Colorado Republican officials created the Abraham Lincoln Opportunity Foundation in 1984 to assist the needy and organize speech contests for poor inner-city teenagers.
But the nonprofit group eventually pursued an entirely different agenda: to help House Speaker Newt Gingrich and his political action committee, GOPAC, "recruit activists all across America to become involved in the Republican Party," as Gingrich wrote in a 1990 fund-raising letter.
As an Internal Revenue Service-approved public charity, the Lincoln Foundation advised donors that their contributions were tax-deductible in the same way that gifts to museums, churches and soup kitchens qualify as tax write-offs. Federal tax law requires these exempt organizations to operate exclusively for charitable purposes and prohibits any form of partisan conduct, including promoting the interests of a particular party or candidate.
The Lincoln Foundation was not unique. From 1984 to 1994, Gingrich and his cadre of key advisors used no fewer than six nonprofit groups to extend the reach of GOPAC, the partisan committee that fueled the successful 1994 Republican drive to gain control of Congress.
Together the foundations were part of a loose network of Gingrich-related enterprises dubbed "Newt's World" in a GOPAC strategy memo. They formed an innovative approach to political organization that, in the view of many tax experts, stretched the rules governing charitable groups.
"The pattern is unusual, perhaps even unprecedented in American politics," said Frances Hill, a University of Miami law professor who has written extensively about tax-exempt law, including one of the foundations associated with Gingrich. "Newt was just more flamboyant. He pushed the envelope further" than other politicians.
All six nonprofit groups shared a direct connection to GOPAC between 1985 and 1995, when Gingrich was its chairman, records show. They were run by GOPAC officers and consultants, Gingrich campaign advisors and congressional staffers. Some even worked directly out of GOPAC headquarters. The foundations generated at least $6 million combined in tax-deductible contributions that were outside the purview of federal election law.
Two of the organizations--the Kennesaw State College Foundation and the Progress & Freedom Foundation--are under the scrutiny of special counsel James M. Cole, who was hired in December by the bipartisan House Ethics Committee. He is investigating allegations that the speaker improperly used charitable funds by advancing Republican causes through his nationally televised college course.
Records examined by The Times raise similar questions about the Abraham Lincoln Opportunity Foundation, the West Georgia College Foundation and the American Opportunity Foundation. The work of a sixth nonprofit organization, the American Campaign Academy, was so blatantly partisan that the IRS and a federal judge ultimately refused to approve its application for tax-exempt status.
Gingrich, who declined to be interviewed, has denied misusing any foundations.
"Newt Gingrich's support of any organization, nonprofit or otherwise, has always been conducted properly and lawfully," said his spokeswoman Lauren Sims.
To be sure, Gingrich is not the first elected official to use tax-exempt foundations. These groups appeal to politicians because, unlike normal campaign contributions, there is no limit to the amount of money they can collect from businesses and individuals. There also is no requirement to disclose publicly the identities of financial donors. Nor are nonprofit groups obligated to reveal expenditures in detail.
In 1987, the House Ways and Means subcommittee on oversight sought to curtail what it described as "the alarming use of tax-exempt organizations to further the political ambitions of a particular candidate." Congress passed a law that toughened sanctions and defined a prohibited political expenditure by a tax-exempt group as any "expense which has the primary effect of promoting public recognition" of a political candidate.
The federal ban on improper political activity is "absolute" and prohibits even "subtle" or "inadvertent" acts of partisanship, according to an IRS technical advice memorandum released in December.
Chief among the potential tax problems confronting Gingrich is whether he has run afoul of this ban.
Some of the foundations, tax experts who were consulted for this story said, appear to have been used as conduits to sponsor political activity.
"This practice amounts to a form of charitable money laundering," said Gregory L. Colvin, an attorney with the San Francisco law firm of Silk, Adler & Colvin and a widely recognized expert. "Tax-exempt foundations are intended for programs like delivering meals to people who have AIDS, not to providing cover for a political project."
The Abraham Lincoln Opportunity Foundation
In 1990, Gingrich launched an ambitious GOPAC project that he predicted "could literally change the face of American politics." The program, called the American Opportunity Workshop, offered an electronic town hall meeting that featured Gingrich and others who shared GOPAC's goal of transforming citizens into conservative activists.
Gingrich proclaimed the initial workshop--beamed via satellite to more than 650 locations across the country--a huge success. But the project "caused a cash drain of $160,000" on GOPAC coffers, according to internal accounting records.
To avoid depleting its funds, GOPAC, while under Gingrich's direction, transferred the TV workshop to the Abraham Lincoln Opportunity Foundation, a charitable organization established six years earlier by the Colorado Republican Party for the benefit of disadvantaged urban youths.
Aside from an occasional speech contest, however, few teenagers were served by ALOF. "We weren't prepared for the kind of manpower something like that would take to get initiated," said Mindy Meiklejohn, former vice chairman of the Colorado GOP and an original ALOF director.
Instead, tax returns show the foundation spent $259,449, or 95%, of its budget, to produce three TV workshops between 1990 and 1993.
Once the TV workshop was turned over to the Lincoln Foundation, financial supporters were entitled to deduct donations on their tax returns.
The founder and president of the Lincoln Foundation was former Rep. Howard H. "Bo" Callaway, who also served as GOPAC chairman and was a trusted Gingrich associate.
The foundation relocated from Denver to GOPAC headquarters in Washington, where the two organizations shared the same officers, staff, resources, telephone and financial supporters. Tax returns show ALOF received $43,785 from GOPAC and at least $150,000 from GOPAC charter members while using GOPAC personnel to produce the TV workshop--renamed American Citizens Television.
The foundation was formally dissolved last year.
Callaway said foundation staffers were "very, very careful" never to say or do anything that could be construed as favoring one particular party over another. "I'd be amazed if you could find anybody that found anything partisan taking place," he said.
Yet GOPAC solicitations by Gingrich and Callaway himself leave little doubt that the foundation's TV workshop was intended to attract Republican voters.
"I am excited about the progress of the American Citizens Television project, which will carry the torch of citizen activism begun by our American Opportunities Workshop. . . . " Gingrich wrote to GOPAC charter members in a June 1990 fund-raising appeal. "We mobilized thousands of people across the nation at the grass-roots level who, as a result of AOW, are now dedicated GOPAC activists."
Gingrich's appeal indicates a level of motivation and the direct use of a charitable organization for political purposes, said John G. Simon, a Yale University law professor who has specialized in nonprofit law since 1963.
Laura Chisolm, a Case Western Reserve University law professor, said: "I would think this would certainly raise eyebrows at the IRS."
West Georgia College Foundation
In 1990, Gingrich started a summer reading program designed to motivate "at-risk" schoolchildren within his Georgia congressional district. The project, called Earning by Learning, paid third-grade students $2 for each book they read.
Gingrich provided $34,250 in seed money for the program by taking advantage of a widely used provision in the Ethics Reform Act of 1989. The legislation gave House members a substantial pay raise while banning the controversial practice of taking speaking fees from special interest groups. But the law allowed members to steer honorariums to their favorite charities, and Gingrich instructed lobbyists to send his speaking fees to the Earning by Learning program.
To make the contributions tax-deductible, Gingrich arranged for the foundation at West Georgia College, where he taught history before getting elected to Congress in 1978, to adopt the reading program as a line item on its balance sheet.
Documents obtained through the Georgia Open Records Act show how Earning by Learning resources were commingled with partisan activities:
* The director of the reading program, Melvin T. Steely, used Gingrich campaign stationery on at least half a dozen occasions to write notes and submit Earning By Learning expenditures for reimbursement from the foundation. The stationery said "Re-elect Newt" and "Newt Is My Friend" on the top and "Paid for by Friends of Newt Gingrich" on the bottom. Steely served as Gingrich's campaign manager in 1986 and a Gingrich congressional aide in the early 1990s.
"If you are absolutely prohibited from supporting any candidate, you don't go distributing letters saying reelect him," said Marion R. Fremont-Smith, a Boston lawyer who launched the Massachusetts division of public charities as an assistant attorney general.
* Steely's Earning by Learning files contain an undated memo that appears to assess Gingrich's chances of getting reelected in neighboring counties outside his congressional district. In the early years of the reading program, Gingrich was uncertain how the once-in-a-decade reapportionment process would affect his reelection chances. "Bartow [County]--Newt--OK . . . " the handwritten memo said. "Newt should be OK in Floyd [County]."
* Reading program funds were used to reimburse Steely for travel, lodging and meal expenses during three trips to attend Gingrich's Saturday morning college course. The speaker's inner circle of advisors and GOPAC consultants often accompanied Gingrich to Georgia to "help Newt think" on a wide range of political issues, according to court records submitted by the Federal Election Commission. Steely said he attended lectures that mentioned Earning By Learning at Gingrich's request.
"This really seems like a scrambling of political and educational eggs," said Simon, the Yale University law professor. "You don't have to be a zealot Democrat to have a justifiable basis for concern."
But officials at the West Georgia College Foundation said that they did not scrutinize whether IRS rules guiding tax-exempt organizations were followed.
"All we do is receive contributions and write checks out," said foundation director Susan A. Mabry. "This office is not involved in administering the program in any way."
Last year, Gingrich touted the reading program during his nationally televised college course. "Now, what we do with Earning by Learning is very simple. . . . The overhead is totally volunteer, the entire structure is totally volunteer. The only money goes to the kids. So, if you have $1,000--at $2 a book you can pay for 500 books. Whereas, in the welfare state model, if you have $1,000 you pay $850 of it for the bureaucracy."
But financial documents for the reading program tell a different story.
Nearly two-thirds of Earning by Learning's $62,254 budget since 1992 was paid in fees to Steely, who also earned salaries as a full-time West Georgia history professor and a part-time congressional aide in Gingrich's district office. Steely currently is writing the speaker's authorized biography.
Last year, 86% of the $24,126 spent on the local reading program went to Steely and two other West Georgia faculty members, who were paid $75 per hour to evaluate whether participants were motivated to continue reading. Their conclusion: The program "was just short of phenomenal," Steely said.
During the first two years of the program, $20,677 was paid to children for reading books. But between 1992 and last year, records show that a total of $17,374, or 28%, of program funds, went to students.
By providing the bulk of Earning by Learning funds to Steely, Gingrich's reading program ran the risk of violating IRS regulations, tax experts said.
Steely acknowledged in an interview that, contrary to Gingrich's assertions, the majority of reading funds went into his pocket. "If we were to be totally accurate, I should not have received any remuneration at all," he said.
Steely said Gingrich started Earning by Learning with the purest of motives and that politics played no part in the program.
"One of the greatest disservices the press has done is to picture Newt as an uncaring, cold person," Steely said. "It's just the opposite. He really does care about these kids. He really wants to motivate them to read."
Kennesaw State College Foundation
In 1993, Gingrich offered to teach a nationally televised history course at Kennesaw State College in his new congressional district. The goal, Gingrich wrote supporters, "is to have 200,000 committed activists nationwide before we're done."
The class, called Renewing American Civilization, was organized out of GOPAC headquarters in Washington and promoted by Republican organizations, according to hundreds of pages of internal memos and documents obtained through the Georgia Open Records Act. Among the groups involved were the National Republican Committee, the National Republican Congressional Committee, the Young Republicans organization and the Christian Coalition.
In addition, a draft letter from Gingrich urging Republican students on campuses across the country to enroll in the course via satellite sounded an unmistakably partisan call. It began by saying that "conservatives today face a challenge larger than stopping President Clinton."
Gingrich raised $300,000 to broadcast his lectures nationwide by soliciting contributions from GOPAC charter members, major corporate donors and longtime political supporters. To make the donations tax-deductible, course organizers arranged for the Kennesaw State College Foundation to handle the finances.
However, just as the West Georgia College Foundation failed to monitor Gingrich's reading program, Kennesaw Foundation officials said they were unaware that GOPAC was Gingrich's political committee or that the course was produced with partisan resources.
"We acted like a bank essentially," said Jim Fleming, executive director of the Kennesaw Foundation. "We didn't create the fund-raising plan. We didn't solicit donors. We didn't do any of those things."
Tax experts said that officers of both the Kennesaw and West Georgia college foundations had a fiduciary duty to ensure that funds for Gingrich's programs were raised and spent appropriately. Earlier this month, special counsel Cole traveled to the Kennesaw campus to interview college officials as part of the ethics committee inquiry.
Progress & Freedom Foundation
Less than two months into Gingrich's first semester at Kennesaw State, the Georgia Board of Regents cited concerns about the speaker mixing politics and education when it voted to prohibit elected officials from teaching on state campuses.
The following semester, Gingrich moved to private Reinhardt College in Waleska, Ga., and turned over production of the course to the Progress & Freedom Foundation, a new tax-exempt group created by Jeffrey A. Eisenach, a Gingrich confidante and former GOPAC executive director.
The foundation "emerged from a series of conversations with my friend Newt Gingrich. . . . " Eisenach wrote in PFF's inaugural newsletter. Several top PFF officers, directors and fellows are longtime Gingrich loyalists.
According to IRS records the Progress & Freedom Foundation was formed as a nonprofit, conservative think tank to conduct "independent" research on methods for the "advancement of American society."
But records show that PFF devoted the bulk of its resources to promoting Gingrich.
PFF spent 84% of $460,471 in program services during its first year on Gingrich's televised college course and his weekly cable program. Most of these expenditures occurred in the year leading up to the historic congressional elections in November 1994 when Republicans captured a majority of seats in both houses of Congress for the first time in four decades.
When the foundation applied for tax-exempt status in mid-1993, officials failed to inform the IRS of its numerous connections to Gingrich or extensive support for the speaker's political projects, records show.
Initially, PFF notified the IRS of plans to develop the nationally televised college course in Georgia "to study and explore American civilization" but neglected to mention that Gingrich would teach the class and raise money from Republican donors.
The Progress & Freedom Foundation also told the IRS it would produce a weekly, hourlong television show to disseminate its research, but didn't reveal that Gingrich would be the host. The "Progress Report," available to about 10 million viewers on the National Empowerment Television network, was shown through December of last year.
The foundation and Eisenach each have received subpoenas as part of the Ethics Committee inquiry.
"The notion that we are here to advance Gingrich per se or the Republican Party is inconsistent with what we've actually done," Eisenach said.
American Opportunity Foundation
In 1984, Gingrich created the American Opportunity Foundation Inc., a Maryland-based nonprofit formed "exclusively for charitable and educational purposes," incorporation papers show.
Gingrich served as chairman and director of AOF, making it the only organization of the six for which he served in an official capacity. The president was James T. Tilton, Gingrich's boyhood friend and chairman of GOPAC's finance committee. The secretary-treasurer was Dan Swillinger, a GOPAC lawyer who also served as treasurer of the Lincoln Foundation. The board of directors included Republican consultant Eddie Mahe Jr., a GOPAC advisor, and James C. Richards, a GOPAC charter member who gave more than $80,000.
Before disbanding in 1990, AOF officers listed GOPAC headquarters in Washington as the foundation's address.
For its initial project, AOF joined with College Republican National Committee chapters across the country in holding political rallies at more than 100 campuses to celebrate the one-year anniversary of the U.S. invasion of Grenada. The "Student Liberation Day" was staged in conjunction with a White House ceremony in October 1984, shortly before President Reagan faced Democrat Walter F. Mondale in November.
A letter to GOP campus leaders from a College Republican official linked the Grenada rallies to Reagan's campaign: "I am confident that an impartial study of the contrasts between the Carter/Mondale failure in Iran and the Reagan victory in Grenada will be most enlightening to voters 12 days before the general election," wrote the official.
Sponsors said the rallies weren't organized to benefit Reagan.
"I don't think anybody gives Ronald Reagan the partisan advantage of being the only one who believed in the need for the invasion of Grenada," said Ladonna Lee, a Republican consultant who helped form the American Opportunity Foundation.
But tax experts said the timing so close to an election and the involvement of a Republican organization raised substantial questions about whether tax-exempt funds were used to intervene in a political campaign.
"Generally, the closer you get to an election the stronger is the case that activities with these kinds of links are political," said Hill, the University of Miami law professor.
The American Campaign Academy
The academy was started in 1986 by Joseph R. Gaylord, a Republican consultant and Gingrich's chief political strategist. Between 1991 and 1994, Gaylord received $832,634 in fees and expenses from GOPAC and Gingrich's campaign, according to federal spending records.
Formed to teach professional campaign workers how to win elections, the academy was "purely educational" and "non-partisan," ACA officials stated in IRS application papers.
But federal court records show the academy primarily benefited Republican candidates: The ACA was an outgrowth of a similar program run by Gaylord at the National Republican Congressional Committee; the academy's $972,000 budget was funded entirely by the National Republican Congressional Trust and the curriculum included such partisan themes as "How some Republicans have won black votes" and "Use of GOP allies."
A federal judge in 1989 rejected the academy's attempt to gain tax-exempt status and the school closed the following year. The IRS concluded in court papers that academy officials "sought to hide the Republican Party connection."
Times staff writer David Willman in Washington and researcher Edith Stanley in Atlanta contributed to this story.