LOBBYING : Seniors Coalition Crippled by Leadership Dispute, Credibility : Conservative group is in turmoil after court ousted board in favor of one allied with its founder, a felon.

When House Speaker Newt Gingrich (R-Ga.) announced the Republicans’ Medicare reform policy last year, he spoke at a conference of an organization called the Seniors Coalition.

The Seniors Coalition? It’s Gingrich’s kind of group: a conservative alternative to that much larger and more liberal lobbying powerhouse, the American Assn. of Retired Persons. Although the coalition is outgunned by the AARP in membership by 33 million to 1 million, it was recently designated by Roll Call, a newspaper specializing in Congress, as one of the 10 most effective lobbying organizations on Capitol Hill.

But the Seniors Coalition is now in turmoil over the return of allies of its controversial founder, Dan Alexander, who was convicted of extortion in 1987 while chairman of the Mobile, Ala., school board and who was bounced off the coalition at the end of 1992.

The coalition’s board of directors moved against Alexander when it discovered that the organization was helping with his credit-card bills and the lease payments on his car, not to mention paying $3,000 a month to a management-consulting firm he controlled.

But the Virginia Supreme Court ruled in January that the board of directors that threw Alexander overboard had not formally replaced the board that Alexander had handpicked when he chartered the coalition in 1992. With the new board powerless, Alexander’s allies took control of the coalition within a few days and immediately changed the locks at the group’s headquarters in Fairfax, Va.

Nine top people on the coalition’s staff of 20 quit in protest, including the chief executive officer, operations manager, chief lobbyist, spokeswoman and newspaper editor.

“We worked very hard to build the coalition, and we are concerned that members won’t know the difference now and will continue sending money to a good organization that has turned radioactive,” said Jake Hansen, who resigned as director of government relations.

“I just don’t trust the people in charge now to do the right thing,” said Vicki Lovett, the former spokeswoman.

Many members of Congress don’t either. The new people operating the Seniors Coalition “don’t have credibility working with members and staff up here at this time,” said Carl Parks, counsel for Sen. Paul Coverdell (R-Ga.).

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After Hansen resigned as chief lobbyist, the Seniors Coalition was stripped of its leadership role in the influential Coalition to Save Medicare, which was promoting the Republican approach to providing an expanded range of health plans for senior citizens.

“The Seniors Coalition was very important, and Jake was very energetic and a very hard worker,” said R. Bruce Josten of the U.S. Chamber of Commerce, who replaced Hansen as co-chairman of the Medicare coalition, which is composed of health and business groups.

In the lobbying community, credibility is a precious coin, and the Seniors Coalition is eager to renew its validity. “We have an excellent, dedicated group of members. This is an exciting place to be, and we don’t want to miss a beat,” said Thair Phillips, the Seniors Coalition’s new CEO. “I came in here to run the coalition; the Virginia Supreme Court made its decision, and the legal aspects are not my concern.”

Alexander proclaims that he will have no role, official or otherwise, with the organization. But he attended the meetings at which lawyers wrangled over the severance pay and settlement for Hansen and other departing staff members. He also sat in on gatherings with staffers, trying to persuade them to stay.

“All they want to do is run around town and talk about Dan Alexander, convicted felon,” Alexander said in an interview. “I have done everything I can do to tell folks I don’t have anything to do with the damn thing. I’m not making anything from all this.”

As founder of the Seniors Coalition, Alexander controlled its most precious asset: the names and addresses of its more than 1 million members and donors. When the board dislodged him in 1992, it had to buy out his interest in the mailing list. Through the end of last year, the coalition had paid $757,000 to another group founded by Alexander, the Taxpayers Education Lobby.

Alexander’s wife, Fay, is listed as the sole employee of the Taxpayers Education Lobby, drawing a salary of $120,000 a year, according to the 1993 form that the group filed with the Internal Revenue Service as a tax-exempt organization.

The Seniors Coalition, like many successful political groups, began life as a mailing list in search of a cause. The sophisticated direct-mail industry is the tool various groups use to raise money, recruit members and generate letters, postcards, petitions and protests.

When he was president of the school board in Mobile, Alexander created the Taxpayers Education Lobby in 1979 to help promote such ideas as teaching traditional values and testing teacher competence.

The man he contacted to translate the idea into an effective cash-generating machine was Richard Viguerie, the godfather of direct mail fund-raising.

Alexander was convicted of extortion and mail fraud in 1987 for demanding kickbacks on school construction projects. During his four years in prison, his wife ran the Taxpayers Education Lobby.

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The organization continued to raise money with appeals to conservatives on education issues. It branched out in 1988, with mailings calling on seniors to fight federal legislation that provided a major expansion of Medicare benefits, financed by a tax on senior citizens.

That new enterprise, Seniors Coalition Against the Tax, became a successful fund-raising venture by appealing to conservative seniors who felt that the AARP did not represent them.

With a modest membership fee of $8 a year, the AARP offers a range of benefits, including a mail-order prescription service and discounts for hotels, motels and car rentals. But many conservative members were displeased with the AARP’s stand on Washington issues.

The Seniors Coalition Against the Tax became the foundation of a new permanent organization, the Seniors Coalition, which was chartered in 1992. It agreed to pay Viguerie’s firm about $600,000 to buy out his share of the mailing list, which Viguerie had helped develop through waves of mailings over the years.

Conflicts developed between the Seniors Coalition’s board, which Alexander had selected, and the founder himself.

“All of a sudden in late 1992, we saw that the man was paying himself and his wife funds that had never been revealed to the board of directors,” said George P. McDonnell, one of the directors ousted in January by the Virginia Supreme Court ruling.

“During an investigation, we brought in auditors and made the judgment that Mr. Alexander should no longer be associated with the Seniors Coalition, and he returned significant amounts of money to the organization,” McDonnell said. Alexander wrote checks totaling more than $100,000 to repay the group, according to Seniors Coalition records obtained by The Times.

The directors also learned that Alexander, because of his relationship to the Seniors Coalition’s board, was able to influence its choice of a fund-raising contractor--and was paid a $32,000 commission from the contractor.

Alexander insists that he acted correctly in all his financial dealings with the Seniors Coalition. He says McDonnell and the other board members he ousted are simply angry and jealous because they can no longer benefit from being associated with the coalition.

McDonnell and the other ousted directors “came on the board to help my wife out when I went to prison,” Alexander said. “They sat in meeting after meeting with me for two years when I got home--from then until they locked the doors on me in 1992, we met all the time. Then they threw me out of there.”

McDonnell made $4,000 a month as a director of the Seniors Coalition, and two other directors made $2,000 a month each. Staffs run most organizations, he said, but at the coalition, “we ran the organization.”

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McDonnell remains as a director of the Seniors Foundation, a separate tax-exempt foundation created by the coalition to spread its conservative political message. Paul Brammel, who quit as the coalition’s executive director, and Hansen, the former chief lobbyist, are part-time consultants for the foundation. It raised money through a direct-mail appeal last year, and the proceeds are in a separate account beyond the reach of the coalition, which is suing to get the cash and to control the foundation.

The fight between the old and new management is leaving a bitter taste. The coalition’s newspaper, the Senior Class, was recently mailed to members with an open letter, purportedly from Hansen, saying he had decided “to set out in a new direction” and vowing to help in the transition.

Hansen said he never approved the letter. “I can go to something else and get on with my life. But what I worry about are the members. Some of these are people who sent in $5 and said, ‘I can’t really afford this, but I want you to have it because I know you are speaking out for me.’ ”