[Congressional Record Volume 158, Number 171 (Monday, December 31, 2012)]
[Extensions of Remarks]
[Pages E2019-E2020]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RICHARD ARMEY'S $8,000,000 GOLDEN PARACHUTE
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HON. BARNEY FRANK
of massachusetts
in the house of representatives
Monday, December 31, 2012
Mr. FRANK of Massachusetts. Mr. Speaker, given the role that former
Majority Leader Richard Armey has played in significantly increasing
the role in militant conservatives in the Republican party, the article
in the Washington Post on December 25 is important information that all
Members should know.
[From The Washington Post, Dec. 25, 2012]
Freedom Works Tea Party Group Nearly Falls Apart in Fight Between Old
and New Guard
(By Amy Gardner)
The day after Labor Day, just as campaign season was
entering its final frenzy, FreedomWorks, the Washington-based
tea party organization, went into free fall.
Richard K. Armey, the group's chairman and a former House
majority leader, walked into the group's Capitol Hill offices
with his wife, Susan, and an aide holstering a handgun at his
waist. The aim was to seize control of the group and expel
Armey's enemies: The gun-wielding assistant escorted
FreedomWorks' top two employees off the premises, while Armey
suspended several others who broke down in sobs at the news.
The coup lasted all of six days. By Sept. 10, Armey was
gone--with a promise of $8 million--and the five ousted
employees were back. The force behind their return was
Richard J. Stephenson, a reclusive Illinois millionaire who
has exerted increasing control over one of Washington's most
influential conservative grass-roots organizations.
Stephenson, the founder of the for-profit Cancer Treatment
Centers of America and a director on the Freedom Works board,
agreed to commit $400,000 per year over 20 years in exchange
for Armey's agreement to leave the group.
The episode illustrates the growing role of wealthy donors
in swaying the direction of FreedomWorks and other political
groups, which increasingly rely on unlimited contributions
from corporations and financiers for their financial
livelihood. Such gifts are often sent through corporate
shells or nonprofit groups that do not have to disclose their
donors, making it impossible for the public to know who is
funding them.
In the weeks before the election, more than $12 million in
donations was funneled through two Tennessee corporations to
the FreedomWorks super PAC after negotiations with Stephenson
over a preelection gift of the same size, according to three
current and former employees with knowledge of the
arrangement. The origin of the money has not previously been
reported.
These and other new details about the near-meltdown at
FreedomWorks were gleaned from interviews with two dozen
current and past associates, most of whom spoke on the
condition of anonymity in order to talk freely.
The disarray comes as the conservative movement is
struggling to find its way after the November elections,
which brought a second term for President Obama and
Democratic gains in the House and Senate. Armey said in an
interview that the near-meltdown at his former group has
damaged the conservative cause.
``Freedom Works was the spark plug, the energy source, the
catalyst for the movement through the 2010 elections,'' Armey
said, referring to the GOP midterm sweep. ``Harm was done to
the movement.''
Stephenson, 73, declined a request for an interview. Matt
Kibbe, the group's president, and Adam Brandon, its senior
vice president, declined to discuss the issue.
``I don't comment on donors,'' Brandon said. ``He's on our
board, he's a board member like anyone else. That's it. I see
him at board meetings.''
Stephenson, a longtime but little-known player in
conservative causes, is a resident of Barrington, Ill., a
northwest suburb of Chicago known for its affluence and
sprawling horse estates such as his Tudor Oaks Farm. He
founded the Cancer Treatment Centers of America in 1988
following his mother's death from bladder cancer, according
to the for-profit company's Web site and his public remarks.
Stephenson also holds investments in a broad portfolio of
other businesses, including finance and real estate
companies.
Stephenson has a passion for libertarian politics
stretching back to the 1960s, when he attended seminars
featuring ``Atlas Shrugged'' author Ayn Rand and economist
Murray Rothbard, according to those who know him at
FreedomWorks. Like Armey, Stephenson was an early supporter
of Citizens for a Sound Economy, the conservative lobbying
group founded by oil billionaires Charles and David Koch in
1984 that split into Freedom Works and Americans for
Prosperity 20 years later. The Kochs, known for bankrolling a
variety of conservative causes, kept control of AFP, while
Stephenson and Armey stayed with FreedomWorks.
FreedomWorks has been on a remarkable run in recent
election cycles, growing its annual budget from $7 million to
$40 million in just a few years and helping lead the tea
party movement against Obama's agenda. The group was among
several that rose up last week in opposition to a failed
proposal from House Speaker John A. Boehner (R-Ohio) to raise
federal taxes on millionaires.
The group played a crucial role in ushering a wave of tea
party candidates into office in recent years, staging
rallies, hawking books and videos, and organizing media
appearances with conservative personalities such as Glenn
Beck and Rush Limbaugh.
``I've enjoyed my association with FreedomWorks,'' said
Sen. Mike Lee (R-Utah), who defeated incumbent Bob Bennett
with help from the group. ``Matt Kibbe and Dick Armey
endorsed me early in my candidacy for the U.S. Senate, and
they were a big help to me.''
Despite such testimonials, FreedomWorks has struggled with
accusations that it is an ``astro-turfer''--a national
organization of big-money donors that swept in to lay claim
to an independent movement.
According to public records, FreedomWorks received more
than $12 million before the election from two corporations
based in Knoxville, Tenn.: Specialty Investments Group and
Kingston Pike Development. The firms were established within
a day of each other by William S. Rose III, a local
bankruptcy lawyer.
Rose, who could not be reached for comment, has said
publicly he would not answer questions about the donations.
But according to three current and former FreedomWorks
employees with knowledge of the donations, the money
originated with Stephenson and his family, who arranged for
the contributions from the Tennessee firms to the super PAC.
Brandon, FreedomWorks' executive vice president, told
colleagues starting in August that Stephenson would be giving
between $10 million and $12 million, these sources said.
Brandon also met repeatedly with members of Stephenson's
family who were involved in arranging the donations, the
sources said.
Stephenson attended a FreedomWorks retreat in Jackson Hole,
Wyo., in August at which a budget was being prepared in
anticipation of a large influx of money, according to several
employees who attended the retreat. At the retreat,
Stephenson dictated some of the terms of how the money would
be spent, the employees said.
``There is no doubt that Dick Stephenson arranged for that
money to come to the super PAC,'' said one person who
attended the retreat. ``I can assure you that everyone around
the office knew about it.''
Among other things, Stephenson wanted a substantial sum
spent in support of Rep. Joe Walsh (R-I11.), a tea party
favorite and Stephenson's local congressman, several who
attended the retreat recalled. Walsh garnered national
headlines during the campaign when he questioned whether his
opponent, Tammy Duckworth, a former Blackhawk helicopter
pilot who lost both legs in Iraq, was a ``true hero.''
Despite internal misgivings about the value of the
investment, FreedomWorks spent $1.7 million on ads supporting
Walsh; he lost the race.
Two watchdog groups last week asked the Federal Election
Commission and the Justice Department to investigate the
donations from the two Tennessee companies. The groups,
Democracy 21 and the Campaign Legal Center, say the
arrangement could violate federal laws that prohibit
attempting to hide the true source of a political
contribution by giving it under another name. (Brandon
declined to comment on the complaints, but he said the
group's books were in order.)
Partnership unravels
For years, FreedomWorks was headed by an unlikely duo:
Armey, 72, the old-guard poi who wears a black cowboy hat
even when he's not on his Texas ranch, and Kibbe, 49, who
sports mutton-chop sideburns and has a passion for the
Grateful Dead.
But the most important relationship appears to be the bond
between Kibbe and Stephenson, who bridged their age gap
through shared libertarian views and Kibbe's battle with
testicular cancer a decade ago, Armey and others said. They
said Kibbe, after being given a terminal diagnosis, was
encouraged by Stephenson to get treatment at his cancer
clinics; more than a decade later, they said, he is cancer-
free.
Until this year, the partnership between Kibbe and Armey
worked well. Armey's renown as a former House member drew
media attention and crowds of conservative activists--most of
them old enough to remember Armey's role in the Republican
revolution in Congress in 1994. And Kibbe's youthful
intellectualism drew a new generation of libertarian soldiers
into the FreedomWorks fold. In 2010, the two co-wrote a book,
``Give Us Liberty: A Tea Party Manifesto,'' that became a New
York Times bestseller and a successful marketing tool for
FreedomWorks, which collected the book's proceeds and used it
to attract donations.
The partnership came to a crashing end when Armey marched
into FreedomWorks's office Sept. 4 with his wife, Susan,
executive assistant Jean Campbell and the unidentified man
with the gun at his waist--who promptly escorted Kibbe and
Brandon out of the building.
``This was two weeks after there had been a shooting at the
Family Research Council,'' said one junior staff member who
spoke on the condition of anonymity because he was not
authorized to talk to the media. ``So when a man with a gun
who didn't identify himself to me or other people on staff,
and a woman I'd never seen before said there was an
announcement, my first gut was, 'Is Freedom Works in danger?'
It was bizarre.'?''
By nearly all accounts, including from those loyal to him,
Armey handled his attempted coup badly. Armey says he was
stepping in because of ethical breaches by Kibbe
[[Page E2020]]
and Brandon, accusing them of improperly using FreedomWorks
staff resources to produce a book--ironically, named
``Hostile Takeover''--for which Kibbe claimed sole credit and
was collecting royalties. The use of internal resources for
Kibbe's benefit could jeopardize the group's nonprofit tax
status; the group denies any impropriety.
``This is not only about this one incident,'' Armey said.
``But that one incident was a matter of grievous concern.''
Armey also accused Brandon, Kibbe and other staff members
loyal to them of squeezing him out of media appearances and
management decisions while using his name to market the
group.
Armey appeared out of touch and unsure of how FreedomWorks
operated when he took over that Tuesday morning, according to
interviews with more than a dozen employees on both sides who
witnessed the takeover. Sitting in a glass-walled conference
room visible to much of the staff, he placed three young
female employees on administrative leave, then reversed
himself when they burst into tears; his wife lamented aloud
that maybe they had ``jumped the gun.''
In subsequent meetings, Susan Armey passed her husband
notes that several employees assumed contained suggestions on
what to say. According to a recording of a staff conference
call provided to The Washington Post, Armey bewildered his
audience by demanding more FreedomWorks support for Todd
Akin, the Missouri Republican whose Senate campaign had
already cratered after his comments about ``legitimate
rape.''
``It was clear that under Armey's leadership, the
organization as we knew it was going to be driven into the
ground,'' said one junior employee.
Enter Stephenson, who agreed to the multimillion-dollar
financial incentive to push Armey out and install Kibbe back
at the helm.
The payments were necessary, several FreedomWorks leaders
said, because Armey was threatening to sue over Kibbe's book
deal.
``It was very clear to him that I would not work with
Matt,'' Armey said, referring to Stephenson. ``He felt that
Matt knew the levers and understood it better than I did and
was very urgent to reinstate that.''
Brandon, back in the No. 2 spot as executive vice
president, scoffed at the notion that the group is in trouble
or that the dispute with Armey was indicative of a larger
problem for the tea party. He said Freedom Works has 2.1
million members, nearly 4 million fans on Facebook and a
budget that has grown sixfold in five years. He also pointed
to the elections of Senate conservatives Ted Cruz in Texas
and Jeff Flake in Arizona as evidence of the group's
electoral success.
``We doubled our budget, and we doubled our membership,''
Brandon said, referring to the group's growth since 2011.
``That's how we ended up the year.''
(Alice R. Crites contributed to this report)
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