Secret Ad Fund Deal Called Case of Betrayal

On the opening day of his election fraud trial, a lawyer for Los Angeles businessman Michael Goland said Wednesday that the well-known pro-Israeli activist was “betrayed” by his own aides over secret support to the campaign of U.S. Sen. Alan Cranston (D-Calif.).

Goland admits he financed a $120,000 television commercial on behalf of a little-known third party candidate, Edward B. Vallen, in an attempt to draw support away from Cranston’s Republican challenger, Ed Zschau, attorney Seth Waxman told a federal court jury.

But Goland’s aides, “either by mistake, incompetence, or perhaps the design . . . to protect themselves at Michael Goland’s expense,” ignored his instructions and presented the commercial as being paid for by Vallen’s campaign--and thus subject to legal spending limits and reporting requirements, Waxman said.

“The evidence will show that Mr. Goland’s motive in this case was principle,” he asserted.

Prosecution View

But Assistant U.S. Atty. George B. Newhouse Jr., who is prosecuting Goland and two business associates, told jurors that Goland sought out straw donors to secretly finance the television campaign in an attempt to get around federal election spending limits.

“This case is not about the Middle East, it’s not about Israel, it’s not about candidates that may or may not support policies designed to aid Israel,” Newhouse said.

“It’s perfectly permissible for people in this country to support candidates for whatever reason. . . . But what they may not do, and what this case involves, is an unlawful campaign contribution that went far above the limits of the law.”

In opening statements in what is expected to be a monthlong trial before U.S. District Judge Ronald S. W. Lew, the prosecution said Goland and his co-defendants, Lyle Weisman and Sandor Habalow, two former business associates, devised an elaborate scheme to finance the television commercial in the waning days of the campaign that would help draw support away from Zschau where he was most vulnerable, among conservatives.

Vallen, an American Independent Party candidate who had declared he would not accept any Jewish money, was told only that “some conservatives” were paying for the commercial. In the script, drafted by Goland, Vallen declared that he and Cranston were the only candidates with “integrity” in the race.

‘Straw Donors’ Used

There is no evidence that Vallen or Cranston knew the true backing for the commercial, prosecutors say. But after it aired, Goland and his co-defendants persuaded 55 straw donors to write checks to the Vallen campaign which were subsequently reported to the Federal Elections Commission, Newhouse said. Goland then reimbursed the donors, he said.

In pretrial arguments, defense lawyers have argued that political activists have a constitutional right to make anonymous contributions, an argument the judge rejected. The defense’s opening statement Wednesday provided the first detailed look at Goland’s factual defense to the charges.

Waxman compared the 1986 campaign to an effort Goland had waged two years earlier in Illinois, when he spent an estimated $1.1 million on a television campaign against Republican incumbent Charles Percy.

Although federal election law limits individual donors to $1,000 per election for a given candidate, the U.S. Supreme Court has held it is unconstitutional to limit what one can say about a candidate independently. Hence, there is no limit on “individual expenditures” during an election that are not related to the campaign of a particular candidate.

After his successful Illinois effort in 1984 (Goland paid a $5,000 settlement for not accurately identifying the sponsor of one advertisement), Goland decided to mount a similar campaign against Zschau in order to benefit Cranston’s campaign, Waxman said.

Instructions to Aides

Goland told his aides from the beginning that he wanted to finance the TV commercial--but not on behalf of Vallen’s campaign, Waxman said.

“A man of Mr. Goland’s principles and beliefs would never give money to the likes of Ed Vallen,” he said. “Mr. Goland paid for that message as an independent expenditure. . . . It was his commercial, in which Mr. Vallen was just an actor.” Moreover, he said, “the evidence will show that Mr. Vallen was perfectly happy to deliver the message without knowing who was paying for it.”

The problem arose, Waxman said, when the commercial aired and cited Vallen’s campaign as the sponsor, putting Goland in “a terrible predicament.”

When both Cranston and the media began demanding to know where the money had come from--Vallen until then had raised only $5,000--Goland’s aides told him he needed to come up with some credible donors in order to keep it on the air, Waxman said.

Goland never intended that the donors’ names would be reported as Vallen donors to the Federal Elections Commission, the violation charged in the indictment, but one of his aides forwarded copies of the donation checks to Vallen’s treasurer without Goland’s knowledge, Waxman said.

Newhouse said in an interview that Goland, if he were intending to finance the commercial as an independent expenditure, would have had to make a separate report to the FEC. But no such filing was made, he said.