Foundation Was Corporations’ Conduit to Speaker

After providing House Speaker Newt Gingrich various platforms to help forge a Republican majority in Congress, the Progress & Freedom Foundation wasted little time in capitalizing on the relationship as well.

The foundation, which used 84% of its first-year expenditures to promote Gingrich beginning in 1993, stepped up its efforts to solicit financial support from major corporations once Republicans took control of Congress last year. The campaign was an unqualified success: The foundation received donations of $3.5 million in 1995, or more than twice the amount collected in the previous 20 months.

In some cases, corporate officials would get special access to the new speaker in return for tax-deductible donations, according to lobbyists who were approached by PFF.

“They were selling Newt, and they were heavy-handed about it,” recalled a regional Bell telephone executive whose firm responded with a five-figure donation. “They let you know that you’d be hurt if you didn’t participate.”

Furnishing access to an elected official in exchange for tax-deductible contributions runs counter to Internal Revenue Service regulations that require exempt foundations to engage exclusively in charitable activity, according to interviews with a half-dozen legal experts.

A large share of the money came from firms in the medical, pharmaceutical and telecommunications industries that support the anti-regulatory and pro-business privatization positions that were advocated in PFF policy papers.

Telecommunications firms were obvious targets for PFF fund-raisers because Gingrich had signaled his interest in rewriting 60-year-old telecommunications law and deregulating the telephone monopolies.

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Five regional Bell firms donated a total of $225,000 last year, according to records and interviews. In 1994, by comparison, only one of the seven regional Bell companies contributed $25,000 to PFF.

The events that followed the fund-raising appeals to Bell lobbyists suggest that PFF was well-positioned to deliver on its promises:

* The foundation invited executives of telecommunications firms to a private dinner with Gingrich in January 1995, during the opening days of the speaker’s first legislative session. The dinner presented PFF an opportunity to bring together a dozen guests representing the industry to exchange ideas with the speaker.

The event also succeeded in helping attract substantial financial support from the heads of telephone firms who attended, among them Bell Atlantic, BellSouth and Pacific Telesis. “You didn’t have to give to be there, and people understood that,” said PFF President Jeffrey A. Eisenach.

* Philip Quigley, the Pacific Telesis chairman who led the Bells’ lobbying campaign on Capitol Hill, was booked on June 27, 1995, as a guest on “The Progress Report,” the PFF weekly cable program hosted by Gingrich. Before his appearance, Quigley met privately with Gingrich for half an hour at the National Empowerment Television studio to discuss his specific concerns about the telecommunications bill, according to two sources familiar with the meeting.

* In May of last year, the foundation published “The Telecom Revolution: An American Opportunity,” a 111-page report that called for getting the government out of the telecommunications marketplace and eliminating the Federal Communications Commission--the same positions favored by the Bells.

That same month the foundation’s telecommunications working group was asked by Gingrich to provide recommendations for new industry regulation, according to the trade publication Communications Daily.

The work of the PFF telecommunications policy group, which consisted of scholars from a variety of research institutes and universities, was in no way influenced by contributions, said Eisenach. “We weren’t carrying water for anybody,” he added.

But when the House Commerce Committee, on a lopsided 38-5 vote in May of last year, passed a bill containing language that erected significant barriers before local phone companies could enter the long-distance market, Bell lobbyists didn’t hesitate to voice their displeasure with officials at the Progress & Freedom Foundation.

“We let them know our feelings that the bill needed fixes,” said one Bell lobbyist.

On July 12, the chairman of the Commerce Committee, Rep. Thomas J. Bliley Jr. (R-Va.), was summoned to the speaker’s second-floor suite and directed by Gingrich and the Republican leadership to insert the revisions sought by the Bells, according to two congressional sources who were present.

The changes were greeted with outrage by the heads of the major long-distance companies. They wrote Gingrich protesting that the back-room maneuvering “violates all notions of decency and fair play.”

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It is not known precisely what role if any PFF played in persuading Gingrich to intervene on behalf of the Bells. The telecommunications bill was a massive piece of legislation that involved a complex mix of special interests and was lobbied vigorously by dozens of parties. But lobbyists representing both the long-distance carriers and regional phone companies said the foundation at a minimum provided the Bells another button to push when they needed assistance.

Since the bill was signed into law by President Clinton last year, PFF donations from the regional telephone companies have dropped. Only two of the five Bell firms that gave $225,000 last year have donated this year, for a total of $65,000.