Gingrich PAC Used Charity to Route Gifts, Papers Show

By GLENN F. BUNTING

Jan. 22, 1997 12 AM PT

TIMES STAFF WRITER

WASHINGTON —

Newly available documents reveal how a political committee run by House Speaker Newt Gingrich channeled tax-deductible donations through a charity in the early 1990s to raise money to elect a Republican Congress.

The practice, referred to by experts as a form of “charitable money laundering,” consists of using tax-exempt entities as conduits from donors to political organizations. Federal law prohibits IRS-approved public charities from engaging in any form of partisan conduct.

Internal memos and financial documents show that GOPAC, a political committee headed by Gingrich between 1985 and 1995 to support Republican candidates nationwide, encouraged wealthy donors to pay a minimum $10,000 in annual charter dues--and gain a tax write-off--by giving the money to the Abraham Lincoln Opportunity Foundation. The nonprofit group, formed in 1984 to help inner-city youths, forwarded the contributions to GOPAC.

In one case, a top GOPAC official urged a New York businessman to send his initial GOPAC dues to the Lincoln Foundation “and thus be of enormous help in our efforts to change the Congress in 1992.” The businessman contributed $25,000 to the foundation and, nine days later, the foundation sent $25,000 to GOPAC, the records show.

“This is very blatant,” said Frances R. Hill, a University of Miami law professor and tax expert whose published work was cited by Gingrich’s attorneys in his defense. “What the entire pattern says to me is these people knew exactly what they were doing and they were trying to be very clever.”

Money Used to Fund Gingrich Broadcasts

In all, more than $1.6 million--primarily in tax-deductible donations--was spent to produce nationwide broadcasts of Gingrich’s televised workshops and his college course. Of the funds, $260,000 went to GOPAC via the Lincoln Foundation to finance Gingrich’s American Citizens Television workshop, tax records show.

Gingrich received the harshest punishment ever levied against a sitting speaker when the House voted, 395 to 28, on Tuesday to impose a reprimand and a $300,000 fine for ethical violations. After a two-year investigation, the House Ethics Committee concluded--and Gingrich admitted--that he had failed to ensure that he had complied with federal laws barring the use of tax-exempt funds for partisan purposes.

While Tuesday’s action assures that Gingrich will continue as speaker, the Georgia Republican still faces an Internal Revenue Service inquiry into tax-exempt organizations that helped advance his political career. Moreover, the Ethics Committee and its special counsel, James M. Cole, referred all relevant materials gathered during their investigation to the IRS and established a “liaison” with the tax agency.

Spokesman Anthony Burke said that the law prohibited IRS officials from discussing pending investigations. A spokeswoman for Gingrich also declined comment.

GOPAC’s association with the Lincoln Foundation is no different from the use of tax-exempt entities by the National Organization for Women, the Sierra Club and dozens of other interest groups in Washington, said Kay Riddle, a former GOPAC executive director who also served as secretary to the Lincoln Foundation.

“This is nothing unusual . . . “ Riddle said. “Newt is just being held to a different standard.”

The Times reported in June that the Lincoln Foundation was among six nonprofit groups that Gingrich and his cadre of key advisors used for a decade to extend GOPAC’s reach. The Lincoln Foundation and GOPAC shared the same headquarters, officers, staff, resources, telephones and financial supporters.

Documents released by the Ethics Committee last weekend to support its case against Gingrich showed a new pattern: the channeling of GOPAC contributions through the Lincoln Foundation in such a way that the donors received tax deductions and GOPAC received operating funds, according to interviews with three experts in the field of tax-exempt law.

“This is a case of charitable money laundering,” said Gregory L. Colvin, a San Francisco attorney who exclusively represents nonprofit organizations. “It looks like the funds of GOPAC and the funds of [the Lincoln Foundation] were considered to be completely interchangeable by the parties involved.”

The Lincoln Foundation was founded in 1984 by the Colorado Republican Party to benefit disadvantaged inner-city teenagers. After struggling for a few years, the foundation went dormant and was revived in 1990 by GOPAC. 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 advisor.

In 1990, Gingrich and GOPAC launched a series of televised town hall meetings that was touted to the public as a nonpartisan campaign to build a nationwide citizens’ movement among nonvoters. In his report to the Ethics Committee, Cole concluded that there was clear evidence Gingrich designed the workshop for the “substantial partisan, political purposes” of electing a Republican majority to Congress.

But producing the televised workshops proved expensive--it cost more than $500,000 and consumed about two-thirds of GOPAC’s budget during the first six months of 1990. “Because of this, Mr. Gingrich and others at GOPAC decided to transfer [the television workshop to the Lincoln Foundation] in order to attract tax-deductible funding,” Cole told the Ethics Committee on Friday.

The new documents released last weekend include copies of fund-raising letters, internal correspondence and canceled checks. They reveal that in 1991 and 1992, six contributions for a total of $117,000 were sent by donors to the Lincoln Foundation just days before the foundation wrote checks of the same size to GOPAC.

Report Notes Lack of Gingrich Involvement

Cole noted in his report there was no evidence that Gingrich “had any significant involvement” in the details of these financial transactions.

But handwritten notes and fund-raising letters by Gingrich, Callaway and others show that the tax-deductible benefits of contributing to GOPAC were discussed before the checks were made out to the Lincoln Foundation.

Gingrich, in a May 31, 1990, letter on GOPAC stationery, pitched to a donor a “new” foundation that would produce a TV workshop.

“The Abraham Lincoln Opportunity Foundation is a nonpartisan, nonprofit educational foundation and corporate as well as individual contributions are accepted,” Gingrich wrote. “This organization has been given 501(c)(3) status by the Internal Revenue Service and your contribution is deductible on your income tax form.”

On Feb. 27, 1992, then-GOPAC Executive Director Jeffrey A. Eisenach solicited $10,000 from R. Randolph Richardson, a New York City businessman and former president of the Smith Richardson Foundation, to join GOPAC as a charter member. Eisenach wrote Richardson that “it is of course not appropriate” for GOPAC, as a partisan organization, to accept tax-deductible donations.

But Eisenach suggested an alternative approach to Richardson: “You might consider a contribution to ALOF . . . and thus be of enormous help in our efforts to change the Congress in 1992.”

On April 14, 1992, Richardson arranged to donate $25,000 to the Lincoln Foundation, which issued a check in the same amount to GOPAC nine days later.

Richardson “was urged to become a GOPAC charter member,” Cole told the ethics panel. “He knew that $10,000 was required in order to become a charter member. He was able to satisfy his contribution to GOPAC by contributing money to ALOF.”

Richardson could not be reached for comment.

On March 16, 1992, Eisenach issued an internal GOPAC memo regarding Callaway’s “charter dues.” Callaway, Eisenach wrote, was offering GOPAC a choice: He could make his $10,000 annual donation to GOPAC as in previous years or a $20,000 tax-deductible gift to the Lincoln Foundation.

GOPAC officials opted for the $20,000. Callaway “then wrote a check for $20,000 to ALOF to satisfy his GOPAC charter membership.” The same day, records show, ALOF wrote a $20,000 check back to GOPAC.

The year before, Callaway wrote a $10,000 check to the foundation and the money was forwarded to GOPAC five days later, records show.

In an interview Tuesday, Callaway disputed Cole’s account that he paid off his GOPAC dues through the Lincoln Foundation. “I can absolutely promise you that this had nothing to do with my charter membership,” he said.

‘The Question of Money Laundering’

Callaway, who received a subpoena to testify before the Ethics Committee, said that Cole had asked him specifically about “the question of money laundering.” All of the money that went from the Lincoln Foundation back to GOPAC, Callaway said, was intended to pay off a $160,537 loan.

But Callaway said that he had no papers documenting the loan, he did not know whether GOPAC charged interest and the foundation never fully repaid the debt. Moreover, the Colorado accountant who prepared the foundation’s final tax returns in 1993 noted in a letter that “ALOF has no proof that any of the money sent to GOPAC was used for nonpartisan, nonprofit programs.”

Cole’s investigation found that, in an attempt to produce documentation of nonprofit services, the foundation submitted fees for two consultants who could not recall doing any work for the foundation. Other invoices for expenses that were incurred in 1990 were either undated or dated in 1991.

The accountant, Toni L. Newbill, claimed a constitutional privilege against testifying before the Ethics Committee. Asked about the foundation records, she told The Times: “What I saw stunk too.”

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How Political Money Went to ‘Charity’

GOPAC, a partisan committee headed by Speaker Newt Gingrich until 1995, encouraged wealthy donors to pay a minimum $10,000 in annual GOPAC charter dues--and gain a tax write-off--by giving the money to a tax-exempt, charitable organization. Here’s how the scheme, described by some experts as “charitable money laundering”, worked:

1) Solicit Donation for Partisan Group.

“We would love to have you as a GOPAC Charter Member. As you know, the Charter Program involves a $10,000 commitment.”

2) Explain Partisan Group Cannot Accept Charitable Donations

“It is of course not appropriate for GOPAC to accept 501(c)3 [tax-deductible] money.”

3) Suggest a Charity.

“You might consider a contribution to Abraham Lincoln Opportunity Foundation.”

4) Explain Funds Will Be Used for Political Cause

”..Consider getting involved in what we believe is the best opportunity to change Congress we’re likely to see for quite some time.”

5) Donor Gives to Charity

Donor gives $25,000 to Abraham Lincoln Opportunity Foundation.

6) Charity Sends Money to Partisan Group.

Abraham Lincoln Opportunity Foundation gives $25,000 to GOPAC.