105th Congress
; 2nd Session
Senate Report 105-167 Part 5
105 S. Rpt. 167; Prt. 5
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996
FEDEELECTION CAMPAIGNS
DATE: Ordered to be printed March 10,
1998
SPONSOR: Mr. Thompson submitted the
following report
COMMITTEE: from the Committee on
Governmental Affairs
TEXT:
PREFACE
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.'' (note - 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. (note - 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. (note - 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. (note - 9Triad 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. (note - 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. (note - 12The 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note -
32) Between January and September 1996, Triad received a total of $1 (note - 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. (note - 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. (note - 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. (note - 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.
(note - 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. (note -
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. (note - 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. (note - 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. (note - 53Another 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.'' (note - 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.''
(note - 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. (note - 62)
In addition to providing advice and fundraising assistance to candidates, Triad
worked to raise funds for individual candidates. (note - 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. (note - 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.'' (note - 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.'' (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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.'' (note - 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. (note - 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. (note
- 95Foster 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. (note - 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. (note - 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. . .'' (note - 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?'' (note - 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. (note - 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. (note - 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. (note - 108) The majority of groups
that aired such advertisements, produced mailings, and made telephone calls 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. (note - 111While 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. (note - 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. (note - 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].'' (note - 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.'' (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 147As 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.
(note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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 (note - 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. (note - 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.
(note - 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. (note - 162) Koch Industries
gave at least $2,000 directly to Triad in October 1996. (note - 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 confidentiality agreement 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. (note - 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.'' (note - 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];'' (note - 16An 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;'' (note - 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.'' (note - 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. (note - 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.''' (note - 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.
(note - 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. (note - 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.
(note - 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. (note - 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.
(note - 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. 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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, and fundraising material
provided by Odell to Philip Anschutz that was copied to Greener. (note - 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 (note - 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. (note - 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. (note - 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. (note - 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. ''' (note - 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. (note
- 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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?'' (note - 7Documents 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. (note - 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. (note - 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. (note - 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. (note -
94Ginsberg 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.''' (note - 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.
(note - 102)
Assuming that the Economic Education Trust was behind the CCF ad campaign, the
trust, through Triad and CCF, funneled at least $2 (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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.'' The authors 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. (note - 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. (note - 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.'' (note
- 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.'' (note
- 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.'' (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note -
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. (note - 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. (note - 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. (note - 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]. (note - 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. (note -
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. (note -
72The 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. (note - 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.'' (note -
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. (note - 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. (note -
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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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 Christian Coalition is really an arm of the
Republican Party. . . . This is so explicit, it's incredible.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note
- 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.
(note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. 51Associated Press, 7/7/96. 52See Chapter 10; Exhibit 2367:
Coalition Building Manual, authored by Curt Anderson, R01821 49. 53Exhibit 2367,
at R01841. 54Ibid. at Exhibit 2367, at R01847. 55Exhibit 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. 56Exhibit 2363. 57Exhibit 2353: undated internal RNC memorandum from
''Blaise'' to ''Pat,'' regarding ''Outreach, Auxiliaries, Coalitions,'' R51299
30. 58Exhibit 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. 59Exhibit 2365.
60Hearing 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. 61Drew, p. 14. 62For 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. 63Memorandum 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. 65Memorandum from RNC coalitions director Jack St.
Martin to
RNC Chairman Barbour, 9/6/95. 66Hearing 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. 67See, 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.). 68Drew, p. 106. 69Drew, pp. 161 62. 70Drew, pp. 164 65. 71See Drew,
p. 6. 72See, for example, San Diego Union-Tribune, 8/9/96, p. B1. 73See, 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. 77FEC 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. 80Norfolk Virginian-Pilot, 8/4/97. 81Norfolk
Virginian-Pilot, 8/1/97. 82Christian Coalition $25,000 check to the Second
District Republican Committee, 11/12/91. 83Norfolk 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. 88FEC Complaint, p. 2. 89FEC 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. 90FEC Complaint, p. 6. 91FEC Complaint, pp. 5 12. 92FEC Complaint, p.
5; 2 U.S.C. 441b. 93FEC ''Statement of Reasons,'' Commissioners Thomas, McGarry,
& McDonald, 7/30/96, p.2. 94FEC Complaint, pp. 6 10. 95FEC Complaint, p. 7.
96FEC Complaint, pp. 7 8. 97FEC Complaint, p. 8. 98FEC Complaint, p. 9. 99FEC
Complaint, p. 9 10. 100FEC Complaint, p. 10. 101FEC Complaint, pp. 10 11. 102FEC
Complaint, pp. 11 12. 103FEC Complaint, p. 12. 104FEC 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.'' (note - 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.'' (note - 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.'' (note - 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.''
(note - 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.'' (note - 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. (note - 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.'' (note - 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.'' (note - 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. (note - 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 Internet 20 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.'' (note - 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. (note
- 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. (note - 38) K.
Tucker Anderson, a major donor to ALT, has served on Cato's board. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 24Meddoff 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.'' (note - 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. (note - 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. (note - 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. (note - 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?'' (note - 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. (note
- 37Medoff 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.
(note - 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. (note -
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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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.