[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

                                 ______
                                 

                           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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