC v. Massachusetts Citizens for Life, 479 U.S 238,
248-49 (1986) (quoting Buckley).
63 807 F.2d 857, 863 (9th Cir. 1987).
64 807 F.2d at 864.
65 11 C.F.R. 100.22(b) (``Expressly advocating means any
communication that . . . could only be interpreted by a reasonable
person as containing advocacy of the election or defeat of one or more
clearly identified candidate(s) because--(1) [t]he electoral portion of
the communication is unmistakable, unambiguous, and suggestive of only
one meaning; and (2) [r]easonable minds could not differ as to whether
it encourages actions to elect or defeat one or more clearly identified
candidate(s) or encourages some other kind of action.'') (original
emphasis).
66 See FEC v. Christian Action Network, 110 F.3d 1049,
1055 (4th Cir 1997) (holding that Buckley requires express or explicit
words of advocacy of election or defeat of a candidate); Maine Right to
Life Committee. v. FEC, 98 F.3d 1 (1st Cir 1996) (invalidating FEC
regulation).
67 Maine Right to Life Committee v. FEC, 914 F Supp 8,
10 (D. Me. 1996), aff'd, 98 F.3d 1 (1st Cir. 1996) (per curiam).
68 Lawrence Noble, 9/25/97 Hrg. Pp. 34-40. The FEC is
currently in litigation to determine whether this position--that issue
ads sponsored by an independent group, coordinated with a candidate,
and containing an electioneering message result in a contribution to
the candidate--is correct See also legal analysis of independent groups
coordinating with candidates in Part 2, supra.
69 Trevor Potter, 9/25/97 Hrg. P. 36.
70 Lawrence Noble and Trevor Potter, 9/25/97 Hrg. Pp.
35-36, 39-40. Potter testified that the FEC had traditionally
``presumed all party spending was coordinated with candidates'' and had
deemed coordination between the two irrelevant, concentrating instead
on determining whether specific party expenditures were generic party-
building efforts that could not be attributed to individual candidates
or candidate-specific spending subject to contribution limits. Trevor
Potter, 9/25/97 Hrg. P. 22. See also legal analysis of independent
groups coordinating with candidates in Part 2, supra.
71 FEC Advisory Opinion 1995-25; see also FEC Advisory
Opinion 1985-14; and letter to Senate Judiciary Committee Chairman
Orrin Hatch of Utah from Attorney General Reno, 4/14/97, p. 7.
72 Letter to Senate Judiciary Committee Chairman Orrin
Hatch of Utah from Attorney General Reno, 4/14/97, pp. 6-7.
73 Letter to Senate Judiciary Committee Chairman Orrin
Hatch of Utah from Attorney General Reno, 4/14/97, p 7.
74 See, for example, Harold Ickes, 10/7/97 Hrg. P. 85.
75 S. 25, the McCain-Feingold campaign finance reform
bill, proposes a variety of legislative remedies on soft money, issue
advocacy and coordination.
PART 5 FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES
AND ADMINISTRATIONS
Chapter 25: DNC and RNC Fundraising Practices and Problems
The 1996 federal election cycle set a record for the amount
of money raised and spent by federal candidates and their
parties in the quest to obtain victory at the polls. During the
election cycle, both parties leveled well worn allegations at
each other of improper or illegal fundraising practices and
other wrongdoings, proclaiming that they were shocked at the
opposing party's activities. In past election cycles, these
allegations were largely forgotten after the electoral dust
settled. After the 1996 election, however, allegations against
candidates and national parties persisted and escalated.
The Committee investigated a number of the allegations
against the DNC during the last election cycle, taking 38 days
of depositions, conducting 14 interviews,1 receiving
5 days of public testimony,2 and receiving over
450,000 pages of unredacted DNC documents.3 The
Committee focused on how the DNC had performed its primary
functions of (1) soliciting campaign contributions, (2)
organizing fundraising and other events, and (3) spending its
funds to promote the Democratic Party. After a thorough
investigation, several serious problem areas emerged, which are
set forth below.
---------------------------------------------------------------------------
Footnotes appear at end of chapter 25.
---------------------------------------------------------------------------
Allegations against the RNC were not fully explored by the
Committee, which took only two depositions 4 and one
day of public testimony from one RNC official.5 Even
then, the Committee strictly limited the testimony to issues
involving the National Policy Forum. In addition, the Committee
only received 70,000 pages of RNC documents, many of which were
heavily redacted, despite the fact that the RNC received a
virtually identical subpoena as the one issued to the
DNC.6 As discussed elsewhere in this report, the
lack of information on the operations of the RNC leaves a major
hole in the Committee's analysis of the 1996 election cycle.
However, the sparse information that the Committee did receive
strongly indicates that the RNC engaged in many of the same
practices as the DNC and, as with the DNC, these practices were
not new or unique in 1996.
The primary fundraising and spending activities of the DNC
and the RNC during the last election cycle are addressed in
this chapter. The remaining sections of Part 5 discuss in more
detail both parties' practices of soliciting funds from federal
property; organizing events for contributors which, in exchange
for those contributions, often provided access to elected
officials; and spending party funds by conducting political
advertising.
findings
(1) The evidence before the Committee establishes that both
political parties engaged in questionable fundraising
practices. Both parties scheduled events at government
buildings and promised access to top government officials as
enticements for donors to attend fundraising activities or make
contributions. Both parties used their presidential candidates
to raise millions of dollars in soft money donations in
addition to the $150 million provided in public financing for
presidential campaigns. Both parties worked with their
candidates to design and broadcast issue ads intended to help
their candidates' election efforts.
(2) The RNC's activities were subject to some of the same
or similar problems as the DNC's activities. The RNC received
foreign contributions, gave access to top Republican leaders
for large contributions, held fundraising-related events on
federal property, engaged in coordination between the
Presidential campaign and the national party and used
supposedly nonpartisan, tax-exempt organizations for partisan
purposes.
(3) The compliance systems of the DNC in the 1996 campaign
were flawed. Although the evidence before the Committee
indicates that the DNC fundraising staff as a whole attempted
to do their job in accordance with the law, isolated failures
of supervision coupled with a compelling desire to raise more
money led the DNC to accept hundreds of thousands of dollars in
contributions it otherwise would not have accepted. Despite
these problems, the overwhelming majority of contributions
received by the DNC appear to have been legal and appropriate.
(4) The position taken by the Republican Party in the 1992
and 1994 election cycles that it had no obligation to
investigate contributions or contributors is troubling. The
evidence before the Committee is insufficient to evaluate the
compliance procedures of the RNC during the 1996 election
cycle. Because the Committee did not have the full cooperation
of the RNC in complying with the Committee's subpoenas and
requests for information (and the Committee failed to enforce
the subpoenas), the Committee failed to fully assess the RNC's
practices and procedures for insuring the legality and
propriety of major contributions.
introduction
In September 1996, just weeks before the November 1996
election, the Los Angeles Times published an article that
raised questions about the legality of a contribution to the
DNC from Cheong Am America, a California subsidiary of a South
Korean corporation.7 The article alleged that the
contribution may have been illegal because the subsidiary did
not have sufficient domestic revenues to support its
contribution of $250,000. The DNC reviewed the circumstances
surrounding the contribution, which had been solicited by a DNC
fundraiser named John Huang, and returned the entire $250,000
after determining that it failed to meet the Federal Election
Commission's (FEC) criteria for contributions from domestic
subsidiaries of foreign corporations.8
Following this event, the news media increasingly published
allegations that contributions made to the DNC were illegal or
improper. Beginning in November 1996, with the assistance of
outside law and accounting firms, the DNC conducted an internal
review of the 1200 contributions over $10,000 it had received
in the 1996 election cycle. In addition, contributions
solicited by Huang and Charlie Trie and those made by Trie,
Johnny Chung or in connection with the Hsi Lai Temple or other
Asian Pacific American Leadership Council events were also
reviewed.9 By June 1996, before the Committee's
hearings began, the DNC had returned 172 of those
contributions, which represented .006% of the number of
contributions made to the DNC. By September 1996, the total
amount of contributions returned by the DNC for legal reasons
amounted to .04% of the total raised by the DNC for the
relevant 1994-1996 period.10 The internal review and
returned contributions pointed to a number of problems within
the DNC and focused attention on Huang--both on the
contributions he solicited and the fundraising events he helped
to organize. In turn, questions were raised about the
fundraising practices and guidelines of the DNC and about
whether top DNC and White House officials had actively ignored
those guidelines or federal law as they strove to raise money.
The fundraising practices examined by the media and
explored by the Committee did not begin with this past election
cycle. However, the amount of money--especially large soft
money contributions--raised by both parties in 1995 and 1996
was unprecedented. In order to raise such large sums, both
parties had dramatically increased their fundraising efforts.
The DNC stepped up its drive to raise money in the fall of
1995, when White House and DNC officials decided that the party
would conduct a massive ``media'' campaign starting a full year
before the presidential election.11 According to
White House Deputy Chief of Staff Harold Ickes, the media buy
was designed to carry the Democratic Party's message to the
American people, and the increased funds were designed to keep
up with the Republican Party. He testified:
From the outset, moreover, we Democrats knew that we
would have to do all that we could within the bounds of
the law to get our message out to the American people.
We knew that the Republican money machine would raise
more than we could and would outspend us.
And guess what? They did--by about $222 million. The
three major Republican national committees [the RNC,
the National Republican Senatorial Committee and the
National Republican Congressional Committee] spent over
$558 million in the 1996 election cycle, compared to
approximately $336 raised by their Democratic
counterparts [the DNC, the Democratic Senatorial
Campaign Committee and the Democratic Congressional
Campaign Committee].12
In order to keep up with ``the Republican money machine,''
the DNC took aggressive fundraising steps, which included
reaching out to new communities and soliciting contributions
from donors that had not previously been tapped by Democrats
for large contributions; organizing fundraising and other
events to entice new donors; and spending the funds raised on
media ads that supported the Democratic Party and its
candidates. The DNC activities that later created controversy
were its receipt of contributions from questionable sources;
its use of the President and Vice President as part of its
fundraising efforts; its organization of events that were
controversial because of their location or the political access
they afforded big contributors; and its coordination of media
ads with White House and Clinton campaign staff.
Similarly, the Republican Party, which has out-raised the
Democratic Party in every recent election, also undertook
aggressive fundraising measures during the 1996 election cycle.
The RNC solicited and received questionable contributions;
organized events in order to promote contributions; and
purchased media ads that supported the Republican Party and its
candidates. The RNC activities that later created controversy
were its use of tax-exempt organizations to raise money; its
decision not to investigate or return certain questionable
contributions; its use of federal property to court
contributors; its organization of events that promised
contributors access to Republican leadership; and its
coordination of media ads with Dole for President staff.
These fundraising activities by both national parties were
encouraged by the ability under current law to raise unlimited
amounts of both hard and soft money and to legally spend this
money in the proper hard-to-soft proportions to promote their
issues as well as their candidates. The quest for money, and
the practices used to acquire that money, will control our
electoral system until meaningful campaign finance reform is
enacted.
In examining the problems of the fundraising practices of
the last few years, the Committee, over the strenuous
objections of the Minority Members, chose to focus almost
exclusively on the Democratic Party's activities. Consequently,
the evidence presented to the Committee was lopsided, coming
primarily from the DNC, which cooperated with the Committee,
spending over $4.75 million (not including legal fees) to
respond to the Committee's requests.13 As a result,
our description of how the parties operated during the last
election cycle is heavily weighted to the DNC. Many questions
about the internal workings of the RNC remain unanswered.
structure of the national parties
The Democratic National Committee
During the 1996 election cycle and after the devastating
1994 mid-term elections, the DNC implemented a new, bifurcated
chairman arrangement whereby Donald Fowler was the National
Chairman, responsible for the day to day activities of the
party, and Senator Christopher Dodd was the General Chairman,
acting as the official spokesman for the party.14
The DNC's executive director was Bobby Watson who served in
this position until December 1995.15 In March 1996,
B.J. Thornberry, former Deputy Chief of Staff at the Department
of the Interior, took his place.16 The DNC's
executive director functioned as a ``staff director'' and was
responsible for the overall management of the personnel who
work for the party.17
During the course of the 1996 election cycle, the DNC
fundraising division employed anywhere from 50 to as many as
100 fundraisers.18 The fundraisers were supervised
by a Finance Director who was a paid, full-time employee of the
DNC and a Finance Chairman who was considered an officer of the
party. Through January 1995 they were supervised by Laura
Hartigan, Finance Director,19 and Terry McAuliffe,
Finance Chairman 20 who left their respective DNC
positions to assume the same positions at the Clinton
campaign.21 In April 1995, Richard Sullivan took
over as Finance Director for the remainder of the 1996
cycle.22 Truman Arnold, a Texas businessman and
long-time DNC donor, took over for McAuliffe for a period of
several months,23 and Marvin Rosen took over for the
remainder of the term.24 Sullivan and Rosen
testified that they reported and coordinated the activities of
the Finance Division with Fowler.25 Fowler, however,
testified that he felt the Finance Division was too independent
and that, as National Chairman, he was not able to oversee it
as well as he would have liked.26
Other key fundraising staff were the Deputy Finance
Directors, David Mercer 27 (one of Charlie Trie's
contacts 28) and Erica Payne;29 the
Director of the DNC's Managing Trustee Program, its highest
dollar donor council, was Ari Swiller 30 and his
Deputy Ann Braziel.31 Due to their sizable
donations, many of the donors questioned during the Committee's
investigation were members of the DNC Managing Trustee Program,
members of which must either donate $100,000 or raise
$250,000.32
Joseph Sandler has been General Counsel of the DNC since
February 1993.33 His deputy, and the only other
attorney in the DNC's Office of General Counsel during the
1995-96 cycle, was Neil Reiff.34 Reiff had been with
the DNC's Office of General Counsel since the spring of
1993.35
In most cases, these individuals were interviewed and
deposed for multiple days during the course of the
investigation.
The Republican National Committee
During the 1996 election cycle, the chairman of the RNC was
Haley Barbour and its executive director was Sanford
McAllister. McAllister's immediate predecessor was Scott Reed
who left the RNC in February 1995 to become Senator Dole's
campaign manager.36 The RNC's top political
operative was Curt Anderson, whose title has been listed as
both Political Director and Campaign Operations Director.
Anderson and his assistant Ruth Kistler supervised the RNC's
coordination of political activities with the Dole for
President campaign as well as with independent
groups.37
The RNC's top fundraiser was RNC Finance Director Albert
Mitchler. In March 1996, Mitchler was joined by Jo-Anne Coe,
who was named RNC Deputy National Finance Chair. Coe is a
longtime aide to Senator Dole, served as top fundraiser of the
Dole for President committee until it raised the maximum funds
permitted under FECA for presidential candidates who accept
public financing, and also served as executive director of
Senator Dole's tax-exempt organization, Campaign America. Coe
now works with Senator Dole at a private law firm. Coe directed
fundraising for media ads which the RNC produced in
coordination with the Dole campaign.38
Other key RNC fundraisers included Howard Leach, national
finance chair; John Moran, a national finance chair and head of
Victory '96, a key Republican Party fundraising organization;
Tim Barnes, who served as chair of Team 100, a premier RNC
donor program; and Karen Kessenich, chair of the Eagles,
another top RNC donor program.39
The RNC's general counsel was David Norcross. Its chief
counsel was Thomas Josefiak. The RNC's communications and
congressional affairs director was Ed Gillespie. Rich Galen was
a frequent RNC spokesperson.
Because the Committee's attempts to depose Mitchler, Coe,
Anderson, Kistler, and other RNC officials were not successful,
it did not explore the structure of the RNC.
fundraising drives
In the fall of 1995, White House officials, political
advisors, and DNC officials decided to pursue a strategy that
involved an extensive ``media'' campaign to communicate the
message of the Administration and the Party.40
Fowler set a goal for the DNC to raise a total of $120 million
over the course of 1996.41 In response, the DNC
fundraising staff--led by Rosen and Sullivan--formulated a plan
to raise the money using a variety of methods, including direct
mail solicitations, major donor contribution packages, and
fundraising and other events designed to encourage
contributions of both hard and soft money. The DNC and the
White House recognized that to meet this goal, tremendous
pressure would be placed on all DNC staff, particularly the
fundraisers, and that the involvement of the President and Vice
President would be necessary. The plan proposed that the
President or Vice President attend 100 to 150 events around the
country in the next year and that the DNC organize a variety of
fundraisers and other events, some within the White House
complex.42
The Committee was not afforded the opportunity to depose
RNC officials or Republican political consultants, and
therefore was not able to explore the special fundraising
initiatives planned and implemented by the Republican Party in
the 1996 election cycle. However, the Committee learned that,
for many years, the Republican Party has solicited
contributions through two principal donor programs: Team 100
and the Republican Eagles. Team 100 membership requires ``an
initial contribution of $100,000'' and contributions of $25,000
per year for the next 3 years. Republican Eagle membership
requires contributionsof $15,000 annually. To encourage
individuals to join these programs, the RNC distributes promotional
material describing the benefits of membership, which include meetings
and dinners with high-ranking Republican elected officials. This
fundraising practice of exchanging access for contributions is
discussed in Chapter 28. In addition, the 1996 election cycle witnessed
a new Republican donor program which offered a variety of benefits to
donors informally called ``season ticket holders,'' who contributed
$250,000 or more to the Republican Party.43
Soliciting Contributions
A fundraising organization's primary goal is to solicit and
receive contributions for its cause. As part of its fundraising
organization, the DNC had a staff structure that would (1)
train and monitor its fundraisers and (2) screen incoming
contributions for legality and appropriateness.44
The Minority assumes the RNC had a similar structure, but was
unable to investigate its existence or effectiveness.
During the 1996 cycle, however, both parties undertook
their largest fundraising drives in history. In fact, both
national parties more than doubled the amount they had raised
just two years before: the DNC went from $85.7 million to
$210.3 million and the RNC went from $132.3 million to $306.1
million.45 Considering such a dramatic increase in
fundraising, the national parties, particularly the DNC did not
adequately respond to such enormous pressure by improving old
training and compliance systems to ensure against problems. The
Committee found these problems in the DNC in particular, in
light of the chosen focus of the investigation.
Training fundraisers
The DNC's training procedures and problems
From 1993 to 1996, the DNC general counsel's office, headed
by Joseph Sandler and his deputy, Neil Reiff, worked with the
Finance Division to ensure that the fundraisers were trained in
the legal and appropriate way to solicit and accept
contributions and to identify contributions which might not be
legal or appropriate. The general counsel's office conducted
approximately eight separate group training sessions and
numerous special sessions with groups of Finance Division
staff.46 At those sessions, the counsel's office
distributed and explained the DNC's manual, written by the
Office of General Counsel, which contained the legal
restrictions for national party fundraising as well as the
DNC's own policies and guidelines. The general counsel's office
emphasized to the fundraisers that as they worked and talked to
contributors, they should obtain an understanding of the
contributors' backgrounds and ability to comply with applicable
laws and guidelines. Sandler and Reiff also emphasized to staff
at these sessions that questions and problems should be brought
to the attention of someone in the counsel's office. The
testimony and evidence received by the Committee demonstrate
that the DNC manuals and training sessions were comprehensive
and that Finance Division staff routinely sought the advice of
the counsel's office.47
The DNC's training program seemed adequate: the program and
manual were updated appropriately, and all DNC fundraisers who
testified before the Committee stated that they went through
the training and received the manuals.48 However,
with the large fundraising goal the DNC undertook to meet, this
program could have used some strengthening as more fundraisers
were hired.49 A larger general counsel's office
might have allowed for more active oversight of fundraisers'
activities by attorneys familiar with nuances of the law. More
frequent training sessions in smaller groups might have allowed
for more personal contact with the lawyers. And, as the DNC
reached out to new communities and contributors unfamiliar to
the DNC, more diligent checks should have been conducted on
new, large-dollar contributors. These types of improvements
have since been made by the DNC.50
John Huang was hired by the DNC in late 1995 to target the
Asian-Pacific American community for Democratic fundraising.
The evidence establishes that Huang attended a training
session, a manual was found in his files, and after his first
event he brought checks to Sandler for review which led Sandler
to testify that he believed that Huang had a satisfactory
knowledge of the laws and DNC guidelines under which he was to
raise money.51 Shortly after this meeting, Huang
initiated the return of two checks based on the questionable
citizenship status of the donors.52 However, after
this event, Huang solicited and accepted numerous contributions
that later had to be returned by the DNC. The evidence
presented to the Committee does not establish that these
problems were indicative of the practices of the vast Majority
of other DNC fundraisers during the 1995-96 cycle. See Chapter
4: John Huang.
The RNC's training procedures and problems
The Committee was not afforded the opportunity to depose
RNC officials, and, therefore, was not able to explore the
procedures involved or the appropriateness of the training that
the RNC provided to its fundraisers.
Contribution compliance
Another aspect of the solicitation and acceptance of
contributions by the national parties were the compliance
systems established to screen incoming contributions for
legality and appropriateness.
The DNC's contribution compliance and problems
According to Sandler, the DNC's review for legality had
two basic elements:
[O]ne, review of the contribution check and
accompanying information; and two, training of the
fund-raising staff to spot potential legal problems and
to bring them to the attention of the office of the
general counsel.53
Sandler explained that the general counsel's office would
review all incoming checks as well as the accompanying
information provided by the contributors and consult the DNC
donor database. Sandler or Reiff would then determine, in the
case of ``hard'' money, whether the strict limitations on the
source and amount of money had been met. The office would
review similar information for ``soft'' money
contributions.54
The second element of screening checks for legality, as
outlined by Sandler, was training the fundraising staff to spot
problems and bring them to the attention of the general
counsel's office.55 Although this two-part system
worked in the vast majority of cases, the training of
fundraisers, particularly Huang, and the response to problems
spotted by DNC staff generally, were not vigorously pursued.
Contributions to the DNC were also generally checked for
appropriateness. From the spring of 1993 through May 1994, a
DNC Research Department staff member was assigned to run public
database searches to discover any controversial information
regarding individuals who were to become substantial
contributors. Sometime in May 1994, however, the staff person
assigned to this task left the DNC, and the DNC Research
Department did not reassign responsibility for conducting these
searches to another staff member. Although public data searches
were periodically conducted on new contributors, the screening
system developed a hole that was not patched until after the
1996 elections.56 However, had these searches
continued, it is unclear whether the problems which led to the
return of the majority of the returned contributions, such as
Gandhi's $325,000, Kanchanalak's $190,000, Chung's $275,000, or
the Wiriadinatas' $425,000 would have been
detected.57 However, in the case of the Gandhi
contribution, information was available and was one reason the
White House had initially declined to accept an award Gandhi
had offered to the President.58
In general, most of the contributions that were returned by
the DNC were returned because the information provided was
insufficient to determine the source of the funds for the
contributions.59 Some of these contributions are
associated with individuals who were originally from a number
of different Asian countries and whose citizenship or residency
status was in question. Although there is no evidence that the
DNC encouraged or was aware of the problems with these
contributions or that they were associated with any one
country, it is also clear that the DNC should have been more
diligent in monitoring an inexperienced fundraiser who was
placed in charge of tapping substantial contributions from a
new community.60
Monitoring the origins of campaign contributions is
difficult because of the necessity for the national parties, as
well as candidates' campaign committees, to rely on information
presented by the contributor. In fact, several of the
problematic contributions received by the DNC appeared at first
to be entirely legal and appropriate and were only discovered
to be problematic after a thorough investigation and audit;
others involved the contributors giving false certifications to
the DNC which were discovered and returned later.61
Currently, contributors are not required to certify at the time
that they make a contribution that the information they have
provided is accurate. Amending the law to require contributors
tocertify that they are U.S. citizens or permanent residents
and that they are contributing their own money, accompanied by
penalties for false certification, would assist the parties and
campaigns in complying with legal requirements.
The DNC has since improved many of its procedures. Among
the changes the DNC made were (1) adding to the Office of
General Counsel a compliance director with full responsibility
to ensure contributions and solicitations comply with law and
internal procedure; (2) creating Executive Compliance and
Contribution Review Committees and; (3) requiring fundraisers
to submit an annual certification of compliance. On the
processing side of fundraising, the DNC has improved and
specified the research to be done on donors and the process to
be followed for returns. Finally, the DNC laid out new,
detailed procedures for screening proposed guests at DNC
events.62
The RNC's contribution compliance and problems
The Committee was not afforded the opportunity to depose
RNC officials or receive a meaningful production of documents
in order to explore the legality or propriety of the procedures
the RNC used and the contributions the RNC solicited and
accepted in the 1996 election cycle. This problem was
aggravated by the RNC's failure to conduct a thorough
investigation of its contributions and make that information
available to the public.
Evidence was obtained by the Committee indicating that,
during the 1992 and 1994 election cycles, the Republican Party
took the position that it had no duty to investigate or verify
any contributions or contributors. Rich Galen, a Republican
Party spokesperson, told the press in 1992, ``There's no
requirement in practice or in law that a political organization
or charitable organization get any kind of statement from a
donor as to the origins of the money.'' 63 In 1993,
deposition testimony provided by a top Republican fundraiser,
Elizabeth Ekonomou, in connection with a questioned
contribution provided by Michael Kojima, indicates that
Republican fundraising committees believed they had no legal
obligation to investigate any contributor or contribution, and
provides no evidence of any standing policy or procedure to
conduct such investigations.64 Ekonomou stated under
oath:
Q. Did the Dinner Committee do any kind of background
search or verification regarding its top fundraisers?
A. No.
Q. Do you believe that the Dinner Committee has
responsibility to do any kind of background
verification or search about its fundraisers or top
fundraisers?
A. No.
Q. In light of your experience and the concern that
was raised in you after revelations of Mr. Kojima's
outside activities, you continue to have no belief that
the Dinner Committee has any kind of obligation to do
any verification of the background of its top
fundraisers?
A. I do not believe that the President's Dinner has
any obligation to get background information on its top
fundraisers.65
Jan Baran, long-time legal counsel to the RNC and other
Republican Party organizations, put it even more forcefully in
1993 legal pleadings filed with the U.S. District Court for the
District of Columbia:
[P]olitical organizations such as the [Republican
Dinner] Committee must be able to receive and use
contributions. If they were required to investigate all
contributors and establish a pedigree for all
contributions, their First Amendment protected
activities would be seriously handicapped. . . . The
Federal Election Campaign Act of 1971, as amended,
imposes no burden upon political organizations to
investigate the solvency of contributors.66
The unequivocal position of the Republican Party's longtime
legal counsel, experienced fundraiser and designated
spokesperson suggests that, in the years leading up to the 1996
election cycle, the Republican Party's policy was that it had
no legal obligation to investigate either contributors or
contributions, even if questions were raised about a particular
donation. In addition, neither the civil litigation over the
Kojima contribution nor subsequent investigative efforts by
this Committee produced any evidence that standard procedures
are in place in Republican fundraising organizations requiring
the investigation and evaluation of large contributions from
unfamiliar donors. Moreover, due to the failure of RNC
officials to provide deposition testimony or cooperate with the
Committee's investigation into RNC procedures, there is no
evidence before the Committee which suggests that the
Republican Party changed the policy it espoused in the 1992 and
1994 election cycles, or adopted another position during the
1996 election cycle.
There is also evidence before the Committee that the RNC
has solicited and received funds that were possibly illegal or
inappropriate and which should be refunded. As explored in
Chapter 6, the RNC received funds in 1992 from Michael Kojima
that were likely illegal. Kojima contributed a total of
$500,000 at a time when he was known to have meager resources
and was being pursued by creditors. His contributions were
likely derived directly from Japanese businessmen, and
constituted one of the largest direct foreign contributions to
a national party. Even though, in 1992, there were strong
indications that Kojima's contribution was being financed by
foreign money, the RNC to date has declined to return the
funds. Other examples discussed elsewhere in this report
include funding from the National Policy Forum, an arm of the
RNC, that originated in Hong Kong, Taiwan and China, and direct
contributions to the RNC of funds from German and Taiwanese
nationals. The Minority believes that the RNC should return the
funds from Kojima and the National Policy Forum and that a
thorough public investigation of its other contributions is
overdue.67
Telephone solicitations from federal property
The practice of soliciting political contributions by
telephone, undertaken by current and former Presidents, Vice
Presidents, and other elected politicians, is discussed in
Chapter 26 of the Minority report.
Organizing Fundraisers and Other Events
The national parties also organized fundraisers and other
events for their high dollar contributors and took steps to
``service'' them by intervening on their behalf for meetings
with elected officials and providing other ``political'' access
benefits. These practices are outlined below and discussed in
more detail in Chapter 28 of the Minority Report.
DNC events and contributor services
The Committee fully explored the DNC's practice of
organizing events in the White House complex, such as coffees
with the President and Vice President; inviting a small number
of individuals to attend those events that later generated
controversy; and making requests on behalf of contributors to
the executive branches.
During the 1996 cycle, it was unclear who was responsible
for screening individuals proposed by the DNC to be guests at
events to be attended by the President or Vice President.
Richard Sullivan testified that he understood that the Finance
Department was supposed to raise potential problems regarding
these guests with White House personnel.68 During
the last election cycle, the DNC staff did raise such questions
with White House staff. These questions, particularly those
about foreign nationals who were proposed to be guests of
contributors at DNC events, were then addressed on a case-by-
case basis, primarily by White House personnel consulting with
the relevant staff of the National Security Council. The
Committee received evidence that when asked, the NSC staff
provided more than adequate input on the appropriateness of the
individual attending an event with the President or Vice
President and, with a few notable exceptions addressed in
detail later in this Minority Report, the recommendations were
followed by the DNC. Problems arose, however, when the DNC did
not raise questions to White House officials. In those cases,
the White House and the NSC were not consulted and the DNC
alone made the determination about whether the individuals were
appropriate guests at events to be attended by a
principal.69
Although the White House has established new procedures to
screen White House guests, during the 1996 election cycle, a
number of individuals who later generated controversy attended
events in the White House with the President or Vice President.
These individuals, and the circumstances involved in their
invitations to these events, are discussed in Chapters 29-31 of
this Minority Report. In general, the Committee discovered that
the DNC failed to heed warning signs about certain DNC
contributors. Despite warnings about guests invited by John
Huang and Johnny Chung, as well as those about Roger Tamraz,
the DNC continued to invite these and other individuals to
events in the White House. DNC Chairman Donald Fowler also was
found to have contacted Executive Branch officials to promote
contributors. His contacts on behalf of contributors included
contacting Harold Ickes on behalf of the Chippewa Indian tribe,
and the Treasury Department on behalf of an issue generally
affecting Indian tribes, the Commerce Department on behalf of
an individual who wanted to go on a Commerce Department trade
mission and an individual who was interested in information on
Minority business programs.70
When questioned by the Committee about these practices,
Fowler testified that although DNC employees are forbidden to
intercede with the Administration on behalf of contributors, he
confirmed that he did so on a regular basis. Fowler asserted
that he did not believe that the DNC policy applied to him in
his position as National Chairman.71 Further, Fowler
admitted that many administration and DNC officials admonished
him not to pursue these activities, but his contacts did not
cease.72 Fowler's actions may not have been illegal,
but they were clearly inappropriate.
The Committee also investigated allegations that the DNC
rewarded contributors with spots on trade missions arranged by
the Commerce Department. Despite numerous depositions and
thousands of documents on this matter, these allegations were
not substantiated by the evidence before the
Committee.73
The DNC has now adopted a system that requires several
staff members located in different DNC divisions to conduct
thorough database searches to both assess the appropriateness
of accepting contributions from specific individuals or
companies, and of inviting these individuals and their
associates to attend fundraisers or other events sponsored by
the DNC.74 Likewise, the NSC has adopted a
structured and thorough process that requires certain
individuals invited to attend events at the White House to be
screened by knowledgeable NSC staff.75
RNC events and contributor services
Despite repeated requests by the Minority, the Committee
chose not to conduct depositions of RNC officials or require
the RNC to conduct a meaningful document production regarding
the Republican Party's organization of events and servicing of
contributors. However, the Committee learned that during
previous administrations, the RNC organized events inside the
White House with contributors who raised issues of
appropriateness, and made requests to Executive Branch
officials on behalf of contributors. Those activities, which
are similar to the DNC activities at issue, are discussed in
detail in Chapter 28 of this Minority Report.76
The evidence shows that since the 1970s, the RNC has
routinely arranged for contributors to attend events held in
the White House and to arrange events between contributors and
Republican presidents, presidential candidates, and leaders in
Congress. In addition, when inviting contributors to such
events, the RNC has included several individuals who later
generated controversy.77 This is not surprising
considering that Judith Spangler, a White House career employee
testified that during her 18 year tenure, administrations have
handled invitations to RNC and DNC events at the White House in
the same way as the current Administration handled similar
invitations from 1993 to 1997.78
Not surprisingly then, the Committee received evidence that
several controversial RNC contributors attended private dinners
or meetings inside the White House where President Bush was in
attendance. These individuals include Michael Kojima, whose
foreign contributions to the RNC afforded him the opportunity
to sit next to President Bush at an RNC fundraiser in 1992;
Yung Soo Yoo who attended a state dinner at the White House
with President Bush in 1991, despite being a convicted felon
with known ties to the Korean Central Intelligence Agency; and
James Elliott, who attended private White House meetings in
1992, despite having been convicted of bank fraud in
1986.79
The Committee learned that the RNC contacted Bush
Administration officials on behalf of substantial contributors.
For example, in the late 1980s and early 1990s, then RNC
Chairman Lee Atwater and Team 100 Chairman Alec Courtelis
forwarded the names of several substantial contributors to
President Bush's Commerce Department Secretary Robert
Mosbacher. Mosbacher, who had been President Bush's campaign
manager in 1988, rewarded these contributors by appointing them
to positions with such government entities as the President's
Export Council.80
Both parties use federal property to hold events for,
provide political access for, and contact administration
officials on behalf of, substantial contributors. These are
well-known and common practices in Washington and can be
accomplished without violating any law.
SPENDING PARTY FUNDS
In addition to soliciting political contributions and
organizing events and other perks for contributors, both
national parties spent their funds with the intent of
furthering their issues and their candidates. Such expenditures
are legal, but federal law limits to $12 million the amount a
party can spend ``in connection'' with its presidential
candidates. That $12 million limitation applies only to those
party funds that carry an ``electioneering message'' advocating
the election or defeat of a clearly identified candidate.
Therefore, when the DNC and RNC spent millions of dollars on
``issue ads'' in the last election cycle, they argued that
because the ads focused on issues, and did not advocate the
election or defeat of a clearly identified candidate, they did
not count toward the $12 million limit.81
Presidential campaign committees that accept matching funds
are also limited in the amount of money they can spend in
connection with the nomination of their presidential
candidates. In 1995, both the Clinton Campaign and the Dole for
President campaign accepted matching funds and therefore were
limited to spending $37 million in federal dollars in
connection with the nomination of their candidate, and $74
million in connection with the general election. Both campaigns
claimed that the issue ads run by their parties did not
advocate the election of their candidates and therefore fell
outside the $37 million and $74 million limits.82
The Committee heard allegations that the DNC, the RNC, the
Clinton Campaign, and the Dole for President campaign all
violated these federal restrictions on expenditures. The
allegations were based on two assumptions: (1) that the DNC and
RNC issue ads, in reality, carried electioneering messages
advocating the election or defeat of a clearly identified
candidate and that, therefore, the funds expended on these ads
should have been counted toward the parties' $12 million limit
and the presidential campaigns' $37 and $74 million limits, and
(2) that because both the DNC and RNC coordinated with their
candidates, all ``issue ads'' that had input from the
candidates--regardless of the content of the ads--should be
counted toward the party's $12 million limit and the
presidential campaigns' $37 and $74 million
limits.83
These two assumptions formed much of the public debate on
this issue, but are either not valid, or not clear, under
current federal election law, as explained in detail in the
legal analysis in Chapter 24. Parties are allowed to coordinate
with their candidates, in particular their presidential
candidates, and may work closely with their candidates to
develop, finance and place issue ads.84 Coordination
between a national party and its candidates does not turn
``issue ads'' into ``candidate ads'' simply because
coordination occurred.85
Chapters 32 and 33 of this Minority Report set forth the
DNC and RNC activities in coordinating with its candidates and
broadcasting issue ads. Both parties made use of the existing
legal loopholes for soft money and issue ads to bypass the
spending limits that apply to presidential campaigns that
accept federal funds. Although neither party broke the law, the
RNC came closer to crossing the line between issue ads and
candidate ads.
DNC'S SPLITTING CONTRIBUTIONS BETWEEN HARD AND SOFT MONEY ACCOUNTS
As discussed in greater detail in Chapter 26, the Committee
investigated the legality and appropriateness of the telephone
solicitations made by the Vice President. In the course of that
investigation, the Committee discovered that some of the
contributions solicited by the Vice President were diverted
into hard money accounts by DNC officials. Specifically,
according to FEC records, 20 individuals called by the Vice
President made contributions to the DNC within 30 days of
receiving a phone call from him.86 The DNC received
$737,750 from these 20 individuals and deposited $605,750 into
its non-federal soft money account. The DNC deposited $132,000
donated by eight of the 20 individuals into its federal hard
money account.87 The Minority found that the Vice
President was not aware of these diversions, and that the DNC's
practice of diverting soft money contributions into hard money
accounts without the knowledge or permission of the original
contributor was clearly inappropriate.
CONCLUSION
After media attention and its own internal review, the DNC
returned less than 200 contributions out of more than 3 million
it had received during the 1996 election cycle. The
contributions that were returned based on legality totaled just
over $1 million, as did the contributions returned based on the
DNC's inability to verify their legality or based on the DNC's
determination that they were inappropriate. Thus, the
contributions that generated the campaign finance fundraising
scandal of 1996, and investigated by the Committee, totaled
approximately $2.8 million and represented .006% of the
contributions received by one national party. As of September
1997, the total amount of contributions returned by the DNC for
legal reasons amounted to .04% of the total raised by the DNC
during the relevant 1994-1996 period.
footnotes
\1\ Interviews and Depositions by Committee Staff as of 1/24/98.
\2\ See http://www.senate.gov/gov--affairs/witness.htm,
witnesses who have testified during the Special Investigation hearings.
\3\ Letter from Chairman Thompson to Roy Romer, 7/23/97; Minority
staff telephone conversation with Paul Palmer of Debevoise & Plimpton,
counsel to the DNC.
\4\ Interviews and Depositions by Committee Staff as of 1/24/98.
\5\ See http://www.senate.gov/gov--affairs/witness.htm,
witnesses who have testified during the Special Investigation hearings.
\6\ Subpoena # 64 (DNC) and # 65 (RNC), http://www.senate.gov/
gov--affairs/subpoena.htm.
\7\ Los Angeles Times, 9/21/96.
\8\ Los Angeles Times, 9/21/96. The test for a contribution to a
national political party from a domestic subsidiary of a foreign
corporation is discussed in Chapter 1, and the Cheong Am America
contribution is discussed in Chapter 4.
\9\ Exhibit 62: DNC In-Depth Contribution Review, 2/28/97, DNC
0134-145.
\10\ DNC press release, ``DNC Refunds Contributions,'' 6/27/97;
Joseph Sandler, 9/10/97 Hrg., p. 3.
\11\ Donald L. Fowler deposition, 5/21/97, pp. 291-294.
\12\ Harold Ickes, 10/7/97 Hrg., p. 84. The $558 million of
spending by the Republican national committees included spending by the
RNC, the NRSC, and the NRCC. The $336 million of spending by the
Democratic national parties includes spending by the DNC, the DSCC, and
the DCCC.
\13\ The Washington Post, 1/19/98.
\14\ Donald L. Fowler deposition, 5/21/97, p. 23.
\15\ Staff interview with Bobby Watson, 4/25/97.
\16\ B.J. Thornberry deposition, 5/20/97, pp. 6-7.
\17\ B.J. Thornberry deposition, 5/20/97, pp. 16-17.
\18\ Richard L. Sullivan deposition, 6/4/97, pp. 75.
\19\ Laura Hartigan deposition, 9/16/97, p. 7.
\20\ Terence McAuliffe deposition, 6/6/97, p. 8.
\21\ Laura Hartigan deposition, 9/16/97, pp. 7-8; Terence McAuliffe
deposition, 6/6/97, p. 9.
\22\ Richard L. Sullivan deposition, 6/4/97, p. 32.
\23\ Truman Arnold deposition, 5/16/97, p. 8.
\24\ Marvin S. Rosen deposition, 5/19/97, pp. 12-13.
\25\ Richard L. Sullivan deposition, 6/4/97, p. 62-66; Marvin S.
Rosen deposition, 5/19/97, p. 27.
\26\ Donald L. Fowler deposition, 5/21/97, pp. 45-46.
\27\ Mercer was deposed by the Committee on 5/14/97, 5/27/97 and 6/
11/97.
\28\ David Mercer deposition, 5/27/97, p. 7.
\29\ Payne was deposed by the Committee on 5/7/97.
\30\ Swiller was deposed by the Committee on 5/6/97 and 5/7/97.
\31\ Ann Brazil deposition, 5/13/97.
\32\ Jacob Aryeh Swiller deposition, 5/6/97, p. 16.
\33\ Joseph E. Sandler deposition, 5/15/97, p. 16.
\34\ Neil Paul Reiff deposition, 6/20/97, p. 11.
\35\ Neil Paul Reiff deposition, 6/20/97, p. 6.
\36\ Scott Reed deposition, 7/11/97, p. 8.
\37\ See Chapters 10 and 33.
\38\ See Chapter 33.
\39\ See Chapter 28.
\40\ Donald L. Fowler, 9/9/97 Hrg., pp. 118-122.
\41\ Richard L. Sullivan deposition, 6/4/97, p. 77.
\42\ Richard Sullivan deposition, 6/4/97, pp. 77-78.
\43\ Washington Post, 1/27/97.
\44\ See Joseph E. Sandler deposition, 5/15/97 and Neil Reiff
deposition, 6/20/97.
\45\ FEC press release, 3/19/97, ``FEC Reports Major Increase in
Party Activity For 1995-96.
\46\ Donald L. Fowler, 9/9/97 Hrg., p. 75; Richard L. Sullivan, 7/
9/97 Hrg., p. 33; Joseph Sandler, 9/10/97 Hrg., p. 6.
\47\ See Joseph E. Sandler deposition, 8/21/97; Neil Paul Reiff
deposition, 6/20/97, Exhibits 6-14: DNC 1484624--627; DNC 1484604--610;
DNC 1484892--903; DNC 1485662--675; DNC 1680464--465; DNC 1679038--041;
DNC 1679913--917; EOP 053158--161; Memorandum which includes rules
governing contributions from foreign sources, 11/27/95. This memo
underscores, among other things, that each potential contribution from
a U.S. subsidiary of a foreign-owned company must be examined on a
case-by-case basis by the general counsel's office; List of ``Questions
to Ask Before Accepting Contributions from Foreign Nationals.''
\48\ Donald L. Fowler, 9/9/97 Hrg., p. 75; Richard L. Sullivan, 7/
9/97 Hrg., p. 33.
\49\ Richard L. Sullivan, 7/9/97 Hrg., p. 32. Sullivan testified
that at the peak, there were as many as 100 fundraisers on staff.
\50\ See Joseph Sandler deposition, 8/21/97, Exhibit 11: ``Policies
and Procedures of the Democratic National Committee Regarding
Compliance with Campaign Finance Laws,'' DNC 0132-0161.
\51\ There was a dispute that arose during the testimony regarding
the method of training for Huang. No one maintained that Huang was not
trained--indeed, the testimony has been unequivocal that every DNC
fundraiser was in fact trained. However, Sullivan testified that he
believed that Huang was trained in a private one-on-one training
session, while Sandler stated that he believed Huang was trained in a
group training session, as was done for every other fundraiser. Richard
L. Sullivan, 7/9/97 Hrg., p. 138; Joseph E. Sandler, 9/10/97 Hrg., p.
12-13.
Testimony from Sam Newman, head of the DNC's National Finance
Council, supports Sandler's recollection of the training of Huang,
having testified that he saw Huang at a group training session. Sam
Newman deposition, 7/17/97, p. 142.
Moreover, Sullivan's recollection of a private training session for
Huang may stem from a meeting Sandler had with Huang after his first
fundraiser in February 1996 at which Sandler reviewed contributions
that Huang received from the event and reviewed with Huang the rules
relating to contributions. Joseph E. Sandler deposition, 8/21/97, pp.
16-21.
\52\ Joseph E. Sandler deposition, 8/21/97, pp. 21-28.
\53\ Joseph E. Sandler, 9/10/97 Hrg., p. 4.
\54\ Joseph Sandler deposition, 8/21/97, Exhibit 9: Checklist used
by DNC staff during 1995 and 1996. It outlines at least 40 separate
steps that were required to ensure the proper screening and processing
of contributions. The steps included examining the check and tracking
form information for possible prohibited sources, including foreign
nationals.
\55\ Joseph E. Sandler, 9/10/97 Hrg., p. 8. Richard Sullivan and
Donald Fowler confirmed that they believed that all DNC fundraisers
were trained. Richard L. Sullivan, 7/9/97 Hrg., p. 138.
\56\ Joseph E. Sandler, 9/7/97 Hrg., pp. 7-8; See also Rumi
Matsuyama deposition, 6/10/97.
\57\ Joseph E. Sandler, 9/10/97 Hrg., pp. 9-10. John Huang admitted
to Joseph Sandler that he failed to ask the correct questions in
connection with the Cheong Am contribution. Joseph E. Sandler, 9/10/97
Hrg., p. 13; See also, Chapter 4.
Joseph Sandler testified:
Pauline Kanchanalak was known to be and is a
legal permanent resident with substantial business
interests, income, and assets. We had no reason to
question her contributions at the time they were
received. Neither Nexis nor any other database
research would have revealed anything untoward. She
deliberately deceived the DNC for at least 4 years.
Only in November 1996 did she suggest that the funds
she had contributed to the DNC really came from her
mother-in-law. No system we reasonably could have
maintained would have caught that deception.
Although her mother-in-law herself is apparently a
legal permanent resident and the contributions may
well have been lawful, we determined not to retain
them in view of the deception.
* * * * * * *
Joseph Sandler testified:
The Wiriadinatas first contributed to the DNC in
November 1995, and Mrs. Wiriadinata at that time, I
believe, contributed $15,000. They lived in Virginia
when that first contribution was made. After John
Huang came to the DNC, he continued to solicit them.
Soraya Wiriadinata was known by Mr. Huang to be the
daughter of a billionaire. The Wiriadinatas' checks
continued to bear that same Virginia address. A
Nexis search would have revealed nothing. No one at
the DNC, except perhaps Mr. Huang, knew that the
Wiriadinatas had left the United States in December
1995. Even if we had known that and undertook the
same legal analysis we later undertook, it's very
likely we would have concluded--we would have
accepted their contributions since, when we later
did that analysis, we concluded that legal permanent
residents may lawfully contribute to non-Federal
accounts of political parties even if they are
temporarily absent from the U.S.
* * * * * * *
Joseph Sandler testified in hearings before this
Committee on September 10, 1997:
* * * * * * *
Johnny Chung is a U.S. citizen. He was known to
have a blast fax business, which has been used,
apparently successfully, by California Governor Pete
Wilson, among others. Had we run a Nexis check of
Mr. Chung throughout the period he contributed up
until May 1996, it would have revealed nothing more
of great interest than the fact that Mr. Chung's
business had, as of 1994, government and political
clients in 39 States, that Mr. Chung had lived in
the United States for many years and had owned other
successful businesses, and that, like many U.S.
businessmen, he had visited China to promote his
business. Joseph E. Sandler, 9/10/97 Hrg., pp. 8-11.
Joseph Sandler also explained in his deposition on May
30, 1997:
Johnny Chung's name may have come up, and it's
hard for me to distinguish it from conversations
with them and conversations that I had with people
at the DNC. But there was--there was a--I don't know
if I discussed this with them, but there were
conversations that I recall that took place about a,
for lack of a better word, a brochure or scrapbook
that Johnny Chung maintained with pictures of
himself with Governor Wilson and with Newt Gingrich
and Bob Dole and the President and various other--
the Vice President and various other administration
officials, and that there was concern about the
appropriateness of his maintaining that book for
business purposes. Joseph Sandler deposition, 5/30/
97, p. 46.
* * * * * * *
Joseph Sandler testified:
In May 1996, when his contribution was made,
Yogesh Gandhi had an internationally renowned
foundation dedicated to promoting the principles of
Mahatma Gandhi, whom Yogesh Gandhi claimed was his
relative. A Nexis search as of May 1996 would have
revealed that the foundation's world peace and
humanitarian awards had been presented to former
Presidents Ronald Reagan and Jimmy Carter, Mother
Teresa, Mikhail Gorbachev, Shirley Temple Black, and
former Philippine President Corazon Aquino, among
others. A Lexis check would have revealed a small
claims court judgment and a routine State tax lien
for a few thousand dollars. In other words, there
was no real reason to question Gandhi's contribution
until a newspaper story in late October 1996, citing
the transcript of a small claims court proceeding in
California in which Mr. Gandhi stated that he had no
assets in the U.S. That proceeding itself didn't
take place until August 1996--3 months after Mr.
Gandhi's contribution was made. The text of this
transcript was unavailable through any database
research. Joseph E. Sandler, 9/10/97 Hrg., pp. 9-10.
\58\ See Chapter 21.
\59\ DNC Press Release, ``DNC Refunds Contributions'', 6/27/97.
\60\ Huang was the DNC contact for many of the returned
contributions; however, he was not necessarily the person who
introduced these contributors to the DNC. At least half of the amount
of the returned contributions is attributable to four sources: Pauline
Kanchanalak who had been contributing to the DNC long before Huang
started working there; Yogesh Gandhi who was solicited directly by
Charlie Trie (whose involvement with the DNC predates Huang); Johnny
Chung, with whom Huang has no connection; and Arief and Soraya
Wiriadinata, whom Huang met due to Soraya's father's relationship the
Riadys. While Huang may be credited as the DNC contact for these
contributions based on his responsibility for Asian American
fundraising and their attendance at events he organized, only the
Wiriadinatas are contributors he introduced to the DNC. Huang's
activities are examined in detail in Part 1 of this report. See Chapter
4.
\61\ DNC Press Release, ``DNC Refunds Contributions,'' 6/27/97;
Joseph E. Sandler, 9/10/97 Hrg., pp. 1-17.
\62\ Joseph Sandler deposition, 5/15/97, Exhibit 11: ``Policies and
Procedures of the Democratic National Committee Regarding Compliance
with Campaign Finance Laws,'' DNC 0132-0161.
\63\ Column by Laws-Erik Nelson in San Diego Union-Tribune, 5/14/
92.
\64\ See Chapter 6 on Michael Kojima, supra.
\65\ Elizabeth Ekonomou deposition, 4/8/92, pp. 102-103. For more
information, see Chapter 6 on Michael Kojima.
\66\ Pleading filed by Baran on July 22, 1993, on behalf of the
Republican Senate-House Dinner Committee. For more information, see
Chapter 6 on Michael Kojima.
\67\ See Chapters 3 and 6.
\68\ Richard L. Sullivan deposition, 6/4/97, p. 106.
\69\ Sullivan deposition, 6/4/97, pp. 105-108; Hancox deposition,
6/9/97, pp. 58-59. Interestingly, as with the screening of
contributions, the problems that arose may not have been rectified by
the improved procedures that are now in place. While it is clear in
retrospect that Roger Tamraz should not have been permitted to attend
events at the White House, the fundraising staff did raise questions
relating to Mr. Tamraz and disinvited him from a coffee as a result of
the negative information that was received from the NSC. However, the
DNC did continue to invite him to events largely based on Fowler's
activities. Exhibit 1117: Memorandum to DNC Chairman Donald Fowler from
DNC Finance Division staff member Alejandra Y. Castillo, 7/12/95, DNC
3116351-53; Exhibit 1127: Memorandum to Vice President from Leon
Fuerth, 9/13/95, EOP 45766-67; Roger Tamraz deposition, 5/13/97, pp.
31-33.
\70\ See generally Donald L. Fowler, 9/9/97 Hrg. and Donald L.
Fowler deposition, 5/21/97.
\71\ Donald L. Fowler, 9/9/97 Hrg., p. 214.
\72\ The General Counsel to the Treasury Department contacted the
DNC (Joe Sandler) and asked that he stop Fowler's practice of writing
letters to Secretary Rubin. Donald L. Fowler deposition, 5/21/97,
Exhibit 33. The Chief of Staff of the Department of Commerce told
Fowler that his contact on behalf of the Hathaway Shirt Company was
inappropriate. Joseph Sandler deposition, 5/15/97, Exhibit 38. Sosnik
told Fowler that he should not contact Administration officials on
behalf of donors. Douglas Sosnik deposition, 6/20/97, pp. 209-210.
\73\ See Melissa Moss deposition, 6/11/97.
\74\ Joseph Sandler deposition, 5/15/97, Exhibit 11: ``Policies and
Procedures of the Democratic National Committee Regarding Compliance
with Campaign Finance Laws,'' DNC 0132-0161.
\75\ See Chapter 26.
\76\ See Chapter 28.
\77\ See Chapter 31.
\78\ Judith Spangler deposition, 5/9/97, pp. 39-40.
Q: In the Reagan-Bush White House, did the
Office of Political Affairs from time to time
provide lists of people to be invited?
A: Yes.
Q: Did it do so frequently?
A: May I explain?
Q: Yes.
A: That for almost every event, different
offices within the White House submit names to the
social secretary; names of people that they would
like to have invited to a dinner or a luncheon or
some type of reception, or an event.
Q: Has that been so in every White House in
which you have worked?
A: Yes.
Q: That for events, receptions, dinners,
lunches, events of every kind, the Office of
Political Affairs in those White Houses has
submitted lists of invitees?
A: Yes.
Q: So that the Clinton-Gore White House is not
the first White House which has done that?
A: No.
Q: In earlier administrations did it
occasionally occur that the Republican National
Committee would supply names of invitees?
A: Yes, they did.
Q: Was that so in the Reagan-Bush White House?
A. Yes.
Q: Was it so in the Bush-Quayle White House?
A: Yes.
\79\ See Chapter 31. See also, for example, Washington Post, 4/28/
92.
\80\ See Chapter 28.
\81\ See Chapters 24, 32 and 33.
\82\ See Chapters 24, 32 and 33.
\83\ See Chapters 24, 32 and 33.
\84\ See Chapters 24, 32 and 33.
\85\ See Chapters 24, 32 and 33.
\86\ Summary of Vice President Al Gore's phone call records,
Appendix.
\87\ There is evidence which suggests that only 6 of the 8
individuals who gave a donation that was subsequently deposited, in
part, into the DNC's Federal hard money account made their contribution
in response to a phone call from Vice President Gore. John Catsimatidis
donated $10,000 to the DNC that was subsequently deposited in a Federal
hard money account two days after records show him receiving a call
from the Vice President. However, Thomas Galvin, of the New York Daily
News, wrote on August 5, 1997, that ``Catsimatidis said he never spoke
with Gore--`I talk with the No. 1 guy, not the No. 2 guy,' he said.''
Catsimatidis's statement that he never spoke to the Vice President
combined with the fact that the phone records indicate that the Vice
President only left a message for Catsimatidis strongly indicates that
he did not make the contribution in response to the Vice President's
phone call. N.Y. Daily News, 8/5/97.
PART 5 FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES
AND ADMINISTRATIONS
Chapter 26: Telephone Solicitations on Federal Property
Documents produced to the Committee by both the DNC and the
White House indicate that on a number of occasions the DNC
requested the President to make telephone calls to solicit
funds for the DNC. The Committee reviewed evidence, including
testimony and documents relating to the circumstances and
applicable law surrounding these calls. The Committee also
investigated fundraising telephone calls made by the Vice
President from his office in the White House. The Committee
also investigated whether past Republican presidents, and other
Republican officials, had made fundraising phone calls from
government buildings.
Based on the evidence before the Committee, we make the
following findings with respect to these fundraising calls:
findings
(1) Telephone calls made on federal property to solicit
contributions from persons neither on federal property or
employed by the federal government have been made by elected
officials from both parties and prior administrations.
(2) There was nothing illegal about the one solicitation
telephone call known to the Committee made by the President.
(3) There was nothing illegal about the solicitation
telephone calls made by the Vice President.
presidential telephone calls
At a news conference on March 7, 1997, President Clinton
was asked whether he had ever made fundraising telephone calls
while President, and he responded:
I can't say, over all the hundreds and hundreds and
maybe thousands of phone calls I've made in the last
four years, that I never said to anybody while I was
talking to them, ``Well, we need your help,'' or ``I
hope you'll help us.'' . . .
I simply can't say that I've never done it. But it's
not what I like to do, and it wasn't a practice of
mine. And once I remembered in particular I was asked
to do it and I just never got around to doing it.
. . . I don't want to flat out say I never did
something that I might in fact have done just because I
don't remember it.1
---------------------------------------------------------------------------
Footnotes appear at end of chapter 26.
Documents produced to this Committee by both the Democratic
National Committee (``DNC'') and the White House indicate that
on a number of occasions the DNC requested that the President
make telephone calls to solicit funds for the DNC.2
Many deposition witnesses testified that they were aware of the
President being asked to make calls.3 The only
witness who testified that he believed the President had, in
fact, made at least some calls was Harold Ickes, White House
deputy chief of staff.
Ickes testified that he had asked the President to make
fundraising telephone calls on several occasions after he
checked with White House counsel who advised him that there was
no legal barrier to making such calls.4 Ickes also
testified that the President usually did not make fundraising
calls, not because they were illegal or improper, but because
he did not like making them. Ickes further testified that on
one occasion, during 1994, the President made a few fundraising
calls from the residential area of the White House.5
FBI agents detailed to the Committee were asked to
interview people whose names appeared on a series of call lists
submitted by the DNC to the White House and other documents.
6 They were able to confirm that out of 55 people
interviewed, only three received calls from the President and
only one, businessman Richard Jenrette, was asked by the
President to make a contribution.
Minority exhibit 2504M is a summary of the FBI's
investigation (consisting of interviews) as of October 29, 1997
concerning the President's telephone calls. The exhibit
illustrates the fact that the FBI contacted 55 individuals
listed in various call lists, and 52 individuals stated that
they did not receive a call from the President.7 Two
individuals stated that they did receive calls from the
President thanking them for contributions they had already
pledged to the DNC.8 Jenrette was the only
individual interviewed who stated that he received a call in
which the President solicited a campaign contribution.
The Committee also examined the contributions made by the
people whose names appeared on the telephone lists, including
an October 18, 1994, memorandum to Harold Ickes from Terry
McAuliffe, the then-Finance Chair of the DNC, that contained
Ickes's handwriting.9 Six of the nine people circled
by Ickes on the memo (including Jenrette) made a contribution
to the DNC within one month of October 18, 1994.10
Moreover, Ickes's handwritten notations of money amounts
correlate with the amounts ultimately contributed by only two
of the listed potential contributors.11 The FBI
detailees interviewed five of these six contributors, and only
Jenrette recalled receiving a solicitation from the
President.12
In the final analysis, the evidence submitted to this
Committee suggests that, as Ickes testified, on one occasion in
1994, the President made a few telephone calls to contributors,
including Richard Jenrette. These calls were made on October
18, 1994, and, most likely, were made to some of the people
listed in Exhibit 1653. Ickes's handwritten notations on this
exhibit may have been made while the President was making the
calls. Other than this one series of calls, there is no
evidence that the President made any fundraising calls from
1993 through 1996.
Richard Jenrette
As part of the Committee's investigation, Richard Jenrette
was interviewed by FBI detailees. He stated that he did receive
a fundraising call from the President.13 He was
called as a hearing witness to testify about this
call.14
Jenrette is a retired Wall Street investment banker who has
been contributing to political parties and committees since the
1970s.15 According to Federal Election Commission
(``FEC'') records, he contributed to the DNC either personally
or through his companies between $30,000 and $60,000 each year
from 1993 to 1996.16 He has also contributed to the
RNC and to Republican candidates including Senator Alphonse
D'Amato of New York, Senator Lauch Faircloth of North Carolina,
and former Massachusetts Governor and Senatorial candidate
William Weld.17 Since 1991, FEC records show that he
contributed approximately $170,000 to the Democratic Party or
committees and approximately $40,000 to the Republican
Party.18 Jenrette first contributed to President
Clinton in August 1992.19 Since that time he has
spoken to the President approximately six or seven times at
fundraisers and other events, usually about the
economy.20
An AT&T telephone bill for the White House indicates that
the call to Jenrette was made on the President's private
residence line on October 18, 1994.21 The White
House also produced records to the Committee that establishes
that, at the time of the call to Jenrette, the President was in
the residential portion of the White House.22
Jenrette testified that the call was placed by one of the
President's secretaries. The White House secretary informed
Jenrette's secretary that the President would call Jenrette
back on his ``private'' line.23
Following his conversation with the President, Jenrette
sent a letter to the President confirming his contribution. In
testimony before the Committee, Jenrette stated that the letter
reflected his best recollection of the telephone call. The
letter reads:
In response to your request, I wanted you to know
that I am sending checks totaling $50,000 to the
Democratic National Committee. You said you wanted to
raise $2 million from 40 good friends--by my Wall
Street math, this comes out to $50,000 that you
requested from each. I hope this will be of assistance
to the DNC in its final pre-election push.24
Jenrette testified that his review of this letter had
``triggered'' his recollection of the call,25 and
said, ``If I hadn't had that letter, I would have had trouble
recalling anything.''26
Jenrette testified that he did not feel that the President
had pressured him to make contributions that were out of the
ordinary;27 indeed, he stated that the President did
not exert any pressure.28 The telephone records show
that the call lasted 11 minutes and 18
seconds.29According to Jenrette, the fundraising part of the
call was ``fairly minimal'' and was only a small part of the
conversation.30
The President did not specifically request that Jenrette's
contribution be directed to either hard money or soft money
accounts, according to Jenrette.31 Subsequently, one
$10,000 check that made up Jenrette's $50,000 contribution was
changed--with Jenrette's knowledge and approval--from a soft
money contribution to a hard money contribution.32 A
DNC employee spoke to Joe Hillis, Jenrette's assistant, to ask
if $10,000 could be directed to a hard money account. Jenrette
agreed, because he was still within his annual $25,000
limit.33
While some Members of the Committee told Jenrette that his
candid testimony had cast doubt on the President's
forthrightness,34 Jenrette's testimony is, in fact,
entirely consistent with the President's statements about his
fundraising calls. The President has never denied that he may
have made fundraising calls. In addition, the President's
private attorney has said that although the President doesn't
remember calling Jenrette, he has ``no reason to question Mr.
Jenrette's recollection.''35
Jenrette also testified that he received a fundraising
phone call from Vice President Gore, as discussed below.
The Justice Department has long held the view that calls
made from the White House residence are not covered by 18
U.S.C. Sec. 607.36 As such, there was nothing
illegal about President Clinton's call to Jenrette.
The evidence submitted to the Committee indicates that the
President made a series of calls to contributors on October 18,
1994, in which he solicited at least one person for a
contribution to the DNC. There was nothing illegal or improper
about these calls: they were made from the residential portion
of the White House; the President did not did pressure or
coerce the recipient of the call to contribute; and the
President did not request hard money.
vice presidential telephone calls
In September 1995, DNC and White House officials, including
the President and the Vice President, agreed that the DNC would
undertake an extensive media project, paying for issue
television advertisements to communicate the message of the
administration and the party to the American
people.37 The President and Vice President agreed to
spend more time fundraising for the DNC in order to generate
funds for the media project.38 Shortly thereafter,
DNC officials began formulating fundraising plans to raise
money for a ``media fund'' that included fundraising telephone
calls by the President and the Vice President.39
During the Committee's investigation, numerous witnesses were
asked about the proposed fundraising calls. Several witnesses
had knowledge of the Vice President making phone calls to
assist with fundraising for the media fund. Vice President Gore
personally acknowledged at a press conference in March 1997
that he made such calls:
I participated in meetings of our top campaign
advisors where it became clear that in order to achieve
the President's goals of getting a balanced budget,
passing these measures to protect Medicare and Medicaid
and education and the environment and so forth, that
the DNC needed a larger budget to put advertisements on
television. And I volunteered to raise--to help in the
effort to raise money for the Democratic National
Committee.40
The people called by the Vice President were suggested by
DNC fundraisers who prepared 190 call sheets identifying 161
potential contributors. The Vice President used the DNC call
sheets to make fundraising-related calls from his office of the
White House to 61 individuals on 11 occasions between November
28, 1995, and May 2, 1996:
------------------------------------------------------------------------
Number of
Date Time of call/s individuals
called
------------------------------------------------------------------------
Nov. 28, 1995 \41\................. Unavailable........... 1
Dec. 1, 1995 \42\.................. 3:00-3:45 p.m........ 7
Dec. 11, 1995 \43\................. 9:00-9:45 a.m......... 8
Dec. 18, 1995 \44\................. 1:30-2:30 p.m......... 7
5:00-6:00 p.m......... ...........
Feb. 2, 1996 \45\.................. 2:30-3:00 p.m......... 1
Feb. 5, 1996 \46\.................. 12:30-1:00 p.m........ 13
3:00-4:00 p.m......... ...........
4:00-5:00 p.m......... ...........
Feb. 6, 1996 \47\.................. 11:30 am-12:00 p.m.... 2
Feb. 9, 1996 \48\.................. 2:50-3:40 p.m......... 2
March 13, 1996 \49\................ Unavailable........... 6
April 26, 1996 \50\................ 12:30-1:00 p.m........ 11
3:30-4:00 p.m......... ...........
May 2, 1996 \51\................... 11:45 a.m.-12:00 p.m.. 3
------------------------------------------------------------------------
These calls were initially placed by staff who were
instructed to charge the calls to a Democratic Party credit
card, not to the federal government.52 Once the
calls were placed, the Vice President would speak to the
potential contributor. According to Federal Election Commission
records, 20 of the 61 individuals called by the Vice President
contributed to the DNC within 30 days of receiving a phone call
from him.53 These contributions totaled $757,500.
The documentary and testimonial evidence submitted to the
Committee demonstrates that during the period that the Vice
President was making fundraising phone calls, the DNC was
expressly focused on raising soft money for the media fund.
Moreover, the documents submitted to the Vice President
indicate that he knew that the DNC needed soft, not hard,
money, for the media fund and the evidence supports the
conclusion that he intended to raise soft money when he was
making the calls. All telephone solicitations made by the Vice
President were directed to private individuals who were not on
federal property when they received the calls. According to the
call sheets, each of the 61 individuals contacted by the Vice
President was a private citizen and the telephone numbers on
the call sheets were for their private offices or homes.
Finally, documents submitted to the Committee indicate that the
thank-you notes sent by the Vice President were prepared by the
DNC, on DNC stationary, and were returned to the DNC for
mailing after the Vice President signed them. These
circumstances demonstrate that the Vice President's calls did
not run afoul of the Pendleton Act's prohibitions on
fundraising activity on federal property as explained in
Chapter 24.
Purpose of the phone calls
The Committee examined documents produced by the DNC and
the White House to determine whether the Vice President knew--
or should have known--that any of the money he helped to raise
was being deposited in DNC hard money accounts. Some Members of
the Committee have contended that the Vice President knew or
should have known, pointing to a February 21, 1996, memo from
Bradley Marshall, the DNC's chief financial officer, that was
attached to a February 22 memo from Harold Ickes to the
President and Vice President. The Marshall memo briefly
summarized the law in a short paragraph near the end of the
lengthy document. He wrote:
Federal money is the first $20,000 given by an
individual ($40,000 from a married couple). Any amount
over this $20,000 from an individual is considered Non-
Federal Individual.54
Marshall has confirmed that this paragraph was intended to
be a brief summary of the law and not a description of DNC
policies or practices relating to depositing contributions into
the various DNC accounts. In an affidavit to the Committee, he
stated:
This paragraph was a shorthand description by me of
federal contribution limits to national political
parties and the possible sources of federal and non-
federal funds. That's all it was, period. To put it
another way, I did not intend this memorandum to serve
as an explanation of or reference to the DNC's policies
andprocedures with regard to the deposit of portions of
major donor contributions to the federal or ``hard money''
accounts.55
The primary message of the Marshall memo and the other
documents included in the February 22 package is to alert Ickes
and others to the DNC's need for ``soft'' (nonfederal) money to
pay for issue ads. The memo states that the average 1996 media
buys were paid for with a mix of federal and non-federal
dollars (34 percent federal, 31 percent non-federal corporate,
and 35 percent non-federal individual), but that the DNC had
$675,000 in federal money, $100,000 in non-federal corporate
money, and $0 in non-federal individual money. Accordingly, the
DNC could not make additional media buys because it had
relatively little non-federal corporate money and no non-
federal individual money in its accounts.
On February 22, 1996, Ickes sent Marshall's memo to the
President and Vice President with a short cover memo restating
Marshall's concern that the DNC did not have enough non-federal
soft money in its accounts and warning that, ``until the
amounts of non federal individual [money] is replenished, the
DNC cannot buy media time.'' 56 Ickes did not
mention Marshall's simplified definition of federal and non-
federal monies in his cover memorandum.
When asked about his February 22 memorandum, Ickes
testified to the Committee that the purpose of the memo ``was
alerting the president and the Vice president and others that
we were, in fact, short of soft money. . . .'' 57
Joseph Sandler, general counsel of the DNC, also testified that
he understood the primary purpose of the memo was to alert the
President and Vice President of the urgent need for non-federal
soft money. Sandler testified that it ``is a memo clearly from
Harold [Ickes] addressed to the president and vice president
that is saying until the amounts of non-Federal [money] is
replenished we are out of business on the generic media
program.'' 58
It is noteworthy that the February 22 memo was written
three months after the Vice President began making fundraising
calls in late 1995. Given that the memo had not been written
when the phone calls began, it could not possibly be probative
of the Vice President's state of mind at the time he started
making the calls. Uncontroverted evidence indicates that, at
the time the calls started and throughout the period of time
they were being made, the information given to the Vice
President was that the DNC needed to raise soft money, not hard
money, to fund its media efforts.
Even prior to the first discussion of the Vice President
making fundraising calls, DNC and White House documents
relating to the DNC budget clearly indicate that the DNC needed
soft money. An October 23, 1995 memorandum to Harold Ickes from
Don Fowler, the National Chairman of the DNC, Marvin Rosen, the
Finance Chair of the DNC, and Richard Sullivan, the Finance
Director of the DNC regarding ``1995 DNC Sources of Funds for
DNC Operating Budget and Media Fund'' states that the DNC
intended to raise $3,600,000 non-federal soft money by the end
of the year to meet its goal of raising $6,600,000 for the
DNC's issue-oriented media campaign. This memorandum explains
that the plan was to raise the soft money needed for the media
campaign and to borrow the federal hard money needed to pay for
the media efforts.59 Accordingly, the budget summary
attached to the October 23 memorandum indicates that the DNC
needed to raise non-federal money, not federal money, for the
DNC Media Fund. The budget's bottom line states:
Total to be raised for media fund....................... 3,600,000
Federal................................................. (0)
Non-Federal............................................. 60 (3,600,000)
A November 9, 1995 memorandum to DNC Chairman Christopher
Dodd and DNC Chairman Fowler from Harold Ickes regarding the
DNC 1995 Budget Analysis reiterates that the DNC media
fundraising needs were exclusively for soft money.61
This memo and the attached budgets show that all of the money
to be raised for the DNC Media Fund was non-federal soft
money.62
A November 20, 1995, Ickes memo to the President and the
Vice President again informed them that the DNC needed to raise
$3,600,000 soft money for the media campaign.63
It was in the context of the well-documented need to raise
soft money that the Vice President was asked to make
fundraising calls. To reach the ambitious fundraising goals set
for the television advertising campaign, the DNC proposed in a
November 20, 1995 memo to Ickes that the President and Vice
President make fundraising phone calls.64 Fowler,
Rosen, Scott Pastrick, the Treasurer of the DNC, and Sullivan
recommended to Ickes that the President make 18 to 20 calls and
that the Vice President make ten calls to raise a total of
$1,200,000 ``to be applied to paid television.'' 65
Sullivan confirmed in his June 1997 deposition that the reason.
Fowler, Rosen, Pastrick and Sullivan made this recommendation
was to ``fund these media buys.'' 66
The week after the phone calls were proposed by the DNC
leadership in November 1995, Ickes confirmed that all of the
money to be raised for the DNC media fund was non-federal soft
money. In a November 28, 1995, memorandum to the President and
the Vice President, Ickes described his meeting with Marvin
Rosen, Scott Pastrick, Richard Sullivan, Terry McAuliffe, Laura
Hartigan (all DNC officials), and Karen Hancox and Doug Sosnik,
White House Political Director, regarding DNC fundraising
efforts for the media fund.67 Ickes reported in this
memorandum that Rosen believed $1.2 million could be raised
only if the President and Vice President made telephone calls
to solicit funds for the DNC's media fund. Ickes attached
budget projections that show all of the money to be raised for
the media fund was non-federal soft money.68
Similarly, a December 20, 1995 Ickes memo to the President and
the Vice President again confirmed that all of the money to be
raised for the DNC's media fund was nonfederal soft
money.69
Accordingly, the evidence clearly demonstrates that the DNC
needed to raise non-federal soft money beginning in October
1995. To meet this urgent need, the DNC asked the President and
Vice President to make fundraising phone calls starting in
November 1995. The DNC's need for non-federal soft money to
fund its media campaign continued beyond February 1996,
throughout the period of time in which the Vice President made
fundraising-related phone calls.
The last fundraising calls by the Vice President were made
on May 2, 1996. Through this date, the evidence outlined above
demonstrates that the DNC was in dire need of non-federal soft
money to fund its media campaign. Later in the campaign, in
approximately June 1996, after the Vice President stopped
making fundraising calls, the DNC began to suffer a shortfall
of federal (``hard'') money. In June 1996, Ickes informed the
President and the Vice President that the DNC was beginning to
have a federal hard money short fall. In a June 3, 1996 memo to
the President and the Vice President from Ickes regarding ``DNC
budget/fundraising,'' Ickes reported that a lack of federal
hard money was ``beginning to present a very serious problem.''
70 On the second page of his memo, Ickes concluded,
``Thus, the remainder of the fundraising efforts between now
and the end of October will have to focus very much on
increasing the amount of federal dollars raised . . . . Richard
Sullivan is preparing a plan to specifically address this
problem which will be ready on 3 June.'' 71 During
this period, when hard money became the focus of the DNC's
fundraising efforts, there is no evidence that the Vice
President made any fundraising phone calls.
Raising soft money
The fact that the Vice President was asked on one occasion
to make 28 to 30 telephone calls with a goal of raising
$1,200,000, or $40,000 to $43,000 per person--more than twice
the federal hard money limit of $20,000 per person--further
confirms that he believed that he was raising soft money.
Testimony by Peter Knight, who was present when the Vice
President made approximately 30 fundraising calls in 1995 and
1996,72 supports this conclusion. Knight stated:
Now, if you refer back to the memorandum that Harold
Ickes sent to the president and vice president, you can
see that what is being requested is funds to purchase
media. And the very last line of this says: ``Thus,
until amounts of non-federal individual is replenished,
the DNC cannot buy media time.'' What he's saying is
that what you need to do is make soft money calls to
individuals, i.e., big checks to individuals.
So if you put this together with the media, it was
always understood, and I understood at the time, that
the media calls were soft money calls.
Now, I don't think that there is any reason to
necessarily draw that distinction, because the phone
calls I assumed were legal. However, there would be two
reasons why they would be considered as soft money in
my mind and in helping him to think it through. One
was, as I had indicated, that when you write a check,
one check, and it is over $20,000, you are writing a
soft money check; that had always been my understanding
of whatwas occurring. And number two, although I did
not ever see this memo, I was generally aware that what was needed was
to raise money for media, and media was very heavily oriented toward
non-Federal soft money. [emphasis added] 73
The only recipient of a call by the Vice President who
testified at a hearing of this Committee also confirmed that
the Vice President asked for a soft money contribution in the
call. Richard Jenrette, who received a call from Vice President
Gore in February 1996, testified that the Vice President was
soliciting non-federal soft money for the DNC's issue-oriented
media campaign.74 Jenrette testified that his call
with the Vice President was very brief and that he recalls the
Vice President told him he wanted to ``get an early start in
getting some of the issues out.'' 75
Jenrette confirmed that the Vice President was raising non-
federal soft money for the DNC's media fund in a letter written
to Donald Fowler on February 20, 1996.76 Jenrette
wrote:
Vice President Al Gore called me last week and asked
if I would help in assembling funds totaling $25,000
for the Democratic National Committee's media fund
campaign. I told him I would be glad to do what I could
and therefore I am enclosing the following checks which
have been made payable to the ``DNC Non-Federal
Account.'' 77
Some of the call sheets themselves, supplied by the DNC to
the Vice President, request the Vice President to raise money
for the media fund.78
The evidence, from Jenrette's recollection of his telephone
conversation with the Vice President and his letter to Fowler,
and also the call sheets, illustrates that the Vice President
was soliciting non-federal soft money for the DNC's media fund.
Jenrette's testimony to the Committee and his letter add to the
great weight of evidence that supports the reasonable
conclusion that the Vice President was asked to, and did,
solicit non-federal soft money from November 1995 to May 1996
to fund the DNC's issue-oriented advertising campaign.
DNC splitting contributions between hard and soft money accounts
This Committee discovered that the DNC deposited a portion
of the money contributed by some individuals who received a
call from the Vice President into the DNC's federal hard money
account. The evidence indicates that neither the Vice
President, nor anyone else at the White House, knew about the
deposits of a portion of some contributions into a hard money
account.
According to FEC records, 20 individuals called by the Vice
President made contributions to the DNC within 30 days of
receiving the phone call as noted above.79 The DNC
received $737,750 from these 20 individuals and deposited
$605,750 into its non-federal soft money account. The DNC
deposited $132,000 donated by eight of the 20 individuals into
its federal hard money account.80
Joseph Sandler, general counsel of the DNC, confirmed that
the Vice President was raising non-federal soft money but that
the DNC, without the Vice President's knowledge, deposited some
of the money donated by individuals called by the Vice
President in its federal hard money account. Sandler stated to
the Committee:
[A]ll the materials that we have seen clearly
indicate that the vice president was soliciting non-
Federal money. And that's true even though, because of
internal DNC procedures of which the vice president
would have no reason to be aware, the DNC--after the
fact and without the vice president's knowledge--
deposited a small percentage of a portion of those
contributions that he had solicited into our Federal
account.81
Peter Knight, who as noted above, was present when the Vice
President made several of the calls, confirmed that neither he
nor the Vice President was aware that the DNC might allocate
some of the money he raised as federal hard money.
Q: And to your knowledge, did the vice president have
any knowledge of the fact that the DNC was splitting
off money without consulting with the donors?
A: No.82
Furthermore, Knight explained that in his experience,
whenever a donor makes a contribution to the DNC above $20,000
it is ``automatically'' non-federal soft money.83 He
explained that a contributor would have to affirmatively state
that they were making a federal hard-money donation before the
DNC could properly deposit the funds in its federal money
account. Knight testified:
In my experience, you have to have a conversation
with the contributor to make the switch. If you have a
check that says ``$100,000'' on it, written, that to me
is a soft money check by definition--in my definition--
and that if you for some reason want to take $20,000,
then it was always my understanding that a conversation
had to be had with the contributor to redo it, which is
consistent with what [Bradley Marshall is] saying
here--``Federal money is the first $20,000 by an
individual''--well, the first $20,000 that one gives
is, if it's designated as Federal, as hard. But you
know, I--what was different about this account that I
learned later was that you would designate it without
any--consultation with the donor.84
Sandler and Knight confirmed that the Vice President was
not aware that the DNC deposited some of the non-federal soft
money he raised into its federal hard money account. No
evidence has been presented to the Committee that indicates
that the Vice President knew or should have known that the DNC
deposited some of the funds he solicited into its federal hard
money accounts. Clearly, however, officials at the DNC should
not have unilaterally split contributions between federal and
non-federal accounts.
Applicability of the Pendleton Act
As discussed in Chapter 24, the Pendleton Act forbids
anyone to solicit a federal (hard-money) contribution on
federal property. The law has been interpreted to mean that the
person solicited must not be on federal property when the
solicitation occurs. The Committee received no evidence--
whether documents, sworn testimony or reports of interviews by
FBI detailees--that shows or suggests in any way that any
individuals called by the Vice President were on federal
property when they were solicited.
In his March 3, 1997, press conference, the Vice President
confirmed that he did not solicit a donation from anyone who
was on federal property at the time of the solicitation. The
Vice President stated that he ``never solicited a contribution
from any federal employee, nor would I. Nor did I ever ask for
a campaign contribution from anyone who was in a government
office or on federal property.'' 85
The great weight of the evidence reviewed by this
Committee, clearly shows that the Vice President did not
violate the Pendleton Act because he did not solicit federal
hard money and the individuals he called were not on federal
property when they received his calls.
The contributors
A review was undertaken of the 190 call sheets prepared for
the 169 individuals identified by the DNC for the Vice
President to call. Each call sheet included: the person's name,
title, company, the spouse's name, addresses, telephone
numbers, contributor history, and the reason for the Vice
President to call, and personal notes such as noting that one
couple had their first child about 8 months ago.86
The review found that most of the people on the call sheets
had previously contributed money to the DNC or had indicated an
intent to make a large contribution to the DNC. Of the 190 DNC
call sheets prepared for the Vice President, 134 included
contributor history information and 43 others indicated that
the person intended to make a large contribution to the
DNC.87 Only 13 call sheets did not include any
contributor history or any information regarding the
individual's intent to contribute.88 This
information indicates that 93 percent of the persons contacted
had contributed to the DNC in the past or had expressed an
intent to contribute to the DNC in the future.
These figures indicate that the Vice President was not
being asked to ``strong-arm'' individuals who were not inclined
to contribute to the DNC. And, in fact, the Committee found no
evidence that anyone called by the Vice President felt
pressured to contribute.
Payment for the phone calls
Vice President Gore was aware that any fundraising calls he
made from his office at the White House should be paid for by
the DNC. The Vice President and another person, usually Peter
Knight, sat together in a separate office from the staff person
who placed the calls to individuals listed on the DNC call
sheets. Heather Marabeti, executive assistant to the Vice
President, explained that a staff person who sat in the outer
office of the Vice President's office at the White House,
placed the calls.89 David Strauss, the Vice
President's Deputy Chief of Staff, was present on one occasion
when the Vice President made fundraising-related calls in late
1995, and he confirmed that this was how the calls were
made.90 The staff people who placed the fundraising-
related calls were instructed to use a credit card to pay for
them. Marabeti, one of the staff people who placed calls for
the Vice President testified, ``We were instructed to use the
credit card.'' 91 She explained that it was the
staff's ``intent'' to use the credit card each time they placed
a fundraising-related phone call for the Vice
President.92
In 1995, the Vice President discussed with his staff the
use of the credit card to pay for the cost of the fundraising
calls. Marabeti testified, ``I remember that he [the Vice
President] asked me how the phone calls were being placed,
whether or not a credit card was being used, and I told him
that a credit card was being used.'' 93
In his March 3, 1997, press conference, the Vice President
confirmed that he knew the staff was supposed to use a credit
card to pay for the costs associated with the calls. The Vice
President said, ``On a few occasions I made some telephone
calls from my office in the White House, using a DNC credit
card.'' 94 Shortly after the White House discovered
that some of the calls were not paid for with the credit card,
the DNC reimbursed the U.S. Treasury $24.20 for the cost of
those calls.
Payment for the thank-you notes
The White House and the DNC produced copies of thank-you
letters signed by the Vice President and sent to individuals
who had made commitments to donate to the DNC during telephone
conversations with the Vice President from late 1995 to May
1996.95 All of the thank-you notes were printed on
DNC letterhead with the disclaimer ``Paid for by the Democratic
National Committee'' prominently displayed on the bottom of the
page. David Strauss, the Vice President's Deputy Chief of
Staff, testified that the thank-you notes were prepared at the
DNC, by DNC employees, on stationery paid for by the
DNC.96
Heather Marabeti confirmed that the DNC stationery was not
used at the Vice President's White House office. She testified
that DNC stationery was not even kept in the official
office.97 She testified that the notes were sent to
Gore for his signature and then returned to the DNC for
mailing.98
No other costs to the government
The Vice President, his staff, and the DNC attempted to
ensure that the entire cost of the calls made by the Vice
President for the DNC were paid for by the DNC. The staff
person who placed the phone calls for the Vice President was
instructed to use a credit card to pay for the calls. The
thank-you letters signed by the Vice President were prepared on
DNC stationery, at the DNC and mailed by the DNC. Because of
these careful efforts, the U.S. Government did not incur any
additional costs resulting from the fundraising-related calls
made by the Vice President in 1995 and 1996.
Republican Phone Calls
President Clinton was not the first president asked by his
party to make fundraising calls. The evidence before the
Committee establishes that, from 1982-88, President Reagan was
asked to make fundraising calls to and from federal property.
Unlike the calls made by Vice President Gore, many of these
calls were designed specifically to raise hard money.
May 17, 1988: President Reagan was asked to
make a call from the White House to House Minority
Leader Bob Michel (R-Ill.) which was to be broadcast to
over 275 attendees at an event designed to raise hard
money for Michel's campaign.99
September 28, 1986: President Reagan was
asked to make a call from Camp David to Rep. John
Rowland (R-Conn.) which was to be broadcast to 600
attendees at an event designed to raise hard money for
Rowland's campaign.100
September 7, 1982: President Reagan was
asked to call a Republican Eagles event, which was held
on federal property. Reagan was to tell the Eagles,
``Let me say to you Eagles how important your
contributions are to the Republican Party. . . . We are
so appreciative. You are pillars of the party.''
101
March 2, 1981: President Reagan was
requested to call Amway President Richard DeVos from
the White House and to request DeVos to recruit 335 new
Eagles members, which would raise $3,350,000 for the
RNC.102
Congressman Newt Gingrich requested that President Reagan
make at least one of these calls. A memorandum in connection
with the Rowland fundraiser stated: ``At the request of
Congressman Newt Gingrich and the NRCC, it was agreed to try,
as an `experiment,' a presidential phone call to fundraisers
for selected Congressmen and challengers in their districts.''
These calls were designed to raise hard money.103
President Reagan's White House Counsel's office approved
his fundraising calls. In a May 1988 memorandum on the legality
of President Reagan's call to the Michel fundraiser, which was
designed to raise hard money, Associate White House Counsel
Robert Kruger wrote:
Counsel's office has reviewed the attached scheduling
proposal and has no objection to it from a legal
perspective. Incremental costs associated with the
call, if any, should be billed to the appropriate RNC
account.104
The Minority attempted to review records related to
President Bush to determine if he, too, made fundraising calls
while President, but Chairman Thompson did not concur in the
request to the Bush Library, and the Library did not permit a
search of President Bush's records.
The evidence presented to the Committee indicating that
most of the people on Vice President Gore's call sheets had
previously contributed money to the DNC or had indicated an
intent to make a large contribution to the DNC contrasts with
evidence uncovered by this Committee relating to phone calls
Speaker Newt Gingrich was asked to make to persons who were not
inclined to contribute to the RNC. The RNC produced documents
indicating that Speaker Gingrich was asked in 1996 to solicit
contributions from several corporations whose executives had
expressly indicated that they did not want to contribute
corporate funds to the host committee for the Republican
National Convention.
In a May 23, 1996, memorandum from Fred Bush, finance
chairman for the RNC Convention's host committee, to Gingrich
aide Joseph Gaylord, regarding ``Phone calls for Speaker
Gingrich,'' Bush requested that Gingrich call the chief
executive officers of six companies and solicit $250,000 to
help pay for the convention.105 The comments
included on the call sheet notes that three of the six
companies--Boeing, Coca Cola and Hewlett Packard--had recently
expressed an intent not to donate money to help pay for the
convention.106 The RNC documents strongly suggest
that the Republican Party intended to use the Speaker to
convince these corporations to make contributions that they
otherwise would not make.
Conclusion
The practice of politicians making fundraising calls from
federal property is by no means rare. For example, Senator Phil
Gramm said of fundraising calls: ``I do it wherever I am. . . .
I can use a credit card. . . . As long as I pay for the calls,
I can make calls wherever I want to call.'' 107 Dick
Morris, who has been a political consultant for both
Republicans and Democrats, acknowledged that this practice is
widespread: ``Would you like me to embarrass 15 of my former
clients by telling you when I sat in their office(s) and they
made fund-raising phone calls?'' 108
footnotes
\1\ New York Times, 7/24/97.
\2\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285; Memorandum from
Harold Ickes to the President and the Vice President, 11/28/95, SCGA
00342-43.
\3\ Richard Sullivan deposition, 6/4/97, pp. 181-97; Marvin Rosen
deposition, 5/19/97, pp. 107-29; Donald Fowler deposition, 5/21/97, pp.
289-304.
\4\ Harold Ickes, 10/8/97 Hrg. pp. 210, 215-17.
\5\ Harold Ickes, 10/8/97 Hrg. pp. 124-25, 208-19.
\6\ These documents were Exhibit 1653: Memorandum from Harold Ickes
to Terence McAuliffe and Laura Hartigan, 10/18/94, EOP 036557-64;
Memorandum from Harold Ickes to Terence McAuliffe and Laura Hartigan,
10/21/94, EOP 035494-97; list of names, EOP 036569-74; and DNC Finance
Call Sheets.
\7\ Exhibit 2504M: Summary of Senate FBI Agent's Investigation into
the President's Phone Calls; see Minority counsel, 10/29/97 Hrg. Pp.
22-23, 35-36.
\8\ Exhibit 2504M: Summary of Senate FBI Agent's Investigation into
the President's Phone Calls. Because solicitation means asking for
something, such a call is outside the plain meaning of ``soliciting] or
receiving] any contribution within the meaning of . . . the Federal
Election Campaign Act'' and therefore not prohibited by section 607. In
re William Jefferson Clinton, Notification of the Court Pursuant to 28
U.S.C. Sec. 592(b) of Results of Preliminary Investigation, at 9-10
(D.C. Cir. Dec. 2, 1997) (citing Wisconsin Dep't of Revenue v. William
Wrigley, Jr., Co., 505 U.S. 214, 223 (1992)).
\9\ Exhibit 1653: Memorandum from Terence McAuliffe and Laura
Hartigan to Harold Ickes, 10/18/94, EOP 036557-64.
\10\ Exhibit 1656: Statement of Jerome Campane, 10/28/97. Exhibit
1656 was prepared by Committee Investigator Jerry Campane as an
analysis of certain interviews of potential contributors. This exhibit
was not provided to the Minority until 9:15 a.m. on the morning of the
hearing. Minority counsel, 10/29/97 Hrg. P. 35.
\11\ Exhibit 1656: Statement of Jerome Campane, 10/28/97.
\12\ Exhibit 1656: Statement of Jerome Campane, 10/28/97. Some
Members of the Committee have questioned the credibility of the other
five contributors but without affording them the opportunity to testify
at a hearing. It is possible that these people received phone calls but
do not recall the calls or that a call was placed but the contributor
was not reached. It is also possible that Mr. Ickes's handwritten
notations came from a source other than the President calling the
contributor. For example, Mr. Ickes may have been told some of these
contributors had already contributed or pledged a contribution and thus
there was no reason to call.
\13\ Exhibit 1652: FBI Interview of Richard Jenrette.
\14\ Jenrette was not deposed by the Committee. Early in the week
of October 20, the Majority Chief Counsel spoke to Jenrette. In
contravention of the Committee's protocols, the Minority Staff was not
notified in advance of the Majority Chief Counsel's intention to speak
with a witness. Jenrette then retained an attorney, and the attorney
left a message for the Majority Chief Counsel indicating that he had
been retained. On October 29, the Majority Chief Counsel called
Jenrette directly and they had a half hour conversation about the
issues to which he would testify. The Majority Chief Counsel also met
with Jenrette later that day. Again, Minority Staff was neither
informed in advance of these discussions nor allowed to participate.
Staff interview with Jenrette's attorney, as noted in memorandum of
Minority Counsel.
\15\ Richard Jenrette, 10/29/97 Hrg. Pp. 16-17.
\16\ Richard Jenrette, 10/29/97 Hrg. P. 17; FEC records.
\17\ Jenrette personally or through one of his companies
contributed $1,000 to D'Amato in 1995, $1,000 to Faircloth in 1993,
$1,000 to Faircloth in 1995, and $1,000 to Weld in 1996. FEC records.
\18\ Richard Jenrette, 10/29/97 Hrg. Pp. 17-18; FEC records.
\19\ Richard Jenrette, 10/29/97 Hrg. P. 18.
\20\ Richard Jenrette, 10/29/97 Hrg. Pp. 18, 19.
\21\ Exhibit 2500M: AT&T billing records for the White House for
10/18/94; see Minority counsel, 10/29/97 Hrg. P. 23. Exhibit 2500M was
redacted to remove the President's private phone number, due to obvious
privacy concerns. Senator Glenn, 10/29/97 Hrg. P. 60.
\22\ Exhibit 2500M: AT&T billing records for the White House for
10/18/94.
\23\ Richard Jenrette, 10/29/97 Hrg. Pp. 3-4, 23; Exhibit 1652: FBI
Interview of Richard Jenrette.
\24\ Exhibit 1652: Letter from Richard Jenrette to President
Clinton, 10/24/94; Richard Jenrette, 10/29/97 Hrg. P. 3. The Majority
questioned why the White House did not produce this document to the
Committee. Richard Jenrette, 10/29/97 Hrg. Pp. 4-5. They introduced
phone records produced by the White House on October 27 reflecting the
call to Jenrette (and others), Exhibit 1657, and pointed to this as an
example of the White House's late production of records. Richard
Jenrette, 10/29/97 Hrg. P. 5. The White House did, however, produce in
June 1997 a document identifying Jenrette as a potential contributor.
Exhibit 1653: Memorandum from Ickes to McAuliffe and Hartigan, 10/18/
94, EOP 036557-64; see Richard Jenrette, 10/29/97 Hrg. Pp. 19-20, 38.
The White House has not been able to locate a copy of Exhibit 1652 in
the White House's files, Newsweek, 10/27/97, and does not believe that
one exists.
\25\ Richard Jenrette, 10/29/97 Hrg. P. 68.
\26\ Richard Jenrette, 10/29/97 Hrg. P. 3.
\27\ Richard Jenrette, 10/29/97 Hrg. P. 24.
\28\ Richard Jenrette, 10/29/97 Hrg. P. 24; see also Richard
Jenrette, 10/29/97 Hrg. P. 30. Jenrette was asked:
Senator Torricelli. . . . . Mr. Jenrette, you do
not appear to me, even though we do not know each
other, to be a man who is easily intimidated. If the
President of the United States had called and asked
you for a contribution, and you did not believe he
was a good President, you did not want to support
his campaign, you did not otherwise want to be
involved, would you have hesitated to tell him, No,
I will not contribute to you?
Mr. Jenrette. I'd say sorry.
Senator Torricelli. You would not have
contributed to him?
Mr. Jenrette. No.
Senator Torricelli. In any way based on the
business of your firm, activities of the Federal
Government, did you find something inappropriate
about the timing, the conduct of the phone call, in
any way that would have compromised the integrity of
the firm or yourself or the President in any ongoing
business that was being conducted at that time?
Mr. Jenrette. No.
Senator Torricelli. All right. So there was
nothing intimidating and there was nothing
inappropriate.
Richard Jenrette, 10/29/97 Hrg. Pp. 55-56.
\29\ Exhibit 2500M: AT&T billing records for the White House for
10/18/94.
\30\ Richard Jenrette, 10/29/97 Hrg. Pp. 42, 43.
\31\ Richard Jenrette, 10/29/97 Hrg. Pp. 24-25, 57-58.
\32\ Exhibit 1655: Contribution checks, p. 3. The $50,000 was
contributed in five separate checks. Exhibit 1655: Contribution checks.
\33\ Richard Jenrette, 10/29/97 Hrg. P. 51.
\34\ Senator Nickles, 10/29/97 Hrg. Pp. 47-48; Chairman Thompson,
10/29/97 Hrg. Pp. 63-65; Senator Smith, 10/29/97 Hrg. P. 66.
\35\ Newsweek, 10/27/97.
\36\ See Memorandum Opinion for the Assistant Attorney General,
Criminal Division, from Larry A. Hammond, Acting Assistant Attorney
General, Office of Legal Counsel, 3 Op. O.L.C. 31 (1979) (hereinafter
``OLC Opinion'') (the discrete residential portion of the White House
is not a ``room or building occupied in the discharge of official
duties'' within the meaning of section 607); see also Letter from Janet
Reno, Attorney General of the United States, to Henry J. Hyde,
Chairman, House Judiciary Committee, in accordance with 28 U.S.C.
Sec. 592(g)(2) at 5 (Oct. 3, 1997) (``Section 607 does not apply to
events occurring within the residential areas of the White House.'').
\37\ Donald Fowler deposition, 5/21/97, pp. 292-95.
\38\ Donald Fowler deposition, 5/21/97, p. 295.
\39\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285.
\40\ White House Office of the Press Secretary, press briefing by
the Vice President, 3/3/97, p. 4.
\41\ Notations on call sheets indicate that a message was left for
two individuals on November 28, 1995. DNC Finance Call Sheet, EOP
49257; DNC Finance Call Sheet, EOP 49258.
\42\ Vice President's schedule, 12/1/95, EOP 49147-49.
\43\ Vice President's schedule, 12/11/95, EOP 57207.
\44\ Vice President's schedule, 12/18/95, EOP 57209-11.
\45\ Vice President's schedule, 2/2/96, EOP 57212-14.
\46\ Vice President's schedule, 2/5/96, EOP 57216-18.
\47\ Vice President's schedule, 2/6/96, EOP 57219-21.
\48\ Vice President's schedule, 2/9/96, EOP 49143-45.
\49\ A notation on a call sheet indicates that a message was left
for Ms. Carol Pensky on March 13, 1996. DNC Finance Call Sheet, EOP
063253. Phone bill records confirm that a 30 second call was placed to
Ms. Pensky's phone number on March 13, 1996. Phone records, EOP 063275-
82.
\50\ Vice President's schedule, 4/26/96, EOP 56527-29.
\51\ Vice President's schedule, 5/2/96, EOP 57227-28.
\52\ Despite these instructions to the staff, some of the calls
were not made on a credit card; however, the DNC reimbursed the U.S.
Treasury for the cost of these calls. Payment Authorization from Moe
Vela, Finance Manager, Office of the Vice President, to the DNC, 6/27/
97, EOP 063283-84.
\53\ Summary of Vice President Al Gore's phone call records,
Appendix.
\54\ Exhibit 1065: Memorandum from Harold Ickes to the President
and the Vice President, 2/22/96, attaching Memorandum from Bradley
Marshall to Harold Ickes, 2/21/96.
\55\ Exhibit 2381M: Affidavit of Bradley K. Marshall, 10/6/97.
\56\ Exhibit 1065: Memorandum from Harold Ickes to the President
and the Vice President, 2/22/96, attaching Memorandum from Bradley
Marshall to Harold Ickes, 2/21/96.
\57\ Harold Ickes, 10/8/97 Hrg. P. 122.
\58\ Joseph Sandler, 9/10/97 Hrg. P. 142.
\59\ Memorandum from Don Fowler, Marvin Rosen, and Richard Sullivan
to Harold Ickes, 10/23/95, CGRO 0361.
\60\ Budget summary, CGRO 0362-64.
\61\ Memorandum from Harold Ickes to Chairman Dodd and Chairman
Fowler, 11/9/95, CGRO 0310-13.
\62\Memorandum from Harold Ickes to Chairman Dodd and Chairman
Fowler, 11/9/95, CGRO 0310-13.
\63\ Memorandum from Harold Ickes to the President and the Vice
President, 11/20/95, with attachments, CGRO 0191-96.
\64\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285.
\65\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285.
\66\ Richard L. Sullivan deposition, 6/4/97, p. 180.
\67\ Memorandum from Harold Ickes to the President and the Vice
President, 11/28/95, SCGA 00342-43.
\68\ DNC 1995 Budget Analysis, 11/21/95, p. 3, SCGA 00344-46.
\69\ Memorandum to the President, Vice President, et al., from
Harold Ickes, 12/20/95, with attachment, EOP 027959-65.
\70\ Exhibit 1066: Memorandum from Harold Ickes to the President
and the Vice President, et al., 6/3/96, with attachment, SCGA 00846-53
(emphasis added).
\71\ Exhibit 1066: Memorandum from Harold Ickes to the President
and the Vice President, et al., 6/3/96, with attachment, SCGA 00846-53
(emphasis added).
\72\ Peter Sage Knight deposition, 9/17/97, p. 208.
\73\ Peter Sage Knight deposition, 9/17/97, pp. 214-15 (emphasis
added).
\74\ Richard Jenrette, 10/29/97 Hrg. pp. 12, 28, 71.
\75\ Richard Jenrette, 10/29/97 Hrg. pp. 21, 71.
\76\ Exhibit 1652: Letter from Jenrette to Fowler, p. 2, 2/20/96.
\77\ Exhibit 1652: Letter from Jenrette to Fowler, p. 2, 2/20/96
(emphasis added).
\78\ DNC Finance Call Sheets, e.g., EOP 049237-91, EOP 063413-17.
\79\ Summary of Vice President Al Gore's phone call records,
Appendix.
\80\ There is evidence which suggests that only 6 of the 8
individuals who gave a donation that was subsequently deposited, in
part, into the DNC's Federal hard money account made their contribution
in response to a phone call from Vice President Gore.
John Catsimatidis donated $10,000 to the DNC that was subsequently
deposited in a Federal hard money account two days after records show
him receiving a call from the Vice President. However, Thomas Galvin,
of the New York Daily News, wrote on August 5, 1997 that ``Catsimatidis
said he never spoke with Gore--`I talk with the No. 1 guy, not the No.
2 guy,' he said.'' Catsimatidis's statement that he never spoke to the
Vice President combined with the fact that the phone records indicate
that the Vice President only left a message for Catsimatidis strongly
indicates that he did not make the contribution in response to the Vice
President's phone call. N.Y. Daily News, 8/5/97.
Michael Adler received a call from Vice President Gore on December
11, 1995, and contributed $5000 four days later. However, the
contribution was attributed to a December 15, 1995, fundraising event
for Jewish contributors.
\81\ Joseph Sandler, 9/10/97 Hrg. Pp. 15-16. The DNC has
acknowledged that ``splitting'' contributions in this way without the
contributor's permission was not appropriate. Joseph Sandler, 9/10/97
Hrg. P. 87.
\82\ Peter Sage Knight deposition, 9/17/97, p. 206.
\83\ Peter Sage Knight deposition, 9/17/97, p. 205.
\84\ Peter Sage Knight deposition, 9/17/97, pp. 204-05.
\85\ White House Office of the Press Secretary, Press Briefing by
the Vice President, 3/3/97, p. 2.
\86\ DNC Finance Call Sheet, 2/29/96, DNC 3113672.
\87\ Minority Summary Appendix.
\88\ Minority Summary Appendix.
\89\ Heather Marabeti deposition, 9/3/97, p. 15.
\90\ David Strauss deposition, 6/30/97, pp. 190-94, 197.
\91\ Heather Marabeti deposition, 9/3/97, p. 16.
\92\ Heather Marabeti deposition, 9/3/97, p. 17.
\93\ Heather Marabeti deposition, 9/3/97, p. 17.
\94\ White House Office of the Press Secretary, Press Briefing by
the Vice President, 3/3/97, p.1.
\95\ EOP 49171; EOP 53178-82; EOP 53199-211; DNC 3063789-91; DNC
3063793-800.
\96\ David Strauss deposition, 8/14/97, pp. 233-34.
\97\ Heather Marabeti deposition, 9/3/97, pp. 91-92.
\98\ Heather Marabeti deposition, 9/3/97, p. 59.
\99\ Exhibit 2321M: Memorandum from Alan Kranowitz to Rep. Bob
Michel, 5/4/88.
\100\ Memorandum from Mitchell Daniels to Frederick Ryan, Director
Presidential Appointments and Scheduling, 9/12/86.
\101\ Memorandum from A. Morgan Mason to Michael K. Deaver, 9/16/
82; Presidential Talking Points: Phone Call to Eagles Meeting September
17, 1982, 10:45 A.M.
\102\ Memorandum from Gregory Newell to President Reagan, 3/2/81.
\103\ Memorandum from Mitchell Daniels to Frederick Ryan, 9/12/86.
\104\ Memorandum from Robert Kruger to Rhett Dawson, 5/6/88.
\105\ Memorandum from Fred Bush to Joe Gaylord, 5/23/96, R047170-
72.
\106\ Memorandum from Fred Bush to Joe Gaylord, 5/23/96, R047170-
72.
\107\ AP, 9/8/97.
\108\ Sacramento Bee, 10/5/97.
PART 5 FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES
AND ADMINISTRATIONS
Chapter 27: White House Coffees and Overnights
Many political supporters of President Clinton have
attended so-called ``coffees'' at the White House arranged by
the Democratic National Committee. Others have stayed at the
White House as overnight guests, often in the historic Lincoln
Bedroom. The coffees and ``overnights'' have prompted
widespread criticism of the DNC and the administration. To the
extent that issues have arisen over whether persons with
questionable backgrounds gained inappropriate access to the
White House by attending coffees, those topics are addressed in
Chapters 29, 30 and 31. This chapter discusses allegations that
White House and/or DNC officials improperly used the White
House as a fundraising tool.
findings
(1) Telephone calls made on federal property to solicit
contributions from persons neither on federal property or
employed by the federal government have been made by elected
officials from both parties and prior administrations.
(2) There was nothing illegal about the one solicitation
telephone call known to the Committee made by the President.
(3) There was nothing illegal about the solicitation
telephone calls made by the Vice President.
dnc coffees at the white house
During the 1996 election cycle, the Democratic National
Committee arranged for more than 1,000 individuals to attend
so-called ``coffees''--get-togethers with President Clinton or
Vice President Gore--many of which were held at the White
House. Many of the attendees were Democratic campaign
contributors, prompting allegations that the coffees were
fundraising events on federal property and, as such, were
illegal and improper.
The Committee took testimony from, among others, DNC and
White House personnel, coffee attendees, and reviewed documents
produced to the Committee. FBI agents detailed to the Committee
also questioned several individuals who had attended coffees.
When a public hearing was held on the coffees on September 18,
the Majority called as a ``summary witness'' Jerry Campane, the
head of the team of FBI detailees. During his testimony,
Campane presented charts which highlighted political
contributions by some of the coffee attendees.
The evidence shows that the coffees were prompted by a
January 5, 1995, memo to Nancy Hernreich, director of Oval
Office operations, (and given to President Clinton) from Terry
McAuliffe, who served as finance chair of the DNC until the end
of that month, when he became finance chair of the Clinton re-
election campaign.1 In the memo, which was sent
after McAuliffe met with the President, McAuliffe expressed his
concern that--in light of the Democratic defeat in the 1994
mid-term elections--the President needed to ``energize'' his
supporters. McAuliffe suggested that small groups of supporters
be invited to the White House to meet with the
President.2
---------------------------------------------------------------------------
Footnotes appear at end of chapter 27.
---------------------------------------------------------------------------
McAuliffe's suggestion was accepted and, on January 11, the
DNC held the first of a series of coffees. By August 23, 1996,
103 coffees had been held at the White House--60 of them
organized by the DNC Finance Division.3 The coffees
were attended by a total of 1,241 people who were afforded an
opportunity to meet with the President or the Vice
President.4
The Clinton Administration and the DNC clearly hoped that
the coffees organized by the DNC Finance Division would assist
in the DNC's fundraising efforts. They were arranged by the
DNC's Finance Division and, after the coffees were publicized
in the press, the White House and DNC acknowledged that many of
the coffees had a fundraising component. The coffees were aimed
at encouraging and motivating ``supporters'' of the party,
including both financial and political supporters.5
In February 1997, the President's press secretary stated:
``Obviously, the coffees were held in the hopes that people who
talk with the President about these ideas and goals would share
them and would continue to be or become political and financial
supporters of the President.'' 6
The coffees and fundraising
DNC finance personnel and others active in political
fundraising define a fundraising event''--which they call a
``fundraiser''--as an event with a ``ticket price'': attendees
are obliged to contribute a certain sum in order to
attend.7 The evidence examined by the Committee
establishes that the coffees were not fundraisers in that
sense.
To begin with, they were not conceived as fundraisers. The
McAuliffe memo does not suggest that attendees be obliged to
contribute a certain amount of money--or, indeed, any amount of
money. The memo makes clear that McAuliffe, at least, did not
see the coffees as a way to raise money for the Democratic
Party or for the president's re-election campaign. Harold
Ickes, deputy chief of staff in the White House, testified that
they were originally designed to help the President
``reconnect'' with his constituents and to reenergize
them.8
More importantly, the coffees did not, in fact, operate
like traditional fundraisers. McAuliffe, for example,
testified:
Did we recommend . . . people whom we hoped would be
helpful or had been helpful? You bet, but I always
ended every phone call with you don't--there's no quid
pro quo, and you talk to the hundreds of thousands of
donors that I dealt with . . . People were invited to
spend time. You understand, people didn't care.
They all talk about this White House. It wasn't the
White House. It was people to spend time with the
president. They get an idea of what his policies were,
are, were going to be, to get them energized. That's
what it was all about.
As I've always said, I could[n't] have cared less if
those first 10 coffees were done at McDonald's. It
didn't matter to me. I needed people to see the
President and get his vision for the future to get them
energized, and that's what this was all
about.9
As part of an effort to demonstrate that the coffees were
fundraisers, some Committee members drew attention to DNC
documents suggesting that every coffee was expected to, and
did, raise $400,000 and that DNC fundraising personnel
sometimes credited contributions to specific coffees. For
example, the DNC produced documents listing all the attendees
at particular coffees that tally the contributions made by
these individuals.
Although those documents would seem to suggest that the
coffees were fundraising events, the Committee also found
considerable evidence undermining that allegation. For example,
the $400,000 figure was arbitrary; it was used for every single
coffee organized by the DNC regardless of the number of
attendees or their identities.10 According to FBI
agent Campane's testimony, only one of the 103 coffees actually
resulted in $400,000 being contributed by the attendees. With
three exceptions, most contributions made by attendees around
the time of the coffees were not attributed to the coffees.
Finally, the evidence indicates that of the approximately 1600
contributions made by people who attended coffees, less than 5
were credited on the DNC check-tracking forms to the
coffee.11
Numerous DNC fundraisers were asked under oath whether the
fundraiser had ever told a contributor that he or she could
attend a coffee in exchange for a contribution. The DNC
witnesses were also asked whether there was a specific amount
of total contributions that were required for a contributor to
receive a coffee invitation--specifically, whether there was a
$50,000 ticket price to attend the coffees. The DNC fundraisers
denied these charges: they all stated that no contribution was
required to attend the event and no specific level of
contributions was received from coffee attendees.12
Coffee attendees were also asked whether they were told
that a specific contribution would allow them to attend a
coffee at the White House. Every attendee deposed or
interviewed by the Committee denied this charge. Roger Tamraz--
a witness who testified quite explicitly that he gave money in
order to gain access to the White House 13--stated
that he was not asked to and did not make a political
contribution to enable him to attend a coffee on April 1,
1996.14 FEC records support this claim, showing that
his last large contribution to the DNC was in October of
1995.15 Similarly, Beth Dozoretz, Robert Belfer,
Karl Jackson, and Clark Wallace, all of whom attended a coffee
on June 18, 1996, testified that they were not asked to make a
specific contribution to attend this coffee.16
Richard Jenrette, who attended a coffee on September 7, 1995,
testified in a similar fashion.17
The testimony is supported by documentary evidence. The
records show that 466 of the 1,063 people who attended White
House coffees--44 percent of the total--contributed nothing to
the DNC during the 1995/96 election cycle.18 In the
case of several of the coffees, the majority of the attendees
did not contribute. For example, Minority Exhibit 2049M
(reproduced in the endnotes to this chapter) shows that only
three of the eight people who attended a coffee on November 9,
1995, contributed to the DNC during the 1995/96
cycle.19
The coffees as DNC events
Although the coffees were not traditional fundraisers, they
were certainly related to Democratic fundraising. The coffees
organized by the Finance Division of the DNC were intended to
motivate and encourage political and financial supporters of
the president. For example, when Harold Ickes testified before
this Committee, he said, ``There's no question that those
coffees helped facilitate fund-raising. There's no question
about that, Senator. Nobody denies that, and anybody who denies
that is sort of goofy, in my view.'' 20 In February
1997, the President Clinton's press secretary made the point
this way: ``Obviously, the coffees were held in the hope that
people who talk to the President about these ideas and goals
would share them and would continue to be or become political
and financial supporters of the president.'
Other witnesses used a variety of terms to describe the
link between the coffees and party fundraising. Karen Hancox,
deputy director of the White House political office, called
them ``fundraising tools.'' 21 DNC officials Marvin
Rosen and Ari Swiller said there was a ``fundraising
component.'' 22 Donald Fowler, former DNC chairman,
said the coffees had a ``fundraising aspect.'' 23
Richard Sullivan, former DNC finance director, said that the
coffees were helpful to the DNC's overall ``fundraising goal.''
24
Sullivan's testimony about the coffees being helpful to
reach DNC fundraising goals seems to be the best description.
DNC records produced to this Committee show clearly that
although there was no ``admission price''--as in a traditional
fundraising event--the party did hope to raise money from
coffee attendees. The documents show that there were periods
during which the DNC and the White House were keeping track of
how much money was contributed by coffee attendees, making it
possible to determine whether the coffees were helping with
overall fundraising.25
No convincing evidence was presented to the Committee
indicating that campaign contributions were solicited or
received during White House coffees, which could have violated
the Pendleton Act. All but one of the coffees was held in an
area of the White House which is exempt from the Pendelton
Act's restrictions. In addition, campaign solicitations were
not a feature of the coffees.26 The only coffee
attendee who claims he heard a solicitation is Karl Jackson, a
former aide to Vice President Dan Quayle. According to Jackson,
DNC fundraiser John Huang observed that elections are costly
and then encouraged attendees at one coffee to ``support the
president.'' 27 It is worth noting that Jackson is
the only one of the more than 1,000 coffee attendees to make
such an allegation and that even Jackson did not state that
financial support or contributions were mentioned by Huang.
Other witnesses who attended the coffee with Jackson also
contradict him in important respects as explained in Chapter
4.28 Jackson's allegation that solicitation occurred
at White House coffees is also undermined by videotapes of the
opening segments of the coffees. None of the tapes contains any
evidence of a solicitation. In fact, one tape shows an attendee
attempting to give a contribution to DNC Chairman Donald Fowler
and Fowler refusing to accept it.29
The law and precedent
Under current law, it is not illegal for the President to
invite supporters to the White House, or any other federal
building, or even to hold a fundraising event in certain areas
of the White House. As Harold Ickes told the Committee:
[A] president may entertain and meet with friends and
political supporters, contributors, fund-raisers, and
otherwise, as well as with members of Congress and
heads of state in the White House. He may have coffee
or even tea with his friends and political supporters,
and it is perfectly permissible for them to stay
overnight . . . [A] President and a Vice President, and
certainly Senators and members of Congress, may--
indeed, it is a custom of longstanding that they do--
meet with supporters, including contributors and fund-
raisers, as well as ordinary citizens, be gracious to
them, discuss matters of public policy with them, and,
yes, listen to their concerns. It simply is not illegal
or untoward for a President or a Vice President to
grant access to supporters any more than it is illegal
or inappropriate for United States Senators or members
of Congress to grant access to their supporters,
constituents, political leaders, contributors, and
fund-raisers alike, or any more than it is illegal or
improper [for] the RNC to thank its members of its Team
100 or its Eagles Club by inviting them to dine at the
Capitol to meet with congressional
leaders.30
Even the Majority's summary witness on the subject of the
coffees--FBI detailee Jerome Campane--did not assert that the
coffees were illegal or even improper. ``I am not suggesting
they are improper,'' he testified. ``I am not suggesting
anything illegal.'' His only conclusion, based on his analysis,
was that the coffees were ``in the nature of fund-raising
tools.'' 31 Morever, many of President Clinton's
predecessors have used the White House for political gatherings
resembling the coffees, including former Presidents Gerald
Ford, Ronald Reagan, and George Bush.32
white house overnights
The Clinton Administration has been heavily criticized for
apparently using overnight visits to the White House to reward
contributors. In late 1996, it was reported in the press that
large numbers of campaign contributors had been invited to stay
overnight at the White House, often in the Lincoln Bedroom.
These reports prompted allegations that the Lincoln Bedroom
was, in effect, being ``rented'' to contributors.
Although such allegations received widespread attention,
the Committee found no evidence of a systematic scheme to trade
overnight visits to the White House for campaign contributions.
Most of the visitors were longtime friends and supporters of
the president; 33 continuing a practice of both
Presidents Reagan and Bush. The Committee found no evidence
that visits were tied to specific contributions.34
Morever, the Committee found no evidence that any of the
overnight visitors was solicited for a contribution during the
visit.
The use of the overnights as a fundraising tool was not
illegal--and was not nearly as extensive as alleged by the
Majority. As in the case of the White House coffees, the DNC
and the administration used access to the White House and to
the president as a way of cementing ties to campaign
contributors.
conclusion
The evidence presented to this Committee shows that the
coffees were not traditional fundraising events, that money was
not solicited or received at the coffees, and that the Lincoln
Bedroom was not rented out to contributors.
footnotes
\1\ Exhibit 1217: Memorandum from Terence McAuliffe to Nancy
Hernreich, 1/5/93 [sic], CGRO 1569-70.
\2\ Terence McAuliffe deposition, 6/6/97, pp. 98-99.
\3\ Exhibit 1238: White House Political Coffees.
\4\ Jerome Campane, 9/18/97 Hrg., p. 184.
\5\ Exhibit 1238: White House Political Coffees.
\6\ Senator Levin, 9/18/97 Hrg., p. 227.
\7\ As explained by Richard Sullivan in his deposition and affirmed
by him during the hearings: ``The coffees weren't fundraisers per se,
they were not, I consider a fundraiser to be a--my general description
of a fundraiser is we are holding a dinner at the Hilton Hotel; to have
a seat we need to contribute a $1,000 for a ticket or $15,000 for a
table. We would like your money to be in hand or to have a general
commitment. That was not what they were.'' Richard Sullivan deposition,
6/4/97, p. 91; Richard Sullivan, 7/9/97 Hrg., p. 82.
\8\ Harold Ickes, 10/8/97 Hrg., pp. 144-145; Harold Ickes
deposition, 6/26/97, pp. 64-65.
\9\ Terence McAuliffe deposition, 6/6/97, p. 99.
\10\ Richard Sullivan deposition, 6/4/97, pp. 86-89.
\11\ Jerome Campane, 9/18/97 Hrg., p. 208.
\12\ Ann Braziel deposition, 5/13/97, pp. 117, 126; Ari Swiller
deposition, 5/6/97, p. 148; Terence McAuliffe deposition, 6/6/97, pp.
98-99.
\13\ Senator Levin, 9/18/97 Hrg., p. 63: ``Was one of the reasons
that you made these contributions because you believed it might get you
access? That is my question.
Mr. Tamraz. Senator, I'm going even further.
It's the only reason to get access . . .''
\14\ Referring to Tamraz's last substantial contribution to the
DNC, Minority Chief Counsel asked Tamraz: ``[W]hen you made the
$100,000 contribution you knew that you had no expectation at that time
of going to an event at the White House, right?'' Tamraz replied: ``No,
but the way I view my relationship with the DNC or the RNC is not one
or two years. It's a life-long relationship.'' Roger Tamraz deposition,
5/13/97, p. 139.
\15\ FEC records.
\16\ Beth Dozoretz, 9/16/97 Hrg., pp. 129-32; Robert Belfer
deposition, 9/6/97, pp. 9-10; Karl Jackson, 9/16/97 Hrg., pp. 43-44;
Clark Wallace, 9/16/97 Hrg., pp. 127-28.
\17\ Jenrette was asked: ``Were you asked to contribute a certain
amount of money in order to attend this event?'' and he responded,
``No.'' Richard Jenrette, 10/29/97 Hrg., p. 74.
\18\ This analysis was based on records of coffee attendees.
Duplicate names were counted once. Spouses who attended a coffee were
counted separately. All employees of the DNC and White House, including
those in the offices of the President and the Vice-President were not
counted. Soft money contributions to the DNC from coffee attenders or
organizations with which they were affiliated were reviewed.
The Minority found that 1063 different people attended the 103
coffees. This figure includes 537 people at the 60 DNC-sponsored
coffees; 422 people at the 32 Political and Community Leaders Coffees;
and 104 people at the 11 Clinton sponsored coffees. (At the hearing,
the Majority found that 532 individuals attended the 60 DNC-sponsored
coffees, a difference of five people compared to the Minority
analysis.)
Regarding coffee attendees who did not contribute to the DNC, the
Minority found that 41 individuals, or 39 percent, of the Clinton
campaign sponsored coffees did not contribute. For the Political and
Community Leaders Coffees, the total was 313, or 74 percent who did not
contribute to the DNC. For the DNC-sponsored coffees, the total was
112, or 21 percent who did not contribute to the DNC in the 1996
election cycle. Overall, 466 coffee attendees, or 44 percent of the
1,063 total attendees did not appear to have contributed personally or
through their organizations to the DNC in the 1996 election cycle. It
is possible that coffee attendees may have contributed directly to
other Democratic party committees, such as the DCCC or the DSCC, or to
President Clinton's re-election campaign.
The Majority did not do a similar analysis.
\19\ Minority Exhibit 2049M describes a DNC-sponsored coffee at the
White House that was held on November 9, 1995:
NOVEMBER 19, 1995 DNC-SPONSORED COFFEE AT THE WHITE HOUSE
------------------------------------------------------------------------
Total
Contributions contributions
Contributor within one in 1996
week of Coffee election cycle
------------------------------------------------------------------------
David F. Babensee....................... $0 $0
Joe Barreto............................. 0 0
Javier Bianco........................... 0 0
Greg Cortes............................. 0 26,000
Maxinne Lausell......................... 0 0
Miguel D. Lausell....................... 100,000 100,000
Fernanco Lloveras....................... 0 0
Richard Machado......................... 0 52,100
------------------------------------------------------------------------
\20\ Harold Ickes, 10/8/97 Hrg., p. 170.
\21\ Karen Hancox deposition, 6/9/97, p. 64.
\22\ Marvin Rosen deposition, 5/19/97, p. 35; Jacob Aryeh Swiller
deposition, 5/6/97, p. 141.
\23\ Donald Fowler deposition, 5/21/97, p. 111.
\24\ Richard Sullivan, 7/9/97 Hrg., p. 86.
\25\ Jerome Campane, 9/18/97 Hrg., p. 182.
\26\ See Chapter 24, supra.
\27\ Karl Jackson, 9/16/97 Hrg., p11.
\28\ Beth Dozoretz, 9/16/97 Hrg., p. 119; Robert Belfer deposition,
9/6/97, pp. 77, 81-82. For more information, see Chapter 4 on Huang.
\29\ 12/13/95 Coffee tape.
\30\ Harold Ickes, 10/7/97 Hrg., pp. 91-92 (emphasis added).
\31\ Jerome Campane, 9/18/97 Hrg., p. 218.
\32\ See Chapter 28: Republican Use of Federal Property and
Contributor Access.
\33\ New York Times, 3/2/97; SUP 005303; Exhibit 1229: Overnight
Guests in Response to Request, EOP 029074.
\34\ During testimony to the Committee, Special Agent Campane
presented an analysis of 38 persons who stayed overnight from 1993
through 1996. He testified that he did not examine the other 13
overnight guests. He indicated that of the 38 persons he examined, 37
combined to contribute more than $4 million to the DNC in the 1996
election cycle and 21 of the 38 contributed more than $880,000 to the
DNC within one month of the stay. This chart was based on Exhibit 1229
which identifies 51 individuals and the specific dates on which they
stayed overnight at the White House.
Mr. Campane did not attempt to determine whether the contributions
were, in fact, linked to the overnight stays or were instead attributed
to other events or corporate contributions. He also did not attempt to
determine whether any of the persons had personal or professional
relationships with the President beyond that of political donors. As
Mr. Campane admitted:
Q: So Roy Furman, who appears as a former
finance chair of the DNC; Mr. Grossman is the
current national chair of the DNC; Mr. Solomont is
the current finance chair of the DNC--these are all
people who have other relationships with the
President than simply giving money; isn't that
right? There might be other reasons why he would ask
them to stay at the White House.
A: Yes, there may be other relationships other
than just giving money.
Jerome Campane, 9/18/97 Hrg., p. 214.
Exhibit 2051M also demonstrates that individuals who stayed
overnight at the White House did not contribute solely to the DNC. This
chart lists two individuals who stayed overnight at the White House and
contributed both to the DNC and the RNC. One of them, Carl H. Lindner,
contributed more to the RNC than to the DNC and gave $35,000 to the RNC
and nothing to the DNC within one month of his overnight stay. Campane
conceded that he did not analyze if any White House coffee or overnight
guests contributed to the RNC. Jerome Campane, 9/18/97 Hrg., p. 215.
PART 5 FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES
AND ADMINISTRATIONS
Chapter 28: Republican Use of Federal Property and Contributor Access
In response to claims that practices under the Clinton
Administration were ``unprecedented,'' this Chapter examines
how the Republican Party and preceding Republican
Administrations have used the White House as a fundraising
tool, provided access to elected officials for large
contributors, and appointed large contributors to positions
within the government.
findings
(1) In the 1996 election cycle, the Republican Party
continued its longstanding practice of raising money by
offering, and providing, major contributors with access to top
Republican federal officials. These offers of access are
central components of Republican donor programs such as Team
100 and the Republican Eagles. They started in the 1970s and
continue today.
(2) Federal property has routinely been used by the
Republican Party in its fundraising efforts. The RNC has hosted
fundraising events on Capitol Hill, at the Bush White House,
the Pentagon, and at other federal government locations.
(3) The Bush Administration rewarded major contributors
with significant government positions, including
ambassadorships.
major contributor access to elected officials
The Republican National Committee's two principal donor
programs are Team 100, which requires ``an initial contribution
of $100,000 upon joining, and $25,000 in the subsequent 3
years,'' 1 and the Republican Eagles, which requires
members to contribute $15,000 annually.2 To recruit
members, the RNC's promotional materials promised that
participants in the Team 100 and Eagles programs would receive
special access to high-ranking Republican elected officials,
including governors, senators, and representatives.
---------------------------------------------------------------------------
Footnotes appear at end of chapter 28.
---------------------------------------------------------------------------
Republican Eagles
Since its inception, the Republican Eagles program has
granted its members special access to top Republican officials.
In 1975, the Eagles held their very first meeting in the
Roosevelt Room of the White House with President Gerald
Ford.3 Eagles' access to elected officials continued
throughout the Reagan Administration. For example, a September
16, 1982, memorandum on White House stationery indicates that,
in 1982, President Reagan made a fundraising-related phone call
to an RNC event for the Eagles held in an auditorium at the
Department of Commerce.4 President Reagan's talking
points for this call illustrate the perks provided to the RNC's
largest donors and verify that the President made the phone
call from the White House with full knowledge that this
particular event was directly related to the RNC's fundraising
efforts on federal property:
Hello to all of you high flying Eagles. I am genuinely
sorry I couldn't be there in person with you today. Events here
at the White House and the trip to New Jersey this afternoon
have prevented me from coming over. But we have the Eagles down
to the White House quite often so I will be seeing you soon.
In the meantime, I'm sending Secretary Shultz, Secretary
Regan and other members of the Cabinet over to keep you abreast
of what's going on. In fact, you will be seeing more of my
Cabinet today than I will.
* * * * *
Let me say to you Eagles how important your contributions
are to the Republican Party. I know a lot of people must tell
you that, but we tell you so often because it is so true. We
are so appreciative. You are pillars of the party.5
[emphasis added]
It is clear that this reception was designed to reward and
encourage RNC donors; that large donors were given special
access to members of the President's cabinet; that President
Reagan made the call to the event from the White House; and
that the RNC fundraising-related event was held on federal
property.
The practice of granting access to Eagles members continued
throughout the 1996 election cycle. For example, a 1995 Eagles
brochure contains photographs of Eagles members meeting with
former President George Bush, former Vice President Dan Quayle,
Governor Pete Wilson, Senators Connie Mack and Kay Bailey
Hutchison, and Mayor Rudolph Giuliani.6 The brochure
states:
Each year Eagles receive invitations to four national
meetings. At least two of these meetings take place in
Washington, D.C., and feature strategy and issue
committee sessions with prominent elected Party leaders
from the U.S. Senate and House on such topics as the
budget and tax reform, international trade and
regulatory reform, health care and foreign policy.
Other participants have included Republican Presidents
(at the White House), Governors and former
Administration officials.7 [emphasis added]
On January 24, 1996, Eagles members attended a ``legislative
update'' by Senate Majority Leader Bob Dole and House Speaker
Newt Gingrich, a ``private pre-Gala cocktail reception'' with
Republican governors, and ``Eagles Issues Discussions'' with
six senators and eight representatives.8
Eagles members were granted access not just to American
officials, but to foreign officials as well. The 1995 Eagles
brochure explains that ``International Trade Missions'' are
arranged to allow Eagles to meet foreign government and
business officials:
Reflecting the unequaled position enjoyed by
Republican Eagles, foreign economic and trade missions
to Europe and Asia are also periodically scheduled. We
have been welcomed enthusiastically by heads of state,
such as Premier Li Peng of the People's Republic of
China and King Carl XVI Gustaf of Sweden, as well as
high-ranking government and business officials in
London, Paris, Budapest, Vienna, Beijing, Taipei, and
Hong Kong.9
Membership in the Eagles also entitles contributors to sit
on ``Eagles Issues Committees'' which, according to the Eagles
brochure, ``provide members the opportunity to communicate
their views directly to the elected leadership of the Party and
the Congress.'' 10 The Eagles Issues Committees
prepare reports which are ``distributed to the leadership of
the Republican National Committee, members of the United States
Senate and House of Representatives, Republican Governors, the
National Policy Forum and the 1996 Republican Platform
Committee.'' 11
Team 100
Team 100 membership conferred similar benefits. A 1994 RNC
Team 100 brochure promised that RNC contributors who meet the
Team 100 $100,000 threshold contribution level would get
meetings with :
Former Presidents Gerald Ford and George Bush, Dan
Quayle, Bob Dole, Phil Gramm, Trent Lott, Newt
Gingrich, Dick Armey, Lamar Alexander, Richard Lugar,
Jack Kemp, Dick Cheney, and other Republican leaders.
Past participants include: Connie Mack, Bob Packwood,
Alfonse D'Amato, Thad Cochran, Pete Wilson, Bill Paxon,
Bill Archer, Susan Molinari.12
The RNC also promised Team 100 members:
[E]xclusive missions abroad including meetings in
China, Rome, Paris, Moscow, St. Petersburg, Prague,
Vienna, Warsaw and Madrid. Team 100's stature enables
them to meet with some of the highest ranking
government and business officials during these
international exchanges.13
DNC fundraisers saw this brochure and decided to make a
similar brochure to compete with the RNC's fundraising.
However, the DNC brochure was never used because the President
determined that the written promise of access to large
contributors was offensive and should not be published. As DNC
Finance Director Richard Sullivan explained in his testimony:
Senator Torricelli. In 1994, were you aware that the
Republican National Committee had produced an Eagles and a Team
100 brochure outlining activities, perks, that contributors
would have if they gave $25,000 or other significant sums to
the Republican National Committee?
Mr. Sullivan. Yes. Not only in 1994, but over the course of
the last 10 years.
Senator Torricelli. And at that point, in fact, the
Democratic National Committee had no similar brochure outlining
its programs?
Mr. Sullivan. That's correct . . .
Senator Torricelli. And as a result of this, the Democratic
National Committee decided to issue a brochure of its own?
Mr. Sullivan. That's correct.
* * * * *
Senator Torricelli. And when Bill Clinton received this
Democratic National Committee brochure, which by your own
authorship was reduced in its scope and its promises because
you found a similar program by the Republican National
Committee offensive, Bill Clinton was not pleased with this
brochure; is that accurate?
Mr. Sullivan. That's what I understand.
* * * * *
Senator Torricelli. Right. And, in fact, the president
ordered that these not be distributed and they be destroyed
because he found them offensive.
Mr. Sullivan. That's correct.14
Although the Democratic Party decided not to use similar
promotional material, RNC promotional materials promising
access to large contributors were distributed throughout the
1996 election cycle and into the 1998 cycle. For example, on
December 15, 1995, RNC Chairman Haley Barbour wrote a letter to
Republican members of the Senate Finance Committee that stated:
[T]he RNC's premier fundraising organization, Team 100,
will hold its Winter National Meeting on [January 24, 1996].
The members of Team 100 have requested to meet with the Senate
Finance Committee. I hope you will plan to participate in this
discussion on the budget from 10:00 a.m. to 11:00 a.m. in the
Dirksen Senate Office Building, Room 106. You are also invited
to attend a luncheon hosted by Speaker Newt Gingrich and Senate
Majority Leader Bob Dole following the discussion.15
The RNC arranged for Team 100 members to meet with Republican
senators on the Finance Committee, and with Senator Dole,
Speaker Gingrich, Republican presidential candidates, and
Republican members of the House Ways and Means Committee on
January 24, 1996.16 Following this meeting, at least
one Team 100 member boasted about the access he had bought. In
a July 10, 1996, letter to a prospective Team 100 member, John
Palmer of Mobile Telecommunication Technologies wrote:
I feel we have a rare opportunity with Haley
[Barbour], Trent [Lott], and Thad [Cochran] in the
positions they are [in] today.
Ed Lupberger, CEO of Entergy, joined Team 100 earlier
this year, and this past Spring, I saw Haley escort him
on four appointments that turned out to be very
significant in the legislation affecting public utility
holding companies. In fact, it made Ed a hero in his
industry.
If you have been considering this or if there is a
chance you might, I feel it significant to Haley and
the Senators if you could do this . . .17
Other Republican events and meetings for contributors
In addition to Team 100 and the Eagles, the Republican
Party sponsored a number of other donor organizations and
programs that offered contributors access to top Republican
elected officials. During the Reagan and Bush years, the RNC
sponsored ``President's Dinners,'' which offered contributors a
menu of access that they could buy. For example, a document
entitled ``Benefits for Tablebuyers and Fundraisers'' describes
the access that contributors purchased during a Bush
Administration President's Dinner. ``Tablebuyers'' were
entitled to:
``[p]rivate reception hosted by President
and Mrs. Bush at the White House'' or a ``[r]eception
hosted by The President's Cabinet.''
``[l]uncheon at the Vice President's
Residence hosted by Vice President and Mrs.Quayle''
``Senate-House Leadership Breakfast hosted
by Senator Bob Dole and Congressman Bob Michel''
``Option to request a Member of the House of
Representatives to complete the table of ten. With the
purchase of a second table, option to request one
Senator or one Senior Administration Official.''
18
``Top Fundraisers'' got the ``[o]pportunity to be seated at a
head table with The President or Vice President based on ticket
sales.'' 19 The document did not try to conceal the
fact that the Republican Party was rewarding major contributors
with access. It concluded by saying, ``Benefits based on
receipts.'' 20
The Republican Senate Council, which is a fundraising arm
of the National Republican Senatorial Committee, offers
contributors access to Republican senators. According to a 1993
Senate Council fundraising letter:
The standard membership in the Republican Senate
Council is $5,000 a year and the Policy Board is
$15,000. The standard membership entitles you to
monthly meetings while the Senate is in sesssion. Our
program generally consists of discussion on current
pending legislation with the ranking Republican on the
pertinent committee addressing the membership.
The Policy Board level is entitled to all the
standard membership benefits in addition to quarterly
dining with this smaller group and the Republican
Senators. The meetings serve as a virtual one-on-one as
the Senators may outnumber the Policy Board
members.21
The National Republican Congressional Committee (``NRCC'')
promises contributors to its Congressional Forum and House
Council donor programs access to key House Republicans.
Congressional Forum membership, which requires a $15,000 annual
contribution for individuals and PACs and a $25,000 annual
contribution for corporations, confers the following benefits:
``Monthly private dinners with the Chairmen
and Republican Members of key Congressional
Committees''
``Private dinner with Speaker Newt Gingrich
and the GOP House Leadership''
``Private dinner with House Committee
Chairmen''
``An invitation to the Chairman's Skeet and
Trap Shoot''
``VIP preference at House Council and NRCC
events.''22
The Republican House Council, membership in which cost
$5,000 per year for individuals and Political Action Committees
(``PACs'') and $10,000 per year for corporations, offers
members:
Regular briefings with key Republican
members and staff who work directly on the discussion
topic
Regular political briefings focusing on
national trends and activities crucial to maintaining
Republican control of the House in 1996
Invitations to the NRCC Winter and Summer
Meetings. Each two-day event features political and
legislative discussions with key House members and
keynote addresses by prominent GOP leaders.
23
The RNC also organized ad hoc fundraising events that
offered donors access to politicians. At its 1996 Annual Gala,
the RNC invited those who had raised or contributed $250,000
to:
a private reception and photo opportunity
with the Republican presidential candidates;
lunch and photo opportunity with the Speaker
of the House of Representatives Newt Gingrich and
Senate Majority Leader Bob Dole;
a ``[p]rivate meeting'' with members of
selected Senate and House of Representatives
Committees; and
an ``[e]xclusive reception with Governor
Pete Wilson and Republican Governors in private
residence/yacht.'' 24
The invitation to the 1997 Annual Gala promised those raising
$250,000 similar benefits, including a separate lunch with the
``Republican Senate and House Committee Chairmen of your
choice.'' 25
Similarly, on February 9, 1995, the RNC held the ``Official
1995 Republican Inaugural.'' For $150,000, contributors were
offered:
a ``private reception'' and photo
opportunity with U.S. Senate and House Leadership;
an invitation to a ``Speaker of the House
VIP reception;'' and
breakfast in the U.S. Capitol with Senate
Majority Leader Bob Dole and Speaker of the House Newt
Gingrich.26
One of the more glaring examples of a Republican sale of
access is memorialized in an undated memo from an RNC aide to
Tim Barnes, the chairman of Team 100, relating to Ole Nilssen,
a contributor Barnes referred to as ``hot.'' In the memo, the
aide informed Barnes, ``We are working on getting him an
appointment with [Representative] Dick Armey, so we can get his
other $50,000. We had a meeting set up for this week, but Armey
canceled his Florida leg of his trip.'' 27 The
implication of the memo is clear--to raise money for the RNC,
the Team 100 Chairman would arrange one-on-one meetings with
the House Majority Leader.
The RNC arranged for major contributors to gain special
access to Senate Majority Leader Bob Dole. In a memo to an RNC
fundraiser, Tim Barnes wrote:
Kim White of Mr. Louis Bacon's office (Moore Capital
Management) has been trying to reach Dennis Shea
recently with no success. Kim is trying to establish a
contact in Senator Dole's office for Mr. Bacon. As you
know, Mr. Bacon has been very generous to the RNC. If
there is any way you can assist, it would be greatly
appreciated.28
Also, as shown in Chapter 3, the Republican Party offered
Ambrous Young, the Chairman of Young Brothers Development
Corporation (``YBD'') access to Speaker Gingrich and Senator
Dole as an incentive for YBD's $2.1 million loan guarantee to
the National Policy Forum (``NPF''). On August 15, 1994, Fred
Volcansek, an NPF fundraiser, wrote a memo to Ambrous Young
asking that YBD extend NPF a loan guarantee. The memo
concludes: ``The timing of this effort is crucial. The loan
needs to be arranged and funded in the next two weeks. Chairman
Barbour, Senator Dole and Congressman Gingrich, who are
committed to the NPF, will make themselves available to express
their support for your participation on this project.''
29 After YBD provided the loan guarantee, Young did
meet with and have his photograph taken with Speaker Gingrich
and Senator Dole.30 Following the visit, Chairman
Barbour wrote to Young, ``I am delighted you were able to meet
with both Senator Dole and Speaker Gingrich. They were pleased
to hear your views on developments in Asia. . . . Your role as
a key advisor on Asian policy is essential to both me and the
NPF.'' 31
These meetings are not unlike the meetings with Clinton
Administration officials arranged by DNC Chairman Donald Fowler
that have been publicly criticized by members of both political
parties. In fact, the DNC policies and procedures manuals
prohibited the DNC staff from arranging meetings with officials
on behalf of contributors. But, while members of this Committee
were criticizing Fowler for violating DNC policy, the RNC
continued to arrange for large contributors to meet with
elected officials. On February 27, 1997, Senate Majority Leader
Trent Lott sent out a fundraising letter on behalf of the
National Republican Senatorial Committee (``NRSC'') promising
contributors ``plenty of opportunities to share [their]
personal ideas and vision with some of our top Republican
leaders, senators, and panel members.'' Failure to contribute
meant that ``you could lose a unique chance to be included in
current legislative policy debates--debates that will affect
your family and your business for many years to come.''
32 This year, Senator Mitch McConnell of Kentucky,
the leading Republican opponent of campaign-finance reform,
sent out an NRSC fundraising letter filled with promises to
contributors:
You'll be invited twice a year to attend high-level
Washington policy briefings, receptions and special
dinners with my Republican Senate colleagues as well as
the top leaders of our Republican Party. These are
names you know well . . . Senator Lott and the entire
leadership of Senate Chairmen and Subcommittee Chairmen
who are driving the national Republican agenda . . . .
By signing on today, you will also be able to join in
our Fall Briefing and attend one of our small dinners
hosted by Republican Senators and dignitaries. Over the
years, these intimate gatherings have become the
hallmark events of our Inner Circle
membership.33
As explained in Chapter 24, it is not illegal to reward
contributors with access to politicians. The current laws
regulating fundraising do not prohibit providing access to
elected officials in exchange for contributions, as long as
policy decisions are not ``sold.'' These Republican practices
simply demonstrate that both parties provided access to elected
officials in exchange for contributions and neither can claim
the practices of 1996 were unprecedented or confined to one
party.
use of federal property for fundraising
A significant amount of public attention has focused on the
use of coffees at the White House as a fundraising tool. While
the use of the White House and other federal buildings as a
fundraising tool has been the subject of significant scrutiny
and criticism, it is a longstanding practice that has been
exploited by both political parties. Republicans have
frequently held fundraising-related events on federal property.
These events have occurred in venues such as Capitol Hill and
the White House.
The RNC has frequently sponsored events on federal property
for its Team 100 and Eagles members. For example, on January
23, 1996, Team 100 sponsored a ``Senate/House Leadership
Reception'' at the Library of Congress. 34 A day
later, the RNC invited Team 100 members to meetings at the
Dirksen Senate Office Building with Republican members of the
Senate Finance and House Ways and Means Committees as noted
above. 35 At the RNC's February 9, 1995, ``Official
1995 Republican Inaugural,'' those who contributed $150,000
were invited to ``[b]reakfast in the U.S. Capitol with Senate
Majority Leader Bob Dole and Speaker of the House Newt
Gingrich.'' 36
Moreover, as demonstrated by the chronology in the Appendix
to this chapter, the Republican Party held numerous fundraising
events at the White House during both the Bush and Reagan
Administrations. Even though the Minority was not permitted
access to the Bush Library or testimony from Bush
Administration officials or RNC personnel, the Minority was
able to identify multiple events at the Bush and Reagan White
Houses for Republican Eagles or Team 100 members that appeared
to use the White House as a fundraising tool. The Team 100
brochure used during the 1996 election cycle even predicted,
``Team 100 will be entertaining in the White House again in
January, 1997.'' 37
The Minority was also able to obtain videotapes of a number
of Reagan White House events in which President Reagan thanked
donors for giving money to the Republican Party and asked them
for additional contributions:
At a September 30, 1987, White House reception for the
Eagles, President Reagan said, ``I will campaign hard for the
nominee of our party and let me ask you now--I know this is
silly, but can I count on you to help?'' 38
On April 29, 1987, President Reagan told
guests at a White House reception for the President's
Dinner: I want each of you to know how grateful we are
for your generous support to our cause. When we get to
the dinner, you'll hear me give credit for all that's
been accomplished . . . I don't know if I'm jumping the
gun or not, but if it's finally official and the last
thing has been tallied, I am expecting tonight that
they will tell us that last year we set the record for
a political fundraising event and tonight we're going
to break that all-time record.39
On September 12, 1985, President Reagan told
guests at a White House Eagles reception: ``Yes, I'm
grateful for all you've done in the past, but now that
we have the chance, now that we know the American
people are with us, join me in leaving America and the
world a legacy of prosperity and freedom that future
generations will honor and thank us for. Please just
don't keep up your tremendous work, redouble your
efforts. Make the Eagles even bigger and better than
they are now.'' 40
On April 22, 1985, President Reagan remarked
to guests at a White House meeting for the Republican
Congressional Leadership Council, ``Many of you were
instrumental in giving us the means to keep control of
the Senate. I hope I can count on all of you next time
around.'' 41
At a May 10, 1984, White House reception for
the President's Dinner committee, President Reagan
said, ``We still have a lot to do and that's why your
support in this campaign was so vital. This year, we
must keep the White House, retain our majority in the
Senate and increase our seats in the House.''
42
The RNC played a significant role in determining who would
attend dinners and other events at the Reagan and Bush White
Houses. Judith Spangler, the assistant chief for arrangements
at the White House, who has been a White House employee for 18
years, testified that the RNC supplied the names of invitees to
White House events during the Reagan and Bush
presidencies.43
During the Bush Administration, Republicans also held
fundraising events at other federal venues. For example, on
August 19, 1992, Secretary of Defense Richard Cheney met at the
Pentagon with members of the Presidential Roundtable, a
Republican donor program.44 That month, the
Presidential Roundtable held ``[b]riefings and tours of the
NASA Center limited to Roundtable members and their guests,
hosted by Senators from the Committee on Commerce, Science, and
Transportation.'' 45 On October 15, 1992, the
``House Council,'' afundraising arm of the National Republican
Congressional Committee, invited members to a luncheon with Vice
President Quayle at the ``Vice President's House.'' 46 In
August 1990, Senator Don Nickles, chairman of the Republican ``Inner
Circle,'' invited contributors to the Vice President's Mansion. ``It's
one of the most historic homes in America,'' the letter began. ``And
because it's also the home of one of America's most famous families,
few individuals decline an invitation to attend an event there.'' The
letter was accompanied by an appeal for money.47
These uses of the White House and other federal buildings
were not necessarily illegal. The Minority was unable to
determine whether there were solicitations or receipts of
contributions at these events because the Majority refused to
require individuals who would not voluntarily appear for
depositions to do so. Hence, we cannot say with certainty
whether these events were ``fundraisers'' or fundraising tools
similar to the coffees at the White House organized by the DNC
during the 1996 election cycle. However, there is no doubt that
these events had a fundraising component; the invitation of
contributors to the Bush and Reagan White Houses was obviously
designed to aid fundraising efforts. Indeed, the Majority's
summary witness, FBI detailee Jerome Campane, who analyzed the
coffees in testimony before the Committee agreed that these
Republican events were the same as the coffees--fundraising
tools designed to encourage contributions.48 He
testified:
Q: [L]et me read to you from the Republican Eagles
document produced to the Committee. The Bates number is
R3188: ``Befitting its unequaled stature within our
party, exclusive activities are reserved solely for the
Republican Eagles. National meetings. Each year, Eagles
receive invitations to four national meetings. At least
two of these meetings take place in Washington, D.C.
and feature strategy sessions with prominent elected
party leaders from the U.S. Senate and House. Other
participants have included Republican Presidents,
Governors and former administration officials.'' Would
that meet your notion of a fundraising tool?
A: I speak of it very broadly. So I would--I concede
that I would characterize that as a fundraising tool;
yes, sir. 49
political appointments awarded to republican contributors
Republicans have also used political appointments as a
fundraising tool. Secretary of Commerce Robert Mosbacher turned
this practice into an art form in President George Bush's
administration. In 1989, Mosbacher, who had been finance
chairman of George Bush's 1988 campaign, complained that not
enough campaign fundraisers had been rewarded with political
appointments. Mosbacher said that there were ``several
hundred'' fundraisers who deserved appointments to
ambassadorships, sub-Cabinet posts, or lower-level jobs on
commissions who were being neglected. Mosbacher apparently
stated at the time that, ``[t]here's this perception in
Washington and politics, and to some degree in Government, that
fund-raisers and fund-givers are nice, interesting people to be
sort of patted on the head when you need them and ignored the
rest of the time because they don't really understand the
process.'' 50 He also reportedly complained that
``at least 50 percent'' of ``those who [had] been helpful'' had
not received appointments.'' 51
Mosbacher filled the Commerce Department with appointees
whose main credential was that they were major Republican
fundraisers or contributors. One of Mosbacher's favorite ways
to reward top fundraisers and contributors was to appoint them
to the President's Export Council, a quasi-official panel that
advised the White House on trade matters. Mosbacher solicited
recommendations for appointments to the Export Council from RNC
Chairman Lee Atwater and Team 100 Chairman Alec
Courtelis.52 Six of President Bush's appointees to
the Council were Team 100 members.53 Mosbacher also
appointed four Team 100 members to the Industry Policy Advisory
Committee for Trade Policy Matters, which advised the Commerce
Department and the U.S. trade representative.54
The Bush Administration also appears to have rewarded major
contributors with ambassadorships. President Bush nominated for
ambassadorships 11 people who had each given the Republican
Party over $100,000.55 Three of these eleven were
rated ``unqualified'' by the American Academy of Diplomacy, a
nonpartisan organization of former senior diplomats, including
all living former secretaries of state. 56 The Bush
nomination for the ambassador to Australia was particularly
egregious. The nominee admitted that he and his wife had
``never even been to Australia. When the president told me he
had Australia in mind for me, at first I thought he meant
Austria.'' 57 The Bush nominee to be ambassador to
Barbados and seven other Caribbean nations, whom the Senate
refused to confirm, was even less qualified. That nominee had
no foreign-policy experience, no college degree, and no job
history. She told the Senate that her most recent employment
was helping her husband ``by planning and hosting corporate
functions.'' 58
One Bush appointee candidly admitted that his fundraising
was key to getting his appointment. In 1989, George Bush's
nominee to head the United States Information Agency reportedly
conceded that were it not for the fact that he had helped raise
$3 million for Bush's campaign, he might ``have been selected
to be dog catcher.'' 59
conclusion
For years, the Republican Party has rewarded campaign
contributors with appointments and with access to top
Republican politicians and used federal property for
fundraising and campaign-related activities. The Republicans
have continued these practices at the same time that they have
criticized the Democratic Party for its fundraising practices
and adamantly opposed Democratic efforts to reform the campaign
finance system.
footnotes
\1\ Republican National Finance Committee Summary of Programs, p.
1, R 003169-70.
\2\ Republican National Finance Committee Summary of Programs, p.
2, R 003169-70.
\3\ 1995 Republican Eagles Manual, p. 3, R 000848-69.
\4\ Memorandum from A. Morgan Mason to Michael K. Deaver, 9/16/82;
Presidential Talking Points: Phone Call to Eagles Meeting, 9/17/82
(emphasis added).
\5\ Presidential Talking Points: Phone Call to Eagles Meeting, 9/
17/82 (emphasis added).
\6\ 1995 Republican Eagles Manual, pp. 6-14, R 000848-69.
\7\ 1995 Republican Eagles Manual, p. 16, R 000848-69 (emphasis
added).
\8\ Republican Eagles 1996 Annual Gala Agenda, R 00386-89. The
participants were Senators Pete Domenici, Nancy Kassebaum, Dan Coats,
John McCain, Richard Lugar, and Kit Bond, and Congressmen John Kasich,
John Boehner, Roger Wicker, Benjamin Gilman, Larry Combest, Jan Meyers,
and Robert Walker.
\9\ 1995 Republican Eagles Manual, p. 17, R 000848-69.
\10\ 1995 Republican Eagles Manual, p. 6, R 000848-69.
\11\ 1995 Republican Eagles Manual, p. 6, R 000848-69.
\12\ 1994 Team 100 Brochure, CGRO-2112-27.
\13\ 1994 Team 100 Brochure, CGRO-2112-27.
\14\ Richard Sullivan, 7/9/97 Hrg. Pp. 110-11.
\15\ Letter from Haley Barbour to Bob Dole, 12/15/96, R 048192.
\16\ Team 100 Gala Speakers Agenda, R 003195-97.
\17\ Letter from John N. Palmer (addressee redacted), 7/10/96, R
015772.
\18\ Benefits for Tablebuyers and Fundraisers for the President's
Dinner.
\19\ Benefits for Tablebuyers and Fundraisers for the President's
Dinner.
\20\ Benefits for Tablebuyers and Fundraisers for the President's
Dinner.
\21\ Letter from Senator Christopher Bond, Vice Chairman, NRSC, 7/
1/93.
\22\ Congressional Forum and House Council Announcement.
\23\ Congressional Forum and House Council Announcement.
\24\ 1996 RNC Annual Gala: Benefits for Gala Leadership, R 003186-
89.
\25\ 1997 RNC Annual Gala, 5/13/97.
\26\ Tentative Structure and Benefits for the Official 1995
Republican Inaugural, R 003161.
\27\ Memorandum from Kevin Kellum to Tim Barnes and Kelley
Goodsell, R 003152.
\28\ Memorandum from Tim Barnes to Royal Roth, 3/2/95, R 15029.
\29\ Exhibit 278M: National Policy Forum Proposal for Ambrous
Young.
\30\ Ambrous Young deposition, 6/24/97, pp. 50-51, 71.
\31\ Letter to Ambrous Young from Haley Barbour, January 31, 1995,
NPF 000199.
\32\ Associated Press, 3/11/97.
\33\ Fort Worth Star Telegram, 9/21/97.
\34\ Team 100 Gala Speakers Agenda, R 3195-97.
\35\ Team 100 Gala Speakers Agenda, R 3195-97.
\36\ Tentative Structure and Benefits for the Official 1995
Republican Inaugural, R 3161.
\37\ 1995 Team 100 Brochure, Membership Benefits Section.
\38\ Videotape of 9/30/87 Reception for the Republican Eagles.
\39\ Videotape of 4/29/87 Reception for President's Dinner.
\40\ Videotape of 9/12/85 Reception for the Republican Eagles.
\41\ Videotape of 4/22/85 Meeting for the Republican Congressional
Leadership Council.
\42\ Videotape of 5/10/84 Reception for President's Dinner
Committee.
\43\ Deposition of Judith Spangler, 5/9/97, pp. 39-40.
\44\ 1997-98 Republican Presidential Roundtable Membership
Prospectus.
\45\ 1997-98 Republican Presidential Roundtable Membership
Prospectus.
\46\ Memorandum from Guy Vander Jagt to Members of the House
Council, 10/9/92.
\47\ Letter from Senator Don Nickles to Inner Circle Nominee, 8/31/
90; Fort Worth Star Telegram, 9/21/97.
\48\ Jerry Campane, 9/18/97 Hrg., p. 225.
\49\ Jerry Campane, 9/18/97 Hrg., p. 217.
\50\ New York Times, 2/20/89.
\51\ New York Times, 2/20/89.
\52\ Common Cause Report, 4/92.
\53\ Houston Chronicle, 8/21/92; Common Cause Report, 4/92.
\54\ Common Cause Report, 4/92.
\55\ Los Angeles Times, 7/6/92.
\56\ Seattle Times, 5/26/92.
\57\ St. Petersburg Times, 4/26/92.
\58\ Newsday, 11/9/92.
\59\ New York Times, 2/20/89.