[Senate Report 105-167]
[From the U.S. Government Publishing Office]

105th Congress                                            Rept. 105-167

 2d Session                                                      Vol. 3



                              FINAL REPORT

                                 of the


                          UNITED STATES SENATE

                             together with


                             Volume 3 of 6

                 March 10, 1998.--Ordered to be printed


105th Congress                                            Rept. 105-167

 2d Session                                                      Vol. 3

                      INVESTIGATION OF ILLEGAL OR


                       WITH 1996 FEDERAL ELECTION



                              FINAL REPORT

                                 of the


                          UNITED STATES SENATE

                             together with


                             Volume 3 of 6

                 March 10, 1998.--Ordered to be printed


                   FRED THOMPSON, Tennessee, Chairman
SUSAN COLLINS, Maine                 JOHN GLENN, Ohio
SAM BROWNBACK, Kansas                CARL LEVIN, Michigan
PETE V. DOMENICI, New Mexico         JOSEPH I. LIEBERMAN, Connecticut
THAD COCHRAN, Mississippi            DANIEL K. AKAKA, Hawaii
DON NICKLES, Oklahoma                RICHARD J. DURBIN, Illinois
ARLEN SPECTER, Pennsylvania          ROBERT G. TORRICELLI, New Jersey
BOB SMITH, New Hampshire             MAX CLELAND, Georgia
          Hannah S. Sistare, Staff Director and Chief Counsel
                 Leonard Weiss, Minority Staff Director
                       Lynn L. Baker, Chief Clerk

                             MAJORITY STAFF

                   Michael J. Madigan, Chief Counsel

                  J. Mark Tipps, Deputy Chief Counsel

                   Donald T. Bucklin, Senior Counsel

                     Harold Damelin, Senior Counsel

                 Harry S. Mattice, Jr., Senior Counsel

                  John H. Cobb, Staff Director/Counsel

                        K. Lee Blalack, Counsel

                         Michael Bopp, Counsel

                        James A. Brown, Counsel

                        Brian Connelly, Counsel

                       Christopher Ford, Counsel

                        Allison Hayward, Counsel

                      Matthew Herrington, Counsel

                        Margaret Hickey, Counsel

                          Dave Kully, Counsel

                        Jeffrey Kupfer, Counsel

                          John Loesch, Counsel

                   William ``Bill'' Outhier, Counsel

                         Glynna Parde, Counsel

                          Phil Perry, Counsel

                          Gus Puryear, Counsel

                Mary Kathryn (``Katie'') Quinn, Counsel

                         Paul Robinson, Counsel

                         John S. Shaw, Counsel

                       David Hickey, Investigator

                     Stephen J. Scott, Investigator

                     Matthew Tallmer, Investigator

                     Darla Cassell, Office Manager

                   Mary D. Robertson, Office Manager

                       Kenneth Feng, GAO Detailee

                      Mark Kallal, Legal Assistant

                   John W. M. Claud, Legal Assistant

                     Mike Marshall, Legal Assistant

                   Michael Tavernier, Legal Assistant

                     Michael Vahle, Legal Assistant

                     Amy Alderson, Staff Assistant

                    Kim Bejeck, Executive Assistant

                  Deborah Collier, Executive Assistant

                    Daniel Donovan, Staff Assistant

                      Leanne Durm, Staff Assistant

                 Michele Espinoza, Executive Assistant

              Cheryl Ethridge-Morton, Executive Assistant

                    Heather Freeman, Staff Assistant

                      John Gilboy, Staff Assistant

                   Janat Montag, Executive Assistant

                 Kathryn O'Connor, Executive Assistant

                     Wayne Parris, Staff Assistant

                     Jason Parrott, Staff Assistant

                    Sahand Sarshar, Staff Assistant

                       Jerome Sikorski, Archivist

                  Loesje Troglia, Executive Assistant

                  Sandra Wiseman, Executive Assistant


                   Frederick S. Ansell, Chief Counsel

                  Richard A. Hertling, Senior Counsel

              Curtis M. Silvers, Professional Staff Member

                 Paul S. Clark, Communications Director

                     Michal S. Prosser, Chief Clerk

                   Matthew Peterson, Assistant Clerk

              Christopher W. Lamond, Systems Administrator

                  Steve Diamond, Senator Susan Collins

                   Jim Rowland, Senator Sam Brownback

              Brian Benczkowski, Senator Pete V. Domenici

                  Michael Loesch, Senator Thad Cochran

                   Barbara Olson, Senator Don Nickles

                William J. Morley, Senator Arlen Specter

                   Rick Valentine, Senator Bob Smith

                Bill Triplett, Senator Robert F. Bennett

                             MINORITY STAFF

                   Alan Baron, Minority Chief Counsel

                  Pamela Marple, Deputy Chief Counsel

                   David McKean, Deputy Chief Counsel

                 Jeffrey Robbins, Deputy Chief Counsel

                         Alan Edelman, Counsel

                       Jonathan Frenkel, Counsel

                           Jim Lamb, Counsel

                        Deborah Lehrich, Counsel

                      Cassandra Lentchner, Counsel

                      Dianne Pickersgill, Counsel

                        Lisa Rosenberg, Counsel

                         Kevin Simpson, Counsel

                       Howard Sklamberg, Counsel

                          Beth Stein, Counsel

                     David Cahn, Assistant Counsel

                   Sarah Des Pres, Assistant Counsel

                   Peter Rosenberg, Assistant Counsel

                       Larry Gurwin, Investigator

                      Jim Jordan, Press Secretary

                          Holly Koerber, Clerk

                      Bill McDaniel, Investigator

                      Jay Youngclaus, Investigator

                  Caroline Badinelli, Staff Assistant

                     Ann Metler, Research Assistant

                   Jessica Robinson, Staff Assistant

                   Rachael Sullivan, Staff Assistant

                    Nichole Veatch, Staff Assistant

     Linda Gustitus, Governmental Affairs Committee, Senator Levin

       Elise Bean, Governmental Affairs Committee, Senator Levin

  Laurie Rubenstein, Governmental Affairs Committee, Senator Lieberman

      Nanci Langly, Governmental Affairs Committee, Senator Akaka

     Marianne Upton, Governmental Affairs Committee, Senator Durbin

 Matthew Tanielian, Governmental Affairs Committee, Senator Torricelli

    Bill Johnstone, Governmental Affairs Committee, Senator Cleland

                               FBI DETAIL

                       Anne Asbury, Investigator

             Jerome Campane, Investigator-FBI Detail Leader

                        Becky Chan, Investigator

                      Jeffrey Harris, Investigator

                    Steven Hendershot, Investigator

                       James Kunkel, Investigator

                       Kelli Sligh, Investigator

                     Vo ``Ben'' Tran, Investigator

                            C O N T E N T S

    1. Preface...................................................     1
    2. Procedural Background and Overview........................     5
    3. Summary of Findings.......................................    31
    4. The Thirst for Money......................................    51
    5. The White House Controlled the DNC and Improperly 
      Coordinated the Activities of the DNC and Clinton/Gore '96.   105
    6. The DNC Dismantled Its System for Vetting Contributions...   167
    7. DNC Fundraising in the White House: Coffees, Overnights, 
      and Other Events...........................................   191
    8. Fundraising Calls from the White House....................   499
    9. White House Vetting of Individuals with Access to the 
      President..................................................   751
    10. Johnny Chung and the White House ``Subway''..............   781
    11. The Contribution of Yogesh Gandhi........................   917
    12. Ted Sioeng, His Family, and His Business Interests.......   961
    13. John Huang's Years at Lippo..............................  1117
    14. John Huang at Commerce...................................  1153
    15. John Huang Moves from Commerce to the DNC................  1653
    16. John Huang's Illegal Fundraising at the DNC..............  1689
    17. The Hsi Lai Temple Fundraiser and Maria Hsia.............  1749
    18. The China Connection: Summary of Committee's Findings 
      Relating to the Efforts of the People's Republic of China 
      to Influence U.S. Policies and Elections...................  2499
    19. Charlie Trie's and Ng Lap Seng's Laundered Contributions 
      to the DNC.................................................  2517
    20. Charlie Trie's Contributions to the Presidential Legal 
      Expense Trust..............................................  2711
    21. The Saga of Roger Tamraz.................................  2905
    22. DNC Efforts to Raise Money in the Indian Gaming Community  3071
    23. The Hudson, Wisconsin Casino Proposal....................  3165
    24. The Cheyenne and Arapaho Tribes: Their Quest for the Fort 
      Reno Lands.................................................  3547
    25. The Offer of R. Warren Meddoff...........................  3623
    26. White House, DNC and Clinton-Gore Campaign Fundraising 
      Efforts Involving the International Brotherhood of 
      Teamsters..................................................  3655
    27. Compliance by Nonprofit Groups with Committee Subpoenas..  3833
    28. Role of Nonprofit Groups in the 1996 Elections...........  3993
    29. Allegations Relating to the National Policy Forum........  4195
    30. White House Document Production..........................  4277
    31. DNC Document Production..................................  4425
    32. Campaign Finance Reform Issues Brought to the Forefront 
      by the Special Investigation...............................  4459
    33. Recommendations..........................................  4503

                            Additional Views

    34. Additional Views of Chairman Fred Thompson...............  4511
    35. Additional Views of Senator Susan Collins................  4535
    36. Additional Views of Senator Arlen Specter................  4539
    37. Additional Views of Senator Robert Bennett...............  4545

                             Minority Views

    38. Additional Views of Senators Glenn, Levin, Lieberman, 
      Akaka, Durbin, Torricelli and Cleland......................  4557
    39. Additional Views of Senator Glenn........................  9507
    40. Additional Views of Senator Levin........................  9511
    41. Additional Views of Senator Lieberman....................  9525
    42. Additional Views of Senator Akaka........................  9559
    43. Additional Views of Senator Durbin.......................  9565
    44. Additional Views of Senator Torricelli...................  9571

  The Cheyenne and Arapaho Tribes: Their Quest for the Fort Reno Lands


    The Committee investigated the circumstances surrounding 
contributions totaling $107,000 that the Cheyenne and Arapaho 
Tribes of Oklahoma (``C/A'' or ``tribes'') made to the DNC in 
1996. The bulk of the contributions, approximately $87,000 
worth, was made shortly after two C/A representatives attended 
a June 17, 1996 luncheon at the White House, where they were 
afforded an opportunity to speak to President Clinton about a 
long-standing tribal land claim (to the Fort Reno lands in 
Oklahoma, described below). On March 13, 1997, following media 
accounts that discussed the stark poverty of the tribes and 
raised questions about the source of the money used for the 
contributions, the DNC returned all of the C/A contributions.
    The Committee interviewed and deposed witnesses and 
reviewed documents and other materials in connection with its 
investigation, but public hearings were never held. The 
Committee's work was hampered by a lack of access to key 
witnesses. First, the four most knowledgeable tribal 
representatives were initially cooperative with the Committee's 
investigation but later asserted their Fifth Amendment 
privilege against self-incrimination and would not testify 
under oath without a grant of immunity. The Committee was thus 
unable to depose these crucial witnesses, who were: Charles 
Surveyor, the tribal chairman, Archie Hoffman, the tribal 
secretary, Tyler Todd, the tribal governmental affairs advisor, 
and Rick Grellner, a tribal attorney. Although the Committee 
respected these witnesses' invocation of the privilege, it is 
doubtful they invoked it in good faith. Their immunity proffer 
disclosed no discernible basis for a criminal prosecution. 
Moreover, their assertion appeared to contain a large measure 
of gamesmanship. Through their attorney, they originally 
asserted the privilege unconditionally. Then, the assertion was 
lifted as to the Committee's hearing subpoenas, provided that 
the witnesses could select who among them would testify and 
provided they could make a long speech at the start of their 
testimony. Then, when it was too late for the Committee to call 
them, they dropped their conditions with respect to the hearing 
subpoena but not the deposition subpoena.1
    \1\ Early on, the tribal representatives cooperated with the 
investigation, and they were asked to appear voluntarily for a 
deposition. They agreed but then at the eleventh hour asserted their 
Fifth Amendment privilege and declined to testify. See Conference--
Proposed Depositions, Sept. 15, 1997, pp. 6-7. The Committee then 
served deposition and hearing subpoenas on Hoffman, Todd, Grellner, and 
Surveyor, and the witnesses all asserted their Fifth Amendment 
privilege in response to both the hearing and deposition subpoenas. See 
Letter from Barry Coburn to John H. Cobb, Sept. 16, 1997. (Ex. 
1)(asserting privilege for purposes of deposition). The witnesses never 
withdrew their assertion of the privilege regarding the deposition 
subpoenas, and only withdrew their privilege with respect to the 
hearing subpoenas on Oct. 30, 1997, the last day of the Committee's 
public hearings.
    Second, despite repeated attempts, the Committee was unable 
to secure the voluntary testimony of Michael Turpen, a former 
attorney general of Oklahoma who was retained by the C/A to 
help lobby on their behalf. Turpen was a crucial fact witness, 
a point Committee staff made often to him and his attorney. 
According to the tribe, Turpen helped solicit their DNC 
contributions and invited them to attend the June 17, 1996 
White House luncheon. In one news account, Archie Hoffman, the 
tribal secretary, stated, ``Turpen said give $100,000; he said 
that's the way you gotta work.'' 2 The Committee 
repeatedly sought Turpen's cooperation, but he gave very little 
despite many representations that he would. Like the tribal 
representatives, Turpen seemed to game the Committee for his 
own purposes, giving assurances of cooperation outwardly while 
never really intending to do so.3
    \2\ Sue Schmidt, ``Tribes Disappointed After Gifts to DNC,'' 
Washington Post, March 10, 1997, p. A1.
    \3\ The Committee's fruitless dealings with Turpen are briefly 
summarized in Ex. 2. Letter from John H. Cobb to C.S. Lewis, Nov. 7, 
1997 (Ex. 2).
    Much of the tribes' story was presented to the Committee in 
a series of staff interviews of tribal representatives 
conducted in August and September 1997.4 Except 
where otherwise noted, the information contained in the 
discussion below was provided by the tribal representatives 
during those interviews.
    \4\ Separately, the tribes's attorney gave the Committee a detailed 
oral proffer on September 15-16, 1997, largely duplicating information 
that the tribal representatives had provided the Committee during the 
earlier interviews and also had provided to the press. The Committee 
did not formally consider an offer of immunity for the four tribal 
representatives who invoked the Fifth Amendment.
    Despite the limited cooperation of key witnesses, the 
Committee gathered enough facts to reach the following 
conclusion. This chapter in the DNC's 1996 fund-raising efforts 
is among the most sordid. In brief, Democratic fund-raisers led 
the tribes, who were politically naive, to believe that making 
a large contribution would secure them the long-sought Fort 
Reno lands. The tribes made contributions to the DNC, received 
encouragement about their land claim from many quarters, 
including the President himself, but ultimately received 
nothing. The tribes then fell into the hands of a series of 
Democratic operators, who attempted to pick their pockets for 
legal fees, land development fees, and additional 
contributions. The fleecing stopped only when several 
unflattering press accounts ran regarding the tribes' plight.

            Background and the Decision to Donate to the DNC

    The C/A have aggressively pursued their claim to the Fort 
Reno lands for several years.5 In 1994 and 1995, the 
tribes contacted the Departments of Interior and Agriculture, 
seeking assistance in obtaining the land. The tribes made 
little apparent progress with the agencies, however, and grew 
frustrated. Their frustration was compounded by the widespread 
opposition of the entire Oklahoma congressional delegation to 
the Fort Reno claim.6 By late 1995, the tribes were 
ready to try another approach and hired Michael Turpen, a 
former Oklahoma attorney general, to lobby on their behalf. 
Turpen came to the C/A's attention through Tyler Todd, an 
advisor to the tribal business committee. Turpen set up 
meetings in Washington with relevant administration officials 
regarding the Fort Reno lands, accompanying the C/A to 
Washington on two different occasions in early 1996. In 
addition, Turpen wrote a senior White House official, Mack 
McLarty, in March 1996, seeking his help with the Fort Reno 
    \5\ The Fort Reno lands are located near the C/A tribal complex in 
west Oklahoma. The land is held by the federal government, which 
operates an agricultural research center there. The land apparently has 
valuable oil and gas reserves.
    \6\ Although Democrats and Republicans alike in the Oklahoma 
delegation expressed opposition for their claim, the tribes took 
special exception to Senator Don Nickles and Congressman Frank Lucas 
and ran a series of television ads against them.
    \7\ Letter from Michael C. Turpen to Mack McLarty, Mar. 18, 1996 
(Ex. 3).
    Throughout this time, Turpen was also a top Oklahoma fund-
raiser for the Democratic Party and Clinton/Gore 
'96.8 In early 1996, he first mentioned that the 
tribes should get involved in the ``process'' and make a 
contribution to the DNC. He told them at least once that in 
order for the tribes to be noticed, such a contribution should 
be ``six figures.'' Over the course of several weeks in the 
spring of 1996, the tribal leaders decided that they should 
contribute to the DNC as a means of ``getting heard'' on their 
land claim.
    \8\ The tribal representatives thought Turpen was the Oklahoma 
Chairman of Clinton/Gore '96. However, Jason McIntosh, a former DNC and 
Clinton/Gore official who knows Turpen well, was not aware of any 
official title Turpen held in 1996 with the campaign. McIntosh 
identified Turpen as a leading Democratic fund-raiser in Oklahoma. 
Deposition of Jason McIntosh, Oct. 29, 1997, p. 15.
    In May 1996, several tribal representatives, including 
Surveyor, Todd, Grellner, and perhaps others, met with Turpen 
in his law office. The tribes informed Turpen that they had 
decided to contribute $100,000 to the DNC. Turpen, who was 
pleased, promptly called Jason McIntosh, an official at 
Clinton/Gore '96 and an old friend of his. Turpen put McIntosh 
on the speaker phone with the tribal representatives and 
explained that the tribe would be contributing $100,000 to the 
DNC.9 Tribal representatives recall Turpen noting 
that the contribution would make the tribes the largest DNC 
donor in Oklahoma. During that call, the tribes and Turpen also 
discussed the Fort Reno land claim with McIntosh.
    \9\ Id. at p.22.
    Turpen and McIntosh also discussed whether the tribes could 
afford the contribution. McIntosh apparently asked Turpen 
whether the C/A had sufficient funds to cover the contribution, 
to which Turpen replied, ``Well, my check cleared,'' meaning 
his initial $5,000 retainer payment for representing the C/
A.10 Sometime after the call, McIntosh provided 
wiring instructions to Turpen so that the tribes could wire 
their donation directly to the DNC.11
    \10\ The tribe paid Mr. Turpen at least $10,000 for his lobbying 
services. Tribal Resolution No. 052296S113, May 22, 1996 (Ex. 4). The 
tribe produced one bill from Turpen that shows some of this lobbying 
work on their behalf. Bill from Riggs, Abney, et al. May 2, 1996 (Ex. 
    \11\ McIntosh deposition, p.25.
    Several days later, on June 13, 1996, Turpen called 
Grellner, telling him words to the effect, ``You have decided 
to give $100,000 to the DNC. As a result, you will be invited 
to a lunch with President Clinton at the White House on June 
17, 1996.'' The tribe was ecstatic, although they did not know 
how exactly their invitation came to pass. Neither Turpen nor 
McIntosh had mentioned a luncheon or any other meeting with 
President Clinton previously. Turpen made it clear that two 
tribal representatives could attend the lunch.
    In his deposition, McIntosh indicated that Turpen extended 
the luncheon invitation to the C/A at his own initiative. 
Turpen had been invited to the luncheon, which was set up 
through the DNC and the White House political affairs office. 
Turpen asked McIntosh if two tribal representatives could be 
substituted in his place, and McIntosh passed along the request 
to the DNC and White House, which acceded.12 
McIntosh testified that the tribes's pledge to contribute 
$100,000 ``possibly . . . helped them a great deal'' in 
receiving an invitation to the June 17 luncheon.13
    \12\ Id. at pp. 28-32.
    \13\ Id. at p. 33.

 The June 17, 1996 Luncheon and Encouragement Regarding The Fort Reno 
                               Land Claim

    On June 16, 1996, four tribal representatives, Surveyor, 
Todd, Hoffman, and Grellner, traveled to Washington for the 
luncheon. They chose Surveyor and Todd to attend the White 
House event. The next morning (the day of the luncheon), they 
recall meeting with McIntosh at the DNC 
headquarters.14 Shortly after they arrived at the 
DNC, they remember McIntosh asking them, ``Did you bring the 
check?'' They explained that they had not but that they would 
wire the money as soon as they returned to Oklahoma. McIntosh 
did not seem upset.15 McIntosh recalls simply 
inquiring about whether they had encountered any difficulty in 
wiring their contribution, since he had provided the wiring 
instructions earlier.16
    \14\ McIntosh recalls the meeting taking place at Clinton/Gore's 
headquarters, where McIntosh worked at the time. McIntosh deposition, 
p. 38.
    \15\ In one Committee interview, Grellner indicated that McIntosh 
was in fact upset.
    \16\ McIntosh deposition, pp. 41-42.
    The C/A did not bring a contribution to the DNC because 
there had been dissent among the tribal business committee 
members, the tribal decision-making body, over whether to make 
the contribution. Surveyor and Todd and others favored making 
the contribution; but Robert Tabor, the committee treasurer, 
was not fully sold on the idea. Thus, the C/A came to the DNC 
on June 17 empty-handed.
    Before they left for the luncheon, McIntosh showed the four 
around the offices and struck up some small talk. Eventually, 
McIntosh took them to meet Terry McAuliffe. According to the 
tribes, McIntosh said McAuliffe had raised $40 million so far, 
and McIntosh told McAuliffe that the C/A was now the largest 
donor in Oklahoma.
    McAuliffe then took Surveyor and Todd to the White House 
for the luncheon.17 The group entered the White 
House through the East Gate and were taken to a small room, 
where five or six guests were already waiting. They were 
eventually joined by other guests, including McAuliffe, 
President Clinton, and a photographer. The luncheon consisted 
mainly of small talk, but towards the end of the luncheon, the 
guests were invited (prompted perhaps by McAuliffe) to speak 
briefly to President Clinton about whatever was on their minds. 
Surveyor and Todd have an imprecise recollection of what others 
said, but remember discussions about retirement benefits, 
railroads, and a publishing chain. Todd declined to speak, in 
deference to Surveyor, the tribe's top elected official. 
Surveyor was seated to President Clinton's immediate left, and 
he spoke last and apparently at much greater length than the 
other guests. He talked first generally about matters of 
concern to Native Americans, discussing health care funding, 
education, and the like.
    \17\ The White House political office prepared a briefing 
memorandum for the June 17th luncheon that described the event and the 
participants. Memorandum, Democratic National Committee Presidential 
Luncheon, June 16, 1996 (Ex. 6). McIntosh helped draft the portion that 
discussed Surveyor and Todd. McIntosh deposition, p. 36.
    Surveyor then spoke about the Fort Reno lands. He described 
the situation to President Clinton and noted that since the 
land was taken by executive order in the 1880s,18 
perhaps President Clinton could arrange the return of the land 
by a new executive order. President Clinton turned to an aide 
who was taking down notes and asked, ``Do we have anything on 
Fort Reno?'' and the aide replied affirmatively.19 
Without recalling President Clinton's exact words, Surveyor and 
Todd recount that the President said something like, ``We will 
look into it and see if anything can be done about it, and 
we'll see what we can do.'' They did not take this to be a 
binding promise to return the land, but they were quite 
heartened by the President's comment.
    \18\ The tribes received $15 million from the United States in 
settlement of their land claims. See Cheyenne-Arapaho Tribes v. United 
States, 16 Ind. Cl. Comm. 171 (1965).
    \19\ The tribes have a standard Fort Reno information packet that 
they had given to McAuliffe earlier and surmise that McAuliffe's copy 
ended up with the aide.
    Surveyor and Todd walked out of the luncheon with McAuliffe 
and others. McAuliffe told them, ``If the President says he'll 
do something, he'll do it.'' McAuliffe, in his Committee 
deposition, could not recall any conversation between President 
Clinton and Surveyor, and he did not recall speaking with 
Surveyor or Todd after the luncheon about the Fort Reno 
    \20\ Deposition of Terrance McAuliffe, Sept. 18, 1997, p. 29.
    Of interest to the Committee is whether the words of 
encouragement spoken by President Clinton or McAuliffe might 
have helped induce the tribes to consummate their DNC 
contributions. Because the Committee has not received sworn 
testimony from the tribal representatives, it is difficult to 
parse what exactly they were told, or how they might have 
viewed what was said to them. However, the tribes provided the 
Committee with tapes of two contemporaneous tribal business 
committee sessions--held on June 20 and July 3, 1996--in which 
committee members discussed the decision to contribute to the 
DNC. As the following excerpts from the tapes reveal, it is 
clear the tribes believed that their discussion with President 
Clinton was made possible only by contributions and that the 
discussion with the President would lead to the return of the 
land: 21
    \21\ The Committee transcribed the tapes and gave transcripts to 
counsel for the tribes, with the understanding that the tribes would 
identify the voices on the transcripts and provide the Committee 
annotated versions of the transcripts. The tribes never provided such 
annotated versions, however. Thus, the voice identification made above 
was performed by Committee staff, based on staff`s familiarity with the 
voices of some of the business council meeting attendees. Unidentified 
voices are denoted ``speaker.''

    Todd: Mr. [Surveyor] brought up all of our issues, and the 
President listened very intently, and the secretary took all of 
the notes, and he made certain she had everything.
    Surveyor: It was mostly on Fort Reno what I was talking 
about. And at the last, I told him how it was taken and if 
there was any way they could get it back the same way, then 
[inaudible]. When I got through talking, he [President Clinton] 
said, ``Well, I think we can help you then.'' He told the 
secretary, ``Do you have it?'' and she said, ``Yes.''
    Speaker: It can be returned by Executive Order?
    Surveyor: Yes.22
    \22\ Excerpted transcript of Tribal Working Session, June 20, 1996, 
pp. 38-39 (Ex. 7).

           *         *         *         *         *

    Speaker: Are you saying you feel that this donation----
    Todd: Well, put it this way----
    Speaker [continuing]: Would enhance the transfer of the 
property from the government to the tribe, Fort Reno?
    Todd: I definitely think so.
    Speaker: What kind of commitment did you get from the 
    Todd: Well, in the first place, you don't go in and make 
deals with the President. We go in and talk to him.
    Speaker: That's what [inaudible] were saying, too. It's 
illegal for the President to make deals.
    Surveyor: Well, there were no deals made to the Cherokees a 
few years back. . . . They donated $150-and-some thousand or 
$200-and-some thousand, right around there, and you can see the 
results. They got everything and are getting everything. That's 
what it comes down to. I hate to say it's that way, but . . . 
that's just the way it goes.23
    \23\ Id. at pp. 41-42.

    Moreover, it is clear from the tapes that the tribal 
representatives thought there was an admission price--$50,000 
per head--for attendance at the luncheon:

    Speaker: Was there a commitment?
    Speaker: Tyler [Todd], was there a commitment?
    Todd: Was there a commitment on what?
    Speaker: From us to the Democratic Party?
    Todd: Uh-huh.
    Surveyor: I believe there was something of a commitment--
again, to meet with the President.
    Speaker: It costs $100,000 to visit the President?
    Speaker: What do you charge, Charles? [Laughter.] 
    \24\ Id. at pp. 55-56. Although, as revealed by the tapes, the 
tribal representatives very clearly believed that their contributions 
would help them obtain Fort Reno, they took a more diplomatic view 
publicly. According to the tribal representatives, the contribution 
caused an uproar in the tribal community, which led Surveyor and Todd 
to issue a press release on June 28, 1996. The press release 
characterized the luncheon as an ``historic'' meeting between Surveyor 
and President Clinton. The press release recounted that Surveyor told 
the President about the Fort Reno land claim but rejected the notion 
that Clinton promised to return the land. News Release of Cheyenne-
Arapaho Tribes of Oklahoma, June 28, 1996 (Ex. 8). Despite their public 
diplomacy, the private, contemporaneous words of the tribal leaders in 
the tape excerpts portray a different belief altogether. Or as poet 
Emily Dickinson once observed: ``The thought beneath/so slight a film/
is more distinctly seen/as laces just reveal the surge/or mists the 

    The tribes' belief that DNC contributions would ultimately 
lead to success regarding the land is corroborated by the 
testimony of Terry Lenzner, a private investigator who met with 
the tribes in May 1997.25 Mr. Lenzner told the 
Committee that the C/A representatives with whom he met 
believed they had been promised favorable action on their land 
claim in exchange for contributions to the DNC:
    \25\ Mr. Lenzner's involvement with the C/A is discussed more fully 

          Lenzner: They [the tribal representatives] say they 
        had been approached by somebody who had worked in the 
        campaign, whose name I can't recall. They had been 
        promised action on the lands. . . . My recollection is 
        that they were promised favorable action, that they 
        were going to get their lands returned in exchange for 
        a donation.26
    \26\ Testimony of Terry Lenzner, July 31, 1997, pp. 56-57.

    In fact, Lenzner, whose firm the DNC had retained to 
investigate foreign money contributions, initially thought the 
tribal representatives wanted him to investigate the DNC for 
the failure to consummate a contributions-for-land quid pro 

          Senator Specter: [Tribal representatives say they 
        were told they would] get their lands returned in 
        exchange for a contribution?
    Lenzner: That's my recollection of what they were telling 
me, and at the time . . . I started wondering whether they were 
asking me to conduct an investigation of this incident. . . . I 
thought there might be a problem with them telling me about it 
in view of the Democratic National Committee work we are 
currently doing.27
    \27\ Id. at pp. 57-58.

Lenzner's conflict of interest concerns passed, however, when 
the tribes made clear that the target of the investigation in 
which they might be interested was not the DNC.

          the tribes donate approximately $107,000 to the dnc

The first contribution ($87,000)

    Immediately after the White House luncheon, the C/A were 
called with some frequency by Turpen and McIntosh, an effort 
the C/A viewed as dunning the tribes into making good on their 
contribution pledge. They remember Turpen making the first call 
on June 20 and expressing irritation about the tribes not 
contributing $100,000 before the luncheon event. Turpen 
insisted that the tribes pay the DNC immediately. According to 
tribal representatives, McIntosh then placed several calls 
starting on June 24, 1996 (usually to Grellner, the tribal 
attorney), which became increasingly aggressive in tone. In his 
deposition, McIntosh explained that Turpen had merely asked him 
to ``coordinate'' with the C/A and ensure that the contribution 
came through.28 McIntosh testified that he had 
numerous conversations with Grellner about the 
contribution.29 However, McIntosh said that the 
calls were frequently occasioned by Grellner's indications that 
the money had been transferred, when the money in fact had 
    \28\ McIntosh deposition, p. 43.
    \29\ Id. at p. 45.
    \30\ Id. at pp. 139-40.
    The C/A business committee met to discuss the contribution 
on June 20, 1996. Although no formal resolution authorizing the 
contribution was passed, Surveyor, Todd, Hoffman, and Grellner, 
having determined that the business committee informally 
expressed sufficient support, wired a contribution to the DNC 
on June 26, 1996 for $87,671.74.31 That amount 
represented all of the money in the C/A's bank account. The 
money for the contribution was derived from a bingo hall owned 
by the tribes.32 Although the hall is not 
profitable--it has incurred millions in losses since opening--
the C/A receive a monthly $5,000 payment from the entity that 
manages the bingo hall on their behalf. The tribes had intended 
to contribute the full $100,000 pledged to the DNC, but there 
was a shortfall in the bank balance.
    \31\ Wire transfer, Boatmen's First National Bank of Oklahoma, June 
26, 1996 (Ex. 9).
    \32\ Memorandum from Tyler Todd to Charles Surveyor, April 23, 1997 
(Ex. 10).
    The tribes played a bit of a shell game internally in order 
to make the June 26th contribution. The business council 
treasurer, Robert Tabor, opposed the idea of a contribution and 
wanted nothing to do with it. To get around Tabor's reluctance, 
the money was transferred from the tribal account controlled by 
Tabor and placed into the account of an affiliated entity (a 
business development corporation) from where it was wired to 
the DNC.
    The tribal business committee met again on July 3, 1996 and 
passed a resolution formally approving a $100,000 contribution 
to the DNC.33
    \33\ Tribal Resolution No. 070996S167, July 9, 1997 (and related 
meeting minutes) (Ex. 11).

The second contribution ($20,000)

    Sometime in July, Turpen called the tribe, reminded them 
that they were ``$13,000 short'' on their DNC commitment, and 
suggested that they help host President Clinton's 50th birthday 
celebration in August. Turpen said that hosting the party would 
cost $20,000, and the tribe agreed to do so. The tribe provided 
the funds in a cashier's check 34 to someone at 
Turpen's firm, whom the tribe understood was running the 
Oklahoma portion of the birthday celebration. As with the 
earlier $87,000 contribution, Tabor, the business council 
treasurer, wanted nothing to do with the contribution, so again 
the money was transferred from a tribal account to that of the 
tribal development corporation. The money qualified the C/A as 
a sponsor of a birthday dinner in Oklahoma City that coincided 
with, and was linked up by remote television connection to, the 
main birthday party held at Radio City Music Hall in New York 
in August 1996.35
    \34\ Cashier's check, People's National Bank, August 12, 1996 (Ex. 
    \35\ Invitation to Oklahoma Democratic Rally for President Bill 
Clinton's 50th Birthday (Ex. 13).

                     Where Did the Money Come From?

    At times, the media has described the C/A contributions as 
coming from a tribal ``welfare fund,'' a description resisted 
by tribal representatives who do not like the implication that 
they made large political contributions, which accomplished 
little, at the expense of more basic tribal needs. The source 
of the money also raises the issue of the tribes' poverty. 
Based on its questioning, the Minority appears ready to argue 
that these obviously impoverished tribes are in fact flush with 
    \36\ See McIntosh deposition, pp. 110-14.
    There are several points worth noting in this regard. 
First, while the Committee has undertaken no effort to 
determine the actual poverty level of the C/A, it is fair to 
say that they are very poor. The unemployment rate among tribal 
members is 62%, and two-thirds of tribal members receive public 
assistance.37The average per capita income is 
approximately $6,000 per year.38The tribal 
representatives consider their people's financial condition to 
be desperate, and indeed, one reason obtaining Fort Reno is 
important to them is the economic self-sufficiency that 
judicious development of the land promises. In fact, when the 
business council was debating the DNC contributions, during a 
July 1996 meeting, the tribes' poverty was noted frankly:

    \37\ Michael Grunwald, ``Modern Promises, Old Betrayal,'' The 
Boston Globe, Jan. 18, 1998, p. A1.
    \38\ Id.

          Speaker: $100,000, that is not a lot to the people up 
        there playing big politics, but for us it's a lot of 
        money, and that, from what I gather, practically almost 
        bankrupts us. It puts our capital way down there low. . 
        . Historically, we have a tough time making it, and the 
        bills start coming in--bills, bills, 
    \39\ Transcript of Tribal Working Session, July 3, 1996, p. 43 (Ex. 

    Second, while the account from which the money is drawn 
does not appear to be a specially-earmarked welfare fund, it is 
frequently used to pay for such things as funeral costs, 
heating bills, and general assistance for needy tribal members. 
When the DNC returned the contribution in March 1997, the 
tribes took the money and used it for buses to transport the 
elderly and infirm, a Head Start program, and emergency 
    The DNC returned the tribes' contributions on March 13, 
1997, expressing concern that the contributions might have 
``come from their welfare fund.'' 40 The DNC, 
moreover, refunded the contribution to dispel the ``link in the 
minds of the Tribe's members that they needed to give this 
money in order to be heard on an official government matter.'' 
41 Such a link, of course, is exactly what Turpen 
placed in the minds of the C/A when they were considering 
whether to contribute. Ironically, the tribes were offended 
that the DNC returned the money, thinking that the gesture 
meant their money was not good enough for the Democratic party.
    \40\ DNC Press Release: ``DNC Returns Cheyenne-Arapaho Tribal 
Donation,'' Mar. 13, 1997 (Ex. 15). See also Letter from B.J. 
Thornberry to Charles Surveyor, Mar. 13, 1997 (enclosing contribution 
refund) (Ex. 16).
    \41\ Id.

       Other Political Events Attended by Tribal Representatives

    For a brief time in 1996, the C/A's sizeable contributions 
secured them invitations to several DNC-related events. Those 
     In August 1996, Surveyor attended a reception at 
the Vice President's residence. His attendance was arranged by 
an attorney at Turpen's firm.
     In August 1996, Todd attended a dinner with Vice 
President Gore at a Washington hotel, an event to thank the 
sponsors of the ``remote'' birthday celebrations for President 
Clinton. Todd sat at the same table with Vice President Gore, 
who at one point told the table that if anyone needed anything, 
they should contact Mitchell Berger, a prominent fund-raiser 
also seated there.42
    \42\ Several weeks after the dinner, in October 1996, Tyler Todd 
did call Berger, telling him about some planned federal budget cuts to 
an Indian AIDS program. Berger was very responsive, reciting a list of 
Administration officials he would contact. Many of these officials 
subsequently called Todd to discuss the funding issue. Funding for the 
program was later restored. For his part, Berger contacted Todd around 
December 1996, and asked for a $25,000 contribution to the inaugural, 
which the tribes declined. Berger solicited contributions several 
times, once saying that, ``you [C/A] owe us money.'' For more on 
Berger, see the section of this report on R. Warren Meddoff.
     In August 1996, Surveyor, Todd, and Grellner 
attended the Democratic National Convention.
     On October 18, 1996, DNC Chairman Don Fowler 
visited the tribal complex in Oklahoma.43
    \43\ Don Fowler's Briefing Material for Cheyenne-Arapaho Meeting, 
Oct. 18, 1996 (Ex. 17).

                     Nathan Landow and Peter Knight

    As November and December 1996 wore on, the C/A grew 
restless. They had seen no progress regarding Fort Reno and 
little benefit from their contributions. In fact, the only 
tangible result of their DNC contributions was more 
solicitations from various Democratic fund-
raisers.44 A series of contacts would lead them to 
Nathan Landow, a wealthy Maryland area real estate developer 
who is a longtime supporter of Vice President Gore and the 
DNC,45 and to the law firm where Peter Knight, 
Landow's friend, practiced. Knight, a former Gore aide, is a 
prominent political fund-raiser who chaired Clinton/Gore '96.
    \44\ The fundraisers they mentioned to the Committee were Nathan 
Landow, Mitchell Berger, and Mary Pat Bonner. Tribal representatives 
also told Copperthite about solicitations from these individuals. 
Deposition of Michael Copperthite, Aug. 27, 1997, pp. 29-33. Although 
Landow could not recall soliciting the tribes, he recalled speaking to 
Berger and Bonner, both of whom indicated that they had solicited the 
tribes for contributions. Deposition of Nathan Landow, Sept. 17, 1997, 
pp. 66-67. Landow said it was ``possible'' but unlikely that he 
solicited the tribes himself for political contributions. Id. at pp. 
    \45\ In late November 1995, Vice President Gore successfully 
solicited Landow by phone for a $25,000 DNC contribution. Landow, 
according to the Vice President's notes, replied, ``You'll have it in 
hand in one hour.'' DNC Finance Call Sheet, Nov. 27, 1995 (Ex. 18).
    The path to Landow and Knight went through Michael 
Copperthite, a Democratic political consultant. In 1996, 
Copperthite managed the successful campaign of Arkansas 
Congressman Marion Berry, a former administration official the 
tribes had met in earlier rounds of Washington lobbying. 
Copperthite originally contacted Grellner, the tribal attorney, 
in October 1996 to see if the C/A would consider contributing 
to Berry's campaign. Although the C/A did not give money, 
Grellner did contribute $5,000 personally to the Arkansas 
Democratic Party. Grellner also solicited advice from 
Copperthite about the C/A's growing restlessness over Fort 
Reno, and Copperthite agreed to help the tribes. After the 
Berry campaign, Copperthite took tribal representatives around 
Washington, and arranged for them to meet with lobbyists and 
Capitol Hill staffers to discuss the Fort Reno 
lands.46 One of these meetings was with Landow.
    \46\ Copperthite would figure prominently in the C/A's saga from 
November 1996 until late 1997, and he spent many hours trying to help 
them. Early on, Copperthite tried to arrange a fee-splitting agreement 
with Landow regarding the tribe's land. Copperthite deposition, Sept. 
3, 1997, p. 133. Landow rebuffed the idea and, in any event, would part 
company with the tribes in March 1997, as discussed below.
    To the Committee's knowledge, Copperthite has made no other effort 
to be paid for his work with the tribes, apart from occasionally asking 
(but not insisting on) reimbursement of his out-of-pocket expenses. 
Copperthite's methods seem unorthodox, his motivation somewhat 
inscrutable, but he has worked pro bono for the tribes and appears to 
have earned their trust. He was involved in having a bill introduced in 
the House of Representatives during the 105th Congress to convey the 
Fort Reno lands to the tribes.
    Copperthite first took Surveyor, Grellner, and Hoffman to 
meet Landow on November 24, 1996, at Landow's offices in 
Bethesda, Maryland. Copperthite portrayed Landow as someone 
close to Vice President Gore who might be able to help them 
with the Fort Reno claim. According to Landow, Copperthite was 
persistent in asking Landow to meet with C/A representatives, 
and his persistence finally piqued Landow's interest in the 
    \47\ Landow deposition, pp. 20-21.
    At the November 24 meeting, the tribal representatives 
described for Landow their June 17 luncheon with President 
Clinton, and recounted how the President's words encouraged 
them to think there would be favorable action on the Fort Reno 
land. According to the tribes, Landow disputed their account, 
telling them something to the effect, ``That was no meeting. It 
was an appreciation lunch.'' Landow denies having any 
discussion or any knowledge during this time about the tribes' 
White House luncheon.48 The tribes then described 
their land claim. Landow expressed interest preliminarily, and 
explained his view that the tribes needed to proceed on two 
different tracks--one, negotiating with the federal government 
to obtain the land, and two, determining how to develop the 
land once they had it.49 Landow viewed his role as 
that of the developer and thought the tribes needed to find 
legal representation to help with their claim to Fort 
    \48\ Id. at p. 32.
    \49\ Id. at p. 25.
    \50\ Id.
    Landow said he recommended several Washington lawyers and 
law firms to the tribes at the November 24 meeting, including 
specifically Peter Knight of the firm Wunder, Diefenderfer, 
Cannon & Thelen.51 Landow denied that he marketed 
Knight's close relationship with Vice President 
Gore.52 He does recall saying that Knight and his 
firm would take the case only if they felt ``they could be of 
assistance.'' 53
    \51\ Id. at pp. 25-26.
    \52\ Id. at p. 36.
    \53\ Id. at pp. 40-41.
    The tribes recall Landow's characterization of Knight quite 
differently. They remember Landow explicitly touting Knight's 
close relationship to Vice President Gore and claiming that 
Knight's relationship to the Vice President would improve the 
tribes's likelihood of prevailing on Fort Reno. They also 
recall Landow saying that Knight would only take the case if 
``he could deliver.'' Thus, the tribal representatives were 
quite pleased when Landow called Rick Grellner the night of the 
24th, and told him representatives of Knight's firm wanted to 
meet them the next day. They related this news to 
Copperthite.54 In fact, shortly after the initial 
meeting with Landow ended, Landow called Grellner at Grellner's 
hotel, and directed Grellner to describe the Fort Reno claim 
over the phone to an associate at Knight's law firm, Jody 
Trapasso. They arranged to meet with Trapasso the next day and 
discuss the matter further.
    \54\ Copperthite deposition, Aug. 27, 1997, p. 46.
    The November 25 meeting was held at the Wunder, 
Diefenderfer offices, attended by Grellner, Surveyor, Landow, 
and Trapasso. Grellner described for Trapasso and Landow 
various ways the federal government could return the land to 
the tribes. Without committing, Trapasso indicated that the 
firm would ``take a look at it.'' Landow told Surveyor and 
Grellner that fees would have to be ``worked out.'' According 
to the tribes, Landow also solicited them for a contribution to 
a Gore 2000 Committee. Landow described that such a committee 
was being set up, and the tribe, without making a firm 
commitment, indicated they planned to be supportive. In his 
deposition, Landow did not recall ever soliciting the tribes 
for a political contribution.55 Following the 
initial meetings with Landow and Trapasso, there were a series 
of calls between Landow and Grellner, in which Landow talked up 
Knight's connections to the Vice President and indicated that 
although Knight had not decided whether he would take the case, 
it would be a ``great opportunity'' for the tribes if he did.
    \55\ Landow deposition, p. 59. The tribes never contributed in 
response to any solicitations by Landow.
    The C/A were pleased with this turn of events. They viewed 
Landow and Knight as people with sufficient ties to the 
Administration to cause favorable action on the land. As 
explained by Copperthite, ``[the tribes] were pretty ecstatic 
because they now felt . . . their [DNC] contribution, though it 
didn't get them what they initially thought it would, they now 
were meeting the people who could carry forth and help them get 
their land back.'' 56
    \56\ Copperthite deposition, Aug. 27, 1997, p. 40.
    Landow also began sketching out fees, both for himself and 
Knight or Knight's firm. According to the tribes, Landow told 
Grellner that Knight would require a $100,000 payment up front, 
plus $10,000 a month in order to represent them. Landow also 
described his compensation generally and discussed receiving 
commissions based on a percentage of the closing price for any 
future sales of the Fort Reno lands. Landow and Grellner had 
approximately a half dozen conversations about fees in November 
and December 1996. During one of these, Landow unsuccessfully 
solicited a political contribution from the tribes for an 
entity Landow called the ``Tennessee Victory Fund.''
    On January 21, 1997, Surveyor and Grellner met with Landow 
and Copperthite over breakfast at the Willard Hotel in 
Washington. They again discussed Fort Reno and the nature of 
compensation to be paid to Landow and Knight. Landow once 
again, according to the tribes, indicated that Knight's fee 
would be $100,000 up front and $10,000 per month. According to 
Copperthite, Surveyor indicated that because the tribal 
business committee would have to vote out payments to Knight, 
it might be easier simply to pay one lump sum up front, to 
which Landow replied, ``well, then, make it a quarter of a 
million dollars so they can get the ball rolling.'' 
57 They also discussed Landow's fees. At this 
meeting (and perhaps in subsequent phone conversations with 
Grellner), Landow solicited the tribes one more time for a 
political contribution.
    \57\ Id. at p. 44.
    Copperthite has testified that at the close of the meeting, 
Landow told the tribes they should be ready to sign contracts 
with Landow and Knight's firm and have a check in hand to pay 
Knight's firm when everyone next met. Landow explained that 
Knight was ``filling up with clients,'' and thus it was urgent 
to retain Knight soon.58
    \58\ Id. at p. 45.
    A meeting was held on February 4, 1997, at Knight's office. 
The tribes understood that the purpose of the meeting was to 
execute agreements for Knight and Landow, and for the tribes to 
make an initial payment to Knight. Landow, Knight, Grellner, 
Copperthite, and Trapasso all attended. Surveyor was supposed 
to attend but did not, which became a matter of contention.
    Copperthite and Grellner arrived at the offices and waited 
for approximately 45 minutes while Knight, Landow, and Trapasso 
met privately. That group then joined Copperthite and Grellner. 
Grellner apologized for Surveyor's absence, and informed the 
group that while the tribes remained very willing to retain 
Knight, no tribal resolution had yet been passed approving the 
representation. Grellner also asked for more specifics about 
Landow and Knight's compensation.
    The fact that the tribes were not ready to consummate a 
deal with Landow and Knight's firm incensed Landow. He asked 
Knight and Trapasso to leave the room and then ripped Grellner 
and Copperthite for not having Surveyor present, for not having 
a check to pay to Knight's firm, and for not being able to sign 
a deal that day. Grellner and Copperthite both recollect an 
abusive, profanity-strewn tirade from Landow, one Copperthite 
described as ``Teamster-esque.'' 59 Grellner and 
Copperthite then recount two things happening. First, Landow 
``dictated'' the terms of a contract, which Grellner wrote 
down, later preparing a draft based on what Landow required. 
The contract addressed compensation for both Knight's firm and 
Landow.60 The terms dictated by Landow included: 
$100,000 up front to Knight's firm, with $10,000 monthly 
payments; and for Landow, 10% of any settlement price for 
development of the land and 10% of any revenue from gas or oil 
    \59\ Id. at p. 57.
    \60\ Id. at pp. 54-61.
    Second, Landow threatened the C/A. He told Grellner and 
Copperthite that if they failed to reach an agreement as 
specified by Landow, he would make sure the tribes never 
obtained the Fort Reno lands. At one point, according to both 
Copperthite and Grellner, Landow told them something like, ``If 
you don't do this deal, I will fuck you.'' 61
    \61\ Id. at p. 61.
    It should be noted that Landow takes issue with at least 
some of Copperthite and Grellner's characterization of his 
meeting with them on February 4, 1997. Landow concedes that he 
expressed anger at Copperthite and Grellner because Landow 
thought the purpose of the meeting was to reduce to writing 
agreements involving Landow, the tribes, and the Wunder, 
Diefenderfer firm regarding Fort Reno.62 Landow also 
concedes that he ``suggested'' terms and conditions for an 
agreement between him and the tribes,63 but he 
denies threatening them.64
    \62\ Landow deposition, pp. 79-80, 88.
    \63\ Id. at pp. 84-85.
    \64\ Id. at p. 88.
    Whatever impression Landow thought he left, Grellner sent 
him on February 14, 1997 a proposed ``Consulting Services 
Agreement'' to be signed by the tribes, Landow, and 
Knight.65 The draft agreement reflected Grellner's 
understanding of what Landow dictated during the February 4 
meeting. It provided that Knight and Wunder, Diefenderfer would 
represent the tribes in pursuing the Fort Reno lands and that 
the firm would be paid $100,000 in advance and $10,000 per 
month for its services. It also granted Landow a 
``contingency'' fee of 10% of the settlement price on any real 
estate development on the property, and a 10% ``net working 
interest'' in any oil and gas production 
developed.66 Several days later, Landow sent 
Surveyor a revised agreement that contained essentially 
identical compensation terms but modified other terms of the 
agreement. Landow indicated the tribes would need to contract 
separately with Knight's firm.67
    \65\ Consulting Services Agreement, undated (Ex. 19).
    \66\ Id. The press has reported that Fort Reno sits atop oil and 
gas reserves worth millions of dollars. Don Van Natta, ``Where Tribes 
Saw Promise, Democrats Saw Pledge,'' The New York Times, Aug. 12, 1997, 
p. A1.
    \67\ Letter from Nathan Landow to Charles Surveyor, March 4, 1997 
(with enclosed ``Cheyenne Arapaho-Landow Consulting Agreement'') (Ex. 
    Landow disclaimed having any role in negotiating the terms 
of a representation agreement between Wunder, Diefenderfer and 
the tribes.68 However, Landow had several 
discussions in early 1997 with two attorneys at Knight's firm, 
Ken Levine and Jody Trapasso, about the firm representing the 
tribes, and he admits being ``made aware'' of the fee 
arrangement under negotiation.69 Landow and Levine 
also sent each other copies of the proposed agreements they 
sent the tribes in response to the February 14, 1997 
    \68\ Landow deposition, pp. 52-53.
    \69\ Id. at pp. 54, 78, 96.
    \70\ Id. at pp. 111-12.
    Curiously, Knight told the Committee that by the February 
4, 1997 meeting, he had decided not to represent the tribes and 
assumed Trapasso had relayed that decision to 
Landow.71 Knight, however, noted that other firm 
attorneys (Trapasso and Levine) were continuing to discuss the 
possibility of representing the tribes. Moreover, as late as 
March 4, 1997, Levine was still indicating that Knight would be 
involved in the firm's representation.72
    \71\ Deposition of Peter Knight, Sept. 17, 1997, p. 171.
    \72\ Letter from Kenneth Levine to Charles Surveyor, Mar. 4, 1997 
(Ex. 21).
    Landow did not speak with the tribes again after sending 
his March 4 proposal. The Washington Post ran an unflattering 
story on March 10, 1997 about Landow's dealings with the 
tribes,73 a development that ended the proposed 
consulting arrangement. The tribal representatives told the 
Committee that while they were serious about the terms of the 
proposed Wunder, Diefenderfer representation, Surveyor would 
never have agreed to the consulting terms proposed by Landow, 
which Surveyor considered excessive.74
    \73\ Not long after negative press stories broke, Landow wrote an 
apology to Knight. Letter from Nathan Landow to Peter and Gail Knight, 
Mar. 21, 1997 (Ex. 22).
    \74\ As a postscript, the C/A business committee secretary, Archie 
Hoffman, noted during an early visit to Landow's office that Landow 
possessed a Sioux war bonnet containing golden eagle feathers, an 
apparent violation of federal laws prohibiting such possession. Hoffman 
reported Landow to the U.S. Fish and Wildlife Service, which commenced 
an investigation. See Richard Tapscott, ``Maryland Developer to Donate 
Indian Headdress to Museum,'' Washington Post, Dec. 3, 1997, p. C3.

                              Cody Shearer

    Several weeks after completing their dealings with Landow 
and Knight, the C/A encountered another figure whose interest 
in them they would come to regret. In the spring of 1997, an 
acquaintance of Tyler Todd's, Al Cilella, offered to put the C/
A in touch with someone in Washington named Cody Shearer, whom 
Cilella said could help them. Through Cilella, several tribal 
representatives--Todd, Hoffman, Surveyor, Grellner, and Bob 
Musgrove--first met Shearer on May 8, 1997.
    In his Committee deposition, Shearer describes himself as a 
freelance journalist. He has also touted himself in a Website 
as having been ``involved in a series of backchannel operations 
for President Clinton,'' including brokering the peace in 
Bosnia and opening negotiations between Syria and 
Israel.75 Nevertheless, Shearer says that it was 
only his journalistic interest, not an interest in helping the 
Clinton administration, that drew him to meet with the tribes. 
Cilella, an occasional source of news tips for Shearer, simply 
informed him that the C/A had an interesting story, and 
according to Shearer, all Shearer did was follow 
    \75\ Webpage for Institute for International Mediation and Conflict 
Resolution, undated (Ex. 23). After posting these claims on the Web for 
18 months, Shearer has edited them out in a revised webpage. He 
indicated the claims were false in his Committee deposition. Deposition 
of Cody Shearer, Sept. 16, 1997, pp. 61-64.
    \76\ Shearer deposition, pp. 11-13.
    The initial May 8, 1997 meeting took place at lunch in a 
Capitol Hill restaurant. Although Shearer testified that his 
journalistic interest quickly abated when he sized up the 
tribal representatives at lunch, he nevertheless invited them 
to his house later that day.77 Shearer recounted 
politely hearing the tribes out and being anxious to shoo them 
from his house. In contrast, the tribes recall Shearer bragging 
about his ties to the Clinton administration 78 and 
indicating that he could take the tribes's plight ``to the 
top,'' meaning President Clinton. According to the tribes, 
Shearer played them a videotape greeting to Shearer's parents 
from President Clinton and the First Lady. According to the 
tribes, Shearer also said that he would mention the Fort Reno 
matter directly to President Clinton or the First Lady over the 
upcoming Memorial Day weekend. Shearer recalls making no such 
    \77\ Id. at pp. 16-17.
    \78\ Shearer's brother in law is Strobe Talbott, the Undersecretary 
of State; his brother is Derek Shearer, the U.S. Ambassador to Finland; 
Shearer's sister, Brooke, is a political appointee at the Interior 
Department. Id. at pp. 8-9.
    \79\ Id. at pp. 31-32, p. 73.
    The tribes related their anger about Senator Nickles's 
opposition to Fort Reno reverting to the C/A, so Shearer 
suggested that the tribe contact an investigator acquaintance 
of his, Terry Lenzner of the Investigative Group International 
(IGI). Shearer recommended that the tribes retain IGI to try 
and locate unfavorable information on Senator Nickles to use as 
possible leverage in the future.
    Shearer arranged a meeting the next day, May 8, 1997, at 
IGI. Lenzner and a colleague attended. The tribes stated their 
suspicions that Senator Nickles' opposition to giving Fort Reno 
to the C/A might involve oil and gas interests.80 
Lenzner offered to investigate Nickles, his wife, and family 
businesses, and a proposed investigative work plan was sent to 
the tribes.81
    \80\ The tribes have never offered any proof of this, and the 
Committee has seen none whatsoever.
    \81\ Letter from Terry Lenzner to Richard Grellner, May 12, 1997 
(Ex. 24). In addition to having been hired by the DNC (see above), 
Lenzner was also retained by the Presidential Legal Expense Trust 
(``PLET'') to investigate the source of Charlie Trie's PLET 
contributions. See section of the report regarding PLET.
    Both Majority and Minority Members observed what an 
outrageous proposal this was. When Lenzner attempted to liken 
the proposed investigation to campaign-related ``opposition 
research'' (itself a troubling manifestation of modern 
politics), Members had this to say:

    Senator Specter: [Senator Nickles] was not a candidate 
here. You were doing this in order to have some effect on his 
attitude about the return of the Indian land . . . to find 
information on Senator Nickles which, to put it mildly, would 
try to pressure him or persuade him to change his 
    \82\ Hearing Transcript, July 31, 1997, p. 62.

           *         *         *         *         *

    Senator Lieberman: [Lenzner's proposal] seems to be . . . 
an attempt to investigate the personal lives of Members of 
Congress as a way to affect their votes here, and that is 
really an outrageous intrusion into the system.83
    \83\ Id. at p. 76.

    Ultimately, the tribes decided not to hire Lenzner. As with 
Landow, the tribes' dealings with Lenzner ended when 
unflattering media stories appeared 84 regarding the 
Shearer/Lenzner involvement.
    \84\ See Michael Isikoff, ``The Dark Side of the Money Trail,'' 
Newsweek, Aug. 4, 1997, p. 6.
    In interviews with Committee staff, tribal representatives 
have related their misgivings about Shearer, their suspicion of 
his motives, and their belief that he was trying to silence 
them while he made vague efforts to ``help.'' Shearer has 
denied most of this, but nevertheless there are parts of his 
story that the Committee finds suspicious. First, Shearer 
testified that he had almost no contact with any tribal 
representatives after May 9, 1997. He testified that he had no 
personal meetings with them after that time and that he had 
only three phone conversations with them, all of which were 
brief and related only to media stories.85 Tribal 
representatives, however, have told to Committee staff that 
Shearer had frequent contact with them after May 1997, 
especially with Tyler Todd, and discussed the substance of 
their land claims.
    \85\ Shearer deposition, pp. 53-54.
    Second, Shearer told the Committee that he never told the 
tribes he would, and never in fact did, speak with anyone in 
the Clinton administration or the DNC regarding the tribes' 
land claims.86 Shearer further recounted that he has 
never told the tribes that he would assist them in any way, 
including helping them obtain drug and alcohol treatment 
facilities.87 However, Shearer's version of events 
varies sharply from what the Committee has learned from the 
tribes' attorney and another witness. In a discussion with 
Committee staff, Grellner indicated that Shearer told Todd, as 
recently as late August 1997, that if the tribes would 
``cooperate''--meaning protect the Administration during the 
Committee's investigation--Shearer would help arrange for the 
tribes to receive a drug and alcohol rehabilitation facility at 
the tribal complex in Oklahoma.88
    \86\ Id. at pp. 60-64.
    \87\ Id. at pp. 54, 74.
    \88\ Interviews of Richard Grellner, Sept. 2 & 10, 1997.
    Grellner and other tribal representatives have apparently 
related similar information to Copperthite. In his Committee 
deposition, Copperthite testified: ``Rick Grellner . . . told 
me that Mr. Shearer had called last week and said that if the 
tribe remained silent through their [Committee] testimony or 
depositions because there was an article about them being 
deposed in an Oklahoma paper, they would get an alcohol and 
drug rehabilitation center.'' 89
    \89\ Copperthite deposition, Sept. 3, 1997, p. 192.
    Finally, Shearer testified that he had one brief 
conversation with Peter Knight about the tribes in which while 
discussing an unrelated topic, he inquired simply whether 
Knight had an opinion about the tribes.90 Knight's 
version of the conversation differs: ``[Mr. Shearer] came in 
and told me basically that the Indians were out to get the Vice 
President and me. And he said that he told them, `That would be 
a dumb thing if you're interested in getting your land back.' 
'' 91
    \90\ Shearer deposition, pp. 29-31.
    \91\ Knight deposition, p. 178.


    It is difficult to imagine a more cynical political 
exploitation than that visited upon the tribes by the 
collection of Democratic fund-raisers and operatives they 
encountered in 1996 and 1997. In contrast to wealthy tribes 
with successful gambling enterprises--whose access to the 
highest reaches of the administration is vividly demonstrated 
in the Hudson casino story--the C/A were fleeced, 
unsuccessfully re-fleeced, and then abandoned. They have 
nothing to show for their $107,000 in contributions, except 
memories of a Presidential luncheon and the hollow echoes of 
``encouragement'' to contribute given them along the way. The 
administration and its hangers-on pursued donations from these 
poor and vulnerable tribes without shame or, apparently, 

                     The Offer of R. Warren Meddoff

    Two weeks prior to the November 5, 1996 election, the 
President attended a DNC fundraiser in Florida. At that 
fundraiser, as the President walked along the rope line meeting 
and greeting people, R. Warren Meddoff thrust a business card 
in his hand. The President continued walking and read the words 
written on the back of the card: I have an associate that is 
interested in donating $5 million to your campaign.1 
The President then returned to Meddoff, and asked for another 
card to give to his staff.
    \1\ Testimony of R. Warren Meddoff, September 19, 1997, p. 7.
    The President gave this second card to Harold Ickes, Deputy 
Chief of Staff of the White House, and asked him to call 
Meddoff about the potential contribution, which Ickes did 
within two days. Ickes' calls to Meddoff from the White House 
and Air Force One regarding contributions continued from 
October 24, 1996 to October 31, 1996. Then, on October 31, 
1996, only five days prior to the election, Ickes directed the 
White House to fax instructions to Meddoff steering donations 
to the DNC and several nonprofit groups favorable to the 
President. Later the same day, Ickes called Meddoff and told 
him to ``shred'' the fax. All of this was done without the 
knowledge of the background of R. Warren Meddoff or the actual 
    From October 1996 until July 17, 1997, R. Warren Meddoff 
was the Director of Government Affairs for Bukkehave, Inc. 
(``Bukkehave'') of Fort Lauderdale, Florida.2 
Bukkehave is a wholly owned U.S. subsidiary of a Danish 
corporation, Bukkehave, Limited.3 Prior to his 
employment with Bukkehave, Meddoff was a self-employed 
consultant in the areas of real estate, investment development 
and brokerage, and in financial matters with several foreign 
    \2\ Deposition of R. Warren Meddoff, August 19, 1997, p. 6; see 
also Meddoff testimony, p. 4. According to Meddoff, Bukkehave 
``supplies vehicles and spare parts primarily to governments, the 
United Nations, and charitable organizations operating in the third 
world.'' Id.
    \3\ Meddoff deposition, p. 6. Meddoff testified in his deposition 
that the owners of Bukkehave, Limited were represented to him as Hans 
Christian Bukkehave and Christian Haar, both Danish nationals. Id.
    \4\ Meddoff testimony, p. 4.
    Meddoff also had a business relationship with William 
Morgan, a Texas businessman,5 dealing in pre-World 
War II German governmental gold-backed bearer 
bonds.6 Morgan indicated to Meddoff in early October 
1996 that he would soon be closing a business transaction 
involving the sale of bearer bonds from which he would receive 
approximately $300 million in revenues.7 Morgan told 
Meddoff that since they ``previously had made commitments to 
both presidential campaigns,'' he would honor that obligation 
and donate $5 million to each campaign.8 Morgan 
subsequently called Meddoff on October 22, 1996 to inform him 
that the transaction was proceeding and asked him to notify the 
appropriate individuals that he would be prepared to make the 
donations by the end of that month.9 Meddoff 
previously had been invited by Mitchell Berger 10 to 
attend a fund-raising dinner for the President on October 22, 
1996 at the Biltmore Hotel in Coral Gables, 
Florida.11 Meddoff attended the fund-raiser to speak 
to the President on behalf of a client of Bukkehave, Inc. to 
gain support for permitting humanitarian flights to Cuba, which 
had been hit by a hurricane.12
    \5\ Meddoff deposition, p. 11. Although Meddoff had a business 
relationship with Morgan, they have never personally met. Id. at p. 13.
    \6\ Meddoff testimony, p. 5.
    \7\ Meddoff deposition, p. 14.
    \8\ Id. See DNC memorandum from Penny (no last name listed) to 
Bonnie (no last name listed) regarding $1,000,000 contribution, July 
29, 1996 (Ex. 1) (noting that Penny had ``received a call from Meddoff 
who relayed that Morgan wanted to contribute in excess of $1 million to 
the Democratic campaign.'') This memorandum also notes that ``Leon 
Panetta was apprised of the plan [to contribute] over a year ago. 
Meddoff convinced Morgan to contribute the money through himself and 
Mitchell [Berger] because Mitchell `is a real nice guy.' Meddoff said 
Morgan is not looking for any appointments, favors, etc. However, he 
would like some kind of tax benefits, if possible.'' See also Letter to 
Senator Robert Dole from R. Warren Meddoff, Feb. 22, 1995 (Ex. 2). This 
letter states that Meddoff and his client want to make a donation to 
the Republican Party. Meddoff followed up on his letter with a phone 
call to Senator Dole's office. A member of Senator Dole's staff 
informed Meddoff that when the funds were available to please call back 
and he would be instructed on how to make a proper donation to the 
Republican party. Meddoff deposition, p. 22.
    \9\ Id. at pp. 14-15.
    \10\ According to Meddoff, Mitchell Berger was ``in charge of fund-
raising for the Democratic Party in the State of Florida.'' Id. at p. 
22. Meddoff previously mentioned to Berger's law partner, Manuel 
Kushner, that he would be making a large donation once a gold bond 
transaction closed and that it could go through Berger so he would get 
credit for such a large donation. Id. at p. 24; see also supra note 8.
    \11\ Meddoff deposition, p. 22.
    \12\ Bukkehave paid $1,500 for Meddoff to attend the dinner. 
Meddoff deposition, p. 22. According to Meddoff, the Administration's 
policy did not permit direct flights from the U.S. to Cuba. Bukkehave's 
client, Catholic Relief Services, had materials warehoused in Miami to 
assist the victims of the hurricane but was not allowed to deliver the 
materials because of this policy. Id. at p. 23. The morning of the 
fund-raiser, Meddoff faxed a letter to the White House expressing his 
intention to speak to the President on this policy. Id. at p. 25. See 
also Letter from R. Warren Meddoff to President Clinton regarding Cuban 
humanitarian relief, October 22, 1997 (Ex. 3).
    Although Meddoff attended the fund-raiser primarily to 
speak to the President about those flights, he had talked 
earlier that day to Morgan about informing the ``presidential 
campaigns'' of Morgan's intent to make a large contribution to 
each.13 Morgan and Meddoff discussed the possibility 
that Meddoff would be unable to speak directly to the President 
at the fund-raiser that evening. They concluded that Meddoff 
should write the offer of a donation on the back of a business 
card and hand it to the President.14
    \13\ Meddoff deposition, p. 14. It is illegal to give contributions 
to a Presidential federal election campaign that has agreed to limit 
its spending in return for receiving public financing. There is a 
$1,000 individual contribution limit to presidential primary 
candidates. 2 U.S.C. Sec. 4412(a)(6). There is also a prohibition on 
additional funding to presidential candidates in the general election. 
26 U.S.C. Sec. 9003(b)(2) and 9012(b).
    \14\ Meddoff deposition, p. 28.
    At the fundraiser that evening, Meddoff approached the 
President and said, ``Mr. President, this is for you,'' and 
handed the President his business card.15 The back 
of the business card read, I have an associate that is 
interested in donating $5 million to your 
campaign.16 As the President walked away, he glanced 
down and read the card, then returned to Meddoff and asked for 
another card to give his staff. The President promised that 
someone from his staff would be in touch.17 
According to Meddoff, the President also briefly discussed the 
situation in Cuba and told him that humanitarian flights to 
Cuba could resume.18 The entire conversation lasted 
less than five minutes.19
    \15\ Id. at pp. 28-29.
    \16\ Meddoff testimony, p. 7.
    \17\ Meddoff deposition, p. 29.
    \18\ Meddoff testimony, p. 8.
    \19\ Meddoff deposition, p. 29.
    On October 23, 1996, the day after the fund-raiser, Meddoff 
contacted Morgan to inform him that he had spoken directly to 
the President and relayed his message regarding the 
contribution.20 Harold Ickes left a message for 
Meddoff on Bukkehave's answering machine on Saturday, October 
24, 1996.21 Because Ickes left the message on a 
Saturday, Meddoff did not receive the message until that 
Monday, October 26, 1996.22 Ickes was not in the 
office when Meddoff returned his call on Monday, October 26, 
1996. Instead he was informed him that Ickes needed to speak to 
Meddoff and would get back to him.23
    \20\ Id. at p. 30.
    \21\ Meddoff testimony, pp. 8-9. Ickes testified that he ordinarily 
would have asked someone at the DNC to follow-up on Meddoff's offer. 
However, given the shortness of the time and the fact that the 
President had approached him directly about it, he pursued the offer 
himself. Deposition of Harold Ickes, June 27, 1997, p. 40.
    \22\ Telephone message from Harold Ickes produced by R. Warren 
Meddoff, October 26, 1996 (Ex. 4).
    \23\ Meddoff testimony, p. 9.
    Later that same day, Ickes called Meddoff and informed him 
that the President had given him Meddoff's business card.\24\ 
They discussed Morgan's proposed contribution. Meddoff 
indicated that he did not expect the funds to become available 
until at least November 1, 1996.\25\ Meddoff also told Ickes 
that Morgan was looking for a ``tax-favorable way'' to make the 
donation and was assured by Ickes that this could be worked 
out.\26\ Meddoff further testified that Ickes told him ``that 
there were methods of making tax-favorable contributions.'' 
\27\ According to Ickes, he informed Meddoff that because this 
was a general election, contributions to the President's 
campaign were restricted by the FECA, but that there were other 
ways of making contributions to assist the President's re-
election.\28\ Meddoff also recalls discussing with Ickes that 
the initial donation would be in the amount of $5 million, but 
that Morgan anticipated being able to make a total contribution 
in excess of $50 million over a period of time.\29\
    \24\ Meddoff deposition, p. 38. Ickes testified that President 
Clinton related the facts Meddoff testified to and asked him to call 
Meddoff. Deposition of Harold Ickes, June 27, 1997, p. 38.
    \25\ Meddoff deposition, p. 38. Meddoff did not recall whether 
Ickes asked about how Morgan would be able to make such a large 
contribution. Id. at p. 39. Ickes testified, however, that he ``tried 
to find out a little bit about it. It was very vague, that he--that 
Morgan has come into or had substantial funds, wanted to make 
contributions, would prefer that some of those contributions go to 
organizations that would be basically tax-exempt.'' Deposition of 
Harold Ickes, June 27, 1997, p. 40.
    \26\ Meddoff deposition, p. 39.
    \27\ Meddoff testimony, p.10.
    \28\ Deposition of Harold Ickes, June 27, 1997, p. 39.
    \29\ Meddoff deposition, p. 44. See Ickes' handwritten notes taken 
during his telephone conversation with Meddoff in which he wrote ``$55 
million and $5 million,'' these notes confirm Meddoff's testimony 
regarding the telephone conversation. October 30, 1996 (Ex. 5).
    Meddoff testified that during his conversation with Ickes, 
he was acting ``strictly in [the] capacity of forwarding on 
messages and very much so just being an individual in the 
middle that was trying to facilitate Mr. Morgan's wishes to 
make a contribution and Mr. Ickes' desire to get a 
contribution.'' \30\ According to Meddoff, both Ickes and 
Morgan asked him if he would continue in his capacity as 
intermediary.\31\ Morgan refused to be interviewed by the 
Committee,\32\ but he has been quoted in newspapers to say that 
he was strictly non-political and all he was doing was some tax 
    \30\ Meddoff deposition, p. 43.
    \31\ Meddoff deposition, pp. 43-44.
    \32\ Morgan was not subpoenaed by the Committee because he did not 
have firsthand knowledge of the conversations that occurred between 
Meddoff and Ickes.
    \33\ Robert Nolin, ``Businessman Regrets Contribution Offer,'' Sun-
Sentinel (Ft. Lauderdale), September 28, 1997, p. 3.
    Ickes testified that after he hung up with Meddoff, he 
called Eric Berman, who was the head of research at the 
DNC.\34\ Ickes relayed his conversation with Meddoff to Berman 
and asked him to personally run a check on Meddoff and 
    \34\ Deposition of Harold Ickes, June 27, 1997, p. 40. This 
immediate call to the DNC contradicts his testimony that he did not 
have time to refer the matter to the DNC. See supra note 21.
    \35\ Id. Ickes told Berman to ``get his ass in gear himself, not to 
pawn this off on anybody.'' Id.
    Ickes testified that he recalled receiving from Eric Berman 
``either directly before or directly after the election, a very 
slim packet of material about Morgan and company, and just 
misplaced it.'' \36\ He further testified that because of press 
inquiries he sent an additional memo on November 19, 1996 to 
Berman requesting replacement for the information he lost.\37\ 
The Committee finds this explanation incredible because the 
Meddoff incident did not come into the public eye until 
February 1997.\38\
    \36\ Id. at pp. 54-56.
    \37\ While Ickes never spoke to Meddoff after his October 31, 1996 
telephone conversation about shredding the fax (see below), apparently 
his interest in Meddoff and Morgan continued. See Memorandum from 
Harold Ickes to Eric Berman regarding William R. Morgan and R. Warren 
Meddoff, November 19, 1996 (Ex. 6). Berman in response provided a fax 
with biographies on November 25, 1996. See fax from Eric Berman, Dan 
Fee and Rick Hess to Harold Ickes and Jessica Fitzgerald regarding 
Meddoff, Morgan, Vaduz and Bukkehave, November 25, 1996 (Ex. 7). 
Deposition of Harold Ickes, June 27, 1997, pp. 54-56.
    \38\ Michael Isikoff, ``The White House Shell Game,'' Newsweek, 
February 10, 1997, p. 34.
    Ickes contacted Meddoff on October 29, 1996 and asked 
whether $1.5 million could be disbursed within the next 24 
hours because the campaign had an immediate need for money.\39\ 
When Meddoff told him that it was not possible to have the 
money the next day, and that Morgan and he had not received any 
instructions as to how to structure the donations and transfer 
the funds. Ickes then asked whether it could be available in 
the next 48 hours.\40\ After discussing this request with 
Morgan, Meddoff relayed to Ickes that there was a possibility 
that the money could be disbursed within that time, but that he 
needed the information regarding where the funds should be 
sent.\41\ Ickes told him that he would fax the 
instructions.\42\ Ickes also told Meddoff that he would receive 
information on nonprofit organizations that were friendly to 
the President's campaign but inquired into whether Morgan would 
also be willing to make a contribution to the DNC that would 
not be tax deductible.\43\ Meddoff replied that he would talk 
to Morgan about it, but thought that Morgan probably would be 
willing to make such a contribution.\44\ Meddoff subsequently 
contacted Morgan who was amenable to making a small donation 
that would not be tax deductible.\45\
    \39\ Meddoff deposition, p. 41.
    \40\ Meddoff testimony, p. 12.
    \41\ Meddoff deposition, p. 41. Morgan told Meddoff that he was 
having difficulty in closing the transaction but that he would ``try to 
put together the funds.'' Id. at p. 43. He instructed Meddoff to have 
Ickes tell him to which groups the money should be sent. Id.
    \42\ Id. at p. 41.
    \43\ Meddoff deposition, p. 50 and Testimony of Harold Ickes, 
October 8, 1997, p. 100.
    \44\ Meddoff deposition, p. 50.
    \45\ Id. at pp. 52-53.
    Ickes testified that after speaking to Meddoff, he believes 
that he called Minyon Moore, then political director of the 
DNC, to ask if she knew any ``legitimate organizations'' that 
could use last-minute money.\46\ She suggested the nonprofit 
group National Coalition of Black Voter Participation. In 
addition to the organization Moore recommended, Ickes himself 
selected Vote Now 96, an organization to which the DNC had in 
the past directed money.\47\ Ickes was familiar with Hugh 
Westbrook and Gary Baron, individuals involved with Vote Now 
96, a voter registration organization. He testified that ``they 
were always out trolling for money.'' \48\ Ickes further 
testified that he may have called Gary Baron directly and told 
him there may be some money forthcoming, but made no 
promises.\49\ Ickes also selected a group called Defeat 209 
because he knew Pat Ewing, the Executive Director, and the 
President had spoken out against California's Proposition 209, 
a ballot initiative to ban preferential treatment on the basis 
of race, gender and other immutable characteristics.\50\
    \46\ Deposition of Harold Ickes, June 27, 1997, p. 52.
    \47\ See the section of the report on the Teamsters.
    \48\ Deposition of Harold Ickes, June 27, 1997, p. 53.
    \49\ Id.
    \50\ Id. at p. 52.
    Ickes then called Karen Hancox, the Deputy Director of 
Political Affairs at the White House, from Air Force One. He 
dictated to her a list of these nonprofit organizations, as 
well as their bank account and contact information, for her to 
send to Meddoff, so that Morgan could immediately wire his 
donations to them.51 Hancox typed this information 
into a memorandum to Meddoff from Ickes, and directed one of 
her staff to fax the memorandum to Meddoff.52 This 
memorandum was faxed from the White House to Meddoff on October 
31, 1996 at approximately 9:42 a.m.53 Ickes' 
instruction to and use of White House staff and equipment to 
send a fax providing information to send donations to the DNC 
and nonprofit organizations is a potential violation of the 
     51 Deposition of Karen Hancox, June 9, 1997, p. 149. 
See also Memorandum from Harold Ickes to R. Warren Meddoff regarding 
donations, October 31, 1996, p.1 (Ex. 8).
     52 Hancox deposition, p. 149.
     53 Ex. 8 at p.1.
     54 If Ickes solicited Meddoff for contributions, it 
would appear that he violated criminal provisions of the Hatch Act, 
specifically 5 U.S.C. Sec. 7323(b) which prohibits a federal employee 
from soliciting political contributions from any location at any time.
    After having the fax sent, Ickes called Meddoff later the 
same day and informed him that DNC Finance Director Richard 
Sullivan would contact him.55 Approximately 30 
minutes after Meddoff received the faxed memorandum, he 
received a telephone message that Sullivan had 
called.56 Meddoff and Sullivan spoke several times 
on October 31, 1996, during which Sullivan expressed his 
concern regarding Ickes' handling of the matter.57 
In fact, Sullivan commented to Meddoff that ``that's not the 
way that they did things at the DNC.'' 58 Meddoff 
testified that he talked to Sullivan at least four or five 
times that day.59
     55 Meddoff deposition, p. 47.
     56 Id. at pp. 47-48.
     57 Id. at p. 55.
     58 Id.
     59 Id. at p. 56. Sullivan testified that he called 
Meddoff ``probably four'' times. Deposition of Richard Sullivan, 
September 5, 1997, p. 48.
    Upon receiving the memorandum faxed from the White House, 
Meddoff immediately faxed a copy to Morgan and contacted him 
regarding the information ``within ten minutes of the receipt 
of this fax.'' 60 Morgan instructed him to ``proceed 
forward to see what they wanted.'' 61 After 
reviewing the memorandum, however, Morgan told Meddoff that the 
organizations were ``unacceptable.'' 62 By this 
time, however, Meddoff was no longer dealing with Ickes but 
with Sullivan.
     60 Meddoff deposition, p. 54.
     61 Meddoff deposition, p. 55.
     62 Id.
    During the same day he received Ickes' fax, Meddoff also 
called Don Fowler, Chairman of the DNC, at the suggestion of 
Sullivan.63 Meddoff testified that he talked to 
Fowler three to five times.64 Meddoff testified that 
both Sullivan and Fowler were ``concerned about who Morgan was, 
where the funds were coming from; that they wanted to slow 
down.'' 65 Sullivan testified that when he talked to 
Fowler about his conversations with Meddoff, `` Mr. Fowler 
said, this situation makes me nervous, let's put this on hold 
and see if we can find out something about Mr. Meddoff and/or 
Mr. Morgan.'' 66
     63 Id. at p. 56.
     64 Id.
     65 Id.
     66 Deposition of Richard Sullivan, September 5, 1997, 
p. 51.
     Meddoff informed Sullivan that Morgan wanted a letter 
``expressing appreciation for contributions to these efforts.'' 
67 He received a letter by facsimile the same day 
around 12:56 p.m. from Don Fowler.68 Fowler's letter 
reads, ``Please accept my deep appreciation for the substantial 
financial support you have offered to the Democratic Party. 
Your support will help advance President Clinton's agenda for 
the American people as we enter the 21st Century. We look 
forward to working with you in the future.'' 69 
Meddoff marked up this letter to add references to the 
President and to note that Morgan was the individual making the 
contribution, and sent it back by facsimile to 
Fowler.70 Although Fowler told Meddoff that he would 
send out the revised letter, he never did. In fact, the DNC 
``went silent'' and did not return Meddoff's telephone calls 
inquiring into the status of the letter and the 
contribution.71 Sullivan was instructed by Fowler 
not to pursue the matter any more.72
     67 Id. at p. 49.
     68 Letter from Don Fowler to R. Warren Meddoff, October 
31, 1996, p. 1 (Ex. 9).
     69 Id. at p. 2.
     70 Meddoff deposition, p. 60. See Letter from Donald L. 
Fowler to R. Warren Meddoff with handwritten notes, October 31, 1996 
(Ex. 10).
     71 Meddoff deposition, p. 61.
     72 Deposition of Richard Sullivan, September 5, 1997, 
p. 71.
    According to Meddoff, Ickes called him sometime on the 
afternoon of October 31, 1996 to explain that the fax was sent 
in error and requested that he ``shred'' it.73 Ickes 
testified before the Committee that he did not tell Meddoff to 
``shred the fax,'' but may have told Meddoff that the fax was 
``inoperative.'' 74 Meddoff testified that he 
immediately called Morgan because he was ``rather amazed at a 
request to shred a document from somebody in the White House.'' 
75 After the conversation that afternoon, Meddoff 
had no further contact with Ickes.76 Also, no one 
from the DNC returned Meddoff's calls.
     73 Meddoff testimony, p. 16.
     74 Deposition of Harold Ickes, June 27, 1997, p. 42; 
see also Ickes testimony, p. 187 (testifying that Ickes did ``not 
recall that I said shred it. I am confident that I did not. I don't use 
that kind of language.'').
     75 Meddoff deposition, p. 58.
     76 Id. at p. 62.
    The next time Meddoff heard anything about making 
contributions to the Democratic Party was the next month, 
November 1996, when Mitchell Berger, the fundraiser who had 
invited Meddoff to the dinner at which he met the President, 
``approached him.'' 77 Berger informed him that the 
DNC was not looking for large single donations but smaller 
donations. He told Meddoff that all future donations should go 
through him after the ``foul-up'' with Ickes.78 
Meddoff testified that Berger contacted him on ``numerous 
occasions'' after that discussion for 
contributions.79 In December 1996, Berger requested 
that Meddoff donate $500 to the campaign of Florida Lieutenant 
Governor Buddy MacKay. The money was donated by Bukkehave, and 
Meddoff subsequently attended a private meeting with the 
Lieutenant Governor at Berger's office.80
     77 Id. at p. 63.
     78 Id.
     79 Id. at pp. 63-64.
     80 Id. at p. 64.
    Berger and Meddoff also met in December 1996 to ``discuss 
donations, support of the administration, and the agenda of the 
Vice President.'' 81 At that time Berger suggested 
getting together for breakfast with Bukkehave's Chief Executive 
Officer, Christian Haar, to discuss how Bukkehave could make 
donations to support the Democratic Party. In a December 23, 
1996 memorandum sent by facsimile prior to the breakfast 
meeting, Meddoff indicated to Berger that he wanted to discuss 
arranging a meeting or photo-op with the President and Vice 
President when he and Haar were to be in Washington, D.C., from 
January 27 through 29, 1997.82 During the meeting 
between Berger, Meddoff and Haar, Meddoff and Haar made clear 
that Bukkehave wanted to communicate its concerns to the 
Administration through the Vice President 83 
regarding the United Nations and its procurement policies 
concerning U.S.-manufactured goods. Berger requested that they 
put their concerns in a letter, which he would forward to the 
appropriate individual.84
     81 Id. at p. 68.
     82 Memorandum from R. Warren Meddoff to Mitchell 
Berger, December 23, 1996 (Ex. 11).
     83 Meddoff deposition, p. 72.
     84 Id.
    Immediately after their meeting, Meddoff forwarded a letter 
to Berger listing Bukkehave's concerns.85 Berger 
forwarded this letter to Leon Fuerth, Vice President Gore's 
National Security Advisor.86 As a result of this 
correspondence, and Berger's help, Meddoff was able to arrange 
a meeting in Washington with Fuerth on January 14, 
1997.87 Because Fuerth could not attend the meeting, 
he instead sent John Norris of the Vice President's 
staff.88 During this meeting at the Old Executive 
Office Building, Norris and Meddoff discussed the UN's 
procurement policies.89
     85 Id. Letter from R. Warren Meddoff to Mitchell Berger 
regarding restrictive UN purchase practices, December 26, 1996 (Ex. 
     86 Letter from Mitchell Berger to Leon Fuerth, December 
30, 1996 (Ex. 13).
     87 Meddoff deposition, p. 75.
     88 John Norris' calendar for January 14, 1997 (Ex. 14).
     89 Meddoff deposition, p. 74.
    Three days after the meeting with Norris, Berger contacted 
Meddoff to request that he send a $25,000 contribution to the 
Presidential Inaugural Committee by overnight mail to Mary Pat 
Bonner, a consultant who was helping coordinate the 
event.90 Berger indicated that if the donation was 
made, Meddoff and Haar could attend a private dinner with the 
President and Vice President during the week following the 
inauguration, when they were scheduled to be in 
     90 Id. at pp. 67-76.
     91 Meddoff testimony, p. 20.
    Because Meddoff and Haar felt uncomfortable about being 
asked to send such a large amount by overnight mail on the 
basis of one telephone call, arrangements were made to meet 
Bonner for lunch on January 28, 1997 to present the 
contribution in person.92 Berger telephoned Meddoff 
the day before the scheduled lunch to tell him that the DNC/
Inaugural Committee could not accept the contribution because 
Haar was not a U.S. citizen, and ``they had great concerns over 
accepting funds from a non-U.S.-based company.'' 93 
Despite this conversation, Meddoff and Haar went to their 
scheduled meeting with Bonner.94 When Bonner did not 
appear, Meddoff telephoned her office and spoke to Bonner and 
Berger. When Meddoff told Berger that it was ``not right to 
have people in Washington standing by and then at the last 
moment you deciding that you are not going to accept the 
contribution,'' Berger told him ``[t]hat's just the way it is. 
It's tough luck.'' 95 Meddoff reminded Berger of the 
information he had from his dealings with Ickes, to which 
Berger replied for him to ``take your best shot and let it 
out.'' 96 Shortly thereafter, Meddoff spoke with 
Newsweek regarding his contacts with the President and Ickes 
and provided its reporters with a copy of the October 31, 1996 
memorandum from Harold Ickes.97
     92 Meddoff deposition, p. 65.
     93 Id. at p. 66; Meddoff testimony, p. 23.
     94 Meddoff deposition, p. 78.
     95 Id. at p. 81.
     96 Id.
     98 Id. at pp. 82-83.
    Neither Ickes nor the White House produced the original 
memorandum to the Committee. Rather, Ickes and the White House 
each produced a copy of the fax that Ickes had received from 
Newsweek, which had received it from Meddoff.98 
Ickes testified in his deposition that he never saw the 
original of the memorandum.99 The Committee also has 
never seen the original.100
    \98\ Ex. 8 (This memorandum, which Ickes produced to the Committee, 
contains a tag line at the top of each page indicating that Newsweek 
had sent the memorandum by facsimile to Ickes).
    \99\ Deposition of Harold Ickes, September 22, 1997, p. 232.
    \100\ The destruction of a document to conceal a criminal violation 
may constitute obstruction of justice. Similarly, destroying a document 
that is responsive to this Committee's subpoena may violate 18 U.S.C. 
Sec. 1505 (obstruction of proceedings before departments, agencies, and 
    This incident illustrates the misuse of nonprofit entities 
by presidential campaigns and by donors seeking tax advantages. 
Morgan through Meddoff, told Ickes he was interested in aiding 
the President's re-election in a tax favorable way. Ickes then 
attempted to steer Morgan through Meddoff to nonprofit 
organizations that supported the President's re-election 
efforts. Ickes' conduct was an attempt to circumvent both the 
federal general election contribution prohibition and spending 
limits imposed upon campaigns receiving public financing.
    If Vote Now '96, The National Coalition of Black Voter 
Participation or Defeat 209 had communication with Clinton/Gore 
campaign officials about the steering of donors to these 
entities, any contributions received under those circumstances 
would result in illegal in-kind contributions to the campaign. 
11 C.F.R. Sec. 109.1(c).101 The Committee was not 
able to determine whether these organizations knew that Ickes 
was referring donors to them for the purpose of advancing the 
President's re-election. Further investigation is warranted. 
The Committee believes Congress would do well to examine 
whether it should continue to be legal for campaigns to refer 
donors to nonprofit entities that, for all intents and 
purposes, will further a candidate's election, and whether such 
contributions to nonprofit entities should continue to be tax 
     101 Vote Now '96 and The National Coalition of Black 
Voter Participation are 501(c)(3) entities, donations made to these 
organizations are tax deductible. Defeat 209 is a 501(c)(4) entity. 
Donations made to a 501(c)(4) entity are not tax deductible.
    Additionally, resolution of whether Ickes told Meddoff to 
shred the fax requires reconciling contradictory testimony from 
two witnesses. Nonetheless, there is no doubt that Ickes sent 
Meddoff a fax using official government resources, nor that the 
White House did not produce the original fax. If Ickes did 
instruct Meddoff to shred the fax, that conduct may constitute 
obstruction of justice. 18 U.S.C. Sec. 1505. Finally, the 
Meddoff incident is indicative of the extent to which the White 
House involved itself in raising money.

    White House, DNC and Clinton-Gore Campaign Fundraising Efforts 
          Involving the International Brotherhood of Teamsters


    Labor unions and their political action committees spent 
more than $119 million during the 1996 election cycle on 
political contributions to federal candidates, on political and 
issue advertising, and on other arguably campaign-related 
activities.1 As part of its investigation, the 
Committee examined several allegations related to efforts by 
the White House, the DNC and the Clinton-Gore Campaign to raise 
political contributions from labor unions and to encourage 
labor expenditures favoring Democratic candidates. Such 
allegations included charges that the White House, the DNC, 
and/or the Clinton-Gore campaign undertook a range of 
potentially improper or illegal efforts to ``cultivate'' labor 
union officials and to encourage labor contributions. These 
alleged efforts included:
    \1\ Jennifer Shecter, ``Political Union: The Marriage of Labor & 
Spending,'' Center for Responsive Politics Report, 1997
           misusing federal property and resources;
           participating in illegal ``contribution 
        swap'' schemes involving the International Brotherhood 
        of Teamsters (``IBT'' or ``Teamsters'');
           promising Administration assistance on 
        specific policy matters as part of an effort to 
        encourage political contributions; and
           granting extraordinary access to 
        Administration policy makers.
    In investigating allegations in these areas, the Committee 
issued document subpoenas to the AFL-CIO and the Teamsters' 
union, and to several ``tax-exempt'' entities, including the 
National Council of Senior Citizens, Citizen Action, and Vote 
Now '96. The Committee also sought relevant documents from the 
DNC, the Clinton-Gore campaign, the White House, and various 
individuals with potentially relevant information. The 
Committee conducted fifteen depositions and dozens of 
interviews relating to these allegations. On October 9, 1997, 
the Committee conducted a hearing to examine one facet of the 
Teamsters/DNC contribution swap schemes.
    The Committee's investigative efforts were substantially 
limited by four factors. First, as described in detail 
elsewhere in this report, many of the entities subpoenaed 
refused to produce relevant documents to the Committee, citing 
a range of purported ``First Amendment'' objections to the 
Committee's requests.2 Among the more significant 
non-compliant entities were the following:
    \2\ See the section of this report on discussing subpoena 
compliance issues.
           AFL-CIO--Refused to produce documents 
        reflecting dealings with the White House, DNC and 
        Clinton-Gore campaign. Refused to produce relevant 
        materials from the files of Political Director Steven 
        Rosenthal, Secretary-Treasurer Richard Trumka, 
        President John Sweeney, and other individuals involved 
        in AFL-CIO campaign-related activities.
           Teamsters--Refused to produce documents 
        reflecting dealings with the White House, the DNC, or 
        the Clinton-Gore campaign.
           National Council of Senior Citizens--Refused 
        to produce documents relevant to the contribution swap 
           Citizen Action--Refused to produce documents 
        relating to the contribution swap schemes or any other 
        campaign-related activities.3
    \3\ As discussed more fully in another section of this report, the 
investigation's December 31, 1997 deadline precluded enforcement of the 
subpoenas issued to these entities.
    Second, certain individuals asserted their Fifth Amendment 
right against self-incrimination and refused to testify. Among 
the persons invoking the Fifth Amendment were certain 
individuals associated with the Teamsters contribution swap 
schemes, including William Hamilton, formerly the Teamsters' 
Government Affairs Director.4
    \4\ Richard Trumka, Secretary Treasurer of the AFL-CIO, refused to 
comply with a deposition subpoena issued by the Committee and later 
reportedly asserted his Fifth Amendment rights before the U.S. Attorney 
for the Southern District of New York.
    Third, certain witnesses questioned by the Committee 
provided inaccurate or misleading testimony regarding the 
matters under investigation. Such testimony is addressed later 
in this section.
    Fourth, following consultation with the U.S. Attorney's 
Office for the Southern District of New York, the Committee 
agreed to limit the scope of its investigation in order to 
reduce the possibility of interfering with ongoing criminal 
prosecutions.5 This limitation most significantly 
affected the Committee's investigation of certain aspects of 
the ``contribution swap'' schemes.
    \5\ At the request of the U.S. Attorney's Office, the Committee 
agreed that it would not subpoena or otherwise pursue testimony from 
several individuals, including Martin Davis, Jere Nash, Michael Ansara, 
Nathaniel Charny, Steven Protrulis, and Rochelle Davis.
Fundraising efforts by the White House, DNC, and Clinton-Gore campaign 
        involving the Teamsters
    Through the 1980, 1984 and 1988 campaigns, the Teamsters 
supported Republican candidates for the Presidency of the 
United States.6 In 1991, however, Ronald Carey was 
elected President of the IBT and the union's political leanings 
changed. Carey shifted IBT support to Democratic Party 
candidates and causes, and allocated significant resources to 
support Governor Clinton's 1992 campaign for the Presidency. A 
document produced to the Committee by the White House described 
this Teamsters' support as follows:
    \6\ White House Document titled ``Teamster Notes'' (Ex. 1).

          The Teamsters played an enormous role in the '92 
        campaign. They spent upwards of $2.4 million in 
        contributions to [Democratic] state coordinated 
        campaigns, the DNC, the Clinton campaign, DCCC/DSCC and 
        congressional candidates. They successfully educated 
        and mobilized several hundred thousand of their members 
        for the election and in many cases, local leaders and 
        staff all across the country worked full time on the 
    \7\ Id.

    Following the 1992 campaign, however, the Teamsters' 
support for Democratic political campaigns tapered off. The DNC 
analyzed these circumstances as follows:

          The Teamsters did not contribute anything to the DNC 
        in 1993 or 1994, due largely to internal union 
        politics. President Ron Carey is up for reelection in 
        1996 and is being strongly challenged by Jimmy Hoffa, 
        Jr. It will not be any easier for them to contribute 
        this cycle, but there is a new political director (Bill 
        Hamilton), and we ought to find ways for them to 
        contribute without the money going to the DNC (state 
        parties, NCEC, etc).8
    \8\ Memorandum from Jim Thompson to Senator Dodd and Chairman 
Fowler, February 13, 1997 (Ex. 2).

    In early 1995, the White House determined that it would 
attempt to renew the Teamsters' interest in Democratic 
campaigns. Documents produced by the White House demonstrate 
the nature of this effort. In January or February, 1995, Harold 
Ickes considered several specific recommendations for 
encouraging interest by unions in President Clinton's and the 
DNC's upcoming 1996 campaigns.9 These 
recommendations included inviting labor leaders to meet with 
the President and other Administration policy makers, and 
discussing Administration assistance on certain specific policy 
    \9\ See Deposition of Harold Ickes, September 22, 1997, pp. 197-
218. Ickes' duties as Deputy Chief of Staff included service as the 
White House ``point person'' for organized labor, and the White House 
``point person'' for the Clinton-Gore Campaign and the DNC. Testimony 
of Harold Ickes, October 8, 1997, pp. 8-9, 160.
    Early in 1995, Ickes reviewed a document titled ``Teamster 
Notes'' (produced to the Committee by the White House) 
containing the following analysis of the Teamster's political 

          In the early days of the Administration, [the 
        Teamsters] worked to mobilize hundreds of thousands of 
        Teamster families to contact members of Congress in 
        support of the President's economic plan (they sent 
        150,000 post cards to Arlen Specter alone.) When they 
        are plugged in and energized they can be a huge asset. 
        Over the past two years their enthusiasm has died down. 
        They have been almost invisible at the DNC and other 
        party committees. . . . With our proclamations on 
        striker replacement . . . and our NLRB appointments 
        (very important to Carey) we are in a good position to 
        rekindle the Teamster leadership's enthusiasm for the 
        Administration, but they have some parochial issues 
        that we need to work on.10
    \10\ Ex. 1 (emphasis added by Ickes).

    Ickes highlighted language in the document indicating that 
Bill Hamilton would be the ``new director of government 
relations'' for the IBT, and that ``He [Hamilton] will control 
the DRIVE (Teamster pac) purse strings.'' 11
    \11\ Id. (emphasis added by Ickes). See generally Ickes deposition, 
September 22, 1997, pp. 121-132.
    Later in the document (under the heading 
``Recommendations''), Ickes underlined portions of the 
following text:

          It is in our best interest to develop a better 
        relationship with Carey. . . . Carey is not a 
        schmoozer--he wants results on issues he cares about. 
        The Diamond Walnut strike and the organizing effort at 
        Pony Express are two of Carey's biggest problems. We 
        should assist in any way possible.12
    \12\ Ex. 1 (emphasis added by Ickes).

    In the months following his review of that document, Ickes 
met on three occasions with Bill Hamilton and other union 
representatives to discuss the Diamond Walnut Strike, the Pony 
Express matter, and other issues important to the 
Teamsters.13 One such meeting was held in late March 
1996, and included Hamilton, Ickes, Deputy Transportation 
Secretary Mort Downey, Labor Undersecretary Tom Glynn, Steve 
Silberman from Cabinet Affairs at the White House, and Steve 
Rosenthal, then Assistant Secretary of Labor for 
    \13\ Internal Teamster Memorandum drafted by Bill Hamilton, March 
27, 1995 (Ex. 3).
    \14\ Id. Rosenthal later became the PAC Director for the AFL-CIO.
    As set forth in a contemporaneous memorandum prepared by 
Hamilton, the ``Outcomes'' of the meeting included commitments 
by the Administration to take steps that could benefit the 
Teamsters on the Diamond Walnut strike, the Pony Express 
matter, and other issues. The memo states, in part:

          Diamond Walnut--Ickes said he met face-to-face with 
        USTR Mickey Kantor last week and that Kantor agreed to 
        use his discretionary authority to try to convince the 
        CEO of that company that they should settle the 
    \15\ Id.

Jennifer O'Connor, Ickes' aide at the White House, testified 
that Ickes asked her to follow up with Mr. Kantor to see if 
Kantor had contacted the Diamond Walnut company. O'Connor 
telephoned Kantor's office and determined that Kantor had 
indeed made contact with Diamond Walnut.16 O'Connor 
confirmed that the purpose of Kantor's contact with Diamond 
Walnut was an attempt to assist the Teamsters.17 (By 
contrast, Ickes testified in his deposition that he was not 
aware of any steps ever taken by the Administration relating to 
the Diamond Walnut strike.18)
    \16\ Deposition of Jennifer O'Connor, October 6, 1997, pp. 179-181.
    \17\ Id.
    \18\ Ickes deposition, September 22, 1997, p. 141.
    Other ``Outcomes'' listed in the Hamilton memo included 
Administration actions relating to Pony Express, to 
``regulatory changes in the administration of Section 13(c) of 
the transit act,'' to ``NAFTA Trade Adjustment Assistance,'' 
and to ``Amtrak labor protections.'' 19 On the Pony 
Express matter, the Labor Department agreed ``to move 
expeditiously'' on certain investigations, and the White House 
agreed ``to try to set up a meeting for [Teamster officials] 
with the Fed[eral Reserve Board].'' With respect to the other 
matters, Deputy Transportation Secretary Downey agreed to 
assist with potential regulatory changes ``as a way to head off 
unwanted restrictions on labor protections . . .;'' Labor 
Undersecretary Glynn agreed ``to see what could be done through 
the regulatory process to see that the trade adjustment 
assistance program is extended to drivers and other 
transportation workers;'' Ickes agreed to look into a proposal 
potentially affecting freight railroad workers, and ``agreed to 
ask [White House Chief of Staff Leon] Panetta about bringing in 
the railroad CEO's to lean on them.'' 20
    \19\ Ex. 3.
    \20\ Id.
    The Administration's efforts on these issues appear to have 
succeeded in rekindling the Teamsters' enthusiasm for 
Democratic campaigns. Beginning in late 1995, the Teamsters 
launched a significant effort to assist Democratic Senate 
candidate Ron Wyden defeat Republican Gordon Smith in a special 
election to fill the seat vacated by Senator Packwood in 
    \21\ The Teamsters planned to supported the Wyden campaign through 
direct mailings, get-out-the-vote (GOTV) and voter registration 
efforts, distribution of yard signs and bumper stickers, operation of 
phone banks, and DRIVE (PAC) contributions. In addition, the Teamsters 
assigned two staff members to work full-time supporting the campaign. 
Bill Hamilton wanted ``to make [the Oregon] campaign an unprecedented 
coordinated Teamster effort'' to ``[e]lect a Democrat to fill the 
vacant Packwood Senate seat.'' Internal Teamsters Memorandum from Bill 
Hamilton to Al Panek, re: Oregon, October 19, 1995 (Ex. 4). The IBT 
also intended to run several ``issue advertisements'' on the radio 
critical of Gordon Smith. According to Bill Hamilton, these ads were 
``independent expenditure[s] aimed at influencing the . . . election.'' 
Internal Teamsters Memorandum from Bill Hamilton to David Frulla, re: 
Oregon, January 2, 1996 (Ex. 5).
    This close relationship between the White House and the 
Teamsters continued throughout 1996. As Hamilton noted in a 
March 14, 1996 memo regarding a possible Teamster endorsement 
of President Clinton's campaign:

          It's also a fact that we ask for and get, on almost a 
        daily basis, help from the Clinton Administration for 
        one thing or another. In the absence of a better 
        candidate, it doesn't make sense to complicate our 
        ability to continue doing so.22
    \22\ Internal Teamster Memorandum drafted by Bill Hamilton re: Ron 
Carey's comments at AFL-CIO meeting, March 14, 1996 (Ex. 6).

    Similarly, in the text of what is titled ``Political Action 
Speech to Local Union Leadership,'' Hamilton wrote:

    But let's understand each other. We need Bill Clinton and 
Bill Clinton needs us.
    Every day we get help in small ways from Bill Clinton--he 
makes a phone call, he uses the veto threat, he makes an 
appointment. In the last few months:
          --Stopped the NAFTA border crossings.
          --Told his negotiators to open up Japanese airports 
        to UPS planes, competitively disadvantaged to FedEx 
        there. (We asked him to do it.)
          --Killed a provision that Dole wrote into the budget 
        bill to make it easy for newspapers to contract out our 
          --Guaranteed a veto on Davis-Bacon repeal.
          --His NLRB has changed the rules to make it easier to 
        get hearings and decisions toward single-cit [sic] unit 
          --He stood up against cuts in OSHA, job training.
          --He promised to veto the TEAM Act and FLSA 
    \23\ Internal Teamster Document titled Political Action Speech to 
Local Union Leadership (Ex. 7) (emphasis in original).

    In an effort to further strengthen the relationship with 
the Teamsters, Carey and Hamilton were strongly encouraged by 
White House and DNC personnel to attend White House ``coffees'' 
and other events. At one such event, Hamilton met with the Vice 
President and discussed an issue arising under the North 
American Free Trade Agreement (``NAFTA''):

          The White House has called several times to try to 
        invite you [Ron Carey] to breakfast with the President, 
        and we've begged off. . . . At a similar breakfast with 
        the V-P last week I broached the issue of the [American 
        Trucking Association's] attempt to bring Mexican 
        truckers into the U.S. as owner-operators on 
        ``business'' visas. As a result, we're following up 
        with his staff and the State Department to head it 
    \24\ Internal Teamster Memorandum from Bill Hamilton to Ron Carey, 
April 29, 1996 (Ex. 8).

    Hamilton and the Teamsters were ultimately successful in 
obtaining Administration assistance on the NAFTA cross-border 
trucking issue.25 Indeed, the Administration delayed 
implementation of a previously planned executive action by more 
than one year. A December 19, 1996 internal Teamster memorandum 
from Hamilton to Carey indicates that the delay was tied both 
to the U.S. Presidential election and to Carey's internal bid 
for the Teamster presidency:
    \25\ On December 4, 1995, Secretary of Transportation Federico Pena 
unequivocally stated ``we're ready for December 18th'', the original 
date set for Mexican trucks to gain free access to U.S. highways in the 
border states. See Transcript, speech given by Secretary Pena at a 
joint press conference with his Mexican counterpart on December 4, 1995 
(Ex. 9). The anticipated action did not occur in 1995, or in 1996 for 
that matter. See Internal Teamster Memorandum from Bill Hamilton to Ron 
Carey, December 19, 1996 (Ex. 10). See also ``Truckers, Supplier Press 
Clinton to Open Border,'' Journal of Commerce, December 19, 1996 
(Reporting that DOT action was motivated by a desire to encourage 
Teamsters support for Democratic campaigns).

          Yesterday was the one-year anniversary of the delay 
        in the implementation of the NAFTA border cross 
        truckings. Originally as of December 18, 1995, Mexican 
        trucks and drivers were to be allowed to go anywhere 
        with [sic] the state of their entry. . . . The bottom 
        line: now that their election and your [Ron Carey's] 
        election is over, they are near a decision to go 
        forward and open the border. . . . We might be able to 
        wangle a further delay of 60 to 90 days on pure 
        political grounds--that doing it now undercuts your new 
        election mandate.26
    \26\ Ex. 10 (emphasis in original).

    The Administration's efforts to assist the Teamsters on all 
of the matters described above suggest a potentially serious 
problem. The documentary record indicates that Ickes and other 
Administration officials provided assistance to the Teamsters 
on specific policy matters with the intention of enticing the 
Teamsters to participate in Democratic campaigns and causes. 
Federal law prohibits any government official from ``promising 
. . . special consideration'' in connection with a government 
policy or program in return for ``. . . support of or 
opposition to any candidate or political party. . . .'' 18 
U.S.C. Sec. 600. That provision has been interpreted to outlaw 
efforts to ``entice'' future political support by promising 
government assistance.27 In addition, 5 U.S.C. 
Sec. 7323 prohibits a federal employee from ``. . . us[ing] his 
official authority or influence for the purpose of interfering 
with or affecting the result of an election.'' Further, these 
facts demonstrate a number of potential violations of 3 C.F.R. 
100.735-4, requiring that executive branch employees ``shall 
avoid any action . . . which might result in, or create the 
appearance of . . . [g]iving preferential treatment to any 
person; [or] . . . [m]aking a Government decision outside 
official channels.'' The Committee recommends further 
investigation of these matters.
    \27\ Memorandum Opinion for the Assistant Attorney General, 
Criminal Division, February 25, 1980.
            The Teamsters ``Contribution Swap'' schemes
    Despite the efforts of the White House and the DNC to 
``court'' the Teamsters during 1995 and early 1996, by Spring 
1996 the Teamsters'' leadership was ``somewhat distracted'' by 
the internal race for the Teamsters'' Presidency.28 
As a result, the Teamsters'' union was not participating in 
federal electoral politics at the same extraordinary level as 
it had in the 1992 campaign.29 In May or early June 
1996, a plan for a ``contribution-swap scheme'' between the 
Teamsters and the DNC was conceived. It was relatively simple: 
the DNC agreed to find a $100,000 donor for Ron Carey's 
campaign for reelection as Teamster president; in exchange, the 
Teamsters'' PAC director, Bill Hamilton, would steer 
approximately $1 million to state Democratic 
    \28\ Deposition of David Dunphy, October 28, 1997, pp. 42-43.
    \29\ Id.
    \30\ United States of America v. Martin Davis, U.S. District Court, 
Southern District of New York, Criminal Information 97 Cr., pp. 12-13. 
(Ex. 11).
    Involved in the initial discussions of the scheme were 
Martin Davis, a principal of an organization named ``The 
November Group'' (that simultaneously served as a consultant 
for both Carey and the DNC), and Terry McAuliffe, a former 
Clinton-Gore Campaign Finance Chairman who was engaged in 
special projects for the DNC during the summer months of 
1996.31 Martin Davis described the initial 
conversations regarding the proposed scheme as follows:
    \31\ Id.; Deposition of Terrence McAuliffe, September 18, 1997, pp. 

          In the spring and summer of 1996, I informed 
        individuals, including a former official of the 
        Clinton-Gore '96 Re-election Committee and the 
        Democratic National Committee, that I wanted to help 
        the DNC with fundraising from labor groups including 
        the Teamsters. I told them that I wanted to raise more 
        money from the Teamsters than they originally 
        anticipated. I also asked them if they could help Mr. 
        Carey by having the DNC raised [sic] $100,000 for the 
        Carey campaign.
          The people I was dealing with agreed to try to find a 
        contributor for the Carey campaign. Mr. [Jere] Nash [a 
        Carey campaign consultant] and the Teamsters Director 
        of Government Affairs [Mr. Bill Hamilton] knew of my 
        efforts to leverage the planned Teamster contributions 
        to Democratic party organizations in order to obtain 
        contributions to the Carey campaign.32
    \32\ Martin Davis Guilty Plea allocution, U.S. District Court, 
Southern District of New York, September 18, 1997, pp. 25-26. (Ex. 12).

    Soon after the initial discussions, Laura Hartigan, the 
Finance Director for the Clinton-Gore campaign, and Richard 
Sullivan, the DNC's Finance Director, became involved. 
Sullivan's initial involvement occurred in May or June 1996. 
Sullivan had one or more conversations with Hartigan and Davis 
and discussed the possibility that certain DNC contributors 
might qualify to give to Carey's campaign.33 
Sullivan has described his understanding of the proposed 
arrangement with Martin Davis as follows:
    \33\ Deposition of Richard Sullivan, September 5, 1997, pp. 80-88, 

      Q: Was it your understanding that Laura Hartigan was 
      suggesting that you help Ron Carey?
      A: Um, yeah, it could be interpreted that way.

          Martin Davis . . . told me that he was working with . 
        . . Laura [Hartigan] to raise money from many of the 
        labor unions. . . . He stated that . . . he would be 
        working with Laura on this through the course of the- 
        that he wanted to be helpful to the Democratic cause 
        and that he would be working with Laura through the 
        course of the next couple of months on various unions, 
        and that--but that it would--it would be a personal 
        favor to him if we could help him raise some money for 
        Ron Carey's election.34
    \34\ Id. at pp. 85-86.

    On or about June 12, 1996, Hartigan wrote a memorandum to 
Martin Davis, requesting Teamster PAC donations to specific 
state Democratic parties. Less than one week later, on June 17, 
Davis attended a small White House luncheon with the President 
and eight other guests.35 According to a White House 
document discussing the background of the events guests, Davis 
was ``extremely active in supporting the campaign.'' 
36 McAuliffe and Hartigan also attended the 
    \35\ This is the same luncheon attended by representatives of the 
Cheyenne and Arapaho tribes which is discussed in another section of 
the report.
    \36\ DNC Briefing Memorandum for June 17, 1996 DNC Presidential 
Luncheon, June 16, 1996 (Ex. 13).
    \37\ The Committee has interviewed several attendees at the 
luncheon. According to those attendees, guests were permitted during 
and after the luncheon to speak with the President regarding matters 
concerning them. None of the guests interviewed was either privy to, or 
has a clear recollection of any conversations between Martin Davis and 
the President. Because the Committee has not been able to speak with 
Davis, it cannot be determined whether Davis ever discussed Teamster 
fundraising or Carey's campaign with the President.
    Shortly following the White House luncheon, the Teamsters 
responded to Hartigan's June 12, request for Teamster funds. On 
June 21, Bill Hamilton instructed that DRIVE contribution 
checks be issued to state Democratic parties in amounts which 
corresponded with those requested by Hartigan.38 On 
or about June 24 and 25, $236,000 was transferred from Teamster 
DRIVE funds to the specified state Democratic 
    \38\ Memorandum from Bill Hamilton to Greg Mullenholz, June 21, 
1996 (Ex. 14).
    \39\ Ex. 11, p. 20.
    Referring to Hartigan's June 12, memorandum, Davis has 

          In June 1996 I forwarded to the Teamsters a fax from 
        the DNC requesting that the Teamsters make 
        contributions to certain state Democratic parties 
        totaling more than $200,000. Within the next few weeks, 
        I was informed by either the Clinton-Gore Committee or 
        the DNC that they identified a donor who was willing to 
        give $100,000 to the Carey campaign through Teamsters 
        for a Corruption Free Union [a Ron Carey campaign 
    \40\ Ex. 12, p. 26.

    In late June/early July 1996, the DNC took steps to locate 
a donor for Carey's campaign. Sullivan assigned responsibility 
for DNC fundraising in the Northern California region to DNC 
employee Mark Thomann. In connection with that new assignment, 
Sullivan instructed Thomann to follow-up on outstanding 
contribution commitments made by attendees of a June 9, 1996 
DNC ``Presidential Dinner'' fundraiser at the San Francisco 
home of Senator Diane Feinstein and her husband, Richard 
Blum.41 Among the outstanding contribution 
commitments was one for $100,000 made by Judith 
    \41\ Deposition of Mark Thomann, pp. 20-21.
    \42\ The DNC's Invitation List describes Vazquez as ``the richest 
female entrepreneur in the Phillippines.'' DNC Briefing Memo for DNC 
Presidential Dinner, June 8, 1996 (Ex. 15). Vazquez's lawyers 
understood the dinner to carry a $100,000/plate price tag. Transcribed 
Interview of Twila Foster (Vazquez's attorney), October 20, 1997, p. 
10; Transcribed Interview of Noah Novogrodsky (Vazquez's attorney), 
October 13, 1997, p. 24. Vazquez made the $100,000 commitment because 
she wanted to meet the President, and wanted to support his campaign. 
Novogrodsky Interview, p. 12; Deposition of Mark Thomann, September 23, 
1997, p. 60.
    Vazquez's $100,000 commitment was problematic. Vazquez is a 
Philippine national--she is not an American citizen and does 
not hold a green card.43 Thus, Vazquez could not 
legally contribute to the DNC. Nevertheless, Vazquez was 
invited to, and attended the June 9 fundraiser.44
    \43\ Deposition of Mark Thomann, pp. 29-30. The American subsidiary 
of Vazquez' company had no U.S. earnings and was also ineligible to 
contribute to the DNC. Testimony of Mark Thomann, October 9, 1997, pp. 
    \44\ Richard Blum submitted a Statement to the Committee asserting 
that he met with Vazquez prior to the fundraiser, realized she was a 
foreign citizen and invited her to attend the fundraising event simply 
as a ``guest.'' Statement of Richard C. Blum (Ex. 16). Vazquez informed 
Committee staff in a telephone interview that she did not meet with 
Blum prior to the fundraiser.
    Either contemporaneous with, or following the event, 
Vazquez or her friend and banker, Shirley Nelson, was informed 
that the $100,000 Vazquez contribution should not be directed 
to the DNC.45 Instead, they were told to direct the 
donation to Vote Now '96, a tax-exempt ``Get Out the Vote'' 
organization that focused on traditionally Democratic 
    \45\ Documents obtained by the Committee suggest that Blum directed 
that Vazquez's $100,000 commitment should be channeled instead to Vote 
Now '96. See Novogrodsky notes from ``7/30 conversation with Shirley 
Nelson'' (Shirley ``acknowledged that Vote Now '96 was the brainchild 
of ``Diane's [Senator Feinstein's] husband' '') (Ex. 17). By contrast, 
Thomann testified that he believed that Marvin Rosen, the DNC's Finance 
Chairman, suggested that Vazquez's donation be directed to Vote Now 
'96. Thomann deposition, pp. 28-29. Shirley Nelson corroborated 
Thomann's version of events in a telephone interview with Committee 
    \46\ Id.
    When Thomann initially received his instruction to follow-
up on the Vazquez contribution, he was given a DNC commitment 
sheet that identified Vote Now '96 as the intended recipient of 
the $100,000 contribution. Shortly thereafter, Thomann received 
a telephone call from Richard Sullivan regarding Vazquez's 
contribution. In that telephone call, Sullivan told Thomann 
that there was to be ``a change of direction,'' and that the 
contribution should be made to Carey's campaign committee, 
``Teamsters for a Corruption Free Union.'' 47

    \47\ Thomann testimony, pp. 72-73.
          Richard Sullivan called me and asked whether or not 
        Judith was going to make a contribution to Vote '96 and 
        my response in the initial part of the conversation was 
        ``I'm checking it out with counsel,'' the legalities 
        out with counsel. Then he apprised me of a change in 
        direction and he brought up the possibility of Judith 
        making a contribution to the Teamsters for a Corruption 
        Free Union.
          My first reaction was laughter, based on the fact 
        that I couldn't quite grasp Teamsters for a Corruption 
        Free Union. I had no idea what it was. He did tell me 
        that it was the Ron Carey campaign, and I asked what 
        the legalities were and he gave me the parameters of 
        the contribution, whether or not she was capable of 
        making a contribution, what the parameters would be. He 
        told me that it needed to be an individual and that 
        individual could not have employees, and therefore 
        asked whether or not Pacific Duvas, the American 
        subsidiary [owned by Ms. Vazquez], had employees and if 
        that was a potential source of a 
    \48\ Thomann deposition, p. 38. Thomann provided consistent 
testimony during the October 9, 1997 hearing. Thomann testimony, pp. 

    After speaking with Sullivan, Thomann contacted Vazquez, 
and requested that she redirect a portion of her $100,000 
contribution to Teamsters for a Corruption Free 
Union.49 Vazquez agreed to do so, and wrote to her 
banker, Shirley Nelson, with the following instructions:
    \49\ Thomann testimony, pp. 19-20.

    I received a call from Mr. Mark Thomann, Finance Director 
of the Democratic National Committee with a request that our 
donation from DUVAZ Pacific Corporation be distributed as 
          1. Fifty Thousand Dollars ($50,000) to the Teamsters 
        for a Corruption Free Union; and
          2. Fifty Thousand Dollars ($50,000) to Vote 1996.
    These amounts are to be transferred immediately to the 
accounts of the parties concerned and are to be drawn from 
DUVAZ Pacific Corporation, CA# [account number]. . . 
    \50\ Letter from Judith Vasquez to Summit Bank, July 12, 1996 (Ex. 
    At this point in time--July 12, 1996--it appeared that the 
DNC had succeeded in directing funds to Carey's campaign. The 
DNC, in fact, had control over precisely how and where the 
contribution from Judith Vazquez (a Philippine National) would 
be utilized, instructing her to whom she should write the 
checks.51 Shortly after Vazquez's letter was sent, 
however, Vazquez's attorneys learned of her intentions to 
donate to the Carey campaign and intervened to stop the 
    \51\ Thomann testimony, p. 20.
    \52\ Novogrodsky Interview, p. 34. Vazquez had retained attorneys 
at the firm of Jackson, Tufts, Cole & Black in San Francisco on a 
corporate law issue in June 1996. Part of the attorneys' work for 
Vazquez included an analysis, beginning in early June, of the legality 
of the donations that had been requested by the DNC. Foster Interview, 
pp. 7-9. By late June/early July, the lawyers had concluded that their 
client could only give to a charitable organization of some sort:

      I made it clear to Mark Thomann that the only way we could 
      think of to have our client give a donation would be to a 
      charity . . . I told him very clearly and plainly that it 
      was our legal conclusion that she couldn't give to things 
      that were not 501(c)(3) organizations.

Novogrodsky Interview, p. 41.
    When Vazquez's counsel received a copy of her July 12, 1996 
letter, they acted immediately.53 They determined 
that Vazquez could not legally donate to Teamsters for a 
Corruption Free Union:
    \53\ Id. at p. 83.

          There were two very quick phone calls, and 
        immediately, I concluded that Teamsters for a 
        Corruption-Free Union could not receive a gift because 
        they weren't a charity, and I told Mark Thomann that, . 
        . . and I tried to put the brakes on this donation 
        going because the directions in the July 12th letter 
        seemed to suggest that this was a final outcome, and I 
        had discovered that would be illegal.54
    \54\ Id. at p. 34.

    Vazquez's lawyers succeeded in stopping the donation to 
Teamsters for a Corruption Free Union.

          Q: Is it your understanding that your law firm's 
        legal advice was the reason that the $50,000 donation 
        to Teamsters for a Corruption-Free Union was not made?
          A: Yes. We gave advice that she should not make it, 
        and that advice was followed.55
    \55\ Id. at p. 70.

    After Thomann was informed by Vazquez's attorneys that the 
requested donation would be illegal, Thomann became 

          And after we had determined that the Teamsters for a 
        Corruption Free Union was not a possible source of--for 
        a contribution, I was frankly very distraught and upset 
        that I was put in this situation. . . .56
    \56\ Thomann deposition, p. 47. Thomann provided consistent 
testimony during the October 9, 1997 hearing. See Thomann testimony, 
pp. 21-22.

    Thomann contacted Vazquez over the following days and 
discussed the situation. Their communications, and 
communications among Vazquez and her attorneys, resulted in two 
letters. First, on July 22, 1996, Vazquez wrote to her banker, 
asking that the $100,000 in requested contributions be held 
temporarily ``until everything is straightened out.'' 
57 Then, on July 25, 1996, Vazquez wrote again to 
her bank, instructing that:
    \57\ Letter from Judith Vasquez to Summit Bank, July 22, 1996 (Ex. 

          [A]s per the recommendation of the Finance Director 
        of the Democratic Party, Mark Thomann, Duvaz Pacific 
        Corporation [Vazquez's company] is donating the amount 
        of US $100,000.00 to ``VOTE '96.'' 58
    \58\ Letter from Judith Vasquez to Summit Bank, July 25, 1996 (Ex. 
20). Allegations have been made that Vote Now '96 may have been used as 
a conduit to channel money to Carey's campaign. Although Vote Now '96 
did in fact frequently provide grants to Project Vote and other GOTV 
organizations involved in various aspects of the contribution swap 
schemes, the Committee's investigation has not documented any link 
between Vote Now '96 and the Carey campaign. The Committee has not, 
however, examined financial or accounting records for Vote Now '96 and 
Project Vote.

    At this time, Thomann became so uncomfortable with the 
situation that he decided to recuse himself entirely from the 
matter. Thomann testified:

          Well, the most important thing is that I was in 
        constant contact with Judith Vazquez' local counsel and 
        Shirley Nelson, as well as Richard [Sullivan] to a 
        certain degree, in regards to this Teamsters for a 
        Corruption Free Union contribution. I asked that--after 
        determining that it was not an appropriate contribution 
        for her to be making, I had asked that I be left out of 
        the collection of this contribution. . . .59
    \59\ Thomann testimony, p. 22. During this time, Thomann was also 
receiving significant pressure from Nathaniel Charney, a lawyer who 
represented Carey's campaign. Thomann had determined that Vazquez did, 
in fact, have employees and thus could not, as an individual, 
contribute to Carey's campaign. Thomann testified that he used that 
rationale as ``my way out'' with Charney, but that Charney replied by 
asking if Vazquez's husband could contribute to Carey's campaign. 
Thomann testimony, pp. 24-25.

    I had tremendous trepidation in regards to sending a 
contribution to a campaign--a labor campaign. I didn't know 
anything about it and I just felt that it was not 
    \60\ Thomann deposition, p. 48. Thomann provided consistent 
testimony during the October 9, 1997 hearing. Thomann testimony, pp. 
    Thereafter, on July 31, 1996, Vazquez made a $100,000 
donation to Vote Now '96,61 despite concerns raised 
by Vazquez's counsel about the DNC directing funds to a 
purportedly nonpartisan tax exempt organization.62
    \61\ Summit Bank Cashier's Check made payable to Vote Now '96 from 
Duvaz Pacific Corporation, July 31, 1996 (Ex. 21).
    \62\ Novogrodsky Interview, p. 79. Vazquez's lawyer testified: ``I 
knew that a tight nexus between a DNC official suggesting that our 
client give money to a 501(c)(3) would jeopardize the purpose of the 
501(c)(3).'' Id.
    After the Vazquez donation to Carey's campaign failed to 
materialize, Martin Davis resumed his discussions with Richard 
Sullivan and others regarding the contribution swap scheme:

          I continued to communicate with these officials [of 
        the DNC and/or Clinton-Gore Campaign] in an effort to 
        find a person willing to contribute $100,000 to the 
        Carey campaign. In order to insure that the DNC 
        fulfilled its commitment to raise a hundred thousand 
        dollars, I asked Mr. Nash to make sure that the 
        Teamsters Director of Government Affairs would direct 
        any DNC or Clinton-Gore request for funds through 
    \63\ Ex. 12 at pp. 26-27.

Richard Sullivan was also discussing this matter internally 
with DNC officials:

          I was sitting down with Marvin Rosen in which we were 
        talking about fundraising matters and how much money we 
        could raise over the next couple of months. It had been 
        represented to us by Don Fowler and B.J. Thornberry 
        that there were 10 to 12 unions that still had 
        substantial contributions to make; that there were four 
        to five other unions, Teamsters possibly being one that 
        were still considering doing up to a million dollars 
        for election, some form, some way.
          And I at this particular time, I reminded Marvin that 
        I had this person, Martin Davis, calling me in regards 
        to unions, and that he was asking us to raise money for 
        the Carey for president campaign or whatever, Carey 
        campaign, and that he was representing that it would be 
        helpful to his raising money from unions if we helped 
        him raise some money for Carey.64
    \64\ Sullivan deposition, September 5, 1997, p. 181. Sullivan 
testified that Rosen told him it was not a good idea to pursue the 
contribution swap scheme, and that neither Sullivan nor anyone else 
ever did ``anything specific'' to raise money for Carey. Id. at 95.

    On or about August 10, 1996, Laura Hartigan of the Clinton-
Gore campaign, with the assistance of Sullivan, prepared a 
memorandum to Davis requesting approximately $1 million in 
``State Party Federal and Non-Federal Contributions.'' 
65 The memorandum was very specific in identifying 
particular recipients, and the sums to be contributed. When 
Davis received that memorandum, he forwarded it to Hamilton 
with the following message:
    \65\ Memorandum from Richard Sullivan to Martin Davis, August 10, 
1996 (Ex. 22).

          Bill: I'm forwarding this to you from Richard 
        Sullivan. I'll let you know when they [the DNC] have 
        fulfilled their commitment.66
    \66\ November Group fax memo from Martin Davis to Bill Hamilton, 
August 11, 1996 (Ex. 23). See also Ex. 12 at p. 27.

    At that time, Davis took steps to ensure that none of the 
Teamster contributions requested by Hartigan would be made 
until the DNC ``had fulfilled its commitment'' by obtaining a 
donor for the Carey campaign.67
    \67\ Ex. 12 at pp. 26-27; Jere Nash Guilty Plea allocution, 
September 18, 1997 p. 24 (Ex. 24).
    Because Hamilton, Davis and Nash have not been available 
for questioning by this Committee, and because several critical 
documents were withheld until after depositions on thematters 
at issue had occurred, the Committee has not been able to reach a 
conclusion as to what, if any, further efforts were made in August, 
September, or October 1996 by Sullivan, or others at Sullivan's 
direction, to solicit funds for Carey's campaign.68 The 
following is a summary of the evidence obtained by the Committee on 
this topic:
    \68\ For instance, unanswered questions include the meaning of the 
following phrases in Richard Sullivan's notes: ``Teamsters give money 
to other unions,'' ``4-5 other unions . . . $1 Million.'' Sullivan 
handwritten notes (Exs. 25 & 26).
           During the Committee's deposition of 
        Sullivan on September 5, 1997, he was questioned 
        regarding several of his handwritten notes made during 
        the summer of 1996 that refer to ``Teamsters'' or 
        ``Carey'' and list additional names of DNC donors. In 
        each instance, Sullivan could not recall any contacts 
        by the DNC with any of the listed individuals or any 
        other persons to solicit funds for Carey's 
    \69\ The Committee received information that a DNC donor named 
Alida Messinger may have been contacted by the DNC or McAuliffe and 
asked to contribute, either directly or through an intermediary, to 
Carey's campaign. The Committee contacted Messinger's attorney, to 
determine whether any such contact had occurred. Although Messinger's 
attorney initially promised to provide that information to the 
Committee, he refused to cooperate after consulting with his client.
           Evidence obtained by the Committee indicates 
        that further contributions were made by the Teamsters 
        to state Democratic parties following August 10, 1996. 
        For example, records show that the Teamster's PAC 
        contributed $68,000 to the New York State Democratic 
        Party on October 16, 1996. The amount requested for the 
        New York State Democratic Party in the August 10, 1996 
        memorandum from Sullivan to Hamilton was $69,900. 
        Several other state Democratic parties received DRIVE 
        contributions at or near the amounts requested in that 
           On November 7, 1997, the DNC produced to the 
        Committee an October 14, 1996 internal DNC memorandum 
        regarding ``Special Labor Money.'' The memorandum 
        details union contributions apparently to various State 
        Democratic political organizations totaling $990,000, 
        including $185,000 specifically from the Teamsters 
    \70\ DNC Memorandum to File Re: ``Special Labor Money,'' October 
14, 1996 (Ex. 27). After receiving this memorandum, the Committee 
contacted the DNC and requested an opportunity to interview the DNC 
employee from whose files the memorandum originated. The DNC failed to 
make that individual available for an interview.
    Although the Committee has not identified a further 
prospective donor solicited by Sullivan for the Carey campaign, 
it is clear that further efforts were made after August 1996 by 
Terry McAuliffe to explore possible contribution swap schemes. 
Specifically, in late September or early October 1996, 
McAuliffe discussed with Davis the possibility of a 
contribution swap between the Teamsters and ``Unity '96.'' 
``Unity '96'' was a joint fundraising effort among the DNC, the 
Democratic Senatorial Campaign Committee (``DSCC'') and the 
Democratic Congressional Campaign Committee (``DCCC''). Davis 

          In early October 1996, a Clinton-Gore official [Terry 
        McAuliffe] asked if I would attempt to raise $500,000 
        from the Teamsters for an entity that was a joint 
        fundraising effort of the Democratic National 
        Committee, the Democratic Senatorial Campaign Committee 
        and the Democratic Congressional Campaign Committee. It 
        was understood between us that he and others would try 
        to identify a person who would contribute a hundred 
        thousand dollars to the Carey campaign.71
    \71\ Ex. 12 at p. 27. Ex. 24 at p. 24. ``Davis told me that the 
Clinton-Gore representative had asked Davis to obtain a contribution 
from the Teamsters to the Democratic Senate Campaign Committee also in 
exchange for a donation to the Carey campaign.''

    Thereafter, McAuliffe raised this proposal on at least two 
occasions with persons involved in Unity '96. First, while 
making fundraising telephone calls from DCCC offices, McAuliffe 
spoke with Matthew Angle, the DCCC Executive Director. Angle 

          [H]e [McAuliffe] brought up or asked did we know 
        anybody that could or would write a check to Ron Carey 
        and that if we could help Carey, then we would perhaps 
        get contributions back to the DCCC.72
    \72\ Deposition of Matthew Angle, October 28, 1997, pp. 44-45.

    Second, the proposal was raised during one or more Unity 
Fund meetings attended by representatives of the DNC, DSCC, and 
DCCC. Rita Lewis, a DSCC employee, testified:

          Terry [McAuliffe] said that if we were--if we could 
        find a donor for Ron Carey's election [the Teamsters 
        would] be more apt to give to Unity '96.73
    \73\ Deposition of Rita Lewis, October 27, 1997, p. 16.

    Following the Unity '96 meeting(s), Lewis reported 
McAuliffe's comments to the Chairman of the DSCC, Senator 
Robert Kerrey:

    Q: After you heard those comments, did you inform anybody 
outside of the meeting that topic had been raised?
    A: I brought it up with Senator Bob Kerrey.

           *         *         *         *         *

    Q: In what context did you talk to Senator Kerrey about 
    A: At that point he was spending a lot of time at the 
Senate Campaign Committee, and we were raising money, and we 
were discussing the Teamsters because they were angry at the 
Democratic Senators and, thus, were not contributing to our 
campaigns. And there seemed to be an effort that they were 
trying to get other labor unions to not give to our 
    \74\ Id. at pp. 18-19.

    Senator Kerrey, in turn, telephoned a long-time Democratic 
donor, Bernard Rapoport, and discussed the contribution swap 
proposal. Rapoport testified that Senator Kerrey asked him for 
his opinion of the swap scheme:

    Q: . . . In approximately September or October of 1996, did 
you receive a call from Senator Bob Kerrey of Nebraska, 
informing you of a potential contribution swap whereby he, or 
somebody else, would try to find someone to contribute to Ron 
Carey's campaign and, in exchange, the teamsters would 
contribute a larger sum to the DNC, or some entity like that?

           *         *         *         *         *

    A: I received a call from Senator Kerrey, and he says, ``I 
want your opinion on something,'' and he explained to me about 
this--contributing to Teamsters, and the Democratic Committee 
would benefit, and he said, ``What do you think?''. I said, ``I 
don't like it.'' He says, ``I don't either.'' That ended the 
    \75\ Deposition of Bernard Rapoport, October 20, 1997, pp. 34-35.

    After talking with Senator Kerry, Rapoport called Hamilton 
to express his concerns:

    Q: . . . Did you understand the contribution swap that 
Senator Kerrey told you about to be illegal?
    A: I don't--I'm--I'm not a lawyer so I would not--I--I 
didn't think it would smell good, but I don't know anything 
about the legality. . . .
    Q: . . . After your phone call with Senator Kerrey, did you 
then call Bill Hamilton?
    A: I think I could have talked to him afterwards. I think I 
    Q: And what do you recall about the substance of that 
    A: I think I--I said, ``Bill, I got a call from--from 
Kerrey,'' and I guess I--I told him what transpired in that 
conversation, and then I told him what I thought, and Bill 
said, ``Okay.'' That was it.76
    \76\ Id. at pp. 43-44, 50.

    In a recent newspaper account, Michael Tucker, spokesman 
for Senator Kerrey and the DSCC, was quoted as stating that the 
Teamster contribution swap scheme ``would have been illegal, 
and that was part of the reason for not acting--for dismissing 
it.'' 77 The Committee has found no evidence that 
Senator Kerrey contacted any other DNC donors regarding any 
contribution swap proposal.78
    \77\ Washington Times, October 22, 1997, p. A3.
    \78\ In an October 23, 1996 memo to Carey, Hamilton wrote: ``As you 
know, I have stopped all contributions to the Democratic Senate 
Campaign Committee because of the disappointing performance of Senate 
Democratic leaders, especially Democratic Leader Tom Daschle, on the 
FedEx vote two weeks ago just before they adjourned. I was asked as 
recently as yesterday by Sen. Kerrey, chairman of the DSCC, to 
reconsider. He asked for $500,000; I said no.'' Internal Teamsters 
Memorandum from Bill Hamilton to Ron Carey, October 23, 1996 (Ex. 28).
    In sum, the Committee concludes that Terry McAuliffe and/or 
other officials of the DNC participated in efforts to engage in 
a contribution swap scheme with Martin Davis and Carey's 
campaign. Such efforts included soliciting an illegal 
contribution for Carey's Campaign from Judith Vasquez, a 
Philippine National. Thereafter, McAuliffe and perhaps others 
took further steps to attempt to bring illegal contributions to 
Ron Carey's campaign. The Committee recommends further 
investigation of these matters.
    In the September 18, 1997 Criminal Informations, the U.S. 
Attorney for Southern District of New York alleged that, after 
the Unity '96 contribution swap scheme did not proceed, the 
Teamsters turned to various other political organizations, 
namely the National Council of Senior Citizens (``NCSC''), 
Citizen Action, Project Vote, and the AFL-CIO in its search for 
contributions to Carey's campaign. At the request of the U.S. 
Attorney's Office, the Committee agreed not to probe further 
certain elements of the NCSC, Citizen Action, and Project Vote/
AFL-CIO contribution swap schemes in order to avoid possible 
prejudice to the ongoing Criminal investigations.

                  Misleading and Inaccurate Testimony

    In investigating fundraising efforts involving the 
Teamsters, the Committee was hindered by witnesses who provided 
less than candid testimony. Some examples follow:

Richard Sullivan

     Sullivan was questioned about the proposed contribution 
swap between the DNC and the Teamsters during his September 5, 
1997 deposition, which occurred more than two weeks before the 
Committee deposed Mark Thomann, and also before the U.S. 
Attorney's Office for the Southern District of New York filed 
Criminal Informations publicly describing the contribution swap 
schemes. Sullivan told the Committee that neither he nor any 
other DNC employee ever solicited money for Carey's campaign.

          Q: Did anyone at the DNC, to your knowledge, solicit 
        money for Ron Carey?
          A: Um, no one, to my knowledge, solicited money for 
        Ron Carey at the--no one, to my knowledge solicited 
        contributions for Ron Carey.\79\
    \79\ Sullivan deposition, September 5, 1997, p. 89.

Sullivan also denied ever doing anything ``specific'' to help 
raise money for Ron Carey:

          Q: . . . [D]id you do anything specific to try to 
        raise money for Ron Carey?
          A: Um, did I do anything--I did--I did not, um, um--I 
        don't believe that I did anything specific to try to 
        raise money for Ron Carey.\80\
    \80\ Id. at p. 95.
          Q: Did you ask anyone else at the DNC to try to raise 
        money for Ron Carey?
          A: I did not ask anybody to try to raise money for 
        Ron Carey.\81\
    \81\ Sullivan deposition, September 5, 1997, p. 95.

    Following Sullivan's deposition, the Committee obtained 
testimony and documents indicating that Sullivan had not been 
truthful. As Thomann testified, and as the contemporaneous 
documentation confirms, Sullivan instructed Thomann in early 
July 1996 to ask Judith Vazquez to contribute to Carey's 
campaign.\82\ Thomann did so; Vazquez agreed to make the 
donation and, on July 12, 1996, Vazquez instructed her bank to 
wire $50,000 to Carey's campaign committee, Teamsters for a 
Corruption-Free Union.\83\ Had Vazquez's lawyers not then 
intervened, $50,000 would have ended up in Ron Carey's campaign 
    \82\ Thomann deposition, p. 38, Ex. 18. Although Sullivan did admit 
that he told Thomann that ``there may come the opportunity for us to 
want to raise some money for Ron Carey,'' he failed to disclose that 
the Vazquez solicitation had in fact been made. Sullivan deposition, 
September 5, 1997, pp. 119-20. Notably, Thomann felt so ill at ease 
about solicitating Vazquez that he informed Sullivan in late July 1996 
that he was recusing himself from the matter. Thomann testimony, pp. 
22, 24-25. Sullivan did not mention anything about Thomann's recusal 
during his deposition.
    \83\ Thomann testified that Sullivan called him in August 1997 
(prior to Sullivan's deposition) and asked Thomann ``not to talk to the 
press'' about the Teamster matter. Thomann deposition, p. 52.

Harold Ickes

    As discussed previously, documents produced by the White 
House and other evidence suggest that Harold Ickes assisted the 
Teamsters Union with the Diamond Walnut strike and other 
matters in order to encourage Carey and the Teamsters Union to 
provide more financial assistance to Democratic candidates and 
the DNC. When asked at his September 20, 1997 deposition what 
the Administration did regarding the Diamond Walnut strike, 
Ickes responded: ``Nothing that I know of.'' \84\
    \84\ Ickes deposition September 22, 1997, p. 141.
    In fact, after consultations with the Teamsters Union, 
Ickes asked Mickey Kantor, then the United States Trade 
Representative, to contact the management of the Diamond Walnut 
Company to attempt to persuade them to change their position 
vis-a-vis the Teamsters. According to an internal Teamsters 

          Ickes said he met face-to-face with USTR Mickey 
        Kantor last week and that Kantor agreed to use his 
        discretionary authority to try to convince the CEO of 
        that company that they should settle the dispute.\85\
    \85\ Ex. 3.

    In addition, the Committee determined that Ickes asked his 
aide, Jennifer O'Connor, to confirm that Kantor had indeed 
spoken with Diamond Walnut management. O'Connor confirmed that 
Kantor had done so.

          Q: . . . Did Mr. Ickes ever ask you to assist the 
        Teamsters in any way with the Diamond Walnut strike?
          A: Yes.
          Q: Tell me what this request was? . . .
          A: He asked me to make some inquiries of the U.S. 
        Trade Representative's Office. . . .
          Q: What inquiries were you to make at the U.S. Trade 
        Representative's Office?
          A: I was supposed to find out if the U.S. Trade 
        Representative had spoken to the Diamond Walnut Company 
          Q: Was the U.S. Trade Representative at the time Mr. 
          A: Yes.
          Q: Was it your understanding that Mr. Kantor was to 
        have spoken with the Diamond Walnut head?
          A: Yes. . . .
          Q: Did you have any understanding at the time as to 
        why Mr. Kantor was to speak to the head of Diamond 
          A: I guess my assumption was that somebody somewhere 
        felt that Mr. Kantor could be persuasive with Diamond 
        Walnut. . . .
          Q: What did you learn from the U.S. Trade 
        Representative's Office?
          A: That Mr. Kantor had spoken with the person in 
        question at Diamond Walnut.\86\
    \86\ Jennifer O'Connor deposition, pp. 179-181.

Terry McAuliffe

    Terry McAuliffe, former DNC and Clinton-Gore '96 National 
Finance Chairman, was deposed twice by the Committee. On the 
first occasion, June 6, 1997, McAuliffe testified that ``he 
didn't do anything with the Teamsters.'' \87\ On the second 
occasion, September 18, 1997, when presented with specific 
evidence of certain of his dealings with Martin Davis, 
McAuliffe remembered a meeting he had in which Davis said that 
he wanted to help raise money for the DNC from the Teamsters 
union. McAuliffe testified, however, that after this meeting, 
he passed Davis off to Hartigan and didn't deal with him again 
on this issue. McAuliffe further stated: ``I would tell you, to 
my knowledge, no one ever did anything. I know I never talked 
to anybody, I never talked to any donors. . .'' \88\ ``All I 
know is when the first story or when the first stories on the 
Teamsters came out, I didn't have a clue about any of this.'' 
    \87\ McAuliffe deposition, June 6, 1997, p. 168.
    \88\ McAuliffe deposition, September 18, 1997, at pp. 90-91.
    \89\ Id. at p. 78.
    After McAuliffe's September 18, 1997 deposition, the guilty 
pleas of Martin Davis and Jere Nash became public. In his plea 
allocution, Martin Davis testified as follows:

          In early October 1996, a Clinton-Gore official [Terry 
        McAuliffe] asked if I would attempt to raise $500,000 
        from the Teamsters for an entity that was a joint 
        fundraising effort of the Democratic National 
        Committee, the Democratic Senatorial Campaign Committee 
        and the Democratic Congressional Campaign Committee. It 
        was understood between us that he and others would try 
        to identify a person who would contribute a hundred 
        thousand dollars to the Carey campaign.\90\
    \90\ Ex. 12 at p. 27.

    Jere Nash, in his guilty plea allocution, also refers to 
McAuliffe's efforts on behalf of the Carey campaign: ``Davis 
told me that the Clinton-Gore representative [McAuliffe] had 
asked Davis to obtain a contribution from the Teamsters to the 
Democratic Senate Campaign Committee also in exchange for a 
donation to the Carey campaign.'' \91\
    \91\ Ex. 24 at p. 24.
    Also after McAuliffe's September 18 deposition, the 
Committee deposed Rita Lewis from the DSCC and Matthew Angle 
from the DCCC. Lewis testified that McAuliffe addressed 
fundraising for the Carey campaign at a Unity '96 
organizational meeting. She said thatMcAuliffe ``described if 
we were to find money for Ron Carey's election, that the Teamsters 
would be more likely to give to Unity '96.'' \92\
    \92\ Lewis deposition, p. 15.
    Angle testified that McAuliffe had a conversation with him 
sometime in the fall of 1996 in which ``[McAuliffe] brought up 
or asked did [the DCCC] know of anybody that could or would 
write a check to Ron Carey.'' He mentioned that assistance to 
Carey might facilitate ``contributions back to the DCCC.'' \93\
    \93\ Angle deposition, pp. 44-45.
    After reviewing the testimony of Davis, Nash, Lewis and 
Angle, the Committee requested that McAuliffe appear for a 
further deposition. McAuliffe, through his counsel, declined to 
appear, explaining that he could ``. . . add little if anything 
to the record the Committee has already developed on this 
issue. . . .''


    Significant hurdles impeded the Committee's ability to 
investigate thoroughly many of matters addressed herein. 
Notwithstanding these hurdles, the Committee has obtained 
evidence sufficient to demonstrate a problematic course of 
conduct, and to cite certain specific illegal or improper 
campaign practices involving the White House, the Clinton/Gore 
campaign, the DNC and the Teamsters.
    The Supreme Court, in United States Civil Service 
Commission et al. v. National Association of Letter Carriers, 
AFL-CIO, et al., 413 U.S. 548, 564-65 (1973), opined:

          It seems fundamental in the first place that 
        employees in the Executive Branch of the Government, or 
        those working for any of its agencies, should 
        administer the law in accordance with the will of 
        Congress, rather than in accordance with their own will 
        or the will of a political party. They are expected to 
        enforce the law and execute the programs of the 
        Government without bias or favoritism for or against 
        any political party or group or the members thereof.
          It is not only important that the Government and its 
        employees in fact avoid practicing political justice 
        but it is also critical that they appear to the public 
        to be avoiding it if confidence in the system of 
        representative Government is not to be eroded to a 
        disastrous extent.

    Here, the activities of the White House and DNC not only 
appear to contravene the fundamental notion that our Nation's 
citizens are entitled to equal treatment under the laws, but 
also raise questions as to the applicability of certain Federal 
criminal statutes. Specifically, did Ickes and other 
Administration officials provide special treatment or policy 
assistance to Teamster officials in order to entice the 
Teamsters Union to support Democratic campaigns? Further, did 
McAuliffe and/or DNC officials seek donors other than Vazquez 
as part of a contribution swap scheme with the Ron Carey 
    In sum, substantial further inquiry into each of these 
matters is warranted. The Committee concludes that 
investigation by the Department of Justice is required to 
determine the following:

           Whether Harold Ickes or other Administration 
        personnel violated 18 U.S.C. Sec. 607, 5 U.S.C. 
        Sec. 7323 or any other provision of law in connection 
        with the Diamond Walnut matter, the Pony Express 
        matter, the cross-border trucking issue and other 
        measures taken by the White House on behalf of the 
           Whether Administration officials violated 
        federal election laws by using the prerogatives of the 
        White House to entice labor union officials to make 
        political contributions and to participate in 
        Democratic campaigns;
           Whether McAuliffe or DNC officials violated 
        federal law by attempting to engage in contribution 
        swap schemes with officials of Ron Carey's Campaign.

        Compliance by Nonprofit Groups With Committee Subpoenas

                            I. Introduction

     During the course of the Special Investigation, the 
Committee on Governmental Affairs (``Committee'') issued 427 
subpoenas requiring the production of documents and/or the 
personal appearance of an individual for deposition or hearing 
testimony. The Committee directed a substantial number of these 
subpoenas to nonprofit organizations that were active 
participants in the 1996 elections.1
    \1\ The Committee uses the phrase ``nonprofit group'' as a short-
hand method of describing those entities organized for a noncommercial 
purpose that directly participate in the electoral process through 
contributions to candidates, the expenditure of funds on the behalf of 
candidates, or the expenditure of funds to educate the public on issues 
of public policy. These nonprofit groups are entities that are 
organized under either Sec. Sec. 501(c) or 527 of the federal tax code. 
26 U.S.C. Sec. Sec. 501(c), 527 (1997).
    Entities organized under these sections of the tax code receive 
preferential tax status so that their income is either totally or 
partially exempt from federal taxation. In order to qualify for this 
preferential tax status, these organizations must abide by specified 
limitations on their political activity. The degree of restriction on 
political activity varies widely.
     At the outset of the investigation, press reports 
described the increased use of so-called issue advocacy 
campaigns by nonprofit organizations. These press accounts 
raised questions about whether those groups were truly 
nonpartisan and independent from political parties and 
candidates, as required by federal law.2 Because of 
allegations surrounding the activity of nonprofit groups in the 
1996 election--particularly relating to the use of issue 
advocacy campaigns--the Committee decided to investigate the 
role of nonprofit organizations in the elections.
    \2\ E.g., Glenn F. Bunting et al., ``Nonprofits Behind Attack Ads 
Prompt Senate Probe,'' L.A. Times, May 5, 1997, p. A1; Fred Wertheimer, 
``Investigate the G.O.P., Too,'' N.Y. Times, Feb. 18, 1997, p. A19. 
Elizabeth Drew's book, Whatever It Takes, examined in great detail the 
increased activity of nonprofit groups in the electoral process. Drew 
explored issue advocacy campaigns and the possibility that those 
campaigns were coordinated with the national parties and presidential 
candidates. See Elizabeth Drew, Whatever It Takes (1997).
     In order to further that investigation, the Committee 
subpoenaed thirty-two entities as well as the Republican 
National Committee (``RNC''), the Democratic National Committee 
(``DNC''), and the Dole for President (``DFP'') and Clinton/
Gore '96 campaigns. The Committee also subpoenaed for 
deposition testimony numerous individuals associated with these 
nonprofit organizations. In addition, the Committee issued 
subpoenas to banking institutions, seeking the financial 
records of several of the nonprofit groups.
    Because the bulk of the allegations of illegal and improper 
conduct during the 1996 elections involved the national 
political parties and presidential candidates, the Committee 
served the DNC and the RNC with subpoenas duces tecum on April 
10, 1997. On the same day, the Committee also served DFP and 
Clinton/Gore '96 with subpoenas demanding the production of 
    \3\ The compliance of the DNC and Clinton/Gore '96 campaign is not 
discussed in this section of the Committee's report but receives full 
consideration in other portions of the report. See below for discussion 
of compliance with Committee subpoenas by the DNC and Clinton-Gore '96 
     In addition to the candidate and party committees, the 
Committee investigated several nonprofit organizations that 
were supportive of the Republican agenda during the 1996 
elections. By either developing policy or sponsoring issue 
advocacy campaigns, these groups advocated policy positions 
generally associated with the Republican Party. Accordingly, on 
April 9, 1997, the Committee issued subpoenas demanding the 
production of certain documents to the National Policy Forum 
(``NPF''), Americans for Tax Reform (``ATR''), Triad Management 
Services, Inc. (``Triad''), the Coalition for Our Children's 
Future, Inc. (``CCF''), Citizens for the Republic Education 
Fund, Inc. (``CREF''), and Citizens for Reform, Inc. 
    \4\ Triad is a for-profit organization. However, Triad managed 
issue advocacy campaigns sponsored by CR and CREF and, thus, enjoyed a 
unique relationship to the nonprofit organizations. Because many of the 
compliance questions that arose during the investigation of CR and CREF 
relate to the Minority staff's efforts to obtain information about CR 
and CREF from Triad, the Committee is treating Triad as a nonprofit 
organization for the purposes of this discussion.
    The AFL-CIO (hereinafter referred to as ``the AFL-CIO'' or 
``the Federation'') was another group that was very active 
during the 1996 election cycle. Press accounts linked the 
leadership of the AFL-CIO with an illegal conspiracy to funnel 
general treasury funds from the International Brotherhood of 
Teamsters (``IBT'') to the reelection campaign of IBT President 
Ron Carey. In addition, the Federation sponsored a massive, $35 
million dollar issue advocacy campaign overtly designed to 
return control of Congress to the Democratic Party.5 
Because of allegations of illegality and impropriety 
surrounding these activities, the Committee unanimously issued 
a subpoena duces tecum to the AFL-CIO on May 23, 1997.
    \5\ The Annenberg Public Policy Center, in its report on issue 
advocacy campaigns in the 1996 elections, dubbed the AFL-CIO ``the-800 
pound gorilla of issue advocacy advertisers during the 1996 campaign.'' 
Paul Taylor, Introduction to Deborah Beck, et al., Issue Advocacy 
Advertising During the 1996 Campaign 3 (Annenberg Public Policy Center 
     The Committee issued additional document subpoenas to a 
host of nonprofit groups on July 30, 1997. These nonprofit 
organizations, which spanned the ideological spectrum, were 
allegedly involved in a variety of questionable campaign 
practices during the 1996 elections. Press reports suggested 
that some of these groups might have violated their tax status 
and committed election law infractions. The subpoenaed groups 
included Citizen Action, Citizen Vote, Inc. (``Vote Now '96''), 
the National Education Association (``NEA''), the International 
Brotherhood of Teamsters (``IBT''), the National Council of 
Senior Citizens (``NCSC''), the Sierra Club, the Campaign to 
Defeat 209, the Democratic Leadership Council, Inc. (``DLC''), 
EMILY's List, the National Committee for an Effective Congress 
(``NCEC''), the Association of Trial Lawyers of America 
(``ATLA''), Americans United for Separation of Church and State 
(``Americans United''), the American Defense Institute 
(``ADI''), the American Defense Foundation (``ADF''), the 
National Right to Life Committee, Inc. (``NRLC''), Citizens for 
a Sound Economy (``CSE''), the Christian Coalition, Inc., the 
Better American Foundation, Inc. (``BAF''), the American Cause, 
the Republican Exchange Satellite Network (``RESN''), The 
Coalition: Americans Working for Real Change (``Coalition''), 
Women for Tax Reform (``WTR''), the Heritage Foundation, and 
Citizens Against Government Waste.
    The Committee encountered substantial resistance to these 
subpoenas. Entirely apart from the ten individuals who fled the 
country or the thirty-five witnesses who invoked their Fifth 
Amendment right against self-incrimination, a large number of 
individuals who had been subpoenaed for depositions simply 
refused to appear or declined to answer substantive questions. 
A still larger number of nonprofit organizations, led in 
particular by the AFL-CIO, refused in whole or in part to 
produce documents pursuant to lawfully issued subpoenas duces 
    Compliance comprises several elements: 1) the timeliness of 
production, 2) the thoroughness of production, and 3) good 
faith--evidencing a genuine desire to cooperate with the 
Committee. Clearly, compliance is a relative term. With some 
notable exceptions, most of the entities failed to comply with 
the Committee's subpoenas. 6 Some of these nonprofit 
groups refused to produce any docunly provided documents 
specifically requested by Committee staff, while a few produced 
only publicly available material.7
    \6\ The Committee notes that the NPF initially resisted the 
Committee's efforts to learn the identities of donors to the group. See 
Order of Chairman Fred Thompson, July 3, 1997 (Ex. 1). The NPF also 
objected to efforts by the Committee to investigate activities 
occurring prior to the 1996 federal election cycle. Id. One NPF 
witness, Michael Baroody, refused to answer questions during a 
deposition on the grounds that the questions sought information beyond 
the scope of the Committee's legitimate authority. Id. After Chairman 
Thompson issued an order overruling these objections, NPF fully 
complied by producing witnesses for depositions and answering each and 
every question put to them. See below for discussion of the NPF's 
compliance with Committee subpoenas.
    \7\ For almost three months, the AFL-CIO repeatedly refused to 
produce any documents to the Committee as required by the subpoena. 
Eventually, the Federation produced only 4,145 pages of material, all 
of which had been made publicly available. Letter from Robert M. 
Weinberg and Robert F. Muse, Counsel for AFL-CIO, to Michael J. 
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug. 
20, 1997 (Ex. 3).
    Many of the nonprofit groups claimed that the Committee's 
subpoenas sought information beyond the scope of its legitimate 
investigative authority. Several nonprofit groups alleged that 
the Committee's subpoenas violated constitutional guarantees, 
including the First Amendment right to freedom of expression 
and association.8 Some of the organizations baldly 
asserted that they could not be investigated since they did not 
engage in illegal or improper behavior during the 1996 federal 
    \8\ ATLA, the Christian Coalition, Citizen Action, Citizens Against 
Government Waste, the IBT, NCSC and the NRLC submitted joint objections 
to the Committee's subpoenas, arguing that those subpoenas exceeded the 
Committee's authority and infringed on the First Amendment rights of 
the members of the various organizations. See Letter from ATLA, 
Christian Coalition, Citizen Action, Citizens Against Government Waste, 
the IBT, NCSC and the NRLC to Michael J. Madigan, Chief Counsel, and 
Alan I. Baron, Minority Chief Counsel, Sept. 3, 1997 (Ex. 4).
    \9\ For example, Counsel for ATR objected to the Committee's 
subpoena on the grounds that ATR had no documents relating to ``illegal 
or improper activities'' in connection with the 1996 elections. See, 
e.g., Letter from Thomas E. Wilson, ATR Counsel, to Madigan J. Madigan, 
Chief Counsel, June 11, 1997 (Ex. 5).
     In addition, some of the nonprofit groups--most notably 
the AFL-CIO, the IBT, and the Christian Coalition--refused to 
produce witnesses pursuant to deposition subpoenas, or to allow 
the Committee to interview persons affiliated with those 
groups.10 Several of the organizations produced 
witnesses for depositions but, on advice of counsel, those 
witnesses declined to answer substantive 
    \10\ Following the lead of the AFL-CIO, many of these nonprofit 
groups jointly refused to comply with the Committee's subpoenas. Neil 
A. Lewis, ``Nonprofit Groups to Defy Subpoenas in Senate Inquiry,'' 
N.Y. Times, Sept. 4, 1997, p. A16.
    \11\ For example, on advice of counsel, witnesses affiliated with 
Triad, CR and CREF refused to answer substantive questions during their 
depositions. E.g., Deposition of Carolyn Malenick, Sept. 16, 1997, pp. 
5-29; Deposition of Lyn Nofziger, Sept. 16, 1997, pp. 6-22; Deposition 
of Carlos A. Rodriguez, Sept. 17, 1997, pp. 5-23.
    In Senate Resolution 39, which authorized the Special 
Investigation, the full Senate imposed a deadline of December 
31, 1997 on the investigation. As a result of this deadline, 
the Committee found it virtually impossible to enforce its 
subpoenas. Enforcing a contempt of Congress citation is a time 
consuming and lengthy process.12 As a result, the 
December 31, 1997 deadline severely hampered the Committee's 
ability to threaten and conduct enforcement proceedings.
    \12\ See below for detailed analysis of contempt procedures.
    In the pages that follow, the Committee discusses the 
organized resistance to its subpoenas by some of the nonprofit 
groups and the impact that this resistance had on other 
nonprofit organizations that had previously been cooperating 
with the Special Investigation.13 The Committee then 
outlines the prevailing legal and constitutional standards 
governing congressional subpoena power.14 The 
Committee closes with an analysis of the contempt procedures 
and discusses the manner in which the December 31, 1997 
deadline rendered those compliance procedures useless to the 
    \13\ See below for discussion of resistance to Committee subpoenas.
    \14\ See below for discussion of legal standards governing 
congressional subpoena power.
    \15\ See below for discussion of December 31, 1997 deadline and its 
impact on Committee's investigation.
    As the following discussion makes clear, this record of 
noncompliance presents a troubling precedent. The Committee 
shares the grave concerns expressed by Senator Joseph 
Lieberman, ``[t]he message is: if you ignore a congressional 
subpoena, you're immune. That's an awful precedent.'' 
    \16\ Guy Gugliotta, ``Congressional Investigations: More Partisan 
and Less Powerful,'' Wash. Post, Nov. 20, 1997, p. A23.

                             II. DISCUSSION

A. Subpoena Compliance by Nonprofit Groups

            (1) Contagious noncompliance
    The Special Investigation encountered more than sporadic 
resistance in its effort to learn about illegal and improper 
activities by nonprofit groups in the 1996 election. In fact, 
noncompliance was contagious. By the close of the Committee's 
investigation, most of the nonprofit groups had publicly 
declared their intent to defy subpoenas.17 Quite a 
few groups that had theretofore complied with subpoenas ceased 
cooperating with the Committee after several prominent 
organizations publicly defied the Committee with impunity.
    \17\ Neil A. Lewis, ``Nonprofit Groups to Defy Subpoenas in Senate 
Inquiry,'' N.Y. Times, Sept. 4, 1997, p. A16 (stating that 26 nonprofit 
groups subpoenaed by the Committee would not comply with requests for 
documents and witnesses).
    This pattern of noncompliance had its genesis in the 
obstructionist tactics of the AFL-CIO. Indeed, until the AFL-
CIO publicly announced its intention--on August 20, 1997--to 
withhold virtually all of the documents and witnesses requested 
by the Committee, most of the nonprofit groups were 
cooperative. After the AFL-CIO took the lead in defying the 
Committees subpoenas, compliance by nonprofit groups declined 
    For instance, before the AFL-CIO openly refused to comply 
with document and deposition subpoenas on August 20, 1997, 
Triad, CR and CREF produced virtually all documents requested 
by the Committee. Triad, CR and CREF also produced four 
witnesses for depositions and scheduled several additional 
witnesses requested by the Minority staff. Following the AFL-
CIO's letter informing the Committee that it would not 
cooperate, Counsel for Triad, CR and CREF instructed their 
clients to appear for depositions but not to answer substantive 
    \18\ E.g., Malenick deposition, pp. 5-29; Nofziger deposition, pp. 
6-22; Rodriguez deposition, pp. 5-23.
            (2) The AFL-CIO's strategy of obstruction
    Therefore, in order to understand why the Committee 
encountered enormous opposition to its subpoenas, it is first 
necessary to understand the circumstances of the AFL-CIO's 
noncompliance. On May 23, 1997, the Committee subpoenaed the 
AFL-CIO, demanding the production of all responsive documents 
by June 15, 1997. The subpoena listed forty-eight 
specifications, of which Nos. 14 through 48 sought information 
directly related to the Federation's electoral and political 
action efforts during the 1996 election cycle.
    Counsel for the AFL-CIO responded to the subpoena on June 
5, 1997, and immediately objected to the production of 
documents, arguing that the subpoena exceeded the Committee's 
mandate and abridged the Federation's First Amendment rights of 
free speech and association.19 The Committee staff 
met with the Federation's Counsel on June 19, 1997, and 
attempted to accommodate their concerns by asking the attorneys 
to identify the specific specifications to which they objected. 
Consistent with the Committee's policy of working with 
subpoenaed entities to encourage maximum compliance, the 
Committee offered to narrow the scope of the subpoena in return 
for the Federation commencing a rolling production schedule.
    \19\ Letter from Robert M. Weinberg and Robert F. Muse, AFL-CIO 
Counsel, to Michael J. Madigan, Chief Counsel, and Alan I. Baron, 
Minority Chief Counsel, June 5, 1997 (Ex. 6).
    On July 11, 1997, a full month after the initial return 
date, the AFL-CIO informed the Committee that it would not 
articulate specific objections to the scope of the subpoena and 
declined to begin a rolling production of 
documents.20 In response, the Committee again 
offered to limit the documents initially requested in order to 
facilitate compliance. The Committee asked that the Federation 
produce the requested documents by July 30, 1997, and warned 
that the failure to agree on a proposed production schedule 
would require the Committee to institute contempt 
    \20\ Letter from Robert M. Weinberg and Robert F. Muse, AFL-CIO 
Counsel, to Philip Perry and James A. Brown, Majority Counsel, July 11, 
1997 (Ex. 7).
    \21\ Letter from Philip Perry and James A. Brown, Majority Counsel, 
to Robert M. Weinberg, AFL-CIO Counsel, July 17, 1997 (Ex. 8).
    Throughout most of August, the AFL-CIO refused to cooperate 
and declined repeated efforts by the Committee to establish 
even a modest production schedule. On August 15, 1997, the 
Committee summarized the stalemate as follows:

          This is not a complex situation. Nearly three months 
        have passed since the subpoena was issued and yet you 
        have not produced a single page of material to the 
        Committee. We have made every effort to facilitate 
        compliance by you, including by repeatedly offering to 
        negotiate a reduction in the breadth of the AFL-CIO 
        subpoena, and by indicating a narrow range of high 
        priority documentation for an initial segment of a 
        rolling production process. At no point have you 
        cooperated in this process.22
    \22\ Letter from Michael J. Madigan, Chief Counsel, and Philip 
Perry, Majority Counsel, to Robert M. Weinberg and Robert F. Muse, 
Counsel for AFL-CIO, Aug. 15, 1997 (Ex. 9).

    On August 20, 1997, the AFL-CIO produced three boxes of 
documents totaling 4,145 pages, which its counsel acknowledged 
were ``materials already in the public domain--e.g., public 
disclosure forms filed with the Federal Election Commission, 
publicly filed tax documents, Department of Labor disclosure 
forms, press releases, television advertisements, and leaflets 
and handbills.'' 23 This production obviously 
included none of the highly relevant documents sought by the 
    \23\ Ex. 3.
    At the same time, the AFL-CIO submitted its first brief to 
the Committee, which set forth constitutional and legal 
objections to the subpoena. In the brief, the Federation cited 
First Amendment free speech and associational rights and argued 
that the Committee's subpoena exceeded the scope of its 
enabling resolution.24
    \24\ In the Matter of: A Subpoena to the AFL-CIO, Memorandum of 
Points and Authorities in Support of AFL-CIO's Objections to Subpoena 
Duces Tecum, Aug. 20, 1997 (Ex. 10).
    The Committee responded to those objections on August 25, 
1997, stating that

          . . . our review to date has demonstrated that such 
        objections lack significant legal support. It is also 
        clear from the character of such objections that the 
        AFL-CIO has chosen, without consulting the Committee, 
        to construe the subpoena in as overbroad a manner as 
        possible in order to attempt to justify its continuing 
        delays in compliance.25
    \25\ Letter from Michael J. Madigan, Chief Counsel, to Robert M. 
Weinberg and Robert F. Muse, Counsel for AFL-CIO, Aug. 25, 1997 (Ex. 

In the same letter, the Committee significantly narrowed the 
scope of the subpoena to encourage voluntary compliance so the 
Committee could proceed expeditiously with its investigation. 
It did so by amending eleven specifications and unilaterally 
agreeing not to enforce seventeen others.26
    \26\ Id.
    After reviewing the AFL-CIO's objections, Chairman Thompson 
issued an order on September 3, 1997, that instructed the AFL-
CIO to produce the requested documents.27 The order 
limited the production of documents as set forth in the 
Committee's August 25, 1997 letter, and indicated that the 
Committee would not enforce any other specifications in the 
    \27\ AFL-CIO Production Order, Sept. 3, 1997 (Ex. 12).
    \28\ Id.
    The AFL-CIO refused to comply with the Chairman's order. 
Instead, the AFL-CIO's Counsel submitted a second letter brief 
reasserting the constitutional and other arguments set forth in 
their August 20, 1997 letter.29 The Committee never 
sought to compel compliance by the AFL-CIO. Because of the 
likelihood that a contempt citation against the Federation 
would meet a prolonged filibuster on the floor of the Senate, 
the Committee concluded that it was simply not viable to pursue 
contempt with only a few months until the expiration of the 
December 31, 1997 deadline.
    \29\ Letter from Robert M. Weinberg and Robert F. Muse, Counsel for 
AFL-CIO, to Chairman Fred Thompson and Senator John Glenn, Sept. 8, 
1997 (Ex. 13). In addition to the document subpoena noted above, the 
Committee also issued five subpoenas requiring deposition testimony 
from individuals affiliated with the AFL-CIO. With the exception of 
Geoffrey Garin, a pollster that worked with the AFL-CIO, those 
witnesses refused to appear. All five of those individuals, including 
two consultants retained by the AFL-CIO, were represented by Counsel 
for the AFL-CIO.
    The Committee concludes that the AFL-CIO not only failed to 
comply with subpoenas, but that it deliberately adopted an 
obstructionist strategy designed to thwart production of 
responsive and relevant documents. The Committee believes that 
the Federation intentionally adopted this strategy in the 
cynical hope of escaping scrutiny, knowing that the Committee 
was operating under a December 31, 1997 deadline that rendered 
calls for contempt an empty threat.
            (3) The AFL-CIO encouraged noncompliance by other nonprofit 
    The AFL-CIO's obstructionist tactics hampered the 
Committee's ability to draw any kind of reasonable conclusions 
about the Federation's activities in the 1996 election cycle. 
Even more damaging to the Committee's efforts, however, was the 
encouragement of unwarranted defiance that the AFL-CIO provided 
other subpoenaed entities.
    The Federation openly encouraged other nonprofit groups to 
resist the Committee's subpoenas. For example, on August 20, 
1997, the NEA's Counsel contacted the Committee and stated that 
he had received a copy of the AFL-CIO memorandum in opposition 
to the Committee's subpoena.30 He added that ``[t]he 
arguments that the AFL-CIO makes with regard to the invasion of 
constitutional rights, exceeding the Committee's mandate, and 
overbreadth largely are applicable to the NEA 
subpoena.''31 The Committee notes that the NEA's 
letter, which was received via facsimile, arrived at the 
Committee's offices before the AFL-CIO's memorandum in 
opposition. Following the lead of the AFL-CIO, the NEA did not 
produce a single document to the Committee.
    \30\ Ex. 2, p.2.
    \31\ Id.
    The NEA is not the only nonprofit group that took guidance 
from the AFL-CIO. On September 3, 1997, the same day that the 
Federation was ordered to comply with the Committee's subpoena 
or face a contempt citation, a diverse coalition of nonprofit 
groups filed joint objections to the Committee's 
subpoenas.32 The groups, which represented the 
entire political spectrum, complained that the Committee's 
subpoenas (1) exceeded the Committee's delegated authority, (2) 
demanded documents the confidentiality of which were protected 
by federal law, (3) were overbroad, burdensome and oppressive, 
and (4) violated the First Amendment rights of the subjected 
organizations and their members.33
    \32\ Ex. 4.
    \33\ Id.
    The merits of these objections will be addressed in greater 
detail below but, after a careful review of the authorities and 
arguments offered by the groups, the Committee finds the 
objections to without merit.34
    \34\ See below for discussion of congressional subpoena power and 
its constitutional and legal limitations.
    Like the NEA, several of the groups that submitted joint 
objections to the Committee on September 3, 1997 conceded in 
late August that the AFL-CIO had shared its legal brief with 
the organizations. For example, on August 21, 1997--the day 
after the AFL-CIO submitted its formal objections to the 
Committee--the IBT's Counsel advised the Committee that she had 
received a copy of the Memorandum of Points and Authorities in 
Support of AFL-CIO's Objections to Document Subpoena, and that 
``we agree with the AFL-CIO's legal analysis.'' 35 
On the same day, Citizen Action's Counsel wrote to the 
Committee that her client ``agree[d] with many of the 
objections raised by the AFL-CIO in its opposition . . .'' 
    \35\ Letter from Leslie Berger Kiernan, Counsel for IBT, to Michael 
J. Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, 
Aug. 21, 1997, p. 2 (Ex. 14).
    \36\ Letter from Lyn Utrecht, Counsel for Citizen Action, to 
Michael J. Madigan, Chief Counsel, and Alan I. Baron, Minority Chief 
Counsel, Aug. 21, 1997, p.1 (Ex. 15).
    The impact of the AFL-CIO's obstructionist tactics cannot 
be overstated. The NCSC, which has a long-standing affiliation 
with the AFL-CIO, initially agreed to comply with the 
Committee's subpoena. In fact, on August 13, 1997, the NCSC's 
Counsel contacted Committee staff and asked that the return 
date be extended until mid-September because key organization 
officials were on vacation and unable to respond to the 
subpoena.37 Committee staff met with NCSC's Counsel 
on August 14, 1997, at which time the NCSC agreed to comply 
with eleven specifications by September 7, 1997. However, on 
August 20, 1997--the same day that the AFL-CIO filed its legal 
brief in opposition to the Committee's subpoena--the NCSC's 
Counsel stated that ``on closer examination of the subpoena, we 
see further First and Fourth Amendment problems, together with 
what appears to be a demand for records far in excess of the 
Committee's jurisdiction.'' 38
    \37\ Letter from Robert Mozer, Counsel for NCSC, to Michael J. 
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug. 
13, 1997 (Ex. 16).
    \38\ Letter from Robert J. Mozer, Counsel for NCSC, to Michael J. 
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug. 
20, 1997 (Ex. 17).
    As this correspondence indicates, the AFL-CIO actively 
encouraged other nonprofit organizations--even groups that had 
already agreed to cooperate with the Committee--to defy 
subpoenas. A cursory comparison of the letter from these groups 
and the brief submitted by the Federation on August 20, 1997 
indicates that the organizations supported their joint 
objections with the same arguments raised by the AFL-
CIO.39 Furthermore, the AFL-CIO's defiance of the 
Committee's deposition subpoenas encouraged other groups, who 
did not want their employees or officers testifying before the 
Committee, to follow suit.
    \39\ Ex. 4.

B. Congressional subpoena power and its limitations

            (1) The nonprofits' objections to the Committee's subpoenas
    As explained above, many of the nonprofit groups justified 
their noncompliance by arguing that the Committee's subpoenas 
sought documents beyond the scope of its mandate and/or that 
the subpoenas impinged on various constitutional rights. In 
particular, the AFL-CIO--and the groups that followed its 
lead--claimed that the Committee's subpoenas violated First 
Amendment rights to freedom of speech and 
association.40 ATLA also suggested that the 
subpoenas violated the Fourth Amendment's protection against 
unreasonable searches and seizures.41 After a 
careful review of the materials submitted by the various 
nonprofit groups, the Committee concludes that--with a rare 
exception--these objections were baseless.
    \40\ Ex. 10; see also Ex. 4.
    \41\ Letter from Roger S. Ballentine, ATLA Counsel, to Michael J. 
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug. 
14, 1997 (Ex. 18).
    The Committee will first address the objections that were 
raised as to the Committee's legislative authority. A 
congressional committee's authority to issue and enforce a 
subpoena is derived from its enabling resolution. In this case, 
the Committee derived its authority from Senate Resolution 39 
and Senate Report 105-7.
    It is well established that such a resolution and the 
accompanying report shall be interpreted first by reference to 
the language of the resolution, and then, by resorting to the 
legislative history.42 Both Senate Resolution 39 and 
Senate Report 105-7 clearly demonstrate that the Committee 
possessed the authority to conduct a broad-scale inquiry into 
the 1996 election campaign, and that the full Senate approved 
the scope of the Special Investigation.
    \42\ See, e.g., Wilkinson v. United States, 365 U.S. 399, 408-409 
(1961); Barenblatt v. United States, 360 U.S. 109, 117 (1959); Watkins 
v. United States, 354 U.S. 178, 209-15 (1957). See also United States 
v. Rumely, 345 U.S. 41, 43 (1953) (holding that ``the problem [of 
interpreting a congressional resolution] is much the same as that which 
confronts the Court when called upon to construe a statute'').
    The Majority Leader originally proposed a version of Senate 
Resolution 39 which would have allocated $3 million for 
``conducting an investigation of illegal activities in 
connection with [the] 1996 Federal election campaigns.'' As 
envisioned by the original resolution, the Committee on Rules 
and Administration would have conducted the 
    \43\ Congressional Record, Mar. 11, 1997, p. S2096.
    The Committee on Governmental Affairs subsequently approved 
an amendment that greatly increased the investigation's budget, 
granted jurisdiction to the Committee on Governmental Affairs, 
and expanded the investigation's scope to include ``illegal or 
improper activities in connection with 1996 Federal election 
campaigns.'' 44 Majority Leader Lott subsequently 
agreed to the Committee's amendment and offered the amendment 
on the Senate floor.45
    \44\ Senate Report 105-7, p. 3 (emphasis added).
    \45\ See above for introduction discussing Committee's mandate.
    As set forth in Senate Report 105-7, the Committee's 
authority extended to an investigation relating, but not 
limited to, the following activities:
          The independence of presidential campaigns from the 
        political activities pursued for their behalf by 
        outside individuals or groups;
          the misuse of charitable and tax-exempt organizations 
        in connection with political or fundraising activities;
          unregulated (soft) money and its effect on the 
        American political system;
          promises and/or the granting of special access in 
        return for political contributions or favors;
          the effect of independent expenditures (whether by 
        corporations, labor unions, or otherwise) upon our 
        current campaign finance system, and the question as to 
        whether such expenditures are truly independent; and
          contributions to and expenditures by entities for the 
        benefit or in the interest of public 
    \46\ Senate Report 105-7, p. 3.
    The scope of the Committee's proposed inquiry was ``a 
testament to the patent need for a through and wide-ranging 
investigation into the role of big money in federal elections, 
both presidential and congressional.'' 47 In fact, 
the Minority members of the Committee stated that ``[w]e agree 
wholeheartedly with the description of the scope of the 
investigation as set forth by the majority report.'' 
48 The Senate ultimately enacted the Committee's 
amendment to Resolution 39, as offered by the Majority Leader.
    \47\ Id. at pp. 2-3.
    \48\ Id. at pp. 5-6.
    Thus, while much of the nonprofit activity under 
investigation by the Committee would clearly be illegal, the 
language of Senate Resolution 39 included more than simply 
illegal conduct. It allowed the Committee to examine practices 
that might be legal yet improper or unethical. In addition to 
the text of Senate Resolution 39, a thorough reading of the 
legislative history--including the ensuing floor debate--
clearly shows that the subpoenas issued to the various 
nonprofit groups did not exceed the scope of the Committee's 
    For example, Subpoena No. 72, which was issued to Triad, 
required the production of the following types of documents:
          (1) Documents referring or relating to the founding 
        of the organization, its structure, management, and tax 
          (2) Bank records for all Triad accounts;
          (3) Documents used for fundraising, marketing, 
        polling as well as information concerning advertising 
        and other voter education activity, including phone 
        banks and direct mail;
         (4) Documents relating to any communications by Triad 
        and an agent of any political committee as well as any 
        donations or contributions to or from a national party 
        committee; and
         (5) Documents relating to any donations to nonprofit 
        organizations related to Triad.49
    \49\ With the exception of requiring the production of documents 
involving persons specifically associated with each group, the language 
of this subpoena is identical to the language used in the other 
subpoenas that were issued on April 9, 1997. These subpoenas included 
those served on the NPF, CR, CREF, ATR and CCF.
This subpoena only requires the production of documents that 
relate or refer to the group's voter education and election 
    Similarly, Subpoena No. 95, which the Committee issued to 
the AFL-CIO, sought only the production of documents directly 
related to the Federation's voter education, electoral and 
political activities. Subpoena No. 95 required the AFL-CIO to 
produce the following types of documents:
         (1) All documents relating to the organizational 
        structure, management, annual reports, annual financial 
        statements, board minutes involving federal elections, 
        campaigns or candidates, as well as employee manuals or 
        handbooks relating to political activity;
         (2) All documents relating to contributions to any 
        federal political committee or candidate;
         (3) All documents related to the AFL-CIO's political 
        action committee as well as voter education efforts, 
        including precinct targeting efforts;
         (4) All documents relating to political or voter 
        education advertising, including polling and other 
        support materials;
         (5) All documents that relate or refer to any federal 
        election, candidate or campaign;
         (6) All documents relating to other political action 
        committees working with the AFL-CIO; and
         (7) All documents relating to grass roots political 
        organizing by the AFL-CIO.50
    \50\ The AFL-CIO subpoena is the only subpoena containing this 
exact language.
    Finally, the language of the last group of subpoenas, which 
the Committee issued to nonprofit organizations on July 30, 
1997, is also well within the broad legislative mandate of 
Senate Resolution 39. For example, Subpoena 296, which was 
issued to the National Right to Life Committee, requires the 
production of the following types of documents:
         (1) Documents referring or relating to the founding of 
        the organization, its structure, management, and tax 
         (2) All financial statements and annual reports;
         (3) Documents used for fundraising, marketing, polling 
        as well as information concerning advertising and other 
        voter education activity, including phone banks and 
        direct mail;
         (4) Documents relating to any communications by the 
        National Right to Life Committee and an agent of any 
        political committee as well as any donations or 
        contributions to or from a national party committee; 
         (5) Documents relating to any donations from the 
        National Right to Life to any federal candidate, 
        political committee or campaign.51
    \51\ With the exception of requiring the production of documents 
involving persons specifically associated with each group, the language 
of this subpoena is identical to the language used in the other 
subpoenas that were issued on July 30, 1997. These subpoenas include 
the bulk of the nonprofit groups under investigation. See above for 
listing of entities subpoenaed on July 30, 1997.
As these three examples illustrate, the Committee's subpoenas 
sought only information related to the voter education, 
political and electoral activities of the various nonprofit 
    It was argued that the Committee's subpoenas were invalid 
because the term ``improper'' in Senate Resolution 39 was 
impermissibly vague. It is specious to argue that the term 
``improper'' is vague and undefined by Senate Resolution 39 and 
the accompanying Report. ``Improper'' as a functional matter 
can be defined from several sources, including the Committee's 
authorizing resolution and statements of Chairman Thompson and 
other members of the Committee. Consequently, the Committee 
rejects all of the objections as to scope that were raised by 
the nonprofit groups during the investigation.
    Most of the nonprofit groups also objected to Committee 
subpoenas on constitutional grounds. For the most part, the 
Committee finds those objections unpersuasive. While the power 
of Congress to investigate is broad, ``its range and scope'' is 
not unlimited.52 The ``scope of the [Committee's] 
power of inquiry . . . is as penetrating and far-reaching as 
the potential power to enact and appropriate under the 
Constitution.'' 53 This power is extremely broad so 
long as the Committee pursues a legitimate legislative 
    \52\ Barenblatt, 360 U.S. at 112 (quotation omitted).
    \53\ Id. at 111.
    The cases relied upon by the nonprofit groups to justify 
their noncompliance are inapposite, since they involved 
attempts by state legislatures to obtain the membership lists 
of private, volunteer organizations.54 None of those 
cases are applicable to Congress. Moreover, it is clear from 
reading the specifications contained in the various subpoenas 
that the Committee never sought donor information or membership 
lists. In fact, Chairman Thompson specifically refused to order 
nonprofit groups to produce membership or donor information 
except with respect to foreign members and donors.55
    \54\ E.g., Gibson v. Florida Legis. Investig. Comm., 372 U.S. 539 
(1963); NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958).
    \55\ Ex. 1.
    The other cases cited by the nonprofit groups to support 
noncompliance are equally distinguishable because they concern 
the investigative authority of regulatory bodies.56 
Because the Senate's investigative authority is vested in the 
Constitution itself, these cases are inapposite.
    \56\ E.g., FTC v. American Tobacco Co., 264 U.S. 298 (1924) 
(addressing whether an adjudicatory agency has the legal authority to 
subpoena documents related to a price-fixing investigation); Hearst v. 
Black, 87 F.2d 68 (1936) (involving a Federal Communication Commission 
subpoena of all telegraphs made over a certain time period).
    Notwithstanding the limitations in the Bill of Rights, the 
Supreme Court has generally acknowledged the broad subpoena 
authority of Congress. For example, in Packwood v. Senate 
Select Committee on Ethics,57 the Supreme Court 
ruled that a subpoena seeking a senator's personal diaries was 
not overly broad and did not violate either his First or Fourth 
Amendment rights. The Supreme Court also rejected a First 
Amendment objection to a Senate subpoena in Eastland v. United 
States Servicemen's Fund.58
    \57\ 510 U.S. 1319 (1994).
    \58\ 421 U.S. 491 (1975).
    As a result, the Committee concludes that only three valid 
objections could be raised by the nonprofit groups. First, the 
Committee recognized the assertion of an individual's Fifth 
Amendment right against self-incrimination. Second, the 
Committee did not challenge assertions of the attorney-client 
and work-product privileges.59 Third, the Committee 
recognized the First Amendment rights of the nonprofit groups 
to maintain the secrecy of their domestic members and donors. 
Therefore, the Committee believes that the remaining objections 
as to scope and constitutionality were baseless and frivolous.
    \59\ The Senate has never officially recognized these common law 
privileges, see Jurney v. MacCracken, 294 U.S. 125, 146 (1935), but the 
Committee did not elect to challenge their assertion during the Special 

C. Enforcement of Committee subpoenas

            (1) Contempt procedures and the December 31, 1997 deadline
    A contempt citation is the only mechanism available to the 
United States Senate for enforcing a subpoena against a party 
in noncompliance. As outlined in the preceding pages, many of 
the nonprofit groups were, at best, in ``partial compliance'' 
with the Committee's document and deposition 
subpoenas.60 Partial compliance and outright 
noncompliance obstructed the Committee's efforts to investigate 
allegations of improper or illegal campaign finance abuses 
during the 1996 federal election cycle.
    \60\ See above for discussion of noncompliance with Committee 
subpoenas by nonprofit groups.
    Although the Committee attempted to secure full compliance 
with its subpoenas, these efforts were severely hampered by the 
full Senate's imposition of a December 31, 1997 deadline for 
the Special Investigation. As is explained in the succeeding 
pages, the contempt process is very time consuming. Thus, the 
deadline substantially reduced the Committee's leverage and 
weakened its ability to threaten contempt proceedings as a 
means of forcing compliance.
            (2) Classifications of contempt
    The ability to issue contempt citations is an inherent 
power of both chambers of Congress.61 There are 
three types of contempt proceedings--inherent, statutory 
criminal and statutory civil contempt.62 Civil 
contempt is available to the Senate only.63 Criminal 
contempt citations are ``after the fact'' punishments for 
failure to comply, whereas the civil citation compels 
cooperation with the subpoena in order to obtain the 
information requested. The Senate has used the civil citation 
six times since its inception in 1978, and the criminal 
citation has not been used by the Senate since the creation of 
the civil contempt procedures.
    \61\ See Anderson v. Dunn, 19 U.S. (6 Wheat) 204 (1821). See also 
Jay R. Shampansky, Congress' Contempt Power, CRS Report No. 86-83A, 
Feb. 28, 1986.
    \62\ See Groppi v. Leslie, 404 U.S. 496 (1972); 2 U.S.C. 
Sec. Sec. 192 & 194; 2 U.S.C. Sec. 288d; 28 U.S.C. Sec. 1365.
    \63\ See 2 U.S.C. Sec. 288d; 28 U.S.C. Sec. 1365.
    The ``inherent contempt'' power has not been used by the 
House or Senate in over sixty years. It is a cumbersome 
procedure that requires the Senate's Sergeant-at-Arms to 
physically bring the recalcitrant party before the Senate. 
There, the party is tried. Conviction by the Senate can result 
in confinement in the Capitol Jail until compliance or the 
expiration of a specified time period.64
    \64\ The time period can be either the end of the current session 
of Congress or the life of the Committee. See Morton Rosenberg, 
Investigative Oversight: An Introduction to the Law, Practice and 
Procedures of Congressional Inquiry, Apr. 7, 1995, p. 14.
    The ``statutory criminal contempt'' procedure is set forth 
in 2 U.S.C. Sec. Sec. 192 and 194, which state that a party 
under subpoena who refuses to testify or produce documents, or 
who appears before the Committee and refuses to respond to 
questions, is subject to a criminal contempt citation from the 
Senate. The citation must be approved by the Senate to issue. 
Once passed by the Senate, the President Pro Tempore must 
certify the criminal contempt citation and then submit it for 
prosecution to the United States Attorney for the District of 
Columbia.65 Upon submission to the United States 
Attorney, it becomes the ``duty'' of the United States Attorney 
to ``bring the matter to a grand jury for action.'' 
    \65\ 2 U.S.C. Sec. 194. If Congress is not in session, the citation 
can be approved by the ``presiding officer.'' Id.
    \66\ Id.; see also Todd D. Peterson, Prosecuting Executive Branch 
Officials for Contempt of Congress, 66 N.Y.U.L. Rev. 563 (1991); 
``Prosecution of Contempt of Congress,'' Subcommittee on Administrative 
Law and Governmental Relations, House Comm. on the Judiciary, 98th 
Cong., 1st Sess. 21-35 (1983) (citing testimony of Stanley Brand). It 
is unclear whether the United States Attorney retains discretion under 
the statute to decline prosecution of the recalcitrant party.
    Criminal contempt requires a ``willful'' violation of the 
Senate subpoena.67 This form of contempt is punitive 
and not compulsory. Therefore, if the Senate--and ultimately 
the court--holds a recalcitrant party in criminal contempt, 
that party cannot purge the contempt penalty by producing the 
subpoenaed information.68
    \67\ 2 U.S.C. Sec. 192.
    \68\ 2 U.S.C. Sec. 192. The recalcitrant party can be found guilty 
of a misdemeanor, which is punishable by a fine up to $1,000 and 
imprisonment for one year. Id.
    The ``statutory civil contempt'' procedure is available 
only to the Senate pursuant to 2 U.S.C. Sec. 288d(a). The 
committee issuing the subpoena, when faced with noncompliance, 
must file a report to the full Senate.69 This report 
must outline the procedure followed to issue the subpoena; the 
extent to which the party has complied with the subpoena; any 
objections raised by the subpoenaed party; and supply the 
reasons the committee is pursuing civil enforcement, rather 
than certifying a criminal action for contempt of Congress or 
initiating a contempt proceeding directly before the 
    \69\ Id. Sec. 288d. In order to be reported out of Committee, the 
report must be approved by a majority of members voting and present. 
Id. Sec. 288d(c)(1).
    \70\ Id. Sec. 288d(c)(2).
    The civil contempt citation and its accompanying report 
constitute a Senate Resolution, which is a privileged motion. A 
privileged motion means that the resolution goes to the Senate 
floor immediately and is not subject to 
amendments.71 Once the resolution reaches the Senate 
floor, however, it is subject to the rules of the chamber, 
including filibuster. The Senate, after considering the report, 
may adopt a resolution directing the Senate Legal Counsel to 
initiate civil contempt proceedings against the recalcitrant 
    \71\ Id. Sec. 288j(a)(1).
    \72\ Id. Sec. 288d(a).
    After adoption of the resolution, Senate Legal Counsel 
submits an application to the United States District Court for 
the District of Columbia. The civil action, filed in the 
committee's name, will request either declaratory relief or an 
order compelling compliance with the subpoena. In the district 
court, the recalcitrant party can make motions and interpose 
objections. If the district court rejects those objections, the 
court issues an order requiring compliance with the Senate 
    If the party still refuses to comply, the court may try the 
person in summary proceedings for contempt of court by applying 
for an order to show cause why the party should not be held in 
contempt for failure to comply with the court's order. If the 
court overrules the party's objections to the contempt order, 
it will impose sanctions in order to compel the recalcitrant 
party to comply with the subpoena.73 The contempt 
order can be purged by the recalcitrant party. Even if the 
Senate prevails in the district court, the recalcitrant party 
may still exercise its right to appeal.74
    \73\ The judicial contempt power supplements, but does not 
supplant, the Senate's contempt power. See id. Sec. 288d(g).
    \74\ 28 U.S.C. Sec. 1291.
    The entire process can take as long as three 
months.75 If the recalcitrant party appeals from the 
district court, the process can extend for years.
    \75\ For example, during the controversy over the Senate Ethics 
Committee's attempts to secure former Oregon Senator Bob Packwood's 
diaries, the Committee's civil contempt order and report issued on 
October 20th; the full Senate considered the civil contempt citation on 
November 1st and 2nd; the Senate's filed its application to the 
district court on December 16th; and, the district court issued its 
order requiring production of the diaries on January 7th of the 
following year.
            (3) Summary
    The contempt procedures are the only vehicles by which a 
Senate committee can ensure compliance with duly issued 
subpoenas. In order for a Senate committee to conduct a 
thorough and complete investigation against parties who are 
willing to withstand public pressure to cooperate, a committee 
must be able to force the recalcitrant parties to comply with 
lawful Senate process. Due to the lengthy and arduous 
procedures for civil and criminal contempt, it is essential 
that future Senate investigations be free of arbitrary time 
deadlines. Such deadlines encourage stalling, gamesmanship and 
outright resistance to committee authority. In fact, the 
conduct of the nonprofit and other groups illustrates how the 
Senate imposed deadline of December 31, 1997 impeded the 
Special Investigation.

                            III. CONCLUSION

    Senate Resolution 39 granted the Committee explicit 
authority to examine the numerous press accounts of illegal and 
improper conduct by nonprofit groups in connection with the 
1996 federal election cycle. In order to fulfill its 
responsibilities, the Committee issued subpoenas to those 
nonprofit groups that were most active during the 1996 
elections. Those subpoenas did not exceed the Committee's 
mandate or its constitutional authority to investigate matters 
relevant to the Senate's consideration of reforms to the 
federal campaign finance system. Despite the exercise of lawful 
process, most of the nonprofit groups did not comply with 
Committee requests for documents and deposition testimony.
    Most troubling to the Committee, however, is the manner in 
which its investigation was obstructed. Prior to the AFL-CIO's 
open defiance of the Committee, most of the nonprofit groups 
displayed a general willingness to cooperate with the 
investigation. Most of the organizations readily produced 
documents and scheduled witnesses for depositions. Once the 
AFL-CIO refused to comply with the Committee's subpoenas by 
raising specious and unsupported legal objections, the other 
nonprofit groups had no reason--other than public 
spiritedness--to cooperate. In other words, after the AFL-CIO 
thwarted the Committee's investigation with impunity, the 
remaining nonprofit groups did not fear the Committee's threats 
of contempt.
    Had the Committee been able to pursue contempt proceedings 
against the AFL-CIO, or even credibly threaten contempt 
proceedings, the Committee might have avoided the 
obstructionist tactics of the AFL-CIO and others. Those threats 
lacked credibility, however, because the nonprofit groups 
understood that the Committee could not obtain a contempt of 
Congress citation from a federal district court before the 
expiration of the December 31, 1997 deadline. Moreover, even if 
the Committee could have obtained such a citation, the right of 
the organizations to appeal a finding of contempt guaranteed 
that the Committee could not effectively utilize the contempt 
    Therefore, the Committee concludes that the Senate's 
imposition of an arbitrary deadline dramatically impeded the 
course of the Special Investigation. As is discussed in more 
detail in other sections of the report, absent the necessary 
evidence, the Committee was unable to draw any meaningful 
conclusions about the activities of nonprofit groups during the 
1996 elections.

             Role of Nonprofit Groups in the 1996 Elections

    The 1996 election witnessed an unprecedented level of 
political activity by nonprofit groups.1 The 
Annenberg Public Policy Center at the University of 
Pennsylvania estimates that, during the 1996 election cycle, 
nonprofit groups spent between 55 and 70 million dollars on 
political advocacy campaigns.2 These figures include 
so-called ``independent expenditure'' 3 and ``issue 
advocacy'' campaigns, 4 and constitute roughly one-
seventh of the 400 million dollars expended on political 
advertising during the 1996 elections by parties, candidates 
and others.5 This amount does not measure all of the 
political advocacy and work of nonprofits, however. Get-out-
the-vote (``GOTV'') efforts and other types of in-kind 
contributions by nonprofits supplemented paid media campaigns.
    \1\ Paul Taylor, Introduction to Deborah Beck, et al., Issue 
Advocacy Advertising During the 1996 Campaign 3 (Annenberg Public 
Policy Center 1997). The Committee uses the phrase ``nonprofit group'' 
as a short-hand method of describing those entities organized for a 
noncommercial purpose that directly participate in the electoral 
process through contributions to candidates, the expenditure of funds 
on behalf of candidates, or the expenditure of funds to educate the 
public on issues of public policy. These nonprofit groups are entities 
that are organized under either Sec. 501(c) or Sec. 527 of the federal 
tax code. 26 U.S.C. Sec. Sec. 501(c), 527 (1997).
    \2\ Taylor, supra note 1, p. 3. The Annenberg Report calculated 
that the national political parties spent roughly $80 million on issue 
advocacy and independent expenditure campaigns. This figure represents 
a substantial portion of the $135 to $150 million spent by nonprofit 
groups. Id.
    \3\ ``Independent expenditure'' campaigns are communications that 
expressly advocate the election or defeat of a clearly identified 
federal candidate. These expenditures must be disclosed by the 
sponsoring group but are not subject to contribution or expenditure 
limits. In order to qualify as an independent expenditure, the 
communication cannot be made in coordination with the candidate. 2 
U.S.C. Sec. 441a(a)(7)(B).
    \4\ ``Issue advocacy'' campaigns are communications designed to 
promote a set of ideas or public policies. Issue advocacy is 
distinguished from ``express advocacy'' in that the communications do 
not advocate the election or defeat of a clearly identified federal 
candidate. Buckley v. Valeo, 424 U.S. 1, 43-44 (1976) (narrowly 
construing Federal Election Campaign Act of 1974 as applying only to 
``expenditures for communications that in express terms advocate the 
election or defeat of a clearly identified candidate for federal 
    \5\ Taylor, supra note 1, p. 3.
    During and after the 1996 election, there were numerous 
press reports about the activities of nonprofit groups. These 
press accounts raised questions about whether the organizations 
were truly nonpartisan and independent from political parties 
and candidates as required by federal law.6 Because 
of allegations surrounding the political activities of 
nonprofit groups--particularly relating to the use of issue 
advocacy campaigns--one of the priorities of the Committee was 
to investigate the role of nonprofit organizations in the 
    \6\ See, e.g., Glenn F. Bunting et al., ``Nonprofits Behind Attack 
Ads Prompt Senate Probe,'' Los Angeles Times, May 5, 1997, p. A1; Fred 
Wertheimer, ``Investigate the G.O.P., Too,'' New York Times, Feb. 18, 
1997, p. A19; Elizabeth Drew, Whatever It Takes (1997).
    Senate Resolution 39, which authorized the Special 
Investigation, specifically expanded the scope of the inquiry 
to include not only illegal activities but improper conduct as 
well.7 As a result, the Committee intended to 
examine the following activities involving nonprofit 

    \7\ Senate Report 105-7, p. 3.
          The independence of presidential campaigns from the 
        political activities pursued for their behalf by 
        outside individuals or groups;
          the misuse of charitable and tax-exempt organizations 
        in connection with political or fundraising activities;
          unregulated (soft) money and its effect on the 
        American political system;
          promises and/or the granting of special access in 
        return for political contributions or favors;
          the effect of independent expenditures (whether by 
        corporations, labor unions, or otherwise) upon our 
        current campaign finance system, and the question as to 
        whether such expenditures are truly independent; and
          contributions to and expenditures by entities for the 
        benefit or in the interest of public 
    \8\ Id.
    In order to further this goal, the Committee subpoenaed 
thirty-two nonprofit organizations in addition to the 
Republican National Committee (``RNC''), the Democratic 
National Committee (``DNC''), and the presidential campaigns of 
Senator Robert Dole and President Bill Clinton. The Committee 
also subpoenaed numerous persons associated with these entities 
for deposition testimony. Lastly, the Committee subpoenaed 
several banking institutions, seeking the financial records of 
some of the nonprofit groups.9
    \9\ See below for listing of nonprofit groups that were subpoenaed 
by the Committee.
    The Committee issued these subpoenas to investigate several 
specific allegations involving illegal or improper conduct by 
nonprofit groups during the 1996 federal elections. First, the 
Committee sought evidence that some political action committees 
(``PACs'') participated in schemes to evade the contribution 
limits set by federal election law.10 Second, the 
Committee wanted to determine whether expenditures by nonprofit 
groups for issue advocacy campaigns were coordinated with 
federal candidates and/or party committees in such a manner 
that those expenditures became illegal in-kind contributions to 
the candidates or parties. Third, the Committee intended to 
explore the increased use of issue advocacy campaigns by 
nonprofit groups during the 1996 elections. Specifically, the 
Committee hoped to examine the distinction between issue and 
express advocacy--a distinction which in practical terms 
appeared to be meaningless in the 1996 elections. Fourth, the 
Committee sought evidence about the illegal use of nonpartisan, 
tax-exempt groups by political parties and candidates for 
partisan purposes.11
    \10\ PACs, which are classified under Sec. 527 of the tax code, may 
receive income that is exempt from federal taxation if that income is 
spent ``influencing or attempting to influence'' the election of 
candidates to federal, state, or local office. 26 U.S.C. 
Sec. 527(c)(3), (e)(2). Unlike nonprofit groups organized under 
Sec. 501(c) of the tax code, there are no partisan limitations on the 
political activities of PACs. Indeed, PACs may contribute directly to 
political candidates. However, because PACs may engage in partisan 
political advocacy--as distinct from the nonpartisan advocacy of groups 
organized under Sec. 501(c)--their activities are subject to regulation 
under the Federal Election Campaign Act of 1971 (``FECA'').
    \11\ Entities organized under Sec. 501(c) of the tax code receive 
preferential tax status so that their income is either totally or 
partially exempt from federal taxation. In order to qualify for this 
preferential tax status, these organizations must abide by specified 
limitations on their political activity. The degree of restriction on 
political activity varies widely.
    Groups organized under Sec. 501(c) may not contribute to political 
candidates or parties but they may participate in the political 
process. Groups organized for charitable, religious or educational 
purposes are generally classified under Sec. 501(c)(3). Contributions 
to groups organized under Sec. 501(c)(3) are not only exempt from 
federal tax, but the donor may deduct the contribution as well. 26 
U.S.C. Sec. 170(a), (c)(2). In return for this extremely favorable tax 
treatment, these nonprofits may ``not participate in, or intervene in . 
. . any political campaigns on behalf of (or in opposition to) any 
candidate for public office.'' Id. Sec. 501(c)(3). Moreover, a 
Sec. 501(c)(3) may not sponsor issue advocacy campaigns. In short, 
these groups may not engage in political advocacy of any kind and must 
limit their activities to purely educational functions.
    Groups classified under Sec. 501(c)(4) are generally considered 
social welfare organizations. Id. Sec. 501(c)(4). While the income of 
groups organized under Sec. Sec. 501(c)(3) and (c)(4) is exempt from 
federal taxation, donations to a Sec. 501(c)(4) are not deductible to 
the contributor. A group organized under Sec. 501(c)(4), however, may 
engage in political advocacy so long as the advocacy is of a 
nonpartisan nature. Id. As a result, a Sec. 501(c)(4) may sponsor issue 
advocacy campaigns.
    Labor unions are nonprofit groups organized under Sec. 501(c)(5) 
and mutual not-profit business organizations, such as the Chamber of 
Commerce, are classified under Sec. 501(c)(6). These groups may engage 
in nonpartisan political advocacy only. Id. Sec. 501(c)(5),(6). Both 
types of groups can sponsor issue advocacy campaigns.
    As described in great detail in the portion of the report 
dealing with compliance, the Committee encountered substantial 
resistance to its subpoenas.12 A substantial 
majority of the nonprofit organizations, led by the AFL-CIO, 
refused in whole or in part to produce documents or witnesses 
pursuant to lawfully issued subpoenas. Relying on dubious 
arguments about the constitutionality and scope of the 
Committee's subpoenas, many of these groups pursued a tactical 
strategy designed to impede the Special Investigation. Knowing 
that the Senate had imposed a December 31, 1997 deadline on the 
Special Investigation--a deadline that rendered useless the 
lengthy contempt procedures available to the Committee--the 
nonprofit groups stalled, delayed and ultimately refused to 
cooperate with the Committee.
    \12\ See below for discussion of noncompliance with Committee 
subpoenas by nonprofit groups.
    Because of the deadline, the Committee had no ability to 
force the nonprofit groups to provide the documents and 
testimony necessary to a full understanding of their conduct. 
As a result of these tactics--particularly those of the AFL-
CIO--the Committee obtained only a smattering of relevant 
documents and a handful of useful depositions.
    With only a portion of the material evidence before the 
Committee, it was unable to draw any reasonable conclusions 
about the conduct of most of the nonprofit groups. In fact, the 
Committee believes that it would be irresponsible to draw 
inferences about serious allegations of illegality and 
impropriety on such a limited amount of evidence. Consequently, 
the Committee cannot confirm or deny most of the allegations of 
illegal or improper conduct relating to the political 
activities of nonprofit groups in the 1996 elections.
    In their zeal to find a moral equivalent to the proven 
misconduct of the DNC and the Clinton/Gore '96 campaign, the 
Minority has repeatedly disclosed to the press--in violation of 
the Committee's Confidentiality Protocol--documents and 
deposition testimony that they contend prove violations of 
election and tax laws by the RNC, Republican candidates and 
sympathetic nonprofit groups. The Committee finds such 
conclusions irresponsible given the limited available evidence 
and the lack of public hearings.
    Instead of sitting in judgment on an incomplete record, the 
Committee will lay out some of the evidence that has been 
uncovered during the course of the Special Investigation.
    As noted above, the Committee sought to thoroughly examine 
allegations that some nonprofit groups illegally coordinated 
issue advocacy expenditures with federal candidates andparty 
committees, thereby providing unreported and unlimited in-kind 
contributions to those candidates and committees. FECA Sec. 431(9)(A) 
defines the term ``expenditure'' as anything of value ``made by any 
person for the purpose of influencing any election for Federal 
office[.]'' 13 Section 441a(a)(7)(B)(1) states that 
``expenditures'' that are made ``by any person in cooperation, 
consultation, or concert, with, or at the request or suggestion of, a 
candidate, his authorized political committees, or their agents, shall 
be considered to be a contribution to such candidate[.]'' 14 
As contributions, coordinated expenditures are subject to FECA's 
limitations as to amount and source. Consequently, when a nonprofit 
expends funds for communications designed to influence a federal 
election, and the expenditure is made at the request of the candidate 
or the candidate's agent or is based upon information obtained from the 
candidate or the candidate's agent, the expenditure must be treated as 
an in-kind contribution to the candidate for the purposes of disclosure 
requirements and contribution limits.
    \13\ 2 U.S.C. Sec. 431(9)(A)(1).
    \14\ Id. Sec. 441a(a)(7)(B)(1).
    In addition to FECA and FEC regulations applying to 
nonprofit groups generally, there are several regulations that 
specifically apply to political communications by labor 
organizations. For example, FEC regulations allow registration 
and voting communications ``provided that . . . [t]he 
preparation and distribution or registration and get-out-the-
vote communications shall not be coordinated with any 
candidate(s) or political party.'' 15 Labor 
organizations may also prepare and distribute the voting 
records of Members of Congress ``provided that . . . [t]he 
decision on content and the distribution of voting records 
shall not be coordinated with any candidate, group of 
candidates or political party.'' 16 FEC regulations 
also allow labor organizations to prepare and distribute voter 
guides so long as the unions do not contact ``or in any way act 
in cooperation, coordination, or consultation with or at the 
request or suggestion of the candidates, the candidates' 
committees or agents.'' 17
    \15\ 11 C.F.R. Sec. 114.4.
    \16\ Id. In addition to these regulations, the FEC has issued at 
least one advisory opinion holding that coordination is a consideration 
in determining whether general public communications critical of 
Members of Congress' voting records are subject to the contribution 
limitations and prohibitions of the FECA. FEC Advisory Opinion 1985-14.
    \17\ 11 C.F.R. Sec. 114.4.
    FEC regulations define coordination as:
          any arrangement, coordination, or direction by the 
        candidate or his or her agent prior to the publication, 
        distribution, display, or broadcast of the 
        communication. An expenditure will be presumed to be so 
        made when it is--
          Based on information about the candidates plans, 
        projects, or needs provided to the expending person by 
        the candidate, or by the candidates agents, with a view 
        toward having an expenditure made; or
          Made by or through any person who is, or has been, 
        authorized to raise or expend funds, who is, or has 
        been, an officer of authorized committee, or who is, or 
        has been, receiving any form of compensation or 
        reimbursement from the candidate, the candidate's 
        committee or agent.18
    \18\ Id. Sec. 109.1(b)(4)(I)(A),(B).
Using these regulations as a guidepost, the Committee found 
some evidence that the AFL-CIO coordinated issue advocacy 
campaigns with the DNC and the Clinton/Gore '96 campaign.
    The Annenberg Report dubbed the AFL-CIO ``the-800 pound 
gorilla of issue advocacy advertisers during the 1996 
campaign.'' 19 Following the 1994 election in which 
Republicans wrested control of both houses of Congress for the 
first time in forty years, the AFL-CIO and its affiliated 
unions set about reinvigorating the political operation of 
organized labor. One of the principal manifestations of this 
reorganization was a series of paid media campaigns, or issue 
ad campaigns, designed to boost the political influence of 
organized labor. The AFL-CIO and its affiliated unions 
developed and funded three separate and distinct programs: 
``Stand Up for America's Working Families,'' ``Project '95,'' 
and ``Labor '96.'' All three programs were ostensibly efforts 
to convince Congress to support the AFL-CIO's political and 
legislative agenda and to educate voters about the voting 
records of their federal elected officials.
    \19\ Taylor, supra note 1, p. 3.
    Evidence obtained by the Committee indicates, however, that 
all three programs were conceived, designed and implemented to 
defeat Republican Members of Congress during the 1996 federal 
elections. Specifically, the AFL-CIO sponsored a paid media 
campaign that repeatedly targeted incumbent Republicans. The 
Federation's issue advertisements constituted an unrelenting 
barrage of television and radio ads, beginning in April 1995, 
that did not cease until the close of the 1996 elections.
    The AFL-CIO and its affiliate unions provided the campaigns 
of the challengers in those districts direct contributions 
through COPE. The AFL-CIO also committed 102 political staff 
workers to organize union members in those races, and sponsored 
both direct mail campaigns and get-out-the-vote drives in those 
targeted districts.20 In fact, the day after the 
1996 election, AFL-CIO President John Sweeney claimed credit 
for reducing the Republican majority in the House of 
    \20\ ``Hotline Turnout Study,'' Hotline, Nov. 1, 1996, p. *21 
(quoting AFL-CIO Spokesperson Deborah Dion).
    \21\ ``Statement of John Sweeney, President, AFL-CIO, on Election 
'96'' AFL-CIO Press Release, Nov. 6, 1996 (Ex. 1).
    The first of these issue ad campaigns was called ``Stand Up 
for America's Working Families,'' which began airing 
commercials attacking Republican legislative proposals on April 
7, 1995.22 There can be little doubt about the 
partisan tone of the issue ads sponsored by the AFL-
CIO.23 For example, on June 26, 1995, the AFL-CIO 
released an issue ad entitled ``Sparkler'', which attacked 
Republican budget proposals. The text and video of the ad were 
as follows:
    \22\ ``AFL-CIO Campaign for America's Working Families,'' AFL-CIO 
Press Release, Apr. 7, 1995 (Ex. 2).
    \23\ Thomas Donahue, who served as President of the Federation 
during most of 1995, described the program as ``the AFL-CIO's national 
effort to expose . . . Republican votes against workers and their 
families, and in favor of their rich friends. It's our campaign to let 
the American people know the truth about what the Republicans are doing 
in Washington, and what else they have planned.'' ``AFL-CIO President 
Tom Donohue, Stand Up News Conference,'' AFL-CIO Press Release, Aug. 
21, 1995, p.1 (Ex. 3).

                   Video                                Audio           
Kids at a Fourth of July parade...........  America. Where children can 
                                             go as far as their dreams  
                                             will take them . . .       
                                            If we keep their            
                                             opportunities bright and   
                                             alive . . .                
Kids on front steps, holding sparklers.     But every time the          
 Light fades until all we see is the         Republican Congress cuts   
 sparklers and the light of the sparklers    jobs, cuts education, cuts 
 on their faces..                            college loans, Medicare or 
                                             health and safety to pay   
                                             for tax cuts for the rich, 
                                             they undercut the promise  
                                             of America . . . And a     
                                             dream dies.                
Sparklers start to go out until they are    Ask Congress to make America
 all extinguished..                          the land of opportunity    
                                             again . . . To keep the    
                                             American dream alive . . . 
                                             To stand up for America's  
                                             working families.24        
24 ``AFL-CIO TV:30, `Sparkler,''' AFL-CIO                               
 Press Release, June 26, 1995, p. 1 (Ex.                                
One sparkler lights. Kids laughing and                                  
 waving sparklers.                                                      

    Subsequent issue ads singled out Republican Members of 
Congress by name for criticism and urged the audience to 
contact their representatives directly. For example, the AFL-
CIO released an issue ad for the Labor Day congressional recess 
in 1995, which criticized Republican proposals reforming the 
Occupational Health and Safety Act (``OSHA''). The commercials 
were titled by the name of the Member of Congress that was 
targeted. In one such ad, entitled ``Grain-Dickey,'' the text 
was as follows:

                   Video                                Audio           
                                            (Slow, Moving Track)        
Stills of Patrick Hayes...................  (Ron Hayes voice:)          
                                            Our son Patrick was a good  
                                             kid. A real hard worker    
Slow push in on silo......................  Two years ago, Patrick was  
                                             crushed to death in the    
                                             feed mill where he worked. 
Rescue shots..............................  The company thought they    
                                             could get away with        
                                             breaking the law.          
                                            Patrick was just 19 years   
                                             old when he died.          
Ron and Dot Hayes, sitting together. Soft   Now, the Republicans in     
 lighting.                                   Congress are cutting health
                                             and safety . . .           
Close up on Ron Hayes.....................  Protections I know can save 
                                             lives. If they succeed,    
                                             more people will die.      
Worker and family shots...................  (Voice over)                
Call Rep. Dickey 1-800-765-4440...........  Tell Republican Congressman 
                                             Jay Dickey to stop cutting 
                                             health and safety . . .    
Disclaimer................................  So other families don't lose
                                             their loved ones. 25       

    During a press conference discussing the OSHA issue ad, a 
reporter asked Tom Donohue how the AFL-CIO selected the thirty-
six congressional districts in which it ran these ads. He 
responded that the districts were selected because ``the bulk 
of them are [represented by] first-term, freshmen Republicans 
who . . . may be defeatable.'' 26 Donohue's remarks 
suggest that these Republican Members of Congress were targeted 
because the AFL-CIO thought they were vulnerable in the 1996 
federal election. 27
    \25\ AFL-CIO Press Release, Aug. 1995 (Ex. 5).
    \26\ Ex. 3, p. 3.
    \27\ Donahue later told reporters that the AFL-CIO would be 
targeting congressional ``districts that are designated marginal or 
critical to us.'' Press Conference of Thomas Donohue, President of AFL-
CIO, Sept. 21, 1995, p. 3 (Ex. 6).
    The Stand Up for America's Working Families campaign was 
later joined by ``Project '95,'' which was an issue ad campaign 
sponsored by the American Federation of State, County & 
Municipal Employees (``AFSCME''). Project '95 grew out of the 
internal struggle over control of the AFL-CIO. For only the 
second time in Federation history, an incumbent leader, Tom 
Donahue, was being challenged by an insurgent, John Sweeney.
    As part of the campaign to unseat Donahue, AFSCME President 
McEntee--an ally of Sweeney--created Project '95. Press 
accounts described Project '95 as ``grassroots organizing 
against 14 targeted GOP Members [of Congress] that, union 
leaders hope, will materialize into electoral victory next 
year.'' 28 The Committee found evidence that AFSCME 
designed Project '95--purportedly an issue advocacy campaign--
in order to defeat Republican Members of Congress, including 
many of the same representatives whose districts had been 
bombarded with AFL-CIO advertisements as part of the Stand Up 
for America's Working Families campaign. Press accounts 
explained that Project '95 was
    \28\  Tim Curran, ``Labor's Political Rebirth?,'' Roll Call, Nov. 
6, 1995, p. 1.

          [f]unded by independent unions and other citizen 
        groups and headed by 1990 [Democratic] Rhode Island 
        House candidate Scott Wolf, the project has provided 
        ``issues education efforts'' and full-time local 
        coordinators in selected Republican-held 
        [congressional] districts . . .
          Already, Wolf said, the '95 Project is in place in 14 
        House districts ``and we will be expanding our coverage 
        in the near future.'' He identified a quartet of 
        potentially vulnerable GOP Members elected last year--
        ``Reps. Phil English (Pa), John Ensign (Nev), Frank 
        Riggs (Calif), and Jim Longley (Maine)--as early 
        targets.'' 29
    \29\ Id.

    The aggressive use of partisan attack ads disguised as 
issue advocacy--similar to Project '95--became a centerpiece of 
John Sweeney's successful challenge to Donohue. The partisan 
motives for the issue ad campaigns were widely known. Deputy 
White House Chief of Staff Harold Ickes testified that Project 
'95 was ``a very, very substantial campaign . . . that McEntee 
was basically heading up for Sweeney to take back the Congress 
[for the Democratic Party].'' 30
    \30\ Deposition of Harold Ickes, June 27, 1997, p. 92.
    Sweeney's proposals, however, went further than those put 
forth by McEntee and AFSCME. Sweeney proposed a new political 
training institute designed not only to train workers, campaign 
managers and prospective political candidates, but also to 
organize other union members to participate in key 
congressional races in 1996. Therefore, Project '95 can be 
understood as a dress rehearsal for Labor '96, the massive 
issue ad campaign sponsored by the AFL-CIO during the 1996 
election cycle.
    Labor '96 cost the AFL-CIO $35 million. Of that figure, the 
paid media campaign cost $25 million, with the balance funding 
direct mail advertising and organizational activities. The AFL-
CIO financed the issue ad campaign with a $.15 per member, per 
month assessment.31
    \31\ Beck et al., supra note 1, pp. 10-12.
    Labor '96 sponsored issue ads that were clearly designed to 
influence the outcome of the election. For example, Labor '96 
aired a number of issue ads that attacked by name Republican 
Members of Congress, while simultaneously depicting an ominous 
looking image of House Speaker Newt Gingrich and Senate 
Majority Leader Bob Dole. One of those ads, which aired in the 
Washington state congressional districts of Republican 
Congressmen Rick White and Randy Tate, stated as follows:
    \32\ AFL-CIO Video Tape, ``Randy Tate/Rick White''.

                   Video                                Audio           
Congressmen Rick White....................  On November 20th, our       
                                             Congressmen voted with Newt
                                             Gingrich and against       
                                             working families.          
(Picture of Newt Gingrich)                                              
Federal budget vote.......................  They voted to cut Medicare, 
                                             education, and college     
                                             loans, all to give huge tax
                                             breaks to the big          
                                             corporations and the rich. 
(Picture of elderly man) Cut Medicare                                   
(Picture of graduate) Cut Education                                     
Congressmen Rick White and Randy Tate                                   
 voted tax breaks for the rich (picture of                              
 Wall Street, limousine doors opening).                                 
Picture of Clinton vetoing bill in Oval      . . . But President Clinton
 Office . . ..                               said no. He stood up for   
                                             working families and sent  
                                             the Gingrich budget back to
Dole and Gingrich pictured behind podium                                
Congressmen Rick White and Randy Tate.....  Now it's up to us. We need  
                                             to get involved and speak  
                                             out. Let's tell Congressmen
                                             White and Tate, this time, 
                                             don't vote for the wealthy 
                                             special interests.         
(American Flag)                                                         
(Man at the mail box, woman on the phone)                               
(Picture of Capitol)                                                    
(Picture of family) 1-800-765-4440          This time vote for America's
                                             working families.          
Paid for by the Men and Women of the AFL-                               

As this ad illustrates, Project '96 was a partisan campaign 
designed to influence federal elections and return political 
control of Congress back to the Democratic Party.
    Since these expenditures were apparently ``made for the 
purpose of influencing a[] federal election''--as that phrase 
is used in FECA Sec. 431(9)(A)(1)--the question of coordination 
becomes central to any determination of impropriety against the 
AFL-CIO, the DNC, the Clinton/Gore '96 campaign and Democratic 
Members of Congress. Within weeks of John Sweeney assuming the 
AFL-CIO presidency in October 1995, the Federation stepped up 
the coordination of its political efforts with the DNC, the 
White House and Democratic Members of Congress.
    For example, on November 15, 1995, the senior leadership of 
the AFL-CIO, including Sweeney, Richard Trumka and Linda 
Chavez, met in the Oval Office with Vice President Gore, Harold 
Ickes, Chief of Staff Leon Panetta, Deputy Chief of Staff 
Erskine Bowles, Jennifer O'Connor, Ickes' assistant for labor 
matters, and David Strauss, the Vice President's Chief of 
Staff. Ickes' handwritten notes indicate that the possible 
purpose of the meeting was to discuss the AFL-CIO's political 
contributions and strategy during the 1996 federal election 
    \33\ Handwritten Notes of Harold Ickes, Nov. 15, 1995 (Ex. 7).
    Beginning on December 1, 1995, the AFL-CIO launched 
television and radio issue advertisements opposing budget 
proposals put forth by Republican congressional leaders. The 
issue ads targeted twenty Republican congressional districts. 
As part of this effort, the AFL-CIO also funded a direct mail 
campaign in fifty-five districts represented by Republican 
Members of Congress.34
    \34\ Mike Hall, ``Workers Building Support for Budget Veto,'' AFL-
CIO News, Dec. 1, 1995 (Ex. 8).
    Ickes met for a second time with senior leaders of the AFL-
CIO on December 5, 1995. That afternoon, Sweeney and McEntee 
met with Ickes at the White House. Documents obtained by the 
Committee show that the AFL-CIO's leadership provided the White 
House and Clinton-Gore '96 campaigns a sneak preview of the 
Federation's political plans for 1996. Ickes' handwritten notes 
of the meeting state that the Federation was targeting fifty-
five congressional districts, that AFSCME ``freed up'' $10.5 
million for the upcoming political campaign to ``move 75 people 
into [the] field for '96,'' and that Sweeney ``will propose . . 
. that all unions do this.'' 35
    \35\ Handwritten Notes of Harold Ickes, Dec. 5, 1995 (Ex. 9).
    According to Ickes' sworn deposition testimony, his notes 
``refer[] to the fact that organized labor was going to make a 
very strong effort to try to take back the House . . . to make 
it Democratic.'' 36 He stated that his notes 
``referred to the internal campaign of the AFL-CIO mounted in 
1996, which was reportedly about $35 million to focus on taking 
back the House of Representatives.'' 37 Ickes 
testified that the campaign ``focused on swing districts to try 
to ensure that Democrats could take back the House in '96.'' 
38 Ickes added that AFL-CIO Political Director Steve 
Rosenthal wanted ``to let the White House know the key points 
[of the AFL-CIO's political action efforts in 1996] and the 
amount of resources that labor was devoting to trying to take 
back the House.'' 39
    \36\ Deposition of Harold Ickes, Sept. 22, 1997, p. 168.
    \37\ Id. at pp. 176-77.
    \38\ Id. at p. 177.
    \39\ Id. at p. 185.
    Two days later, on or about December 7, 1995, Ickes 
presided over a critical third meeting at the White House with 
officials of the AFL-CIO and representatives of various 
affiliated unions. Media consultants for both the AFL-CIO, the 
DNC and the Clinton-Gore '96 campaign, including the 
President's chief media consultant Dick Morris, also attended 
this meeting with Ickes. According to the deposition testimony 
of Morris, the meeting was held in the Roosevelt Room of the 
White House. 40 Morris testified about that meeting 
as follows:
    \40\ Deposition of Richard Samuel Morris, Aug. 20, 1997, p. 216.

          The second meeting was one that was set up by Mr. 
        Ickes in the Roosevelt Room of the White House, which 
        was a meeting he arranged, conceptualized, and chaired. 
        And at that meeting, there were six or seven 
        representatives of labor there, and on the campaign--on 
        the Clinton-Gore side, present were Ickes, Sosnik, 
        Stephanopolous, myself, and I believe--and some of the 
        consultants. I can't be quite clear on who I think 
        probably--some--either Penn or Schoen or Knapp. I don't 
        believe Squier was there. And at the meeting--and from 
        labor, they had somebody from the teachers, somebody 
        from the municipal--from the AFSCME, somebody from the 
        AFL. And they may have had Vic Fingerhut there, who was 
        their media creator. I'm not sure about that.
          And they showed us the ads that they either had run 
        or were--either had run or were thinking of running. I 
        was never quite clear what it was. And we showed them 
        ads that we had already run, and they suggested to us 
        that there be coordination of the advertising--this was 
        issue oriented ads about the budget . . . And their 
        suggestion was that in States where we were advertising 
        they not, and in States where they weren't, we 
    \41\ Id. at p. 216-17 (emphasis added).
    When asked who from organized labor spoke at the meeting, 
Morris testified that

          [t]here were five or six [people] who spoke. The 
        teachers union person--each of the union people--the 
        teachers union, the AFSCME, the AFL, and there may have 
        been one or two other unions--spoke in turn about what 
        their media plans were that they were planning to 
        advertise in states of Republican senators, they were 
        going to spend $1 million over the course of the next 
        year on doing it, here are the ads they had already 
        run, here were the ads that they were about to run. It 
        was a full briefing of us by them on their media 
    \42\ Id. at p. 222.

    Morris also testified that Ickes was favorably disposed to 
the idea of coordination with the AFL-CIO. Morris said that, 
during the course of that meeting, Ickes ``was basically urging 
us, me, to coordinate with a [labor-run media] campaign that I 
thought was counterproductive to our campaign and would have 
rather not been on the air.'' 43
    \43\ Id. at p. 220.
    Ickes' version of the meeting conflicts somewhat with the 
recollection of Morris:

         Q: Do you recall if . . . they actually showed their 
        media ads?
         A: It was during the budget fight. I think AFL-CIO was 
        running--in fact, I'm pretty sure they were running 
        some ads during the budget fight and they may well have 
        shown us some of those ads.

           *         *         *         *         *

         Q: Do you recall why the labor representatives were 
        showing you their ads?
         A: Yeah. They would come over from time to time, just 
        the way Steve Rosenthal would tell me what labor was 
         Q: Were there other occasions where they came over and 
        showed you [their] ads?
         A: Very, very seldom. I vaguely remember this. I don't 
        recall--there may have been another meeting like this, 
        but I don't recall it specifically. But I have some 
        vague recollection of them coming over because I think 
        they put--they ran ads in certain areas.

           *         *         *         *         *

         Q: During these meetings, did anyone from labor ever 
        suggest that they divide up the media area such as 
        states or congressional districts with the DNC or the 
        Clinton-Gore campaign?
         A: With respect to the budget fight?
         Q: Yes, specifically.
         A: They may--a lot of things were suggested in 
        meetings like that and it could well have been that 
        there was some suggestions. But my--I think that these 
        ads were up and running and that the AFL-CIO just 
        wanted to show us what they were running.44
    \44\ Deposition of Harold Ickes, Sept. 22, 1997, pp. 191-93.

    White House Political Director, Doug Sosnik, also attended 
the meeting in the Roosevelt Room on December 7, 1995. In his 
deposition, Sosnik recalled being present but could not 
remember any details.45 Sosnik testified, however, 
that he discussed AFL-CIO advertisements with Harold Ickes on 
at least one other occasion. Sosnik testified that he told

          Harold [Ickes]--when the AFL-CIO said that they were 
        going to run ads, I said to Harold--and this was prior 
        to them running the ads, and this was prior to the DNC 
        running ads--I said how are we supposed to--what are 
        the rules of the road here, in terms of what is 
        appropriate or not appropriate in working with labor?
    \45\ Deposition of Douglas Brian Sosnik, Sept. 12, 1997, pp. 141-

           *         *         *         *         *

          The decision that I made following these discussions 
        [with White House and/or DNC counsel] was not to 
        discuss with labor either the content or the placement 
        of their ads prior to them doing it, and the same in 
        our world, which was not to discuss with them any ads 
        that the campaign was to--were going to put out, either 
        in substance or where they were going to 
    \46\ Id. at pp. 148-49.

Despite Sosnik's testimony, both Ickes and Morris testified 
that organized labor and the DNC previewed each other's ads. In 
addition, Morris' testimony that Ickes and the labor 
representatives openly discussed coordinating their respective 
campaigns is the most direct evidence that Labor '96 was 
nothing more than a coordinated expenditure--and therefore an 
in-kind contribution--to the DNC and Clinton-Gore reelection 
    Shortly after the coordination meeting in the Roosevelt 
Room, the AFL-CIO launched Labor '96, its issue advocacy 
campaign that aired through the presidential and congressional 
elections. On January 16, 1996, the AFL-CIO announced ``a 
scornful $1 million radio and television campaign'' protesting 
the federal government shutdown, and targeting twenty-seven 
unspecified congressional districts.47
    \47\ ``27 Members of Congress Who Voted to Cut Medicare, Medicaid, 
Education, College Loans to Fund Tax Cut for Rich Now Face Public 
Outrage, Media Blitz,'' AFL-CIO Press Release, Jan. 16, 1996 (Ex. 10).
    Documents obtained from the White House further illustrate 
how the Clinton-Gore '96 campaign coordinated with organized 
labor, particularly the AFL-CIO, to obtain the maximum 
electoral benefit from their issue advocacy efforts. On 
February 14, 1996, Jennifer O'Connor--Ickes' principal aide for 
labor issues--wrote him a draft memorandum about organized 
labor's anticipated role in the 1996 election campaign. 
O'Connor proposed ``[c]ommunications/message sessions,'' which 
involved ``[b]ring[ing] in unions to discuss message with 
[White House Communications Director] Don Baer, [Clinton-Gore 
'96 Communications Director] Ann Lewis and others.'' 
48 Her memorandum to Ickes also called for 
``mailings/union talking points,'' and ``GOTV'' 
    \48\ Draft Memorandum from Jennifer O'Connor to Harold Ickes, Feb. 
14, 1996 (Ex. 11).
    \49\ Id.
    One week later, the AFL-CIO's ruling executive council 
formally approved Labor '96 (a.k.a. ``Project '96''). At a 
special convention, one month later, the affiliated unions of 
the AFL-CIO voted to endorse President Clinton for re-election, 
and to fund Labor '96 with $35,000,000. A Federation press 
release announced that Labor '96 intended to inform voters 
``how Republican leaders of Congress are trying to destroy 
Medicare, Medicaid, education and college loans . . . and how 
they tried to destroy workplace health and safety protections, 
wage standards and environmental protections[.]'' 50
    \50\ ``AFL-CIO Special Convention Endorses Clinton for Re-election, 
Votes Funds for Massive National Education and Action Program,'' AFL-
CIO Press Release, Mar. 25, 1996 (Ex. 12).
    On March 30, 1996, Steve Rosenthal met with DNC Chairman 
Don Fowler at Federation headquarters to discuss ``funding 
issues outside of the Coordinated Campaign structure,'' 
including ``the amount of financial support that w[ould] be 
directed from the various [unnamed] organizations[.]'' 
51 Rosenthal and Fowler also discussed ``which 
states should receive support from these organizations in order 
to maximize our effort.'' 52
    \51\ Memorandum from Alejandra Y. Castillo to Don Fowler, Mar. 29, 
1996 (Ex. 13). The Committee did not have the opportunity to question 
Chairman Fowler about this meeting with Rosenthal because the DNC did 
not produce this document until one week after Chairman Thompson 
announced the suspension of hearings.
    \52\ Id.
    Labor '96 was not simply a paid media issue advocacy 
campaign. During the second week of July, the AFL-CIO conducted 
a candidate seminar for fifty Democratic congressional 
candidates at which Geoffrey Garin and other labor pollsters 
presented their research and consulting services.53 
In addition, the Committee has documentary evidence and 
deposition testimony indicating that the AFL-CIO also may have 
shared the results of internal polling data and other 
information with officials of the White House, the DNC and/or 
Clinton-Gore '96. Garin testified that ``after the disaster [of 
the 1994 elections] occurred and they decided to change 
pollsters at the White House,'' he provided several briefings 
to President Clinton's key political aides, including Harold 
Ickes.54 Garin also indicated that the AFL-CIO 
shared with White House, DNC and Clinton-Gore '96 officials the 
results of the 1995 polling data that prompted the Federation 
to overhaul its political operation. Garin said that the AFL-
CIO shared the polling data in order ``to strengthen the 
quality of political education and political action within the 
labor movement.'' 55
    \53\ Mary Jacoby, ``Labor Works Around Edges of Election Law,'' 
Chicago Tribune, July 27, 1996, p. 1.
    \54\ Deposition of Geoffrey Garin, Sept. 5, 1997, p. 37.
    \55\ Id. at p. 29.
    David Strauss, a key aide to Vice President Gore, also 
testified in his deposition that Garin briefed the Vice 
President and other White House officials during the fall of 
1995 on ``a whole range of issues . . . concerning the mood of 
the country and how people were responding to the President.'' 
56 At about the same time that the AFL-CIO created 
``Stand-Up for America's Working Families,'' Garin and a 
Democratic pollster conducted a major research project entitled 
``The Situation Facing America's Working Families.'' Garin 
testified that he presented the results of that paper to White 
House economic advisors in early 1995.57 It is 
unknown whether that research was shared with the President's 
political aides as well.
    \56\ Deposition of David M. Strauss, Aug. 14, 1997, p. 71.
    \57\ Garin deposition, pp. 40-41.
    On July 13, 1996, Steve Rosenthal met again with Ickes in 
the White House. Ickes' handwritten notes of the meeting 
indicate that they discussed Labor '96 in great detail. For 
example, Ickes' notes show that Rosenthal said that the AFL-CIO 
was going to commit ``102 staff'' in ``76 CDS [congressional 
districts],'' ``500 guys in 30 districts,'' spend ``$20.5 
[million] for radio [advertisements],'' and ``devote 2000-2500 
[staff and union activists] full-time during [the] last 6 weeks 
[of the campaign].'' 58
    \58\ Handwritten Notes of Harold Ickes, July 13, 1996 (Ex. 14).
    The Committee also obtained documents that suggest that 
Steve Rosenthal and other senior leaders of the AFL-CIO knew, 
or should have known, of the statutes and regulations 
prohibiting coordination of campaign expenditures between the 
Federation, the DNC, White House, and Clinton-Gore '96 
campaign. For example, an AFL-CIO press release announcing the 
hiring of Rosenthal noted that he previously served as the 
deputy political director of the DNC, where he supervised the 
party's nationwide 1992 coordinated campaign.59 
Prior to that, Rosenthal served as political director of the 
Communications Workers of America (``CWA'') and on several 
state and local political campaigns.60
    \59\ ``AFL-CIO President Announces More Key Staff Changes,'' AFL-
CIO Press Release, Nov. 16. 1995 (Ex. 15).
    \60\ Id.
    There is additional evidence that the leadership of the 
AFL-CIO knew about restrictions on coordinated political 
activity. Documents produced by the DNC show that Rosenthal and 
possibly Garin attended and participated in a conference, 
entitled ``Win In '96: A Coordinated Campaign Meeting.'' The 
DNC sponsored the conference in June of 1996 in Washington and 
presented the legal framework for coordinated campaigns. DNC 
General Counsel Joseph Sandler and Deputy General Counsel Neil 
Reiff devoted an entire section of the briefing materials to 
``working with . . . labor unions.'' 61
    \61\ ``Win in '96: A Coordinated Campaign Meeting,'' DNC Handbook, 
June 6-9, 1996, pp. 15-18 (Ex. 16).
    A handbook distributed by Sandler and Reiff states that 
``unions can distribute voter registration information, as long 
as `[such] activity is not coordinated with any particular 
party or candidate, [and] no activity can be targeted toward 
[a] particular party or candidate.' '' 62 The DNC 
lawyers advised the AFL-CIO that voter guides could ``say 
anything short of express advocacy if there is no contact 
whatsoever with any campaign or party . . . [and] no 
coordination as to [the] distribution or content with any 
campaign or party committee.'' 63 Finally, the 
handbook states that union-sponsored GOTV drives ``must not 
include express advocacy, cannot be targeted to supporters of a 
candidate or to members of a particular party, [and] cannot be 
coordinated with [a] candidate or party.'' 64
    \62\ Id. at p. 16.
    \63\ Id. at p. 16 (emphasis in original).
    \64\ Id. at p. 17.
    Therefore, there is a substantial body of evidence 
suggesting that the AFL-CIO violated FEC regulations regarding 
coordination of public communications by labor organizations 
and candidates for federal office. There is also evidence that 
the AFL-CIO coordinated expenditures for its Labor '96 issue 
advocacy campaign with officials from the White House, DNC and 
Clinton-Gore '96 campaign. If so, the AFL-CIO may have provided 
illegal in-kind contributions to Democratic candidates for 
federal office, including President Clinton and Vice President 
    As explained in the compliance section of this report, the 
Committee subpoenaed several nonprofit groups that are 
generally supportive of the Republican agenda. Despite limited 
evidence, the Committee found that some of these organizations 
sponsored issue ads that were clearly designed to influence the 
outcome of federal elections.
    One of the organizations that the Committee subpoenaed was 
Triad Management Services, Inc (``Triad''). Triad, which was 
the subject of several press reports, is a for-profit political 
consulting firm that advises conservative donors as to which 
PACs, candidates and special projects (i.e., tax-exempt 
organizations) are most likely to advance the conservative 
principles of the donors.65 Triad does not work for 
individual candidates or PACs. Carolyn Malenick, the President 
and founder of Triad, started the company in 1995 after serving 
as the Finance Director of the Oliver North for Senate 
    \65\ Deposition of Meredith O'Rourke, pp. 107-108.
    \66\ Deposition of Anna Lee Malenick Evans, August 19, 1997, at pp. 
8, 23-24.
    In return for a set fee, Triad provides its conservative 
clients due diligence and research on political candidates, 
PACs, and tax-exempt organizations. Triad then recommends to 
its clients where to make donations. Triad earns management 
fees from two nonprofit organizations, Citizens for Reform 
(``CR'') and Citizens for the Republic Education Fund 
(``CREF''), that were also subpoenaed by the 
Committee.67 In return for the management fees, 
Triad solicited donations to CR and CREF from its conservative 
clients in order to fund an issue advocacy campaign that was 
critical of Democratic congressional candidates.68 
In the Fall of 1996, Triad raised several million dollars and 
also managed the issue advocacy campaigns.69
    \67\ Id. at p. 26; O'Rourke deposition at p. 40.
    \68\ Evans deposition at p. 28; O'Rourke deposition at p. 140.
    \69\ Evans deposition at p. 63; O'Rourke deposition at pp. 140-150.
    Under the guidance of Triad, CR and the CREF funded several 
million dollars of issue ads in the weeks preceding the 1996 
elections.70 Like the issue ad campaign sponsored by 
the AFL-CIO, these commercials mentioned the name and depicted 
the image of federal candidates. Many of the advertisements 
sponsored by CR and CREF, under Triad's direction, can be 
fairly labeled as ``attack ads'' that focused on the voting 
records and even personal backgrounds of Democratic candidates.
    \70\ Evans deposition at pp. 138, 146.
    For example, during the hearings, the Committee viewed an 
issue ad sponsored by CR that informed voters that Bill 
Yellowtail, the Democratic candidate for a Montana 
congressional seat, had been arrested for spousal 
abuse.71 Also like the Labor '96 campaign, many of 
the CREF's issue ads focused attention on the candidate rather 
than exclusively on issues. For example, the CREF aired an 
issue ad attacking Winston Bryant, the Democratic candidate for 
Senate in Arkansas. In the ad, the announcer stated as follows:
    \71\ Testimony of Lawrence Noble, Sept. 25, 1997, p. 71.

          Senate candidate Winston Bryant's budget as Attorney 
        General increased 71%. Bryant has taken taxpayer funded 
        junkets to the Virgin Islands, Alaska and Arizona. And 
        spent about $100,000 on new furniture. Unfortunately, 
        as the state's top law enforcement official, he's never 
        opposed the parole of any convicted criminal, even 
        rapists and murderers. And almost 4,000 Arkansas 
        prisoners have been sent back to prison for crimes 
        committed while they were out on parole. Winston 
        Bryant: government waste, political junkets, soft on 
        crime. Call Winston Bryant and tell him to give the 
        money back.72
    \72\ Beck et al., supra note 1, p. 23.

    Since the issue ads were intended ``to influence the 
outcome of a[] federal election''--within the meaning of FECA 
Sec. 431(9)(A)--the question of illegality turns on whether 
those issue ads were coordinated with federal candidates or the 
candidate's agents.73 The Committee has no evidence 
of coordination between Triad and any of the national party 
committees. In fact, there is some suggestion that Carolyn 
Malenick created Triad because of dissatisfaction with the 
Republican Congressional Campaign Committee (``RCCC'') and that 
the RCCC viewed Triad as a competitor for conservative 
Republican donors.
    \73\ 11 U.S.C. Sec. 441a(a)(7)(B)(1).
    Triad gathered crucial information about individual 
Republican candidates before selecting the topics and media 
markets for issue ads. Triad's political consultant, Carlos 
Rodriguez, performed what Triad called ``political audits'' on 
over 250 Republican congressional campaigns. These audits 
allowed Rodriguez to evaluate the strengths and weaknesses of 
each campaign and to make recommendations of assistance to 
    \74\ See, e.g., Randy Tate Audit Memorandum, Oct. 3, 1996 (Ex. 17).
    For example, a typical audit memorandum indicated the 
campaign's proposed budget, cash on hand, and current debt. The 
memoranda also provided the latest polling data and highlighted 
the key issues in the campaign. The memoranda also set forth an 
extensive narrative discussion of each campaign's good and bad 
points. Rodriguez would then close with a discussion of the 
candidate's crucial needs and issue a recommendation to 
    \75\ E.g., Rick White Political Audit Memorandum, Oct. 3, 1996 (Ex. 
    Rodriguez audited the campaign of John Thune, a Republican 
congressional candidate on September 25, 1996. Though Rodriguez 
did not meet with Thune personally, he did visit with the 
campaign manager, Dan Nelson. Rodriguez noted in his audit 
memorandum that the Thune campaign possessed ``[g]ood 
consulting. Good polling. Good media. In a state where strategy 
and media dictates the outcome of an election, this campaign is 
well staffed and poised to win in November.'' 76 
Under the ``Action'' item, Rodriguez indicated that he and 
Malenick should ``[c]ontinue communication with Dan Nelson and 
John Thune.'' 77 In the way of assistance, Rodriguez 
suggested to Malenick that, ``[i]f there is anything we can do 
to help [the campaign] it would probably be in the area of 
501(c)4 education with regards to the liberal tendencies of his 
opponent.'' 78 There is no evidence, however, to 
support a finding that Triad coordinated issue advocacy 
expenditures with the Thune campaign, or that the Thune 
campaign had any knowledge of or participation with Triad in 
its activities.
    \76\ John Thune Political Audit Memorandum, Sept. 25, 1997, p. 2 
(Ex. 19).
    \77\ Id.
    \78\ Id.
    Under FECA and FEC regulations, the expenditure must be 
shown to have been made at the request of the candidate or the 
candidate's agent, or based on information obtained from the 
candidate.79 Communication in the abstract is not 
equivalent to coordination. The Committee found no evidence 
that Congressman Thune or anyone from his campaign staff 
directed the substance or location of issue advocacy 
expenditures made by CR and CREF. In fact, the Committee has 
found no evidence that Congressman Thune or his campaign even 
knew about these issue ads before they were aired. Therefore, 
there is no basis to conclude that Triad illegally or 
improperly coordinated issue advocacy expenditures with the 
Thune campaign.
    \79\ 2 U.S.C. Sec. 441a(a)(7)(B)(1); see also 11 C.F.R. 
Sec. 109.1(b)(4)(I)(A),(B).
    Another example illustrates the point more clearly. During 
a visit with the campaign of Rick Hill, a Republican 
congressional candidate in Montana, Rodriguez learned that the 
Democrat candidate, Bill Yellowtail, had been involved in a 
spousal abuse incident. During the audit, Rodriguez also 
learned that Hill did not intend to raise the issue in the 
campaign. In his audit memorandum following the visit, 
Rodriguez described one of the Hill campaign's needs as ``3rd 
Party to `expose' Yellowtail'' for wife-beating.80 
Triad followed Rodriguez's advice and, in the last weeks of the 
1996 campaign, CR funded several hundred thousand dollars worth 
of issue ads that focused on Yellowtail's arrest for spousal 
    \80\ Rick Hill Political Audit Memorandum, Sept. 24, 1996, p. 2 
(Ex. 20).
    At first blush, this evidence suggests that CR, acting 
through Triad, selected the substance and location of issue ads 
at the request of a congressional candidate. The 
Committee,however, found evidence that indicates that the Hill campaign 
did not ask Triad to air these ads. Shortly after the CR issue ads 
began running in Montana, the Rick Hill campaign contacted Triad to 
protest the negative advertising and demanded that the ads cease 
immediately. On October 25, 1996, the Hill campaign's lawyer, Tom 
Hopwood, wrote to Mark Braden, the attorney for CR, decrying CR's 
``unwanted intrusion into this congressional campaign.'' \81\ Hopwood 
noted that Rick Hill ``was not consulted about these ads, had no 
knowledge of their existence and most assuredly disapproves of their 
content.'' \82\ He added that ``this type of overtly negative 
campaigning simply does not work in Montana. . . . Simply put, 
Montanans do not need or want the type of campaigning embodied in your 
client's ads.'' \83\
    \81\ Letter from Tom K. Hopwood, Counsel for the Rick Hill for 
Congress Committee, to E. Mark Braden, Counsel for CR, Oct. 25, 1997 
(Ex. 21).
    \82\ Id.
    \83\ Id.
    In light of the contemporaneous letter from the Hill 
campaign and the inability to depose Carolyn Malenick or Carlos 
Rodriguez, the Committee cannot conclude that CR funded the 
Yellowtail issue ad at the request of Congressman Hill or his 
campaign. As a result, there is no basis to conclude that Triad 
illegally or improperly coordinated issue ad expenditures with 
the Hill campaign.
    In the case of Congressman Vince Snowbarger, a Republican 
from Kansas, there is evidence of contact between his campaign 
staff and Rodriguez. However, the Committee has not found any 
documents or testimony to support a finding of coordination. 
Rodriguez met with Snowbarger's campaign staff in June of 1996 
and provided the staff a detailed fundraising strategy. In the 
action item of his audit memorandum, Rodriguez stated that he 
would ``continue to monitor the campaign, working closely with 
[the campaign] to find out what progress they are making both 
in fundraising and voter contact.'' \84\ In September of 1996, 
Snowbarger's campaign staff visited with Triad in Washington to 
discuss the progress of the campaign. In the last weeks before 
the election, CR spent roughly $300,000 on issue ads and phone 
banks in Snowbarger's district.
    \84\ Vince Snowbarger Political Audit Memorandum, June 15, 1996 
(Ex. 22).
    Even though there was regular communication between Triad 
and the campaign, the Committee has found no evidence 
suggesting that CR selected media markets or the substance of 
the issue ads at the request of Representative Snowbarger's 
campaign or based on information obtained from the campaign. 
The Committee cannot determine what information CFR used to 
create the issue ads that aired in Representative Snowbarger's 
district. Absent some evidence of direction and control, the 
Committee is left only with evidence of communication between 
Snowbarger's campaign and Triad. Communication alone is clearly 
not sufficient to infer illegal or improper coordination of 
expenditures. There is no evidence that the Snowbarger campaign 
had any role in CFR's advertisements.
    In the case of Senator Sam Brownback of Kansas, the 
Committee obtained testimony that Senator Brownback met with 
Carolyn Malenick and her clients during the 1996 Republican 
National Convention.\85\ As described by Meredith O'Rourke in 
her deposition to the Committee, the meeting was arranged so 
that Senator Brownback could thank Triad clients who had 
contributed to his campaign.\86\ O'Rourke also testified that, 
on two occasions, she helped Senator Brownback call potential 
contributors from the RCCC.\87\
    \85\ Deposition of Meredith O'Rourke, Sept. 3, 1997, p. 119.
    \86\ Id. at pp. 119-20.
    \87\ Id. at pp. 94-96.
    The Committee found no evidence to suggest that the 
Brownback campaign acted in any way illegally or improperly in 
its dealings with Triad. It is entirely appropriate for Senator 
Brownback to meet with campaign contributors to thank them for 
a donation. The Committee has no evidence suggesting that any 
of those contributions was given illegally or improperly. In 
addition, the Committee finds no impropriety in Meredith 
O'Rourke helping Senator Brownback telephone potential donors. 
While it would be an illegal in-kind donation from a 
corporation for O'Rourke to assist Senator Brownback as part of 
her job responsibilities at Triad, the preliminary evidence 
indicates that O'Rourke performed this service in a voluntary 
capacity and on her own time. Mark Braden, Triad's Counsel, has 
indicated that Triad's employment records show that O'Rourke 
was not compensated by Triad for the service she rendered 
Senator Brownback.\88\ Like any other citizen, O'Rourke is free 
to volunteer time to political candidates of her choosing.
    \88\ Ruth Marcus, ``The Secret of a Senator's Success?'' Washington 
Post, Dec. 12, 1997, p. A1.
    The Committee also discovered evidence that Triad was 
particularly sensitive at the time to coordination problems. 
Shortly before the election, Triad discovered that several sub-
vendors had not observed the proper distance between the 
nonprofit groups and individual campaigns. On October 24, 1996, 
Carlos Rodriguez circulated a confidential memorandum to all 
vendors and subvendors hired by CR and CREF, reminding them of 
the strict requirements of issue advocacy campaigns.\89\
    \89\ Memorandum from Carlos Rodriguez to All CR and CREF Vendors/
Subcontractors, Oct. 24, 1996, p. 1 (Ex. 23).
    Rodriguez advised the vendors that Triad had recently 
learned that ``at least one mail piece submitted for legal 
clearance is a version of a voter contact piece that has been 
used in at least one Republican campaign for a House seat. Even 
worse, the piece used by that campaign was paid for by the 
Republican party.'' \90\ Rodriguez reminded Triad vendors that, 
``[u]nder no circumstances is Citizens for Reform or Citizens 
for the Republic Education Fund to act or even create the 
appearance of acting as an agent of, or in cooperation with any 
political party, candidate or campaign.'' \91\ He then warned 
the vendors not to use materials generated by candidate or 
party committees, stating as follows:
    \90\ Id.
    \91\ Id.

        If you have received clearance on any educational 
        material (direct mail, TV, radio) that is not your 
        original work product created solely for the 
        educational effort on behalf of our two committees, you 
        must do the following immediately:
          1. STOP production/distribution of that work product.
          2. Contact me.

           *         *         *         *         *

          Violation of this rule may result in serious legal 
        action against [CR, CREF] and you. These are issue 
        advertisements, not party or candidate ads.
          I know that this is new to most of you, so please 
        bear with us and be extra careful as we try to meet the 
        letter and spirit of the rules that apply to these 
        types of educational efforts.\92\
    \92\ Id. at pp. 1-2 (emphasis added & omitted).

    The Committee considers this memorandum to be a highly 
probative contemporaneous statement of Triad's intent with 
respect to coordination of issue advocacy campaigns. It clearly 
demonstrates that Triad was sensitive to coordination concerns 
and that it took every effort to ensure that its vendors 
observed the requirements for issue advocacy.
    Carolyn Malenick reiterated her concern about coordination 
in a November 6, 1996 memorandum to Dick Dresner and Joanne 
Banks, who were media consultants hired by Triad to create 
issue ads for CR and CREF.\93\ In the memorandum, Malenick 
chastised Dresner, Wicker & Associates for not observing 
instructions regarding coordination with individual campaigns. 
She stated as follows:
    \93\ Memorandum from Carolyn Malenick to Dick Dresner and Joanne 
Banks, Nov. 6, 1997 (Ex. 24).

          It has come to my attention that from Wednesday of 
        last week, the sub-contractors chosen by Dresner, 
        Wicker and Associates, Inc. chose additional 
        subcontractors to perform the duties for the 501(c)4 
        projects managed by TRIAD Management Services, Inc.
          When planning meetings took place between the 
        principals of both parties, vendors were discussed at 
        great length. It was made clear, in the final 
        discussion on Tuesday, October 15th, that the vendors 
        could have no contact with campaigns and that all 
        vendors were to be known. The vendors of Dresner, 
        Wickers & Assoc, Inc. having sub-contracted additional 
        vendors without TRIAD's knowledge, has created both 
        legal and political problems that could have been 
        avoided, had this requirement been met.
          . . . Both Citizens for Reform and Citizens for the 
        Republic Education Fund, managed by TRIAD, plan to hold 
        Dresner, Wickers and Associates responsible for any 
        fall-out incurred over the coming months, with vendors 
        chosen by Dresner, Wickers and Associates.\94\
    \94\ Id. (emphasis added).
    As this memorandum makes clear, Malenick and Triad 
attempted to ensure that vendors hired to create issue ads did 
not coordinate--or even have contact--with individual 
    Consequently, there is substantial evidence militating 
against a finding of coordination between Triad and federal 
candidates. Without a complete factual record, the Committee 
simply cannot conclude that there is evidence sufficient to 
infer that CR and CREF--acting through Triad--illegally 
coordinated issue advocacy expenditures with individual 
candidates or their campaigns.
     The same can be said of the RNC and the nonprofit groups 
that have been linked to it in numerous press reports. The 
Committee's investigation found evidence that the RNC routinely 
supported nonprofit groups that it considered sympathetic to 
its cause. This support principally took the form of financial 
contributions directly from the RNC or from funds raised by RNC 
officials. Standing alone, there is nothing illegal or improper 
about the RNC donating money to like-minded nonprofit groups.
    Despite evidence of substantial contributions to nonprofit 
groups by or through the RNC, the Committee has found no 
evidence that the RNC directed or controlled the expenditure of 
those funds. Absent such direction and control or other 
evidence that the RNC coordinated the expenditure of those 
funds, the Committee cannot conclude that the RNC misused the 
various nonprofit groups that it supported.
    Documents obtained by the Committee indicate that the RNC 
considered nonprofit groups an integral part of the 
conservative coalition. For example, an April 23, 1996 
memorandum to RNC Chairman Haley Barbour from RNC Political 
Director Curt Anderson, explained that the RNC ``no longer 
treat[s] coalition planning as if it is an ancillary activity, 
or a quaint way of getting well meaning but ignorant people 
involved. . . . We teach that campaigns must include both a 
thematic and tactical approach to including the combined 
efforts of every coalition group that they can conceivably 
appeal to.'' \95\ Anderson explained that ``[a]t virtually all 
of our field meetings we have put together day long meetings 
[sic] in which we bring the decision makers from the biggest 
coalition groups. We generally spend an hour with each of them 
comparing notes on races. . . .\96\ Anderson further advised 
Barbour that, ``[w]hile it has always been true that our 
coalition groups need direction on how they can best effect 
[sic] the outcome of elections, many of the larger groups are 
becoming increasingly sophisticated in their approach and they 
employ competent professionals who know how to make things 
happen.'' \97\
    \95\ Memorandum from Curt Anderson, RNC Political Director, to 
Haley Barbour, RNC Chairman, Apr. 23, 1996, pp. 1-2 (Ex. 25).
    \96\ Id. at p. 2.
    \97\ Id. at p. 3.
    In an earlier memorandum to Chairman Barbour on the same 
subject, Anderson indicated that--in response to a request from 
Barbour--he had collected a list of nonprofit groups that would 
be most supportive of the Republican agenda.\98\ Anderson 
included the NRLC, the Christian Coalition, ATR and Citizens 
for a Sound Economy as possible members of this coalition 
group.\99\ The senior leadership of the RNC considered 
approximately thirty nonprofit groups for membership in this 
coalition,\100\ but Anderson envisioned that the coalition 
would be limited to groups ``that actually have troops in the 
field that they can motivate, activate, and deliver, or groups 
that have a track record of expending significant resources to 
do the same.'' \101\
    \98\ Memorandum from Curt Anderson, RNC Political Director, to 
Haley Barbour, RNC Chairman, Mar. 4, 1996 (Ex. 26).
    \99\ Id.
    \100\ RNC Chart of Nonprofit Groups (Ex. 27).
    \101\ Ex. 26 at p. 1.
    RNC documents indicate, however, that the RNC clearly 
appreciated the difference between the permissible and 
impermissible activities of PACs and nonprofit groups. In a 
manual on nonprofit groups and coalition building prepared by 
the National Republican Senatorial Committee (``NRSC''), each 
of the organizations is listed and described. The NRSC manual 
divides the groups into two categories, ``those who endorse 
candidates and those who do not.'' \102\ The manual states 
that, as a PAC, the NRLC can endorse candidates and directly 
advocate the election or defeat of a candidate, while correctly 
noting that Citizens for a Sound Economy, the Christian 
Coalition and ATR cannot endorse candidates as groups organized 
under Sec. 501(c)(4) of the tax code.\103\
    \102\ NRSC Coalition Building Manual, Chapter XII, p. 21 (Ex. 28).
    \103\ Id.
    The Committee obtained documents showing that the RNC, NRSC 
and RCCC followed the coalition building strategy outlined in 
the Anderson memoranda by contributing large sums of money to 
coalition members, including ATR, the NRLC, and the CCF. The 
documents indicate that, on October 4, 1996, the RNC donated $2 
million to ATR from its Republican National State Elections 
Committee Corporate Operating account.\104\ The RNC donated an 
additional $1 million to ATR on October 17, 1996.\105\ ATR 
received another $1 million contribution from the RNC on 
October 25, 1996,\106\ and received $600,000 more from the same 
account on October 31, 1996.\107\ In addition to the $4.6 
million donated to ATR, the RNC contributed $650,000 to the 
NRLC in the last weeks before the 1996 election.
    \104\ Republican Nat'l St. Elections Comm. Corp. Operating Check 
No. 8501 (Ex. 29).
    \105\ Republican Nat'l St. Elections Comm. Corp. Operating Check 
No. 8576 (Ex. 30).
    \106\ Republican Nat'l St. Elections Comm. Corp. Operating Check 
No. 8633 (Ex. 31).
    \107\ Republican Nat'l St. Elections Comm. Corp. Operating Check 
No, 8673 (Ex. 32).
    In addition to direct contributions from the RNC to 
nonprofit groups, the senior leadership of the RNC helped to 
raise funds for many of the coalition's nonprofit 
organizations. An October 17, 1996 memorandum from Joanne Coe 
to Haley Barbour, Curt Anderson and Sanford McCallister 
indicates that the RNC solicited contributions to several 
nonprofit groups and routed those donations from the donor to 
the organizations.\108\ In the memorandum, Coe stated that she 
sent two $100,000 checks to ATR and NRLC from Carl Lindner, a 
wealthy businessman and a major donor to the RNC. She also 
indicated that senior RNC officials had raised $950,000 for the 
American Defense Institute (``ADI''), a pro-defense group 
organized under Sec. 501(c)(3) of the tax code.
    \108\ Memorandum from Joanne Coe, to Haley Barbour, RNC Chairman, 
et al., Oct. 17, 1996 (Ex. 33).
    Although there is evidence that the RNC donated large sums 
of money to several sympathetic nonprofit groups and even 
solicited additional funds for those groups from the RNC's 
largest donors, there is no evidence that anyone at the RNC 
ever directed or controlled the expenditure of these funds. 
Based upon the evidence obtained by the Committee, the 
Committee finds nothing illegal about the RNC financially 
supporting like-minded nonprofit groups. In addition, the 
Committee possesses no evidence of illegalities by the 
organizations that received these contributions, such as ATR 
and ADI. Indeed, the Committee obtained the entiretyof its 
information on this subject because prior to the AFL-CIO's intentional 
noncompliance with valid Committee subpoenas, these organizations 
complied with the Committee's subpoenas.
    In a related area, there can be little doubt that the RNC's 
issue ads were intended to influence the outcome of a federal 
election within the meaning of FECA Sec. 431(9)(A)(1). One of 
those issue ads, entitled ``The Story,'' was nothing more than 
a biography of Bob Dole. The Story states as follows:

          Audio of Bob Dole: We have a moral obligation to give 
        our children an America with the opportunity and values 
        of the nation we grew up in.
          Voice Over: Bob Dole grew up in Russell, Kansas. From 
        his parents he learned the value of hard work, honesty 
        and responsibility. So when his country called . . . he 
        answered. He was seriously wounded in combat. 
        Paralyzed, he underwent nine operations.
          Audio of Bob Dole: I went around looking for a 
        miracle that would make me whole again.
          Voice Over: The doctors said he'd never walk again. 
        But after 39 months, he proved them wrong.
          Audio of Elizabeth Dole: He persevered, he never gave 
        up. He fought his way back from total paralysis.
          Voice Over: Like many Americans, his life experience 
        and values serve as a strong moral compass. The 
        principle of work to replace welfare. The principle of 
        accountability to strengthen our criminal justice 
        system. The principle of discipline to end wasteful 
        Washington spending.
          Voice of Bob Dole: It all comes down to values. What 
        you believe in. What you sacrifice for. And what you 
        stand for.\109\
    \109\ Script of RNC's ``The Story'' Commercial, May 29, 1996 (Ex. 

    Like The Story, another RNC issue ad entitled ``Stripes'' 
focused on personality traits rather than public issues. The 
text of the RNC ad is as follows:

          Voice Over: Bill Clinton, he's really something. He's 
        now trying to avoid a sexual harassment lawsuit 
        claiming he is on active military duty. Active duty? 
        Newspapers report that Mr. Clinton claims as commander 
        in chief he is covered under the Soldiers and Sailors 
        Relief Act of 1940, which grants automatic delays in 
        lawsuits against military personnel until their active 
        duty is over. Active duty? Bill Clinton, he's really 
          Accompanying Visual: Clinton golfing, duck hunting, 
        and, clad in a safety helmet, enjoying a bike ride with 
        Hillary. In the background, someone whistles a vaguely 
        martial tune. The ad closes with a ``Blues Brothers'' 
        photo of Clinton in dark glasses and a dark suit, and 
        smiling. \110\
    \110\ ``GOP Ad on Clinton's Claim in Sexual Harassment Suit,'' AP 
File, PM Cycle, May 25, 1996 (Ex. 35).

A detailed analysis is unnecessary. A document produced by the 
RNC indicates that even the RNC's Political Director did not 
think The Story qualified as issue advocacy. In a May 22, 1996 
memorandum to Haley Barbour, Curt Anderson stated that ``[w]e 
could run into a real snag with the Dole Story spot. Certainly, 
all the quantitative and qualitative research strongly suggests 
that this spot needs to be run. Making this spot pass the issue 
advocacy test may take some doing.'' \111\
    \111\ Memorandum from Curt Anderson, RNC Political Director, to 
Haley Barbour, RNC Chairman, May 22, 1996, p. 2 (emphasis added) (Ex. 
    Under the language of FECA, however, the RNC's issue ad 
campaign would only be illegal if it was produced at the 
request of Senator Dole or coordinated with the Dole 
campaign.\112\ Based on the available evidence, the Committee 
finds no basis for concluding that any illegal coordination 
between the RNC and Dole campaign took place.
    \112\ 2 U.S.C. Sec. Sec. 431(9)(A)(1), 441a(a)(7)(B)(1).
    The RNC's issue ad campaign commenced well after--almost 
eight months--the beginning of the DNC's issue ad campaign. In 
addition, the RNC spent almost $20 million less than the DNC on 
this effort. Finally, there is no evidence that Senator Dole 
micro-managed the RNC's issue ads in the same fashion that 
President Clinton controlled the DNC's campaign. Whereas the 
evidence indicates that the President ``directed and 
controlled'' the DNC's issue ads--including drafting and 
editing scripts--there is no evidence that Bob Dole personally 
had any role in the RNC's ad campaign.\113\
    \113\ Senator Dole did know contemporaneously that the RNC intended 
to sponsor the issue ad campaign on his behalf. ``Remarks of GOP 
Presidential Candidate Senator Bob Dole,'' Federal News Service, June 
6, 1996 (Ex. 37).
    There is some indication, however, that the RNC may have 
had some communication with the Dole campaign to some extent on 
the campaign. Documents produced by the RNC suggest that Scott 
Reed may have provided input regarding the amount of 
expenditures for issue ads for party-building purposes. Haley 
Barbour, the RNC Chairman, wrote a memorandum to Curt Anderson, 
the RNC's Political Director, on June 5, 1996 concerning 
Barbour's rejection of a request by the RNC staff for $800,000 
to underwrite costs of RNC Unity Events.\114\ In the 
memorandum, Barbour advises Anderson that he
    \114\ Memorandum from Haley Barbour, RNC Chairman to Curt Anderson, 
RNC Political Director, June 5, 1996 (Ex. 38). The FEC allows political 
parties to spend a mix of soft and hard money on television issue 
advocacy. FEC Advisory Op. 1995-25, Fed. Election Camp. Fin. Guide 
(CCH) para. 6162 at 12,109 (August 24, 1995).

          will reach out to Scott Reed to ask him whether the 
        Dole campaign would want us to 1) reduce other 
        spending, such as the issue advocacy television 
        advertising, by $800,000; 2) significantly increase the 
        number and lead time for Victory '96 events in order to 
        offset these costs (although I am not convinced at this 
        time that the Victory '96 events will produce the 
        revenue currently anticipated and budgeted for 
        expenditure [sic]; 3) not spend the sum requested for 
        Unity Events; or 4) consider some other 
    \115\ Id.

    As explained in the compliance section of the report, the 
Committee was never able to secure the deposition testimony of 
Curt Anderson, Joanne Coe, or Don Sipple.\116\ In addition, the 
Committee attempted unsuccessfully to obtain the testimony of 
Scott Reed on these topics after he was deposed originally in 
connection with he National Policy Forum (``NPF''). As a 
result, the Committee obtained no evidence that the RNC's issue 
ads were aired at the request or suggestion of the Dole 
campaign staff. Similarly, the Committee cannot determine on 
this limited factual record whether the substance of the ads or 
the markets in which they aired were selected based on 
information obtained from the Dole campaign staff. As a result, 
the Committee cannot draw any meaningful conclusions about the 
allegations that the RNC coordinated its issue advocacy 
expenditures with the Dole campaign.
    \116\ Barbour was deposed, and testified before the Committee at 
public hearings, but was not questioned about this memorandum.
    At the outset of the investigation, there were also several 
press accounts that cited documents obtained from the Minority 
staff and alleged that Triad participated in illegal schemes to 
funnel contributions to candidates from donors that had already 
contributed the maximum allowed by law to those candidates. For 
instance, several stories focused on the in-laws of Senator Sam 
Brownback.\117\ The press reports noted that FEC records 
indicate that, after John and Ruth Stauffer had donated the 
maximum allowed by law to Senator Brownback, they donated 
$37,500 to eight PACs. Within days of those contributions, the 
eight PACs contributed $36,000 to Senator Brownback's 
    \117\ James Kuhnhenn, ``Inquiry Sought into Donations by Brownback 
In-laws,'' Kansas City Star, May 2, 1997, p. A6.
    \118\ Id.
    Carolyn Malenick and most of the principal witnesses with 
knowledge of Triad's activities refused to answer substantive 
questions under oath during scheduled 
depositions.119 The Committee did not interview or 
depose the Stauffers or any of the persons associated with the 
eight PACs. There is no evidence that Senator Brownback had any 
knowledge of or involvement with these activities.
    \119\ E.g., Deposition of Carolyn Malenick, Sept. 16, 1997, pp. 5-
29; Deposition of Lyn Nofziger, Sept. 16, 1997, pp. 6-22; Deposition of 
Carlos A. Rodriguez, Sept. 17, 1997, pp. 5-23.
    In another example, the press reported that Robert Riley, 
Jr., donated $1,000 to the 1996 primary campaign of his father, 
Robert Riley, Sr., a successful Republican congressional 
candidate in the third district of Alabama. After consulting 
and hiring Triad, Robert Riley, Jr., donated $1,000 each to 
five conservative leaning PACs in May of 1996. Several days 
after the donations, four of the five PACs donated a total of 
$3,500 to Representative Riley's campaign.120
    \120\  Kuhnhenn, ``Inquiry Sought into Donations by Brownback In-
laws,'' Kansas City Star, at p. A6. The four PACs were the Free 
Congress PAC, the American Free Enterprise PAC, the Citizens Allied for 
Free Enterprise PAC, and the Faith, Family and Freedom PAC. Id.
    The Committee obtained an interview with Robert Riley, Jr. 
He stated that his contributions to the Triad-recommended PACs 
were not given with the guarantee or understanding that the 
PACs would return the contributions to his father's 
campaign.121 Riley stated that Malenick was very 
emphatic that she could not promise that Triad or its PAC 
coalition would help his father. Malenick convinced Riley that 
contributing to conservative PACs would be the best way to 
assist the Republican cause generally and thereby ensure a 
Republican majority in Congress.122
    \121\ Memorandum of Interview of Robert R. Riley, Jr., Sept. 16, 
1997, p. 2.
    \122\ Id.
    Riley vigorously denied that his contributions to the PACs 
were an effort to illegally funnel money to his father's 
campaign in order evade the individual contribution limits of 
federal law. Riley asserted that his purpose in supporting the 
conservative PACs was to advance, in general, the conservative 
agenda through the overall support of sympathetic candidates. 
His purpose in consulting with Carolyn Malenick was to identify 
which PACs would best achieve these goals, relying on the 
research and advice of Triad.123 The Committee found 
no testimony or documents to contradict Riley's account of his 
    \123\ Id.
    \124\ In fact, Riley provided the Committee with copies of 
affidavits from Billie Joe Johnson, Jr., his father's campaign manager, 
and Donna Rose Suggs, his father's campaign treasurer, which 
corroborated his account of the contributions. Affidavit of Billie Joe 
Johnson, Jr. (Ex. 39); see also Affidavit of Donna Rose Suggs (Ex. 40). 
The affidavits were prepared in connection with an FEC complaint, MUR 
4633, filed against Robert Riley, Jr. by James Anderson of Montgomery, 
    In the affidavits, Johnson and Suggs state that they received PAC 
checks from Triad but that they had no discussions with Triad 
indicating that donations from Robert Riley, Jr., would be funneled 
through the PACs back to his father's campaign. Id.
    Even though the timing and amount of the contributions in 
these examples suggest that the PACs served as conduits that 
allowed the donors to evade the $1,000 contribution limit, 
there is no evidence that the PACs or donors understood that 
their donations would be passed back to a particular candidate. 
In fact, in the case of Robert Riley, Jr., Riley emphatically 
denied that there was ever such an agreement between himself 
and the four PACs who later donated to his father's campaign. 
The circumstantial evidence cited in the press reports about 
Representative Riley and Senator Brownback is simply 
insufficient to draw an inference of illegality, and there is 
no evidence to suggest the campaigns had any knowledge of these 
    Relying solely on a suspicious pattern of donations is 
unpersuasive by itself, because the pattern is far too common 
to support a finding of wrongdoing. For example, on June 29, 
1996, Marilyn Williams of West Bloomfield, Michigan contributed 
$1,000--the maximum allowed by law--to the primary campaign of 
Sandy Freedman. Freedman was seeking the Democratic nomination 
for Florida's eleventh congressional district. On August 2, 
1996, Williamson donated $3,000 to Emily's List, a PAC that 
exclusively supports female Democratic candidates. Eleven days 
later, on August 13, 1996, Emily's List donated $3,000 to Sandy 
Freedman's campaign.125
    \125\ Federal Election Commission Records for Emily's List and 
Marilyn Williamson (Ex. 41).
    Similarly, on June 3, 1996, Barry Shier of Las Vegas, 
Nevada contributed $1,000 each to the primary and general 
election campaigns of Robert G. Torricelli, the Democratic 
candidate for Senate in New Jersey. Shier is an executive with 
Mirage Resorts, Inc., in Atlantic City, New Jersey. On June 4, 
1996, the day after Shier's donations, the Torricelli primary 
and general election campaigns each received $1,000 donations 
from the Mirage Resorts, Inc., Political Action Committee, 
a.k.a., Golden Nugget PAC. Perhaps coincidentally, Shier 
donated $2,000 to the Golden Nugget PAC two days later on June 
6, 1996.126
    \126\ Federal Election Commission Records for Barry Shier and the 
Golden Nugget PAC (Ex. 42).
    On June 30, 1995, Don Tyson of Springdale, Arkansas donated 
$1,000 to the primary campaign of Tom Harkin, the Democratic 
candidate for Senate in Iowa. Tyson is the Chairman of Tyson, 
Inc., a food processing company that is one of the largest 
wholesale distributors of chicken in the country. On July 18, 
1995, several weeks after Tyson contributed to the Harkin 
campaign, he donated an additional $1,000 to the National 
Broiler Council Political Action Committee. Nine days later, on 
July 27, 1997, the PAC contributed $1,000 to the Harkin 
    \127\ Federal Election Commission Records for Don Tyson and the 
National Broiler Council PAC (Ex. 43).
    On September 28, 1995, Charlotte Lowder of Montgomery, 
Alabama contributed $1,000--the maximum allowed by law--to the 
primary campaign of Roger Hugh Bedford, the Democratic 
candidate for Senate in Alabama. Several months later, on 
December 15, 1995, she donated another $1,000 to the Colonial 
Bancgroup Inc. Federal Political Action Committee (``Colonial 
Fed PAC''). Only four days later, on December 19, 1995, the 
Colonial Fed PAC contributed $1,000 to the Roger Hugh Bedford 
for U.S. Senate primary campaign.128
    \128\ Federal Election Commission Records for Charlotte Lowder and 
the Colonial Fed PAC (Ex. 44).
    As with Triad, the Committee cannot conclude that Emily's 
List, the Golden Nugget PAC, the National Broilers PAC, and the 
Colonial Fed PAC participated in schemes designed to evade the 
individual contribution limits established by federal law. 
Likewise, the Committee does not believe that there is evidence 
sufficient to conclude that the federal candidates who received 
donations from these PACs were party to a conspiracy designed 
to evade the individual contribution limits.
    The Committee gathered documents that--at least initially--
suggest that some national labor unions participated in 
conspiracies to evade contribution limits. Under federal 
election law, multi-candidate PACs can donate a maximum of 
$5,000 per election, per candidate committee.129 One 
way of circumventing this limit is to create several different 
PACs that are controlled by a common entity or source. In order 
to prevent such a scheme, FECA contains ``affiliation'' rules 
that impose a single limit on ``all contributions made by 
political committees established or financed or maintained or 
controlled by any corporation, labor organization, or any other 
person.'' 130
    \129\ 2 U.S.C. Sec. 441a(a)(2)(A).
    \130\ Id. Sec. 441a(a)(5) (emphasis added).
    FEC regulations identify a number of circumstantial factors 
probative of affiliation between PACs, including (1) common or 
overlapping membership, (2) common or overlapping officers or 
employees, (3) the direct provision of funds or goods on an on-
going basis from one PAC to another, (4) an active or 
significant role by one PAC in the formation of the other and, 
perhaps most importantly, (5) similar patterns of 
contributions.131 Using these factors as a 
guidepost, the Committee found circumstantial evidence that the 
National Council of Senior Citizens (``NCSC''), a 
Sec. 501(c)(4) organized ostensibly to lobby on behalf of 
America's elderly,132 was affiliated with the AFL-
CIO during the 1996 elections in a manner that allowed the 
latter to circumvent the $5,000 contribution limit for PACs.
    \131\ 11 C.F.R. Sec. 110.3.
    \132\  The NCSC receives the bulk of its annual revenue from the 
federal government. In fiscal year 1996, the NCSC received $34 million 
in grants from the Department of Labor as part of its Senior Community 
Service Employment Program. In contrast, the NCSC's lobbying budget for 
1996 totaled only $4.4 million. The Lobbying Disclosure Act of 1995 
prohibits lobbying activities by groups, organized under 
Sec. 501(c)(4), that receive federal funding. Therefore, the NCSC 
divided its functions between a Sec. 501(c)(4) and a PAC in order to 
spend only nonfederal funds on political activity.
    This scenario is illustrated by the campaign of Thomas 
Fricano, the Democratic congressional candidate for the twenty-
seventh district of New York. Fricano is a former executive of 
the United Auto Workers (``UAW''). The Committee on Political 
Education (``COPE''), the AFL-CIO's PAC, contributed $5,000 to 
Fricano's primary campaign on June 19,1996, the maximum allowed 
by law. The NCSC's PAC followed COPE's lead with an additional $5,000 
donation to Fricano's primary campaign on September 5, 
    \133\ Federal Election Comm'n Records for COPE and the NCSC PAC 
(Ex. 45).
    On its face, there is nothing suspicious about two PACs 
donating the maximum contribution to the same political 
candidate. In this case, however, the evidence suggests that 
the NCSC is affiliated with the AFL-CIO so that both PACs' 
contributions are limited in the aggregate to $5,000 per 
candidate, per election.134 There is evidence that 
national labor unions helped create the NCSC. Virtually the 
entire NCSC Board of Directors and local directors are 
officials of AFL-CIO affiliated unions.135
    \134\ 2 U.S.C. Sec. 441a(a)(2)(A),(5).
    \135\ For example, Eugene Glover, the NCSC's President, is the 
former Secretary-Treasurer of the International Association of 
Machinists. Steve Protulis, the NCSC's Executive Director, is the 
former National Coordinator of Support Groups for COPE.
    The most significant evidence of affiliation, however, lies 
in the donation and contribution patterns. The NCSC's PAC 
received only seven donations from individuals in 1996, and 
these were all from employees or officers of the NCSC. The 
remainder of the funds donated to the NCSC's PAC derived from 
COPE and the PACs of AFL-CIO affiliated unions, almost all of 
which had already donated to COPE itself. As a result, 96% of 
the funds flowing into the NCSC's PAC in 1996 derived from 
union sources. In addition, all of the candidates that received 
contributions from the NCSC's PAC were similarly supported by 
    \136\ Ex. 45.
    This pattern of donations to the NCSC PAC and of 
contributions by the PAC to AFL-CIO supported candidates 
suggests--at least circumstantially--that the NCSC acted in 
concert with the AFL-CIO during the 1996 election cycle. If the 
NCSC was affiliated with COPE, as the evidence suggests, then 
the AFL-CIO could use the NCSC as a conduit to evade the $5,000 
contribution limit set by federal law. Indeed, the Fricano 
campaign discussed above illustrates how affiliated PACs can 
potentially funnel additional donations to candidates after one 
PAC has donated the maximum of $5,000.
    While evidence of this affiliation scheme is compelling, 
the Committee believes that it would be inappropriate to 
conclude that the AFL-CIO and the NCSC acted illegally, even 
though both the AFL-CIO and the NCSC refused to comply with 
Committee subpoenas requesting documents. The AFL-CIO defied 
deposition subpoenas and thereby prevented the Committee from 
gaining sworn testimony from persons involved in these 
contributions. As a result, the Committee does not possess the 
full documentary record about these contributions.
    In summary, because many of the nonprofit groups refused to 
cooperate with the Committee and the Committee had no effective 
means to compel compliance, it does not possess a sufficient 
factual record to make findings about allegations of illegal 
and improper conduct by nonprofit groups during the 1996 
elections. As a result, the Committee does not believe that it 
can draw sustainable conclusions on the many serious 
allegations regarding nonprofit activity that arose out of the 
1996 elections.

           Allegations Relating to the National Policy Forum

    The National Policy Forum (``NPF'') was founded in 1993 as 
a ``grassroots'' think tank to develop a policy agenda through 
a series of ``town meetings,'' i.e. policy forums, throughout 
the nation. The NPF was formed by Haley Barbour, then the 
recently elected Chairman of the Republican National Committee 
(``RNC''), and others, and started with $100,000 in RNC ``seed 
money.'' The NPF was structured as a nonprofit corporation 
under Section 501(c)(4) of the Internal Revenue 
    \1\ See 26 U.S.C. Sec. 501(c)(4)(1997).
    The Committee's investigation of the NPF covered a wide 
range of allegations. The lion's share of these allegations 
related to a ``loan guarantee'' transaction involving the NPF 
and a Florida Corporation named Young Brothers Development 
(USA), Inc. (``YBD (USA)''), the subsidiary of a Hong Kong 
entity, Young Brothers Development, Ltd. (``YBD (Hong Kong)''). 
Such allegations included claims that:
          (1) the NPF was utilized to launder or illegally 
        ``funnel'' money from the Hong Kong entity into the RNC 
        to assist the RNC in the 1994 federal election cycle;
          (2) the NPF received money from the Hong Kong entity 
        in exchange for government favors or business 
        considerations and;
          (3) the NPF misused its non-profit tax status in some 
    In pursuing the allegations, the Committee subpoenaed 
documents from many sources, deposed fourteen individuals and 
conducted several interviews. In the course of these efforts, 
several of the subpoenaed parties objected to certain of the 
Committee's inquiries, citing the Committee's limited 
jurisdiction to the 1996 election cycle. On July 3, 1997, 
Chairman Thompson issued an Order clarifying these parties' 
obligations. The Order provided that information predating 
November 1994 (the beginning of the 1996 election cycle) must 
be provided if it sheds light on efforts by the NPF to raise 
foreign funds during the 1996 election cycle, but that ``it is 
not appropriate for the Committee to inquire into matters that 
relate only to the 1994 federal election campaigns.'' 
2 Following issuance of the Order, although 
preserving their objections, the NPF and NPF witnesses fully 
    \2\ See Order of Chairman Fred Thompson, July 3, 1997 (Ex. 1).
    \3\ See Catalog of NPF Document Production (Ex. 2).
    None of the witnesses associated with the NPF or the Young 
Brothers companies invoked their Fifth Amendment rights or fled 
the country to avoid testifying before the Committee. In 
contrast to numerous Democratic donors, fundraisers and 
administration officials, persons associated with the NPF and 
the Young Brothers appeared voluntarily for Committee 
depositions. Indeed, Ambrous Young, the Director of YBD (Hong 
Kong), voluntarily traveled from Hong Kong to London to be 
deposed by the Committee. Former RNC Chairman Haley Barbour 
voluntarily testified at length before the Committee.

          formation and financing of the national policy forum

    The NPF was created in the spring of 1993 as a 
``participatory policy institute . . . in which average 
citizens, community leaders, people away from Washington, 
legislators, local officials, state officials, as well as 
Federal officials had an opportunity to participate in the 
issues that face our government.'' 4 The NPF was 
initially envisioned as a wing or subsidiary of the RNC. That 
initial plan was rejected, however, in favor of the creation of 
a separate, distinct and independent policy institute under 
Section 501(c)(4) of the Internal Revenue Code.5 
According to the NPF's first president, Mr. Michael Baroody, 
``[t]he National Policy Forum was to be a Republican Center for 
the exchange of ideas. As I used to say routinely at the start 
of our forums, that was decidedly and intentionally not the 
same as a center for the Republican exchange of ideas--meaning 
NPF was to be open to all and set out to hear from all, 
regardless of party.'' 6
    \4\ See Deposition of Haley Barbour, July 19, 1997, p. 19-20.
    \5\ The NPF had a separate board of directors, separate management, 
separate employees, separate operations and separate offices from the 
RNC. The RNC and NPF had separate accounting systems, and did not 
commingle funds. In short, the two organizations were two separate 
legal entities. See Barbour testimony, p. 117:

      Senator Glenn has said the NPF was an arm or subsidiary of 
      the RNC. That is not correct. Indeed, I had originally 
      considered establishing the policy institute as a part of 
      the RNC. Over time and before it was founded, however, I 
      came to the conclusion that the policy institute should be 
      separate from the RNC for a variety of reasons.

    \6\ See Testimony of Michael Baroody, July 23, 1997, p. 190. The 
nature of the relationship between the NPF and the RNC was not material 
in assessing the legality of the matters at issue. Because the NPF 
undertook no campaign-related activities, its actions were not subject 
to federal campaign restrictions, no matter what link it had to the 
    At its formation, the NPF received a $100,000 loan from the 
RNC. As NPF fundraising efforts failed to satisfy NPF expenses, 
the NPF received additional loans from the RNC. The NPF 
leadership discussed a range of fundraising options, including 
the possibility of soliciting money from foreign sources (which 
would be legal for a non-profit corporation.) 7 By 
the end of 1993, the NPF had a debt to the RNC in the amount of 
$260,000. By mid-1994, that amount had grown to approximately 
$2 million.8
    \7\ See generally Baroody testimony, pp. 202-05.
    \8\ See Baroody testimony, p. 206.
    The NPF debt threatened to grow larger through 1994 as the 
pace of NPF forums increased. 9 During the summer 
and fall of 1994, the NPF was competing with Congressional 
campaigns for contributions from prospective donors. Expecting 
a fundraising shortfall during that period, NPF attorneys 
negotiated and obtained a $2.1 million loan from Signet Bank to 
refinance part of its preexisting debt to the RNC and to 
provide the NPF with operating funds.
    \9\ Between 1993 and 1996, the NPF held over 80 public conferences 
and issues fora involving thousands of people throughout the nation and 
published two books reflecting its findings. The NPF had 14 ``policy 
councils'' involved in these efforts with over 1500 members. See 
generally Deposition of Kenneth Hill, July 11, 1997, pp. 46-48. The 
NPF's document production to the Committee demonstrated an enormous 
breadth of activity undertaken in its public fora and conferences.
    By 1996, the NPF's continuing fundraising shortfalls led to 
a crisis. In early 1996, the NPF negotiated to defer one of its 
payments on the Signet Bank loan. By June 1996, the NPF 
indicated to Signet that it would default on the $1.5 million 
remaining due on the loan. Signet Bank exercised its right to 
take collateral posted by YBD (USA) to cover the default. 
Following its default on the Signet Bank loan, the NPF also 
defaulted on approximately $2.5 million in outstanding debt to 
the RNC.
    In January 1997, the NPF's operations ceased. On February 
21, 1997, the IRS issued a letter ruling disapproving the NPF's 
1993 application for 501(c)(4) status. Although the dispute 
regarding NPF's tax status had no actual tax implications--the 
NPF never earned any profit or conferred any tax deductions on 
its donors--the IRS's decision has been appealed.10 
The appeal is pending.
    \10\ There has been significant controversy regarding the IRS's 
February 21, 1997 ruling. During the Committee's hearings, the IRS's 
disapproval of the NPF's application was sharply contrasted with the 
IRS's approval of tax-exempt status for the Democratic Leadership 
Council. Although this comparison raised certain issues regarding 
partisanship at the IRS, the discussion of the NPF's tax status was not 
material to the legality of the NPF loan guarantee transaction. In 
short, because the NPF never engaged in any election-related activities 
of any kind, it was never subject to federal election law, regardless 
of whether it did or did not qualify for tax-exempt status.

        The RNC's Relationship with the Young Brothers Companies

    The relationship among the RNC and Young Brothers 
Development (USA) began in 1991. At that time, Young was a U.S. 
citizen and served as Director of a Hong Kong corporation, YBD 
(Hong Kong).11
    \11\ Ambrous Young was born in the People's Republic of China, 
emigrated to Taipei, Taiwan when he was 14 years old, and was granted 
U.S. citizenship in 1970. Young's wife, four sons and daughter are all 
U.S. citizens. Young, a Hong Kong resident, gave up his U.S. 
citizenship at the end of 1993. Benton Becker, counsel to YBD (USA), 
was asked why Young gave up his U.S. citizenship:

        Senator Durbin. Do you know why he renounced his U.S. 
        Mr. Becker. Well, I've asked him that question, and every 
      time I ask him that question he always says, ``That's not 
      the right word, Benton. I didn't renounce anything. I still 
      feel strongly about the United States.'' He said that he 
      simply decided that he wanted to create a single 
      citizenship in the Republic of China and in Hong Kong, and 
      he just doesn't come to the U.S., doesn't have any real 
      reason to come to the U.S., and his children have all 
      graduated from colleges in the U.S. He used to spend a lot 
      of time here visiting his children when they were studying. 
      That's the only explanation that's ever been given to me.

See Becker testimony, July 23, 1997, pp. 135-36. Although the Committee 
obtained certain tangential evidence suggesting that Young's decision 
may have been influenced by prospective tax implications, the Committee 
has received nothing conclusive on that issue.
    In 1991, Alex Courtelis was a commercial real estate 
developer doing business in Florida. Courtelis also served as 
an official of the RNC's ``Team 100'' program.12 In 
1991, Courtelis and Young began to discuss a potential shopping 
center deal in Southern Florida. In structuring the potential 
deal, YBD (USA), a Florida corporation and a subsidiary of YBD 
(Hong Kong), was formed. By October of 1991, negotiations for 
the real estate purchase were progressing. Courtelis asked 
Young to consider contributing $100,000 to the RNC to become an 
RNC ``Team 100'' member.13
    \12\ Becker testimony, p. 40.
    \13\ Id. at 42.
    Team 100 members were provided with several benefits, 
including invitations to certain Team 100 events each year. 
Although then a U.S. citizen, Young spent a considerable amount 
of time abroad. Young's sons, all U.S. citizens, spent 
substantially more time in the U.S. Young and Courtelis 
determined that the Team 100 membership would be in the name of 
YBD (USA) so that Young's sons could attend the Team 100 
events.14 The funds for YBD (USA)'s Team 100 
donations were provided, in the form of a loan, from YBD (Hong 
Kong) to YBD (USA).15
    \14\ Id.
    \15\ See Becker testimony, p. 174; Becker testimony, p. 43.
    In Spring 1992, after the YBD (USA)'s $100,000 in Team 100 
contributions had been made, the shopping center deal involving 
YBD (USA) and Courtelis fell through.16 Thereafter, 
YBD (USA) continued to pursue several U.S. real estate 
opportunities but apparently did not generate sufficient funds 
to repay immediately YBD (Hong Kong) for its $100,000 
    \16\ Becker believed when the Team 100 contributions were made that 
YBD (USA) would generate U.S. earnings sufficient to cover the 
contributions. See Becker testimony, p. 172: ``The actual Team 100 
commitment and payment occurs [in late 1991] while the [YBD 
(USA)]shopping center deal is still viable.''
    \17\ Richards, Becker and Young have all testified that it was 
their intention that YBD (USA) would engage in substantial business in 
the United States. Although several potential ventures were explored--
including various commercial real estate opportunities and an 
investment in a software company--none came to fruition. Although the 
Committee understands that YBD (USA) did have income from property 
management activities and certain interest income during its lifetime, 
the Committee has insufficient information to determine whether this 
income was sufficient to account for any substantial portion of the 
Team 100 donations.
    If the RNC had reason to know that the funds for the YBD 
(USA) Team 100 contributions were derived from a foreign source 
rather than the U.S. earnings of a domestic corporation, 
acceptance of this donation would have been illegal. According 
to Richard Richards, then the President of YBD (USA):

          To the best of my knowledge no officer or employee of 
        the RNC or anyone associated with the RNC other than 
        Mr. Courtelis knew at the time that the Young Brothers 
        USA contributions to the RNC arose out of Young 
        Brothers Hong Kong money.18
    \18\ See Affidavit of Richard Richards, Esq. (Ex. 3) The affidavit 
was created under the following circumstances:

        Mr. Richards: . . . [I]t was probably a couple of weeks 
      ago. The attorneys that represent The Republican National 
      Committee asked if they could see me, and they flew out to 
      Ogden, Utah, where I live and presented me with an 
      affidavit that they had previously prepared consistent with 
      some telephone conversations I had with them. We went over 
      the affidavit. There were some things that I felt were not 
      accurate. We made the changes. I signed the affidavit and 
      it appears here today. . . .
        Mr. Madigan (Majority Counsel): . . . [D]oes it [the 
      affidavit] accurately reflect the facts as you know them?
        Mr. Richards: I think so. I don't know of anything that 
      is not true.

Testimony of Richard Richards, July 25, 1997, pp. 91-92.

The RNC did not obtain financial or other information 
indicating that YBD (USA) had insufficient income in the U.S. 
to make a legal donation. Rather, it appears that Courtelis and 
the RNC relied upon the representations of the YBD (USA) 
counsel, Benton Becker, that the donations were 
    \19\ Courtelis (now deceased) dealt with Becker on behalf of the 
RNC. Courtelis was not an attorney, but apparently knew that Mr. Young 
and his family were U.S. citizens. Becker performed a legal analysis of 
the transaction, and prepared a memorandum advising that the 
transaction be legally structured such that a loan would be made from 
YBD (Hong Kong) to YBD (USA) which YBD (USA) would repay with its U.S. 
earnings. See Memorandum from Benton Becker to File, October 11, 1991 
(Ex. 4).
    The RNC has informed the Committee that it returned 
contributions to YBD (USA) in May 1997 when it obtained 
information indicating their possible foreign origin.

        Solicitation of the YBD (USA) Loan Guarantee to the NPF

    In the spring of 1994, an NPF fundraiser named Fred 
Volcansek met with Dan Denning, the NPF's Chief Financial 
Officer, and Donald Fierce, an RNC official.20 The 
three discussed the faltering fundraising efforts of the NPF, 
and the NPF's outstanding debt to the RNC.21 It was 
agreed that Volcansek would work to find an entity willing to 
provide a loan or a loan guarantee to the NPF.22
    \20\ Volcansek testimony, July 24, 1997, pp. 10-11, 27.
    \21\ Volcansek testimony, p. 28.
    \22\ Volcansek testimony, p. 30. Note: Mr. Volcansek's testimony 
regarding this meeting differs somewhat from that of Mr. Denning. Mr. 
Volcansek, an ``international businessman,'' believed that he had been 
asked to assist with seeking a loan guarantee due to his foreign 
expertise. See Volcansek testimony, p. 57. Mr. Denning recalls no 
conversation relating to foreign sources of funds. See Deposition of 
Daniel B. Denning, June 30, 1997, p. 74-75.
    In the summer of 1994, Fred Volcansek contacted his friend 
Richard Richards, a former RNC chairman with a law practice in 
Washington, D.C. The NPF recognized that, as a result of the 
impending congressional elections, the RNC and congressional 
campaigns would present stiff competition for available 
fundraising sources through November, 1994. The NPF also 
recognized that the competition for funds could present the NPF 
with a significant cash flow problem in the coming months. 
Richards had introduced Volcansek to Ambrose Young and knew of 
Richards' relationship with Young. Volcansek asked Richards if 
Young or the Young companies might agree to provide a loan 
guarantee the NPF.23
    \23\ Volcansek testimony, p. 12.
    In early August 1994, Ambrous Young, along with his son, 
Steven Young, and Richards, met over dinner in Washington with 
Barbour, Volcansek and Denning. Barbour knew that YBD (USA) was 
already a Team 100 member.24
    \24\ It is not clear when Barbour learned that Ambrous Young was no 
longer a citizen. See Barbour testimony, p. 231-32. Ambrous Young's 
son, Steve Young, was a U.S. citizen. See Deposition of Richard 
Richards, June 10, 1997, p. 86. Barbour believed that the name ``Young 
Brothers'' in YBD (USA) referred to Steve Young and his brothers, all 
of whom are U.S. citizens. Barbour testimony, pp. 208-09.
    At the dinner, Barbour requested that Young consider 
whether YBD (USA) would provide a loan guarantee to the NPF. 
Young agreed to consider it, and asked for information on the 
NPF and the proposed loan guarantee.25 Mr. Barbour 
responded in writing on August 30, 1994, and explained that, by 
obtaining a bank loan guaranteed by YBD (USA), the NPF:
    \25\ Young deposition, p. 35.

          . . . would not need to raise funds during the fall's 
        political season when competition for contributions is 
        especially keen, and most potential donors are focused 
        on elections and not public policy.26
    \26\ See Letter from Haley Barbour to Ambrous Young, with 
attachment, August 30, 1994 (Ex. 5). Ambrous Young prepared a letter in 
reply dated September 9, 1994 expressing reservations regarding the 
loan guarantee proposal. Letter to Haley Barbour from Ambrous Young, 
Sept. 9, 1994. (Ex. 6). Although the letter was to be delivered to 
Barbour by Young's son, Barbour does not recall receiving the letter, 
and no such letter appears in the RNC or NPF files. The Minority has 
theorized that one sentence in Young's September 9, 1994 letter 
suggests that Mr. Barbour was actually soliciting funds from Young for 
use in the 1994 elections:

        . . . [W]e are willing to consider the support of the 
      $2.1 million which is the amount you have expressed to me 
      is urgently needed and directly related to the November 

Haley Barbour stated that the above-quoted sentence from Young's letter 
refers to Barbour's earlier statement that the NPF would have 
significant trouble raising funds in the months preceding the November 
elections, not that the NPF loan guarantee would somehow be used in the 
    Whether or not Barbour received Young's September 9, 1994 letter is 
not material to the Committee's assessment of the transaction.

    Young asked Becker to act as counsel to negotiate the terms 
of the potential loan guarantee from YBD (USA) to the NPF. 
Young asked Becker to make all efforts to obtain security in 
the event of an NPF default.27
    \27\ Young deposition, p. 37.
    Young and Becker both testified that they understood that 
the loan guarantee sought by Barbour was for the NPF, and 
understood the NPF to be a separate entity from the RNC:
            Ambrous Young Deposition Testimony
          Q: What did you understand, as a general matter, was 
        the use for which this money was sought?
          A: All I understood the Forum, the National Policy 
        Forum needs money. . . .28
    \28\ Id. Young also testified:
        [N]obody explained to me how the money should be utilized 
      and this and that, nor mentioned to me about election of 
      the congressional system. . . .

Young deposition at 29.
            Benton Becker Deposition Testimony
          He [Ambrous Young] also informed me that he was told 
        by Mr. Barbour that the National Policy Forum was not 
        part of the Republican National Committee, that it, the 
        National Policy Forum, was not within the auspices of 
        the Federal election laws, since it, as an 
        organization, was not involved with Federal elections, 
        that it was a think tank. . . .29
    \29\  Becker deposition, pp. 31-32.
    Volcansek also explained to Young that, as an individual without 
U.S. citizenship, Young could not have any role in the federal 

      Many times I had the opportunity to explain to Mr. Young 
      that he could not participate in our political process. I 
      explained to Mr. Young that it was impossible for him to 
      participate in the process of elections and to directly 
      contribute in any way to the Republican National Committee 
      or to any individual campaign. (Volcansek testimony, p. 

It was also clear that the Florida corporation, YBD (USA), 
would be the loan guarantor:

          No one ever considered the Hong Kong entity as being 
        the loan guarantor. From day one, the consideration, it 
        is my understanding, had always been the U.S. 
        corporation. . . .30
    \30\ See Becker testimony, p. 124.

    In negotiating the terms of the loan guarantee, Becker 
asked the RNC General Counsel, David Norcross, whether the RNC 
would formally agree to repay any loss by YBD (USA) if the NPF 
defaulted.31 Norcross told Becker that the RNC could 
not do so.32 Becker nevertheless continued to 
request some form of commitment from the RNC. Ultimately, 
Barbour responded with a letter committing to raise the issue 
with the RNC Budget Committee and seek its approval in the 
event that the NPF defaulted on an outstanding debt to ``a 
domestic corporation.'' 33
    \31\ Becker deposition, pp. 38-39.
    \32\ Becker deposition, pp. 39.
    \33\ See Letter from Haley Barbour to Benton Becker, August 30, 
1994, p. 1 (Ex. 7); See also Becker deposition, pp. 39-40; Barbour 
deposition, pp. 72-74.
    To evaluate Barbour's ``commitment,'' Young and Becker 
consulted with Young's long-time friend, Richard Richards. 
Richards informed Young and Becker that he believed that the 
RNC Chairman would have power to compel the RNC Budget 
Committee to cover any NPF default.34 Richards, 
Becker and Young recognized that Barbour's ``commitment'' was 
not a judicially enforceable obligation.35
    \34\ See Richards testimony, p. 78-79.
    \35\ See Becker deposition, p. 39.
    Following such consultations, Becker, along with attorneys 
for the NPF and Signet Bank, the lender, analyzed the proposed 
loan guarantee transaction. Mr. Volcansek described such 
efforts as follows:

          [N]umerous nationally prominent campaign finance 
        lawyers reviewed this transaction and deemed it 
        perfectly legal, ethical, and proper in all respects. 
        This was a transaction that was conducted in the full 
        light of day with the most extensive legal review that 
        I have ever seen for a transaction of comparable 
    \36\ See Volcansek testimony, pp 14-15. See also Memorandum from 
Benton Becker to Ambrous Young, dated September 23, 1994 (Ex. 8):

        These procedures outlined in this memo are calculated to 
      accomplish the following goals:
        1. To insure that no arguable violation of U.S. law could 
      result to YBD or its principals. . . . [p. 1]
With this in mind, as you have instructed, all considerations have been 
made to assure that no claim and no violation of law could result from 
YBD (USA) serving as a loan guarantor. [p. 3]

    On September 19, 1994, Barbour wrote to Ambrous Young, 
thanking Young for YBD (USA)'s agreement to make the loan and 
describing Barbour's dealings with Young's son, Steve:

          . . . I was heartened by Steve's telling me that at 
        the end of the year consideration would be given to 
        doing even more. The Young family and your company are 
        exceptionally generous, and I am genuinely grateful for 
        the confidence you are showing in me.37

    \37\ See Letter from Haley Barbour to AmbrousYoung, September 19, 
1994 (Ex. 9).

    On October 13, 1994, the loan guarantee documents were 
signed. The transaction was structured as follows: Signet Bank 
loaned $2.1 million to the NPF. The loan was collateralized by 
$2.1 million in CD's posted by YBD (USA). As NPF made its 
quarterly loan payments to Signet Bank, Signet Bank would 
release the CD's to YBD (USA). In the meantime, YBD (USA) 
earned market-rate interest on the CD's.38 YBD (USA) 
received the funds to purchase the $2.1 million in CD's to be 
posted as collateral for NPF's loan in the form of a loan from 
its parent, YBD (Hong Kong).
    \38\ Testimony of Benton Becker, July 23, 1997, p. 47.
    When the NPF received the $2.1 million in loan proceeds on 
October 13, 1994, it wrote to Signet Bank indicating that $1.6 
million of the proceeds would be used to retire a portion of 
the NPF's debt to the RNC's non-federal Republican National 
State Election Committee (``RNSEC'') account.39 On 
October 20, 1994, $1.6 million of the outstanding debt of $2.4 
million was repaid to the RNSEC account.40 The 
remaining $500,000 was applied to NPF expenses. NPF's $1.6 
million repayment reduced its debt to the RNSEC account to 
approximately $800,000.41
    \39\ See Letter from NPF Comptroller Steven Walker to Kevin 
Killoren of Signet Bank, October 13, 1994, (Ex. 10).
    \40\ See Deposition of Haley Barbour, pp. 85-86.
    \41\ See Deposition of John Bolton, July 15, 1997, p. 46.
                allegations regarding the 1994 elections
    Although matters relating to the 1994 elections are not 
within this Committee's investigative mandate, certain charges 
relating to such elections were raised during Committee 
hearings. The Minority has alleged that the $1.6 million debt 
repayment by the NPF to the RNC was used by the RNC to fund 
critical campaign activities in Congressional districts across 
the country. Specifically, the Minority contends that the flow 
of funds evidences a plan to funnel foreign money into the 1994 
elections, i.e. from YBD (Hong Kong) to YBD (USA) to Signet 
Bank to collateralize a loan to the NPF, a portion of which was 
utilized to repay a legitimate pre-existing debt to the RNC. 
Barbour offered two reasons why that allegation was ``wrong in 
fact, and . . . wrong in effect.'' 42 First, all the 
funds were loaned from and repaid to the RNSEC ``non-federal'' 
account. Such funds cannot be used on behalf of any candidate 
in a federal election.43 There is no evidence that 
these funds found their way to any federal ``hard money'' 
accounts, or that the RNSEC funds were used in coordination 
with any congressional candidate.
    \42\ See Barbour testimony, pp. 254-55.
    \43\ See Barbour testimony, p. 254.
    Second, there was no shortage of funds in the RNSEC 
account: The RNC's RNSEC account had more than $3 million 
available for use as of October 19, 1996--before it received 
the $1.6 million NPF repayment.44 Shortly following 
the NPF repayment, the RNC transferred $500,000 from the RNSEC 
account to its building fund, which was utilized for the 
physical operations of the RNC, and transferred $1.6 million in 
repayment of an outstanding RNC loan from Signet 
Bank.45 In addition, the funds available for use 
from the RNSEC account, including funds available via a line of 
credit, never dipped below $5 million between October 20, 1994 
and the election.46 In sum, there is no evidence 
that the $1.6 million repaid by the NPF to the RNSEC account 
was used for any electoral or campaign activity and thus had 
any impact in any 1994 Republican congressional 
victories.47 Moreover, there is no evidence that the 
YBD loan guarantee transaction, which was legal and authorized 
under federal election laws, was related to or affected the 
1996 election campaigns.
    \44\ See Chart, Republican National Committee, Non-Federal Funds 
Available October, 1994--November, 1994 (Ex. 11).
    \45\ See Barbour testimony, pp. 127, 252.
    \46\ See Ex. 11.
    \47\ See Barbour Testimony, pp. 127, 235-37.
    Allegations have also been made that a seven day delay in debt 
repayment by the NPF to the RNSEC account (from October 13 until 
October 20, 1994) evidences a conspiratorial intent to delay public 
disclosure of such repayment. The Committee has not received an 
explanation of this delay from any person responsible for it, but 
Barbour suggested a possible rationale:

      I never talked to Steve Walker [the NPF Controller] about 
      it, but if he had asked me, if he would have asked me, I 
      would have told them wait and make the payment, the 
      repayment, actually, on October 20th or thereafter, because 
      when you are raising money like we do, almost not 
      exclusively, but very heavily from small donors, you don't 
      want the newspaper saying the RNC got a $1.5 million 
      contribution or a $2.5 million contribution because then 
      your small donors say, well, they don't need more money. 
      You know, that chills-the small donors drive our party. Our 
      average contribution at the RNC was $45.

Barbour testimony, p. 190.
      dealings between barbour and young: january 1995--june 1996
    Following the 1994 elections, Young and Barbour 
communicated on several occasions. In early 1995, Young made a 
trip to the United States for medical treatment. During that 
trip, Barbour arranged for Young to meet briefly with Speaker 
Gingrich and Senator Dole in their Congressional offices. 
Although discussions at such meetings included the possible 
fate of Hong Kong following the British departure and the 
Taiwanese-Chinese relationship, there was no discussion 
relating to any legislation, government program or government 
contract of any kind.48
    \48\ Neither Young nor any of his companies ever did business or 
sought any business with the United States Government. See Young 
deposition, p. 83; Volcansek testimony, p. 77; Barbour testimony, pp. 
196, 198.
    In August 1995, Barbour paid a visit to Young in Hong Kong 
and asked if YBD (USA) would relinquish the CD's held by Signet 
Bank, effectively ``forgiving'' NPF's obligation to repay YBD 
(USA). Young agreed to consider the matter.49
    \49\ The Minority has argued that one portion of Young's testimony 
regarding his August 1995 conversations with Barbour should be read to 
indicate that Young explained to Barbour that forgiveness was 
impossible because YBD (Hong Kong), the actual source of funds for the 
loan guarantee, was undergoing a government audit. Barbour, however, 
recalls no such explanation, and recalls that Young agreed to consider 
his request for forgiveness. Barbour's recollection on this point is 
supported by that of Young's lawyer, Richard Richards. Richards wrote:

      Shortly after the loan was made, you [Barbour] journeyed to 
      Hong Kong, and approached Mr. Young for the first time 
      about the question of forgiveness of the loan. Mr. Young 
      called me and told me of the discussion and informed me 
      that he wanted to be as helpful to you as he could and he 
      would take the request for forgiveness under advisement.

See Letter from Richard Richards to Haley Barbour, September 17, 1996 
(Ex. 12). In any event, Barbour's knowledge or lack thereof regarding 
YBD (Hong Kong)'s role in the transaction was immaterial--as discussed 
elsewhere herein, the loan guarantee transaction was legal whether or 
not the funds originated in Hong Kong.
    In late 1995, Barbour planned a trip to Beijing, including 
a meeting with the Chinese Foreign Minister. Barbour invited 
Young to accompany him. Young agreed.50 In early 
1996, Barbour met with the foreign minister while Young and 
others attended this ceremonial meeting.51 Mr. Young 
described the encounter as follows:
    \50\ Young testified that he agreed to go on the trip as a gesture 
of ``friendship'' to Barbour. Mr. and Mrs. Young, Mr. and Mrs. Barbour, 
and Mr. and Mrs. Richard Richards all participated in the trip, which 
apparently included sightseeing in and outside Beijing. See Ex. 3. Mr. 
Young and Mr. Barbour both testified that they neither discussed nor 
did any business of any kind while on the trip to China, or at any 
other time. See Young deposition, pp. 83, 85-86; see Barbour 
deposition, p. 106.
    \51\ See Ex. 3; Becker testimony, p. 49; see Young deposition, pp. 

          Q: Can you describe the type of reception given by 
        the Chinese Government to Haley Barbour on that trip?
          A: The reception, I would say--I will give a rate: I 
        would say third class or lower.
          Q: Do you know why that type of reception was given 
        to Haley Barbour?
          A: Much later I was puzzled why they do that, 
        because, as a party Chairman for China they always want 
        to win friendship from the United States, and later I 
        raised the question through my personal friends who did 
        ask the questions and they come back to me and said 
        that during that particular moment the Chinese 
        government are in favor of the winning of President 
        Clinton, i.e. the Democrats, so they tried not to 
        offend the Democrats, so therefore they lowered down 
        Mr. Barbour. That's the answer I got.52
    \52\ Young deposition, p. 84.

Although there was apparently no discussion relating to 
forgiveness of the loan guarantee during the trip to China, the 
topic arose again in 1996.
    By 1996, it was clear that the NPF's disappointing 
fundraising efforts would not support its operating expenses. 
The NPF had taken a series of loans from the RNC, but the RNC 
was becoming increasingly reluctant to extend 
credit.53 The NPF missed its January 1996 loan 
repayment to Signet Bank, and asked Signet (the lending bank) 
and YBD (USA) (the loan guarantor) for permission to defer the 
payment.54 Both agreed.
    \53\ Becker testimony, p. 46.
    \54\ Becker deposition, pp. 55-57.
    In or about May 1996, Barbour had a conversation with 
Richard Richards regarding the loan guarantee. During that 
conversation, Barbour understood Richards to agree that YBD 
would not object if NPF defaulted on the $1.5 million in funds 
remaining due on the loan and Signet Bank took the YBD (USA) 
CD's.55 By contrast, Richards has described that 
conversation as follows:
    \55\ See generally Barbour testimony, pp. 147, 149-151.

          I did not say, because I did not have the authority 
        to say, ``Go ahead and default and we will do 
        nothing.'' In essence that would that would be our way 
        of forgiving the loan. I think I did say I doubted Mr. 
        Young would sue you in the event of default, but Mr. 
        Young did not say that, and did not give me 
        authorization to say we wouldn't sue and therefore, go 
        ahead and default and we'll simply walk 
    \56\ See Ex. 12.

    By June 1996, NPF had informed Signet Bank that it intended 
to make no further payments and would default on the loan. 
Later that summer, Signet accelerated the loan and took $1.5 
million in YBD (USA) CD's.57
    \57\ See generally Becker testimony, p. 50 .
                         dispute and settlement
    In July 1996, after learning of the default, Richards and 
Becker wrote to Barbour and asked him to obtain authorization 
from the RNC Budget Committee for the RNC to repay the NPF's 
debt to YBD (USA). In August, 1996, at the Republican 
Convention, Barbour sent the President of the NPF, John Bolton, 
to present the issue to the Budget Committee. Bolton made a 
presentation, but the Committee tabled the matter.58
    \58\ See Bolton deposition, July 15, 1997, p. 82.
    When Richards and Becker learned that the RNC Budget 
Committee would not cover the NPF default, they became very 
angry. Although Richards and Becker recognized that the RNC did 
not have a legally cognizable obligation to cover the NPF 
default, they decided, in service to their client, YBD (USA), 
to attempt to pressure to the RNC to cover the 
    \59\ See e.g. Memorandum from Becker to Young and Richards, 
September 16, 1996 (Ex. 13).
    On September 17, 1996, Richards wrote to Barbour 
threatening to sue him and laying out a purported factual 
record of the transaction.60 Included in the letter 
were claims that Barbour had offered to arrange ``business 
opportunities'' in China in return for loan forgiveness, and 
that the loan guarantee was originally made in order to funnel 
money to sixty targeted House seats. Richards has since 
recanted several of those statements:
    \60\ See Ex. 12.
Mr. Richards' Testimony:
      Q: Is there anything in this letter that you feel 
requires some level of clarification to be properly understood?
      A: Yes. The tone--the reference in the letter to business 
is grossly misleading, because we didn't go there to get 
business. We didn't discuss business. But Ambrous's ability to 
pay the loan depended upon him getting business. And so I know 
the tone of the letter kind of says we all went there for a 
business purpose, and that isn't quite accurate. And I 
attribute that to writing the letter when I was grossly 
    \61\ Richards deposition, June 19, 1997, p. 112.
Mr. Richards' Affidavit:
      At the time I wrote this letter, the repayment of 
collateral was very much at issue and I was concerned that my 
client, Mr. Young, would suffer as a result of an NPF default. 
Accordingly, in the letter, I made several serious statements 
which, upon reflection, were made as negotiating tools and were 
not accurate. In particular, I stated that if Mr. Young could 
get some business opportunities it may justify the contribution 
of a portion of the loan collateral. I know of no business 
activities Mr. Barbour was ever asked to undertake or did 
undertake on behalf of Mr. Young, his sons, or any of the Young 
Brothers entities either in the United States or abroad. In 
addition, in my September 17, 1996 letter, I stated that the 
repayment of the loan made certain funds available to the RNC 
during the 1994 federal election cycle, the funds merely repaid 
the RNC for its earlier loans to NPF, and I now understand that 
these funds could not and were not used to directly benefit 
congressional candidates.62
    \62\ See Ex. 3 (emphasis supplied); see supra n. 20 (discussing 
origin of Mr. Richards' affidavit.)

    The statements in Mr. Richards' September 17, 1996 letter 
have also been contradicted by the testimony of Young and 
Testimony of Ambrous Young:
      Q: Did you or any Young Brothers business benefit 
financially as a result of your trip with Haley Barbour to 
      A: No.

           *         *         *         *         *

      Q: So Haley Barbour never suggested any business?
      A: Never at all, nor we approached him or him approached 
us. . . . I have never had any business in mind.63
    \63\ Young deposition, pp. 83-86.
Testimony of Haley Barbour:
      Q: Did Mr. Young articulate any point of view that you 
can recall that specifically would have helped Young Brothers 
Development either in this country or in China or Hong Kong, 
anywhere--or Taiwan?
      A: He never said anything to me or in front of me about 
his company's business or businesses or his companies' 
businesses or business, ever.64
    \64\ Barbour testimony, pp. 197-198.

    After receiving Richards' September 17, 1996 letter, 
Barbour decided that the best course of action was no 
response.65 Richards followed with an October 16, 
1996 letter containing the following statement:
    \65\ See id. p. 146. Barbour testified ``Now, that's what I took 
the letter to be, a negotiating tool to try to put pressure on me. 
That's why I didn't respond. And it's also why I didn't give it 

          I believe it is significant that Bob Dole and the 
        Republican Party are now challenging contributions made 
        to the Clinton campaign by Indonesian citizens through 
        an American contact. Obviously there are some 
        differences between that situation and ours; however, I 
        think we stand the same risk of some very adverse 
        publicity if the loan were forgiven. . . .66
    \66\ See Letter from Richards to Barbour, October 16, 1996 (Ex. 

    Richards has since testified as follows regarding the 
meaning of his reference to ``differences'' between the Clinton 
campaign and the YBD loan guarantee:

          Ambrous Young's money did not go to a political 
        campaign, where I believe that the money, the 
        Indonesian money went to the Presidential campaign and 
        to the Democratic party for campaign purposes. Ours 
        went to a think tank. Ours went to the 
    \67\ Richards deposition, June 19, 1997, p. 114.

    Following the 1996 elections, Becker and the NPF negotiated 
a settlement.68 The NPF repaid (with RNC funds) 
approximately half of the $1.5 million lost by YBD 
    \68\ The NPF agreed to pay $800,000 in settlement of the dispute 
but then reduced that amount by $50,000--the interest accrued to date 
by the YBD (USA) certificates of deposit. Becker testimony, pp. 52-53.
    \69\ Becker testimony, pp. 52-53. The Committee also investigated 
allegations of two other allegedly foreign donations to the NPF. First, 
the Committee reviewed a $25,000 donation on August 2, 1996 from the 
Pacific Cultural Foundation, a non-profit think-tank located in Taiwan. 
The NPF was one of several U.S. organizations that received funds from 
the Pacific Cultural Foundation. Second, the Committee reviewed a 
$50,000 donation from Panda Industries on or about July 18, 1995. Panda 
Industries and related entities are the subject of further examination 
in the section on Ted Sioeng of the Committee's Report. Under present 
law, such donations are legal.
    Mr. Becker has informed that Committee that, although YBD 
(USA) admittedly has no legal right to return of the $800,000, 
it continues to request that the RNC reimburse it for its 

         Allegations Relating to the Testimony of Haley Barbour

    As the Committee's investigation progressed, the Minority's 
focus shifted from the mechanics of the loan guarantee 
transaction to allegations that Haley Barbour had given false 
testimony. The Minority's allegations regarding Barbour's 
testimony relate principally to one set of statements: During 
the hearing and his deposition, Barbour testified that he did 
not have credible information until the Spring of 1997 that the 
funds for the CD's collateralizing the NPF loan from Signet 
Bank were obtained by YBD (USA) via a loan from it parent, YBD 
(Hong Kong).70
    \70\ Barbour deposition, pp. 130-131.
    To be clear, neither Barbour nor any other person 
questioned during this investigation denied that the funds for 
the NPF loan guarantee originated in Hong Kong--that fact was 
never in dispute. Rather, Barbour stated that he did not have 
credible information on that topic until he reviewed NPF files 
retrieved from storage in Spring 1997. Moreover, whether or not 
Barbour personally knew prior to 1997 that the funds for the 
guarantee originated in Hong Kong is notmaterial to the 
Committee's assessment of the loan guarantee transaction. As noted 
above, the NPF was a non-profit corporation and it was free to accept 
donations from foreign sources.
    The Minority has theorized that there were certain 
occasions prior to Spring 1997 when, contrary to his testimony, 
Barbour was informed that the funds for the NPF guarantee 
originated in Hong Kong.
    First, the Minority cites a conversation sometime prior to 
October 1994 among Barbour, Fred Volcansek (then engaged in NPF 
fundraising), Dan Denning (the NPF Chief Financial Officer) and 
Dan Fierce (an RNC official). Volcansek testified that, during 
that conversation, he told the group that the loan guarantee 
money would originate in Hong Kong.71 When 
questioned regarding this conversation Barbour responded:
    \71\ Volcansek deposition, p. 108-109.

          Fred may be right and I may not have heard it because 
        it was not relevant. That issue is a totally irrelevant 
        issue. It was then and it is now, but I do not recall 
        his saying that in that meeting or any other meeting. . 
    \72\ Barbour testimony, p. 141.

Denning, who also attended the meeting, testified that he 
recalled no such conversation with Volcansek or anyone 
else.73 Indeed, Volcansek himself testified that:
    \73\ See Denning deposition, p. 222.

          [A]s I tried to point out to Mr. Baron a moment ago, 
        that wasn't an issue. I mean, the significance of it 
        being a foreign transaction, because of our viewpoint 
        on the whole matter, the fact that I mentioned it and 
        brought it up in the overall context of a long and 
        lengthy meeting about a lot of things, I'm not 
        surprised that Mr. Denning didn't focus on what I 
    \74\ Volcansek testimony, pp. 48-49.

    The second instance in which, according to the Minority, 
Barbour learned that YBD (Hong Kong) was lending the funds to 
YBD (USA) for the loan guarantee was an alleged conversation at 
an August 1994 dinner in Washington. The dinner was attended by 
Ambrous Young, Steve Young, Barbour and Denning.75 
The Minority argues that Young told Barbour during that dinner 
that the funds for the loan guarantee would come from YBD (Hong 
Kong). In support of that proposition, however, the Minority 
has only cited a single question and answer from Ambrous 
Young's deposition:
    \75\ See generally Denning deposition, p. 153.

          Q: Can you describe in general what you recall was 
        the discussion at the dinner?
          A: The discussion basically was Mr. Haley Barbour 
        requested me to consider for the loan of $3.5 million 
        and assured me of the safe return of the loan, but as a 
        result of that, I could not commit, nor have the power 
        to commit, but requested him to give us more 
        information so that we can present it to YBD (Hong 
        Kong) Board of Directors for further 
    \76\ Young deposition, p. 35.

    However, in his answer, Young said nothing to indicate that 
funds from the YBD (USA) CD's came from Hong Kong. Even if 
Young had stated that he needed to take the issue to the Board 
of YBD (Hong Kong), such a statement does not necessarily 
indicate that the actual funds for the loan guarantee were 
originating in Hong Kong rather than from the U.S. subsidiary. 
This interpretation of Young's testimony parallels other 
evidence obtained by the Committee, including the following 
statement by Barbour:

          I remember Mr. Young saying that he having a 
        favorable but non-committal response, not that he would 
        have to go back to his board . . .77
    \77\ Barbour testimony, p. 142.

This interpretation is also supported by Barbour's August 30, 
1994 letter to Young's attorney, Benton Becker (written shortly 
after the dinner):

          It is my understanding one of your clients--a 
        domestic corporation--is considering guaranteeing a . . 
        . bank loan to the National Policy Forum 
    \78\ See Letter from Haley Barbour to Ambrous Young dated October 
10, 1994 faxed to Benton Becker on October 11, 1994 (Ex. 15).

In addition, Denning, an NPF official also attending the dinner 
that night, did not recall any discussion that the funds for 
the loan guarantee come from a Hong Kong 
    \79\ See generally Denning deposition, pp. 153-159.
    Next, the Minority cited a 1995 conversation between Young 
and Barbour, during Barbour's visit to Young's yacht in Hong 
Kong. During that visit, Barbour and Young had a discussion 
regarding the possibility that the NPF might default on the 
Signet Bank loan. Barbour asked Young whether YBD (USA) would 
``forgive'' any such default. Young testified regarding that 
exchange as follows:

          Q: What was your response to Mr. Barbour's 
        proposition that the loan be forgiven, as we have 
          A: I said no in the manner of an apology. I explained 
        to him that we have difficulties to do that, because 
        the YBD (USA) money, which was guaranteed under the 
        form of a certificate, deposit certificate, for the 
        Forum loan, was a loan from YBD Hong Kong, and YBD Hong 
        Kong we are facing a government audit every year. 
        Without justification to the directors, or to the 
        board, who approved such loan could face government 
        punishment, so therefore I explain this cannot be 
    \80\ Young deposition, pp. 57-58.

It is clear from Young's testimony that he recalls discussing 
the issue of forgiveness with Barbour. It is also clear why 
Young ultimately did not regard forgiveness as a viable option. 
It is not clear, however, that Young explained his reasons for 
rejecting forgiveness during the 1995 conversation with 
Barbour.81 Indeed, when Young's attorney, Richard 
Richards, memorialized the 1995 conversation in his September 
1996 letter to Barbour, Richards made no mention of the YBD 
(Hong Kong) government audit and, contrary to Young's 
testimony, indicated that Young was actually considering 
forgiving the NPF obligation:
    \81\ When read the portion of Young's testimony relating to a 
government audit of YBD (Hong Kong), Barbour replied:

        I do not recall him saying, and I did not understand him 
      to say, anything like that.

Barbour deposition, p. 120.

          Shortly after the loan was made, you [Barbour] 
        journeyed to Hong Kong and approached Mr. Young for the 
        first time about the question of forgiveness of the 
        loan. Mr. Young called me and told me of the discussion 
        and informed me that he wanted to be as helpful to you 
        as he could and he would take the request of 
        forgiveness under advisement.82
    \82\ See Ex. 12. Although there are significant questions regarding 
the accuracy of many portions of Richards' letter (including Richards' 
own admissions that the letter was written as a bargaining tool), Young 
testified generally that this portion of the letter was accurate. See 
Young deposition, p. 86-87.

    Further, other portions of Young's own testimony also raise 
questions regarding the content of his communications to 
Barbour in August 1995. For example, Young testified that he 
and Barbour were ``concentrating on the subject of forgiving 
the loan [to NPF]'' and did not make ``any special point'' of 
the fact that the funds for the loan guarantee had originated 
in Hong Kong.83 In addition, Young testified that, 
as the conversation with Barbour progressed on the issue of 
forgiveness, ``I think he [Barbour] misunderstood me . . .'' 
and that Barbour mistakenly believed that Young had agreed to 
provide NPF with yet further funds in order to pay off the 
Signet Bank loan.84 In sum, there is significant 
reason for uncertainty regarding the content of Young's and 
Barbour's 1995 conversation.
    \83\ See Young deposition, p. 58.
    \84\ See Young deposition, p. 59.
    Finally, the Minority cites certain alleged communications 
between Richard Richards and Barbour as possibly providing 
Barbour with knowledge prior to 1997 that YBD (USA) was lent 
the funds for the CD's by its Hong Kong parent. Specifically, 
the Minority has focused upon an alleged 1994 telephone call 
between Richards and Barbour (which Richards mentioned for the 
first time during his hearing testimony), and statements in 
Richards' September 17, 1996 letter.85 In both, 
Richards states that the funds for the NPF guarantee would be 
transferred (via a loan) to YBD (USA) from YBD (Hong Kong). The 
following, however, was Richards' sworn deposition testimony on 
June 19, 1997:
    \85\ Barbour testified that he did not regard the September 17, 
1996 letter as credible when he received it. See Barbour deposition 
145-46; see also Bolton deposition, July 15, 1997, pp. 138-40.

          Q: On the third page, first paragraph begins, ``With 
        this in mind, as you have instructed, all 
        considerations have been made to assure that no claim 
        and no violation of law could result from YBD (USA) 
        serving as a loan guarantor.''
          Now, that paragraph goes on to discuss a loan from 
        YBD (Hong Kong) to YBD (USA). Mr. Richards, do you know 
        if that loan transaction was, in fact, performed? . . .
          A: Yes it was. It was the source of the funds in the 
        American bank.
          Q: Were the details of that loan transaction ever 
        communicated to Mr. Barbour?

           *         *         *         *         *

          A: No. It was all done between 
    \86\ Richards deposition, June 19, 1997, p. 106.

    Indeed, several other aspects of Richards' testimony before 
this Committee have been inconsistent or self-contradictory. 
(In fact, Richards contradicted himself on several issues 
during his public testimony.87) Also, Richards has 
admitted that he wrote correspondence to Barbour containing 
purposely inaccurate statements regarding his dealings with 
Barbour on this transaction:
    \87\ For instance, when questioned during the hearings by the 
Minority, Richards stated that language in his September 17, 1996 
letter to Barbour was accurate. When questioned by the Majority, 
Richards confirmed that his affidavit contradicting that letter was 
actually accurate. See generally Richards testimony, p. 91-92.

          At the time I wrote this letter, the repayment of 
        collateral was very much at issue and I was concerned 
        that my client, Mr. Young, would suffer as a result of 
        an NPF default. Accordingly, in the letter, I made 
        several statements which, upon reflection, were made as 
        negotiating tools and were not accurate.88
    \88\ Ex. 3.

    As noted above, the only contemporaneous writings by 
Barbour that might be probative of his knowledge on this issue 
are his letters of August 30, 1994 and October 10, 1994. In 
both, Barbour states that YBD (USA)--a ``domestic 
corporation''--is guaranteeing the loan. This, of course, 
suggests that Barbour understood YBD (USA), not YBD (Hong 
Kong), to be the source of funds for the NPF loan guarantee.
    Barbour summarized his response to questions regarding the 
accuracy of his testimony in the following exchange with 
Senator Lieberman:

          Senator Lieberman: . . . So I am puzzled, with all 
        respect and affection, which I have for you, that you 
        never--that you did not know that this money was going 
        to come. My God, you went to Hong Kong to see Mr. 
        Young, and I am just surprised that you did not know at 
        any point in this, and again, it is legal, that the 
        money was going to come from Hong Kong to YBD (USA).
          Mr. Barbour: Senator, I appreciate the statement of 
        affection, which you know is mutual . . . and the fact 
        of the matter is . . . it would be easier to say, hey, 
        I knew all along, it was legal, it didn't make any 
        difference. The problem with that is I didn't. . . . It 
        was irrelevant, the whole time. Maybe that is why it 
        just never caught my attention if different people in 
        fact really did bring it up, but the fact of the matter 
        is, it was legal either way, version A, version B. It 
        happens that version A is what I truly remember and 
        what I got to tell you is the truth, and I knew that 
        Mr. Young was the head of the family, and I knew that 
        the family lived in Hong Kong, and the boys, the sons, 
        the Young Brothers, I assumed, were all Americans, that 
        their mama was an American, and it didn't--you know--
        this is somebody that had been giving to the RNC.
          So I just had to tell you like I remember it, and 
        like I said, it would be easier to tell it another way, 
        but it is the truth.89
    \89\ Barbour testimony, pp. 208-09.


The NPF loan guarantee transaction did not violate existing law

    Four sets of attorneys reviewed the NPF loan guarantee 
transaction before it was consummated: Mark Braden, a 
nationally recognized election law expert represented the NPF; 
Shea and Gardner, a prominent Washington firm, represented 
Signet Bank; Benton Becker, a former U.S. Attorney and counsel 
to President Ford, represented YBD (USA); and David Norcross, 
the General Counsel of the RNC, represented the RNC in its role 
as NPF's creditor. Documents and testimony obtained by the 
Committee indicate that all of these counsel concluded that the 
transaction was legal in all respects.90 Indeed, the 
testimony is undisputed that the transaction was carefully 
structured to clear all legal hurdles:
    \90\ As noted above, there is no dispute that the NPF was legally 
able to receive foreign contributions or assistance.

          To the point of the matter, Senator, is nobody was 
        hiding anything or concealing anything. It was a 
        commercial transaction, and it didn't matter that the 
        money was coming from a foreign corporation to its 
        subsidiary in the U.S.91
    \91\ See Becker testimony, p. 164.
          [W]hat would be the motive for Mr. Young to enter 
        into such a nefarious plot? There would be no motive. . 
        . . nothing to gain by that.92
    \92\ See Becker testimony, p. 165-166. Recognizing that the 
transaction was subject to such exacting legal review, some have 
attempted to adopt an alternative legal theory unsupported by the facts 
of the transaction. Proponents of this theory argue that the Committee 
should ignore all the efforts undertaken to ensure that the 
arrangements were legal and instead focus on certain alleged 
communications among Barbour and Young preceding the transaction. They 
argue that Barbour may have violated federal election law (in 
particular 2 U.S.C. Sec. 441e) when he solicited a loan guarantee for 
the NPF from Young. Specifically, they argue that Barbour illegally 
solicited a foreign contribution from Young ``for the purpose of 
influencing a federal election'' by suggesting that the contribution to 
the NPF would help the Republican Party's prospects for the upcoming 
1994 elections. This theory is infirm in several important respects, 
including that it mischaracterizes the evidence obtained by the 
Committee. Contrary to the theoretical assertions, Young testified that 
neither Barbour nor others associated with the NPF or RNC ever informed 
him that the NPF loan guarantee would assist Republican candidates in 
the 1994 election. Young deposition, p. 29-30. Likewise, Volcansek (the 
NPF fundraiser) explained to Mr. Young that, as an individual without 
U.S. citizenship, Young could not have any role in the federal 
elections. Volcansek testimony, p. 81.

    In sum, the Committee has found no evidence of any plan 
involving the NPF to inject foreign funds into the 1994 or any 
other federal election.93 Rather, the Committee 
finds that the NPF loan guarantee was a legitimate commercial 
transaction intended to facilitate funding for the NPF's 
continuing operations. The transaction was thus in all respects 
legal and proper.
    \93\ The opposite is true--the NPF was a significant drain on RNC 
resources, ultimately defaulting on $2.5 million in RNC loans.

There is no evidence that the loan guarantee transaction involved an 
        illegal or improper ``quid pro quo'' arrangement

    The loan guarantee transaction did not involve an illegal 
or improper ``quid pro quo'' arrangement. Neither YBD (USA) nor 
YBD (Hong Kong) ever had any dealings with the U.S. Government. 
YBD (USA) counsel Benton Becker testified as followed:

          Senator Collins: Have Mr. Young, Mr. Ambrous Young, 
        or YBD (USA) or YBD (Hong Kong) to your knowledge ever 
        asked Haley Barbour for assistance in obtaining 
        contracts or business or assistance of some sort from 
        the United States Government?
          Mr. Becker: I have asked that question several times 
        several ways of my clients, and they have answered 
        those questions--that question under oath, and I'll 
        repeat their answer. The answer is unequivocally no.

           *         *         *         *         *

          There was no special favor, no quid pro quo, no 
        under-the-table understanding or deal.94
    \94\ Testimony of Benton Becker, July 23, 1997, pp. 117-118, 120.

The NPF was not subject to federal election law restrictions on foreign 

    Evidence obtained by the Committee demonstrated that the 
NPF did not engage in any campaign related activities in either 
1994 or 1996. Thus, it was not subject to restrictions on 
foreign funding.

The NPF did not misuse its tax status

    Although the NPF's application for 501(c)(4) tax exempt 
status was not approved, the NPF's tax status was never 
relevant. The NPF was a non-profit corporation that never had 
any income. Thus, the NPF could never have incurred any tax 
liability. Moreover, because the NPF was organized as a 
501(c)(4) rather than a 501(c)(3) entity, no donor ever 
received any tax deduction for a contribution to the NPF.

The evidence does not support a conclusion that barbour misled this 

    There is insufficient credible evidence to conclude that 
Barbour misled this Committee:
         Mr. Volcansek's testimony was contradicted.
         Mr. Richard's testimony is inconsistent and 
         Mr. Young's testimony was far from clear.
         Moreover, contemporaneous documents support 
        Mr. Barbour's recollection.95
    \95\ See supra.
    The Committee concludes that twisting Barbour's remarks to 
make a charge of illegal activity is wrong and unfair. Although 
the elaborate chain of evidence is subject to being confused or 
deliberately misrepresented, the Committee's conclusion is that 
the facts cannot be twisted to support a charge that Barbour's 
testimony was anything less than truthful.

                    White House Document Production


    Beginning with the earliest meeting between Committee 
investigators and White House Counsel on February 11, 1997, the 
White House promised its cooperation with the Committee's 
investigation and committed to produce documents requested by 
the Committee on a timely basis. At that meeting, Counsel to 
the President Charles F.C. Ruff conveyed the President's wishes 
that Ruff's office cooperate with the Committee to the fullest 
extent possible.1
    \1\ See Memorandum from Paul L. Robinson to Michael J. Madigan, et 
al., Feb. 17, 1997 (Ex. 1); See also Letter from Charles F.C. Ruff to 
Donald T. Bucklin noting continuing applicability of earlier pledge to 
``voluntarily provide all of the information that the Committee needed 
for its investigation,'' July 29, 1997 (Ex. 2).
    The Committee was, of course, well aware of the dilatory 
tactics confronted by prior Congressional investigations into 
Clinton Administration activities.2 Ruff and the 
staff of lawyers he put together to handle the numerous 
investigations into White House wrongdoing, however, joined the 
White House Counsel's office only in early 1997.3 
The Committee therefore remained cautiously optimistic that 
Ruff's promises to cooperate were real, and that Ruff and his 
staff did not intend to adopt the blatantly obstructionist 
methods of his predecessors.4 The Committee hoped 
that, in this instance, the Clinton White House would choose to 
emulate the responsiveness of the Reagan and Carter 
Administrations--each of which voluntarily waived executive 
privileges applicable to documents requested by Congressional 
investigative bodies.5 Instead, Ruff and the White 
House Counsel's office selected the Nixon White House as their 
    \2\ See 143 Cong. Rec. S716 (daily ed. Jan. 28, 1997) (statement of 
Sen. Thompson) (``If one looks solely to the past, there is little 
reason to be optimistic. We have seen what appears to be a grudging 
release of information . . . . We have seen all manner of delaying 
tactics which congressional oversight committees claimed were intended 
to avoid scrutiny by Congress . . . .''); Memorandum from Michael 
Madigan to Charles F.C. Ruff attaching ``excerpts from the Whitewater 
investigation final report that illustrate the type of document 
production problems/miscommunications'' faced by the Whitewater 
investigators, February 17, 1997 (Ex. 3). See also S.Rep. 104-280, 
Report of the Special Committee to Investigate Whitewater Development 
Corp. and Related Matters, pp. 151, 225-27, 237-39; H.Rep. 104-849, 
Report of the Committee on Government Reform and Oversight on the 
Investigation of the White House Travel Office Firings and Related 
Matters, pp.154-59.
    \3\ See Deposition of Charles F.C. Ruff, Oct. 27, 1997, pp. 4-5 
(``Q: What is your current position? A: Counsel to the President. Q: 
How long have you held that position? A: Since February 10, 1997.'); 
Deposition of Lanny A. Breuer, Oct. 17, 1997, p. 6 (``I joined the 
White House on--I believe it is February 16, 1997.'); Deposition of 
Michael X. Imbroscio, Oct. 17, 1997, p. 7 (``I began work in the White 
House on March 3, 1997.').
    \4\ See 143 Cong. Rec. S716 (daily ed. Jan. 28, 1997) (statement of 
Sen. Thompson) (``There is a new team in the White House, individuals 
who command respect. I am hoping that the new White House counsel will 
understand that his position is one of counsel to the office of the 
President. He is not the President's personal attorney.').
    \5\ See id. (``As instructive examples of the cooperation of . . . 
Presidents [Reagan and Carter], they both allowed congressional 
examination of all documents . . . .'').
    Eleven months' experience with White House document 
production practices unfortunately established that the 
Committee's initial optimism was undeserved, and that the White 
House never had any intention of cooperating beyond what its 
staff believed was absolutely necessary, when under extreme 
pressure. The Committee presented the White House with an 
immediate opportunity to prove its good intentions by initially 
agreeing to proceed with the production of documents from the 
White House without first issuing a subpoena. The White House, 
however, responded to the Committee's expression of goodwill by 
improperly delaying and manipulating its document production to 
take advantage of the Committee's December 31, 1997 expiration. 
The Committee's later attempt to jump start the White House's 
production through issuance of a formal--although ultimately 
unenforceable 6--Committee subpoena was met with 
continued White House obstruction.
    \6\ Senate committees are powerless to enforce subpoenas against 
executive branch employees acting in their official capacities. See 28 
U.S.C. Sec. 1365(a). That provision vests in the United States District 
Court for the District of Columbia original jurisdiction over actions 
brought by the Senate or its committees to enforce compliance with its 
subpoenas. Section 1365(a), however, also explicitly withholds district 
court jurisdiction over actions to enforce subpoenas issued ``to an 
officer or employee of the executive branch of the Federal Government 
acting within his or her official capacity . . . .''
    The following is a discussion of the most egregious 
examples of the White House's consistently uncooperative 
approach to its production of documents to the Committee. This 
discussion begins with a description of the White House's utter 
disregard for any reasonable document production schedule set 
by this Committee or promised by the White House itself. It 
then describes broken promises relating to particular documents 
withheld by the White House on spurious assertions of executive 
privilege. Finally, this section summarizes the manipulative 
manner in which the White House handled its production to the 
Committee of White House entrance records, White House 
videotapes and several other specific categories of documents 
and other materials.
    In spite of the significant problems posed by the White 
House's efforts to obstruct and manipulate the Committee's 
investigation, the Committee remains satisfied that it met one 
of its primary goals of uncovering for the American people 
important information about their government. Whether 
disseminated through the Committee's hearings or through the 
simultaneous production of documents by the White House to the 
Committee and to the press,7 the American people now 
possess far more knowledge about the inner workings of the 
Clinton White House than they did prior to the commencement of 
the Committee's investigation.
    \7\ The White House, on a number of occasions, attempted to 
manipulate the Committee's investigation by providing copies of 
significant documents to the press at the same time that it produced 
the documents to the Committee. For instance, the White House produced 
copies of the purportedly belatedly discovered White House videotapes 
to the Committee late in the evening of October 14, 1997, and made the 
video footage available to the press on the following day. See Susan 
Schmidt & Lena H. Sun, ``On Tape, Clinton Links Lead in Polls, Issue 
Ads,'' Washington Post, Oct. 16, 1997, p. A1. Similarly, on December 8, 
1997, the White House simultaneously produced to the Committee and to 
the press copies of a daily chronicle of Presidential activities. See 
Marc Lacey & Glenn F. Bunting, ``White House Forwards More Donor 
Records,'' Los Angeles Times, Dec. 9, 1997, p. A1. The Committee notes, 
however, that the White House chose not to provide to the press copies 
of the thousands and thousands of pages of useless and irrelevant 
material it produced to the Committee, such as 40,000 printed pages of 
unintelligible information from the White House database. See Letter 
from Donald Bucklin to Charles F.C. Ruff, July 28, 1997 (Ex. 4).

Slow-walking in the production of documents

    In response to the White House Counsel's pledges of 
cooperation and the Committee's optimism that the document 
production problems that burdened prior Congressional 
investigations into the Clinton Administration could be 
avoided, the Committee, at the request of the White House, 
elected to proceed with the production of White House documents 
without first issuing a subpoena to the White House. Instead, 
on April 9, 1997,8 the Committee delivered a request 
for production of documents in the form of a letter to the 
White House Counsel's office.9 This document request 
constituted a ``narrowly defined'' subset of a larger document 
request that the Committee intended to make in the 
future.10 The Committee understood that most of the 
documents had already been gathered by the White House 
Counsel's office in response to written directives sent by 
previous White House Counsel Jack Quinn to all White House 
personnel in December 1996 and January 1997.11 By 
limiting the request to these documents, the Committee--facing 
a December 31, 1997 deadline--hoped to expedite the time frame 
within which it could expect a production from the White House. 
In fact, the Committee expressly requested ``as many of these 
documents as possible within . . . ten days.''12
    \8\ After the initial meeting on February 11, 1997, the Committee 
and White House spent ``several weeks'' negotiating the terms of a 
document protocol addressing the White House's confidentiality and 
privilege concerns. See Letter from Michael Madigan to Charles Ruff, 
April 23, 1997 (Ex. 5). The White House's document production could not 
proceed until the protocol was finalized in April. The protocol, when 
completed, outlined the procedures for Committee review, storage and 
use of documents designated ``Confidential'' or ``Highly Confidential'' 
by the White House. It also created a mechanism for Committee review of 
documents withheld from production by the White House. See ``Security 
Procedures and Other Protocols,'' April 1, 1997 (Ex. 6). Unresolved 
issues relating to the funding for and scope of the Committee's 
investigation also played a role in the early suspension of the 
progress of the investigation. These issues were settled by the 
Senate's adoption of the Committee's funding resolution on March 11, 
1997. See Helen Dewar, ``Senate GOP Widens Election Fund Probe; Legal 
but `Improper' Practices Included,'' Washington Post, March 12, 1997, 
p. A1.
    \9\ Letter from J. Mark Tipps to Lanny Breuer, April 9, 1997 (Ex. 
    \10\ Id.
    \11\ See Ex. 5.
    \12\ Ex. 7.
    On April 11, 1997, Committee counsel met with Lanny Breuer 
of the White House Counsel's office and discussed the April 9 
letter request ``line by line.'' 13 Breuer assured 
the Committee that the White House would produce the majority 
of the records responsive to the April 9, 1997 request on April 
    \13\ See Ex. 5.
    \14\ See id.
    Late in the afternoon of April 21, however, the Committee 
received a single box of documents accompanied by a letter 
indicating that additional documents would be forthcoming the 
following week.15 Chief Counsel Michael Madigan 
expressed the Committee's ``shock[ ] that [only] a single box 
of documents was produced'' and that the Committee would ``not 
receive the balance of the requested documents until next 
week.'' 16
    \15\ Letter from Charles F.C. Ruff to The Honorable Fred Thompson, 
April 21, 1997 (Ex. 8).
    \16\ See Ex. 5.
    Even the subsequent week's production, however, did not 
represent the balance of the documents responsive to the April 
9 letter request. On May 13, 1997, Chairman Thompson called 
Erskine Bowles, White House Chief of Staff, to complain about 
the pace of the White House's production of 
documents.17 Bowles then ordered Breuer and Michael 
Imbroscio of the White House Counsel's office to meet with 
Committee Senior Counsel Donald Bucklin to discuss the 
delinquent production.18 After the meeting, Bucklin 
provided to the White House a detailed list of the ``several 
categories'' of documents requested by the Committee that the 
White House had not yet produced.19
    \17\ See Bob Woodward, ``Senator Criticizes White House Action in 
Fund-Raising Probe,'' Washington Post, May 16, 1997, p. A14.
    \18\ See id.; Memorandum from Donald T. Bucklin to Lanny A Breuer, 
May 15, 1997 (Ex. 9).
    \19\ Id.
    On May 21, 1997, the Committee, as promised, issued a 
second, more comprehensive document request to the White House 
by letter from Bucklin to Breuer.20 Although Senior 
Counsel Donald Bucklin indicated that the Committee 
``consider[ed] the items contained in the . . . request to be a 
priority,''21 the White House responded with the 
same lack of urgency and timeliness as it did with the April 9 
request. The White House delivered its documents to the 
Committee in small batches and on a schedule that bore no 
discernible relation to the Committee's deadlines or 
expressions of urgency. In fact, almost four months after the 
Committee's first document request, Ruff acknowledged in a July 
25, 1997 letter to Madigan that not only was the White House's 
production in response to several of the Committee's April 9 
requests still incomplete,22 twenty-four of the 
forty-two ``priority'' items contained in the May 21 request 
had also not received a White House response.23 In 
retrospect, it is apparent that the only Committee deadline of 
any interest to the White House was the Committee's December 
31, 1997 termination date.
    \20\ Document Requests attached to Letter from Donald T. Bucklin to 
Lanny A. Breuer, May 21, 1997 (Ex. 10).
    \21\ Id.
    \22\ Letter from Charles F.C. Ruff to Michael J. Madigan, July 25, 
1997 (Ex. 11). Although Ruff stated in the text of his letter that 
``all of the [April 9] requests have been completed,'' he nevertheless 
identified in an attachment to his letter four specific document 
requests for which production remained incomplete.
    \23\ See id. The Committee issued a specifically targeted 
``supplemental'' document request on June 9, 1997. Letter from Donald 
T. Bucklin to Lanny A. Breuer, June 9, 1997 (Ex. 12). By July 28, 1997, 
the White House had completed its production in response to none of the 
four requests contained in the supplemental request. See Letter from 
Donald T. Bucklin to Charles F.C. Ruff, July 28, 1997 (Ex. 13).
    In response to the White House's consistent failure to 
abide by any reasonable production schedule--as well as its 
frequent production of documents either immediately before or 
even after deposition or hearing testimony relating to the 
author or subject of the documents (discussed in detail 
below)--the Committee voted unanimously on July 31, 1997 to 
issue a subpoena to the White House bearing a return date of 
August 12, 1997.24 Although Chairman Thompson 
himself communicated to Ruff the Committee's insistence on 
``strict and prompt compliance'' with the 
subpoena,25 the subpoena did not succeed in altering 
the lack of the responsiveness of the White House in any 
meaningful way. For instance, as discussed below, it was not 
until well after the August 12 return date on the subpoena that 
the White House produced videotapes of White House coffees. The 
White House also produced highly relevant documents even after 
the December 31, 1997 termination of the Committee's 
investigation. On January 16, 1998, the White House hand 
delivered to the Committee (and simultaneously produced to the 
press 26) a package containing documents found in 
the files of a White House employee charged with evaluating 
facsimile technology services offered to the White House by 
Johnny Chung, a central figure in the Committee's 
investigation.27 The White House did not attempt to 
explain why this employee's files had not previously been 
searched for these unquestionably responsive documents.
    \24\ See Guy Gugliotta, ``Panel Unanimously Issues Subpoena to 
White House; Committee Allows Sen. Thompson to ``Order'' Compliance if 
Deadline is Not Met,'' Washington Post, Aug. 1, 1997, p. A16.
    \25\ Letter from Chairman Fred Thompson to Charles F.C. Ruff, Aug. 
6, 1997 (Ex. 14).
    \26\ See ``Party Donor Pitched Fax Business to White House,'' 
Washington Post, January 17, 1998, p. A12.
    \27\ See Letter from Lanny A. Breuer to Michael Madigan, January 
16, 1998 (Ex. 15). Among the significant documents produced by the 
White House on January 16 was a July 17, 1995 memorandum from Harold 
Ickes to a DNC employee ``strongly urging'' that the DNC obtain 
``broadcast fax capability'' and suggesting Johnny Chung's company as a 
suitable outside contractor for such service. See Ex. 33 to the section 
of this report on Johnny Chung. The White House also belatedly produced 
in January 1998 a list identifying the dates on which certain large 
contributors to the DNC spent the night in the Lincoln Bedroom. ``U.S. 
Senate Committee on Government Affairs Request--Certain Overnight 
Guests Dates,'' Dec. 23, 1997 (Ex. 16). The Committee specifically 
requested this information from the White House in August and continued 
to actively pursue this request in the succeeding months. See Letter 
from Glynna Parde to Dimitri Nionakis, Oct. 31, 1997 (Ex. 17).

Broken promise to assert the executive privilege in only the narrowest 

    The scope of executive privilege applicable to the 
documents sought by the Committee was the central focus of the 
February 11, 1997 meeting between the Committee and 
representatives of the White House Counsel's office, the first 
substantive discussion of document production 
issues.28 At that meeting, Ruff stated that he 
anticipated that executive privilege would be inapplicable to 
most White House documents relating to campaign 
contributions.29 While he added that the privilege 
would apply to documents relating to allegations that campaign 
contributions influenced a White House policy decision, Ruff 
also stated that the White House would accommodate the 
Committee by permitting review of the purportedly privileged 
documents.30 Ruff's suggestion that the Committee 
have an opportunity to review documents withheld on executive 
privilege grounds was subsequently incorporated by the 
Committee on April 1, 1997 into its formal protocol governing 
White House document production issues.31
    \28\ See Ex. 1. In a floor speech on January 28, 1997, Chairman 
Thompson also expressed his opinions on the proper breadth of the 
executive privilege. See 143 Cong. Rec. S716 (daily ed. Jan. 28, 1997) 
(statement of Sen. Thompson).
    \29\ See Ex. 1.
    \30\ See id.
    \31\ See Ex. 6, p. 4.
    The actual breadth of executive privilege ultimately 
asserted by the White House--as opposed to the theoretically 
narrow privilege suggested by Ruff on February 11, 1997--was 
revealed by documents withheld from the first White House 
production to the Committee on April 21, 1997. This production 
demonstrated vividly that the White House did not validate the 
Committee's initial optimism that the WH would adopt the narrow 
approach to executive privilege asserted by the Reagan and 
Carter Administrations. For example, request number 19 in the 
Committee's April 9 letter asked for the production of ``[a]ll 
documents referring or relating to Charlie Trie's appointment 
to the Commission on US-Pacific Trade and Investment Policy, 
and all documents regarding Executive Order #12987 signed on 
January 31, 1996.''32 On April 21, 1997, the White 
House produced only a few documents in response to request 
number 19, but notified the Committee that a substantial number 
of additional responsive documents had been withheld on 
executive privilege grounds.33
    \32\ Ex. 7.
    \33\ Ex. 5.
    In accordance with the document production protocol, 
Committee counsel reviewed the two and one-half boxes of 
withheld documents at the White House.34 After a 
four-hour review, Committee counsel concluded that most of 
``the documents withheld did not remotely resemble the type of 
sensitive information'' that Ruff had suggested the White House 
would withhold.35 The documents instead included a 
number of public speeches, manuals, background news articles, 
resumes and other similar public documents, and few documents 
that legitimately implicated deliberative process 
concerns.36 Committee counsel segregated the most 
relevant documents from the two and one-half boxes, and Madigan 
thereupon insisted in his April 23, 1997 letter to Ruff that 
the segregated portion be produced to the 
Committee.37 Although the White House produced these 
documents on May 7, 1997,38 it both redacted the 
documents and also insisted that they be accorded ``highly 
confidential'' treatment under the protocol, and thereby made 
available only to specifically-designated Committee 
staff.39 The White House's spurious assertion of 
executive privilege succeeded in forcing the needless review by 
the Committee of wrongfully withheld documents and delaying by 
several weeks the progress of central aspects of the 
Committee's investigation.
    \34\ See Ex. 6.
    \35\ See Ex. 5.
    \36\ See id.
    \37\ Id.
    \38\ Letter from Lanny Breuer to Don Bucklin, May 7, 1997 (Ex. 18).
    \39\ Id.; see also Ex. 6. The White House produced additional 
documents relating to Trie's appointment to the Commission on U.S.-
Pacific Trade and Investment Policy on July 24, 1997 and September 10, 
1997. See Letter from Lanny A. Breuer to Donald T. Bucklin, July 24, 
1997 (Ex. 19) and Letter from Dimitri J. Nionakis to Donald T. Bucklin, 
Sept. 10, 1997 (Ex. 20). The Committee's public hearings on Trie's 
illegal activities concluded on July 31, 1997.

Production of incomplete WAVES records

    Another category of documents requested from the White 
House in the Committee's April 9 letter request were ``Workers 
and Visitors Entrance System'' (``WAVES'') records identifying 
the dates and times of White House admission by John Huang and 
other central figures involved in the Committee's 
investigation.40 Although the White House produced 
records in response to this request on April 21, 
1997,41 the Committee discovered during a meeting 
with representatives of the United States Secret Service on 
April 30, 1997 that the records produced by the White House 
left out critical categories of unquestionably relevant 
information.42 The Secret Service explained to the 
Committee that complete WAVES records contain a comments 
section in which problems that surfaced during a particular 
individual's background check are noted, and an ``XX'' notation 
identifying those whose admission is questioned by the Secret 
Service.43 Neither section was included in the WAVES 
records produced by the White House on April 21, 1997.
    \40\ See, e.g., Document Request No. 1, attached to Ex. 7.
    \41\ See Ex. 2.
    \42\ See Memorandum from Margaret A. Hickey to Donald T. Bucklin, 
May 9, 1997 (Ex. 21). The Secret Service generates the WAVES records of 
all individuals entering the White House and turns over a computer tape 
of the records to the White House at the end of each month. Id.
    \43\ See id.
    The White House, when confronted with these omissions, 
explained that it believed that this information had not been 
requested by the Committee.44 As the Committee's 
April 9 letter request expressly asked for the production of `` 
`WAVE[S]' records''--and not exclusively the entrance and 
departure information contained in those records--the Committee 
immediately demanded production of copies of these records in 
the form described by the Secret Service.45 
Incredibly, Karen Popp of the White House Counsel's office then 
informed the Committee during a telephone call that, in spite 
of the Secret Service's description of the records, the 
categories of information missing from the records already 
produced to the Committee by the White House simply did not 
exist. The White House withdrew this specious assertion and 
eventually produced complete copies of the WAVES records, but 
only after its position was specifically refuted during a 
meeting among representatives of the Committee, the Secret 
Service, and the White House.
    \44\ See Letter from Donald T. Bucklin to Lanny A. Breuer, May 12, 
1997 (Ex. 22).
    \45\ See id.

Production of relevant documents either immediately before, or in some 
        cases, even after a witness' deposition or hearing testimony

    In spite of Ruff's assertion that ``the timing of [the 
White House's document] production . . . had absolutely nothing 
to do with politics or tactics,'' and that the White House 
``produced . . . documents as soon as we found them,'' 
46 the pattern of White House production of 
documents either immediately before or even after the 
deposition or hearing appearance of the author or subject of 
those documents leads the Committee to the opposite conclusion. 
The repeated instances of the production of significant 
documents relating to a particular witness whose testimony was 
immediately upcoming or just completed belies Ruff's suggestion 
that the timing of the production was merely coincidental.
    \46\ ``Statement of Charles F. C. Ruff,'' July 30, 1997 (Ex. 23).
    The most egregious example of the White House's timing of 
the production of particular documents to coincide with the 
Committee's deposition or hearing schedule was its production 
of the WAVES records of Ng Lap Seng, the Macau-based 
businessman and financial supporter of Charlie Trie. On July 
29, 1997, Jerry Campane, an FBI agent on detail to the 
Committee, testified before the Committee concerning the 
results of the Committee's investigation into the source of the 
funds used by Trie for his substantial contributions to the 
DNC. The Committee had found that Trie relied on over $1 
million wired by Ng Lap Seng from accounts he maintained at 
banks in Hong Kong and Macau to support his laundered political 
contributions.47 Late in the afternoon of July 29, 
1997, after the completion of Campane's testimony, the White 
House hand-delivered to the Committee a package of documents 
containing WAVES records revealing that Ng Lap Seng had visited 
the White House ten times between June 22, 1994 and October 21, 
    \47\ See the section of this report on Charlie Trie's DNC 
contributions and fundraising.
    \48\ See Memorandum from Glynna Parde to Donald T. Bucklin 
attaching copies of Ng Lap Seng's WAVES records, July 30, 1997 (Ex. 
    Significantly, the July 29 delivery also included 
handwritten notes and other documents created by Lisa Berg, a 
White House employee who was deposed by the Committee on the 
same day that Campane testified.49 Berg's deposition 
concluded approximately three hours before the production of 
these documents.50
    \49\ See id.
    \50\ See id.
    Chairman Thompson publicly excoriated the White House on 
July 30, 1997 for its blatant efforts to manipulate the work of 
the Committee.51 The Chairman added that the 
Committee would no longer tolerate such improprieties, and that 
a subpoena had been prepared for the overdue White House 
document production.52 As discussed above, the 
Committee unanimously voted to issue the subpoena on July 31, 
    \51\ Hearing Transcript, statement of Chairman Fred Thompson, July 
30, 1997, pp. 121-22.
    \52\ Id., pp. 122-23.

Late production of White House audio and videotapes

    On October 1, 1997, Michael Imbroscio of the White House 
Counsel's office revealed to Committee Counsel Donald Bucklin 
that he had discovered the existence of videotapes of several 
coffees and other events attended by the 
President.53 In the following weeks, the White House 
produced to the Committee one videotape containing footage of 
President Clinton's attendance at forty-four White House 
coffees and sixty-six additional videotapes of hundreds of 
other fundraising events attended by President 
    \53\See Memorandum from Donald T. Bucklin to Senator Fred Thompson, 
Oct. 6, 1997 (Ex. 25). Imbroscio testified that he informed Bucklin of 
the existence of the videotapes on the following day, on October 2, 
1997. Testimony of Michael Imbroscio, Oct. 29, 1997, pp. 126-27. As 
discussed below, Imbroscio's recollection of the events leading to the 
discovery of the videotapes differs in several significant ways from 
the recollection of other individuals involved in the discovery and 
production of the videotapes.
    \54\ The White House, however, produced the videotape footage of 
the White House coffees to Time magazine prior to its Saturday, October 
4, 1997 production to this Committee. Time's article discussing the 
contents of the videotapes appeared on the newsstands on Monday, 
October 6. See Michael Duffy & Michael Weisskopf, ``Let's Go to the 
Videotape,'' Time, Oct. 13, 1997, p. 30. This production to Time in 
advance of the Committee's receipt of the videotapes is one more 
example of the White House's cynical effort to manipulate the 
    These videotapes were responsive to the Committee's first 
document request to the White House--the April 9 letter 
request--which expressly requested the production of 
videotapes.55 The Committee's May 21, 1997 document 
request and its July 31, 1997 subpoena also expressly included 
videotapes within their explanations of the types of materials 
sought by the Committee.56 These specific requests 
for videotapes (as well as subsequent direct inquiries by 
Committee counsel), however, produced only assurances from the 
White House Counsel's office that no responsive videotapes 
    \55\ See Ex. 7 (defining ``document'' as ``any written, recorded, 
or graphic matter of any nature whatsoever, regardless of how recorded, 
. . . including, but not limited to, the following: . . . graphic or 
oral records or representations of any kind (including, without 
limitation, . . . videotape . . . )'').
    \56\ See Ex. 10.
    \57\ See Ex. 25.
    In spite of the Committee's repeated requests for the 
production of videotapes, the tapes were produced to the 
Committee only after the Committee was able to rebut the White 
House Counsel's initial insistence that none existed and direct 
the White House's own inquiry to locate them. In an August 7, 
1997 meeting with representatives of the White House Counsel's 
office, Bucklin--acting on the basis of information provided by 
a third-party source--requested that the White House ``double-
check'' with an entity called the White House Communications 
Agency (``WHCA'') for the existence of responsive 
videotapes.58 After receiving no response, Bucklin 
subsequently reiterated this request in an August 19, 1997 
letter to Breuer.59 On August 29, 1997 (after the 
unexplained passage of an additional ten days), Imbroscio 
followed up on Bucklin's lead and met with Steven Smith, WHCA's 
Chief of Operations.
    \58\ See id.
    \59\ Letter from Donald T. Bucklin to Lanny A. Breuer, Aug. 19, 
1997 (Ex. 26).
    During his August 29, 1997 meeting with Smith, Imbroscio 
learned that WHCA videotaped fundraisers, political dinners and 
other events attended by the President.60 Imbroscio 
testified that Smith also informed him that WHCA typically did 
not record ``closed events''--closed to the press as well as 
the public--and that a WHCA cameraman would thus not have 
attended the White House coffees.61 While Imbroscio 
reported this information to the Committee in a meeting on 
September 9, 1997,62 it turned out to be both 
incorrect and inconsistent with the information that Smith 
recalled communicating to Imbroscio during their August 29, 
1997 discussion. Smith testified that he told Imbroscio that 
WHCA videotaped closed events ``all the time,'' 63 
but that Imbroscio never asked him specifically about the 
videotaping of coffees.64 In fact, Smith testified 
that ``[t]he word ``coffee'' . . . was never used'' during his 
meeting with Imbroscio.65
    \60\ Deposition of Michael Imbroscio, Oct. 17, 1997, pp. 89-90.
    \61\ Id., p. 91.
    \62\ Id., p. 116.
    \63\ Deposition of Steven Smith, Oct. 10, 1997, pp. 138-139; see 
also Testimony of Steven Smith, Oct. 23, 1997, pp. 52-53.
    \64\ Smith testimony, p. 53.
    \65\ Id. 
    Imbroscio further misinformed the Committee during the 
September 9, 1997 meeting by stating that WHCA possessed a log 
of its videotapes that he would make available to the 
Committee.66 Imbroscio, at the same time, failed to 
notify Committee counsel that Smith had informed him that WHCA 
instead possessed a searchable computer database of its 
videotapes through which WHCA could confirm the existence of 
videotapes of desired White House events.67 The 
confusion created by Imbroscio's misstatements led Bucklin to 
repeatedly urge Imbroscio to produce the log to the Committee 
instead of pushing for the ultimately more fruitful exercise of 
searching the database.68 Imbroscio testified that 
he did not search WHCA's database and uncover the existence of 
the responsive videotapes until October 1, 1997.69
    \66\ Imbroscio deposition, pp. 116-19.
    \67\ Smith deposition, pp. 146-47; see also Smith testimony, p. 52.
    \68\ Imbroscio deposition, pp. 120-22 (acknowledging Bucklin's 
frequent requests to review a log of WHCA's videotapes).
    \69\ Id., pp. 152-53.
    Imbroscio immediately shared his discovery with Ruff, who 
directed Imbroscio to pass his findings on to 
Bucklin.70 When Ruff later met with Attorney General 
Janet Reno on October 2, 1997, however, he did not inform her 
of the discovery of the videotapes, even though he knew that 
Reno was preparing a letter to House Judiciary Committee 
Chairman Henry Hyde addressing Hyde's recommendation that 
several allegations of White House fundraising improprieties 
(to which the videotapes proved to be relevant) necessitated 
the appointment of an independent counsel.71 Without 
the benefit of several illuminating portions of the White House 
videotapes, Reno concluded in her October 3, 1997 letter to 
Chairman Hyde that she found that the evidence against 
President Clinton did not call for any action under the 
Independent Counsel statute.72 The Committee, 
however, believes that the evidence provided in the White House 
videotapes compels the opposite conclusion.
    \70\ Id., pp. 172-74.
    \71\ See Roberto Suro, ``Reno Explores Probe of Gore Phone Calls; 
Statement Cites `Complexity' of Issues,'' Washington Post, Oct. 4, 
1997, p. A1.
    \72\ See id. 
    The failure of the White House Counsel's office to 
explicitly direct White House employees to turn over responsive 
``videotapes'' was a primary factor in the failure of the White 
House to produce the videotapes in a timely fashion. On April 
28, 1997, Ruff circulated to ``[e]very employee'' of the 
Executive Office of the President a memorandum (the ``Ruff 
Directive'') directing its recipients to ``conduct a thorough 
and complete search of ALL of your records (whether in hard 
copy, computer, or other form)'' for ``[a]ny documents or 
materials'' relating to the subjects of the various ongoing 
campaign fundraising investigations (including this Committee's 
investigation).73 Unlike the Committee's April 9, 
1997 document request, which specifically defined the term 
``document'' to include ``videotape[s],'' 74 the 
Ruff Directive neither defined the terms ``document'' or 
``material'' nor otherwise expressly indicated the Committee's 
intention that responsive videotapes be produced.
    \73\ Memorandum from Charles F.C. Ruff to Executive Office of the 
President, April 28, 1997 (Ex. 27). White House Special Counsel Lanny 
Breuer explained that the Ruff Directive was not specifically tailored 
to collect documents responsive to the Committee's April 9 letter 
request. In addition to responding to this Committee's request, the 
Ruff Directive was designed to ``collect the materials that were 
responsive to . . . the House request, the Justice Department request, 
and other subcommittees and other investigatory bodies that were 
interested in campaign finance investigations.'' Deposition of Lanny 
Breuer, Oct. 17, 1997, pp. 29-30. It did so, however, only by replacing 
the Committee's narrowly tailored requests with more generic 
alternatives. For example, the Committee's April 9 letter request 
sought ``[a]ll documents referring or relating to the May 13, 1996 
coffee.'' The Ruff Directive replaced this request with one for ``[a]ny 
documents or materials . . . [r]eferring or relating to White House 
political coffees.''
    \74\ Ex. 7; see footnote 55, supra. 
    Representatives of the White House Counsel's office 
defended the decision to replace the Committee's detailed 
definition of ``document'' (which included an express reference 
to ``videotape'') with the instruction to White House employees 
to search ``ALL of your records.'' Breuer testified that he 
believed that the deletion of the Committee's detailed 
definition actually made it more likely that the video tapes 
would have been produced in the first instance.75 
Breuer claimed that busy White House employees, most of whom 
are not lawyers, would be less likely to carefully read and 
properly respond to a detail-laden document request than they 
would to the White House's simplified replacement.76
    \75\ Testimony of Lanny Breuer, Oct. 29, 1997, p. 202.
    \76\ Breuer deposition, pp. 37-38.
    For two reasons, the Committee finds the White House 
Counsel's explanation to be untenable. First, Smith, WHCA's 
Chief of Operations, specifically rejected Breuer's suggestion. 
Smith stated that ``if somebody wanted the White House 
Communications Agency to look for tapes, audiotapes, 
videotapes, . . . that's what they should ask for, you know, 
video or audiotapes.'' 77 The Committee also finds 
that the elimination from the Ruff Directive of the Committee's 
specific reference to videotapes substantially decreased the 
likelihood that individuals outside of WHCA who were familiar 
with WHCA's practice of videotaping events involving the 
President would have identified the need to produce the 
videotapes. Deputy Counsel to the President Cheryl Mills, who 
testified to the Committee that she ``certainly'' knew that one 
of WHCA's functions was to videotape the 
President,78 and who frequently attended meetings of 
the White House lawyers working on the campaign finance 
investigation,79 would have been a likely source of 
this information. However, as Mills also testified that 
``everybody . . . in the White House'' knew that WHCA 
videotaped events,80 others should have identified 
to the White House Counsel its oversight at an earlier time.
    \77\ Smith deposition, p. 166; see also id., pp. 167-68.
    \78\ Deposition of Cheryl D. Mills, Oct. 18, 1997, p. 83. Mills, in 
fact, appears on the videotape of the President's March 11, 1995 radio 
address. See id., pp. 59-60. Johnny Chung purchased admission for 
himself and a delegation of Chinese businessmen to the radio address 
attended by Mills with a $50,000 check he hand delivered to the First 
Lady's Chief of Staff at the White House. See the section of this 
report on Johnny Chung.
    \79\ See Breuer deposition, p. 24.
    \80\ Deposition of Cheryl D. Mills, Oct. 18, 1997, p. 87; see also 
Deposition of Alan P. Sullivan, Oct. 16, 1997, pp. 80-81 (``[T]hese 
tapes were made by two guys lugging a commercial Beta camera around 
with a boom mike with a fuzzy grey ball, wandering around in front of 
large groups of people. Hardly what one would categorize as covert 
    A contributing factor leading to the failure of WHCA 
personnel to turn over the videotapes immediately in response 
to the Ruff Directive was the mysterious failure of the White 
House Military Office--WHCA's parent entity--to transmit a 
complete copy of the Ruff Directive to WHCA. Alan Sullivan, 
head of the White House Military Office, testified that he 
remembered receiving the Ruff Directive from the White House 
Counsel's office, and directing that it be faxed to the 
Military Office's ``operating units.'' 81 Although 
Col. Charles Campbell, Deputy Commander of WHCA, remembered 
receiving the fax from the White House Military Office, he 
testified that WHCA received an incomplete copy of the Ruff 
Directive.82 Campbell testified that WHCA did not 
receive the page of the Ruff Directive that specifically 
directed its recipients to search their ``files and records for 
. . . [a]ny documents or materials . . . [r]eferring or 
relating to White House political coffees.'' 83 WHCA 
personnel testified to the Committee that they believed that if 
they had received a complete copy of the Ruff Directive, they 
would have searched WHCA's database and produced the videos of 
the White House coffees at that time.84
    \81\ Alan Sullivan deposition, pp. 52-56.
    \82\ Deposition of Charles Campbell, Oct. 21, 1997, p. 48.
    \83\ Id., p. 53. The White House Military Office produced to the 
Committee copies of the faxes that it sent to four other units under 
its supervision, each of which contained a complete copy of the Ruff 
Directive. All four of the faxes are dated April 29, 1997 and all bear 
fax confirmation information indicating that they were sent within 
minutes of each other. See Ex. 28--31. Neither WHCA nor the White House 
Military Office was able to find the purportedly incomplete copy of the 
Ruff Directive that the Military Office faxed to WHCA. Campbell 
deposition, pp. 53-54.
    \84\ See, e.g., Testimony of Charles McGrath, Oct. 23, 1997, p. 92.
    WHCA's purely speculative assessment of the impact of this 
mysterious and inadvertent transmission error, however, is a 
considerably less significant and blameworthy factor in the 
delinquent production of the videotapes than the absence from 
the Ruff Directive of a specific reference to videotapes. WHCA 
certainly cannot be held accountable for its failure to receive 
a complete copy of the Ruff Directive from the White House 
Military Office. The White House, on the other hand, made the 
intentional decision to infect the document production process 
with uncertainty and imprecision by eliminating the Committee's 
express reference to videotapes.

Delinquent production of Presidential diaries and daily chronicles

    A further category of information specifically requested by 
the Committee in its document requests and subpoena to the 
White House was ``diaries.'' 85 Although Imbroscio 
acknowledged his awareness of the existence of a Presidential 
diarist ``in the opening months that [he] was working at the 
White House,'' 86 the White House concealed the 
existence of the detailed daily diaries of the activities of 
the President from the Committee until the deposition of the 
diarist, Ellen McCathran, on October 27, 1997.87 
McCathran testified in her deposition that she prepares and 
maintains a detailed chronological log of the President's 
movements and activities that is based on a broad range of 
documentary material, including annotated presidential 
schedules, movement logs, and various phone logs.88
    \85\ See Document Request No. 9 attached to Ex. 10 (``All personal 
or business calendars, date books, personal notes, logs, phone logs, 
call sheets, journals or diaries maintained or used by President 
Clinton or Vice President Gore from 1993 to the present that refer or 
relate to any of the individuals or entities listed [above].''); see 
also, e.g., Document Requests attached to Ex. 7 (Defining ``document'' 
as ``any written, recorded, or graphic matter of any nature whatsoever, 
regardless of how recorded, . . . including, but not limited to, the 
following: . . . diaries . . . .'').
    \86\ Imbroscio deposition, p. 191. Imbroscio joined the White House 
Counsel's office on March 7, 1997. Id., p. 7.
    \87\ The discovery of the existence of the diaries was a 
serendipitous event and not the primary purpose for the deposition of 
the diarist. The Committee deposed the diarist after discovering that 
she was the custodian of presidential telephone logs originally created 
by WHCA. The Committee's discovery of the continued existence of the 
telephone logs was itself contrary to earlier representations of 
Imbroscio, who reported to Committee counsel during a September 9, 1997 
meeting that WHCA's phone logs were destroyed after 60 days. Imbroscio 
deposition, pp. 238-40.
    \88\ Deposition of Ellen McCathran, Oct. 27, 1997, pp. 15, 19, 41-
    Instead of producing the complete diary, the White House 
turned over to the Committee approximately one thousand pages 
of the documentary material used by McCathran to prepare her 
diary.89 These records, however, are merely the 
pieces of the jigsaw puzzle that the diarist had already 
completed. As McCathran herself indicated, the diary she 
prepares from the voluminous documentary material represents 
the only complete source of information on the President's 
activities.90 Despite the Committee's repeated 
requests, and Ruff's assurances that he ``underst[oo]d the 
Chairman's concerns'' about the White House's failure to 
produce the diaries,91 the White House never 
produced them to the Committee.
    \89\ Testimony of Charles F.C. Ruff, Oct. 29, 1997, pp. 198-99. 
Imbroscio, in fact, sought to contradict in public hearings Chairman 
Thompson's assertion that the White House concealed the existence of 
the diaries by simply referring to the quantity of documents produced 
from the files of the diarist. Imbroscio testimony, pp. 114-15. While 
the mass of background information gathered from the diarist's files 
may indeed reveal to the Committee the existence of a diarist, it was 
patently disingenuous for Imbroscio to suggest that these background 
materials somehow revealed the existence of the diarist's final work 
    \90\ See ``Talking Points for Senate Deposition,'' prepared by 
Ellen McCathran, Oct. 27, 1997 (Ex. 32).
    \91\ Ruff testimony, p. 218.
    The White House also failed until December 8, 1997 to 
disclose to the Committee the existence of a second diary-type 
document. On December 8, the White House simultaneously 
produced to the Committee and to the press hundreds of pages of 
a ``chronicle'' of the daily activities of the President 
prepared by Special Assistant to the President and Records 
Manager Janis Kearney.92 Kearney reports to Nancy 
Hernreich, Deputy Assistant to the President and Director of 
Oval Office Operations.93 Kearney testified that 
when she began work in the White House in December 1995, 
Hernreich directed her to ``keep a daily chronicle of the 
Presidency'' derived from her review of White House 
correspondence and attendance at various White House 
    \92\ Marc Lacey and Glenn Bunting, ``White House Forwards More 
Donor Records,'' Los Angeles Times, Dec. 9, 1997, at A1.
    \93\ Deposition of Janis Kearney, Dec. 23, 1997, p. 12.
    \94\ Id., pp. 17-18, 21-22.
    Hernreich certified in a memorandum to the White House 
Counsel's office on April 29, 1997 that she ``directed all 
individuals in [her] office to search their files'' in response 
to the April 29, 1997 Ruff Directive, and that ``all responsive 
documents ha[d] been provided.'' 95 However, 
although Kearney's ``chronicles'' were unquestionably 
responsive to the Committee's document requests,96 
Kearney testified that Hernreich instructed her that ``there 
was no need'' for Kearney to respond to the White House 
Counsel's requests.97
    \95\ Memorandum from Nancy Hernreich to Dimitri Nionakis, April 29, 
1997 (Ex. 33).
    \96\ For instance, the June 19, 1996 entry states that ``[the 
President] hosted a coffee, that Nancy H[ernreich] described as a 
``political'' coffee that would probably last all morning. She 
explained the difference between ``money'' coffees and the ``political/
issues'' coffees as how much [the President] interjected.'' Diary entry 
of Janis Kearney, June 19, 1996 (Ex. 34). This entry falls squarely 
within May 21, 1997 Document Request No. 11 which sought ``[a]ll 
documents referring or relating to any White House coffee . . . .'' Ex. 
10. The late production of this entry is also particularly significant, 
as it appears to contradict Nancy Hernreich's affirmative response in 
her deposition to the suggestion that she could not ``tell [the 
Committee] much about what happened at the coffees or after the coffees 
with regard to fund-raising.'' Deposition of Nancy Hernreich, June 20, 
1997, pp. 104-05.
    \97\ Kearney deposition, p. 60.


    Although the White House repeatedly pledged its cooperation 
with the Committee's investigation, its actions spoke far more 
loudly than its words. The White House produced documents to 
the Committee pursuant to its own schedule and without regard 
to any deadlines other than the December 31, 1997 expiration of 
the Committee's investigation. The White House, in fact, 
ignored even deadlines imposed by the scheduling of deposition 
or hearing testimony of the author or subject of particular 
documents, and instead often produced documents after the 
appearance of the witnesses to whom the documents related. It 
withheld documents under specious assertions of executive 
privilege. It concealed the existence of highly relevant 
materials and unreasonably and improperly redacted significant 
information from many of the documents it chose to disclose. 
Finally, the White House's intentional omission from the 
document search directive disseminated among White House 
employees of any indication of the breadth of the materials 
sought by the Committee caused a six-month delay in the 
production of the critically important White House videotapes.
    This is not the behavior of a White House seeking to 
cooperate with a Senate Committee's exercise of its important 
oversight authority. Rather, these actions vividly demonstrate 
the lengths to which this White House went in order to obstruct 
the work of a Committee seeking to reveal information that the 
White House hoped to keep secret. In spite of the White House's 
efforts, however, the Committee's efforts led to the exposure 
by the White House--either through the Committee's hearings or 
through the White House's production of information directly to 
the press--of much that would otherwise have remained 
    In light of the above, the Committee urges other lawful 
authorities who are investigating criminal conduct and who are 
subpoenaing White House records, to exercise extreme caution in 
assuming that any White House document production is either 
complete or accurate.

                        DNC Document Production

    The DNC's failure to comply fully and in a timely manner 
with the Committee's subpoena significantly hampered the 
Committee's investigation. The DNC delayed the production of 
documents, produced documents in a manner calculated to impede 
the effective examination of DNC officers and employees, and 
generally obstructed the Committee's investigation. More 
specifically, the DNC responded slowly to the Committee's long-
anticipated subpoena, produced previously-gathered documents 
only on the eve of depositions at which they were to be used, 
and never fully complied with the Committee's subpoena. In so 
doing, the DNC's constant refrain was that the financial burden 
of complying with the Committee's lawful subpoena was too 
great. Alternatively, the DNC would urge that its resources 
were being diverted by grand jury subpoenas. All the while, the 
DNC could take comfort from the Committee's investigatory 
deadline, knowing that judicial enforcement of the Committee's 
subpoena was impossible.
    The deadline imposed on this Committee lurked at all times 
behind the DNC's noncompliance. As discussed elsewhere in this 
report,\1\ many organizations simply chose to ignore this 
Committee's subpoenas, with the hope that the time limit 
imposed on the Committee's investigation would render court 
enforcement of its subpoenas impossible--and perhaps legally 
moot. The DNC could not pursue the same strategy and ignore 
this Committee's subpoena; the political costs of doing so 
would have been too great. The DNC still found its own ways to 
hinder the Committee's investigation by exploiting the 
Committee's investigatory deadline.
    \1\ See e.g., the section of this report on the noncompliance by 
nonprofit organizations with the Committee's subpoenas.
    The Committee and the DNC engaged in many battles over 
document production. The purpose of this section of the report 
is not to describe every shortcoming in the DNC's production of 
documents in response to the Committee's subpoena. Nor is the 
purpose of this section to document tediously every meeting and 
phone call between Committee staff and the DNC's lawyers on 
issues that arose concerning document production. Rather, the 
Committee merely wishes to focus attention on a few serious 
issues that arose in the course of the DNC's alleged compliance 
with the Committee's subpoena, and which the Committee believes 
fairly illustrate a pattern of obstruction on the part of the 
    One case in particular--the belated production of Richard 
Sullivan's files--may even raise criminal issues. The Committee 
cannot exclude the possibility that these files were 
intentionally withheld, which would constitute the crime of 
obstruction of Congress. Indeed, the inconsistent, incredible 
explanations for the belated production of those files give 
weight to the possibility that they were deliberately withheld 
from the Committee.
The committee's subpoena
    The Committee issued a subpoena to the DNC on April 9, 
1997. The subpoena was served on April 10. The subpoena's 
return date--the date by which the DNC was to comply with the 
subpoena--was April 30, 1997.
    This subpoena hardly came as a surprise to the DNC. As 
early as November 6, 1996, the day after the 1996 election, DNC 
General Counsel Joseph Sandler sent a memorandum to all DNC 
division directors, headed ``Immediate Attention,'' which 
directed them to preserve DNC documents and required DNC 
employees to prepare an inventory of their files.\2\ The 
memorandum was drafted in apparent anticipation of 
congressional and law enforcement subpoenas.\3\
    \2\ Memorandum from Joe Sandler, November 6, 1996 (Ex. 1).
    \3\ Memorandum from Joseph E. Sandler, January 13, 1997 (Ex. 2). By 
January 13, 1997, the DNC had received at least two federal grand jury 
    Moreover, the Committee gave a draft of the subpoena to the 
DNC's outside lawyers on March 18, 1997. By March 18, the DNC 
was thus aware that the Committee would request, at a minimum, 
documents already requested by grand jury subpoenas. The DNC 
was also permitted to comment on the draft subpoena, with an 
eye toward streamlining and expediting its document production. 
In some cases, the Committee even incorporated into the final 
subpoena suggestions made by the DNC's lawyers. In short, the 
DNC should have been well-prepared for the Committee's 
The DNC's sluggish response to the subpoena
    Despite having ample time to prepare to respond to the 
subpoena, the DNC responded sluggishly. Sandler testified that 
the DNC circulated a memorandum directing employees to search 
their files on or about April 24, 1997--less than a week before 
the subpoena's return date, and nearly two weeks after the 
Committee issued its long-anticipated subpoena.\4\
    \4\ Deposition of Joseph E. Sandler, August 22, 1997, pp. 113-14.
    In fact, the DNC chose to ignore the subpoena's return 
date. Sandler testified that the DNC did not require its 
employees to finish searching their files pursuant to the April 
24, 1997, search memorandum until nearly four months after the 
Committee's subpoena was issued--and nearly one month after the 
Committee commenced public hearings. Sandler's testimony on 
this point contained an implicit suggestion that this 
Committee's subpoena was either ignored or given a ``low 

          Q: All right. Mr. Sandler, you had indicated in one 
        of your previous answers that DNC employees began 
        reviewing their files for documents specifically 
        responsive to this committee's subpoena on or about 
        April 24th of this year?
          A: Something--yeah. I'd have to look at the search 
        memo. That's right.
          Q: Now, how long did that process take for employees 
        to complete their search of their files?
          A: It took a long time. It didn't--it wasn't 
        completed until a couple weeks ago. We set a deadline 
        of July 31st. It was a Friday, around there was the--we 
        set an absolute deadline. A lot of people had turned 
        stuff in already, but we made a point of having it 
        wrapped up by then.
          Q: So it was only within the past two weeks that 
        the--I mean, that the--am I correct that the process of 
        having employees of the DNC review their files in terms 
        of responsiveness to our subpoenas lasted from 
        approximately April 24th until approximately two weeks 
          A: Two or three weeks ago. But I want to say that it 
        was an ongoing process. There were continually 
        materials being received. You asked us to focus again 
        on certain things as a matter of the committee's 
        priorities. And you have to keep in mind, Mr. Mattice, 
        that the DNC has been simultaneously responding to 12 
        other subpoenas, most of which were issued by federal 
        grand juries that can hardly be ignored or made a lower 
    \5\ Id. at pp. 114-15 (emphasis added).

The Committee concludes that the DNC was slow-walking its 
response to the subpoena, knowing that the DNC could use the 
allegedly more urgent subpoenas issued by federal grand juries 
as an excuse for delaying the Committee, even though the DNC 
knew the Committee's investigation would have to be concluded 
by the end of the year. The DNC's bad faith is patent.\6\
    \6\ Moreover, as will be discussed in some detail later, the DNC's 
July 31, 1997 deadline for searching documents may have contributed to 
the late discovery of 4,000 documents from the files of Richard 
Sullivan. If Paul DiNino's testimony is to be credited, he looked into 
one drawer of the only file cabinet in his office only when, in late 
July, the DNC sought to ensure that all files had been searched for 
responsive documents by the end of July. See infra, notes 35-38 and 
accompanying text.
A pattern of gamesmanship
    While the DNC waited for months for its employees to finish 
searching their files to respond to the Committee's subpoena, 
it began to produce some documents soon after the receipt of 
the subpoena. From the very beginning of this production, the 
Committee discerned a pattern of gamesmanship. Between April 25 
and April 30, 1997, the DNC produced approximately 25 boxes of 
documents to the Committee. The Committee understood that these 
boxes contained documents previously produced to other 
governmental entities (such as grand juries) in response to 
their subpoenas. Although a smattering of these documents were 
relevant, most were of no value. The production included 
repetitive donor lists, thousands of pages of ``The Hotline'' 
(a political newsletter circulated by electronic mail), and 
non-consecutive spreadsheets containing donor information, 
which were virtually impossible to piece together in the form 
    Because of the Committee's investigative deadline, 
depositions for DNC witnesses had to begin quickly. The 
shortage of relevant documents would impair the Committee's 
examination of DNC witnesses, many of which were scheduled for 
May. The Committee was concerned that the DNC's manner of 
production would result in having to constantly re-call 
witnesses as documents relevant to them trickled out of the 
DNC. Responding to the Committee's concern, the DNC agreed to 
produce documents relating to particular witnesses in advance 
of their depositions.
    Unfortunately, even more gamesmanship ensued. The DNC's 
supposed compliance with its agreement smacked of bad faith; it 
routinely produced documents relevant to particular witnesses 
the afternoon before their deposition, even though the 
documents had been gathered by the deponents long before.
    One representative example of this sort of egregious 
behavior concerns documents relevant to the testimony of DNC 
Deputy National Finance Director David Mercer. The Committee 
began to depose Mercer on Wednesday, May 14, 1997. On the 
afternoon of Tuesday, May 13, the DNC delivered two boxes of 
documents previously gathered by Mercer from his files. When 
the Committee could not conclude Mercer's deposition on May 14, 
his deposition was scheduled to resume on Tuesday, May 27, 
1997, the day following Memorial Day. On the evening of Friday, 
May 23, 1997, the DNC produced four boxes of additional 
documents that the DNC represented had been previously gathered 
by Mercer from his files. During the continuation of his 
deposition on May 27, Mercer was shown one of the documents 
produced on the previous Friday, and he testified that the 
document had been produced by him to Sandler around 
``Christmastime'' of 1996.\7\
    \7\ Deposition of David Mercer, May 27, 1997, p. 59.
    The Committee concludes that the DNC's production of 
documents on the eve of a witness' second day of deposition 
testimony, when the witness had gathered the documents and 
given them to the DNC's counsel roughly six months earlier, was 
an obstructionist tactic. Unfortunately, the DNC frequently 
employed this tactic in the course of the Committee's 
    In the midst of this gamesmanship, the DNC informed the 
Committee in a meeting in the middle of June 1997 that 55 boxes 
of documents had been produced to other governmental entities 
in response to their subpoenas, but had not been produced to 
the Committee--even though they had been specifically requested 
by the Committee's subpoena, and the Committee had been led to 
believe that the productions between April 25 and April 30 were 
comprised primarily of documents previously produced to other 
governmental entities. Even more surprising was that the DNC 
would not just copy the contents of these boxes and forward 
them to the Committee; rather, the DNC insisted on re-reviewing 
these documents and producing them incrementally--allegedly to 
protect privileges, even though any alleged privilege would 
have been waived by the previous production to other 
governmental entities. The DNC produced the documents over the 
days leading up to the July 4 holiday; production of the 55 
boxes was not complete until July 2, 1997--less than a week 
before the commencement of the Committee's public hearings, 
which were to open with the testimony of former DNC National 
Finance Director Richard Sullivan.
    This dismal pattern of production continued throughout the 
Committee's investigation.

Richard Sullivan's file cabinet: Possible Obstruction of Congress

    On Monday, July 28, 1997, several DNC lawyers met with 
Committee counsel to discuss many of the document production 
problems. In the course of that meeting, they described 
documents then in the immediate ``pipeline'' to the Committee. 
In so doing, they specifically represented to the Committee 
that it would soon be receiving several boxes of ``generic'' 
Finance Division documents.
    On Friday, August 1, 1997--one day after the Committee had 
concluded its July hearings and adjourned for the August 
recess--a DNC lawyer called the Committee and informed it that 
the representation that the boxes were generic Finance Division 
documents may have been ``mistaken.'' According to the DNC, it 
had just learned that a number of the boxes were actually from 
Richard Sullivan's files. Sullivan had been deposed in May and 
June, and had been the Committee's first witness in public 
hearings on July 9-10.\8\ The DNC promised that the documents 
would be produced by Monday, August 4, as it clearly recognized 
the significance of failing to produce documents relating to 
the Committee's first public witness. Indeed, on that same day, 
August 1, DNC Chairman Roy Romer personally called Chairman 
Thompson to inform him of the same discovery and to apologize 
for the delay.
    \8\ During the first day of Sullivan's deposition, he expressed 
concerns about his access to the documents that he left behind at the 
DNC. See Deposition of Richard Sullivan, June 4, 1997, pp. 13-27. At 
the same time, Sullivan's lawyer, Robert Bauer, expressed vague 
concerns to the Committee that the DNC had not produced all of 
Sullivan's documents to the Committee. In fact, Bauer later informed 
the Committee that, immediately following the second day of Sullivan's 
deposition, on June 5, 1997, he had spoken with Judah Best, a lawyer 
for the DNC, and advised Best that it appeared that the Committee had 
not received all of Sullivan's documents.
    On Monday, August 4, 1997, the DNC's delivered two boxes of 
documents from Richard Sullivan's files. The Committee 
estimates the total number of pages produced at 4,000. 
Committee staff quickly reviewed the documents, and discovered 
that the documents were among the most significant yet produced 
to the Committee. The documents included:
           Approximately 1,500 pages of Sullivan's 
        handwritten notes, apparently taken during meetings or 
        telephone conversations.\9\
    \9\ Sullivan acknowledged during the first day of his deposition 
testimony that he ``worked off a legal pad'' during his day; however, 
he also testified that he ``did not take copious notes of meetings.'' 
Deposition of Richard Sullivan, June 4, 1997, p. 10. Sullivan also 
testified that he ``would keep the legal pads for a period of two to 
three weeks as they were relevant to what I was working on, and then 
generally would throw them away.'' Id. In the light of the subsequent 
production of 1,500 pages of Sullivan's handwritten notes, which 
represent only those notes responsive to the Committee's subpoena, 
Sullivan's candor is called into serious doubt.
           Sullivan's ``Roger Tamraz'' file.
           Sullivan's ``Johnny Chung'' file.
           Sullivan's ``Mark Middleton'' file.
           Sullivan's ``Harold Ickes'' file, which, 
        among other things, included documents relating to 
        possible fund-raising phone calls placed by the 
        President and Vice President.
           Numerous call sheets prepared by the DNC for 
        the First Lady.
    The press was quick to pick up on the DNC's belated 
production of such highly relevant files concerning a major 
witness. In a front-page article in The Washington Post on 
August 8, 1997, entitled ``Senate Panel Probes DNC Files 
Delay,'' reporter Bob Woodward quoted DNC Chairman Roy Romer as 
saying that the new Sullivan material was discovered on July 30 
by Paul DiNino, the new DNC finance director who had replaced 
Sullivan.\10\ Woodward reported that he had interviewed DiNino, 
and that DiNino said that the new Sullivan documents were in a 
drawer in the only file cabinet in his office. Woodward's 
article continued:
    \10\ Bob Woodward, ``Senate Probes DNC Files Delay'', The 
Washington Post, Aug. 8, 1997, p. A14.

          Asked why he waited more than five months to look in 
        the drawer, DiNino said there was a new push at the end 
        of July to make sure all DNC files had been reviewed. 
        ``I hadn't looked in before . . . I don't like paper 
        anyway, and I didn't need space for files. Richard 
        [Sullivan] and I have different styles. Richard saved a 
        lot of things. When he discovered the material July 30, 
        DiNino said, he called DNC lawyers at once.\11\
    \11\ Id.

    The Committee investigated the delay in producing the 
Sullivan files. The testimony on this subject was 
contradictory,\12\ which raises disturbing inferences, 
especially given the proximity of the depositions to the events 
in question.
    \12\ One day after the Woodward article, Marc Lacey and Alan Miller 
of The Los Angeles Times reported on their own interview with Paul 
DiNino. Marc Lacy & Alan Miller, ``Delayed DNC Papers Irk Thompson,'' 
The Los Angeles Times, Aug. 8, 1997, p. A16. According to their report, 
DiNino said that he had ``opened the drawers of the filing cabinet at 
some point after he first arrived at his DNC office on Feb. 20, and, in 
a cursory review, spotted brochure and other seemingly innocuous 
material.'' Id. The article continued:
    ``I opened the top drawer and it appeared to me to be very common 
items such as brochures,'' he said. ``I opened another drawer that had 
legal pads with doodles on them.''

      DiNino said that when DNC officials recently urged staffers 
      to search the premises again for papers sought under a 
      Senate subpoena, he inspected the filing cabinet again on 
      July 30 and discovered four boxes of relevant records.
    Id. There are subtle inconsistencies between this account and that 
reported by Woodward.

Joe Birkenstock's testimony

    The first witness to testify on this topic was Joseph 
Birkenstock, who was deposed on August 28, 1997. Birkenstock is 
a lawyer working for the DNC's Office of General Counsel, and 
he primarily handles document production issues relating to the 
various campaign finance investigations. He reports directly to 
    \13\ Deposition of Joseph M. Birkenstock, August 28, 1997, p. 8.

    Birkenstock testified that he first became aware of the 
existence of the Sullivan files on Wednesday, July 30, 
1997.\14\ On that day, he overheard DiNino and Scott Freda, 
formerly Sullivan's administrative assistant and now the 
Finance Division's chief of staff, talking about ``a certain 
group of documents that they seemed unfamiliar with and seemed 
not to know whose responsibility they would be to search . . 
.''\15\ So, Birkenstock called Freda and offered to resolve the 
issue by having ``somebody from the document group come over 
with a bunch of boxes. We would just box the documents up and 
take them with us and put them into the production process.'' 
\16\ Obviously, Birkenstock thought the documents were relevant 
from the snippets of conversation he allegedly overheard. 
Indeed, if DiNino's testimony, discussed later, is to be 
credited, DiNino was certainly aware of the relevance of the 
documents prior to discussing them with Freda.
    \14\ Id. at p. 109.
    \15\ Id.
    \16\ Id. at pp. 113-14.
    When the documents were retrieved by personnel from the 
General Counsel's office, they filled four boxes--roughly 
12,000 pages.\17\ Two days later, Birkenstock realized the 
documents were Richard Sullivan's, and ``alarms went off'' in 
his head.\18\
    \17\ See Id.
    \18\ Id. at pp. 114-15.
    Birkenstock was asked how these documents were overlooked 
earlier. He explained that, on the day that Sullivan was 
leaving the DNC, Birkenstock met with Sullivan in an office 
located about two doors down from Sullivan's office.\19\ 
Sullivan was leaving about eight boxes of documents in the 
room.\20\ Birkenstock testified that he thought the eight boxes 
comprised the entire universe of Sullivan's files:
    \19\ Id. at p. 111.
    \20\ Id. at p. 112.

          I asked him if all of these documents--if this was 
        all of the files he had at the DNC. As I recall his 
        response--I guess you are aware of his characteristic 
        way of speaking in which he would kind of being three--
        or a handful of phrases and then finish one of them. 
        So, again, I don't recall the specific words that he 
        used, but, in general, I recall his response being, 
        ``To the best of my--as far as I know--as far as I 
        can--yes, these are all my files.'' \21\
    \21\ Id. at p. 112-13.

Birkenstock re-affirmed that, ``in general, what I am asking 
him was whether those were all of his files, and in general, I 
recall him responding that they were.'' \22\
    \22\ Id. at p. 113. Sandler testified that, when Sullivan departed 
the DNC, Sullivan ``assembled a number of boxes which he represented to 
. . . Mr. Birkenstock constituted all of his files at the DNC.'' 
Deposition of Joseph E. Sandler, August 22, 1997, p. 100. Sandler said 
that the reason the file cabinet documents were not produced earlier 
was ``that Mr. Sullivan didn't turn them over to Mr. Birkenstock when 
he left the DNC.'' Id. at p. 105.

Richard Sullivan's testimony

    Sullivan's recollection differs significantly from 
Birkenstock's. Concerning the meeting they had on the day of 
Sullivan's departure, Sullivan testified as follows:

          A: . . . I pointed out to him the boxes in which I 
        assembled the documents from my office with the 
        exception of the file cabinet and I pointed out the 
        file cabinet to him.

           *         *         *         *         *

          Q: Why did you point the file cabinet out to him?
          A: Because I had moved everything else but the file 
        cabinet, all the--a new finance director was coming in. 
        So, I had moved everything out of my desk and on my 
        desk and on a table that was in my office into another 
        office. I did not move the file cabinet nor did I box--
        nor did I place in any boxes the contents of the file 
        cabinet. So, I pointed to the boxes in one room and 
        then pointed to the file cabinet in the other room.\23\
    \23\ Deposition of Richard Sullivan, September 5, 1997, p. 215.

Sullivan repeated his claim that he pointed out the file 
cabinet to Birkenstock.\24\
    \24\ Id. at 216. Sullivan also testified that, in response to one 
of the DNC's search memoranda for documents to respond to various 
subpoenas, he believed he may have referenced his file cabinet as a 
location for potentially responsive documents on a schedule that he, 
like other DNC employees, was to return to Joe Birkenstock. Id. at p. 
218; see also id. at p. 216. (provided schedule to Birkenstock). The 
DNC has resisted production of that schedule, asserting that the 
schedule was protected from disclosure by the work product doctrine. On 
the strength of Sullivan's testimony about the contents of the 
schedule, the Committee asserted that any work product protection was 
waived, and sought the schedule again from the DNC. The DNC produced 
the schedule on September 11, 1997. One could reasonably read the 
schedule as corroborating, in some respects, Sullivan's testimony. 
Among other things, the ``Johnny Chung'' file which was in the file 
cabinet of documents belatedly produced to the Committee, appears to be 
referenced in that schedule (the schedule describes a responsive 
document as ``Johnny Chung Luncheon List''). Its location is described 
as ``File.'' Although the reference is not as clear as the phrase 
``File Cabinet,'' it is similar. Memorandum from Richard Sullivan to 
Joe Birkenstock, December 19, 1996, p. 2 (Ex. 3).
    Further buttressing the probability that Sullivan's account is 
truthful is that Sullivan told the Committee about his file cabinet on 
the first day of his deposition. See Deposition of Richard Sullivan, 
June 4, 1997, p. 12. If Sullivan were attempting to conceal the 
existence of these files, this would be odd. Moreover, given Sullivan's 
reference to his file cabinet in the deposition on June 4 (in which a 
lawyer representing the DNC was present), and given that Sullivan's 
lawyer informed a DNC lawyer on June 5 that he believed that the 
Committee may not have received all of Sullivan's responsive documents, 
see supra note 8, it is difficult to comprehend that DNC's continued 
``oversight'' of Sullivan's file cabinet.

Paul DiNino's testimony

    Paul DiNino was deposed on September 16, 1997. He admitted 
to inspecting the file cabinet at least twice prior to July 30, 
1997. He stated that he first opened the file cabinet sometime 
within a month or so of his arriving at the DNC on February 20, 
1997.\25\ He testified that he opened the file cabinet ``[j]ust 
to see what was in there.'' \26\ According to DiNino, he opened 
two drawers of the four-drawer filing cabinet: the top drawer 
and the third drawer down.\27\ In the top drawer, he saw 
``brochures,'' and in the third drawer, he found ``doodled 
legal pads.'' \28\ His concluding thought was, ``It's junk.'' 
    \25\ Deposition of Paul DiNino, September 16, 1997, pp. 22-23.
    \26\ Id. at p. 23.
    \27\ Id. The file cabinet had four drawers, and DiNino testified 
that it stood about four or four and a half feet tall. Id. at p. 11.
    \28\ Id. at p. 23.
    \29\ Id.
    A few months later, DiNino testified that he ``opened the 
same drawers and I saw the same thing and I closed it. Again, 
that time it was probably more out of boredom than of 
curiosity.'' \30\ DiNino was pressed concerning his explanation 
for why he opened the same two drawers of the filing cabinet 
that he had previously opened and found to be junk. His answers 
are hard to accept:
    \30\ Id. at p. 26.

          Q: Do you know why it would be that you, on at least 
        two occasions, opened drawers one and three but never 
        looked in drawers two and four?
          A: I wish I had an answer for you. No, I don't
          Q: You said that through boredom or curiosity you 
        looked in drawers one and three.
          A: Mm-hmm.
          Q: Curiosity never led you to two and four?
          A: My curiosity was pretty much killed in one and 
        three. There was nothing in there.\31\
    \31\ Id. at pp. 29-30.

    When even more questions were asked on this topic, it turns 
that DiNino did have an answer for the Committee about why he 
opened only drawers one and three:

          Q: I guess my question would be I'm curious and maybe 
        you can clarify why on a repeated number of occasions 
        you'd looked through drawers one and three and not 
        looked in drawers two and four.
          A: Again, that's a good question. The first drawer is 
        at eye level. The third drawer is at the level my hand 
        is. I ask myself the same question.
          Q: Okay, Now, the second time you looked at the 
        drawers you said you were also bored or curious?
          A: I'm a pacer. I opened the same drawers. They were 
        at eye level and they were at the same level as my 
          Q: I guess the point I don't understand is if you've 
        looked at drawers one and three and you're curious, 
        wouldn't you be looking in two and four?
          A: If my curiosity was organized, I would have done 
        that. I didn't. Had I, this would have been taken care 
        of a long time ago.\32\
    \32\ Id. at pp. 33-35 (emphasis added).

The Committee finds this explanation--that drawer one was at 
eye level and drawer three was at hand level--preposterious. 
The file cabinet stood four and a half feet tall. DiNino was a 
man of normal height. Four feet tall is not eye level, and, 
more important, drawer three (which is the second drawer up 
from the floor) would have been far from hand level. Anyone 
reading DiNino's testimony in the presence of a four-drawer 
filing cabinet would find his explanation incredible.
    Be that as it may, DiNino testified under oath that he did 
not open drawer two until July 30.\33\ He testified that he 
never opened the bottom drawer, drawer four.\34\ The reason he 
re-investigated the file cabinet was that, at a senior staff 
meeting on Tuesday, July 29, ``it was announced that a woman on 
staff would be going around to every filing cabinet, assigning 
each filing cabinet a number, and whoever's area that filing 
cabinet or box or whatever was in, they were responsible to 
have that filing cabinet searched.'' \35\ This was part of ``a 
final push at the DNC to get all the documents that complied 
with the subpoena'' by Friday, August 1, 1997.\36\ DiNino 
further testified that, when ``the filing cabinets were 
numbered, I asked my assistant . . . if she would search the 
filing cabinet. And before I asked her to do that I wanted to 
make absolutely sure that there was nothing in there that she 
would stumble upon, so I investigated first.'' \37\ When he 
opened drawer two, he discovered three documents that 
``complied with the document search that we were finishing 
up.'' \38\
    \33\ Id. at pp. 9-12; 35-36.
    \34\ Id. at pp. 12, 29.
    \35\ Id. at p. 27.
    \36\ Id. Recall that the DNC did not require its employees to 
complete their search of their files to respond to the Committee's 
subpoena until July 31, 1997. See supra, note 5 and accompanying text.
    \37\ DiNino Deposition at pp. 35-36. This testimony is internally 
inconsistent: on the one hand, DiNino asserts that he asked his 
assistant if she would search the file cabinet; on the other hand, he 
asserts that before asking her to do so, he first investigated the file 
cabinets and discovered the Sullivan documents. Obviously, this 
discovery--and DiNino's alleged instruction to Freda to handle the 
documents--eliminated the need for asking his assistant to search the 
file. See infra, note 39 and accompanying text. Nevertheless, DiNino 
testified that he asked his assistant to search the file cabinet.
    \38\ Id. at p. 9; see also id. at pp. 11-12, 35-36.
    DiNino then called Freda into his office, and asked Freda 
to take care of the documents.\39\ Originally, DiNino did not 
remember any further discussion on that day with Freda 
concerning the documents.\40\ Later, DiNino testified that, 
after he called Freda into his office to take care of the 
documents, Freda came back and said he had spoken with Joe 
Sandler, and that the documents would be taken care of.\41\
    \39\ Id. at p. 9.
    \40\ Id. at pp. 15-16.
    \41\ Id. at pp. 31.
    DiNino's recollection of events in this regard could be at 
odds with Birkenstock's. If DiNino called Freda into his 
office, it seems less likely that Birkenstock would have 
overheard Freda and DiNino conversing regarding the file 
cabinet. Moreover, DiNino does not seem to recall the 
conversation with Freda as one concerning who would be 
responsible for searching the newly discovered files, which 
seemed to be Birkenstock's recollection of the nature of the 
conversation between Freda and DiNino.\42\
    \42\ The Committee sought to re-depose Freda and DiNino to try to 
sort out some of these contradictions. Counsel for Freda and counsel 
for DiNino each informed the Committee that their clients would not 
appear for a deposition without a formal subpoena. Just before the 
Committee requested that Freda and DiNino appear and testify 
voluntarily, the Committee had reached an understanding that no 
additional subpoenas for depositions would be issued. Apparently, the 
minority advised the lawyers for DiNino and Freda of the understanding, 
resulting in DiNino's and Freda's unavailability (both had appeared 
voluntarily for depositions earlier--Freda before the discovery of the 
file cabinet--when the Committee was routinely issuing subpoenas).
    Paul DiNino resigned from the DNC within days of his 
    \43\ See Brian McGrory, ``Democrats Name Finance Director,'' Boston 
Globe, Sept. 23, 1997, p. A4.


    The testimony concerning the belated production of 
documents from Richard Sullivan's file cabinet is largely 
incredible. The many unanswered questions and contradictions 
require further exploration, because they raise the possibility 
that some individual or group within the DNC or acting on its 
behalf may have acted intentionally to withhold these documents 
from the Committee. If that is the case, a crime may have been 
committed; the intentional withholding of documents from a 
Congressional committee constitutes obstruction of 
Congress.\44\ The Committee thus urges the Justice Department 
to investigate.
    \44\ See 18 U.S.C. Sec. Sec. 1501, 1505.

                       the august 29, 1997 order

    Given the DNC's pattern of noncooperation, obstruction, and 
delay, Chairman Thompson issued an order on August 29, 1997. 
Among other things, the order required that the DNC produce all 
documents responsive to the Committee's April 9, 1997 subpoena 
by September 3, 1997. After recounting examples of the DNC's 
tactics in responding to the Committee's subpoena, the Chairman 
specifically determined that the ``DNC . . . willfully refused 
to comply with the lawful subpoena the Committee issued on 
April 9, 1997. . . .''\45\
    \45\ August 29, 1997 Order (Ex. 4).
    The DNC simply ignored the order, and sought yet another 
meeting with the Committee to discuss document production 
issues. The meeting was held on September 4, and was attended 
by Chairman Thompson, Committee staff, DNC Chairman Roy Romer, 
and DNC in-house and outside counsel.\46\
    \46\ In the meantime, the DNC's pattern of obstructionism and 
gamesmanship continued. On Friday, September 5, 1997, the DNC produced 
approximately 20,000 documents gathered from the personnel within the 
``Office of the Chairman.'' Former DNC National Chairman Don Fowler was 
then scheduled to testify only four days later, on Tuesday, September 
9, 1997, when he did, in fact, testify. Documents from the Friday 
afternoon production were used at the public hearings the following 
Tuesday, but would have been more useful had they been produced in a 
timely manner, such as before Fowler's May 21, 1997 deposition.
    Additional evidence of DNC obstructionism concerns DNC General 
Chairman Christopher Dodd. The DNC did not produce files relating to 
him until October 31, 1997, after Chairman Thompson had announced 
earlier that day that the hearings were being recessed subject to the 
call of the chair.
    In the course of this September 4 meeting, which largely 
consisted of the DNC's assertions that it was doing everything 
that it could to respond to the Committee subpoena and could 
not comply with the August 29, 1997 order, a repeated topic of 
conversation between the Committee staff and the DNC's lawyers 
was revisited: Why had the Committee received virtually no 
electronic mail (``e-mail'') from the DNC? \47\
    \47\ The Committee believed that DNC e-mail might be a fruitful 
area for discovery, because users are often extremely candid in their 
e-mail messages.
    The DNC explained--for the first time--that a computer 
system crash in March 1996 made all e-mail prior to that date 
unrecoverable. Moreover, the DNC further represented--for the 
first time--that no e-mail from March 1996 to November 1996 
could be recovered unless the receiver failed to open a 
message. In sum, virtually no DNC e-mail could be recovered 
prior to the 1996 election. The loss of almost all e-mails from 
March 1996-November 1996 occurred, according to the DNC, 
because the DNC e-mail system, in the course of ``backing-up,'' 
was overwriting on back-ups of previous e-mails, thereby 
erasing them.
    According to Jack Young, of the staff of the DNC's Office 
of General Counsel, who attended the September 4, 1996 meeting, 
the DNC determined only during the first week of September that 
most e-mail for the period March 1996-November 1996 was not 
available. This late discovery suggests that the DNC was not 
looking for e-mail requested by the Committee until then--
underscoring that the DNC never intended to comply with the 
Committee's subpoena's return date, or even the DNC's self-
imposed July 31 deadline.\48\
    \48\ The date of the DNC's discovery that e-mail from March 1996 to 
November 1996 was not generally recoverable was provided to the 
Committee only after repeated letters and phone calls to Young in the 
wake of the September 4 meeting. Young was asked three times during the 
September 4 meeting to explain precisely when the DNC learned that much 
of the e-mail could not be produced; indeed, both Chairman Thompson and 
Governor Romer asked the question directly. No answer was given in that 

The DNC produces 15 boxes as the committee closes the investigation

    On December 23, 1997, two days before Christmas and roughly 
a week before the Committee's deadline for concluding its 
investigation, the DNC produced 15 boxes of documents.\49\ 
Because the investigation was ending on December 31, most of 
the staff had left or were in the process of leaving. Because 
the few remaining staff were drafting the Committee's final 
report (which was due by the end of January 1998), the 
Committee could not and has not reviewed the documents in the 
15 boxes. Thus, the Committee cannot ascertain whether the 
December 23, 1997 production, like the belated production of 
Richard Sullivan's files, contains documents that would have 
been significant to the investigation. The Committee can state, 
however, that the December 23 production is emblematic of the 
DNC's dilatory and obstructionist tactics.
    \49\ A box holds approximately 3,000 pages of documents. Most of 
the boxes were at least two-thirds full, which means that the December 
23 production contained approximately 30,000 to 45,000 
    The DNC's response to the Committee's subpoena was rife 
with gamesmanship, hindrance, and obstruction. Engaging in such 
practices no doubt consumed much of the DNC's treasury, a fact 
that, ironically, the DNC has used to impugn investigations of 
its fund-raising practices.\50\ The DNC also trumpets the raw 
numbers of documents produced--but the manner of their 
production undercuts any claim they might make of full 
cooperation and good faith.\51\ In short, one of this country's 
major political parties deliberately hindered the Committee in 
fulfilling the Senate's constitutional role for oversight and 
investigation, a sad event for the American public.
    \50\ Peter Kadzik, one of the DNC's attorneys, complained on the 
Cable News Network that, ``I think that there is a strategy here to use 
the investigations to cripple the [DNC] and to benefit the Republican 
Party for the upcoming 1998 elections, and we're certainly not going to 
participate in that kind of a scheme.'' Inside Politics, CNN, December 
12, 1997. Even the President has voiced this accusation, urging that 
the investigations are ``obviously part of a strategy'' to hobble 
Democrats, and complaining, ``I've worked very hard this year to try to 
keep it [the strategy] from bankrupting the party.'' Jeanne Cummings, 
``From one Angle or Another, Half the Committees in House Plan to Probe 
Democrats' Fund Raising,'' The Wall Street Journal, December 24, 1997, 
p. A12.
    Much of the President's ``hard'' fund-raising work could have been 
avoided if the DNC had been more forthcoming in responding to the 
Committee's subpoena. The DNC could have easily gathered and copied 
responsive documents and forwarded them to the Committee at modest 
expense. Instead, the DNC and its principal outside law firm, Debevoise 
& Plimpton, opted to pursue the expensive strategy of managing the 
document production to obstruct and run out the clock on this 
investigation. The Committee cannot estimate the legal fees consumed by 
Debevoise & Plimpton lawyers, who were constantly negotiating (in 
person, over the phone, and in letters) with the Committee over 
document production issues, re-reviewing documents already produced to 
the other governmental entities, see supra (discussing late June 
through early July production of 55 boxes previously produced to other 
governmental entities), and fighting losing battles over asserted 
``common interest'' privileges. See the section of this report on fund-
raising phone calls. Had the DNC and Debevoise & Plimpton been 
forthcoming and responsive to the Committee's subpoena, the DNC would 
have saved substantial resources.
    \51\ In fact, the raw number of documents produced does not 
correlate in any way to a party's good faith. Lawyers refer to document 
productions in which boxes upon boxes of trivial, arguably non-
responsive documents are produced (interspersed with significant, 
responsive documents) as a ``boxcar'' production--as in handing over a 
``boxcar'' of documents and letting the other party sift through the 
documents in search of the important, relevant documents. The DNC's 
approach has been consistent with this technique, and it has excused 
every oversight and delay by boasting about the number of documents it 
has produced--and complaining about the expense of photocopying so many 
documents. The December 31, 1997 investigative deadline encouraged the 
use of this production tactic, because the DNC could easily calculate 
that it is difficult to find a needle in a haystack in a limited period 
of time.
    Sadder still is that the DNC was aided and abetted by an 
unreasonable deadline imposed on the Committee's investigation. 
The Committee concludes that no successful investigation 
involving unwilling parties may be undertaken with an 
unreasonable short-term cutoff date. No future investigatory 
committee should labor with such a burden. The realistic treat 
of seeking judicial enforcement of Senate subpoenas must be 
present to coerce compliance from those--such as the DNC in 
this investigation--who will not voluntarily cooperate.

Campaign Finance Reform Issues Brought to the Forefront by the Special 

                            i. introduction

    On March 11, 1997, the Senate passed Senate Resolution 39 
empowering the Senate Governmental Affairs Committee to 
investigate ``illegal and improper'' activities that arose 
during the 1996 federal elections. While the Senate 
Governmental Affairs Committee does not have jurisdiction over 
campaign finance reform legislation, one of its oversight 
responsibilities encompasses operation of the current federal 
campaign finance system. Therefore, it is the Governmental 
Affairs Committee's obligation, to report our findings to the 
Senate committee with legislative authority in this area, the 
Senate Rules Committee. Included in this section of the report 
are examples of violations of the campaign finance laws that 
were revealed by our investigation, as well as findings of 
improper federal campaign activity. These findings should be 
taken into consideration in any Senate evaluation of federal 
campaign finance system reform.
    As a result of the Governmental Affairs Committee 
investigation into illegal and improper federal campaign 
activity during the 1996 federal election two things are 
abundantly clear. First, there is no doubt that a wide range of 
activity undertaken by the Clinton/Gore '96 Re-election 
Campaign Committee, the Democratic National Committee, the AFL-
CIO, various non-profit organizations, and a variety of other 
individuals either explicitly violated the Federal Election 
Campaign Act (the ``FECA''), or violated the spirit of the 
FECA. Second, the never ending quest by those involved in the 
campaign process to use any vagaries of the law to their own 
advantage, and the resulting legal uncertainties based upon 
twenty years of the courts' and the FEC's stressing and 
straining to provide coherent interpretations of the FECA, have 
made it timely and appropriate for Congress to consider 
revisions to the existing law.
    In the 1996 election President Clinton decided to accept 
federal campaign funding in return for an agreement to cap 
spending, but he nevertheless coordinated with the DNC on 
expenditures of soft money above that cap to broadcast thinly 
disguised issue advertisements meant to advocate his election. 
Due to such activity the federal campaign finance system 
virtually collapsed. When the FECA was passed in the early 
1970s, no member of Congress could have foreseen some of the 
developments that will be discussed in this section of the 
report: the distinction between ``hard'' and ``soft'' money; 
the use of ``issue advocacy'' to advance the election of 
specific candidates; the total direction and control that a 
presidential candidate would come to assert over national and 
state party committee expenditures; the explosive growth in the 
cost of running for office and placing television campaign 
advertisements; and how the creation of an untested independent 
regulatory agency structure to oversee the FECA would impact 
the law. As a result of the Committee's investigation and 
examination of various illegalities and improprieties during 
the 1996 federal elections, it appears that it may be time to 
re-evaluate the effectiveness of the campaign finance system as 
it exists today.
    It must first be recognized that the regulation of federal 
campaigns today is not carried out under the comprehensive 
scheme anticipated by Congress when it enacted the FECA. As 
Thomas Mann, Director of Government Studies at the Brookings 
Institute testified, ``the 1974 law worked pretty well at the 
Presidential level, but because the Court intervened [to] cut 
of[f] pieces of the law on free speech grounds, the 
Congressional system was really never in play.'' \1\ During 
testimony before the Committee, Professor Burt Neuborne, Legal 
Director of the Brennan Center for Justice at New York 
University School of Law, asserted that the current system ``is 
the worst of all possible worlds'' because it has ``emerged as 
a judicial mutant.'' \2\ Although Congress originally devised 
and enacted a comprehensive statute, the provisions of which 
were intended to interact through checks and balances, over 
time various legal interpretations issued by the courts and the 
Federal Election Commission (``FEC'') produced a system quite 
different from the one Congress enacted.
    \1\ Testimony of Thomas E. Mann, September 23, 1997, p. 64.
    \2\ Neuborne Prepared Testimony submitted to the Governmental 
Affairs Committee.
    The law now in place had its genesis in the Federal 
Election Campaign Act of 1971, together with the 1971 Revenue 
Act. The FECA, effective April 7, 1972, not only required full 
reporting of campaign contributions and expenditures, but also 
limited spending on media advertisements. These limits on media 
advertisements were later repealed. The FECA incorporated an 
explicit ban on foreign contributions that had been enacted in 
1966. The FECA continued the long standing ban on direct 
contributions by corporations (first enacted in the 1907 
Tillman Act) and a similar ban imposed on unions (part of the 
Taft-Hartley Act of 1947), but at the same time established the 
basic legislative framework for separate segregated funds, 
popularly referred to as PACs (political action committees). 
Thus, the FECA provided corporations and unions a previously 
unavailable opportunity to participate in federal elections 
through PACs, but limited that opportunity only to PAC 
involvement. The sole use of corporate and union general 
treasury funds allowed under the FECA was for the PAC's 
establishment, operation and solicitation of voluntary 
contributions. It is these voluntary donations that in turn are 
contributed to Federal races. Under the 1971 Revenue Act--the 
first of a series of laws implementing Federal financing of 
Presidential elections--citizens could check a box on their tax 
forms authorizing the Federal government to use one of their 
tax dollars to finance Presidential campaigns in the general 
    It was not until passage of the 1974 amendments to the 
FECA, however, that Congress created a comprehensive structure 
regulating the financing of federal political campaigns. This 
system incorporated a number of features from the regulatory 
past--the ban on union, corporate and foreign contributions, 
for example--and it strengthened the reporting requirements 
while creating the Federal Election Commission to enforce and 
administer the legislation. The FEC was given jurisdiction in 
civil enforcement matters, authority to write regulations and 
responsibility for monitoring compliance with the FECA.
    The new post-1974 FECA was primarily a structure of 
limitations on the movement of money and a venture into public 
funding of presidential politics. The 1974 legislation imposed 
a variety of limitations on contributions. Individuals were 
limited to contributions of $1,000 per candidate per election, 
and to a total calendar-year contribution cap of $25,000, of 
which $20,000 could go to national party committees. PACs and 
party committees could contribute no more than $5,000 per 
election to a candidate, except for the major party senatorial 
committees that were allowed to contribute $17,500 to each 
party senatorial candidate. Expenditure limits were also put in 
place, but all of them except those limiting expenditures by 
party committees were eventually struck down by the courts.\3\
    \3\ Buckley v. Valeo, 424 U.S. 1, 39-59. The Court emphasized that 
the interest in ``equalizing the relative financial resources of 
candidates'' was not sufficient to justify the First Amendment 
infringement imposed by expenditure ceilings.
    Based on the law as modified by the courts, the 
Governmental Affairs Committee made an initial examination of 
illegal and improper activities carried out during the 1996 
federal elections. In late September, 1997 the Committee 
reflected on its investigatory findings to that point by 
holding four days of hearings on the statutory flaws and 
omissions that campaign finance experts maintained allowed or 
encouraged the very activities under Committee review. During 
these four days of hearings the Committee made a deliberate 
attempt to gain insight from a broad range of experts 
representing truly diverse viewpoints toward federal campaign 
finance regulation. As part of the discussion of campaign 
finance statutory shortcomings, the Committee examined proposed 
legislative action advocated to prevent future illegalities and 
improprieties. The various experts who testified advocated 
everything from replacement of the current federal campaign 
finance system's reliance on contribution limits and 
prohibitions with an open market system relying solely on 
disclosure 4 to a highly regulated system involving 
a full public financing option.5
    \4\ Testimony of Leo Troy, Sept. 24, 1997, p. 171.
    \5\ Testimony of Ellen Miller, Sept. 24, 1997, p. 188.
    As a result of these four days of testimony, in addition to 
knowledge gained through the overall investigation, the 
Committee identified several issues as particularly problematic 
in the current statutory scheme regulating federal campaigns in 
the United States. Issues that seem particularly salient and 
partly responsible for the widespread abuses in the 1996 
federal elections include the following: failure to properly 
vet large contributions; the use of soft money to circumvent 
restrictions in the law; the conflict between First Amendment 
guarantees of free speech and campaign spending limitations; 
campaign spending by non-profits; the potential to undermine 
the current campaign system through coordination between 
entities; the use of union members' dues in political 
campaigns; as well as a variety of structural problems related 
to administration of the current system. The problem areas 
examined by the Committee for possible reform are highlighted 
below. This review is not intended to advocate or criticize any 
particular reform, but rather it is designed to ensure that the 
results of this investigation are considered whenever Congress 
undertakes reform of the FECA.

                             ii. soft money

    Much of the testimony the Committee heard involved ``soft 
money,'' as opposed to ``hard'' money which is raised within 
the prohibitions and limitations of the FECA. ``Soft'' money is 
raised and spent in the political process outside of the FECA 
prohibitions and limitations. As a result of the evolutionary 
process discussed in this section, national party committees 
now raise and spend ``soft'' money received from corporations, 
unions and individuals in unlimited amounts. This money is in 
turn spent by national and state political party committees. In 
certain instances outlined below, national party committees 
allocate specific expenditures between soft and hard money 
according to predetermined ratios established by the FEC to 
reflect the percentage of impact such expenditures are 
estimated to have on federal versus other elections. According 
to testimony before the Committee, $265 million in such soft 
money funds entered national party committee coffers for uses 
related to the 1996 federal elections.6 In addition 
to the corporate and union sources, much of this money was made 
up of unlimited individual contributions from those who had 
otherwise given the maximum amount permitted to given political 
committees under the FECA limits.
    \6\ Testimony of Burt Neuborne, Sept. 25, 1997, p.129 and A. 
Corrado, T. Mann, D. Ortiz, T. Potter and F. Souraf [HEREINAFTER 
Corrado], Campaign Finance Reform A Sourcebook, 167 (1997).
    Soft money has also grown to mean money spent directly by 
corporations, unions, non-profits or individuals to impact 
specific elections through the discussion of issues, but which 
avoids the Buckley Court's ``magic words'' of express advocacy 
7 on behalf or in opposition to an identifiable 
federal candidate. Such funds, according to current regulation, 
whether expended by party committees, unions, corporations, or 
other entities, are supposed to be expended only on ``get-out-
the-vote'' campaigns and other non-candidate specific 
    \7\ See discussion of Advocacy Standards below.
    This is an area of the law where vagueness, court 
interpretations, and FEC guidance have encouraged those active 
in campaigns to avoid the restrictions of the system in a 
manner that the authors of the FECA could not have possibly 
foreseen. As a result of the demand for campaign funds, some 
believe that the limits established by federal law have been 
rendered meaningless. Some like Professor Burt Neuborne argue 
``soft money is nothing more than a campaign contribution. It 
is a contribution by a person to a political party with the 
funds to be used in some sense in connection with a campaign.'' 
    \8\  Neuborne testimony, p. 130.

A. Background of soft money

    The alleged abuses of the soft money stem from two 
provisions of the current FECA, and court interpretations of 
those provisions over the past twenty years. First, party 
committees are limited in the amount of money they are allowed 
to spend on behalf of their individual candidates.9 
These coordinated ``hard'' money accounts must consist of 
contributions from non-prohibited sources (no union, corporate 
or foreign money),10 and be within the $20,000 limit 
placed on individual contributions to party 
committees.11 Disbursements from these accounts are 
called ``coordinated expenditures'' because they can be made in 
direct coordination with a candidate's campaign. (They are also 
known as 441a(d) monies, since this is the section of Title 2 
of the United States Code that authorizes such spending.) Given 
that the FECA indexes these coordinated amounts for inflation, 
by 1996 they were roughly three times their original level: 
National party committees could spend $12 million on behalf of 
a presidential candidate, or $30,910 for a House candidate 
($61,820 in a single-district state), and from $61,820 in the 
smallest states, to $1.4 million in California on behalf of a 
Senate candidate.12
    \9\ 2 U.S.C. Sec. 441a(d).
    \10\ 2 U.S.C. Sec. Sec. 441b(a) & 441e.
    \11\ 2 U.S.C. Sec. 441a(a)(1)(C).
    \12\ 2 U.S.C. Sec. 441a(d) and 1996 Coordinated Party Expenditure 
Limits, 22 Federal Election Commission Record 14 (April, 1996).
    Prior to the 1996 election, it was presumed that the full 
amount of party expenditures on any broadcast advertisements 
placed to assist a party's candidate would necessarily be paid 
for with hard dollars from such coordinated hard dollar 
accounts.13 As a result of the Supreme Court's 
decision in Colorado Republican Federal Campaign Committee v. 
FEC, (Colorado Republican), 116 S. Ct. 2309 (1996), the last 
federal election also saw the advent of party committee 
independent expenditures made on behalf of non-presidential 
federal candidates. Thus, for the first time since the passage 
of the FECA, party committees were allowed to expend unlimited 
hard money to expressly advocate the election or defeat of 
clearly identified federal candidates and not count those 
expenditures against their 441a(d) limits, so long as those 
expenditures were not made in express coordination with a 
candidate in the particular race.
    \13\ See the discussion below of changes wrought by FEC Advisory 
Opinion 1995-25, Fed. Election Camp. Fin. Guide (CCH) para. 6162 at 
12,109 (August 24, 1995).
    The various uses of soft money in 1996 are a culmination of 
a long evolutionary process. In amendments to the FECA passed 
by Congress in 1979 to encourage grass-roots participation, 
greater leeway was given to party organizations to spend 
federal funds (hard money) with respect to election-related 
activity. As a result of these amendments party organizations 
could spend unlimited amounts of hard money on voter 
registration and identification, certain types of campaign 
material, and voter turnout programs. Although these 1979 
Amendments authorized a circumscribed realm of unlimited party 
expenditures, they did not sanction unlimited spending by party 
committees of unregulated (soft money) on activities designed 
to assist a particular candidate for federal office. The latter 
activity came into vogue as a result of FEC interpretations of 
the FECA. In Advisory Opinion 1978-10 the FEC declared that the 
Kansas Republican State Committee could use corporate and union 
money to finance a share of their voter drives, so long as it 
allocated its costs to reflect the federal and nonfederal 
shares of any costs incurred.14 They did this 
because in Kansas, as in many states, the use of corporate and 
union money in state elections is permissible. By direct 
analogy, national party committees have since been allowed to 
split the costs of such grassroots ``state based'' activity 
between soft and hard money elements. The practice grew because 
federal and state committees are largely allowed to transfer 
funds without restriction.15 The practice also grew 
despite the eventual acknowledgment by the courts that such 
grassroots activity directly impacted federal 
    \14\ FEC Advisory Op. 1978-10, Fed. Election Camp. Fin. Guide (CCH) 
para. 5340 at 10,335 (August 29, 1978).
    \15\ 2 U.S.C. Sec. 441a(a)(4).
    \16\ See Common Cause v. Federal Election Commission, 692 F. Supp. 
1391 (D.D.C. 1987) and Common Cause v. Federal Election Commission, 692 
F. Supp.. 1397 (D.D.C. 1988).
    Thus, just as Congress was allowing party organizations to 
spend unlimited amounts of money raised under federal rules on 
voter programs and other activities, the FEC allowed them to 
pay a share of such costs with funds not subject to federal 
limits.17 As a result of this evolution, national 
party committees could now spend ever greater amounts of soft 
money, and the quest was on to find a way to spend this money 
outside of the system to directly benefit federal candidates.
    \17\ FEC Advisory Op. 1978-10, Fed. Election Camp. Fin. Guide (CCH) 
para. 5340 at 10,335 (August 29, 1978).
    As an outgrowth of Common Cause court action against the 
it,18 the Federal Election Commission finally issued 
new soft money regulations that took effect on January 1, 1991. 
Under these rules, all party committees raising and spending 
soft money in conjunction with federal elections must file 
regular disclosure reports of their contributions and 
disbursements with the FEC. These reports must identify any 
contributors to national party committees who give more than 
$200 to soft money accounts or party building-fund accounts.
    \18\ See Common Cause v. Federal Election Commission, 692 F. Supp. 
1391 (D.D.C. 1987) and Common Cause v. Federal Election Commission, 692 
F. Supp. 1397 (D.D.C. 1988).
    Most importantly the new regulations established specific 
allocation formulas for the use of soft and hard money. These 
rules require national party committees to pay for 65% of all 
their overall ``generic voter drive'' costs made in a 
presidential election year out of ``hard dollar'' accounts (60% 
must come from hard dollars in non-presidential election 
years). Thus, 35% of the money spent on generic activity during 
a presidential election year (40% in non-presidential election 
years) may come from money raised outside the limits and 
prohibitions of the Federal Election Campaign Act.19 
As a result of these new regulations, the public learned in 
1992 that the major party committees raised more than $83 
million in soft money, or about four times the amount of soft 
money estimated to have been spent by party committees in 1984. 
In the 1996 cycle the explosion in soft money continued. Soft 
money receipts at the Republican national party committees 
increased by 178% over 1992 to $138.2 million, while Democratic 
party committee receipt of soft money increased 242% over 1992 
levels to $123.9 million.20 Due to such disclosure 
we now know the extent and potential impact of party committee 
soft money in the federal political process. No such disclosure 
exists for direct corporate, or large individual soft money 
expenditures on ``issue advertisements.''
    \19\ 11 C.F.R. Sec. 106.5(b).
    \20\ Corrado, Campaign Finance Reform A Sourcebook, 175 (1997).
    The latest, and perhaps the most significant event, 
contributing to the current questionable use of soft money for 
issue advocacy advertisements was the FEC's issuance of 
Advisory Opinion 1995-25. 21 In Advisory Opinion 
1995-25 the FEC ruled that party issue advertisements relating 
solely to congressional legislative proposals would have to be 
paid for by a mixture of hard and soft money, even if they did 
not expressly advocate the election or defeat of any 
identifiable federal candidate. The FEC ruled that such party 
issue advertisements must be paid for by using 60% (1995 was a 
non-presidential election year) hard money. The FEC reasoned 
that because of the very nature of a national party committee, 
it would not make any generic expenditures that did not in some 
way benefit federal election candidates.
    \21\ FEC Advisory Op. 1995-25, Fed. Election Camp. Fin. Guide (CCH) 
para. 6162 at 12,109 (August 24, 1995).

B. Problems arising from soft money

    As outlined above, soft money can be spent directly by a 
national party committee for a portion of its state based 
generic party building and issue advocacy, or transferred to 
the various affiliated state party committees for similar 
activity. Under no circumstances can soft money be utilized to 
advocate the election or defeat of a clearly identifiable 
federal candidate (i.e. express advocacy). The statute, FEC 
application of the law, and court opinions make clear that 
party committees in particular are further prohibited from 
spending soft money on any kind of electioneering message. As 
defined by the FEC, ``electioneering messages'' are statements 
``designed to urge the public to elect a certain candidate or 
party.'' 22 The electioneering message standard is 
discussed in greater detail in the advocacy section of this 
    \22\ FEC Advisory Op. 1985-14, 2 Fed. Elec. Camp. Fin. Guide (CCH) 
para. 5819, at 11,185--11, 186 (May 30, 1985).
    As described in further detail in the coordination section 
below, the Clinton/Gore '96 campaign devised a way to 
circumvent the DNC's 441a(d) coordinated expenditure limit and, 
in violation of the FECA, illegally utilize approximately $44 
million in national committee soft money to their candidate's 
advantage through electioneering messages that they claim to be 
pure issue advertisements. These advertisements carefully 
avoided expressly advocating the electionof President Clinton, 
but these party committee expenditures were clearly made for the 
purpose of influencing the Presidential election. This election 
influencing purpose has been acknowledged by those who worked directly 
with President Clinton on them, including Dick Morris 23 and 
Leon Panetta.24
    \23\ Deposition of Dick Morris, August 20, 1997, pp. 274 & 345. See 
also the section of this report on The Thirst for Money.
    \24\ Meet the Press (NBC television broadcast, March 9, 1997).
    It is established practice that national party committees 
and state party committees work in tandem when spending for 
federal, state and local elections. Given that state party 
committees may spend the same coordinated amounts as the 
national party organizations in House and Senate races, 
``agency agreements'' have gained popularity. In those states 
or districts where a state party lacks adequate funding to meet 
the coordinated spending limit, and a national party committee, 
usually a congressional or senatorial campaign committee, 
considers a race strategically important, the state and 
national party committees form an ``agency agreement'' that 
transfers the state party's spending quota to the national 
committee. With national party committees now able to spend 
soft money on an expanding array of things that they formerly 
paid for with hard money,25 ``agency agreements'' 
have become increasingly common because national party 
committees have larger reserves of hard money to maximize 
potential coordinated expenditures on express advocacy in tight 
    \25\ Witness the broadcast issue advertisements that appeared as a 
result of FEC Advisory Op. 1995-25, Fed. Election Camp. Fin. Guide 
(CCH) para. 6162 at 12,109 (August 24, 1995).
    In addition to agency agreements, the DNC deftly utilized 
state party committees in 1996 as a conduit to further increase 
their illegal expenditure of soft money on electioneering 
messages favoring the re-election of President Clinton, all the 
time claiming such advertisements consisted of pure issue 
advocacy outside of the realm of the FECA. Such manipulation of 
the current FECA for party committee advantage results from the 
regulatory distinction establishing different hard to soft 
expenditure ratios for state party committees and national 
party committees. 26 The FEC lacks jurisdiction to 
regulate any state party committee spending outside that made 
on behalf of federal candidates. Therefore, FEC guidelines 
leniently allow general state party expenditures that have an 
incidental federal election impact to be allocated over a two 
year election cycle using the ratio of federal to nonfederal 
candidates on that State's November ballot. For example, in a 
state where the ballot includes candidates for two types of 
federal races--say, presidential and congressional--and 
candidates for eight nonfederal offices, the state party could 
pay for 80% of the generic activities with soft dollars. Given 
that hard dollars (raised in $1,000 increments from FECA non-
prohibited sources) are significantly more difficult to raise, 
the distinction described above creates an incentive to have 
the state party pay for as many activities as possible using 
soft money. To take advantage of the current system, national 
party committees have begun transferring soft money to state 
party committees to utilize the various states' higher soft 
money allowance. Substantial amounts of such transfers are made 
to state and local political parties for ``generic voter 
activities'' that in fact ultimately benefit federal candidates 
because the funds for all practical purposes remain under the 
control of the national committees. The use of such soft money 
thus allows more corporate, union treasury, and large 
contributions from wealthy individuals into the system.
    \26\ Testimony of Anthony Corrado, September 25, 1997, p. 7.
    Despite disclosure regulations for the national party soft 
money accounts, monies raised and spent by state and local 
committees that claim to be unrelated to federal election 
express advocacy do not have to be reported to the FEC (but 
they are often reported at the state level). Of course, 
transfers to the state party committees from the national party 
committees are reported as expenditures on the national party 
committee FEC filings. Disclosure reports required to be filed 
at the state level by state party committees are often 
inadequate to fully disclose the ultimate use of such 
transferred funds.27
    \27\ Testimony of Anthony Corrado, September 25, 1997, p. 8, ll. 7-
12 .
    In the crucial 1995 pre-election year, according to FEC 
reports, the DNC transferred almost $11.4 million in soft money 
to state parties, followed by another $6.4 million in the first 
quarter of 1996. In sharp contrast, the RNC shifted a little 
over $2.4 million to the states from January 1, 1995 to 
February 29, 1996. Ultimately the DNC quietly transferred at 
least $32 million,28 and perhaps as much as $64 
million,29 to state Democratic party committees in 
the 1996 cycle. This transfer of funds allowed state party 
committees to utilize a higher proportion of the national party 
committee's soft money in areas impacting federal elections 
than if the national party committee had made the expenditures 
directly. The DNC on its own would have had to purchase the 
very same air time under the much tighter federal allocation 
guidelines requiring a higher percentage of hard dollars.
    \28\ Democrats Used the State Parties to Bypass Limits, New York 
Times, October 1, 1997, at A1.
    \29\ Anthony Corrado testimony, p. 7.
    Recent history is replete with evidence that these 
different state and national allocation formulas are being 
utilized to circumvent the FECA. In October 1990, the DNC 
accepted a $230,000 contribution in soft money from Louisville, 
Kentucky newspaper publishing heiress Mary C. Bingham. Shortly 
thereafter, the DNC transferred $215,000 to the Kentucky 
Democratic Party, which in turn paid for an advertising blitz 
that closely paralleled the themes that Bingham's favored 
candidate used in campaigning for the U.S. Senate.30 
In the Spring of 1995 the Pennsylvania Democratic Party was 
$200,000 in debt, but after receiving $2.8 million from the DNC 
it used approximately $2.7 of the funds to pay for television 
spots created by DNC media consultant Squier, Knapp & Ochs. The 
Squier firm was also paid by the Clinton/Gore ``96 campaign 
committee, and ads that it produced for the Clinton/Gore ``96 
committee were either identical to, or closely mimicked by 
state party and DNC re-election campaign ads.31 The 
flow of funds in and out of the Michigan Democratic Party 
during the first quarter of 1996 vividly displays this scheme. 
On five separate occasions, the DNC shifted cash from both its 
federal and nonfederal accounts to the Michigan Democratic 
Party. Within days of each transfer, the Michigan Democratic 
Party wrote a check in the same amount to the Squier firm to 
pay for pro-Clinton ads.32 Moreover, the proportion 
of hard and soft dollars that the Michigan Democrats used to 
pay Squier was exactly the same as the hard and soft-dollar 
transfers from the DNC. All told, the DNC conveyed $172,731 
from its federal (hard-dollar) account and $281,824 from its 
nonfederal (soft-dollar) account to the Michigan Democrats. 
That is exactly the same ratio as the FEC allocation formula 
that applies to the cost of generic activities paid for by the 
Michigan Democrats in 1996: 38% hard and 62% soft. If the DNC 
had directly paid for those ads in Michigan, its 65/35 FEC 
allocation formula would have required the committee to spend 
$295,461 in hard dollars and $159,094 in soft 
dollars.33 Thus, the DNC saved $122,810 in hard 
dollars by using the Michigan Democratic Party as a conduit to 
pay for these particular advertisements. If this is not a 
violation of the current FECA, it is definitely a manipulation 
of an undesirable ``loophole'' in violation of the spirit of 
the law.
    \30\ Federal Election Commission Enforcement Matter Under Review 
3182 (DNC, Kentucky Democratic Party, Harvey Sloane for U.S. Senate, et 
    \31\ J. Barnes, Party Favors, National Journal, May 11, 1996, p. 
    \32\ For example, the investigation uncovered an advertisement 
containing the same visuals incorporating President Clinton giving a 
speech and the exact language which, according to the disclaimers on 
the advertisement, was alternatively paid for by the DNC, or the 
Michigan Democratic Party. The narration of that advertisement stated 
the following: ``Every year in America, one million women are the 
victims of domestic abuse. It is a violation of our Nation's values. 
It's painful to see. It's time to confront it. The President's plan: 
Increased child support enforcement. Work, not welfare, to encourage 
stronger families. Improve and enforce domestic violence laws. One 
million women. A test of our national character. A challenge we will 
meet.'' Given the acknowledged ``gender-gap'' of the 1996 election 
there is little doubt that this mention of President Clinton during an 
election year was intended to influence the Presidential election.
    \33\ J. Barnes, Party Favors, National Journal, May 11, 1996, p. 
    FEC reports of the receipts and expenditures of a dozen 
state Democratic parties from July 1, 1995, through March 31, 
1996, indicate that the state entities operated as little more 
than a pass-through for the DNC to pay for the production and 
broadcasting of ads by the Squier firm. Clearly, the Democratic 
National Committee produced commercials that various state 
Democratic party committees in turn placed in their local media 
market with a disclaimer stating that the advertisements had 
been paid for by that specific state Democratic party 
committee. In news accounts the Pennsylvania Democratic Party 
spokeswoman Kelly McBride said, when asked about DNC transfers 
and the subsequent ads, ``The state party cooperated with the 
national party to produce those commercials.'' This scheme to 
avoid FEC mandated allocation is especially odious in that it 
allows national party committees to continue to control the 
content and placement of advertisements, and at that same time 
avoid adherence of the FEC's specific regulations. The truth 
was probably most accurately reflected by Florida Democratic 
Party communications director Jo Miglino who said, when asked 
about such Florida Democratic Party advertising in her state, 
``Those aren't ours; those are the DNC's.'' 34
    \34\ Id.

C. Potential reforms directed at soft money

    Under the FECA's current system of contribution 
limitations, the investigation has found, soft money spending 
by political party committees eviscerates the ability of the 
FECA to limit the funds contributed by individuals, 
corporations, or unions for the defeat or benefit of specific 
candidates. The development of soft money has severely 
undermined the party coordinated expenditure limits of the 
FECA, since party committees that reach this coordinated limit 
can now continue to spend money to influence federal elections 
beyond the coordinated limit through a variety of means. One 
option available to national party committees is to simply 
shift their spending to issue advocacy ads (those having a 
bearing on issues of the specific election contest, but 
avoiding explicit advocacy of any candidate). Another course 
national parties can now pursue as a result of the Colorado 
Republican decision (discussed infra) is to make independent 
expenditures 35 that can benefit a candidate without 
counting against any party spending ceilings. Finally, 
unlimited national party committee soft money can be 
transferred to state parties to pay for issue advertisements 
carefully designed to influence a federal election, but at the 
same time avoid reporting by not expressly advocating the 
election or defeat of an identifiable federal candidate.
    \35\ See discussion elsewhere in this section of Colorado 
Republican Federal Campaign Committee v. FEC, 116 S. Ct. 2309 (1996).
    Reforms in the area of soft money must recognize that state 
parties are governed by state laws; that traditional party-
building activities from voter registration and get-out-the-
vote drives to sample ballots impact both the campaigns for 
state and local office and campaigns for federal office; and 
that most students of the system believe it is desirable to 
enhance the role of parties. One solution for the ``soft 
money'' morass that the Committee heard advocated was a 
suggestion to simplify the current complicated distinctions 
between hard money, soft money, coordinated money, and 
independent expenditures. Anthony Corrado suggested a clear 
statutory definition of national party committee money, 
subjecting it all to federal limitations and 
prohibitions.36 Eliminating the legal distinction 
between non-federal (soft) and federal (hard) funds at the 
national party committee level is a tempting proposal, if a 
decision is made to rid the system of soft money. Many people 
maintain that the Buckley decision allows political parties to 
be subjected to the same source and amount restrictions that 
apply to candidate contributions.37 Don Simon of 
Common Cause brought to the Committee's attention a letter co-
signed by 124 constitutional scholars from across the country. 
That letter concludes that Congress clearly possesses the power 
to limit the soft money system through such a limitation on 
national party committee funds.38
    \36\ Testimony of Anthony Corrado, Sept. 25, 1997, pp. 96 & 97.
    \37\ Neuborne testimony, September 25, 1997, pp. 130-134.
    \38\ Letter from Ronald Dworkin and Burt Neuborne to Senator John 
McCain and Senator Russell Feingold, September 22, 1997.
    The wisdom of extending the hard money limitations now 
being imposed on candidates to party committees, hinges on the 
assumption that national political party expenditures 
inevitably affect the outcome of federal elections, that 
national party committees do not expend funds unless they 
benefit their candidates, and that the courts will accept the 
argument that such contributions to party committees have the 
potential to influence a legislator's votes and thus can have a 
corrupting influence. Court decisions support the proposition 
that Congress has broad power to regulate the flow of funds 
into the electoral process. Courts have upheld limitations 
ranging from the overall $25,000 individual annual contribution 
limit to the $5,000 PAC contribution ceiling.39
    \39\ See California Medical Ass'n v. FEC, 453 U.S. 182 (1981); FEC 
v. National Right to Work Committee, 459 U.S. 197 (1982), and Austin v. 
Michigan Chamber of Commerce, 494 U.S. 652 (1990).
    In return for prohibiting national party committee receipt 
of soft money, some advocate raising the existing limits on 
individual contributions to parties, such as creating a 
separate $25,000 annual limit to party committees above and 
beyond any other annual limit imposed on individual 
contributors. At the same time, party committees could be 
allowed to allocate these ``hard money'' resources among their 
candidates as they choose without restriction.40 
Under this reform scenario, the party committees would retain 
control of their spending priorities, the public would have 
full disclosure of the source of funds, and the party system 
would be freed of excessively large contributions from 
individuals, unions or corporations that might lead to the 
appearance of corruption or actual quid pro quo.
    \40\ Testimony of Norman Ornstein, Sept. 24, 1997, p. 82 and 
Testimony of Douglas C. Berman, Sept. 24, 1997, p. 200.
    Curtis Gans, Executive Director of the Committee for the 
Study of the American Electorate, proposed Congress merely 
prohibit the use of party committee soft money for broadcast 
advertising. Rather than completely eliminating soft money, 
this approach would allow its continued use for non-federal 
grassroots activity and institutional building.41 On 
the other hand, Anne McBride of Common Cause testified that any 
compromise under which soft money was allowed to exist at the 
state level, but not at the federal level, would result in more 
manipulation and ``gaming'' of the system.42
    \41\ Testimony of Curtis Gans, September 24, 1997, p. 157.
    \42\ McBride testimony, p. 5.
    One witness testified that soft money limitations on 
national party committees would be unconstitutional because 
money to party committees raises no compelling state interest 
in preventing quid-pro-quo corruption.43 Brent 
Thompson, former director of the Fair Government Foundation, 
credits soft money for allowing party organizations to increase 
their role in elections and thus strengthen the ``federalism'' 
of the American party structure.44 He also argues 
that party committee receipt of such soft money separates the 
source of the funds from the candidates, and thus prevents the 
appearance of corruption or actual quid pro quos for campaign 
    \43\ Testimony of Roger Pilon, Senior Fellow, CATO Institute, Sept. 
25, 1997, pp. 144, and 153-155.
    \44\ Brent Thompson, Despite Reform Frenzy, Don't Blame Soft Money 
for Campaign Scandal, Roll Call, March 27, 1997, p. 12.
    Yet others note that candidates, such as President Clinton, 
essentially are the party committee,45 and as such 
control party solicitations and reap the rewards of these 
excessive contributions. Such a posture makes the candidate 
just as susceptible to corruption or actual quid pro quos as if 
the contributions were given directly to the candidate's 
campaign committee. Failure of the FECA to effectively address 
the symbiosis between a sitting President and his party 
committee is another example of the need for an overall 
coherent set of checks and balances to counteract the revisions 
read into the FECA since its passage.
    \45\ Deposition of Richard (Dick) Samuel Morris, August 20, 1997, 
pg. 30.
    During the Committee's hearings, witnesses such as Edward 
Crane, President of the CATO Institute and Roger Pilon, Senior 
Fellow at the CATO Institute, argued that there should be no 
restrictions at all on the source or amount of party committee 
expenditures. Under such a system, prompt and complete 
disclosure is seen as sufficient regulation to control the 
potential evils of union, corporate and large contributions. 
There is no explanation of how such disclosure prevents state 
reporting gaps, potential delays in federal reporting, or the 
FEC's previous inability to sufficiently sanction violators of 
similar provisions in order to avoid reoccurrence. Despite all 
of these options discussed, it may be impossible to completely 
control the flow of soft money as our system of Federalism 
makes it unlikely that federal legislation could 
constitutionally deprive the various state party committees of 
the right, where it is now legal under state law, to continue 
to raise corporate, union and large individual contributions.

                       III. Foreign Contributions

    A central focus of the Committee's investigation was the 
manner in which illegal foreign money made its way into the 
federal election process. Title 2 U.S.C. Sec. 441e explicitly 
makes it illegal for any foreign national to contribute to any 
federal or non-federal election in the United States, either 
directly or indirectly.46 This prohibition dates 
from 1966 legislation responding to congressional hearing 
revelations that Philippine sugar producers and agents of 
Nicaraguan president Luis Somoza contributed to federal 
candidates. The foreign contribution prohibition also prevents 
domestic subsidiaries of foreign corporations from establishing 
PACs if the foreign parent finances the PAC's establishment, 
administration, or solicitation costs, or if individual foreign 
nationals within the corporation have an impact on the 
decisions of the PAC, participate in its operation, or serve as 
officers.47 Since federal law prohibits a foreign 
national from making contributions through another person or 
entity, the FEC has made it clear that domestic subsidiaries of 
foreign parent corporations may only make contributions out of 
domestic profits.48
    \46\ Sec. 441e Contributions by Foreign Nationals
    (a) It shall be unlawful for a foreign national directly or through 
any other person to make any contribution of money or other thing of 
value, or to promise expressly or impliedly to make any such 
contribution, in connection with an election to any political office or 
in connection with any primary election, convention, or caucus held to 
select candidates for any political office; or for any person to 
solicit, accept, or receive any such contribution from a foreign 
    (b) As used in this section, the term ``foreign national'' means --
    (1) a foreign principal, as such term is defined by section 611(b) 
of title 22, except that the term ``foreign national'' shall not 
include any individual who is a citizen of the United States; or
    (2) an individual who is not a citizen of the United States and who 
is not lawfully admitted for permanent residence, as defined by section 
1101(a)(20) of title 8.
    \47\ 11 C.F.R. Sec. 110.4(a)(3).
    \48\ FEC Advisory Op. 1992-16, Fed. Election Camp. Fin. Guide (CCH) 
para. 6059 at 11,813 (June 26, 1992).
    The Committee's investigation heard testimony that three 
problems led to increased illegal foreign contributions in the 
1996 federal elections. First, organizations like the 
Democratic National Committee (DNC) failed to establish and 
abide by sufficiently stringent vetting procedures to review 
even the largest contributions. Second, the solicitation of 
massive amounts of soft money increased the perception that 
large contributions could result in some quid pro quo, and thus 
foreign contributors decided their money might influence 
policy. Finally, the foreign contribution prohibition is very 
difficult to enforce for the average contribution because 
recipient committees lack a reliable method to ensure that 
donors who are not known to campaign solicitors are in fact 
American citizens.
    Foreign contributions were encouraged by many contributors' 
belief that the DNC's obviously desperate and aggressive search 
for large contributions meant contributing in 1996 was more 
likely than ever to lead to personal gain. One prime example of 
the DNC's encouragement of this state of mind is found in a 
$250,000 contribution from South Korean businessman, John K. H. 
Lee.49 Michael Mitoma, the mayor of Carson, 
California, testified during the Committee's public hearings on 
September 5, 1997 that he believed arrangement of a meeting 
between President Clinton and Lee would encourage Lee's 
decision to locate a factory in Carson.50 Once 
Mitoma related information to John Huang about a Korean 
businessman who was considering starting a business in America, 
Mr. Huang and his colleagues at the DNC anxiously arranged a 
photo-op for Lee with the President in exchange for a $250,000 
contribution. Any casual observer, let alone someone vetting a 
$250,000 contribution to the President of the United States, 
should have quickly come to the conclusion that the source of 
this particular corporate soft money contribution, Lee's newly 
incorporated U.S. company Cheong Am America, Inc., was merely a 
front for processing an illegal foreign contribution from Lee. 
Despite the fact that Lee spoke no English, and needed to fly 
to Washington from Korea, he and four individuals of his choice 
were able to meet on April 8, 1996 with Don Fowler, Richard 
Sullivan, Peter Knight, and ultimately the President. A simple 
check of the California incorporation records would have shown 
that Cheong Am was incorporated at the end of February 
1996.51 Thus, even without the bank records showing 
that the Cheong Am America bank account was funded by a 
transfer of $1.3 million from Korea on March 26, 
1996,52 one could have surmised that it was unlikely 
Cheong Am America had operated long enough to generate the U.S. 
revenue needed to make a U.S. political contribution. This 
$250,000 contribution was covered with red flags--all of which 
were ignored.
    \49\ See detailed discussion of the John K.H. Lee contribution in 
the section of this report on John Huang's illegal fundraising at the 
    \50\ Testimony of Michael Mitoma, September 5, 1997, p. 126.
    \51\ See section of this report entitled ``John Huang's Illegal 
Fund-raising at the DNC,'' Ex. 11, State of California Certificate of 
    \52\ Id., Ex. 12, Assorted bank records of Cheong Am America.
    In their zeal to raise money, DNC officials at best 
neglected to ask the obvious questions, and at worst 
deliberately looked the other way. The drive for large 
contributions led the DNC to accept the Lee contribution. 
Considering that the legal hard dollar limit for individuals is 
$1,000 per election, the person solicited for a $250,000 soft 
money contribution would logically anticipate something in 
return, or at least expect a higher level of access. As Common 
Causes' Ann McBride pointed out in her testimony,

          [i]f you look at what this Committee exposed about 
        foreign contributions, . . . [they] simply would not 
        have found a way into the system if this huge 
        unlimited, unregulated system did not exist, and so we 
        believe the best reform to end the problem revealed in 
        this Committee about foreign contributions is to end 
        the soft money system.53
    \53\ McBride testimony, p. 5.

    During the 1996 election, the issue of whether this foreign 
national prohibition applies to the gift of ``soft'' or 
nonfederal money to a national party committee came to the 
forefront. The FECA definition of ``contribution'' is limited 
to ``any gift, subscription, loan, advance, or deposit of money 
or anything of value made by any person for the purpose of 
influencing any election for Federal office.'' 54 As 
seen in the footnote above quoting the FECA foreign 
prohibition, it only bans foreign contributions. Technically, 
soft money as described above, by definition may not therefore 
constitute a ``contribution'' because it is supposedly not made 
``for the purpose of influencing any election for Federal 
office.'' In response to a question from Senator Thompson 
challenging her stance that ``soft money'' never constitutes a 
``contribution,'' 55 Attorney General Janet Reno's 
testimony before the Senate Judiciary Committee on April 30, 
1997, indicates that the Department of Justice interprets 
Section 441e to prohibit soft money contributions to party 
committees from foreign nationals.56 Certainly that 
was the common understanding prior to the 1996 elections, and 
clearly the DNC believed such a prohibition to exist as it 
refunded all such foreign soft money contributions that it was 
found to have received. Regardless of this questionable new 
interpretation limiting the reach of the FECA's foreign 
contribution prohibition, the President's unprecedented use of 
soft money to advance his re-election prospects renders the 
acceptability of foreign soft money contributions moot in the 
present context.
    \54\ 2 U.S.C. Sec. 431(8)(A)(i) (emphasis added).
    \55\ Attorney General Reno letter to Senator Orrin Hatch, April 14, 
    \56\ See Department of Justice Oversight, Hearing of the Senate 
Judiciary Committee, Federal News Service, April 30, 1997.
    The dismantling of the DNC vetting procedures 57 
only exacerbated the problem of foreign contributions finding 
their way into the 1996 federal elections. For the 1992 
election cycle the DNC implemented a system for vetting 
contributions over $10,000. Any check for $10,000 or more was 
to go through a vetting desk.58 This desk was 
supervised by Barbara Stafford, an attorney in the DNC's Office 
of General Counsel. Stafford had full-time responsibility for 
vetting contributions, as did her assistant, David 
Blank.59 In fact, the 1992 vetting system involved 
an entire group of individuals, usually numbering between six 
and ten, who did nothing but vet major 
contributions.60 Current DNC Deputy General Counsel 
Neil Reiff confirmed to the Committee that there was once a 
separate ``unit'' of about seven or eight people, supervised by 
Barbara Stafford, that vetted checks.61 Indeed, 
current DNC General Counsel Joseph Sandler has testified that 
``for the 1992 election a procedure known as Major Donor 
Screening Committee'' was in place.62 Sometime after 
the 1994 election this vetting procedure was 
dismantled.63 According to FEC records, the DNC 
received 178 contributions of $100,000 or more in 1995 and 1996 
without an appropriately established vetting procedure, and 
without in fact checking to determine if they were legal. The 
DNC's failure to properly vet donations facilitated the 
funneling of foreign contributions to the DNC by fundraisers 
like John Huang.
    \57\ See the section of this report on The DNC Dismantled Vetting 
    \58\ Deposition of Robert J. Stein, June 17, 1997, p. 58.
    \59\ Stein deposition, p. 81.
    \60\ Deposition of Melissa A. Moss, June 11, 1997, pp. 12 and 17.
    \61\ Deposition of Neil Paul Reiff Esq., June 20, 1997, p. 30.
    \62\ Deposition of Joseph E. Sandler, May 15, 1997, p. 47.
    \63\ For a fuller account, see the section of this report on The 
DNC Dismantled Vetting System.
    In addition to strengthening sanctions imposed upon those 
who do not take appropriate precautions to avoid violating 
existing FECA provisions, witnesses at the Committee's hearings 
raised the possibility of establishing through law stringent 
vetting procedures. There are currently no established 
statutory or regulatory requirements detailing appropriate 
vetting procedures to be utilized by political committees to 
ensure acceptance of contributions within the limitations and 
prohibitions of the FECA. Such vetting procedures could be 
modeled after the FEC's regulatory requirements detailing the 
best efforts required of political committees to obtain 
required contributor information.
    As a result of the discussion above, application of the 
foreign contribution prohibition to soft money also might be 
reformulated. Banning contributions from permanent non-citizen 
residents did not meet with much approval when it was discussed 
during the Committee's hearings.64 One alternative 
raised would prohibit those who cannot legally vote from 
contributing to political campaigns (i.e., non-U.S. citizens, 
as well as those who are not 18 years old or who are convicted 
felons).65 A bright line test such as a voting 
eligibility requirement is easily understandable and could be 
communicated through a required disclaimer on all campaign 
    \64\ Discussion between Senator Akaka and Thomas E. Mann, September 
24, 1997 pp. 55-56.
    \65\ Discussion between Senator Akaka and Thomas E. Mann, September 
24, 1997, p. 56.

                         IV. Advocacy Standards

A. Issue advocacy, express advocacy and electioneering message

    The FECA, as interpreted by the FEC and various court 
opinions, allows the government regulation of the political 
speech of corporations, unions, non-profits and individuals on 
First Amendment grounds in only those instances containing 
express advocacy of the election or defeat of a clearly 
identifiable candidate.66 The Supreme Court in 
Buckley v. Valeo indicates the following explicit advocacy 
terms satisfy the strict ``express advocacy'' test applied when 
limiting First Amendment rights: ```vote for,' `elect,' 
`support,' `cast your ballot for,' `Smith for Congress,' `vote 
against,' `defeat,' `reject.''' 67 Still, at no 
point did the Court state that this list was exhaustive. The 
Court stated such a strict line was required because,
    \66\ Buckley v. Valeo, 424 U.S. 1 (1976); see caveat in 
Coordination section below.
    \67\ Buckley, 424 U.S. at 44 n.52.

          the distinction between discussion of issues and 
        candidates and advocacy of election or defeat of 
        candidates may often dissolve in practical application. 
        Candidates, especially incumbents, are intimately tied 
        to public issues involving legislative proposals and 
        governmental actions. Not only do candidates campaign 
        on the basis of their positions on various public 
        issues, but campaigns themselves generate issues of 
        public interest.68
    \68\ Id. at 42.

According to the Court, a standard that depends on the 
speaker's intent or purpose has a chilling effect on political 
    Applying the Supreme Court's reasoning in Buckley, the 
Ninth Circuit in Federal Election Commission v. Furgatch, 807 
F. 2d 857 (1987), cert denied, 484 U.S. 850 (1987) reviewed the 
following advertisement text:

        DON'T LET HIM DO IT.
          The President of the United States continues 
        degrading the electoral process and lessening the 
        prestige of the office.
          It was evident months ago when his running mate 
        outrageously suggested Ted Kennedy was unpatriotic.
    The President remained silent.
          And we let him.
          It continued when the President himself accused 
        Ronald Reagan of being unpatriotic.
          And we let him do it again.
          In recent weeks [Jimmy] Carter has tried to buy 
        entire cities, the steel industry, the auto industry, 
        and others with public funds.
          We are letting him do it.
          He continues to cultivate the fears, not the hopes, 
        of the voting public by suggesting the choice is 
        between ``peace and war,'' ``black or white,'' ``north 
        or south,'' and ``Jew vs. Christian.'' His meanness of 
        spirit is divisive and reckless McCarthyism at its 
        worst. And from a man who once asked, ``Why not the 
          It is an attempt to hide his own record, or lack of 
        it. If he succeeds the country will be burdened with 
        four more years of incoherences, ineptness and 
        illusion, as he leaves a legacy of low-level 
        DON'T LET HIM DO IT.69
    \69\ Furgatch, 807 F.2d at 858.

    Despite the lack of any of the magic words from Buckley, 
the Ninth Circuit found this to constitute express advocacy. 
The opinion specifically stated, ``[a] test requiring the magic 
words `elect,' `support,' etc., or their nearly perfect 
synonyms for a finding of express advocacy would preserve the 
First Amendment right of unfettered expression only at the 
expense of eviscerating the Federal Election Campaign Act. 
`Independent' campaign spenders working on behalf of candidates 
could remain just beyond the reach of the Act by avoiding 
certain key words while conveying a message that is 
unmistakably directed to the election or defeat of a named 
candidate.'' 70 Instead of the magic words test, the 
Furgatch court outlined the following three prong test to 
determine whether advocacy comes within the purview of the 
FECA: (1) speech constitutes express advocacy if it is 
``unmistakable and unambiguous, suggestive of only one 
plausible meaning;'' (2) such express advocacy speech must 
present a ``clear plea for action''; and (3) it must be clear 
what action is being advocated.
    \70\ Id. at 863.
    When applying Buckley to determine whether advocacy falls 
within the regulatory framework of the FEC, other federal 
appeals courts have held that the express advocacy test set out 
in Buckley can only be met by communications that contain 
explicit and unambiguous words that urge readers (or viewers) 
to elect or defeat a clearly identified candidate. This 
includes the First [Faucher v. Federal Election Commission, 928 
F. 2d 468 (1991), cert. denied sub nom., 502 U.S. 820 (1991)], 
the Second [Federal Election Commission v. Central Long Island 
Tax Reform Immediately Committee, 616 F. 2d 45 ( 2d Cir. 
1980)], and the Fourth circuit [Federal Election Commission v. 
Christian Action Network, 894 F. Supp. 946 (W.D. Va. 1995), 
aff'd, No. 95-2600, slip op. (3d Cir. Aug. 2, 1996)].
    When the FEC tried to incorporate the Furgatch express 
advocacy standard into its regulations it was successfully 
challenged in the First Circuit, where a district court ruled 
the new regulations are unconstitutional on their face. Maine 
Right to Life Committee, Inc. v. Federal Election Commission, 
914 F. Supp. 8 (D. Me. 1996). In striking down the Commission's 
``express advocacy'' regulations, the court distinguished 
between mere ``contact,'' which the court ruled cannot be 
regulated, and issue advocacy that is ``coordinated'' with or 
authorized by a candidate, which the court suggested could be. 
The court pointed out that ``Buckley talked only about 
prohibiting expenditures `authorized or requested by the 
candidate,' interpreted at its broadest as `all expenditures 
placed in cooperation with or with the consent of a candidate.' 
The FEC has gone far beyond `cooperation' or `consent' in these 
prohibitions of all contact and consultation in the preparation 
of voter guides . . .'' 71
    \71\ Clifton v. Federal Election Commission, 927 F.Supp. 493, 499 
(D. Me. 1996).
    Thus, currently the laws have been interpreted to allow 
pure uncoordinated ``issue advocacy'' to be paid for directly 
by corporations, unions, non-profits or individuals with soft 
money (i.e. from sources and in amounts beyond the prohibitions 
and limitations of the FECA). In the 1996 cycle this 
distinction led to abuses as unions and non-profits ran ``issue 
advertisements.'' Evidence shows that these advertisements were 
coordinated with candidate committees, and in some instances 
seem to cross the line from issue based advertising into 
candidate targeted express advocacy.
    As opposed to the clearly independent entities discussed 
above, the courts have indicated, and the FEC has clearly 
implemented, an ``electioneering message'' threshold for 
regulation of party committee expenditures coordinated with 
federal candidates and made in connection with a candidate's 
federal election.'' 72 In her April 14, 1997 letter 
to Senator Hatch and the Senate Judiciary Committee, Attorney 
General Reno reaffirms the ``electioneering message'' standard 
as appropriate when applied to ``party media advertisements 
that focus on `national legislative activity.''' 73 
The FEC advisory opinions cited by the Attorney General define 
``electioneering message'' to mean statements ``designed to 
urge the public to elect a certain candidate or party.'' 
74 This distinction from the standard applied to 
independent groups flows from the following Supreme Court 
discussion found in Buckley:
    \72\ See FEC Advisory Op. 1995-25, 2 Fed. Elec. Camp. Fin. Guide 
(CCH) para. 6162, at 12,109-12,110 (August 24, 1995); and FEC Advisory 
Op. 1985-14, 2 Fed. Elec. Camp. Fin. Guide (CCH) para. 5819, at 11,185-
11, 186 (May 30, 1985).
    \73\ Reno Letter to Hatch, April 14, 1997 at 7 (citing FEC Advisory 
Opinions above).
    \74\ FEC Advisory Op. 1985-14, 2 Fed. Elec. Camp. Fin. Guide (CCH) 
para. 5819, at 11,185-11, 186 (May 30, 1985).

          [I]ndependent advocacy . . . does not presently 
        appear to pose dangers of real or apparent corruption 
        comparable to those identified with large campaign 
        contributions. The parties defending [the FECA] contend 
        that it is necessary to prevent would-be contributors 
        from avoiding the contribution limitations by the 
        simple expedient of paying directly for media 
        advertisements or for other portions of the candidate's 
        campaign activities. They argue that expenditures 
        controlled by or coordinated with the candidate and his 
        campaign might well have virtually the same value to 
        the candidate as a contribution and would pose similar 
        dangers of abuse. Yet such controlled or coordinated 
        expenditures are treated as contributions, rather than 
        expenditures under the Act (emphasis added). [The 
        FECA's] contribution ceilings . . . prevent attempts to 
        circumvent the Act through prearranged or coordinated 
        expenditures amounting to disguised contributions . . . 
        The absence of prearrangement and coordination of an 
        expenditure with the candidate or his agent not only 
        undermines the value of the expenditure to the 
        candidate, but also alleviates the danger that 
        expenditures will be given a quid pro quo for improper 
        commitments from the candidate.75
    \75\ Buckley v. Valeo, 424 U.S. 1, 46-47.

The Court later limited the express advocacy standard to the 
banks, corporations, and labor organizations discussed in 
section 441b of the FECA:

          [W]hen the maker of the expenditure is not within 
        these categories--when it is an individual other than a 
        candidate or a group other than a `political 
        committee'--the relation of the information sought to 
        the purposes of the Act may be too remote. To insure 
        that the reach of Sec. 434(e) [detailing FECA reporting 
        requirements] is not impermissibly broad, we construe 
        `expenditure' for purposes of that section . . . to 
        reach only funds used for communications that expressly 
        advocate the election or defeat of a clearly identified 
    \76\ Buckley, 424 U.S. at 80 (emphasis added). See also FEC v. 
Massachusetts Citizens for Life (``MCFL''), 479 U.S. 238, 249 (1986).

    The Court in Buckley made clear that the term ``political 
committees'' can ``only encompass organizations that are under 
the control of a candidate or the major purpose of which is the 
nomination or election of a candidate. Expenditures of 
candidates and of `political committees' so construed can be 
assumed to fall within the core area sought to be addressed by 
Congress.'' 77 As provided throughout the FECA, 
``political committees'' are more highly regulated than other 
entities. Thus, coordinated electioneering messages by 
political committees (such as the DNC) must be paid for with so 
called hard-money (money acquired within the limits established 
by the FECA and from non-prohibited sources).
    \77\ Buckley, 424 U.S. at 79.

B. Examples of questionable issue advocacy

            1. The DNC
    In the 1996 election the Governmental Affairs Committee 
investigation found blatant electioneering messages illegally 
paid for with soft money funds by the Democratic National 
Committee and its affiliated state party committees, all of 
which were made at the behest of the Clinton/Gore '96 campaign. 
In clear contradiction to the FECA, court pronouncements and 
FEC guidance, these party committees maintained that their 
advertisements were immune from federal regulation because they 
constituted issue advertisements, which did not expressly 
advocate the election or defeat of the Clinton/Gore ticket. 
Such attempts at clever obfuscation of the appropriately 
applicable legal standard, through positive or negative 
portrayal of certain candidates in the context of issues, does 
not ultimately exempt a party committee from the electioneering 
message standard.
    The following are sample DNC and Democratic state party 
committee advertisements which the investigation reviewed from 
videotapes, and which appear to constitute ``electioneering 
messages'' within the FECA's jurisdiction (despite DNC 
insistence that they are appropriate issue advertisements) 
outside the jurisdiction of the FECA:
           ``American values. Do our duty to our 
        parents. President Clinton protects Medicare. The Dole/
        Gingrich budget tried to cut Medicare $270 billion. 
        Protect families. President Clinton cut taxes for 
        millions of working families. The Dole/Gingrich budget 
        tried to raise taxes on eight million of them. 
        Opportunity. President Clinton proposes tax breaks for 
        tuition. The Dole/Gingrich budget tried to slash 
        college scholarships. Only President Clinton's plan 
        meets our challenges, protects our values.''
           ``America's values. Head Start. Student 
        loans. Toxic cleanup. Extra police. Protected in the 
        budget agreement; the President stood firm. Dole, 
        Gingrich's latest plan includes tax hikes on working 
        families. Up to 18 million children face healthcare 
        cuts. Medicare slashed $67 billion. Then Dole resigns, 
        leaving behind the gridlock he and Gingrich created. 
        The President's plan: Politics must wait. Balance the 
        budget, reform welfare, protect our values.''
           ``Head Start. Student loans. Toxic cleanup. 
        Extra police. Anti-drug programs. Dole, Gingrich wanted 
        them cut. Now they're safe. Protected in the '96 
        budget--because the President stood firm. Dole, 
        Gingrich? Deadlock. Gridlock. Shutdowns. The 
        President's plan? Finish the job, balance the budget. 
        Reform welfare. Cut taxes. Protect Medicare. President 
        Clinton says get it done. Meet our challenges. Protect 
        our values.''
           ``The President says give every child a 
        chance for college with a tax cut that gives $1,500 a 
        year for two years, making most community colleges 
        free, all colleges more affordable . . . And for 
        adults, a chance to learn, find a better job. The 
        President's tuition tax cut plan.''
           ``Protecting families. For millions of 
        working families, President Clinton cut taxes. The 
        Dole-Gingrich budget tried to raise taxes on eight 
        million. The Dole-Gingrich budget would have slashed 
        Medicare $270 billion. Cut college scholarships. The 
        President defended our values. Protected Medicare. And 
        now, a tax cut of $1,500 a year for the first two years 
        of college. Most community colleges free. Help adults 
        go back to school. The President's plan protects our 
    The Republican National Committee's issue advocacy campaign 
seems to have complied with the law. It is true that the RNC 
broadcast a series of commercials highlighting key legislative 
and other issues confronting the country during the spring and 
summer of 1996. It also ran a commercial discussing traditional 
American values shared by Senator Dole in helping to formulate 
the Republican legislative agenda. The commercial called on 
Americans to urge their elected officials to support the agenda 
of welfare reform, criminal justice reform, and ending wasteful 
government spending. In educating Americans on these key 
issues, the RNC's spots did not expressly advocate the election 
or defeat of any candidate, and do not otherwise seem to 
reflect an electioneering message.
    The Committee found no evidence of coordination between 
Senator Dole and the RNC sufficient to make these RNC issue 
advertisements in-kind contributions to the Dole for President 
Committee. The Committee gathered no evidence contradicting 
Senator Dole's assertion that the RNC retained editorial 
control over its advertising at all times.78 There 
is no evidence that anyone at the Dole for President 
Committee--including Senator Dole--dictated what the content of 
RNC advertisements would be, or decided where or how often the 
advertisements would be broadcast.
    \78\ Dole: Illegal Ads Cost Him Election, AP Wire Story, January 9, 
            2. Unions and non-profits 79
    \79\ For a detailed discussion of 1996 nonprofit activity reviewed 
by the Committee's investigation see the section of this report on 
``Misuse of Nonprofit Groups in the 1996 Elections.''
    While the Democratic National Committee opened the soft 
money advocacy wars in 1995 with advertisements designed to 
deter primary challengers to President Clinton and bolster his 
support by portraying him as standing up to the new Republican 
congressional majority,80 the AFL-CIO followed suit 
by announcing a $35 million soft money issue advertising 
campaign aimed at the legislative records of potentially 
vulnerable Republican House incumbents.81 As 
discussed in the Misuse of Nonprofits section of this report, 
these advertisements often crossed over into express advocacy 
due to the level of alleged coordination between candidates and 
the AFL-CIO. After the conventions, a variety of issue groups 
and organizations, usually tax-exempt 501(c)(4) organizations, 
began running ``issue ads'' to counter the AFL-CIO efforts in 
targeted districts and states.82
    \80\ See the section of this report on The Thirst for Money.
    \81\ Id.
    \82\ Id.
    Currently, tax-exempt organizations that utilize issue 
advocacy attempt not to cross the line into judicially defined 
express advocacy to avoid election law limits on the amount and 
sources of campaign contributions and contributor restrictions. 
However, such non-profits often secretly, and illegally, 
coordinate their efforts with the candidates they favor in 
particular elections. Such mixing of politics and non-profits 
carries little risk to any politician who might benefit because 
financial penalties imposed by the Internal Revenue Code for 
prohibited political activity can only be levied against the 
charity and its managers. Besides, by the time the IRS pursues 
such activity the money can be spent and the organization 

C. Proposed reform

    The Committee heard testimony from Professor Daniel R. 
Ortiz, that ``[t]o anyone interested in campaign finance 
reform, issue advocacy is the 800-pound gorilla. Without taming 
it, campaign finance reform--no matter how thoroughly it 
addresses public funding, soft money, PACs, and other perceived 
problems--will come to naught.'' 83 Nothing in the 
Buckley decision, or the First Amendment, prevents Congress 
from substituting a better definition for election related 
activity that is more encompassing than the magic words express 
advocacy standard. While the Buckley decision criticized any 
express advocacy standard based on a subjective interpretation 
of the speaker's intent, one option is to establish a 
``totality of the circumstances test'' for FECA application to 
speech that would objectively gauge the speaker's intent. Such 
a standard would incorporate such considerations as proximity 
to the election, the use of the candidates' name or likeness, 
and whether the ad is geographically targeted.84 
Under this approach, much of what was labeled ``issue 
advertising'' during the 1996 elections would fall within FECA 
regulation, and thus the money used to pay for such ads would 
have to be raised and reported in accordance with the federal 
election laws. Thus unions, corporations, non-profits and 
others wishing to run candidate targeted electioneering 
advertisements would need to raise funds for such ads in 
accordance with the FECA.
    \83\ Testimony of Daniel R. Ortiz, September 25, 1997, p. 19.
    \84\ Neuborne testimony, p. 136.
    Another proposal would require any advocacy that uses a 
federal candidate's name or likeness in a given period of time 
before a primary or general election date to be paid for with 
funds within the prohibitions and limitations of the FECA, and 
appropriately disclosed through reporting.85 A 90 
day time frame often has been suggested for such reporting 
because it reflects the same time frame used by Congress to 
limit lawmakers'' postal patron mass-mailing communications. 
This proposal maintains the magic words express advocacy test 
of Buckley prior to the 90 day period, and might pass the 
Supreme Court's compelling interest test by imposing reporting 
obligations on issue advocacy for only a very limited time 
period. Unions, corporations and non-profits could run issue 
ads as they did in the 1996 race up until this 90 day 
threshold, after which they could continue their activity if 
they utilized hard money from affiliated political action 
committees, which register and report. The undergirding 
rationale behind this proposal is that the mention or 
appearance of any candidate in mass media advertising is bound 
to have some impact on that candidate's election, and that the 
Court might interpret Buckley to find the totality of the 
circumstances (e.g. timing close to an election) compelling 
enough in such a situation to allow ``issue advertisements'' to 
be treated as a campaign contribution. Furthermore, the courts 
have been more receptive to restrictions placed upon 
corporations and unions than any other groups. Pure issue 
advocacy groups (e.g. The Sierra Club, the NRA, NARAL, the 
National Right to Life Committee, etc.) that wish to engage in 
candidate directed issue advocacy during this limited 90 day 
time period could establish registered and reporting separate 
segregated funds for such activity during that time 
    \85\ See McCain/Feingold proposed legislation.
    \86\ Neuborne Opening Statement, Sept. 25, 1997, Hearing 
Transcript, pp. 130-140.
    In response to proposed expansions in the definition of 
express advocacy, the obvious First Amendment sensitivity to 
regulating issue advocacy leads many to believe any limits 
violate the right to free speech. In his testimony before the 
Committee Professor Roger Pilon,Senior Fellow at the Cato 
Institute, cited Buckley when he argued that limitations on 
contributions and expenditures ``are subject to strict judicial 
scrutiny: they must serve a `compelling state interest' employing the 
`least restrictive means.' '' 87 Although it is not 
explicitly clear whether a more encompassing definition of express 
advocacy is desirable, or even constitutional, if the course of non-
action is followed, it must be recognized that Congress would be 
encouraging further growth of union, corporate non-profit and 
individual independent expenditures. As was witnessed in the 1996 
election, such independent expenditures often drown out the 
advertisements of the very candidates competing in certain 
congressional elections. Senator Bennett indicated during testimony 
that he and other candidates want more, not less, control of their own 
    \87\ Pilon testimony, pp. 143-144.
    \88\ Hearing Testimony of Senator Bennett, Sept. 24, 1997, pp. 63 & 
    As a result of the Supreme Court's application of the 
compelling state interest test to the regulation of issue 
advocacy, some argue in favor of a constitutional amendment 
allowing limited regulation of political speech, as opposed to 
other First Amendment protections. It has been argued that the 
constriction of the free speech rights of private groups and 
political candidates increased the influence and power of the 
press, and is therefore bad public policy.89 As 
Edward H. Crane, President of the CATO Institute, noted during 
the Committee's hearings, ``[t]he media functions as a 
gatekeeper of information to the public and its gatekeeping 
role is reduced when candidates [or third parties] can 
communicate directly with the voters.'' 90
    \89\ Brent Thompson, Will campaign reform hurt?, Washington Times, 
    \90\ Testimony of Edward H. Crane, Sept. 24, 1997, p. 139, ll. 17-

                            V. Coordination

    The Supreme Court in Buckley distinguished between 
``independent'' advocacy and advocacy coordinated with a 
candidate when it declared restrictions on independent spending 
by individuals unconstitutional.91 If an entity's 
express advocacy expenditures are ``coordinated'' with 
candidates, the expenditures are treated as in-kind 
contributions that are applicable to the entity's contribution 
limits. The courts have only recently begun to address whether 
individuals and organizations who fund issue advocacy must also 
act independently of candidates, or otherwise risk exposure to 
the financial limitations, prohibitions, registration and 
reporting requirements of the FECA. On the other hand, as will 
be discussed below, FEC enforcement matters have clearly 
determined that coordination of any advocacy results in in-kind 
contributions subject to FECA regulation.
    \91\ Buckley, 424 U.S. at 46-47.
    In Colorado Republican 92 the Supreme Court 
overruled the previously accepted presumption that a party 
committee could not make independent expenditures, but in doing 
so made the degree of coordination between candidates and their 
party committees the crucial determining factor in deciding 
whether the expenditure was truly ``independent.'' Indeed, in 
the Court's view, the ``constitutionally significant fact'' 
requiring the absence of limits on independent expenditures 
``is the lack of coordination between the candidate and the 
source of the expenditures.'' 93 The Court 
recognized that the FECA's structure would make no sense if the 
FECA's limits could be easily circumvented through the actions 
of third parties who coordinated with candidates. Importantly, 
Justice Breyer's plurality opinion was not the only one that 
stressed coordination in determining the legality of the 
regulation of the relationship between a party and its 
candidates. Two additional justices, who along with the three 
justices joining in Justice Breyer's opinion constitute a 
majority of the Court, believe that all party spending on 
behalf of a candidate is a ``contribution,'' and hence subject 
to the FECA limits.94
    \92\ Colorado Republican Federal Campaign Committee v. FEC, 116 S. 
Ct. 2309 (1996).
    \93\ Id. at 2317.
    \94\ Id. at 2332.
    The Committee's investigation discovered that the Clinton/
Gore '96 Re-election campaign not only subverted the Federal 
Election Campaign Act by coordinating spending and other 
activities with the Democratic National Committee, but in fact 
the DNC served as little more than a conduit through which 
funds raised by the reelection campaign were funneled into 
advertisements commissioned, designed, revised and placed by 
the reelection campaign in order to advance the President's 
reelection chances. Here again, those involved in the political 
process have stretched to the breaking point an illogical 
interpretation of a provision of the FECA, in clear 
contradiction to FEC guidance, all in order to gain advantage.
    During 1995 and 1996 the DNC paid for a variety of advocacy 
pieces supporting the re-election of Bill Clinton and Al Gore 
under the thin guise of issue advertisements. These 
advertisements were paid for using soft money.95 An 
Annenberg Public Policy Center Report indicates that about $44 
million in soft money was used for such DNC 
advertising.96 None of these ads were counted 
against the 1996 DNC presidential campaign coordinated 
expenditure limit of $11,994,007.97 There is also 
evidence that the Clinton/Gore '96 campaign coordinated its 
activities through the DNC with the AFL-CIO, EMILY's List, and 
others.98 The degree of coordination between the 
DNC, and these other entities, and agents of the Clinton/Gore 
'96 campaign committee raises the specter of a wide variety of 
Federal Election Campaign Act violations.
    \95\ See the section of this report on The Thirst for Money.
    \96\ The Annenberg Pub. Policy Ctr., No. 16, Issue Advertising 
During the 1996 Campaign: A Catalog (1997).
    \97\ 1996 Coordinated Party Expenditure Limits, 22 Federal Election 
Commission Record 14 (April, 1996).
    \98\ See specific discussions of these organizations in the section 
of the report on Misuse of Nonprofit Groups.

A. The law

    The FECA defines ``contribution'' to include ``any gift, 
subscription, loan, advance, or deposit of money or anything of 
value made by any person for the purpose of influencing any 
election for Federal office.'' 99 Under the FECA, 
payment for a communication made ``for the purpose of 
influencing any election for Federal office'' is automatically 
considered a contribution if it is made by any person ``in 
cooperation, consultation, or concert, with, or at the request 
or suggestion of, a candidate, his authorized political 
committees, or their agents.'' 100
    \99\ 2 U.S.C. Sec. 431(8).
    \100\ 2 U.S.C. Sec. Sec. 431(9)(A)(i), 441a(a)(7)(B)(i).
    Pursuant to these statutory directives, the FEC has issued 
regulations that clearly and directly state that coordination 
of an expenditure with a candidate places such expenditure 
within the purview of the FECA. The FEC regulations elaborate 
on the statute by asserting a presumption of coordination when 
an expenditure is made ``[b]ased on information about the 
candidate plans, projects, or needs provided to the expending 
person by the candidate, or by the candidate's agents, with a 
view toward having an expenditure made. . . .'' 101 
Under the FEC's regulations, the financing of the dissemination 
of any broadcast or other form of campaign materials prepared 
by the candidate, his campaign committees, or their authorized 
agents in cooperation or consultation with a third party shall 
be considered a contribution to that candidate from the third 
party for the purpose of contribution limitations and shall be 
the reporting responsibility of the person making the 
expenditure.102 Such contributions are illegal if 
they violate the prohibitions and limitations of the FECA.
    \101\ 11 C.F.R. 109.1(b)(4)(i)(A).
    \102\ 11 C.F.R. Sec. 109.1(d)(1).
    The FEC has pursued the issue of coordination in a variety 
of enforcement cases. In one such case, the FEC found illegal 
coordination when the agent of a presidential candidate 
committee recommended a vendor to assist an outside individual 
in towing a banner behind an airplane that read ``No Draft 
Dodger for President.'' 103 Based on this illegal 
coordination, the FEC found the campaign had received an in-
kind contribution. While the campaign committee certainly never 
maintained any control over the individual's expenditure, and 
the message did not contain express advocacy of a distinctly 
identifiable candidate, the FEC nonetheless found a violation. 
In the end, the presidential political committee admitted to 
the violation by its agent and paid a civil penalty.
    \103\ FEC Enforcement Matter Under Review 3608.
    In the FEC enforcement case most analogous to the 
coordination undertaken between President Clinton's reelection 
campaign committee and the DNC, the FEC found similar 
circumstances to constitute illegal coordination resulting in 
an excessive in-kind contribution. The FEC emphasized 
coordination in the Hyatt Legal Services enforcement 
case,104 in which the candidate's principal media 
consultant also prepared issue advertisements on the public 
policy issues of health care and crime for an outside 
organization bearing the candidate's name. The Hyatt for Senate 
Committee's ``campaign director'' acted as liaison between the 
media consultants and the outside organization, and, in 
addition, the candidate exercised final editorial approval over 
each of the scripts for the third party organization's radio 
advertisements. As the FEC conceded, these advertisements 
definitely did not constitute express advocacy advertisements 
under Buckley, and they were paid for with soft money. 
Nonetheless, the FEC found the coordination between the 
campaign and the third party organization sufficient to make 
the expenditures for these advertisements illegal under the 
    \104\ FEC Enforcement Matter Under Review 3918.
    To reach this conclusion the FEC used the following logic. 
Payments for any communication made for the purpose of 
influencing a federal election are contributions if the 
communication is coordinated with a candidate, a candidate's 
committee, or agents of the candidate or 
committee.105 The FEC determined that certain 
communications or activities involving the participation or 
control of a federal candidate resulted in a contribution or 
expenditure on behalf of the candidate if: ``(1) direct or 
indirect reference is made to the candidacy, campaign or 
qualifications for public office of you or your opponent;'' or 
(2) reference was made to ``your views on public policy issues, 
or those of your opponent, or [to any] issues raised in the 
campaign;'' or ``(3) distribution of the newsletter is expanded 
significantly beyond its present audience, or in any manner 
that otherwise indicates utilization of the newsletter as a 
campaign communication.'' 106
    \105\ 2 U.S.C. Sec. 441a(a)(7)(B)(i).
    \106\ See FEC Enforcement MUR 3918 [citing FEC Advisory Op. 1990-5, 
2 Fed. Election Camp. Fin. Guide (CCH) para. 5982 at 11,612 (March 27, 
    Under FEC regulations and decisions, any issue 
advertisement containing an ``electioneering message'' and 
coordinated by a union, corporate, or non-profit sponsor with a 
candidate falls under the FECA's definition of ``contribution'' 
and its applicable limits.107 Although to date the 
courts have not definitively dealt with coordination in the 
issue advocacy context, Attorney General Reno's April 14, 1997 
letter to the Senate Judiciary Committee acknowledged the 
central importance of coordination when advocacy materials 
contain an ``electioneering message.'' 108 In citing 
FEC Advisory Opinion 1985-14, Attorney General Reno brought to 
the forefront the FEC's emphasis on coordination. As noted 
above, in AO 1985-14 the FEC held that ``[e]lectioneering 
messages include statements ``designed to urge the public to 
elect a certain candidate or party.'' 109 Although 
the FEC concluded that the ``issue advertisements'' 
specifically outlined in the request were not subject to the 
FECA limitations, it explicitly based its decision on the 
complete lack of coordination. The FEC stated it viewed the 
request ``as limited to the situation where expenditures for 
these communications are made without any consultation or 
cooperation, or any request or suggestion of, candidates 
seeking election to the House of Representatives in the 
selected districts.'' 110
    \107\ Noble testimony, September 25, 1997, p. 73.
    \108\ Letter from Attorney General Reno to Senator Orrin Hatch, 
April 14, 1997, at 7.
    \109\ Fec Advisory Op. 1985-14, 2 Fed. Election Camp. Fin. Guide 
(CCH) para. 5819 at 11,185 (April 12, 1985).
    \110\ Id.
    Lyn Utrecht, General Counsel for Clinton/Gore '96, argues 
that a political party is legally allowed to coordinate 
activities with the party's Presidential candidate because that 
candidate may even designate the national committee of his 
party as his own principal campaign committee. Ms. Utrecht 
fails to note that the same sections of the FECA and FEC 
regulations that allow a presidential candidate to declare a 
national party committee as his authorized campaign committee, 
also require that national party committee to maintain separate 
books of account for that purpose.111 Furthermore, 
at no time did the Clinton/Gore '96 campaign designate the DNC 
as its principal campaign committee, nor did it maintain 
separate books of account as such a designation would require. 
She argues that the Commission has always presumed coordination 
between a party committee and its presidential 
candidate.112 Ms. Utrecht fails to note that the 
Supreme Court in the Colorado Republican 
decision,113 discussed above, definitively stands 
for the proposition that party committee's cannot be presumed 
to coordinate with candidates. Furthermore, the existence of 
FECA coordinated party expenditure limits for presidential 
candidates is illusory if Ms. Utrecht's interpretation is 
    \111\ See 2 U.S.C. Sec. 432(e)(3)(A)(i) & C.F.R. Sec. 102.12(c)(1).
    \112\ Lyn Utrecht, Issue Ads: They're Legal, The Washington Post, 
December 4, 1997, at A23 [hereinafter: Issue Ads].
    \113\ Colorado Republican Federal Campaign Committee v. FEC, 116 S. 
Ct. 2309 (1996).
    \114\ 2 U.S.C. Sec. 441a(d)(2).

B. Reform related to coordination

    The degree of coordination undertaken between the DNC and 
the Clinton/Gore '96 campaign cannot be justified in light of 
prior court opinions, despite the lack of an explicit Supreme 
Court decision directly on point about coordination between a 
party committee and a party candidate.115 As a 
result of a clear reading of the FECA and prior FEC guidance, 
the current General Counsel of the Federal Election Commission 
unequivocally stated the following in the Committee's 
investigatory hearings:
    \115\ Discussion between Thompson and Thomas E. Mann, Sept. 24, 
1997, pp. 25-26.

          The Commission views coordination as relevant. It 
        does matter. A candidate coordinating an ad may turn 
        that ad into a contribution to the candidate and, thus, 
        soft money would be prohibited being used for that ad. 
    \116\ Noble testimony, p. 34, ll 17-20.

    Committee hearing discussion on coordination reform 
centered mainly on the need for legislation clarifying the 
legal status of issue advertising paid for by third parties and 
coordinated with candidate committees.117 Trevor 
Potter, a former Chairman of the FEC, maintained before the 
Committee that the Buckley decision clearly stands for the 
proposition that ``if spending by some third party is 
controlled by a candidate, is done at the direction of the 
candidate, then it can be attributed to the candidate.'' 
118 Professor Daniel Ortiz concurred by stating, 
``if there is direct coordination between a candidate and an 
individual or any of these other entities . . . there is a very 
strong argument that should count as an in-kind contribution . 
. .'' 119 It was thus proposed that coordination 
regarding issue advocacy be more explicitly prohibited between 
candidates and third parties.120 Norman Ornstein 
pointed out the following:
    \117\ Discussion between Senator Cochran and Don Simon, Sept. 24, 
1997, pp. 92-94.
    \118\ Potter testimony, September 25, 1997, p. 36.
    \119\ Ortiz testimony, September 25, 1997, p. 37.
    \120\ Mann testimony, September 24, 1997, p. 26.

          What the Supreme Court set up in the law as an 
        independent expenditure, which meant that there could 
        be no coordination with parties or candidates, referred 
        to express advocacy and hard money. What we are now 
        finding is people have begun to use that definition to 
        get around it so that they can, in fact, collude 
        together in ways that I think go against the grain of 
        what we hope to have in a free and robust political 
        debate in our process where you know who is making the 
        charges and where you have some sense of where things 
        are coming from.121
    \121\ Ornstein testimony, p. 57, ll. 4-13.

    In the view of various witnesses, reformers should be 
careful not to shut down the availability of disclosed soft 
money, only to encourage candidates to hide their donations 
through unreported coordinated issue advocacy with third 
parties.122 As Thomas Mann testified,
    \122\ Mann testimony, September 23, 1997, p. 65.

          if you ban soft money but do nothing about issue 
        advocacy, the parties, the candidates, and most 
        importantly, the consultants, will rush to this 
        opportunity to engage in undisclosed coordination of 
        private dollars going to sham issue advocacy campaigns, 
        which will do more than anything else to undermine the 
        whole notion of accountability of candidates and 
        parties in our elections.123
    \123\ Mann testimony, September 24, 1997, p. 24.

      VI. Corporate and Union Spending in U.S. Federal Elections 

    \124\ Some of the following discussion is attributable to: U.S. 
Library of Congress. Congressional Research Service. The Use of Union 
Dues for Political Purposes and Agency Fee Objectors. CRS Report 97-555 
E, by Gail McCallion, October 14, 1997; and Political Spending by 
Organized Labor: Background and Current Issues. CRS Report 96-484 GOV, 
by Joseph E. Cantor.
    During the Committee's investigation, there was much 
discussion on the proper role of unions and corporations in 
federal elections, and specifically the appropriate use of 
membership dues paid to the unions or general treasury funds 
expended by corporations. Due to the disproportionate influence 
that unions and corporations are able to exert as a result of 
their ability to accumulate large amounts of funds, they have 
long been restricted in their involvement in the federal 
electoral process. The combined wealth of the corporate 
community is an undeniable fact, and testimony before the 
Committee confirmed that unions today continue to hold huge 
financial sway, as they ``possess $10 billion in assets 
collectively.'' 125
    \125\ Testimony of Leo Troy, Sept. 24, 1997, p. 169.

A. Background

    Corporations have been prohibited from directly 
contributing to federal candidates since the 1907 Tillman Act. 
The Smith-Connally Act, or War Labor Disputes Act of 1943, 
first prohibited labor unions from using their treasury funds 
to make political contributions to candidates for federal 
office. As a war measure, Smith-Connally expired six months 
after the end of the World War II, but the ban was made 
permanent by including it as one of the provisions of the Taft-
Hartley Act, or the Labor Management Relations Act of 1947. 
This prohibition against the use of labor union treasury funds 
as a source of candidate contributions has been part of federal 
law ever since, and was incorporated along with the analogous 
corporate prohibition into the Federal Election Campaign Act at 
Section 316.126
    \126\ ``It is unlawful for any national bank, or any corporation 
organized by authority of any law of Congress, to make a contribution 
or expenditure in connection with any election to any political office, 
or in connection with any primary election or political convention or 
caucus held to select candidates for any political office, or for any 
corporation whatever, or any labor organization, to make a contribution 
or expenditure in connection with any election at which presidential 
and vice presidential electors or a Senator or Representative in, or a 
Delegate or Resident Commissioner to, Congress are to be voted for, or 
in connection with any primary election or political convention or 
caucus held to select candidates for any of the foregoing offices, or 
for any candidate, political committee, or other person knowingly to 
accept or receive any contribution prohibited by this section, or any 
officer or any director of any corporation or any national bank or any 
officer of any labor organization to consent to any contribution or 
expenditure by the corporation, national bank, or labor organization, 
as the case may be, prohibited by this section.'' 2 U.S.C. 
Sec. 441b(a).
    Presently, corporations and unions spend money to influence 
the political process through four principal 
mechanisms.127 First, these entities use separate 
segregated funds (called political action committees or PACs) 
to influence federal elections. These funds are regulated by 
law, and must consist of totally voluntary union member 
contributions,128 in the case of union PACs. In the 
case of corporate PACs, the money must be garnered voluntarily 
from corporate stockholders, executive or administrative 
personnel or their families. These PAC funds can be directly 
contributed by corporate or union PACs to federal campaigns, or 
utilized for independent expenditures, which by definition 
expressly advocate the election or defeat of an identifiable 
candidate. Despite the voluntary nature of the contributions to 
these accounts, the costs of administering such separate 
segregated funds (PAC) may be paid out of general treasury 
funds. Second, unions are explicitly allowed under the FECA to 
conduct unlimited communications with union members and their 
families on any subject, including advocacy of the election or 
defeat of clearly identifiable federal 
candidates.129 Similarly, corporations are allowed 
such unlimited communications with stockholders, executive or 
administrative personnel. Unions and corporations are further 
allowed to conduct nonpartisan registration and get-out-the-
vote campaigns aimed at these same people.130 For 
these activities unions and corporations may use non-regulated 
general treasury funds (so-called ``soft money''). Third, such 
non-regulated union or corporate soft money may be used for 
contributions to state and local elections (including 
contributions to national parties for use in state and local 
elections or other purposes), in those states and local 
jurisdictions which do not have their own prohibition against 
union or corporate contributions. It has been asserted that 
such expenditures have a tangential impact on simultaneously 
conducted federal elections. The fourth, and most 
controversial, mechanism is the use of so-called issue 
advertisements (public education that promote union public 
policy perspectives) financed directly out of union revenue, 
and consequently, largely paid for by union member and 
nonmember dues and fees. Keeping in mind their fiduciary duties 
to stockholders, corporations have a similar mechanism 
available to them. As our investigation revealed, sometimes 
union and corporate revenue is given directly to third party 
entities, such as non-profit organizations, so that these 
groups may pay for their own issue advertisements outside of 
FECA regulation.
    \127\ U.S. Library of Congress. Congressional Research Service. 
Business and Labor Spending in U.S. Elections. CRS Report 97-973 GOV, 
by Joseph E. Cantor. October 28, 1997.
    \128\ ``It shall be unlawful for such a fund to make a contribution 
or expenditure by utilizing money or anything of value secured by 
physical force, job discrimination, financial reprisals, or the threat 
of force, job discrimination, or financial reprisal; or by dues, fees, 
or other moneys required as a condition of membership in a labor 
organization or as a condition of employment, or by moneys obtained in 
any commercial transaction.'' 2 U.S.C. Sec. 441b(b)(3)(A); See also 11 
C.F.R. Sec. 114.5(a).
    \129\ 2 U.S.C. Sec. Sec. 431(9)(B)(iii) and 441(b)(b)(2)(A).
    \130\ 2 U.S.C. Sec. 441(b)(b)(2)(B).
    In the 1996 federal elections, the AFL-CIO utilized to its 
advantage some of the questionable interpretations imposed on 
the vagaries of the FECA to advance its federal candidate 
specific political agenda. The AFL-CIO then allegedly expanded 
on those questionable interpretations by illegally coordinating 
its pursuit of a $35 million ``issue advocacy'' campaign in 
1996 with the Clinton/Gore '96 Re-election campaign, as well as 
other entities and candidates. The AFL-CIO allegedly carried 
out such an advocacy program in part through a special 
assessment included in their member's union dues and non-
member's compulsory agency fees, 131 rather than 
through their political action committee. The current 
controversy over the use of such funds centers on two issues. 
First, there is the question of whether such advertisements 
were actually issue based, or rather, cleverly designed 
advertisements avoiding the use of express words of advocacy, 
but nonetheless aimed at specific federal 
candidates.132 The specific activities undertaken by 
unions such as the AFL-CIO and problems associated with issue 
advocacy, as well as proposals for legislative action in that 
area, are found elsewhere in this report. This section of the 
report centers on the second issue, which involves agency fees 
required to be paid by all individuals covered by union 
bargaining agreements as part of union security agreements 
permitted in 29 states and the District of Columbia.
    \131\ Full union members pay union dues voluntarily, as opposed to 
those who resign from the union. In non-right to work states these non-
members are compelled to pay ``agency fees'' for that portion of union 
expenses determined to be germane to collective bargaining.
    \132\ Discussion between Senator Bennett and Norman J. Ornstein, 
September 23, 1997, pp. 90-91.
    In non-right to work states union security agreements are 
agreements between employers and unions that require employees 
to give financial support to unions as a condition of 
employment. Section 8(a)(3) of the National Labor Relations Act 
(NLRA) and Section 2, Eleventh of the Railway Labor Act 
133 explicitly authorize an employer and a union to 
enter into an agreement requiring all employees in the 
bargaining unit to pay union dues as a condition of continued 
employment, whether or not the employees become union members. 
The premise was that under the principle of exclusive 
representation, a certified union must represent all the 
workers in a bargaining unit, so it is only fair that all such 
workers pay their fair share of the union's costs in doing so. 
Nonetheless, out of deference to ``states'' rights,'' under the 
language of Section 14(b) of the NLRA, individual states are 
free to prohibit agency shops and union security clauses in 
collective bargaining agreements. The Supreme Court has ruled 
that a union security agreement may not require an employee to 
actually join a union but only to pay union initiation fees and 
dues.134 An employee who chooses not to join is 
called a ``financial core member'' or ``dues-paying non-
member'' because he or she continues to provide financial 
support to the union but does not participate in other union 
    \133\ 29 U.S.C. Sec. 158(a)(3), and 45 U.S.C. Sec. Sec. 151-158.
    \134\ NLRB v. General Motors Corp., 373 U.S. 734 (1963).
    The political use of such agency fees paid by financial 
core members first reached the U.S. Supreme Court when Harry 
Beck and twenty of his coworkers sued the Communications 
Workers of America (CWA) over support of Democrat Hubert H. 
Humphrey in his bid for the presidency in 1968. Beck and his 
colleagues were strong opponents of gun control, and therefore 
they filed suit against the CWA over the use of agency fees to 
benefit Humphrey, who strongly advocated gun control. It took 
until 1988 for the Supreme Court to rule in Communications 
Workers of America v. Harry E. Beck, 487 U.S. 735 (``Beck''), 
that dues-paying non-member employees covered by union security 
agreements may only be charged a pro rata share of union dues 
and fees that are attributable to collective bargaining, 
contract administration, or grievance adjustment; they may not 
be charged a pro rata share of union dues and fees that are 
attributable to union expenses for political or ideological 
purposes.135 In determining that the CWA should 
reimburse all excess fees Beck and his colleagues paid since 
January 1976, the Supreme Court majority placed heavy emphasis 
on the lower court finding that the union was unable to 
establish that any more than 21 percent of its funds were used 
in support of collective-bargaining efforts.
    \135\ See U.S. Library of Congress. Congressional Research Service. 
The Use of Compulsory Union Dues for Political Purposes. CRS Report 97-
618 A, by John Contrubis. July 12, 1994.
    Individuals like Beck, who are members of a bargaining unit 
covered by a union security agreement, but who object to the 
use of their dues for political purposes, are now called agency 
fee objectors.136 In order to pay a reduced agency 
fee, an employee must be aware of his right to object to 
payment of union political expenses, and then must express his 
objection to the union. In addition, in order to qualify as an 
agency fee objector, a union member must first resign his union 
membership. According to the U.S. Bureau of Labor Statistics, 
in 1996 16.3 million individuals age 16 and over were members 
of unions (14.5% of all those employed); and, 18.2 million 
individuals were represented by unions (16.2% of all those 
employed). Thus, in 1996, 1.9 million individuals (including 
government workers many of whom cannot be covered by union 
security agreements, and agricultural workers) were represented 
by unions, but were not union members. There is no way of 
knowing the number of union members that, if given the option, 
would request a portion of their funds not be utilized for 
political purposes.
    \136\ Id.
    On April 13, 1992, President George Bush signed Executive 
Order 12800. This order directed the Secretary of Labor to 
require all companies performing federal contract work to post 
notices in their plants and offices during the term of their 
contract informing workers of their Beck rights. In do so 
President Bush quoted Jefferson's declaration that ``to compel 
a man to furnish contributions of money for the propagation of 
opinions which he disbelieves and abhors is sinful and 
tyrannical.'' Ultimately this all came to naught, as in one of 
his first official acts in office, President Clinton issued 
Executive Order 12836, rescinding President Bush's Executive 
Order 12800.
    After President Clinton assumed office all agency 
initiatives attempting to support President Bush's Executive 
Order 12800 were also stymied. The Department of Labor 
(``DOL'') had previously published 28 pages of proposed rules 
revising the manner in which labor unions report their 
financial condition to the DOL, the NLRB, and their members. 
One noteworthy proposed revision pertained to forms LM-2 and 
LM-3 and the inclusion of a new schedule entitled ``Statement 
C--Expenses,'' which would be used by unions to allocate all 
expenses among eight new functional categories: contract 
negotiation and administration; organizing; safety and health; 
strike activities; political activities; lobbying; promotional 
activities; and ``other.'' Internationals and labor 
organizations in general were united in the opinion that such 
unit-by-unit accounting would be extremely costly and 
burdensome, just to account for Beck related costs. On February 
10, 1993, the DOL, under Clinton and then Labor Secretary 
Robert Reich, proposed a one-year extension in the effective 
date of these final rules. In Final Rules issued December 21, 
1993 the Clinton administration DOL ultimately rejected most of 
the proposed Bush Administration changes.
    The NLRB has issued three important decisions, among many 
others, interpreting and applying Beck. In two cases issued on 
December 20, 1995, California Saw and Knife (320 NLRB 224) and 
United Paperworkers International Union (320 NLRB 349), the 
Labor Board ruled that unions must inform all workers of their 
Beck rights when they are hired; that organizing costs are not 
core expenses,137 but lobbying or litigation 
expenses are; that unions can limit the time during which 
workers may object; that a notice published once a year in a 
union newspaper is acceptable notice; that unions may set their 
own methods for handling differences with objectors and they do 
not have to let outside auditors see their books. In Service 
Employees International Union, 323 NLRB 39, March 21, 1997, the 
NLRB ordered an SEIU local to take affirmative steps to notify 
individuals covered by the collective bargaining agreement of 
their rights to remain nonmembers of the union, and to abstain 
from paying that part of agency fees attributable to political 
    \137\ Apparently one cannot be forced to pay for union efforts to 
proselytize others.

B. Problems reviewed by the investigation

    The Committee heard testimony that union use of general 
treasury soft money funds for political issue advocacy violates 
both the spirit of the FECA and the Beck decision. Senator 
Kassebaum Baker testified to the following:

          I tend to believe that the unions have been coercive 
        in their activities, have been particularly focused in 
        those efforts, and actually the corporate contributions 
        and individual contributions found ways to match that 
        by utilizing this ability to use the so-called soft 
        money, where you do not have to identify that you are 
        for or against a candidate. You can speak to an issue 
        and clearly influence how the viewer would regard that 
    \138\ Testimony of Senator Nancy Kassebaum Baker, September 30, 
1997, p. 76.

Professor Leo Troy, of the Rutgers University Department of 
Economics, testified that in reality, the Beck decision 
provides union members no protection from the use of their dues 
for political advocacy they oppose. He noted that members are 
not sufficiently informed about their Beck rights, nor 
sufficiently empowered, to take an affirmative stand against 
their union leadership and demand a refund.139 
Senator Nickles maintained during the hearings that Beck's 
solution of requiring post-hoc affirmative action by union 
members seeking a refund serves only to ostracize such union 
members from their organization. Furthermore, it was 
acknowledged during the hearings that Beck actually requires 
union members to first forfeit their union membership and any 
corresponding involvement in the union's policy decisions 
before seeking such a refund. As Senator Nickles points out, 
that is hardly the equivalent of a voluntary 
contribution.140 Even if you accept that the 
advertisements run by the unions are issue oriented, and not 
candidate specific, Professor Troy notes that ``dues-paying 
member[s] . . . are often being compelled to pay for something, 
political preferences and ideas that they do not support.'' 
141 One need only remember that the Beck challenge 
initially revolved around opposition to gun control, not merely 
the candidate that espoused gun control.
    \139\ Testimony of Leo Troy, September 24, 1997, p. 192.
    \140\ Discussion between Senator Don Nickles and panelists, Mann, 
Ornstein, Simon, and McBride, September 24, 1997, pp. 109-110.
    \141\ Troy testimony, p. 170.

C. Reform proposals

    There are a range of ideas aimed at reforming this hotly 
disputed area of campaign finance. One idea is to codify some 
form of the Beck decision. As discussed elsewhere in the 
report, other witnesses testified before the Committee that 
legislation designed to deal with the interaction of soft money 
and issue advocacy is necessary to effectively tackle union and 
corporate manipulation of the current system.
    Don Simon of Common Cause stated that ``if you do ban soft 
money, then the only contribution that a union could make to a 
political party would be out of its affiliated political action 
committee, which by definition has voluntarily contributed 
money.'' 142 Senator Kassebaum Baker testified that 
she and former Vice President Mondale agreed with Presidents 
Bush, Carter, and Ford that one of the most needed reforms is 
``a ban on soft money contributions to the national parties and 
their campaign organizations, equally applied to corporations 
and unions.'' 143 Nonetheless, Thomas Mann, Director 
of Government Studies at the Brookings Institute, clarified 
that merely abolishing soft money would not deal with the 
problem because of the possibility that ``shutting off soft 
money will lead to an incredible growth in coordinated issue 
advocacy with groups and their favorite candidates basically 
running shadow campaigns outside the regulated system.'' 
144 Such issue advocacy was exactly the crux of the 
problem in the 1996 election use of $35 million in union 
general treasury funds composed of membership dues.
    \142\ Testimony of Donald J. Simon, September 24, 1997, p. 111.
    \143\ Senator Nancy Kassebaum Baker, p. 5.
    \144\ Thomas E. Mann testimony, p. 87.
    A ban on the raising of soft money by national party 
committees effectively deals with the use of union and 
corporate general treasury funds in the federal political 
process only if it is combined with some restriction on issue 
advocacy. One such proposal discussed in the issue advocacy 
section of this report expands the definition of express 
advocacy during a set period prior to an election to include 
any use of a candidate's name or image. As former Vice 
President Mondale testified before the Committee,

        [t]he McCain-Feingold amendment would repeal the 
        availability of soft money from union treasuries or 
        corporate treasuries for what is called express 
        advocacy and, under the expanded definition, that would 
        include ads that use candidates' names under the terms. 
        I think that is a good amendment. It restores the 
        voluntary nature of contributions from union members so 
        that they have to be voluntary. And it seems to me that 
        is a good resolution of the dispute.145
    \145\ Testimony of Vice President Walter Mondale, September 30, 
1997, p. 74, ll. 9-17.

    Another proposal of particular note in this area is a 
California state initiative that will be placed on the next 
California ballot. That initiative seeks to require public and 
private employers and labor organizations to obtain permission 
from employees and members before withholding pay or using 
union dues or fees for political contributions. Permission must 
be obtained annually using a prescribed form. That annual 
permission would be sought through a form, the sole purpose of 
which is for the documentation of such a request. The form 
would contain the name of the employee, the name of the 
employer, the total annual amount which is being withheld for a 
contribution or expenditures and the employee's signature. 
Labor organizations would in turn be required to maintain 
records of all such authorizations for review upon request of 
the California Fair Political Practices Commission (the 
California equivalent of the FEC).
    Proposed federal legislation would codify the Beck decision 
by requiring unions to notify non-union members of their right 
to request a refund of the portion of their agency fees used 
for political activities.146 Other legislation calls 
for notification of Beck rights in writing for each new 
employee, as well as annual written notification for all 
employees.147 Under legislation proposed in the fall 
of 1997, unions would be required to notify such non-members of 
their reimbursement rights, and they would be required to 
obtain written, voluntary authorization before a union could 
use member or nonmember dues or fees for political 
activities.148 Nonetheless, such initiatives might 
not successfully deal with one of the problems that existed in 
the 1996 elections for the reason that the AFL-CIO is not a 
union, per se. Technically, Beck cannot be directly applied to 
the AFL-CIO because it is a federation of various unions, and 
it could quite possibly argue that the 1996 special assessment 
was really the burden of the constituent unions, and not 
necessarily paid out of union member dues. However, non-members 
could challenge the possible use of their agency fees by the 
AFL-CIO affiliated union, and thus seek a refund after the 
    \146\ See S. 25 (McCain/Feingold), the Bipartisan Campaign Reform 
Act of 1997, Introduced January 21, 1997; referred to the Committee on 
Rules and Administration. Considered September 29, 1997, by the Senate, 
modified by unanimous consent, amendments SP 1258 through 1265 
    \147\ See S. 179 (Hutchinson), the Campaign Finance Reform and 
Disclosure Act of 1997, Introduced January 22, 1997; referred to the 
Committee on Rules and Administration.
    \148\ See S. 9 (Nickles), the Paycheck Protection Act, Introduced 
January 21, 1997; referred to Committee on Rules and Administration. 
Hearings held on June 25, 1997, by the Committee on Rules.
    The bills currently being considered include a variety of 
proposals that would, if enacted into law, have an impact on 
unions. They include new posting requirements, requiring unions 
to receive written permission to use an individual's dues for 
political purposes, revamping union financial reporting 
requirements, and eliminating union security provisions 
altogether. Labor unions object to all of these proposals on 
the grounds that they are too onerous and expensive to 
    Employer posting of Beck rights, however, would not create 
any overt burden on a union. Posting would be the 
responsibility of the employer. The AFL-CIO publicly stated its 
willingness to accept codification of Beck rights during Senate 
consideration of S. 25. However, unions have also argued that 
it is unfair to single out Beck rights for special posting 
requirements. They argue that if new employer posting 
requirements are enacted, they should not be limited to Beck 
rights, but should include requirements to post employee rights 
to organize and join unions as well.
    Unions oppose a new requirement that they receive written 
permission to use dues for political purposes because of the 
administrative burdens it would entail and because it might 
result in more individuals choosing to become agency fee 
objectors. Nonetheless, it is the constitutional right of those 
that might choose to become agency fee objectors to do so, and 
the administrative burden can hardly outweigh an otherwise 
unjustifiable requirement for union members to pay for support 
of beliefs they oppose. Supporters of this proposal argue that 
union members can only make educated decisions if they are 
fully informed of their Beck rights.
    Finally, vigorously opposed by unions are proposals to 
abolish union security agreements, or to require unions to 
allow agency fee objectors to remain union members rather than, 
as now, to withdraw from the union when they choose to become 
an agency fee objector. Regarding membership requirements, one 
union witness before the Subcommittee on Employer-Employee 
Relations testified that:

          Unions, like every other voluntary association, 
        operate on the principle that it is the right of the 
        majority to decide the duties of membership, and that 
        those who desire to enjoy the privileges of membership 
        are required to become members of the organization and 
        accept whatever responsibilities come with membership . 
        . . to force a union to allow dissidents who withdraw 
        from membership to retain the right to participate in 
        membership decisions would turn Beck--and the First 
        Amendment--on their heads.149
    \149\ Testimony of James Coppess, Communication Workers of America, 
before the U.S. Congress. House. Committee on Education and the 
Workforce. Subcommittee on Employer-Employee Relations. Hearing on 
Union Dues. 105th Congress, 1st Sess., March 18, 1997, pp. 7-8.

            vii. dealing with the demand for campaign funds

    Testimony by Professor Burt Neuborne described the current 
campaign finance regulatory system as strictly ``supply side'' 
because it only limits contributions. Prior to the Buckley 
court's finding that expenditure limits were largely 
unconstitutional unless voluntarily agreed to in exchange for 
some benefit, the FECA had attempted to lessen the demand for 
funds by placing caps on campaign expenditures. Professor 
Neuborne noted that as a result of the Buckley decision 
``expenditures, whether made by candidates from their personal 
wealth; or by candidates using money raised from supporters; or 
by independent entities wishing to support a candidate, are 
virtually immune from regulation.'' 150 Ornstein 
pointed out in his testimony that the inability to limit 
expenditures was probably for the best because ``we need a 
significant and large sum of money or resources in our 
political arena because what you want in a campaign process, as 
what you want in the legislative arena, is a robust dialogue, a 
communication process that people can see.'' 151
    \150\ Neuborne testimony, September 25, 1997, pp. 130-140.
    \151\ Testimony of Norman J. Ornstein, September 23, 1997 p. 66, 
ll. 20-25.
    Nonetheless, the desire to win political contests, and the 
demand for the money participants believe necessary to do so, 
helps drive the never-ending cycle of fund-
raising.152 Under such circumstances, the Court's 
interpretation that there is no legally enforceable upper 
expenditure limit for federal candidates only increases the 
drive not to fall behind in fund-raising. Spiraling campaign 
costs are further exaggerated by the media costs associated 
with a candidate's important task of getting his message to the 
public. The Committee heard testimony that 60 percent of every 
competitive Senatorial campaign dollar goes to media and 30 
percent goes to fund-raising, with the remaining 10 percent for 
travel and staff.153 Ornstein, and others the 
Committee heard from, argue that in order to get a grasp on 
current campaign improprieties, legislation must somehow 
appropriately deal with the desperate pursuit for campaign 
funds that creates an environment wherein propriety and the law 
are stretched to the breaking point.154 Ornstein 
expressed the feelings of most witnesses on this issue in the 
following statement:
    \152\ See the section of this report on The Thirst for Money.
    \153\ Gans testimony, September 24, 1997, p. 155.
    \154\ Ornstein testimony, September 23, 1997, p. 56.

          I am not for spending limits. I am uneasy about 
        spending limits, and I am afraid, especially now as I 
        see what is happening with the issue ads, that if we 
        put spending limits on candidates that it is going to 
        enhance the role of some of the outside groups.
          I would prefer to go in a different direction which 
        is to increase the incentives and provide [other] ways 
        of ameliorating the demand. . . .155
    \155\ Ornstein testimony, September 24, 1997, p. 107.

Below is a discussion of ideas advocated to dampen demand for 
campaign spending, increase public participation and allow 
candidates more time to concentrate on the issues of the 
election instead of spending excessive time fund-raising.

A. Free or subsidized postage and television time

    Most proposals for dampening the demand for campaign funds 
center around the provision of some free or subsidized postage 
and/or television time to candidates and parties. Testimony 
before the Committee indicated that television costs are 
increasingly a larger percentage of every candidate's costs, 
and such costs are clearly driving up the overall costs of 
campaigns.156 Proposals range from block grants of 
television time given to the party committees to allocate as 
they see fit, to fund-raising qualification thresholds for 
individual candidates to receive television time in their 
markets of choice. The argument is that party committees and 
candidates will spend less time raising funds and more on the 
issues if they are assured the opportunity to espouse their 
    \156\ McBride testimony, September 24, 1997, p. 58.
    While there is no requirement that the provision of such 
free services necessarily be in return for anything, testimony 
before the committee noted that if free television or reduced 
postal rates are enacted in return for overall expenditure 
limitations, the net impact may be an undesirable reduction in 
the overall political discourse. Professor Pilon quoted the 
Eighth Circuit when it assessed similar state provisions: ``one 
is `hard-pressed to discern how the interests of good 
government could possibly be served by campaign expenditure 
laws that necessarily have the effect of limiting the quantity 
of political speech in which candidates for public office are 
allowed to engage.' '' 157 While free television 
time might be made contingent on certain candidate behavior, it 
could instead be provided with no strings as a floor enabling 
all qualified candidates the ability to spread their views to 
the voting public.
    \157\ Pilon Opening Statement, September 25, 1997 Hearing 
Transcript, quoting Shrink Missouri Government PAC v. Maupin, 71 F.3d 
1422, 1426 (8th Cir. 1995).

B. Public financing

    The Committee heard testimony that some sort of extension 
of the Presidential public funding system to Congressional 
elections would eliminate the demand-driven pressure to obtain 
campaign contributions. The public financing currently 
available at the state or local level in Maine, Arkansas, and 
Nebraska was noted. Twelve states are currently considering 
public funding legislation.158
    \158\ Senator John Glenn Hearing Transcript, September 24, 1997 p. 
    A compromise suggestion to encourage small contributors is 
creation of a 100% tax credit for contributions of $100 or less 
to federal candidates. To truly encourage broad-based small 
contributions, as opposed to subsidizing current large 
contributors, this tax credit could be limited to individuals 
who contribute less than $500 during the tax 
year.159 As one witness testified, ``[r]ight now, 
let us face it, a candidate is going to do a cost-benefit 
analysis before spending time to raise money, and raising money 
from small donors takes a lot of time, and the return is not 
there.' 160 In addition to lessening the candidates' 
scramble for funds, this reform suggestion stems from the 
belief that encouragement of small contributors will lead 
citizens to become more involved in the political process. It 
is hoped that such small contributors will feel they have more 
at stake in the process, and it will reduce the public's 
perception that contributions buy legislative action.
    \159\ Ornstein testimony, September 23, 1997, p. 84.
    \160\ Ornstein testimony, September 24, 1997, p. 123.

C. Revising contribution limits

    There was much discussion before the Committee about the 
possibility of revising the current contribution limits imposed 
on individuals, candidates and party committees. Many agreed 
with Senator Bennett's assessment that ``one of the problems we 
have now is campaign contribution limits. . . . Certainly the 
greatest demand on your time is fund-raising.'' 161 
When discussing Eugene McCarthy's primary challenge of Lyndon 
Johnson, both Senator Bennett and Curtis Gans made the point 
that today's $1,000 per contributor limit would have prevented 
the relatively unknown McCarthy from mounting any 
campaign.162 In fact, the individual contribution 
limit of $1,000 (set in 1972) is worth approximately $259 
today. In order to have the same amount of purchasing power 
today as in 1972, individual contribution limits would need to 
be increased to approximately $3,800.
    \161\ Hearing transcript iscussion between the Senator Robert F. 
Bennett and panelist Ann McBride, September 24, 1997, p. 65-66.
    \162\ Remarks of Senator Robert F. Bennett, September 23, 1997, p. 
37 and Gans testimony, September 23, 1997, p. 154.
    Edward H. Crane, President of the CATO Institute, advocated 
abolition of campaign contribution limits all together. He 
noted ``[t]he First Amendment applies to all Americans, not 
just those in the media, which is why we should eliminate 
contribution limits on individual contributors.'' 
163 Toward the other extreme, Norman Ornstein 
testified contribution limits are necessary, otherwise 
``contributor[s] cannot say, `Jeez, I'm sorry I've maxed out at 
some point,' the relentless pressure can be very, very great, 
which is not good.'' 164
    \163\ Testimony of Edward H. Crane, September 24, 1997, p. 140.
    \164\ Ornstein testimony, September 23, 1997, p. 67.
    Most discussions in this area centered around adjusting the 
current $1,000 figure for inflation since the FECA was enacted, 
and providing some sort of automatic future inflation 
adjustment devise.165 Particular emphasis was placed 
on raising the individual contribution limit to political 
campaign committees. Currently individuals have a $25,000 
annual limit, and of that, a sub-limit of $20,000 can be given 
to party committees. Testimony before the Committee advocated 
creating two separate $25,000 annual individual limits: one for 
party committees and the other for all other federal 
contributions.166 It was pointed out that a ban on 
soft money would make such a revision all the more important. 
Without such a revision party committees would be in direct 
competition for scarce resources with their very own 
    \165\ Ornstein testimony, September 24, 1997, p. 73.
    \166\ Ornstein testimony, September 24, 1997, p. 82 and Testimony 
of Douglas Berman, September 24, 1997, p. 200.
    \167\ Ornstein testimony, September 24, 1997, p. 85.

                viii. political action committees (pacs)

    Other than the ability of PACs to coordinate their 
activities with affiliated soft money independent expenditure 
issue advocacy programs, the Committee heard little testimony 
regarding problems with PACs. The Committee heard of no 
improprieties that arose from the FECA's treatment of PACs. The 
Committee did hear testimony indicating that a ban on political 
action committees would be found to be unconstitutional because 
there is no empirical evidencethat such a ban would meet the 
compelling governmental interest of preventing corruption as defined by 
the courts--``a financial quid pro quo, dollars for political favor.'' 
    \168\ Pilon Written Testimony, p. 5.

          ix. the federal election commission and enforcement

    As Professor Neuborne pointed out in his testimony before 
the Investigation Committee, ``[i]f you have good rules, but 
you do not have an enforcement mechanism, people will laugh at 
the rules. . . .'' 169
    \169\ Neuborne testimony, September 25, 1997, p. 137.

A. A brief history of the Federal Election Commission

    In 1975, Congress created the Federal Election Commission 
(FEC) to administer and enforce the Federal Election Campaign 
Act (FECA)--the statute that governs the financing of federal 
elections. The regulation of federal campaigns emanated from a 
congressional judgment that our representative form of 
government needed protection from the corrosive influence of 
unlimited and undisclosed political contributions. The laws 
were designed to ensure that candidates in federal elections 
were not--or did not appear to be--beholden to a narrow group 
of people. Taken together, it was hoped, the laws would sustain 
and promote citizen confidence and participation in the 
democratic process.
    Guided by this desire to protect the fundamental tenets of 
democracy, Congress created an independent regulatory agency--
the FEC--to disclose campaign finance information, to enforce 
the limits, prohibitions and other provisions of the election 
law, and to administer the public funding of Presidential 
elections. The FEC is made up of six members, appointed by the 
President and confirmed by the Senate. Each member serves a 
renewable six-year term; and two seats are subject to 
appointment every two years. By law, no more than three 
Commissioners can be members of the same political party, and 
at least four votes are required for any official Commission 
action. This structure was created to encourage nonpartisan 
decisions. The Chairmanship of the FEC rotates among the 
members each year, with no member serving as Chairman more than 
once during his or her term.

B. Structural problems

    Critics of the Federal Election Commission claim it is 
designed to fail. Further, these critics cite political 
patronage and the exclusion of third party commissioners as 
detrimental to the FEC's professional even-handed 
interpretation of the law.170
    \170\ Id. at 138-140.
    One problem that arises is due to the fact that there are 
an even number of Commissioners, which often leads to 
stalemates over their decisions. The six voting members are 
traditionally equally divided between Democrats and 
Republicans, making it difficult if not impossible for the FEC 
to move against a campaign that is seen as injurious to only 
one of the parties. Such a structure is not conducive to 
coherent rulings, but there are a limited number of proposals 
that are designed to restructure the Federal Election 
Commission. The major proposal is with regards to the terms of 
the FEC Commissioners. If the repetitive six-year terms that 
Commissioners now serve were replaced with a single eight year-
term having no holding over after expiration, some of the 
problems inherent with shorter patronage appointments might be 
relieved. Specifically, it is hoped that this will preserve the 
independence of Commissioners from political pressure related 
to their re-appointment.
    Another proposal has to do with strengthening the office of 
the FEC chairman and creating a new presiding officer as the 
Commission's ``Chief Administrator.''

C. Disclosure

    One of the primary missions of the FEC is to disclose to 
the public the source of federal candidate campaign 
contributions, as well as the ultimate use of those funds by 
candidates. Faster and more complete disclosure will aid in 
alleviating many of the problems found in the current system. 
To facilitate speedy and universal access to campaign reports 
this Committee heard testimony from Thomas Mann and Norman 
Ornstein recommending that electronic filing become mandatory 
for all federal candidates and reporting committees after a de 
minimus threshold is crossed. Such electronic filing was almost 
universally endorsed by those appearing to 
testify.171 Such mandatory electronic filing is 
already the rule in state elections held in California.
    \171\ Testimony of Becky Cain, September 24, 1997, p. 151; Ornstein 
testimony, September 23, 1997, p. 77; Mann testimony, September 23, 
1997, p. 79.
    Yet another idea to enhance disclosure is to require a 
campaign to provide all requisite contributor information to 
the FEC before allowing deposit of any contribution. Should any 
disclosure information be missing, a contribution could be put 
in an escrow account where the money cannot be spent. In turn, 
the current ten-day maximum holding period on checks would have 
to be waived. This would solve past reporting 
discrepancies where some committees achieved over 95% 
contributor identification disclosure, while others supplied 
the required identification for less than half of their 

D. Other suggested changes

    To speed the process of justice and avoid inaction 
resulting from partisan splits on the FEC, many people advocate 
the creation of a private cause of legal action directly 
against the alleged wrongdoer where the FEC is (a) unable to 
act by virtue of a deadlock, or (b) where injunctive relief 
would be necessary and appropriate (a high standard requiring a 
showing of immediate, irreparable harm). To deter frivolous 
actions, a ``loser pays'' standard should apply to requests for 
injunctive relief. Another suggestion involves streamlining the 
process for allegations of criminal violations, by creating 
more shared procedures between the FEC and the Justice 
Department, and fast-tracking the investigation from the FEC to 
Justice if any significant evidence of fraud exists.

                             x. conclusion

    As reflected throughout this report, the committee's 
investigation uncovered blatant abuses and violations of the 
FECA. The current state of our campaign finance system is in 
serious need of an overhaul. Unanticipated loopholes discovered 
in the federal campaign finance laws since they were developed 
in the 1970s, as well as the active manipulation of vague 
aspects of the FECA by parties trying to gain advantage through 
the system, lead to dissatisfaction with the currently enforced 
system by all parties. After this investigation, the Committee 
can reaffirm the following statement made by Senator Thompson, 
which accompanied the investigation's original charter: ``[t]he 
Founders of this Republic did not believe that the errors of 
government were self-correcting. They knew that only constant 
examination of our shortcomings, and learning from them, would 
enable representative government to survive.'' 172 
The Committee's investigatory hearings have certainly provided 
a learning experience for both participants and the general 
public. Now is the time to apply the knowledge gained from this 
experience to effective legislation, or the American public 
must be prepared to endure more blatant campaign finance law 
manipulation and corruption.
    \172\ Senator Fred Thompson, March 10, 1997, Senate Report 105-7 at 


    Based on its findings, the Committee makes the following 
recommendations to the Senate and the Executive Branch. Some of 
the recommendations are for legislative action; others could be 
implemented by government agencies without Congressional 
    1. In this report, the Committee sets forth new grounds 
which call for the appointment of an independent counsel with 
regard to the campaign finance scandal and urges the Attorney 
General to seek the appointment of an independent counsel. 
Consistent with this recommendation, the Committee urges the 
Department of Justice to aggressively pursue the many instances 
of apparently illegal activity as set forth in this report.
    2. Throughout this report, the Committee highlights the 
testimony of different witnesses, given under oath, whose 
truthfulness or candor are called into question, as their 
testimony appears to have been contradicted by other witnesses 
and/or documentary evidence. The Committee recommends and 
expects that the Attorney General will review this report with 
care and make determinations as to whether or not such 
instances constitute perjury within the meaning of 18 U.S.C. 
Sec. 1621 or obstruction of the Committee's investigation 
prohibited by 18 U.S.C. Sec. 1505.
    3. The Committee recommends that executive branch 
procedures for granting top secret security clearances be 
changed. Persons seeking security clearances who have lived in 
foreign countries should receive background checks on their 
activities while in those foreign countries. Access to 
classified materials should be strictly limited to what the 
official needs to know as part of his or her job 
responsibilities. Persons performing classified briefings must 
know the job responsibility of the persons to whom they show 
classified materials. No one should be given access to 
classified material as a routine matter before a background 
check is conducted. Agencies should ensure that security 
clearances are terminated when employees leave the positions 
necessitating clearances.
    These recommendations flow directly from acts to the 
contrary that took place with respect to John Huang during the 
1990's. Huang was given top secret security clearance while 
working at the Commerce Department. Although Huang had lived 
for many years abroad, no background check was undertaken with 
respect to his work in those foreign countries. No follow up 
was done on the ``hit'' on the computer database that tracks 
convictions with regard to Huang's being detaining by the INS 
in the 1970's. Huang was not only shown top secret documents 
that he had no reason to see, but also, documents related to 
areas of responsibility he was specifically excluded from 
handling. Those materials were very relevant to the interests 
of his former employer. Insufficient steps were taken to make 
sure that only persons with a need to know were knowledgeable 
of the top secret material. This occurred because the briefers, 
including CIA personnel, did not know what Huang's job 
responsibilities were. The problem was compounded because of 
the indiscriminate manner in which security clearances were 
given to political appointees as soon as they began employment.
    Even worse, Huang held on to his security clearance after 
he left the Commerce Department and worked for the DNC. There 
is no justification for this breach of security to occur, and 
it was inappropriate for any Commerce Department officials to 
suggest arrangements by which Huang could keep his security 
clearance after he left the government.
    The Commerce Department has already changed some of its 
policies regarding security clearances, but there is a 
potential problem with any government department or agency. 
Whether legislation is enacted or not, the Committee's 
investigation has demonstrated the inappropriate manner in 
which classified information was made available to Huang and, 
through him, possibly to others whose knowledge of such 
information was not in the interests of the United States.
    4. The Committee recommends that Congress legislate 
guidelines for the operation of legal defense funds. Congress 
should also legislate guidelines for contacts between the funds 
and the beneficiary of the funds and the beneficiary's staff.
    In recent years, members of Congress, and now the 
President, have established legal defense trusts to assist in 
paying of the principal's legal fees incurred in defending 
against civil cases, ethics complaints, and criminal charges. 
Although the Office of Government Ethics regulates certain 
executive branch legal defense trusts, legislation is needed to 
standardize the rules governing all such trusts. Persons 
interested in the operation of the government, limited in the 
amount of hard campaign contributions they could provide, might 
believe that they could obtain influence with powerful figures 
if they were to make large contributions to the legal defense 
fund established to benefit that individual. The more than 
$700,000 that Charlie Trie raised for the President's legal 
expense trust obviously was calculated to achieve that result.
    In the absence of legislation, contributions to legal 
defense funds may achieve that effect. To discourage that 
result, Congress should pass uniform guidelines for the 
creation and operation of legal defense funds by executive 
branch and legislative branch officials. Such legislation 
should mandate accounting procedures, require that 
contributions be disclosed and limited, and that the sources of 
funds be according to federal election law, among other 
    It is important also to establish the independence of these 
defense funds. In the case of the President's legal expense 
trust, meetings were held between the director of the trust and 
large numbers of White House staff. Given the nature of the 
discussions held, these meetings raise serious questions about 
the independence of the trust from the person for whose benefit 
the trust was created. Congress should strictly limit contact 
between the trust and the beneficiary.
    5. The Committee intends to revisit the Independent Counsel 
Act. In addition to all the specific concerns that have been 
raised about the statute's operation, the Committee believes it 
important that the Attorney General did not invoke the statute 
to investigate the subject of the Committee's investigation, 
when its operation was clearly called for, and whether 
legislation can remedy that situation in light of the 
discretion in seeking an appointment that the Attorney General 
must constitutionally possess. The Committee expects to revisit 
the statute in 1998 to determine whether it should be 
reauthorized and, if so, with what amendments.
    The independent counsel statute was enacted to prevent the 
inherent conflict of interest that occurs when the Justice 
Department investigates the possibly criminal conduct of high-
ranking government officials. The facts at issue in the 
Committee's investigation clearly warranted the appointment of 
an independent counsel. Yet, as of now, none has been 
appointed, except as to a matter arising from the course of the 
Committee's hearings themselves. The Attorney General enjoys 
absolute discretion under the statute to decide whether the 
standard of appointment has been triggered. This discretion is 
necessary to the statute's constitutionality.
    Nonetheless, serious questions were raised, based on 
credible allegations, that the President and other covered 
officials may have violated federal law. These allegations 
should have triggered the seeking of the appointment of an 
independent counsel. It makes no difference that the facts were 
essentially established, but the issues of law were disputed. 
In determining whether a crime ``may have been committed'' by a 
covered person, the conflict of interest is thesame whether the 
Attorney General is called upon to determine the facts or the law. The 
statute was passed to avoid this conflict.
    Apart from the theoretical reasons for the need to appoint 
an independent counsel, confidence of the American people in 
the conduct of the investigation mandates the appointment in 
these circumstances. The Department's investigation has not 
engendered public confidence. Documents have been left 
unexamined, including public record documents and classified 
materials of great relevance. Stones have been left unturned. 
Moreover, the legal positions taken by the Attorney General 
have been inconsistent in many cases with the sources she 
claims support her, as well as Supreme Court decisions in some 
    In addition, the Attorney General seems to have set the bar 
higher to begin the investigation of a covered person than to 
investigate an ordinary citizen. Any information against an 
ordinary citizen can lead a prosecutor to begin an 
investigation. Under the Attorney General's interpretation of 
the current independent counsel statue, however, unless the 
evidence rises to a level sufficient to trigger the appointment 
of an independent counsel, no investigation of a covered person 
can occur. This turns the intent and language of the statute on 
its head. Under this interpretation, a covered person has more 
protection from investigation that he would enjoy in the 
absence of the statute.
    This Committee is the committee of jurisdiction in the 
Senate for this statute. The Committee plans to hold hearings 
in 1998 on the operation of the statute and to propose 
legislation on how the statute should be altered, assuming it 
should be reauthorized beyond 1999.
    6. The Committee recommends that time deadlines not be 
imposed on investigations authorized by the Senate. Such 
deadlines weaken the ability of the Senate to ensure compliance 
with its subpoenas, to ensure cooperation, and to gather the 
facts necessary to fulfill the charge to the Senate to conduct 
a complete investigation.
    The Committee opposed imposing a deadline on its 
investigation. Deadlines have been deplored by Senators of both 
parties over the years because they impinge on the ability of 
an investigating committee to perform the tasks assigned to it. 
In the case of the Committee's investigation, such concerns 
were more than theoretical. They greatly affected the ability 
of the Committee to ensure compliance with its subpoenas, to 
receive timely information, and to gain cooperation and develop 
the necessary facts.
    Because of the deadline, many potential witnesses and 
possessors of documents relevant to the investigation were 
unwilling to cooperate. Such noncooperation was likely to be 
successful because the deadline rendered enforcement of 
subpoenas problematic and contempt proceedings academic.
    The Committee encountered stalling from the White House, 
from the DNC, and from a number of nonprofit entities, most 
notably the AFL-CIO. The deadline placed on the Committee 
emboldened noncooperation in light of the Committee's available 
procedures for enforcement of subpoenas. Under these 
procedures, months would be necessary to gain court 
enforcement. By the time the case would ever go to court, the 
Committee's deadline would have expired, and with that, the 
Committee's power to enforce.

           *       *       *       *       *       *       *

    The remaining recommendations deal with the issue of 
campaign finance reform. Since the Committee does not have 
legislative jurisdiction over the subject, the options for 
reform presented to the Committee during its hearings are 
referred to the Committee on Rules and Administration for its 
consideration. Among the suggestions for reform made to the 
Committee were the following.
    7. The Committee recommends that those ineligible to vote 
be precluded from making contributions to candidates for 
federal office.
    Given the extensive evidence and testimony reviewed by the 
Committee's investigation related to federal candidate 
contributions originating from foreign sources, the current 
prohibition on foreign contributions needs to be strengthened. 
At the present time, some individuals who are not legally 
eligible to vote are allowed to contribute to political 
campaigns. There is also substantial evidence that minors are 
being used by their parents, or others, to circumvent the 
limits imposed on contributors. Candidate committees could 
confirm through a simple question in all solicitations, and 
disclose as part of the currently required contributor 
identification material filed with the FEC, that each 
contributor is an American citizen of voting age.
    8. The Committee recommends that Congress enact protections 
for union workers so that their dues are not used for political 
purposes with which they disagree. No person should be 
compelled to contribute to a federal campaign without his or 
her consent.
    9. The Committee recommends that publicly funded 
presidential candidates, on behalf of their authorized campaign 
committee, be required to certify to the Federal Election 
Commission, within a certain time frame, that they have not 
inappropriately coordinated their activity with outside 
entities to overcome contribution and expenditure limits placed 
upon those activities by the Federal Election Campaign Act. 
Such certification would not be required for incidental 
contacts between candidates and outside entities, nor for 
attendance at widely attended fundraisers conducted by outside 
    The Committee's investigation established that the Clinton/
Gore '96 Campaign Committee not only coordinated its activities 
with the Democratic National Committee in order to circumvent 
the contribution and expenditure limits imposed upon 
presidential candidates accepting public funding, but that the 
Clinton/Gore Campaign actually directed and controlled the soft 
money fundraising, television advertisement development, and 
placement undertaken by the DNC. Furthermore, there is evidence 
to indicate that Presidential candidates have shared their 
plans, projects and strategies with outside third-party 
entities in order for those entities to make what constitute 
in-kind contributions on behalf of the candidates. Such third 
party expenditures make a mockery of the current campaign 
finance system.
    10. The Committee recommends that legislation increase the 
penalties for knowingly and wilfully accepting illegal campaign 
    The Committee's investigation revealed that between 1994 
and 1996 the DNC completely dismantled a previously established 
vetting procedure for large and questionable contributions. As 
a result, a variety of contributions were accepted in direct 
violation of the FECA. Penalties for accepting illegal 
contributions, which are criminal if the campaign entity 
knowingly accepted such contributions, should be increased. 
Since the Committee believes the goal should be to prevent 
acceptance of such contributions in the first place, evidence 
that a campaign entity established stringent vetting procedures 
should be admissible to establish a lack of the knowledge of 
illegality that could lead to the imposition of criminal 
    11. The Committee recommends enactment of legislation 
mandating electronic filing with the Federal Election 
Commission for all federal candidates and political committees, 
and providing for appropriate verification procedures for 
electronic filing to avoid fraud.
    Easier and more rapid access to campaign finance 
information requires that the campaign finance laws be 
modernized to account for advancements in computer technology. 
Currently, the FEC is not even allowed to accept facsimiles, or 
any form of electronic filings as official because these 
documents cannot reflect an original signature of the filer, as 
called for in the current law. Available computer technology 
now allows almost instantaneous disclosure of political 
contributions and expenditures. In computer format, such data 
is much easier to review, compare and contrast. A recent FEC 
survey revealed that 85 percent of all committees or campaign 
operations have access to computers, that three-fourths of the 
computerized committees have access to the modems, and two-
thirds can reach the Internet. While the FEC currently provides 
for voluntary electronic filing, with hard copy backup, there 
is no incentive for reporting entities to participate. 
Exercising the option for electronic filing now imposes extra 
work on committees beyond the required hard copy filing. No 
entity wants to expose itself to speedier and more easily 
accessible computer disclosure if its opponents are not 
subjected to the same level of review. While smaller start-up 
participants in the federal election process may not have the 
resources to acquire computer technology, they could be 
exempted from the mandatory electronic filing legislation by 
providing for a relatively high financial activity threshold 
before such reporting would be necessary. To ensure accurate 
and secure reporting, legislation should also require the FEC 
to develop report filing verification procedures. To speed 
dissemination of campaign filings it would be much easier to 
require the FEC to place electronically filed reports on the 
Internet. Such universal access could be provided at the 
current FEC website within 24 hours of receipt. To complement 
these advancements, legislation should mandate that the FEC 
compile, publish, regularly update and post on the Internet a 
complete and detailed index of enforcement actions and advisory 
opinions. Currently there is no one repository for such 
information that is easily and quickly available to the public.
    12. The Committee recommends legislation to require 
expedited reporting of all contribution activity during the 90 
days immediately before an election.
    With the advancement of electronic filing and broadcast 
technology, the Committee discovered that campaign activity has 
become accelerated at the end of the election cycle. The 
current paper filing system allows for manipulation of the 
disclosure process because facilitating paper filings makes 
necessary a cut-off date prior to the election. That would no 
longer be the case under an electronic filing system. Last 
minute surprise infusions of cash or expenditures would be 
disclosed in advance of the election. This would allow 
interested parties to evaluate the nature of a candidate's or 
entity's support in making an informed decision when going to 
the polls.
    13. The Committee recommends simultaneous filing with the 
FEC of any required state-level state and local committee 
    At this time, no centralized electoral finance filing 
system exists, even for federal candidates. Because national 
party committee transfers to state party committees remain 
unlimited, there is no way to ensure such transfers are not in 
turn made to facilitate expenditures by the state party 
committees for the benefit of federal candidates. The same is 
true for expenditures that might be coordinated as a result of 
transfers from national unions and non-profit organizations to 
local affiliated organizations. Federal election campaign 
expenditures are often intertwined with state and local 
election activity. The courts and the FEC have acknowledged 
this fact through promulgation of their allocation regulations. 
To understand the impact of these expenditures, and the 
allocations required by the FEC, a central repository of all 
available election materials is necessary.
    14. The Committee recommends establishment of a ``traffic 
ticket approach'' of scheduled fines for minor FEC reporting 
    The current structure of the FCA requires an elaborate due 
process mechanism for all alleged violations of the Act, 
regardless of severity. Thus, late, miscalculated and non-filed 
report violations are subjected to several votes of the 
Commission, and full briefing of the surrounding facts before 
the Commission can seek a civil penalty. This process takes 
time and resources away from more involved and egregious 
violations, a category including corporate reimbursement 
schemes and illegal coordinated soft money issue advertisement 
campaigns. The Committee recommends a bifurcated process under 
which clear filing violations are enforced via a pre-
established system of non-negotiable civil penalties, while 
serious allegations of wrong-doing are processed with careful 
consideration of due process rights (S. 1516).
    15. The Committee recommends legislation be enacted 
reforming the structure and enforcement procedures of the 
Federal Election Commission. Currently there are no limits on 
the number of times an FEC Commissioner may be reappointed, 
Commissioners whose terms expire hold over indefinitely, 
enforcement matters are not handled in a timely manner, and 
there is no mechanism for resolving 3-3 split Commission votes.

    The Committee Report documents the facts surrounding what 
may be considered, at least from a campaign money standpoint, 
the most corrupt political campaign in modern history. Little 
needs to be added to the ugly picture that has already been 
painted. It is important for us now to reflect upon the other 
implications of the investigation.
    It is well established that Congress has the authority 
under the Constitution to conduct investigations for the 
purpose of laying facts out before the American people as to 
the workings of their government and for the additional purpose 
of helping Congress to legislate. Therefore, our duties were 
twofold: to look into any wrongdoing and, secondly, to consider 
the implications of what we learn in terms of existing laws. 
The Committee had some success with regard to both of these 
responsibilities. The American people have a much better 
understanding of how their system operated in 1996. Also 
several individuals were identified as having been involved in 
improper or illegal conduct. Almost as soon as our Committee 
went out of business, federal indictments started being 
returned and there has been at least one call for an 
independent counsel by the Attorney General. These activities 
in large part have to do with our Committee's activities.
    Although campaign finance reform legislation was not 
passed, it was not because of lack of information. The gigantic 
loopholes that were created by the Clinton-Gore campaign and 
the Attorney General's acquiescence in those activities are now 
well known because of the work of the Committee. This 
information should have been sufficient reason for Congress to 
act, but it did not. However, a permanent record has been 
created and will forevermore be a part of the ongoing debate 
which I am confident will eventually result in an overhaul of 
the laws pertaining to how we elect public officials in this 
country. Those who are critical of the Committee's efforts 
because we did not produce a ``smoking gun'' or pass a 
particular piece of legislation, overlook these solid 
    Nevertheless, we didn't do as well as we could have. Our 
work was affected tremendously by the fact that Congress is a 
much more partisan institution than it used to be. I was 
personally involved in the Watergate investigation. We had our 
share of battles on the staff level, but when push came to 
shove, the Members of the Watergate Committee stood together in 
order to ferret out wrongdoing on the part of the Nixon 
Administration. As a young lawyer, I signed the pleading suing 
President Nixon in order for the Committee to gain access to 
the White House tapes. Senator Howard Baker, the Ranking 
Republican Member, made the motion to file that suit. I asked 
the question in public session that revealed for the first time 
publicly the existence of that taping system. The Republicans 
on that Committee felt an obligation to thoroughly investigate 
the alleged wrongdoing of their own President. And, in large 
part because the investigation was conducted with bipartisan 
cooperation, campaign finance reform was one of the benefits. 
Congress made sweeping changes in 1974.
    We all watched the Iran Contra investigation of President 
Reagan and saw that, although the Committee had many rough days 
when witnesses seemed to put the Committee on the defensive, 
the Republican leader of the Committee, Senator Warren Rudman, 
joined with the Chairman, Senator Daniel Inouye and presented a 
united front in order to get at the truth.
    Historically there are other examples wherein Committee 
minorities have cooperated in an aggressive investigation of a 
President of their own party.
    We should realize that not only is Minority cooperation in 
investigations and hearings desirable and appropriate, it is 
actually an absolute necessity if the Committee is going to 
carry out its obligations to the American people. As we look to 
the future and possible future investigations, we should do so 
with the understanding that if a handful of Senators, along 
with counsel, see their role as defense lawyers for the 
President and use the Committee's valuable time to minimize and 
denigrate the Committee's work and to provide justification and 
encouragement for those being investigated, then we can be 
assured that the investigation will not achieve its goals.
    In the past I believe that members have been deterred from 
extreme partisanship because of concern over public opinion and 
how they would be treated in the press. For whatever reason I 
believe that concern is not nearly as prevalent today. 
Partisanship begets partisanship and confrontation and the 
press is much more likely to report on ``partisan bickering'' 
than to pass judgment on who is responsible for it. That hurts 
the reputation of the Committee and plays into the hands of 
those who want the Committee to fail.
    The minority, of course, claims that the partisanship was 
on the Republican side; they simply wanted the investigation to 
be balanced. Yet I repeatedly assured the Minority, publicly 
and privately, that if they would assist and participate in the 
investigation of illegal and improper campaign activities, I 
would join them not only in making sure that Republicans didn't 
escape scrutiny, but in assuring that we looked at the broader 
picture of the role of independent groups. I also promised to 
address other issues that might merit legislative attention in 
our report to the Senate and other committees of jurisdiction. 
I went against the wishes of many in my party and supported an 
inquiry broad enough to include more than just the Clinton-Gore 
Campaign. The Minority answered that gesture with a demand that 
we have the broadest possible investigation with the least 
amount of money with which to conduct it. From the outset, the 
Minority went about trying to sell the notion that the primary 
mission of our investigation was campaign finance reform--even 
though the Governmental Affairs Committee has no jurisdiction 
in this area. If that had been the primary reason for the 
hearings, the Rules Committee would have conducted it. Instead 
of being concernedabout the massive array of criminal and 
improper activity that affected the basic integrity of our electorial 
process, the Minority attempted from the outset to divert valuable time 
and resources toward subpoenas to Republican-related groups which 
apparently were engaged in no illegal activity at all. So even though 
we were faced with investigating a massive scandal, and even though 
scores of people were leaving the country and taking the fifth 
amendment and the Committee was faced with a severe time limitation, 
the Minority insisted that the Committee, at the very beginning, devote 
substantial valuable time and resources to ``even things up.'' No 
Committee can effectively operate under these circumstances.
    The Minority report reveals the depth of their partisan 
commitment. It consists of three parts: First, an attack on the 
Majority of this Committee; secondly, attacks on as many other 
Republicans as possible; and third, a defense brief for the 
Administration. The Minority now comprises the only group in 
America that does not believe that there was serious wrong 
doing in the Clinton-Gore campaign and the DNC during the last 
election. The Minority's concerns are not with the improper 
activities of the highest elected and appointed officials in 
this country. Their concerns are with Republicans who are 
private citizens, people such as Grover Norquist, whom they 
ruthlessly castigate without justification.
    While espousing campaign finance reform, the Minority 
proved to be reforms greatest enemy. By opposing a fair 
investigation into the wrongdoing of the administration, they 
sacrificed all credibility on the reform issue and provided a 
safe haven for all opponents of reform.
    I would recommend, that in the future, it be acknowledged 
that a Committee investigation cannot reach its potential if 
there is not agreement on the front end as to what the 
Committee's goals are to be. In future similar circumstances, 
leaders of both parties, along with the Chairman and Ranking 
Member of the Committee, should meet and agree upon the goals 
and priorities of the Committee. The agreement should be 
reflected in the resolution authorizing the investigation. If 
such an agreement cannot be reached, then the investigation 
should not proceed. While this seems to give the Minority a 
veto, in a very real sense the Minority already has a veto 
power as set forth above. The court of public opinion will 
remain the only real restraint, as is the case now.
    Furthermore, future investigations should be done by a 
select Committee, not a standing Committee. The model should be 
the Watergate Committee. The leadership should select four 
members of the Majority and three member of the minority, 
based, in part, upon their agreement to work together to 
achieve the agreed upon purposes and priorities of the 
    The Committee should not have a cutoff date. As set forth 
in the Committee report, the imposition of a cutoff date 
severely hamstrings the Committee's work by giving those being 
investigated a target date by which to delay and stonewall. 
After the Iran-Contra hearings, Senators Mitchell and Cohen 
advised us of how unwise it was to impose such a cutoff date 
and that message needs to be delivered again.
    I believe that, with adherence to the above guidelines, 
that Congress can continue its historic investigative 
responsibilities. Otherwise, unless the atmosphere in Congress 
changes markedly, investigations will become increasingly 
partisan and less productive. Under present circumstances, a 
President under investigation knows that, regardless of his 
transgressions, he will have substantial support in Congress, 
with some Members defending his every action. It is important 
to recognize that a Committee must have a certain measure of 
cooperation from the President, whether it be voluntary or 
    During this investigation, the White House did everything 
possible to delay, mislead and undermine the Committee. It was 
very mindful of the cutoff date. Time and again promises to 
produce documents would be broken. Records would be produced 
after the relevant witness already had testified. Documents 
would be withheld and privileges would be asserted solely for 
the purpose of buying time. During the Iran-Contra 
investigation, President Reagan waived all privileges and 
opened up all records, even including his own personal diaries. 
During Watergate, President Nixon faced a united committee and 
a special prosecutor willing to take him to court to force the 
release of the White House Tapes. President Clinton faced a 
much different situation. His White House felt no compulsion to 
cooperate, knowing that we had a divided committee and knowing 
he had an Attorney General who would not appoint a special 
counsel to investigate the campaign finance scandal.
    In addition, most Committees conducting investigations as 
important as this one are accompanied by a very active grand 
jury. Again, this was true of Watergate and Iran Contra, as 
well as many other investigations. Aggressive criminal 
investigations make it much more likely for a Committee to 
obtain a cooperation of key witnesses because of the pressure 
such witnesses feel. Clearly, key witnesses felt no such 
pressure during our investigation. But very shortly after our 
Committee went out of business on December 31, 1997, 
indictments started to be returned against associates of the 
President and Vice President, even though information of their 
activities had been known for over a year. Although many are 
questioning the future viability of the independent counsel 
statute, the Attorney General's handling of this matter will 
present a strong argument against abolition of that statute.
    It is also clear that major committee investigations have 
to come to terms with the realities of the modern media. Most 
of the activities of Congress and individual members of 
Congress are judged by their ability to get their message 
across on television, usually in short sound bites. With the 
proliferation of cable channels, there is extreme competition 
for the attention of the public, which has an increasingly 
short attention span.The public demands, or at least the news 
media thinks the public demands, high drama and quick resolutions. 
Witnesses with ``star quality'' are required. Complex Committee 
investigations do not fit neatly within this environment. In the first 
place, 16 Senators, each usually with only 10 minutes in which to 
question, is not a system designed to effectively cross examine 
witnesses. With rare exceptions, these investigations are laborious, 
often boring, piecemeal processes which require an audience which 
follows closely enough to understand the significance of the testimony 
they are hearing.
    Watergate, of course, was an exception. Although that 
investigation started off in the traditional way, things soon 
changed. The Watergate Committee started off with a young 
employee of the Committee to Re-elect the President, who was 
questioned about an organizational chart which set forth the 
members of the Committee staff. The Committee was pursuing a 
``bottom up'' approach, starting with minor witnesses. 
Predictably, the hearings were pronounced boring and useless. 
Fortunately, shortly thereafter, James McCord was being 
sentenced down the street before Judge Sirica and important 
information was elicited. Shortly after that, Mr. McCord was 
before the Committee and things began to take a different 
course. Then, John Dean, the White House Counsel, came forth to 
testify against the President and then the taping system was 
discovered. Of course, these were extremely unusual events 
which had never occurred before that time and have not since 
then. Historically, investigations have much less dramatic 
results. Investigations usually resolve some matters and leave 
many matters unresolved, as is the case with both criminal and 
civil trials.
    It may be that Committees could serve their purpose in the 
future by simply laying out the results of investigations 
already completed. Under such an approach, the decision as to 
whether or not to even have public hearings would await the 
completion of the investigation when results had been analyzed 
and conclusions reached. Regardless of the quantity or 
importance of the information produced, the investigative 
committee of the future that cannot produce a ``smoking gun'' 
or dramatic witnesses on a regular basis will not be judged as 
having ``captured the public attention,'' which now is becoming 
the ultimate test of success.

                            The China Issue

    As with all other non-Republican areas of our 
investigation, the Minority in their report seeks to minimize 
the Committee's efforts with regard to the issue of foreign 
influence--even to the point of using misleading closed-session 
comments out of context. Therefore, the public is left with a 
partisan split as to the interpretation of classified 
    I would suggest to anyone who wants to objectively consider 
this matter to do the following: Read my July 8, 1997 opening 
statement, wherein I set forth some of the facts pertaining to 
the Chinese plan to influence our elections. First of all, you 
will note the difference between what I said and what some have 
reported that I said. I did not say, for example, that I would 
prove, nor did I allege, that the PRC funnelled money into our 
elections, although, as it turns out, there is strong 
circumstantial evidence that they were so involved. Some in the 
media have difficulty in making the distinction between the 
plan on the one hand, and the implementation of the plan on the 
other. Secondly, read the Majority report which sets forth the 
individuals with close ties to the Chinese government who were 
funneling illegal money into the Democratic National Committee. 
It concludes that there is ``strong circumstantial evidence'' 
that China was involved. And while reading these documents, 
keep in mind the fact that both of these documents were 
carefully worded and they were thoroughly vetted by the CIA and 
FBI and National Security Agency, which, are headed by 
appointees of the Clinton Administration. When Members of the 
Minority began to attack my statement, I asked FBI Director 
Freeh, ``Would you have let me go forward with my statement 
knowing that it contained incorrect information?'' He 
responded, ``Of course not.''
    In view of some of the comments in the Minority report and 
certain Minority individual views, I believe a few further 
comments are appropriate.
    Why did I make the comments I made on the opening day of 
the hearings? First of all, I knew the statement was accurate 
and, secondly, I did not believe that the matter was being 
seriously investigated. Our committee had a short life span and 
it was my belief that, if we could not bring the matters to the 
public's attention, serious questions with regard to the 1996 
campaigns might never be thoroughly pursued. Therefore, after 
consulting with the Majority on the Committee and after having 
asked Senator Glenn to join me (which he declined to do), I 
made the statement and have continued to press our federal 
agencies to inform Congress on the information they have on 
this matter and to conduct a proper and thorough investigation. 
As a result, our intelligence and investigative agencies began 
to supply to Congress--albeit grudingly--the information to 
which it was entitled. The public now knows about the plan and 
the serious questions that have been raised concerning the 
implementation of the plan. Also, after several missteps, the 
Justice Department seems to be pursuing this matter. 
Indictments are now being returned. All of this has been done 
without revealing classified information which might jeopardize 
our country's means and methods or sources.
    To go back in more detail, early on in our investigation, 
our staff became aware of the fact that our Federal 
intelligence and investigative agencies had information which 
conclusively demonstrated that in mid-1995 the Chinese 
government devised a plan comprised of several parts, including 
illegal activities with regard to our elections. Several 
targeted Members of Congress were briefed concerning this plan 
as was the National Security Council. As we looked into this 
matter, we came away with the distinct impression that the 
Justice Department was doing very little, if anything, to 
pursue this matter and thatthis information was not being 
coordinated with those in the Justice Department who were investigating 
the campaign finance scandal. These concerns later proved to be well 
    The information, of course, was classified. We requested 
that the FBI, CIA and NSA work with us to develop a 
declassified document whereby the public could be informed of 
this information at least in general terms. Over a period of 
many days our staff worked with these agencies. The agencies 
made suggestions, deletions and corrections and finally agreed 
upon a document. They requested that the heads of these 
agencies not be called into public session because the mere 
revelations of which agency had which information might prove 
to be damaging to sources and methods. We agreed. So while the 
underlying documentation could not be revealed and witnesses 
could not be called in public session, we would at least be 
allowed to provide some hard conclusions to the American people 
concerning an issue of importance to them. We thought it might 
also have the effect of energizing the Justice Department. I 
assumed that, because of the sign-off by these agencies, my 
July 8 statement would provoke little controversy within the 
Committee. That, of course, proved to be an incorrect 
    We persisted in prodding these agencies for additional 
information. They became very reluctant to give us additional 
information, and in response to question after question, the 
Justice Department in particular would refuse to provide 
answers because of ``an ongoing criminal investigation.'' 
However, even with these barriers, troubling signs appeared. On 
two different occasions, we were told that the FBI had 
discovered extremely relevant information, with regard to 
individuals with close ties to the Chinese government, that 
they had just discovered in their files. In other words they 
had the information, but they didn't know that they had it. 
This last occasion was after the Committee had ended its public 
hearings. Furthermore, the Attorney General acknowledged that 
this information involving China had not been given to the 
Campaign Finance Task Force. This prompted the Attorney General 
to request an inspector general investigation as to why this 
had happened.
    So not only did the Justice Department have information 
concerning China's plan to involve itself in our elections. 
Justice also had information involving illegal money laundering 
by individuals with close ties to the Chinese government. 
Apparently no one was looking at the information in its total 
context to determine if there was a relationship. This, of 
course, was and is extremely troubling. We are now told that 
that problem has been rectified at this late date.
    As part of the Committee report, we again worked with the 
above mentioned agencies to carefully draft a rendition of the 
facts in this area. Again, the underlying information is 
classified, but we were able to produce a report which 
demonstrates that (1) there definitely was such a plan and (2) 
there is strong circumstantial evidence that the Chinese were 
involved in causing money to be funneled into our 1996 
political campaigns.
    Since the Minority persists in trying to undermine this 
report, certain additional facts should be added. The 
characterizations of Maria Hsia and Ted Sieong were 
characterizations given to this Committee by an investigative 
agency of this Administration. They provided underlying 
information which has never been and may not be disclosed, 
which more than amply supports these characterizations. While 
it is certainly not usually desirable to make such a statement 
about individuals without being able to supply all of the 
reasons for making it, on balance its obvious importance and 
relevance to this investigation makes it important that this 
information be given to the public. There is little point in 
undertaking a sentence-by-sentence rebuttal of the deficiencies 
in the Minority discussion. However, a few representations made 
in the Minority chapter are worth mentioning here.
    First, the Minority's narrative regarding Mochtar and James 
Riady, which states ``there was no non-public relevant 
information not already uncovered in the Committee's public 
investigation,' 1 is wrong. There is additional 
information available from two separate federal agencies. It 
discloses a long-term relationship between the Riadys and a 
Chinese intelligence agency that is distinct from the business 
relations between the Riadys and China Resources cited by the 
    \1\ Minority Report, Chapter Two, section ``The Riadys.''
    Second, the Minority chapter discusses the notion of what 
constitutes an ``agent'' at some length, stating that its use 
in the Committee report resulted in ``misleading allegations.' 
2 The Committee report employs the word in one 
instance--to describe Maria Hsia. The word choice was agreed to 
by the relevant intelligence and law enforcement agencies. In 
fact, it was suggested by them. As the Minority well knows, or 
ought to know, the use of the word ``agent'' is amply supported 
by information made available to the Committee, which cannot be 
disclosed publicly.
    \2\ Minority Report, Chapter Two, section ``Intermediaries: 
Relation to the Committee's Public Investigation.'
    Quite apart from these and other problematic 
representations by the Minority, I am bothered by their 
selective and misleading quotations drawn from the Committee's 
July 28, 1997 closed session hearing. The apparent point of 
that exercise is to revisit the issue of whether the opening 
statement I made on July 8, 1997 regarding the ``China Plan'' 
was accurate or not. To this end, the Minority suggests that 
``senior Executive Branch officials'' disagreed with my July 8 
    As the Minority Members must know, since most of them were 
there, the same officials confirmed the accuracy of the July 8 
statement during the July 28 hearing, particularly regarding 
whether the information then available suggested that the 1996 
Presidential race might have been affected by Chinese efforts 
toinfluence our electoral process. It is safe to say that the 
July 28 hearing was confusing, for reasons that became clear at a 
September 11, 1997 briefing attended (and called) by those same senior 
Executive Branch officials.3 At the September 11 briefing, 
one senior Executive Branch official reconfirmed the accuracy of my 
July 8 statement, and explained that the earlier confusion was largely 
a matter of semantics. Questions posed at the July 28 session generally 
asked whether there was any ``evidence'' regarding certain matters, and 
such questions elicited answers in the negative.4 The 
official explained that he had construed ``evidence'' narrowly to 
include only proof which would be admissible during a court 
proceeding.5 When asked questions more broadly about ``all 
the information and circumstances,'' the official gave quite different 
answers, and observed that the July 8 statement was reasonable and 
    \3\ The Minority mistakenly calls the September 11 gathering a 
hearing. It was not. The senior Executive Branch officials called the 
meeting at their own behest in order to share with the Committee some 
significant information about a leading figure in the campaign finance 
investigation. The briefing was not transcribed, and in hindsight, I am 
sorry it was not.
    \4\ See, e.g., Minority Report, Chapter Two, section ``Political 
Contributions to Federal Elections.''
    \5\ Closed Committee Briefing, September 11, 1997.
    \6\ Id.
    As early as July 1997, Minority Members ``acknowledge[d], 
and never denied, that the information shown to us strongly 
suggested the existence of a plan by the Chinese Government--
containing components both legal and illegal--designed to 
influence U.S. congressional elections.' 7 At the 
same time, significant contributions to the DNC and, to a 
lesser extent, other campaigns, including Republican causes, 
were being made or solicited by individuals who have ties to 
the PRC government. One would think that this sequence of 
events would have engaged the curiosity of the Minority more 
    \7\ Joint Statement by Senators John Glenn and Joseph Lieberman, 
July 15, 1997.

                        campaign finance reform

    Having refused to participate in the investigation of the 
most egregious offenses of the 1996 campaign, the Minority now 
pronounces the Committee's work a failure because we did not 
``produce'' campaign finance reform. This line has been readily 
adopted by many beltway pundits. This must be the first time in 
history that the investigating committee has been charged with 
the responsibility of creating a public groundswell to cause 
sufficient pressure on Congress to produce a particular piece 
of legislation. The theory seems to be while on the one hand 
the Committee's revelations were not significant and not 
interesting enough to merit television coverage, the Committee, 
nevertheless, should have produced such a groundswell and 
probably would have if we only had been more ``bipartisan.'' 
Interestingly, in the few days of testimony we had concerning 
our campaign finance system, lessons to be drawn from our 
hearings to date and possible remedial legislation, there was 
no television coverage and few reporters in the hearing room.
    Despite the hypocrisy of many carrying the ``reform 
banner'' it must be noted that our investigation did 
demonstrate the fact that there are no longer any effective 
limits on campaign contributions in this country and apparently 
very few limits on what people are willing to do to get them. 
Primarily because of the Clinton-Gore campaign and the Attorney 
General's view of those activities, big money now dominates the 
American political scene as never before. And it will only get 
    Even though the President and Vice President certified that 
they would abide by federal fundraising and spending limits in 
order to receive public funds, they devised a scheme whereby 
they could raise an additional $44 million on behalf of their 
campaign. Others will now follow that example.
    Decades ago, we decided in this country that we did not 
want corporations and labor unions to dominate the political 
scene. We outlawed contributions by them, imposed limits on 
individual and political action committee contribution and 
allowed a certain amount of soft money for local party building 
activities. Now because of FEC rulings, court rulings and 
Attorney General opinions, that system has been totally 
    The 1996 campaign provides us with a glimpse of the future. 
Money laundering, solicitation of foreign contributions, 
shakedowns of Indian tribes and Buddhist Monks and, apparently, 
policy being purchased with regard to a casino were all due at 
least in part to the new perception of what could be gotten 
away with. Campaigns can control huge wads of soft money spent 
on TV ads and feel perfectly safe from a legal standpoint. The 
problem is of course, that the much harder-to-prove transaction 
that produced the soft money is often illegal. Without Congress 
lifting a finger we have rapidly moved from an era of the 
$1,000 individual contributor or $10,000 ``party builder'' 
contributor to one where in order to be a real player you are 
going to have to come up with hundreds of thousands of dollars. 
Unless we change the situation, this will lead to future 
scandals and further cynicism among the American people. A 
recent public opinion survey on trust in government conducted 
by the PEW research center revealed that only 44% of the 
American people believe that their leaders are trustworthy. 
Among people between the ages of 18 through 29, the number is 
39%. And this survey was conducted during a time of economic 
prosperity at home and peace abroad. These results are 
consistent with other surveys and should cause the Congress to 
seriously reconsider the role of money in politics and what 
effect it is having on the public's perception of us.
    Congress has not revised the campaign finance laws since 
1979. In many other areas we see that after a period of time 
laws have been passed that resulted in unintended consequences, 
and elsewhere court decisions and administrative rulings point 
out weaknesses in the legislation which go contrary to 
congressional intent. In those instances we have concluded that 
we need to address the law again. As a result of 
thisinvestigation, I believe that this is what we are going to have to 
do so with regard to campaign finance legislation.
    In passing the Federal Election Campaign Act Congress 
eliminated private contributions to general election 
Presidential campaigns altogether for those who opted into the 
Presidential public financing program that was established. For 
the last 25 years Presidential nominees who were willing to 
certify that they would not raise and spend additional funds 
were given millions of dollars of taxpayers money to fund their 
campaigns. As with the idea of limiting corporate, union, and 
individual contributions, the idea was to cut down on the 
corrupting influence or appearance of corruption of large sums 
of private money being given to elected official and those who 
aspired to political office. Congress also believed this 
legislation would have the added benefit of pulling candidates 
out of the fundraising chase, and instead allow them time to 
focus on the issues and not so much on the money provided by 
factions supporting those issues.
    Things began to happen in the '70s, which along with later 
more significant developments in the early '90s, totally 
transformed the system that Congress had established. For 
example, the national, state, and local party committees were 
limited as to what they could spend for individual candidates. 
These expenditures were called coordinated expenditures. In the 
late 70's Congress amended the campaign laws, and the FEC 
interpreted those amendments, to allow national parties to 
spend unlimited amounts for voter registration, voter turnout, 
etc., without these monies counting against the limitations. On 
the grounds that these expenditures also benefited state and 
local candidates not subject to ``hard money'' limits, Congress 
and the FEC also allowed part of these expenditures to be 
funded with money that might be referred to as ``outside the 
system''--what came to be known as ``soft money.'' Under these 
new rules, parties could raise additional unlimited monies from 
individuals, corporations and unions and use those monies for 
grassroots efforts.
    In 1991, the FEC decided that national parties could fund 
35 per cent of their generic voter drive costs from soft money 
(40 per cent in a non-election year). The rest would come from 
hard money. These new regulations also provided for the first 
disclosure of party soft money activity, and thus the public 
learned in 1992 that the major party committee raised more than 
$83 million in soft money, or about four times the amount of 
soft money estimated to have been spent by party committees in 
    In the 1996 cycle, the explosion in soft money continued. 
Soft money receipts at the Republican National Party committees 
increased by 178 per cent over 1992, to $138.2 million, while 
Democratic Party committee receipts of soft money increased 242 
per cent over 1992 levels, to $123.9 million. Naturally, with 
all this new money on hand, there was a tremendous urge to 
marry that money up with the largest campaign costs by far--
television advertisements.
    That marriage was destined to happen once the FEC issued 
Advisory Opinion 1995-25 on August 24, 1995. Despite an attempt 
to use careful language, the clear import of Advisory Opinion 
1995-25 was to place the FEC stamp of approval for the first 
time on the use of soft money by national party committees to 
pay for broadcast media advertisements that directly referenced 
federal candidates. From that point on candidate-specific, but 
issue based, TV advertisements could be lumped with grassroots 
activity encouraged by the 1979 Amendments. The DNC and the 
Clinton-Gore campaign felt sanctioned under the FEC's hard/soft 
allocation regulations to run such helpful TV advertisements 
utilizing 40% soft money in 1995 (and 35% in the 1996 election 
year). The first such soft-money DNC and Democratic state party 
committee ads (also controlled and directed by the Clinton-Gore 
Re-election Committee) began running in October of 1995. At 
about the same time the AFL-CIO built on the idea by running 
similar soft money candidate-specific, but issue based, ads in 
favor of Clinton-Gore. However, the rules still prohibited soft 
money electioneering messages and coordination.
    The stage was set for those who were willing to take the 
soft money game to its next level, even if it meant violating 
the letter and the spirit of the rules. The Clinton-Gore 
campaign in 1995 and 1996 filled that role. Briefly stated, the 
Clinton-Gore campaign circumvented the DNC's coordinated 
expenditure limit and used approximately $44 million in 
national committee soft money to their candidates' advantage 
through electioneering messages that they claimed to be ``issue 
    The President and Vice President personally raised a good 
deal of the soft money--putting them back into the campaign 
fundraising chase that Congress specifically intended the 
campaign laws to put them above. The President personally 
reviewed and edited the television commercial scripts that the 
soft money went for and helped make the decisions on where the 
ads would be run. As I pointed out earlier, soft money is not 
permitted to go to support individual candidates and is not 
supposed to be coordinated or directed by those candidates. 
Nevertheless, the Attorney General, through her opinion on this 
matter, has permitted this abuse.
    The second large area that was exploited in the 1996 
election cycle had to do with the transfer of large amounts of 
soft money from the national party to the state parties which 
in turn would be directed by the national parties as to how to 
use the funds for national party purposes. Under FEC rules the 
amount of permissible soft money expenditures by state parties 
depends upon the ratio of federal to non-federal candidates on 
that state's November ballot. For example, if there are two 
federal races, say Presidential and Congressional, and 
candidates for eight non-federal offices, the state party can 
pay for 80 per cent of its generic activities with soft 
dollars. Given that hard dollars raised in $1,000 increments 
are significantly more difficult to raise, this gives an 
incentive to the state party topay for as many activities as 
possible using soft money. To take advantage of the system, national 
party committees begin transferring soft money to state party 
committees to utilize the various state's higher soft money allowance. 
Substantial amounts of such transfers are made with state and local 
parties for ``generic voter activities,'' but in fact ultimately 
benefit federal candidates, since the funds remain under the control of 
the national committees. So, again, the use of such soft money allows 
more corporate, union and large contributions by wealthy individuals 
into the system.
    In the crucial 1995 pre-election year, according to FEC 
reports, the DNC transferred almost $11.4 million of soft money 
to state parties, followed by another $6.4 million in the first 
quarter of 1996. The RNC shifted a little over $2.4 million to 
the states in about that same period of time. Ultimately the 
DNC quietly transferred at least $32 million and perhaps as 
much as $64 million to state democratic party committees in the 
'96 election cycle. Much of this money was used for television 
commercials. This transfer of funds allowed state party 
committees to use the national party soft money in areas to 
help their federal election goals more than if the national 
party committee had made expenditures directly. The DNC on its 
own would have had to have purchased the same air time under 
guidelines requiring a higher percentage of hard dollars.
    Our hearings demonstrated that on some occasions the very 
same ad would be run by both the national party and the state 
party, all created by the DNC Clinton-Gore media consultant, 
Squire, Knapp and Ochs. FEC reports of the receipts and 
expenditures of a dozen state Democratic parties from July 1, 
1995 to March 31, 1996 indicate that the state entities 
operated as little more than a pass-through for the DNC to pay 
for the production and broadcasting ads by the Squier firm.
    Thus, the DNC and the Clinton-Gore campaign found a way to 
use all of the big corporate, union, and individual soft money 
they could raise for the direct benefit of the Clinton-Gore 
campaign. The Clinton-Gore campaign would actually raise the 
soft money for the DNC, which in turn would spend it as they 
were directed by the Clinton-Gore campaign on ads to benefit 
the Clinton-Gore campaign. In addition, the DNC would send soft 
money to the states, which could use higher percentage of soft 
money than could the DNC, then direct the states as to how to 
use the money, once again for televison ads to benefit the 
Clinton-Gore campaign.
    It was all an obvious ruse, but it could work in a world 
where the FEC might take four or five years to impose a modest 
fine, and with an Attorney General who was willing to adopt a 
tortured Clinton-Gore legal defense theory in order to justify 
such actions.
    Of course, labor unions and the 501(c)(4) tax exempt 
independent groups supporting both parties have kept apace of 
these new developments. They, too, now systematically run ads 
supporting or targeting specific candidates, all the while 
coordinating their activities with the candidate they support 
and often with each other. As with issue ads the national 
parties, they claim that the ads they run are ``issue ad'' and, 
therefore, can't be regulated even though sometimes they 
contain clear electioneering messages. However, the fact that 
they are coordinated with the candidate makes the expenditure, 
in effect, contributions to the candidate's campaign under 
Buckley, 424 U.S. (1976), and various FEC enforcement cases. 
There is nothing in the court cases that would indicate that 
such coordination is legal. In fact, quite the contrary. 
Moreover, the FEC takes the position that even ``issue ads'' 
which are coordinated are illegal. National parties and 
independent groups seem to be taking the position that ``we 
didn't coordinate,'' but if we did it's legal anyway. The DNC 
and the Clinton-Gore campaign stand alone in this regard 
because their coordination and actual control by the candidate 
himself of the soft money expenditure was so open and so 
blatant that they had to make an all out legal defense based 
upon the proposition that coordination is permissible.
    Buckley addressed the problems of would-be contributors 
avoiding the contribution limitations by the simple expedient 
of paying directly for media advertisement for a candidate when 
the expenditures were controlled by or coordinated with the 
candidate or his campaign. Buckley stated ``. . . such 
controlled or coordinated expenditures are treated as 
contributions rather an expenditures under the Act's (the 
FECA's) contributions ceilings (And this) . . . prevents 
attempts to circumvent the Act through prearranged or 
coordinated expenditures amounting to disguised contributions . 
. . .''
    And it certainly makes no difference if the person who 
wants to purchase the television ad runs his contribution 
through the DNC instead of buying it directly. The potential 
corrupting influence is present either way. Nevertheless, the 
Attorney General seems to have adopted the Clinton-Gore's 
campaign argument.
    The Attorney General's position will have many 
ramifications. Her position is based upon the idea that soft 
money contributions are not ``contributions'' under the FECA. 
But if that blanket position is true, then soft money foreign 
contributions are not illegal either. It is only foreign 
``contributions'' that are illegal under the statute. Under her 
interpretation, unlimited amounts of foreign money could be 
brought in by a political campaign and placed in a soft money 
account and used for so-called ``issue ads'' and it would be 
perfectly legal.
    So in summary, we see that the '96 elections produced some 
clear violations of the criminal law and Congress' job in this 
area is to exercise oversight over the Justice Department to 
make sure that the laws are enforced. However, we also see the 
way in which soft money, issue advocacy and coordination are 
being used--used in ways that have been long considered to be 
violations of the law. So with the combination of court 
rulings, FECopinions, and lax law enforcement, as a practical 
matter we are left with no campaign finance system at all.
    There are some simple legislative solutions to many of the 
problems witnessed during the Committee's investigation, and 
touched on in the discussion above. First, the national party 
committees and federal candidates must address the soft money 
situation. The practice of allowing publicly funded primary and 
general Presidential candidates to raise soft money for 
themselves, or others, is not consistent with the Federal 
election Campaign Act's major goal of preventing actual, or the 
appearance of, corruption resulting from a quid pro quo for 
large campaign contributions. Legislation needs to be passed 
prohibiting federal party committees from soliciting, accepting 
or directing any money outside that regulated under the Federal 
Election Campaign Act. Furthermore, federal candidates should 
be prohibited from soliciting or directing soft money in any 
manner related to federal elections. The courts, and numerous 
constitutional scholars, agree that unions and corporations can 
be constitutionally prohibited from participating in the 
federal political process. Such a limitation could certainly 
extend to the party committees whose main purpose is to elect 
federal candidates.
    Implicit in doing away with the soft money system is the 
corresponding need to raise the hard money contribution limits 
to a reasonable level in order to dampen the demand for money 
outside the regulated system. The Committee's investigation 
revealed that the constant pressure to raise more and more 
contributions in $1,000 increments has lessened the time 
federal election candidates have to spend on the actual issues 
of the campaign, and increases the risk that illegal 
contributions will be accepted without proper vetting. 
Inflation has taken its toll over the years. An individual 
contribution of $1,000 (set in 1972) is worth $259 today. In 
order to have the same amount of purchasing power today as in 
1972, individual contributions would need to be increased to 
approximately $3,800. All of the contribution limits 
established in the FECA are subject to the same devaluation. 
Therefore, it seems advisable to raise all contribution 
limitations established by the FECA, and index them for future 
    As noted in the Final Report's recommendations, the foreign 
money prohibition can be strengthened by allowing contributions 
to federal candidates and party committees only from those 
eligible to vote. This is a brighter line that is more easily 
enforced than the current law.
    Finally, certain revisions in the law related to the FEC 
itself will speed and facilitate fuller disclosure, as well as 
more effectively allow the FEC to do its job. The most 
important component of such legislation would be the mandatory 
requirement that all political committees file electronically 
with the FEC. This allows for quicker and more widely 
distributed searchable data to be placed on the internet at 
very little cost. In order to ``unclog'' the FEC enforcement 
system, it is also necessary to establish a traffic ticket type 
schedule of fines for minor reporting violations. Currently the 
FEC wastes incredible resources processing the most minor 
violation under the complicated due process procedures 
established by the FECA with more serious violations in mind.

                         THE COORDINATION ISSUE

    The Minority contends that it is legal for a presidential 
candidate to direct and control the content of the issue 
advocacy conducted by that candidate's political party. The 
Minority also contends that the Majority's conclusion to the 
contrary is unsupported by any authority. In fact, under 
current law, it is illegal for a presidential candidate to 
control his party's issue advocacy expenditures in excess of 
the permissible coordinated expenditure limits. The purported 
authorities cited by the Minority are inapposite.
    For presidential campaigns, the Federal Election Campaign 
Act creates an optional public finance system whereby 
candidates who make the required certifications to the Federal 
Election Commission can receive federal matching funds. 26 
U.S.C. Sec. Sec. 9003, 9004, et seq. Candidates who voluntarily 
agree to participate in this system of partial public financing 
are limited in the amount of money they can spend. 2 U.S.C. 
Sec. 441a(c). Political parties can make expenditures in 
connection with the election campaigns of their presidential 
candidates, but such ``coordinated expenditures'' are limited 
to amounts set in the FECA (in 1996, $11,994,007). 2 U.S.C. 
Sec. 441a(d).
    In enacting the presidential campaign funding mechanisms of 
the FECA, ``Congress properly regarded public financing as an 
appropriate means of relieving major-party candidates from the 
rigors of soliciting private contributions.'' Buckley v. Valeo, 
424 U.S. 1, 96 (1976) (per curiam). The FECA's contribution 
limits to congressional and presidential candidates in general, 
and the institution of the public financing of presidential 
campaigns in particular, were enacted ``to limit the actuality 
and appearance of corruption resulting from large individual 
financial contributions.'' 424 U.S. at 26 (contribution 
limits), 96 (public financing of presidential campaigns). In 
the Buckley case, the Supreme Court upheld the scheme of limits 
on contributions and expenditures when they were conditioned by 
the receipt of public funds. The rationale for these limits was 
to restrict the influence of prospective donors. Clearly, this 
would apply equally when candidates solicit directly for 
contributions to their campaigns or to a party committee the 
candidate controls.
    Under the FECA, two important variables that determine 
whether a particular contribution or expenditure is legal are 
the content of the message and whether coordination exists 
between the candidate and the entity that funds the 
expenditure. In her April 14, 1997 letter to Senator Hatch, 
Attorney General Reno purported to rely upon FEC rulings that 
``advertisements that donot contain an `electioneering message' 
may be financed, in part, using `soft money,' '' to support the 
contention that the President's ads were legal. Letter from Attorney 
General Janet Reno to Senator Orrin Hatch, April 14, 1997, p. 7. Then 
the Attorney General assumed, without discussion, that the Clinton-Gore 
ads did not contain an electioneering message. She did so because, 
consistent with the Minority Report, she equated ``electioneering 
message'' with ``express advocacy.'' In other words, she and the 
Minority apparently take the position that if the ads are not express 
advocacy, they, by definition, do not contain an electioneering 
message. However, the FEC draws a distinction between the two concepts. 
And under their definition, these ads contain an electioneering 
    The FEC defines ``electioneering message'' to cover a broad 
range of expression, broader than the express advocacy standard 
set forth in Buckley v. Valeo. Under FEC Advisory Opinion 1985-
14, ``[e]lectioneering messages include statements `designed to 
urge the public to elect a certain candidate or party.' '' FEC 
Advisory Op. 1985-14, 2 Fed. Election Camp. Fin. Guide (CCH) 
para. 5819 at 11,185 (April 12, 1985) (citing United States v. 
United Auto Workers, 352 U.S. 567, 587 (1957); see also FEC 
Advisory Op. 1984-15; FEC Advisory Op. 1984-23; and FEC 
Advisory Op. 1984-62). For instance, in Advisory Op. 1985-14, 
the FEC found the following language that is clearly not 
express advocacy to constitute an electioneering message: ``Let 
your Republican Congressman know that their irresponsible 
management of the nation's economy must end--before it's too 
late.'' If an advertisement contains an ``electioneering 
message,'' then the FECA's restrictions on sources and amounts 
of funding, and its disclosure and disclaimer requirements 
apply. See 2 U.S.C. Sec. Sec. 441d (disclaimer provisions); 431 
et seq. (contribution limitations); 441b(a) (prohibition on 
corporate and union funds); 441e (prohibition on foreign 
funds); 441f (prohibition on contributions made in the name of 
another); 434 (reporting requirements); 441a(d)(2) (limitations 
on the amount of ``coordinated expenditures'' a party can make 
on behalf of its presidential candidate).
    Clearly, under the FEC's test, which defines 
``electioneering message'' to encompass far more than ``express 
advocacy,'' the Clinton-Gore controlled DNC ads were 
``electioneering message'' ads and could not be legally funded 
with soft money. President Clinton drafted ads that referred to 
both the President and to Republican Presidential candidate Bob 
Dole. These ads all criticized candidate Bob Dole and praised 
candidate Clinton, and compared the two. This content is what 
the FEC means by advertising ``designed to urge the public to 
elect a certain candidate or party.'' Accordingly, these 
advertisements clearly could not legally be funded with ``soft 
money,'' but rather only with hard money subject to the 
coordinated expenditure limits set further in the FECA.
    Similarly, the Attorney General's April 14, 1997 letter to 
Senator Hatch, which the Minority Report again adopts, stated: 
``The FECA does not prohibit the coordination of fundraising or 
expenditures between a party and its candidate for office. 
Indeed, the Federal Election Commission . . . has historically 
assumed coordination between a candidate and his or her 
political party.'' Letter from Reno to Hatch 4/17/97, at 6-7 
(emphasis in original). The conclusion that the legality of 
coordinated media advertisements between candidates and parties 
turns solely on the content of the advertisement, and not on 
the degree of coordination that the Minority finds to be 
``assumed,'' runs counter to Supreme Court case law as well as 
FEC rulings.
    Under the FECA, payment for a communication made ``for the 
purpose of influencing any election for Federal office'' is 
automatically considered a contribution if it is made by any 
person ``in cooperation, consultation, or concert, with, or at 
the request or suggestion of, a candidate, his authorized 
political committees, or their agents.'' 2 U.S.C. 
Sec. Sec. 431(9)(A)(I), 441a(a)(7)(B)(I). FEC regulations 
provide that coordination is presumed when candidates provide 
information about their plans, projects, or needs to third 
persons with a view towards having an expenditure made, 11 
C.F.R. Sec. 109.1(b)(4)(I)(A). In addition, those regulations 
state that financing of a candidate's broadcast materials in 
cooperation or consultation with a third party is a 
contribution for the purpose of contribution limitations. 11 
C.F.R. Sec. 109.1(d)(1).
    In its enforcement actions, the FEC found that an in-kind 
contribution resulted from coordination when the agent of 
apresidential candidate recommended a vendor to assist an outside 
individual who towed a banner behind an airplane that read ``No Draft 
Dodger for President.'' (MUR 3608). The FEC found a violation even 
though the message contained no express advocacy. And in the Hyatt 
Legal Services MUR (MUR 3918), the FEC found that electioneering 
advertisements not containing express advocacy and paid for with soft 
money were illegal under the FECA when coordinated between a candidate 
and an outside organization. The advertisements held to constitute an 
electioneering message stated only, ``Hyatt Legal Services. Serving the 
people of Ohio.'' The FEC found that this constituted an electioneering 
message given that the ad's discussion of bankruptcy due to health care 
costs in promoting legal services echoed a theme of Hyatt's campaign, 
and that no ads for Hyatt Legal Services outside Ohio mentioned a 
similar theme. Additionally, in that case, the campaign's media 
consultant prepared issue advertisements for the outside organization, 
and the candidate exercised final editorial approval over each of the 
scripts for the third party organization's radio advertisements. The 
FEC determined that certain communications involving the participation 
of a federal candidate results in a contribution on behalf of the 
candidate if, inter alia, ``(1) direct or indirect reference is made to 
the candidacy, campaign or qualifications for public office of you or 
your opponent;'' or (2) reference is made to the candidate's ``views on 
public policy issues, or those of [the] opponent . . . .'' (MUR 3918) 
(citing FEC Advisory Op. 1990-5, 2 Fed. Election Camp. Fin. Guide (CCH) 
para. 5982 at 11,612 (March 27, 1990)).
    More importantly, the most recent Supreme Court decision in 
this area contradicts the Minority's position on coordination. 
Colorado Republican Fed. Campaign Comm. v. FEC, 116 S. Ct. 2309 
(1996). In the Court's lead opinion, Justice Breyer explained 
that the Court has held limitations on expenditures generally 
unconstitutional, but limitations on contributions 
constitutional. Nonetheless, the Court has treated 
``coordinated expenditures . . . as contributions rather than 
expenditures'' in order to ``prevent attempts to circumvent the 
Act through prearrangement or coordinated expenditures 
amounting to disguised contributions.'' Buckley v. Valeo, 424 
U.S. 1, 46-47 (1976) (per curiam). Accordingly, Congress can 
regulate coordinated expenditures consistent with the First 
Amendment, since ``[t]he FECA contribution limit governs not 
only direct contributions but also indirect contributions that 
take the form of coordinated expenditures . . . .'' Colorado 
Republican, 116 S. Ct. at 2313 (emphasis added). Where, 
however, as in Colorado Republican, a party makes expenditures 
actually independent of its candidates, those independent 
expenditures cannot be regulated.
    According to the Court, the FECA may require coordinated 
expenditures to be treated as contributions subject to 
limitations, notwithstanding the First Amendment, because large 
coordinated expenditures (and contributions) create an 
appearance of corruption that Congress has a compelling 
interest to prevent. Indeed, in the Court's view, the 
``constitutionally significant fact'' requiring the absence of 
limits on independent expenditures ``is the lack of 
coordination between the candidate and the source of the 
expenditures.'' Colorado Republican, 116 S. Ct. at 2317. The 
Court recognized that the FECA's structure would make no sense 
if the FECA's limits could be easily circumvented through the 
actions of third parties who coordinated with candidates. 
Importantly, Justice Breyer's plurality opinion was not the 
only one that stressed coordination in determining the legality 
of the regulation of the relationship between a party and its 
candidates. Two additional justices, who along with the three 
justices joining Justice Breyer's opinion constitute a majority 
of the Court, believe that all party spending on behalf of a 
candidate is a ``contribution,'' and hence subject to the FECA 
limits. 116 S. Ct. at 2332. (Stevens, J., dissenting).
    To be sure, the Court did not address whether the First 
Amendment prohibits Congressional efforts to limit overall 
party coordinated expenditures, although the parties asked it 
to reach that question. But the Court noted that the Colorado 
Republican Party's suggested affirmative answer to that 
question presented ``the first case in the 20-year history of 
the Party Expenditure Provision to suggest that in-fact 
coordinated expenditures by political parties are protected 
from Congressional regulation by the First Amendment.'' 
Colorado Republican, 116 S. Ct. at 2319.
    I, therefore, cannot agree with the Attorney General's 
position that ``[w]ith respect to coordinated media 
advertisements by political parties . . . , the proper 
characterization of aparticular expenditure depends not on the 
degree of coordination, but rather on the content of the message.'' 
Reno Letter to Hatch 4/14/97, at 7. If that were an accurate 
understanding of the law, the Colorado Republican case would have been 
decided differently: the Court would have simply considered the fact 
that the advertisement could not have constituted a contribution under 
the FECA because ``the content of the message'' was not express 
advocacy. It would not have stressed that the ``constitutionally 
significant fact'' of these party advertisements was ``the lack of 
coordination between the candidate and the source of the 
expenditures.'' Colorado Republican, 116 S. Ct. at 2317. The position 
that content alone controls would not only render the Court's entire 
discussion of coordination irrelevant, but would make nonsensical the 
Court's decision to reserve the question whether party-coordinated 
expenditures with candidates could be constitutionally limited.
    Moreover, Colorado Republican contradicts the position in 
the Attorney General's letter that ``the law specifically 
applies only to contributions as technically defined by the 
Federal Election Campaign Act (FECA)--funds commonly referred 
to as `hard money.' '' Letter from Reno to Hatch 4/17/97, at 4 
(emphasis in original). Soft money is outside the scope of the 
FECA only to the extent it is used for the narrow purposes the 
statute permits, purposes that do not include issue 
advertisements designed to influence federal elections. As 
Justice Breyer wrote, ``We also recognize that FECA permits 
unregulated `soft money' contributions to a party for certain 
activities, such as electing candidates for state office, see 
Section 431(8)(A)(I), or for voter registration and `get out 
the vote' drives, see Section 431(8)(B)(xii). But the 
opportunity for corruption posed by these greater opportunities 
for contributions is at best attenuated. Unregulated `soft 
money' contributions may not be used to influence a federal 
campaign, except when used in the limited, party-building 
activities specifically designated in the statute.'' 116 S. Ct. 
at 2316 (emphasis added).
    Since Colorado Republican and the cited FEC regulations and 
decisions make clear that coordination is the key circumstance 
that determines whether expenditures on behalf of candidates 
are legal, a fortiori, when a candidate directs and controls 
the expenditures of an outside organization as the President 
did with respect to the DNC's issue advocacy advertisements, 
coordinated expenditure limitations necessarily apply to that 
more egregious use of a third party to disseminate the 
candidate's message.
    The evidence produced by the Committee on Governmental 
Affairs' Special Investigation in depositions and at its 
hearings show conclusively that Dick Morris and the President 
devised a scheme in which the Clinton-Gore reelection committee 
used the DNC as a separate and additional campaign checking 
account. The President's control of the DNC was so extensive 
that to characterize the situation at issue as ``coordination'' 
would be to credit the DNC with much more active participation 
than, in fact, it provided. It is hard, if not impossible, to 
imagine how a candidate could do more, and a party less, to 
raise and spend money for that candidate's reelection. These 
ads, created, financed, and run at the personal request and 
authorization of the candidate, clearly must be treated as 
expenditures by the Clinton-Gore reelection campaign.
    As pointed out above, the intent of the FECA in providing 
limited federal funding is to remove the candidate from the 
fundraising process and to prevent the raising of large private 
campaign contributions. The deal the taxpayers make with the 
candidate is that in exchange for their funding, the candidate 
will forswear outside money, thereby making it less likely that 
the election will be influenced or appear to be influenced by 
big money. Obviously, in the matter before us, the clear 
purpose of the law was circumvented. If a candidate can easily 
circumvent those limitations through coordination with a third 
party, such as by raising unlimited sums for a party committee 
the candidate controls, that objective of the statute is 
completely undermined.

  Governmental Affairs Committee Special Investigation Into Campaign 
  Finance Illegalities and Improprieties During the 1995-96 Election 

                              final report

Additional views of Senator Collins (R-ME)
    I agree with the findings and recommendations set forth in 
the Report of the Governmental Affairs Committee Special 
Investigation into Campaign Finance Illegalities and 
Improprieties during the 1995-96 Election Cycle. While I am 
filing additional views to emphasize my belief that the 
Committee's hearings also demonstrate the need for fundamental 
changes in our campaign finance laws, it is imperative that 
calls for reform, whether made by me or others, not be used to 
justify the failure to enforce existing laws. Thus, my 
endorsement of new legislation in no way diminishes my support 
for the Committee's recommendation advocating the appointment 
of an independent counsel and urging ``the Department of 
Justice to aggressively pursue the many instances of apparently 
illegal activity as set forth in this report.'' Indeed, without 
aggressive enforcement that is impartial both in fact and in 
appearance, enacting new laws is a meaningless gesture.
    Regarding the need for new legislation, the hearings 
provided overwhelming evidence that the twin loopholes of soft 
money and bogus issue advertising have virtually destroyed our 
campaign finance laws, leaving us with little more than a pile 
of legal rubble. In an area otherwise beset with constitutional 
disagreements, the Supreme Court has clearly said that Congress 
may restrict campaign contributions to avoid the potentially 
corrupting effect of big money flowing to candidates. Yet, the 
efforts of Congress to establish such limits, made in the 
aftermath of the Watergate scandal, have been undermined by the 
loophole-seekers, who after years of probing, discovered that 
by making creative uses of soft money and running negative 
campaign ads with nominal references to issues, they could get 
around the barriers erected to prevent large donations from 
eroding the confidence of the American people in our electoral 
    Without reviewing the mass of evidence presented at the 
hearings, the episodes involving Roger Tamraz and Yogesh Gandhi 
suffice to show the use of soft money contributions to purchase 
access to high-ranking officials, including the President of 
the United States. In the first instance, an individual facing 
an Interpol arrest warrant for allegedly embezzling more than 
$150 million, made or solicited more than $300,000 in 
donations, with much of that amount going to the Democratic 
National Committee (``DNC'') in the form of soft money, to buy 
entry to the White House to promote a pipeline project. Feeling 
no uneasiness at trading money for access, Mr. Tamraz proudly 
volunteered to the Committee that next time he would double his 
largesse. Similarly, Mr. Gandhi, having been denied a meeting 
at the White House, made a donation to the DNC of $325,000, 
allegedly in laundered foreign money, to obtain a picture with 
the President for two foreign business associates eager to 
impress potential customers with their connections to the 
leader of the most powerful country on earth. Conduct of this 
sort makes a mockery of the $1000 campaign contribution limit 
imposed on individuals.
    Even more damaging to our democracy is the perception that 
soft money contributions may buy not only access but results as 
well. The Hudson Band of Chippewa Indians, an impoverished 
tribe in the State of Wisconsin, has every reason to suspect 
that the denial by the Secretary of the Interior of its casino 
license was driven by the expectation of large soft-money 
donations by the wealthy tribes opposing its application. The 
fact that Native Americans now apparently feel they must play 
the soft money game to participate in our democracy may be the 
saddest commentary of all on our campaign finance system.
    The hearings also reinforced what every American television 
viewer learned in the 1996 elections, namely, that bogus issue 
advertising makes a sham of our campaign contribution limits. 
These ads usually take the form of savage political attacks 
thinly disguised as statements advocating a position on an 
issue. If organizations, some of which are barred from 
contributing to federal campaigns, and individuals, all of whom 
are restricted in the amounts they may contribute, are allowed 
to spend unlimited funds to attack a candidate's opponent, and 
thereby influence the outcome of the election, the reforms of 
the 1970's are rendered a dead letter. Indeed, it has been 
persuasively argued that the situation will have been made 
worse, as candidates will not even be accountable for this 
potentially massive and frequently deceptive form of campaign 
    At a minimum, the hearings demonstrate a need to close 
these loopholes to restore the original purpose of the post-
Watergate reforms, and I have cosponsored legislation to that 
effect. But the hearings also suggest a more fundamental 
problem which, if left unaddressed, will certainly give rise to 
new loopholes. That problem is the mania for money that has 
infected our political system.
    It would be naive to suggest that the mania for money is 
new in the political life of our country, but as the hearings 
revealed, it has reached epic proportions. Indeed, the 
television ad race has become the political counterpart of the 
nuclear arms race, characterized by the same insecure feeling 
that one can never have enough. Unless we address the spending 
side, we will be condemned to the endless task of plugging 
leaks in whatever dams we build to limit the flow of 
    Before these proceedings began, I announced my support for 
legislation that would place voluntary limits on campaign 
spending in return for reduced-priced television time for 
political ads and free mailing privileges for campaign 
materials. The insatiable appetite for television money, 
revealed in the hearings, has strengthened my belief in the 
need for such legislation.
    The hearings had another effect, however, which was to 
strip away the illusion that voluntary spending limits or any 
other solution will be perfect for all times. The pressure for 
money is so great that we may have no choice but to recognize 
that there will be a recurring need to amend our campaign 
finance laws to deal with the latest abuses. In the final 
analysis, the loudest message of these hearings is that if we 
fail to aggressively enforce our current laws, and amend them 
when necessary to close loopholes, we risk a democracy driven 
not by the quality of one's ideas or the level of one's 
integrity but rather by the thickness of one's wallet.

                                   Susan M. Collins,
                                           March 10, 1998.

               Additional Views of Senator Arlen Specter

    The Senate Governmental Affairs Committee had the potential 
to make a significant, if not decisive, impact on campaign 
finance reform when we voted 99 to 0 on March 11, 1997, to 
include improper as well as illegal activities in our 
investigation of the 1996 federal elections.
    That potential was immediately undermined by the December 
31, 1997, deadline. On March 11, I initiated a colloquy with 
the Committee Chairman and Ranking Member pointing to the 
obvious incentive of opponents of our investigation to engage 
in delaying tactics beyond the cutoff date. That December 31st 
cutoff date was a constant cloud over Committee initiatives 
deterring the Committee from activities which might not or 
could not have been concluded before that date. In the end, the 
cutoff date and severe partisan differences led the Committee 
to conclude its hearings on October 31st, even two months 
before the mandated termination date.
    The partisan disagreements were the main reason the 
Committee could not and did not do more to expose the facts 
which could have created the public demand necessary to compel 
the Congress to enact campaign finance reform. I have long been 
convinced that such reform would not occur until there was the 
kind of a tidal wave of public pressure which led to such 
legislation after Watergate.
    It is obviously an uphill battle to change the current 
system which protects incumbents. It did not take too much 
provocation on any issue for one side or the other to throw up 
roadblocks when the Committee would come to an intersection 
where bipartisan agreement was necessary. To try to assess 
blame would be hopeless and pointless. It was a bipartisan, 
joint failure.
    A key difference arose over who would be subpoenaed and how 
broad those subpoenas would be. In June, Senator Levin and I 
were deputized to work out a dispute on the subpoena 
controversy. We succeeded, perhaps too well, because we were 
never deputized again.
    Some subpoenas were particularly sensitive because they 
might have implicated Members. Those not in the Senate have not 
seen and probably cannot understand the constant, frequent 
interchanges among Members on numerous issues which require 
collegiality for the institution to function. Every effort is 
made by Senators to modulate disagreements over specific issues 
with the prevailing attitude being that the next vote is more 
important than the last vote. I would not say that the Congress 
cannot investigate itself; but in this matter, we did not.
    Several subpoena recipients correctly complained that their 
subpoenas were too broad. Instead of limiting and then 
enforcing the subpoenas, the partisan controversy festered and 
ultimately nothing was done. In my opinion, our failures to 
enforce those subpoenas constitutes a serious precedent 
weakening the Senate's institutional authority.
    The Committee's work was substantially hindered by 
difficulties in obtaining important information from the CIA 
and FBI. On September 11, 1997, Attorney General Reno, FBI 
Director Freeh and CIA Director Tenet testified before the 
Committee on a sequence of events which was and is 
extraordinarily difficult to understand and impossible to 
justify. Director Tenet testified that a Committee briefing by 
the CIA and FBI in July 1997 was incomplete because the 
Committee was not told at that time about an FBI report that an 
individual, who had been identified in many news accounts as a 
major foreign contributor to political campaigns and political 
committees, had made significant contributions as part of a 
plan of the government of China.
    The FBI Director advised that the information about that 
individual had been in the FBI files since September or October 
of 1995 on one report and since January 1997 on a second 
report. The FBI Director advised that the Committee was not 
told about that information at the July 1997 briefing because 
the FBI did not know it had the information in its files.
    The Governmental Affairs Committee was further advised at 
the September 11, 1997, briefing that if in the future the 
Department of Justice found similar information, they would 
``very seriously consider and talk about bringing that 
information to the committee.'' That was palpably insufficient.
    After that event, I had no confidence in the completeness 
of information furnished to the Committee by the FBI or CIA. 
During my service on the Intelligence Committee, I found 
similar instances where critical information was withheld by 
the CIA. My experience with former CIA Director John Deutch, 
FBI Director Freeh and CIA Director Tenet leads me to believe 
they did not know about such withheld information.
    In reporting on the Aldrich Ames case, then CIA Inspector 
General Fred Hitz stated that former Directors William H. 
Webster, Robert M. Gates and R. James Woolsey should be held 
accountable on the following rationale:

         We have no reason to believe that the DCIs who served 
        during the relevant period were aware of the 
        deficiencies described in this report. But DCIs are 
        obligated to ensure that they are knowledgeable of 
        significant developments related to crucial Agency 
        missions. Sensitive human source reporting on the 
        Soviet Union and Russia during and after the Cold War 
        clearly was such a mission, and certain DCIs must 
        therefore be held accountable for serious shortcomings 
        in that reporting.

That controversial approach has not been adopted, but it is 
worth considering in the light of repeated failures by heads of 
those departments to find out and know what is in their 
agencies files.
    After the strong criticism by Committee Members at the 
Senate September 11, 1997, hearing, it was reported that the 
FBI then looked further to determine whether other information 
had not been disclosed. Shortly thereafter, on September 27, 
1997, FBI Agent Ray Wickman resigned. Agent Wickman had served 
as a unit chief on Chinese intelligence matters.
    The House Government Reform and Oversight Committee has 
inquired into the circumstances surrounding Wickman's 
termination. One explanation is that he chose to resign because 
he was over the 57 retirement age. Another explanation was that 
he chose to resign rather than accept a new assignment after 
being replaced as the unit chief.
    House Chairman Burton questioned FBI Director Freeh in 
House hearings on December 10 and Director Freeh stated:

           ``. . . he (Wickman) has said that he is retired 
        because he wanted to retire and did not retire because 
        he felt forced. The other thing--excuse me. The idea 
        that he was told to turn in his sources is a 
        nonsensical notion.''

Chairman Burton later asked Director Freeh:

           ``. . . have any agents or anybody at the Bureau 
        indicated that he was dissatisfied with the Justice 
        Department regarding their inquiry into his sources?''

Mr. FREEH: ``No sir.''
    At a later point in the hearing Director Freeh asked to 
``put one thing on the record'' and then testified:

           Mr. FREEH: I got this note from my general counsel, 
        who asked to ask a question with respect to Mr. 
        Wickman. I'm told by my counsel that Mr. Wickman was 
        concerned with the question of DOJ attorneys accessing 
        what we call asset files. An asset file is not the 
        substantive information, but lists the names and 
        address of the informant, which is the most sensitive 
        files that we have.
           I'm told that once the DOJ attorneys understood that 
        the asset files were not substantive, that was the end 
        of that issue. But let me get some more information and 
        report back to you.

As of this date, March 4, 1998, Director Freeh has not yet 
reported back.
    In the total context, there may be more to this issue than 
just the identity of assets and this inquiry should be pursued 
to determine whether Agent Wickman or anybody else at the FBI 
or the Department of Justice had any other information on the 
Chinese issue which was not turned over to our Committee.
    In late February 1998, as the Committee was preparing its 
final report, Chairman Thompson was advised by Attorney General 
Reno that there was new important information on the China 
issue which could not be disclosed. I urged that the 
information at least be made available to the Committee 
Chairman and Ranking Member so that there could be their 
evaluation as to whether that information or perhaps a redacted 
version could be available for our report. No information has 
been made available by the Department of Justice.
    Obviously, additional investigation is necessary to develop 
further the facts on the issue of the government of China 
influencing the 1996 federal elections.
    I believe campaign finance reform is urgently required. My 
specific recommendations are set forth in Senate Bill 1191 
captioned ``The Campaign Finance Reform Act of 1997.'' 
Following my statements on the subject including arguments on 
the Senate Floor, I believe that Independent Counsel should be 
appointed to investigate the financing of the 1996 federal 


    It is my intention to address the question of Mr. John 
Huang in more detail and in another forum.
    Attached are unclassified answers from the Directors of the 
Central Intelligence Agency and the Federal Bureau of 
Investigation to questions I submitted to them on July 28, 

                               Central Intelligence Agency,
                                  Washington, DC, November 3, 1997.
Hon. Robert F. Bennett
United States Senate
Washington, DC.
    Dear Senator Bennett: Enclosed are the unclassified 
responses to the questions you submitted to the Director of 
Central Intelligence on 28 July 1997. (We have previously 
provided classified responses to the Office of Senate 
Security.) As you will note, we were not able to provide 
unclassified responses to all the questions you raised. For 
those questions to which it was possible to offer unclassified 
answers, the information was drawn from a variety of domestic 
and foreign open sources. While we have included references to 
specific publications in a number of these answers, these 
references should not be regarded as a CIA endorsement of 
either the publication or the specific information that is 
    In your comments during the hearing on 7 October 1997, you 
expressed dismay because our original response to you did not 
include unclassified answers. Since the initial receipt of your 
questions in July, our goal has been to provide you and the 
committee with responsive answers. For most of your questions, 
unclassified answers are incomplete and therefore inherently 
inadequate (a judgment that is obvious from a comparison of our 
classified response of 3 October with the information we are 
able to provide in the attachment to this letter).
    It is important to understand why so little unclassified 
information is available on the issues about which you asked 
questions. The focus of the mission of the Central Intelligence 
Agency is to collect and analyze foreign intelligence 
information that is generally sensitive and therefore 
classified. On the specific issues now before the committee, 
much of CIA's information is obtained from sources and methods 
that are particularly sensitive. I understand your desire to 
address publicly important questions raised in the course of 
the committee's investigation, but the nature of this Agency's 
work necessarily limits the information available for public 
    Please feel free to call me if you have any questions or 
concerns on this matter.
                                           David P. Holmes,
          (for John H. Moseman, Director of Congressional Affairs.)

    Question 1. Has the Intelligence Community been officially 
tasked to report on Chinese government attempts to influence 
the American political system?
    Answer. The CIA as a matter of regular practice reports to 
senior US policymakers on Chinese activities, including 
attempts to influence US policy. The Agency brings this 
information to the policymaker in several ways.
     Sometimes, the disseminated reporting is sent 
directly to our customers.
     Finished intelligence also plays a large role--
through the National Intelligence Daily, the Economic 
Executives Intelligence Brief, and numerous briefings, 
intelligence reports, and memoranda tailored to meet specific 
requests and audiences.
    Question 2. As a deputy director of the PLA's Liaison 
Department, does Deng Maomao have any responsibility for media 
placement or other attempts to influence the American political 
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 3. Did the Chinese Communist Party's United Front 
Work Department play a role in Chinese efforts to influence the 
American political system?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 3a. Did the Second Department of the PLA's General 
Staff Department play a role in Chinese attempts to influence 
the American political system?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 4. How much money does the Intelligence Community 
devote to China? To Russia?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 5. How many Chinese language officers do you have 
at Level 2 or better? How many Russian linguists?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 6. What is the relationship between Stanley Ho and 
Beijing authorities, especially the Chinese Communist Party?
    Answer. According to various Hong Kong press reports, 
gambling magnate Stanley Ho was awarded Macau's casino monopoly 
in 1962. He is the Managing Director of the Sociedade de 
Turismo e Diversoes de Macau (STDM), which operates nine 
casinos, the Macau Jockey Club, and several hotels and banks in 
the territory.
     According to Dow Jones, Ho also holds a 14 percent 
share of Air Macau. The airline's majority shareholder is a 
wholly-owned subsidiary of the Civil Aviation Administration of 
    Press reporting indicates that Ho's relationship which 
Beijing is characterized by mutual suspicion.
     Accounts in the Hong Kong press claim that Beijing 
is uncomfortable with Ho's gambling monopoly and has long 
sought to ensure greater influence--including efforts to secure 
seats on STDM's board of directors--over the billions of 
dollars in tax revenues the concession generates for the Macau 
     The Far Eastern Economic Review reported on 6 
September 1996 that Ho is increasing his investments in China.
    Question 6a. What is the relationship between Ted Sioeng 
and Beijing authorities, especially the Chinese Communist 
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 6b. What is the relationship between Beijing 
authorities and Charlie Trie [pronounced Tree]?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 7. What is the business relationship between Ng 
Lap Seng [pronounced Ung Lop Song] and Charlie Trie? Are they 
partners in Ng Lap Seng's Hong Kong Food City operations?
    Answer. We are aware from open source materials, including 
the Wall Street Journal, that they are close associates and 
that Mr. Trie appeared to have helped Mr. Ng establish a 
subsidiary of his Macau-based property development corporation 
here in the United States. The same reporting also shows that 
Mr. Ng subsidized a number of Mr. Trie's business activities 
here in the United States.
    Question 8. While a member of a White House U.S.-Asia 
advisory group, Charlie Trie received a CIA briefing on Asian 
economic issues. How many classified briefings did Charlie Trie 
receive? How many classified documents did Charlie Trie receive 
or review? Please furnish the contents of all classified 
briefings and documents that Charlie Trie received.
    Answer. On 23 April 1996, analysts briefed the 18-member 
Presidential Commisson on U.S.-Pacific Trade and Investment at 
the unclassified level on the general economic outlook for East 
Asia. Mr. Trie, as a member of this Commission, was present at 
the briefing.
    The briefers provided a general overview of China's 
economy, it's importance to the global economy, and its major 
trade and investment partners, especially those in East Asia. 
It also covered China's, Hong Kong's, and Taiwan's economic 
futures. No classified information was disclosed or furnished.
    Question 9. What is the relationship between Ted Sioeng and 
James Riady?
    Answer. Indonesian press reporting shows an indirect link 
between Ted Sioeng and James Riady through the Tanuwidjaja 
family of Indonesia. The Riady family and the Tanuwidjaja 
family are reported in the press as long-time friends. Sioeng 
is related by marriage to the Tanuwidjajas--one of his 
daughters is married to Subandi Tanuwidjaja. There are also 
business connections--the Tanuwidjaja family bought into the 
Worldwide Golden Leaf company, which distributes the same 
Chinese cigarettes as Sioeng's companies.
    Question 10. What ties does Mr. James Riady have to Beijing 
    Answer. A variety of press reporting shows that James 
Riady--the eldest son of Mochtar Riady--is in charge of Lippo's 
Indonesian operations and plays a substantial role in managing 
Lippo's international businesses, particularly in Hong Kong, 
where he is Deputy Chairman of Lippo Limited, which controls 
most of Lippo's investments in China. According to Moody's 
International, Lippo has 17 of its 138 subsidiaries and 13 of 
its 30 affiliates incorporated in China. Almost all of these 
are joint ventures with local, regional, and central 
governments in China. Lippo has provided financial backing for 
large-scale public works projects; for example, Lippo has 
provided concessionary-rate loans to finance many of these 
projects in key party members' home areas.
    Question 11. What ties does Stephen Riady have to Beijing 
    Answer. Stephen Riady lives in Hong Kong and is the 
Chairman of Lippo Limited, which manages Lippo's investments in 
China. U.S. business press reporting states that Lippo has 
substantial interests in China--about $2 billion in the Riady's 
ancestral province of Fujian alone. These include real estate, 
banking, electronics, currency exchange, retail, electricity, 
and tourism. According to Moody's International, Lippo has 17 
of its 138 subsidiaries and 13 of its 30 affiliates 
incorporated in China. Almost all of these are joint ventures 
with local, regional, and central governments in China. Lippo 
has provided financial backing for large-scale public works 
projects; for example, Lippo has provided concessionary-rate 
loans to finance many of these projects in key party members' 
home areas.
    Question 12. What relationship did John Huang develop with 
Chinese authorities while he was a banker in Hong Kong?
    Answer. U.S. press reports claim that John Huang worked for 
the Lippo Group, which is a co-owner of the Hong Kong Chinese 
Bank with China Resources--owned by China's Ministry of Foreign 
Trade and Economic Cooperation.
     In January 1994, Lippo Group and the State of 
Arkansas sponsored five Chinese government officials--four from 
the Ministry of Foreign Trade and Economic Cooperation and one 
from the China Friendship Service--to visit the United States. 
The group named Huang as the contact person for their group.
    Question 13. What advice did the CIA give to the Federal 
Reserve on the China Construction Bank (CCB) licensing 
application? What role did Ted Sioeng have in the license 
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 14. Concerning Ted Sioeng's ``Red Pagoda'' brand 
cigarettes concession, how did he obtain the concession? What 
area does it cover? The U.S.? Southeast Asia? What is its 
    Answer. According to U.S. press reports, including Business 
Week, Mr. Sioeng made money in the late 1970s by selling 
refurbished tobacco equipment to China's Yunan Province. He was 
later granted government rights to manufacture and export 
Hongtashan (``Red Pagoda Mountain'') cigarettes throughout the 
    The producers of Hongtashan cigarettes made pre-tax profits 
of $975 million in 1996, according to press reports. A company 
official told the press in May that the Yuxi Cigarette Plant in 
Yunan Province earned $115 million in foreign exchange last 
year through export.
    Question 15. What relationship does Ted Sioeng have to the 
Iowa Wesleyan College?
    Answer. According to U.S. press reports, including Business 
Week and Time, Mr. Sioeng has donated money to Asian-American 
groups and his donations to Iowa Wesleyan College were 
recognized with an honorary doctorate.
    Question 16. What relationship does Ted Sioeng have with 
Mr. Chio Hocheong of Macao?
    Answer. Our review of Hong Kong and Western press reporting 
shows that Chio Hocheong is a Macao legislator and nightclub 
owner. He won a seat in Macao's September 1996 legislative 
elections. Chio ran under the banner of the Macao Economic 
Promotion Association, which was backed by the territory's 
gambling, entertainment, and property development interests. 
Press reporting is unclear about the nature of the relationship 
between Ted Sioeng and Chio Hocheong, if there is any.
    Question 17. Johnny Chung started seven California 
companies with Chinese nationals as officers, directors, or 
shareholders. Who are the Chinese nationals involved in these 
businesses?: What relationship does Johnny Chung have to the 
China International Trust and Investment Corporation aka CITIC?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 18. What relationship do the Riadys have with 
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 19. What relationship does the CP Group of 
Thailand have with Beijing authorities?
    Answer. The Charoen Pokphand (CP) Group is the single 
largest foreign investor in China with, according to a Harvard 
study on major corporations in ASEAN, 130 joint ventures and 
subsidiaries in 27 provinces worth about $3 billion. More than 
60 percent of CP's revenues come from China. CP's investments 
are diversified in numerous industries including agro-business, 
auto parts manufacturing, real estate, telecom, and energy.
     CP first entered the Chinese market in 1979 in the 
agro-business sector--this has since become the dominant source 
of earnings for CP, contributing about 50 percent of the 
company's overall total. CP is the world's second largest 
producer of chicken boilers and operates more than 100 feed 
mills in more than 12 countries, according to Western Press 
reports, including Reuters. China alone holds about 70 feed 
mills which produce most of more than 6 million tons of chicken 
feed per year and process more than 2 million birds a week, 
holding substantial market share.
     CP is China's second largest motorcycle dealer and 
holds more than a 15 percent market share in one of China's 
fastest growing industries. CP also is heavily invested in real 
estate development in Shanghai.
     CP founded its subsidiary Chia Tai, a Chinese 
translation of its Thai name. The Chia Tai Group name is almost 
always used for business ventures, meeting with Chinese 
officials, and making charitable contributions.
     CP was unique from other foreign investors, who 
concentrated mainly on industry. In addition, CP continued to 
invest in China after the Tiananmen incident when other 
investors either stopped or slowed their investment.
    CP also makes generous contributions to charitable and 
infrastructure projects. In 1991, Dhanin delivered $1.9 million 
to Chen Hong, Chinese Vice-Minister of Civil Affairs and 
Secretary General of the China Committee of the ``International 
Decade for Natural Disaster Reduction,'' for relief assistance 
to China's flood-stricken areas, according to official Chinese 
    Question 19a. What relationship does the CP Group have with 
the PLA?
    Answer. Both the PLA and CP have ventures in the retail 
petroleum business, according to several press reports.
    Question 19b. What relationship does the CP Group have with 
    Answer. Western press reporting shows that the CP Group is 
the single largest investor in China--concentrating in agro-
business and auto parts--and CITIC is the primary vehicle for 
foreign direct investment into China, making commercial 
interaction between the two organizations likely.
    Question 20. Does the CP Group do business with or in Iran, 
Iraq, Syria, or Libya?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 21. What are the business relationships between 
Gregory Luchanskiy of Nordex and Vadim Rabinovich of OSTEX? 
What business relations do either of them have with Roger 
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 22. Does the China Ocean Shipping Company (COSCO) 
have a business relationship with Johnny Chung, Charlie Trie, 
John Huang or Ted Sioeng?
    Answer. According to U.S. press reports, Johnny Chung 
brought a COSCO executive into the White House. COSCO's 
shipping fleet handles about 85% of Chinese exports to the 
United States.
    Question 23. Is it true that the last National Intelligence 
Estimate on the Chinese military was issued in 1992? Is it also 
true that a draft NIE on the PLA was prepared by the CIA last 
summer but was suppressed by an outside panel of experts?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.
    Question 24. In 1976 CIA Director George Bush established a 
Team B to have a second look at Community reporting on the 
Soviet Union. Team B was composed of outside experts who were 
critics of the reporting at the time and who later became the 
leading policymakers of the Reagan Administration. Would you 
consider a Team B for China headed by, for example, former 
Ambassador to Beijing James Lilley?
    Answer. We cannot provide an unclassified response that 
answers this question. A classified response has been provided 
to the Office of Senate Security.