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



105th Congress                                            Rept. 105-167
                                SENATE

 2d Session                                                      Vol. 5
_______________________________________________________________________


 
     INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION
                WITH 1996 FEDERAL ELECTION CAMPAIGNS

                               __________

                              FINAL REPORT

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                             Volume 5 of 6





                 March 10, 1998.--Ordered to be printed


INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996 
                  FEDERAL ELECTION CAMPAIGNS--VOLUME 5


105th Congress                                            Rept. 105-167
                             SENATE

 2d Session                                                      Vol. 5
_______________________________________________________________________


                      INVESTIGATION OF ILLEGAL OR

                   IMPROPER ACTIVITIES IN CONNECTION

                       WITH 1996 FEDERAL ELECTION

                               CAMPAIGNS

                               __________

                              FINAL REPORT

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                             Volume 5 of 6





                 March 10, 1998.--Ordered to be printed


                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   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
ROBERT F. BENNETT, Utah
          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

                   GOVERNMENT AFFAIRS COMMITTEE STAFF

                   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

                              ----------                              
                                                                   Page
Chapter:
    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

  MINORITY VIEWS OF SENATORS GLENN, LEVIN, LIEBERMAN, AKAKA, DURBIN, 
                         TORRICELLI AND CLELAND

                           Table of Contents

                                                                   Page
Foreword.........................................................  4559
Executive Summary................................................  4561
Part 1  Foreign Influence........................................  4577
Chapter 1: Overview and Legal Analysis...........................  4577
    Findings.....................................................  4577
    Overview of Following Chapters...............................  4577
    Legal Analysis...............................................  4579
Chapter 2: The China Plan........................................  4619
    Findings.....................................................  4620
    Introduction.................................................  4621
    The Committee's Investigation................................  4623
    Background...................................................  4623
    The China Plan...............................................  4625
        Events Leading up to the China Plan......................  4625
        Information about the China Plan.........................  4626
        Implementation of the China Plan.........................  4627
        Legal Activities.........................................  4627
        Illegal Activities.......................................  4628
        Individuals Under Investigation and the China Plan.......  4628
        Ted Sioeng...............................................  4629
        John Huang and Maria Hsia................................  4630
        The Riadys...............................................  4630
        Intermediaries: Relation to the Committee's Public 
          Investigation..........................................  4631
        Political Contributions to Federal Elections.............  4632
        Political Contributions: Relation to the Committee's 
          Public Investigation...................................  4633
    Information not Pursued by the Committee.....................  4633
    Conclusion...................................................  4634
Chapter 3: The National Policy Forum.............................  4657
    Findings.....................................................  4657
    Introduction.................................................  4657
    Haley Barbour................................................  4659
    Ambrous Young................................................  4659
    Origin Of the National Policy Forum..........................  4660
     The Barbour-Baroody Split...................................  4661
    Funding the NPF..............................................  4661
    Baroody Resigns..............................................  4662
    The NPF Under John Bolton....................................  4663
    Barbour Solicits Ambrous Young...............................  4665
    The Loan Transaction.........................................  4666
    Funding the Contract With America............................  4668
    The Trip to Hong Kong........................................  4669
    The Trip to China............................................  4670
    The Default..................................................  4670
    Other Foreign Contributions..................................  4671
    Conclusion...................................................  4672
Chapter 4: John Huang............................................  4788
    Findings.....................................................  4788
    Huang's Early Career.........................................  4789
    Background on the Lippo Group................................  4790
    Huang's Activities on Behalf of the Lippo Group..............  4791
        Political Contributions..................................  4792
    Huang's Tenure at the Department of Commerce.................  4794
        Huang's Appointment......................................  4794
        Huang's Role at Commerce.................................  4796
        Huang's Security Clearance and Access to Classified 
          Information............................................  4798
        Granting of Top Secret Clearance.........................  4799
        Huang's Access to Classified Information.................  4800
        Huang's Use of the Stephens Office.......................  4802
        Huang's Post-Commerce Clearance..........................  4803
        No Evidence of Espionage.................................  4806
        Evidence of Solicitations of Contributions...............  4808
    Hiring Huang to Work at the DNC..............................  4811
        Huang's Understanding of Applicable Law..................  4813
        Huang's Fundraisers......................................  4814
        February 1996 Hay Adams APALC Events, Washington, D.C....  4814
        May 13, 1996 Sheraton Carlton Event, Washington, D.C.....  4816
        July 22, 1996 Century Plaza Hotel Event, Los Angeles.....  4816
        July 30, 1996 Jefferson Hotel Event, Washington, D.C.....  4817
        Other Huang Activities...................................  4818
        Hsi Lai Temple Event.....................................  4818
        The Vice President and the Temple Event..................  4819
        John Huang and the Temple Event..........................  4831
        John H. K. Lee and the Cheong Am America Contribution....  4832
        June 18, 1996, DNC Coffee at the White House.............  4836
        Rawlein Soberano.........................................  4838
        The DNC's Supervision of Huang...........................  4839
    Conclusion...................................................  4840
Chapter 5: Charlie Trie..........................................  5270
    Findings.....................................................  5270
    Background...................................................  5271
    Trie's DNC Contributions and Fundraising.....................  5272
        Trie's DNC Contributions.................................  5272
        Trie's DNC Fundraising...................................  5274
    Chu and Wang Contributions...................................  5275
    DNC Awareness of Trie's Activities...........................  5276
    Trie's Fundraising for the Presidential Legal Expense Trust..  5277
        Trie's March 21, 1996 Meeting with Cardozo...............  5278
        Investigation into the Contributions.....................  5279
        The Trust's Decision to Reject the Contributions.........  5281
        The Trust's Change in Accounting Procedures..............  5282
        Foreign Funds............................................  5283
        Analysis.................................................  5284
    Trie's Access to White House and DNC Events..................  5285
    Trie's Commission Appointment................................  5287
    Trie and Wang Jun at the White House.........................  5289
        Wang Jun's Invitation to the White House Coffee..........  5290
        Role of Ernest Green.....................................  5291
        Analysis.................................................  5292
    Trie and China...............................................  5293
Chapter 6: Michael Kojima........................................  5413
    Findings.....................................................  5413
    Contribution History.........................................  5415
    Kojima's Access to the White House and Other Perks...........  5415
    The Bush White House and Fundraising.........................  5418
    GOP Claimed No Duty to Investigate...........................  5423
    Foreign Funds................................................  5425
    Failure to Conduct a Federal Investigation...................  5427
    Conclusion...................................................  5428
Chapter 7: Ted Sioeng............................................  5573
    Findings.....................................................  5573
    Ted Sioeng's Background......................................  5573
    Sioeng's Connections to China................................  5574
    The ``China Plan'' and Ted Sioeng............................  5576
    The Sioeng Family's Contributions to Matt Fong in April 1995.  5576
    The Source of Sioeng's April 1995 Contributions to Fong......  5578
    Fong Arranges for Sioeng to Meet Speaker Gingrich............  5578
    The Sioeng Family's Contributions to the National Policy 
      Forum......................................................  5579
    The Sioeng Family's Contribution to Matt Fong in December 
      1995.......................................................  5580
    Jessica Elnitiarta's Contributions to the DNC................  5581
        The Hay Adams Fundraiser.................................  5581
        Hsi Lai Buddhist Temple Event............................  5582
        Sheraton Carlton Hotel Event.............................  5582
        Century City Event and Subsequent $50,000 Contribution...  5583
    Conclusion...................................................  5584
Chapter 8: Jay Kim...............................................  5683
    Findings.....................................................  5683
    The Korea Traders' Club......................................  5683
    Kim's Contribution From His Own Business in 1992.............  5684
    The Kim's Acceptance of Corporate Funds......................  5684
    Acceptance of Funds From Foreign Nationals...................  5685
    Alleged Violations During the Federal Investigation..........  5686
    The Conviction of Kim's Former Campaign Treasurer............  5686
    Possible Election Law Violations During the 1996 Cycle.......  5687
    Kim's Commitment to Compliance With U.S. Election Laws.......  5688
    The Kims' Book Deal..........................................  5689
    Conclusion...................................................  5690
Part 2  Independent Groups.......................................  5926
Chapter 9: Overview and Legal Analysis...........................  5926
    Findings.....................................................  5926
    Overview of Following Chapters...............................  5926
        1996 Election-Related Activities.........................  5927
    Legal Analysis...............................................  5928
        Categories of Independent Groups.........................  5929
        Disclosure...............................................  5930
        Coordination.............................................  5930
        Circumvention............................................  5933
        Third Party Contributions................................  5934
        Violations of Tax Law....................................  5934
Chapter 10: The Republican Party and Independent Groups..........  5967
    Findings.....................................................  5967
    Introduction.................................................  5967
    RNC Ties to Independent Groups...............................  5969
        Coalition Plans..........................................  5969
        Coordination during the 1996 Election Cycle..............  5973
        RNC Funding of Independent Groups........................  5974
        RNC Funding Schemes in the 1996 Election Cycle...........  5975
        RNC Contributions and Fundraising Help in 1996...........  5976
        Circumventing Campaign Finance Laws......................  5978
    The RNC's Front Organizations................................  5979
        The National Policy Forum................................  5980
        Coalition for Our Children's Future......................  5981
    Fronts For Conservative Donors...............................  5981
        CCF's Attack Ads.........................................  5981
        Triad's Attack Ads.......................................  5982
        Triad's Donors...........................................  5982
    Conclusion...................................................  5983
Chapter 11: Americans for Tax Reform.............................  6034
    Findings.....................................................  6034
    Background...................................................  6034
    Grover Norquist..............................................  6035
    The $4.6 Million October Surprise............................  6037
    ATR Televised Attack Ads.....................................  6041
    ATR Candidate Advocacy.......................................  6043
    ATR: Coordinated Efforts in 1996 to Elect Republicans To 
      Office.....................................................  6048
    RNC-Directed Contributions to ATR............................  6050
    ATR and RNC's Refusal to Cooperate...........................  6051
    Possible Civil, Criminal, and Tax Law Violations.............  6052
        Circumvention............................................  6052
        Coordination.............................................  6053
        Disclosure...............................................  6053
        Tax Laws.................................................  6054
    Conclusion...................................................  6055
Chapter 12: Triad and Related Organizations......................  6289
    Findings.....................................................  6289
    Introduction.................................................  6290
    Background...................................................  6290
    The Committee's Investigation of Triad.......................  6291
    The Political Operation of Triad Management..................  6293
        Triad is Not a Business..................................  6293
        Robert Cone's Financial Support of Triad.................  6293
        Corporate Contributions by Triad.........................  6294
        Triad and Political Action Committees....................  6297
    The Advertising Campaign.....................................  6301
        Creation of Citizens for Reform and Citizens for the 
          Republic...............................................  6301
        Improper Coordination of Triad's Advertising with 
          Political Candidates...................................  6303
        No Comparison Between Triad and the AFL-CIO..............  6306
        Financing the Advertising Campaign.......................  6307
        The Trusts Behind Triad..................................  6308
        Economic Education Trust.................................  6309
        Triad's Impact on the 1996 Elections.....................  6312
        Advertising by Other Triad Contributors..................  6312
    Conclusion...................................................  6313
Chapter 13: Coalition for Our Children's Future..................  6771
    Findings.....................................................  6771
    Background...................................................  6771
    RNC Ties to CCF..............................................  6772
        CCF's 1995 Advertising Campaign..........................  6774
        CCF and its Exempt Organization Status...................  6775
    CCF 1996 Advertising for Republican Candidates...............  6777
    The Secret Trust and CCF's 1996 Election Advertising.........  6780
        Did CCF's Secret Contributor Fund Triad Attack Ads?......  6781
    Conclusion...................................................  6782
Chapter 14: Christian Coalition..................................  6934
    Finding......................................................  6934
    Background...................................................  6934
    Pat Robertson and Ralph Reed.................................  6935
    Voter Guides Before the 1996 Election Cycle..................  6937
    Distortion of Candidates' Positions on Issues................  6937
    Voter Guides in the 1996 Election Cycle......................  6938
    Coalition Officials Endorsed Candidates......................  6941
    Coalition Ties to the Republican Party.......................  6944
    Coalition Activity in State Elections........................  6947
    FEC Action...................................................  6949
    Conclusion...................................................  6951
Chapter 15: Other Independent Groups.............................  7051
    Seniors Organizations........................................  7051
    Term Limits Groups as Fronts for GOP Donors..................  7053
    Nonprofit Groups Linked to Presidential Candidates...........  7055
    Conclusion...................................................  7055
Chapter 16: The Democratic Party and Independent Groups..........  7062
    Findings.....................................................  7062
Chapter 17: Warren Meddoff.......................................  7064
    Findings.....................................................  7064
    Warren Meddoff...............................................  7064
    Meddoff and the October 1996 Fundraiser......................  7065
    Ickes Conversations With Meddoff.............................  7066
    No Evidence of Illegal Coordination..........................  7067
    Ickes's Alleged Direction to Meddoff to Shred the Fax........  7068
    Meddoff's Credibility........................................  7068
    The DNC'S Refusal of the Contribution Offer..................  7071
    Fundraising on Federal Property..............................  7072
    Conclusion...................................................  7073
Chapter 18: Teamsters............................................  7102
    Findings.....................................................  7102
    Teamster Contributions.......................................  7102
        Martin Davis's Initial Contacts With DNC Officials.......  7103
        Judith Vasquez's Contribution to Vote Now '96............  7104
        Teamsters' Contributions.................................  7105
    Sullivan's Role..............................................  7106
    Proposed Contribution to Unity '96...........................  7107
        DCCC Executive Director Rejected the Proposal............  7107
        DCCC Chairman Rejected the Proposal......................  7108
        DSCC Deputy Executive Director Rejected the Proposal.....  7108
        DSCC Chairman Rejected the Proposal......................  7109
        The Proposal and Unity '96...............................  7109
    Conclusion...................................................  7109
Chapter 19: Other Independent Groups.............................  7235
    Findings.....................................................  7235
    Overview.....................................................  7235
    The DNC and Independent Groups...............................  7236
    Activities of Independent Groups.............................  7237
        The AFL-CIO..............................................  7237
        Vote Now '96.............................................  7238
        Citizen Action...........................................  7239
        National Council of Senior Citizens......................  7239
    Conclusion...................................................  7239
Part 3  Contribution Laundering/Third Party Transfers............  7241
Chapter 20: Overview and Legal Analysis..........................  7241
    Finding......................................................  7241
    Overview of Following Chapters...............................  7241
    Legal Analysis...............................................  7242
Chapter 21: Contributions to the Democratic Party................  7244
    Findings.....................................................  7244
    Keshi Zhan, Yue Chu, and Xiping Wang.........................  7246
    Pauline Kanchanalak..........................................  7248
    Yogesh Gandhi................................................  7249
    Hsi Lai Temple Monastics.....................................  7253
    Arief and Soraya Wiaridinata.................................  7256
    The Lum Family...............................................  7257
    Conclusion...................................................  7258
Chapter 22: Contributions to the Republican Party................  7372
    Findings.....................................................  7372
    Michael Kojima...............................................  7372
    Aqua Leisure Industries, Inc.................................  7375
    Empire Sanitary Landfill, Inc................................  7377
    Deluca Liquor and Wine, Ltd..................................  7378
    Conclusion...................................................  7379
Part 4  Soft Money and Issue Advocacy............................  7515
Chapter 23: Systemic Problems of the Campaign Finance System.....  7515
    Findings.....................................................  7515
    Introduction.................................................  7515
    Soft Money...................................................  7516
        Background on Soft Money.................................  7516
        Soft Money Finds a Way into Federal Elections............  7517
        Soft Money Creates the Appearance of Corruption and 
          Undermines Public Financing............................  7519
        Disclosure of Soft Money.................................  7520
    Issue Advocacy...............................................  7521
        Background on Issue Ads..................................  7522
    Proposals for Reform.........................................  7524
        Kassebaum-Baker/Mondale..................................  7525
        League of Women Voters...................................  7525
        Common Cause.............................................  7526
        Campaign Reform Project..................................  7526
        Public Campaign..........................................  7526
        Disclosure Only..........................................  7526
    Conclusion...................................................  7526
Part 5  Fundraising and Political Activities of the National 
  Parties and Administrations....................................  7540
Chapter 24: Overview and Legal Analysis..........................  7540
    Finding......................................................  7540
    Overview of Following Chapters...............................  7540
    Legal Analysis...............................................  7541
        Taking Official Action in Exchange for a Contribution....  7541
        Use of Federal Property..................................  7542
        Use of Federal Employees.................................  7544
        Spending Limits, Coordination and Issue Advocacy.........  7546
Chapter 25: DNC and RNC Fundraising Practices and Problems.......  7595
    Findings.....................................................  7595
    Introduction.................................................  7596
    Structure of the National Parties............................  7598
        The Democratic National Committee........................  7598
        The Republican National Committee........................  7599
    Fundraising Drives...........................................  7600
    Soliciting Contributions.....................................  7600
        Training Fundraisers.....................................  7601
        The DNC's Training Procedures and Problems...............  7601
        The RNC's Training Procedures and Problems...............  7602
        Contribution Compliance..................................  7602
        The DNC's Contribution Compliance and Problems...........  7602
        The RNC's Contribution Compliance and Problems...........  7603
        Telephone Solicitations from Federal Property............  7605
    Organizing Fundraisers and Other Events......................  7605
        DNC Events and Contributor Services......................  7605
        RNC Events and Contributor Services......................  7606
    Spending Party Funds.........................................  7607
    DNC'S Splitting Contributions Between Hard and Soft Money 
      Accounts...................................................  7608
    Conclusion...................................................  7609
Chapter 26: Telephone Solicitations From Federal Property........  7773
    Findings.....................................................  7773
    Presidential Telephone Calls.................................  7773
        Richard Jenrette.........................................  7774
    Vice Presidential Telephone Calls............................  7776
        Purpose of the Phone Calls...............................  7777
        Raising Soft Money.......................................  7780
        DNC Splitting Contributions Between Hard and Soft Money 
          Accounts...............................................  7781
        Applicability of the Pendleton Act.......................  7783
        The Contributors.........................................  7783
        Payment for the Phone Calls..............................  7783
        Payment for the Thank-You Notes..........................  7784
        No Other Costs to the Government.........................  7784
    Republican Phone Calls.......................................  7785
    Conclusion...................................................  7786
Chapter 27: White House Coffees and Overnights...................  7956
    Findings.....................................................  7956
    DNC Coffees at the White House...............................  7956
        The Coffees and Fundraising..............................  7957
        The Coffees as DNC Events................................  7959
        The Law and Precedent....................................  7960
    White House Overnights.......................................  7960
    Conclusion...................................................  7961
Chapter 28: Republican Use of Federal Property and Contributor 
  Access.........................................................  7968
    Findings.....................................................  7968
    Major Contributor Access to Elected Officials................  7968
        Republican Eagles........................................  7968
        Team 100.................................................  7970
        Other Republican Events and Meetings for Contributions...  7972
    Use of Federal Property For Fundraising......................  7975
    Political Appointments Awarded to Republican Contributors....  7977
    Conclusion...................................................  7978
Chapter 29: Democratic Contributor Access to the White House.....  8057
    Findings.....................................................  8057
    Introduction.................................................  8057
    The Secret Service...........................................  8058
    The White House Office of Political Affairs..................  8059
    The National Security Council................................  8060
        Previous NSC Procedures..................................  8061
        Current NSC Procedures...................................  8062
        Other Issues.............................................  8063
    Conclusion...................................................  8065
Chapter 30: Roger Tamraz.........................................  8095
    Findings.....................................................  8095
    Overview.....................................................  8095
    1970-1990: Tamraz's Business Ventures, Dealings With the CIA 
      and Political Contributions................................  8096
        Business Ventures........................................  8096
        Reported Contacts with the CIA...........................  8097
        RNC's Recommendation for a Reagan Administration Position  8097
        Tamraz Leaves Lebanon after Embezzlement Charges.........  8098
    1994-1995: The Commerce Department...........................  8098
    1995: The Caspian Sea Pipeline...............................  8099
        U.S. Policy on the Caspian Sea Pipeline..................  8099
        May-June 1995: Meetings with Executive Branch Officials..  8100
        Bob of the CIA...........................................  8101
    July-October 1995: Contributions to the Democratic Party.....  8103
        Contribution History.....................................  8103
        The DNC's Acceptance of Tamraz's Contributions...........  8103
    September 1995: Request For an Official Meeting With the Vice 
      President..................................................  8104
    Tamraz's Attendance at DNC Events............................  8105
        Summary of Events........................................  8105
        Fowler's Role............................................  8105
        No Effect on Policy......................................  8107
    April 1996: Department of Energy Official Talks to Heslin....  8107
        Tamraz's Attendance at March 27 and April 1, 1996 DNC 
          Events.................................................  8107
        Follow-Up on the Pipeline Project........................  8108
        The Request within the Department of Energy..............  8109
        Carter's Call to Heslin..................................  8110
        Heslin's Testimony.......................................  8110
        Carter's Testimony.......................................  8110
        The Department of Energy Responds to the Request for 
          Information Conclusions................................  8111
    Conclusion: Access Still for Sale in 1997....................  8113
Chapter 31: Other Contributor Access Issues......................  8250
    Findings.....................................................  8250
    Johnny Chung.................................................  8250
        Political Contributions..................................  8251
        Access to Administration Officials.......................  8251
        Link Between Contributions and Visits....................  8252
        Williams's Handling of Chung's $50,000 DNC Contribution..  8253
        The Pendleton Act........................................  8255
        The Hatch Act............................................  8256
    Other Individuals............................................  8256
        Jorge Cabrera............................................  8256
        Grigori Loutchansky......................................  8257
        Wang Jun.................................................  8258
        Yung Soo Yoo.............................................  8259
        Michael Kojima...........................................  8260
    Conclusion...................................................  8260
Chapter 32: Coordination Among the Democratic National Committee 
  and the Clinton/Gore Campaign and the White House..............  8281
    Findings.....................................................  8282
    Introduction and Summary.....................................  8282
    The Origin of the DNC's Issue Ads Campaign...................  8282
    The DNC and Rules Governing Issue Ads........................  8283
    The DNC Adhered to the Legal Rules Governing Issue Ads.......  8285
    The Clinton Campaign and the DNC Campaign....................  8286
    The Legality of Coordination Among the Clinton Campaign, 
      White House and DNC........................................  8286
        The President's Role in the Making of DNC Issue Ads......  8286
        Ickes's Role in Coordinating with the DNC................  8287
    Conclusion...................................................  8290
Chapter 33: Coordination Between the Republican National 
  Committee and the Dole for President Campaign..................  8294
    Findings.....................................................  8294
    Introduction.................................................  8294
    The Origin of the Pro-Dole Issue Ads.........................  8295
    Dole for President and the Dole/RNC Campaign.................  8296
    The Substance of Dole/RNC Issue Ads..........................  8297
    The Dole/RNC ``Issue Ads'' and Presidential Battleground 
      States.....................................................  8299
    Dole/RNC Issue Ads and Soft Money............................  8300
    Coordination of Fundraising and Political Efforts............  8301
    Dole for President and the RNC Impeded the Committee's 
      Investigation..............................................  8302
    Conclusion...................................................  8303
Part 6  Allegations of Quid Pro Quos.............................  8368
Chapter 34: Overview and Legal Analysis..........................  8368
    Legal Analysis...............................................  8368
    Overview of Following Chapters...............................  8369
Chapter 35: Hudson Casino........................................  8371
    Findings.....................................................  8371
    Overview.....................................................  8372
    Secretary Babbitt's Remarks to Lobbyist Eckstein.............  8372
        Eckstein's Affidavit.....................................  8372
        Secretary Babbitt's Letter to Senator McCain.............  8373
        Eckstein's Deposition....................................  8373
        Secretary Babbitt's Letter to Chairman Thompson..........  8374
        Secretary Babbitt's Hearing Testimony....................  8374
    Eckstein's Allegations.......................................  8376
    Eckstein's Interpretation....................................  8378
    Secretary Babbitt and Lobbyists for the Opposing Tribes......  8378
    Role of the White House......................................  8379
        Lobbyist Contacts with Harold Ickes......................  8379
        White House Requested Status Report from Interior........  8380
        White House Requested Second Status Report from Interior.  8381
        White House and Interior Confer on Response to 
          Congressional Inquiry..................................  8382
        Other Interior and White House Contacts..................  8382
    Eckstein's Access to Interior Officials......................  8383
        Eckstein's Telephone Contacts with Secretary Babbitt.....  8383
        The Tribal Applicants' May 1995 Meeting with Interior 
          Officials..............................................  8384
        Eckstein's July 14 Meeting with Secretary Babbitt........  8384
    The Merits of Interior's Decision on the Hudson Application..  8385
        The Hudson Casino and the Surrounding Community..........  8385
        The Surrounding Communities Opposed the Hudson Casino 
          Proposal...............................................  8386
        Interior Staff Recommended Denial........................  8387
        The Administrative Record................................  8388
        Allegations of Timing and Political Pressure.............  8389
        Interior's Final Decision-Maker Acted on the Merits......  8390
    Conclusion...................................................  8390
Chapter 36: Tobacco and the 1996 Election Cycle..................  8511
    Findings.....................................................  8511
    The Tobacco Industry's Political Contributions During the 
      1996 Election Cycle........................................  8511
    Republican Assistance to Tobacco Companies...................  8512
    Haley Barbour Assisted Tobacco...............................  8513
    Tobacco Settlement and the $50 Billion Tobacco Tax Credit....  8514
    Haley Barbour and Kenneth Kies...............................  8515
    Conclusion...................................................  8517
Chapter 37: Cheyenne-Arapaho Tribes of Oklahoma..................  8539
    Findings.....................................................  8539
    Overview.....................................................  8539
    The Battle Over the Closure of the Fort Reno ARS.............  8540
    The Tribes Increase Their Political Activities...............  8543
    The Tribes' Contribution to the DNC..........................  8545
    The White House Luncheon.....................................  8547
    The President's Birthday Fundraiser..........................  8552
    The Tribes Continue Their Lobbying Efforts...................  8553
    The Tribes' Dealings with Mike Copperthite, Nathan Landow, 
      and Peter Knight...........................................  8554
    The Tribes' Dealings with Cody Shearer and Terry Lenzner.....  8560
    The Tribes' Contribution is Returned.........................  8561
    Conclusion...................................................  8562
Part 7  Investigation Process....................................  8680
Chapter 38: Laying the Groundwork................................  8680
    Findings.....................................................  8680
    Introduction.................................................  8680
    Initial Floor Statements By Chairman Thompson and Senator 
      Glenn......................................................  8681
    Organizational Meeting.......................................  8683
        A. Budget................................................  8683
        B. Scope.................................................  8685
        C. Process...............................................  8686
        D. Termination Date......................................  8686
    First Public Debate On Issuance of Subpoenas.................  8687
    Alternative Resolution, S. Res. 61...........................  8687
    Rules Committee Appearances..................................  8687
    Final Floor Debate...........................................  8689
    The Majority Impeded a Fair Investigation....................  8689
        A. Subpoenas.............................................  8690
        B. Consideration of Grants of Immunity...................  8690
        C. Interviews............................................  8691
        D. Hearings..............................................  8692
    Conclusion...................................................  8693
Chapter 39: Democratic Compliance Issues.........................  8710
    Finding......................................................  8711
    DNC Cooperation and Compliance...............................  8711
        Attorney-Client Privilege Issue..........................  8712
        Late Production of Certain Files.........................  8713
    Conclusion...................................................  8713
Chapter 40: Republican Compliance Issues.........................  8775
    Findings.....................................................  8775
    Introduction.................................................  8775
    The First Subpoenas..........................................  8776
    RNC Compliance Issues........................................  8777
    Triad Compliance Issues......................................  8779
    The NPF Order................................................  8780
    NPF Compliance Issues........................................  8780
    ATR Compliance Issues........................................  8782
    Conclusion...................................................  8785
Chapter 41: The Breakdown of Compliance..........................  8938
    Finding......................................................  8938
    Introduction.................................................  8938
    Organizations Suggested for Subpoena by the Minority.........  8941
    Tax-Exempt Groups Linked to Presidential Campaigns...........  8941
        Republican Exchange Satellite Network and Lamar Alexander  8941
        Better America Foundation and Bob Dole...................  8942
        The American Cause and Pat Buchanan......................  8943
    Other Tax-Exempt Groups......................................  8943
        Citizens Against Government Waste........................  8943
        The Heritage Foundation..................................  8944
        The Coalition: Americans Working for Real Change.........  8944
        American Defense Institute/American Defense Foundation...  8945
        Citizens for a Sound Economy.............................  8945
        Women for Tax Reform.....................................  8946
        National Right to Life Committee.........................  8946
        The Christian Coalition..................................  8946
    Private Corporations Linked to Contribution Laundering.......  8947
        DeLuca Liquor & Wine and Empire Landfill, Danella Inc./
          USA Waste Services of Eastern Pennsylvania.............  8947
    Organizations Suggested for Subpoena by the Majority.........  8947
        National Council of Senior Citizens......................  8948
        Citizen Action...........................................  8949
        National Education Association...........................  8949
        Vote Now '96.............................................  8950
        Campaign to Defeat Proposition 209.......................  8950
        The Sierra Club..........................................  8950
        Democratic Leadership Council............................  8951
        EMILY'S List.............................................  8951
        National Committee for an Effective Congress.............  8951
        American Trial Lawyers Association.......................  8951
        Americans United for Separation of Church and State......  8951
    Conclusion...................................................  8952
Chapter 42: White House Tapes....................................  9331
    Findings.....................................................  9331
    Overview.....................................................  9331
    Video and Audio Taping in the White House....................  9332
    The White House Communications Agency........................  9333
    Videotape Procedures for Coffees.............................  9334
    The Initial Failure to Identify Responsive Videotapes........  9335
    White House Definition of Document...........................  9337
    White House Search Procedures................................  9339
    White House Responses to Committee Inquiries About Videotapes  9340
    Notifying the Department of Justice of the Existence of 
      Responsive Videotapes......................................  9344
    Deputy White House Counsel and the Videotapes................  9345
    Allegations Concerning Alteration of the Videotapes..........  9345
    Other Production Issues......................................  9346
        The Presidential ``Diary''...............................  9346
        WAVE Records Relating to Mr. Wu..........................  9347
        Lisa Berg documents......................................  9348
    Conclusion...................................................  9349
Part 8  Minority Recommendations.................................  9394
Part 9  Response to Majority Report..............................  9399
Senator Glenn's Additional Views.................................  9507
Senator Levin's Additional Views.................................  9511
Senator Lieberman's Additional Views.............................  9525
Senator Akaka's Additional Views.................................  9559
Senator Durbin's Additional Views................................  9565
Senator Torricelli's Additional Views............................  9571
PART 2  INDEPENDENT GROUPS
Chapter 12: Triad
    Triad Management, Inc., is a for-profit corporation owned 
by Republican fundraiser Carolyn Malenick. Malenick 
incorporated Triad in the spring of 1996 but appears to have 
operated the business as an unincorporated entity since at 
least early 1995. Triad holds itself out as a consulting 
business that provides advice to conservative donors about how 
to maximize their political contributions. Triad oversaw 
advertising in 26 campaigns for the House of Representatives 
and three Senate races. Triad's spending may have affected the 
outcome of some elections. Because Triad is an unusual 
corporation directly involved in federal campaigns, the 
Committee investigated its work. Despite the refusal by Triad 
and its lawyers to comply fully with the Committee's subpoenas 
for both documents and testimony, the Minority developed 
substantial evidence of wrongdoing by Triad.
    Based on the evidence before the Committee, we make the 
following findings with respect to Triad and the two non-profit 
organizations that it established:

                                findings

    (1) The evidence before the Committee suggests that Triad 
exists for the sole purpose of influencing federal elections. 
Triad is not a political consulting business: it issues no 
invoices, charges no fees, and makes no profit. It is a 
corporate shell funded by a few wealthy conservative Republican 
activists.
    (2) Triad used a variety of improper and possibly illegal 
tactics to help Republican candidates win election in 1996 
including the following:
          (A) Triad provided free services to Republican 
        campaigns in possible violation of the federal 
        prohibition against direct corporate contributions to 
        candidates. These services included raising funds for 
        candidates, providing consulting advice on fundraising 
        and political strategy, and providing staff to assist 
        candidates,
          (B) The evidence before the Committee suggests that 
        Triad was involved in a scheme to direct funds from 
        supporters who could not legally give more money 
        directly to candidates, through political action 
        committees (``PACs''), and back to candidates. Triad 
        obtained from Republican candidates names of supporters 
        who had already made the maximum permissible 
        contributions and solicited those supporters for 
        contributions to a network of conservative PACs. In 
        many instances, the PACs then made contributions to the 
        same candidates.
          (C) Triad operated two non-profit organizations--
        Citizens for Reform and Citizens for the Republic 
        Education Fund--as allegedly nonpartisan social welfare 
        organizations under 501(c)(4) of the tax code and used 
        these organizations to broadcast over $3 million in 
        televised ads on behalf of Republican candidates in 29 
        House and Senate races. Using these organizations as 
        the named sponsors of the ads provided the appearance 
        of nonpartisan sponsorship of what was in fact a 
        partisan effort conducted by Triad. Neither 
        organization has a staff or an office, and both are 
        controlled by Triad. Over half of the advertising 
        campaign was paid for and controlled by the Economic 
        Education Trust, an organization which appears to be 
        financed by a small number of conservative Republicans.

                              introduction

    Triad Management, Inc. (``Triad'') is a corporation which 
appears to exist primarily to make contributions to 
conservative Republican candidates in an attempt to help them 
win election to Congress. Triad claims to be a legitimate 
business, but this is mainly so that it can evade the 
disclosure and contribution limits of the campaign finance 
laws. Triad also created and ran two other shell companies--
Citizens for Reform and Citizens for the Republic Education 
Fund (``Citizens for the Republic'')--for the sole purpose of 
funneling millions of dollars into political advertising. Even 
more troubling is that Triad's nonprofits were, in turn, 
largely funded by money from two trusts: the Personal Trust and 
the Economic Education Trust. The Minority believes that these 
two trusts were controlled by a very small number of wealthy 
individuals who sought to keep their identity unknown. The 
facts suggest that these individuals spent millions of dollars 
to affect over two dozen federal elections despite operating 
completely outside of federal election laws.
    In the 1996 elections, Triad operated in 26 campaigns for 
the House of Representatives and three Senate races. Triad's 
spending alone appears to have changed the outcome of some of 
those elections. In Kansas, where Triad was particularly 
active, it may have changed the results in four of six federal 
races, including a Senate race where the Republican candidate 
received significant support from Triad.
    Most disturbing, Triad is poised to become a model for 
future elections. A fundamental premise of the 1976 campaign 
law is that voters are entitled to know who is funding 
candidates' campaigns. As the Supreme Court noted in upholding 
that law: ``[D]isclosure requirements deter actual corruption 
and avoid the appearance of corruption by exposing large 
contributors to the light of publicity. This exposure may 
discourage those who would use money for improper purposes.'' 
1 The ability of wealthy contributors to finance 
million-dollar advertising blitzes without disclosing their 
identity to voters fundamentally undermines the spirit and 
letter of current campaign finance laws.
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 12.
---------------------------------------------------------------------------

                               background

    Carolyn Malenick, the sole owner of Triad, is a graduate of 
Jerry Falwell's Liberty University, and press reports have 
indicated that she has remained personally close to Falwell and 
his family.2 Malenick appears to have spent her 
entire professional career in conservative Republican politics, 
primarily in the fundraising arena. Malenick initially worked 
for the ``conservative direct mail king'' Richard 
Viguerie.3 Subsequently, she raised funds for Oliver 
North's Freedom Alliance, a nonprofit organization founded by 
North in the wake of the Iran-Contra scandal that has been 
criticized for raising millions of dollars in undisclosed 
funding for North's political activities.4 Malenick 
went on to raise funds for North's losing 1994 bid for U.S. 
Senate.5 Malenick is also a member of the Council 
for National Policy, an organization of ultra-conservative 
political activists who work to further their agenda within the 
Republican Party.6
    According to Malenick's public statements, she personally 
conceived the idea for Triad and started the business from her 
home, most likely in 1995.7 The stated purpose of 
Triad is to provide advice to maximize the effectiveness of 
contributions from conservatives.8 In 1996, Malenick 
incorporated Triad and established an office on Capitol 
Hill.9 Triad is ostensibly a political consulting 
firm that simply works for contributors rather than candidates. 
Purportedly, Triad generates income from yearly subscription 
fees for a fax service, percentage fees for contributions made 
at Triad's advice, and management fees for overseeing the two 
nonprofits it created, Citizens for Reform and Citizens for the 
Republic.10 Triad then employs consultants to 
determine which candidates have the best chance of winning and 
are thus deserving of financial support from Triad's 
clients.11

                 the committee's investigation of triad

    On April 9, 1997, the Committee initiated its investigation 
of Triad and its linked entities, Citizens for Reform and 
Citizens for the Republic, by issuing subpoenas requiring 
production of documents to the Committee. Virtually no 
substantive documents were produced for three months, until 
July. Further, documents which would ordinarily be retained in 
the course of business, including scripts and invoices for 
advertising by one of the nonprofit shells, were not produced 
and appear not to exist. A February 22, 1997, memo from 
Malenick to her employees refers to the completion of the 
``cleaning'' of computer hard drives.12 The memo is 
dated less than two weeks prior to publication of a Washington 
Post article on the subject of Triad and the shell 
companies.13
    After delays in document production and protracted refusals 
to consent to voluntary interviews or depositions, on July 11, 
Chairman Thompson signed deposition subpoenas for 11 
individuals associated with Triad.14 On September 8, 
after only two-and-a-half depositions of people with knowledge 
of the events under investigation had been completed, the 
Committee received a letter from Triad's counsel.15 
He wrote: ``[f]rom press accounts, our clients have been 
substantially more cooperative that other organizations. 
Accordingly, we will not permit additional depositions . . .'' 
16 Not only was the assertion of cooperation dubious 
at best, but counsel set forth no valid basis for Triad's 
obstruction. In a traditional litigation setting, such a 
refusal to appear and answer pursuant to subpoena would likely 
result in a finding of contempt and sanctions against these 
individuals.17
    At the time Triad employees and consultants defied the 
personal subpoenas issued by the Committee, ten individuals--
including all senior-level decision-makers--were under personal 
subpoenas to appear and answer questions. Also refusing to 
appear for deposition was Triad attorney Mark Braden. Braden is 
a former general counsel to the Republican National Committee 
who advised Triad throughout the period in which it carried out 
many of its apparently illegal activities. Although three 
individuals subsequently appeared for deposition, none answered 
any substantive questions. Carolyn Malenick herself, for 
example, eventually appeared for deposition and then refused to 
answer any substantive questions posed by Committee 
staff.18 Prior to the blanket refusal to appear, the 
Committee had already established that Triad had made 
significant corporate contributions to Republican candidates; 
found evidence of illegal earmarking of political action 
committee contributions; found evidence that Triad coordinated 
its advertising campaign with Republican candidates; and found 
evidence that the nonprofit shells had no independent existence 
apart from Triad.
    Malenick and her backers and associates joined officials 
from the RNC and other pro-Republican groups as the only 
individuals to blatantly defy deposition subpoenas issued by 
the Committee. No individuals associated with Democratic 
entities who received personal subpoenas to appear before this 
Committee and answer questions either refused entirely to 
appear, or issued a blanket refusal to answer.19 
Yet, no order was ever issued to enforce the subpoenas or to 
hold Triad, its employees, officers, and directors in contempt 
of the Senate.
    Not only were the Committee's subpoenas not enforced, the 
Majority reneged on its commitment to allow three days of 
hearing time on the subject of abuses by Republican 
organizations, including Triad, despite overwhelming evidence 
that these groups had engaged in improper, and likely illegal, 
conduct. Further, in possibly the most telling failure of this 
investigation, no subpoena was issued for records of the 
Economic Education Trust, a secret entity that provided over 
half of the funding for Triad's advertising campaign. As a 
result, the identity of the figures behind the Economic 
Education Trust and the amount of money they spent funding 
secret advertising campaigns through groups like Triad in the 
1996 election remains unconfirmed.
    Two Republican members of the Senate had links to Triad. 
One Senator received the benefit of more Triad advertising 
dollars than any other candidate in 1996. He also had several 
meetings with Malenick and Triad staff, and his campaign was 
involved in receipt of PAC contributions involving Triad. 
Another Senator appeared in a Triad marketing video that was 
intended to help Triad raise funds for federal candidates. The 
video was filmed in his Senate office, possibly violating 
prohibitions on the use of Senate offices for fundraising and 
commercial purposes. In late 1997, a spokesman for that Senator 
said the video was a mistake.20
    Despite the obstruction by Triad and its lawyers, and 
despite the lack of enforcement by the Committee, the Minority 
developed substantial evidence of wrongdoing by Triad and its 
nonprofit shell organizations. The evidence shows that Triad 
carried out an audacious plan to pour millions of dollars in 
contributions into Republican campaigns nationwide without 
disclosing the amount or source of those contributions.

              the political operation of triad management

Triad is not a business

    The Committee's investigation has shown that Triad is not a 
business in the conventional sense, because it charges no fees 
and generates no profit. Triad did not produce a single client 
bill or invoice to the Committee, nor were any marketing 
materials produced which mentioned fees or discussed a fee 
structure.21 Neither the bookkeeper nor the finance 
director of Triad could tell the Committee how Triad billed its 
clients. While Triad finance director Meredith O'Rourke 
recalled seeing a sheet of paper with a fee structure on it, 
she could not recall if fees were paid on a monthly, weekly, or 
yearly basis.22 She could not explain how fees were 
calculated and could only say that clients were paying for 
``advice'' but could not recall the ``specifics'' of 
it.23 Triad bookkeeper Anna Evans, when asked about 
the fee structure, said she could not state how clients were 
billed or on what basis. Asked about whether clients were 
billed for travel by Triad staff, she responded, ``I'm not 
involved in agreements that are reached between Carolyn and the 
clients.'' 24
    In telephone interviews, a number of people who confirmed 
that they contributed to PACs at the advice of Triad made no 
mention of paying fees.25 At least one individual, 
Floyd Coates, stated that he did not pay Triad for the 
contribution advice he received.26 Another person 
who made contributions at Triad's advice stated he had learned 
of Triad from his friend Robert Cone and that he regarded 
Malenick as the organization's executive 
secretary.27

Robert Cone's financial support of triad

    The evidence shows that at least through the second half of 
1995, and into 1996, Triad was largely a vehicle for a single 
conservative activist, Robert Cone. According to Triad 
bookkeeper Evans, money was given to Triad from a single 
principal donor ``so it could proceed with its work.'' 
28 Bank records show that between June 1995 and 
January 1996, Triad received a total of $196,000 in 
deposits.29 Of this total, Cone provided $175,000, 
or 89 percent of Triad's funding.30 Through the end 
of 1995, Cone's payments were made in increments of 
approximately $25,000 per month.31 During this 
period, Triad received only $1,376 from sources other than Cone 
or fellow conservative Lorena Jaeb.32 Between 
January and September 1996, Triad received a total of $1.1 
million. Of this amount, at least $150,000 was received from 
Robert Cone, while $900,000 was received from unknown sources 
in wire transfers of $50,000 or more. Only $17,000 is known to 
have come from non-Cone sources.33 The total amounts 
received by Triad from Cone may be even larger. Asked to 
estimate the cumulative amounts received from its principal 
donor, Triad bookkeeper Evans estimated that Triad had received 
between $600,000 and $700,000 from this source, while one of 
the two nonprofits received $900,000, and the other received 
between $400,000 and $500,000.34
    Cone, a businessman based in Elverson, Pennsylvania, is a 
well known social conservative who backs anti-abortion 
causes.35 However, it was not until the last few 
years that he began devoting large sums of money to political 
causes. Cone, who together with his brother, Edward, formerly 
owned Graco Children's Products, initially made political 
contributions to a number of candidates who supported tort 
reform shortly after Graco was sued in a series of product 
liability cases.36 In 1996, Cone created a state-
level political action committee in Pennsylvania, which has 
come under media scrutiny because he is the committee's only 
contributor.37 It was reported as early as October 
1996 that Cone along with Malenick visited staff in a 
Republican Senator's office to promote Triad.38 Cone 
also appears in Triad's marketing video and attended a 
presentation of the results of a national poll commissioned by 
Triad he attended.39
    While Triad holds itself out as a for-profit consulting 
business, the evidence before the Committee indicates that it 
charges no fees and is primarily funded by Cone. As discussed 
below, Triad's business activities were confined to activities 
designed to affect the outcome of federal 
elections.40 In effect, Cone used Triad as a vehicle 
to provide in-kind contributions to Republican candidates 
nationwide, contributions that in many instances he would have 
been prohibited from making himself, as he had already reached 
his personal annual contribution limit with contributions to 
PACs and to individual candidates.41 Because Triad's 
sole purpose is to influence the election of conservative 
Republican candidates, legally it should publicly disclose its 
activity to the Federal Election Commission, like any other 
political party or political action committee that exists to 
influence federal elections.42

Corporate contributions by Triad

    As a corporation, Triad is prohibited from making 
contributions to the campaigns of political 
candidates.43 When providing services to campaigns, 
corporations such as Triad are required to charge commercially 
reasonable rates. Any failure to charge such market rates can 
result in the services being deemed illegal ``in-kind'' 
corporate campaign contributions.44 Triad, 
generously funded by Cone and others, apparently never charged 
fees. Instead, Triad provided political consulting services to 
numerous Republican campaigns free of charge. Triad raised 
funds for candidates from PACs and from individuals and advised 
candidates on fundraising and on matters of political strategy, 
often sending consultants to meet with candidates and observe 
the campaign structure. These free services would appear to 
constitute illegal corporate contributions from Triad to the 
campaigns.
    While Triad publicly claimed to act as a consultant only to 
contributors, its activities were, in fact, more broadly based. 
From Triad's offices, Malenick provided advice to candidates on 
subjects as varied as raising funds from PACs, to where to live 
if elected.45 Triad finance director Meredith 
O'Rourke, who was based in Triad's Washington office throughout 
1996 and shared an office with Malenick, testified that 
Malenick spoke to dozens of Republican candidates in 1996 and 
that she herself frequently spoke to candidates about 
fundraising, polling, and how their campaigns were going in 
general.46 Robert Riley, Jr., son of a successful 
candidate for the House of Representatives in 1996, told a 
Committee investigator that he was initially put in touch with 
Malenick as a person who could secure financial support from 
PACs for his father.47 Representative John Thune of 
South Dakota, when asked about Malenick's receipt of a check 
from his campaign committee, explained that he had traveled to 
Washington, and Malenick had spent a couple of days showing him 
around and introducing him to people.48
    Triad also made in-kind contributions to candidates in the 
form of advice from experienced political consultant Carlos 
Rodriguez. Prior to becoming a consultant for Triad, Rodriguez 
was known primarily for his work on behalf of California 
Republicans. In one incident, while he was working for 
Republican State Assembly candidate Curt Pringle, he was 
reportedly responsible for posting uniformed guards outside 
Orange County, California, polling places to discourage Latino 
voters.49 Through November 1996, Rodriguez traveled 
the country assessing the chances of various conservative 
Republican candidates and offering advice to candidates and 
campaigns along the way. Paid $20,000 a month by Triad, 
Rodriguez wrote reports of his visits to at least 53 
congressional districts and campaigns.50 At the same 
time, Rodriguez advised the campaigns on issues from the hiring 
of particular consultants, to the utility of phone banks, to 
the effectiveness of advertising, and how to develop 
fundraising plans.51 The assessments performed by 
Rodriguez also document the high level of personal contact 
between candidates and Triad. Many reports indicate a personal 
meeting with the candidate, or, at a minimum, a meeting with 
senior campaign staff. Many reports were also executed just 
prior to the final decision-making period on advertising buys 
in September and early October. In addition to these visits, 
according to Triad's attorneys, Triad may have actually funded 
visits to as many as 250 Republican campaigns during 
1996.52 Thus, there is no doubt that candidates were 
aware of Triad's activities, and in most cases at least appear 
to have welcomed the activity.
    The ostensible purpose of the Triad campaign site visits 
was for Triad to assess each candidate's viability and thus 
determine if the campaign was deserving of Triad-generated 
financial support. Triad also used the site visits as occasions 
to give strategic advice on such issues as selection of 
vendors, and advisability of polling, mailings, and phone 
banks.
    For example, Rodriguez strongly encouraged the campaign of 
Jay Mathis, a House candidate in Texas, to engage a phone bank 
operation.53 Another site visit report by Rodriguez 
described the particulars of his campaign-consulting 
activities: ``I gave them a plan to work out with regards to 
fundraising, establishing specific goals and programs to meet 
those objectives.'' 54 In the case of Christian 
Leinbach, a House candidate from a Pennsylvania district near 
Robert Cone, Rodriguez wrote: ``I have suggested to Christian 
Leinbach specific steps that need to be taken regarding his 
fundraising. I have asked the campaign chairman to inform me if 
Christian Leinbach does what he has been told he needs to do.'' 
55
    In other instances, Rodriguez advised campaigns to hire 
vendors with whom Triad, or at least Rodriguez, already had 
relationships. For example, in the report on Jim Ryun, a House 
candidate in Kansas, Rodriguez wrote that the bad points about 
the campaign included the lack of a campaign structure. He 
noted that he had recommended Chris Wilson of Fabrizio & 
McLaughlin as ``they are already doing Snowbarger next door and 
Todd Tiahrt's reelect and as such have a good knowledge of the 
state.'' 56 Fabrizio and McLaughlin also worked 
directly for Triad in 1996 and had previously worked with 
Rodriguez on the 1994 campaign of Indiana Representative David 
McIntosh.57 Wilson was also Rodriguez's choice for 
Steve Stockman's House campaign in Texas: ``Should [the 
existing pollster] not be ready to go into the field, I have 
suggested in very strong terms to Steve Stockman that he 
consider replacing [him] with Chris Wilson from Fabrizio 
McLaughlin who has intimate knowledge of Texas and Stockman's 
own district.'' 58 For House candidate Mark Sharpe 
of Florida, Rodriguez recommended his own former partner David 
Gilliard as a paid consultant: ``In addition I recommended . . 
. that Gilliard do their advocacy direct mail to add punch to 
their campaign.'' 59
    Triad also provided staff to assist directly at least one 
candidate in raising funds. O'Rourke testified that on two 
occasions she went to the National Republican Congressional 
Committee to assist a member of the House of Representatives 
who was a candidate for the Senate in ``dialing for dollars.'' 
60 Although Triad counsel Mark Braden has publicly 
insisted that O'Rourke was not acting as an employee of Triad 
when she assisted that candidate,61 O'Rourke (with 
Braden present) testified that Malenick arranged her initial 
meeting with that candidate:

          Q: The first time you met with [the Senate candidate] 
        was at the NRCC and I think you said Carolyn [Malenick] 
        had set it up, is that correct?
          A: Correct.62

    In addition to providing advice and fundraising assistance 
to candidates, Triad worked to raise funds for individual 
candidates.63 One common means that Triad used to 
solicit contributions was a sophisticated system of fax 
messaging that could simultaneously send information to many 
persons. The faxes, written by Malenick, were sent to 
conservative Republicans and contained general information on a 
number of campaigns. Triad also used its fax system to urge 
support or defeat for particular candidates. For example, a 
November 15 fax discussing run-off elections exhorts: 
``Stockman needs our help and we must answer the call.'' 
64 A July 18 fax, sent just before the Kansas 
primary, claims: ``The election of Brownback will send shock 
waves through the Republican national convention! Sheila Frahm 
must be defeated.'' 65 By expressly advocating the 
election and defeat of candidates, these faxes by Triad appear 
to be illegal corporate contributions to the 
campaigns.66 While no witness could tell the 
Committee how many people received the faxes, one fax alert 
notes that ``over 160 businessmen and women have been added to 
the Fax Alert in the last 18 months.'' 67 In one fax 
sent shortly before the November 5 election, entitled ``TOP 
TIER RACES IN NEED OF CASH $$,'' Triad solicited contributions 
for 26 candidates.68 Of the 26 candidates, 19 also 
benefitted from advertising, mail, or telephone attacks on 
their opponents from Triad's affiliated organizations, Citizens 
for Reform or Citizens for the Republic. Essentially, Triad 
acted as a volunteer fundraising consultant for Republican 
campaigns, illegally facilitating contributions to the 
candidates.69
    These services--the solicitation of contributions, visits 
to and assessment of campaigns, general advice, introductions 
to PAC funding sources, and express advocacy on behalf of 
specific candidates--summarize the day-to-day activities of 
Triad up to September 1996. While these activities do not 
significantly differ from the day-to-day business of other 
political consultants, Triad's activities are fundamentally 
problematic because Triad was not paid by the candidates but 
was largely financed by a single individual. Triad's 
activities, therefore, appear to have constituted illegal 
corporate contributions from Triad to the candidates it 
assisted.

Triad and political action committees

    Triad also worked to generate contributions to conservative 
political action committees. Moreover, PACs for which Triad 
solicited contributions frequently gave to candidates who had 
received contributions from the same PAC contributors. If these 
contributions were merely coincidental, no violation of federal 
law occurred. However, if either the contributor or Triad 
suggested or implied to anyone at the PAC that contributions 
should be made to a particular candidate, and the contributor 
had also made the maximum contribution to the candidate, the 
contribution is considered illegally ``earmarked.'' 
70
    The pattern of candidate contributions made by PACs 
receiving Triad-solicited contributions suggests that 
earmarking did occur. An examination of the public records of 
approximately ten conservative political action committees 
shows that on a number of occasions multiple PACs received 
checks from the same individual within a matter of days. All of 
the PACs receiving the contributions then made contributions to 
one candidate within days of one another. In most cases the 
individual contributor had already made the maximum permissible 
contribution (``maxed-out'') to the candidate benefitting from 
the PAC contribution.
    One example of this pattern is the contribution of Robert 
Riley, Jr., an Alabama lawyer and the son of congressional 
candidate Robert Riley. Between May 9 and May 23,1996, Riley, 
Jr. made four contributions to PACs, which appear on an internal Triad 
PAC list.71 Between May 23 and May 29, the same four PACs 
made contributions to the Riley campaign, two of the PACs within 48 
hours of reporting receipt of the Riley contribution.72 On 
June 4, Riley, Sr. won the Republican primary. On November 14, the 
newly elected Representative Riley was quoted in a Triad fax stating, 
``Triad came to our aid in crucial times when we were desperately in 
need of funds.'' 73
    Another series of contributions was made by John and Ruth 
Stauffer. Between July 5 and July 29, the Stauffers made 
contributions to seven PACs. Between July 12 and July 29, all 
seven PACs contributed to the Senatorial campaign of the 
Stauffer's son-in-law. At least one of the checks delivered 
stated, ``c/o Triad.'' 74 Shortly after winning the 
August 6 primary, the same candidate sent Triad a personally 
signed thank-you note which read, ``I cannot even begin to 
thank Triad enough for its help in my Senate primary 
campaign.'' 75
    In her deposition, O'Rourke confirmed that Triad was in 
regular contact with individuals who worked for the PACs 
receiving the Riley and Stauffer contributions. O'Rourke 
testified that either she or Malenick was in contact with 
people at the Faith Family and Freedom PAC, the Conservative 
Victory Committee, the Eagle Forum, the Conservative Campaign 
Fund, Citizens United, the Republican National Coalition for 
Life, the Madison Project, and the Sacramento-based Citizens 
Allied for Free Enterprise and Americans for Free 
Enterprise.76
    Malenick had long-term relationships with many of the 
people in charge of making the PACs' contributions. Peter 
Flaherty, who is responsible for making contributions for the 
Conservative Campaign Fund, testified that he had known 
Malenick for a number of years. 77 The relationship 
with Flaherty is particularly important as he not only oversees 
the Conservative Campaign Fund, which made a number of 
questionable contributions, but also acts as spokesperson for 
one of the nonprofit organizations created by Triad, Citizens 
for Reform.78 David Gilliard, the contact for 
Citizens Allied for Free Enterprise, is also a director of the 
second Triad shell, Citizens for the Republic.79 In 
addition, Gilliard produced mailings for Citizens for Reform 
and is the former business partner of Carlos 
Rodriguez.80 Rodriguez himself worked for the 1994 
election campaign of Representative David McIntosh, who is 
associated with the Faith, Family and Freedom PAC.81 
All of the PACs identified above as well as additional 
political action committees implicated in patterns of 
suspicious contributions appear on an internal Triad list along 
with names and telephone numbers of contacts at each 
organization.82
    The Committee found evidence that Triad was involved in 
each step of the contribution process, from the time a PAC 
contribution was solicited from a contributor to the time the 
PAC contributed to a candidate. Robert Riley, Jr. told a 
Committee investigator that he made his contributions on the 
advice of Malenick and that Malenick had held the checks for a 
period of time before they were cashed by the 
PACs.83 Riley also told the agent that when the 
campaign received the contributions from the PACs, the checks 
were received not from the PACs themselves, but from 
Triad.84 O'Rourke confirmed that, on occasion, she 
personally delivered checks to PACs; that she always called a 
PAC to let it know that a Triad-solicited check would be 
arriving; and that as a general matter people at the PACs knew 
when checks they received were the result of Triad 
involvement.85
    Documents produced to the Committee, along with the 
testimony of O'Rourke, also established that Triad had a 
regular pattern of soliciting Republican candidates for names 
of their supporters who had already contributed the maximum 
amounts to their campaigns permitted by law, so that the 
supporters could be solicited by Triad for PAC contributions. 
O'Rourke confirmed that, on multiple occasions, she solicited 
names from Republican candidates and campaign staff of 
supporters who might be good ``potential Triad clients.'' 
86 Candidates who provided names of such potential 
contributors included the Senate candidate who received 
contributions from the Stauffers, Representative Riley, and 
Representative Gutknecht.87 Carlos Rodriguez's 
reports also reflect this pattern. In the campaign report of 
Texas House candidate Pete Sessions, Rodriguez states: ``[b]oth 
Sessions and [the campaign manager] clearly understood the 
Triad concept and will have a list of their maxed out donors 
for our inspection as soon as there is a call from 
Washington.'' 88 In another Texas campaign report, 
Rodriguez notes, ``Ed Merritt has a number of maxed out donors 
who might want to be introduced to Triad. Towards that end, I 
have recommended over the telephone to Meredith O'Rourke that 
we check their receptance.'' 89
    Triad's pattern of soliciting candidates for the names of 
maxed-out contributors was so well-established that Triad used 
standard ``phrases'' approved by counsel. A June 13, 1996, memo 
from O'Rourke to Triad counsel Mark Braden queries, ``Is this 
phrase okay for candidates to use to refer potential clients to 
Triad? `There is a business in Washington--whose clients are 
donors to conservative causes and campaigns. Call them.' '' 
90 Handwriting in the top corner of the memo 
indicates that on June 13 ``Braden OK'd quotes.'' 91 
Reports of visits to the campaigns by Rodriguez also routinely 
note that O'Rourke should get in touch with the campaign 
staffer in charge of fundraising after his visit. For example, 
in the report on the Rick Hill campaign for the House in 
Montana, Rodriguez notes, ``I have advised Betty Hill (the wife 
of the candidate and an accomplished campaigner herself) that 
she should be receiving a call from Meredith [O'Rourke] in the 
days to come to discuss possible Triad clients [who] might be 
able to help.'' 92
    The public disclosure records of the PACs that appear on 
Triad's internal list also indicate that Triad's network of 
contributors had relationships with one another and with 
Malenick through membership in the Council for National Policy. 
For example, the public records for a Sacramento-based PAC, 
Citizens Allied for Free Enterprise, which is administered by 
David Gilliard, show a number of contributions by Council for 
National Policy Members.93 The PAC, established in 
November 1995, received a total of 21 contributions. Nine 
contributors were members of Robert Cone's family, while four 
additional contributors were, like Cone and Malenick, members 
of the Council for National Policy.94
    Besides the Riley and Stauffer incidents, other 
contribution records reveal a pattern whereby contributions 
found their way from supporters of particular candidates 
through PACs associated with Triad to the candidates the 
contributors supported. The records show:
     Steve Stockman received three $5,000 contributions 
from PACs on Triad's internal list. All three PACs received 
$5,000 contributions from Richard Eckburg. Eckburg also made a 
$1,000 contribution to Stockman.95
     Foster Freiss of Wyoming made a $4,000 
contribution to Peter Flaherty's Conservative Campaign Fund on 
November 1, 1996. On the same day, the Conservative Campaign 
Fund made a $4,000 contribution to Ray Clatworthy, a Senate 
candidate in Delaware. The Conservative Campaign Fund made no 
other contributions in the amount of $4,000. Freiss also 
contributed directly to Clatworthy. On October 31, Freiss made 
a $25,000 contribution to Citizens for Reform, for which 
Flaherty was spokesman. Citizens for Reform spent $18,000 on 
advertising for Clatworthy.96
     Peter Cloeren of Orange, Texas, made a 
contribution to Texas House candidate Brian Babin in September 
1996. On October 14, Cloeren made a $5,000 contribution to 
Citizens United. On the same day, Citizens United made a $5,000 
contribution to Babin. On October 1, Cloeren made a $20,000 
contribution to Triad-affiliated Citizens for Reform. Citizens 
for Reform spent an unknown amount on television commercials 
attacking Babin opponent Jim Turner.97
     Lorena Jaeb of Florida contributed $20,000 to 
Triad in 1995. On April 22, 1996, she made a contribution of 
$2,500 to Citizens United. On April 28, Citizens United made a 
$2,500 contribution to Representative J.C. Watts of Oklahoma. 
Jaeb also made a $1,000 contribution to the Watts campaign. 
Representative Watts was quoted in a Triad fax stating, ``My 
thanks to TRIAD's clients who had the backbone to answer the 
call--putting their money where their mouths were. . .'' 
98
    Meredith O'Rourke and Peter Flaherty, the only individuals 
with knowledge who answered any substantive questions in 
deposition, refused to answer questions on the subject of 
specific PAC contributions. Asked about the Riley 
contributions, O'Rourke responded, ``I don't think I want to 
answer that question.'' Triad counsel Mark Braden then added, 
``No, we're not going to answer any questions in regards to Bob 
Riley, Jr.'' 99 Asked whether any ``clients'' of 
Triad made contributions to Riley's PAC, the Conservative 
Campaign Fund, Flaherty responded, ``It's none of your 
business.'' 100 While a spokesperson for another 
candidate has insisted that O'Rourke obtained names from that 
candidate's public FEC reports, O'Rourke testified that she 
received the names directly from a campaign staff 
member.101 Asked about the Stauffers, O'Rourke 
confirmed that she knew them, but when asked if she had gotten 
their names from a specific Senate candidate, she was 
instructed by her attorney, Mark Braden, not to 
answer.102 Among the questions that Malenick refused 
to answer was, ``Did Triad ever make suggestions to any 
political action committee relating to the candidates that the 
committee intended to contribute to? '' 103
    Triad has tried to make the case publicly that these 
situations are simply coincidences that occur in any campaign 
where a candidate receives funds from individuals and PACs with 
similar ideology. However, the Committee is aware of no other 
situation where an entity acted as an intermediary, soliciting 
candidates for potential contributors, and directing the flow 
of the contributions from contributors to multiple PACs on the 
one hand, while being involved in the subsequent distribution 
of the PAC funds on the other. It strains credulity that 
Malenick repeatedly accomplished each of these steps without 
ever implying to the candidate, the contributor, or the PAC 
representative that a particular candidate might be a good 
selection for a particular PAC contribution. While, according 
to Robert Riley, Jr., Malenick told him she could not guarantee 
that his father would benefit from his PAC contributions, 
evidence gathered by the Committee strongly suggests that 
Malenick made implied representations that particular 
contributions should go to particular candidates, thus 
illegally earmarking contributions for particular 
candidates.104

                        the advertising campaign

    The primary means by which Triad assisted in the election 
of conservative candidates was by overseeing millions of 
dollars' worth of advertising placed by two nonprofit 
organizations, Citizens for Reform and Citizens for the 
Republic. The advertising funded through these groups cost 
between $3 and $4 million and aired in 26 House and three 
Senate races.105 The sole purpose of the advertising 
was to influence voters in favor of conservative Republican 
candidates in those races.

Creation of Citizens for Reform and Citizens for the Republic

    Like other organizations that aired advertising in the 1996 
campaign, Triad took advantage of a series of court cases 
decided as recently as 1996. The cases hold that if a political 
advertisement or other communication (such as a mailing or 
telephone call) is paid for by an individual or corporation 
that is not a candidate or a political party, and the 
advertisement does not use words that expressly advocate the 
election or defeat of a candidate (such as ``vote for,'' 
``elect,'' or ``defeat''), then the advertiser is exempt from 
the campaign-finance laws.106 The ad may be paid for 
with corporate or union funds, and neither the source of the 
funds nor the cost of the advertisement need be publicly 
disclosed. However, if groups preparing such advertising 
campaigns consult with or collude with candidates or campaigns, 
then the cost of the advertisements will be viewed as a 
contribution from the organization to the 
campaign.107
    In the 1996 election cycle, the use of ``issue advocacy'' 
advertising exploded, and many groups began airing 
advertisements that were unmistakably political advertising 
clearly favoring one candidate over another and intending to 
influence the views of potential voters.108 The 
majority of groups that aired such advertisements, produced 
mailings, and made telephonecalls in 1996 were well-established 
membership organizations committed to particular issues. Such groups 
included the AFL-CIO, the U.S. Chamber of Commerce, the Christian 
Coalition, and the Sierra Club.
    In contrast to these groups, Triad conceived of the idea, 
apparently in early 1996, of creating two nonprofit 
corporations--Citizens for Reform and Citizens for the 
Republic--solely for the purpose of airing advertisements 
without disclosing their sources of funding. The two groups 
were incorporated on May 5 and June 20, 1996, respectively, 
within weeks of Triad itself.109 In post-election 
marketing material, Citizens for the Republic boasted that it 
had ``no endowed chairs, no fellowship programs, no committees 
and no departments.'' 110 In fact, neither Citizens 
for Reform nor Citizens for the Republic had committees, 
programs, or chairs. They had no chairs of any sort, nor desks, 
offices, staff, or even telephones. Instead, Citizens for 
Reform and Citizens for the Republic each consists of a set of 
articles of incorporation, a post office box, and a bank 
account. Neither organization has ever engaged in any service 
or activity other than paying for the production and airing of 
political advertising. They are justifiably characterized as 
shell companies created as mechanisms for funding million-
dollar political advertising campaigns and to create of a 
patina of credibility for the advertisements.
    In 1996, both Citizens for Reform and Citizens for the 
Republic claimed to be tax-exempt ``social welfare 
organizations'' pursuant to section 501(c)(4) of the U.S. tax 
code, with a public purpose: respectively, to ``develop greater 
participation on a non-partisan basis, in the debate on the 
size, scope, growth and responsibility of government'' and to 
focus on ``public policy issues concerning the American 
worker.'' Despite holding themselves out as social welfare 
organizations throughout the election, and despite the fact 
that Citizens for the Republic obtained IRS approval, both 
organizations apparently now have conceded that they do not fit 
the requirements of section 501(c)(4) status but are instead 
political organizations governed by section 527, the same IRS 
section that applies to the Democratic National Committee and 
the Republican National Committee.111 While a 
501(c)(4) organization may lobby and may even engage in 
campaign activities, such activities may not be the primary 
activity of the organization. Yet, campaign activity was not 
just the primary but the exclusive activity of both Citizens 
for Reform and Citizens for the Republic. While counsel Mark 
Braden claimed that the change of tax status was ``just a 
question of what forms you file,'' in fact Citizens for Reform 
and Citizens for the Republic have conceded that they exist to 
influence the outcome of elections, coming perilously close to 
an admission that they are subject to the disclosure 
requirements and contribution limits of the campaign-finance 
laws.112
    Carolyn Malenick has insisted that Citizens for Reform and 
Citizens for the Republic are independent organizations that 
Triad simply ``manages.'' In fact, the organizations were 
created at Malenick's instigation and have always essentially 
been run by Triad. In his deposition, Citizens for Reform 
director Peter Flaherty was able to recall that he discussed 
the creation of a nonprofit organization with Malenick between 
one and ten times prior to incorporating Citizens for Reform, 
but he insisted he could not recall any single discussion or 
the specifics of any discussion.113 Triad's role in 
the creation of Citizens for the Republic is even more clear, 
in that it was incorporated by Triad's law firm, and Rodriguez, 
Malenick, and O'Rourke were all appointed as either officers or 
directors of the organization.114
    Triad was also responsible for all financial arrangements 
of both organizations from their creation. In July 1996, 
Citizens for the Republic paid for a series of ``test 
advertisements'' in a variety of congressional districts. All 
funding for this campaign originated with Triad, which simply 
made transfers into Citizens for the Republic's bank 
account.115 In fact, while Flaherty insisted under 
oath that he signed all checks for Citizens for Reform, bank 
records show that financial transactions for both Citizens for 
Reform and Citizens for the Republic consisted only of wire 
transfers that were handled exclusively by Triad bookkeeper 
Anna Evans.116
    On September 27, 1996, six weeks prior to the election, 
Malenick on behalf of Triad entered into a formal consulting 
agreement with both Citizens for Reform and Citizens for the 
Republic. The consulting agreements granted to Triad carte 
blanche authority to act on behalf of both organizations. The 
agreements gave all authority for decision-making and hiring of 
consultants to Triad--destroying any semblance of separation 
between Triad and the two other organizations. The consulting 
agreements read in part:

          TRIAD will be free to decide the means by which it 
        will provide the Services. To the extent that TRIAD 
        requires assistance in providing the Services, it shall 
        be responsible for hiring the necessary individuals or 
        firms. All work done by TRIAD and its agents servants 
        and employees and all employment and other contracts 
        made by TRIAD in the performance of this agreement 
        shall be as principal and not as agent of [either 
        organization].'' 117

Prior to execution of its agreement, Citizens for Reform did 
not even have a bank account. Yet, between the time an account 
was opened on October 11 and the November 5 election, Citizens 
for Reform received 12 deposits totaling $1.79 
million.118 Of these funds, $1.69 million was spent 
by November 7.119 Between October 1 and November 15, 
Citizens for the Republic received eight deposits totaling 
$1.84 million while spending $1.68 million.120 Funds 
were also freely transferred between accounts held by Citizens 
for Reform, Citizens for the Republic, and Triad.121 
In December 1996, Citizens for Reform received $127 in deposits 
and spent only $17.122
    While Citizens for Reform and Citizens for the Republic 
each had a spokesperson, neither person appears to have played 
a substantive role in the advertising campaign. Lyn Nofziger, 
spokesperson and director of Citizens for the Republic, refused 
to answer questions at his deposition but has stated publicly 
that ``Malenick handled most of the work.'' 123 This 
statement is certainly supported by the documents produced to 
the Committee, since Nofziger's name appears on only official 
documents bearing his signature, talking points for a single 
meeting, and his letter of resignation dated April 3, 1997, one 
week prior to the issuance of subpoenas by this 
Committee.124 Peter Flaherty confirmed that, despite 
his title as director, he viewed Malenick as the person in 
charge of fundraising, retaining vendors, and deciding on the 
content and placement of advertising for Citizens for 
Reform.125
    The fact that the Citizens for Reform and Citizens for the 
Republic advertising was financed by so few deposits so close 
to the election suggests that a handful of wealthy contributors 
were financing the huge political advertising campaign. The 
creation of the companies allowed these contributors to 
contribute enormous sums of money without public disclosure. 
Contributors were also free to use corporate funds, which they 
could not otherwise legally contribute to candidates. Besides 
protection from disclosure, the Triad companies also offered 
contributors another huge advantage: control of the substance, 
timing, and location of advertising. Triad essentially allowed 
contributors to launder funds through these entities for their 
own political purposes.

Improper coordination of Triad's advertising with political candidates

    Citizens for Reform and Citizens for the Republic spent a 
combined total of between $3 million and $4 million on 
advertising in 29 races.126 The total amount remains 
unknown, because the documents produced to the Committee 
contain inexplicable gaps. It appears that Citizens for Reform 
and Citizens for the Republic spent money for television, 
radio, mail, and telephone calls in three Senate and 26 House 
races. The Senate races were in Kansas, Arkansas, and Delaware, 
while House races included four in Texas, three in Kansas, 
three in California, two each in Pennsylvania and Oklahoma, and 
one each in Minnesota, Hawaii, Montana, South Dakota, 
Washington, Oregon, Ohio, Illinois, Tennessee, Arkansas, New 
York, and North Carolina. Of the 29 Republican candidates who 
benefitted from advertising ``managed'' by Triad, 22 are known 
to have received campaign visits from Carlos Rodriguez, while 
at least three others spoke personally to 
Malenick.127
    Like other groups running so-called issue advertisements in 
the 1996 campaign, Triad carefully avoided the words ``vote 
for,'' ``support,'' or ``defeat,'' in the advertisements it 
funded, but otherwise attacked the positions, ideology, and, 
frequently, the character of candidates. The advertising 
created by Triad focused on no single set of issues. It more 
closely resembled negative attack advertising aired by an 
opposing candidate. The candidates benefitting from the 
advertising were the same candidates for whom Triad had 
solicited contributions and advised on campaign and fundraising 
strategy.
    When a candidate and an organization exchange information, 
and the organization subsequently spends funds to encourage 
voters to support the candidate, it raises questions about 
whether the expenditures were undertaken in coordination with 
the candidate, thereby making the advertising expenditures a 
disguised contribution to the campaign. One court has said that 
organizations may legally have contact with candidates, but 
noted that the level of contact and coordination was important 
and that the ``government has an interest in unearthing 
disguised contributions,'' and ``the FEC is free to investigate 
any instance in which it thinks the inquiry (between 
representatives of a corporation and a campaign) has become 
collaboration.'' 128 The Committee's investigation 
of Triad has shown that representatives of Triad and its shell 
corporations had contact with the campaigns that went far 
beyond the making of inquiries, and that Triad and campaign 
representatives collaborated on plans, strategies, and the 
needs of the campaigns. Both the content of the advertising and 
the determination of where to air advertising was clearly 
influenced by Rodriguez's conversations with the candidates and 
the campaigns.
    For example, Rodriguez visited the campaign of Rick Hill, a 
Republican running against Democrat Bill Yellowtail for 
Montana's at-large seat in the House of Representatives. In a 
report dated September 24, 1996, Rodriguez wrote that the 
number-one item the Hill campaign needs is a ``3rd party to 
`expose' Yellowtail.'' 129 Rodriguez also noted that 
three ``key issues--anti Yellowtail'' are ``wife beating,'' 
``robbery of camera store in college,'' and Yellowtail's record 
as a ``deadbeat dad.'' 130
    On October 22, Citizens for Reform commenced a $109,500 
television advertising campaign attacking 
Yellowtail.131 The television advertisement exactly 
followed the issues laid out in Rodriguez's report, with the 
announcer intoning:

          Who is Bill Yellowtail? He preaches family values but 
        took a swing at his wife. And Yellowtail's response? He 
        only slapped her. But ``her nose was not broken.'' He 
        talks law and order . . . but is himself a convicted 
        felon. And though he talks about protecting children, 
        Yellowtail failed to make his own child support 
        payments--then voted against child support enforcement. 
        Call Bill Yellowtail. Tell him to support family 
        values.132

Although polling in September showed Yellowtail ahead by three 
points, on November 5, Rick Hill won by a margin of 52 to 
43.133
    In other cases Rodriguez made no secret of the fact that he 
was using information gained in the audits to determine where 
Triad would run advertising and what it would say. On September 
25, after visiting the South Dakota campaign of Republican 
House candidate John Thune, Rodriguez wrote, ``This campaign is 
well on its way to winning. If there is anything we can do to 
help it would probably be in the area of 501(c)(4) education 
with regards to the liberal tendencies of his opponent.'' 
134 The report also noted Democrat Steve Weiland's 
``union ties'' as a key issue in the race.135 
Citizens for Reform subsequently spent $21,000 on television 
advertisements focusing on Weiland's support for organized 
labor.136
    On September 3, Rodriguez noted in a report on the Texas 
campaign of Steve Stockman: ``. . . we ought to place Steve 
Stockman among the top ten races for TRIAD to watch. We should 
also give some very serious thought to the possibility of 
engaging in an educational effort to bring into focus what 
Steve Stockman has done for the district and to expose some of 
the shortcomings that his Democratic opponent brings to this 
campaign.''137 In the two weeks before the election, 
both Citizens for Reform and Citizens for the Republic aired 
advertisements totaling $142,000 attacking Stockman opponent 
Nick Lampson.138 One advertisement stated:

          Can we trust Nick Lampson? As Jefferson County tax 
        assessor, Lampson was criticized as inefficient and 
        disorganized by the county auditor. . . . And the 
        Houston Chronicle reported that Lampson was accused of 
        Medicare fraud by a home health care worker from his 
        family business. Call and tell Nick Lampson to support 
        ethics in government.139

    Other excerpts from Rodriguez's reports demonstrate how 
Triad's extreme conservatism led it to spend money to target 
even moderate Republicans. For example, Sue Wittig, who ran 
against Representative Maurice Hinchey in New York state during 
the Republican primary, benefitted from $111,000 in television 
and radio advertising placed by Triad through Citizens for 
Reform.140 On September 29 Rodriguez wrote:

          During the entire primary season, we have encountered 
        Republican women who represented the more moderate to 
        liberal philosophy in the Republican party. We have 
        been successful, in most cases, in defeating those 
        Republican women. Here is an opportunity for TRIAD 
        clients to play a leading role in helping elect a 
        conservative woman to show that conservative women have 
        a better chance of winning than liberal 
        women.141

In a two-week period, Triad spent $111,000 for Wittig--not much 
less than the $141,000 the Wittig campaign itself spent in the 
same period.142
    These advertisements were the functional equivalent of 
campaign ads. The ads were run in specific districts. Faxes 
sent by Triad indicate that the timing of the ads was carefully 
planned for when advertising was likely to have its greatest 
impact on voters.143 The advertisements seldom if 
ever dealt with ``issues'' but were instead attacks motivated 
by partisan intent. Asked about the ads run by Citizens for 
Reform attacking Democratic candidate Yellowtail, Peter 
Flaherty of Citizens for Reform reportedly stated: ``If more 
wife beaters are out there as public figures, we are going to 
expose them, and they better watch out.'' 144 Asked 
whether his group would attack any Republican wife beaters who 
might turn up, Flaherty said ``Its not up to us to do the job 
of people who have a liberal ideology.'' 145 Even 
Lyn Nofziger, spokesperson for Citizens for the Republic, has 
said that it is ``outrageous'' that groups like this can ``go 
and run political ads and call them educational.'' 
146
    Given the level of coordination with the campaigns and the 
content of the ads, Triad's advertising expenditures 
constituted disguised contributions to the candidates. Triad 
collaborated with campaigns to determine what issues and 
strategies would most benefit the candidates. Because Rodriguez 
was among those refusing to answer questions at his deposition, 
the Committee was not able to expand on the documentary 
evidence concerning the extent to which the advertising 
campaign was discussed with the campaigns and candidates. While 
campaigns may not have been familiar with the names Citizens 
for Reform and Citizens for the Republic when the Triad-managed 
advertising appeared in their districts, it seems highly 
unlikely that neither candidates nor campaigns ever anticipated 
or discussed potential advertising campaigns in the course of 
consultations with Rodriguez.

No comparison between Triad and the AFL-CIO

    Malenick has repeatedly asserted that Triad--through 
Citizens for Reform and Citizens for the Republic--was simply 
trying to respond to the issue advertising effort launched by 
the AFL-CIO in March 1995. However, the advertising aired by 
Triad rarely mentioned labor as an issue. Further, the majority 
of races where Triad aired advertising were not in districts 
where the AFL-CIO was active. In fact, of 26 House races in 
which Triad advertised, only ten were targets of the AFL-CIO. 
Triad also spent over $800,000 on advertising in three Senate 
races even though the AFL-CIO was not active in any Senate 
race. Of the six House races where Triad spent over $100,000 on 
advertising, the AFL-CIO was active in only one district. The 
evidence suggests that two criteria that appear to have 
determined where Triad ran advertising were whether a 
conservative Republican candidate was running in the district 
and whether one of Triad's contributors wanted advertising 
aired in that particular district.
    Additionally, while Triad ran a covert advertising campaign 
through unknown groups funded by secret contributors, the AFL-
CIO campaign was publicly announced in 1995 along with the 25 
freshman House races the AFL-CIO intended to target. Unlike 
Triad, the AFL-CIO is a bona-fide membership organization whose 
member unions are backed by millions of American workers, most 
of whom support the labor federation's public policy positions. 
Hence, advertising paid for by unions is an open and legal 
attempt to promote the interests and views of union members. In 
contrast, Triad received funds from people who went to 
extraordinary lengths to conceal their identity and purpose 
from voters.
            Financing the advertising campaign
    When the Minority began the Committee's investigation into 
Triad Management, it already suspected that Robert Cone was a 
major source of Triad financing. Press reports had linked him 
to Malenick and had noted Cone's increased financial 
involvement with political organizations.147 As the 
Committee's investigation progressed, it became increasingly 
clear that whoever was funding Triad and the shell companies 
was also playing a role in determining the content and the 
location of advertising prepared by Triad. The investigation 
clearly showed that Triad and both Citizens for Reform and 
Citizens for the Republic were largely financed by a single 
backer, and that neither Citizens for the Republic nor Citizens 
for Reform had done anything other than create and air 
advertising with direction from that backer.
    As the Minority became more convinced that understanding 
the role of Triad's backers was essential to the investigation, 
resistance from several quarters to the investigation began to 
build. Nevertheless, in August, the members of the Committee 
agreed that an in camera review of the funding sources of Triad 
was warranted.148 On August 20, the Committee also 
issued a bank subpoena requiring production of financial 
records of Triad, Citizens for Reform and Citizens for the 
Republic. The subpoena permitted the attorneys for the parties 
only to redact certain depositor information from the records 
produced to the Committee.149 Informed of the 
decision to perform an in camera review of Triad's records, and 
the issuance of the bank subpoena, on September 8 attorneys for 
Triad notified the Committee that they would not submit to an 
in camera review and would not produce subpoenaed witnesses for 
depositions.150
    On August 21, attorneys for Triad were notified of the bank 
subpoena, provided a copy of the subpoena, and informed that 
records needed to be produced to the Committee within two 
weeks.151 The Committee subpoena stated that the 
bank holding the records ``shall permit'' representatives of 
the organizations to make redactions, and that representatives 
of the organization ``may'' remove certain information from the 
records.152
    In early September, records including account statements 
and expenditure records were produced to the Committee by the 
bank. The bank records for Triad, Citizens for Reform, and 
Citizens for the Republic showed that:
           Citizens for the Republic was entirely 
        financed by Triad from its creation through September 
        1996;
           Citizens for Reform had no bank account 
        until less than one month prior to the 1996 election;
           both nonprofit organizations received fewer 
        than a dozen deposits of large amounts of money;
           between $1 million and $2 million dollars 
        passed through the accounts of both Citizens for Reform 
        and Citizens for the Republic in the weeks around the 
        1996 election, while the accounts were virtually 
        inactive in other months; and
           money was freely transferred among the three 
        entities.
    However, in its September production, the bank did not 
provide the account deposit records for any of the 
organizations under subpoena. On September 30, six weeks after 
the bank subpoena was served, Minority Chief Counsel sent an 
inquiry to the bank holding Triad's records, noting that these 
records had not been produced and requesting production. The 
letter specifically noted that the subpoena required that 
attorneys for the account holders be offered the opportunity to 
redact information. Two weeks later, the Committee received 
from the bank unredacted account deposit records identifying 
contributors to Triad, Citizens for Reform and Citizens for the 
Republic.153 The records had been sent without 
redactions, presumably because the bank had determined that it 
had provided Triad's attorneys with sufficient opportunities to 
redact the records during the eight weeks between service of 
the subpoena and production.154 At the same time, 
attorneys for Coalition for Our Children's Future, who had been 
similarly notified of issuance of an identical subpoena for the 
bank records of their client, produced records which redacted 
the identity of depositors to the account as permitted by the 
subpoena.
    It is unclear why Triad's attorneys failed to exercise 
their option to redact their client's records, leading to the 
production of records identifying contributors. The 
circumstances of the production and the history of Triad's non-
cooperation with the Committee support the inference that 
Triad's counsel declined to take steps to redact the subpoenaed 
bank records based on the incorrect assumption that the bank 
would not produce the unredacted records. Seen in this light, 
the failure of Triad's counsel to redact the records was 
consistent with a general course of conduct in seeking to 
obstruct the Committee's investigation of Triad's activities. 
When Triad attorney Mark Braden learned that the bank had 
produced the records without redactions, he demanded the 
immediate return of the records. Braden offered no explanation 
of why he did not exercise his option to redact the documents. 
He not only failed to redact the documents by the September 2 
deadline, but also failed to redact them at any point in the 
six weeks prior to the October 16 production by the bank. The 
Minority retained its copy of the documents because, as Senator 
Glenn has explained, the records are relevant to the 
investigation and were properly received pursuant to a valid 
Committee subpoena.155

The trusts behind Triad

    When the Committee received the unredacted documents 
identifying contributors to Triad and the shell companies, it 
became clear why Triad and its attorneys had been so anxious to 
prevent the records from coming to light. The documents contain 
further proof that Triad was used as a tool to evade the 
contribution limits and disclosure provisions of the campaign 
finance laws. Most notably, the bank records revealed that yet 
another layer of dummy organizations existed behind Triad. Two 
secret trusts together contributed $2.34 million to Citizens 
for Reform and Citizens for the Republic, over 83 percent of 
the total money received by the organizations. The trusts 
appear to have given the funds with the specific intent that 
the trusts' existence never come to light. In fact, Triad's 
attorneys have publicly confirmed that Triad entered into 
written agreements to keep the identity of funding sources 
secret.156
    The first trust, identified in bank records only as 
``Personal Trust,'' contributed $600,000 to Citizens for Reform 
and Citizens for the Republic from an account at CoreStates 
Bank in Philadelphia.157 Based on the testimony of 
Triad bookkeeper Evans that Triad's backer provided hundreds of 
thousands of dollars to the two nonprofits, the Minority 
believes that the Personal Trust is, in all probability, 
controlled by Robert Cone. The trust's account is at the same 
bank where Robert Cone's brother Edward, who also contributed 
$300,000 to Citizens for the Republic and $100,000 to Citizens 
for Reform, has a personal account, and the wire transfers from 
the Personal Trust to Citizens for Reform and Citizens for the 
Republic began at the same time that Robert Cone stopped making 
contributions to Triad from his personal account. The only 
public statement Robert Cone has ever made on the subject of 
Triad is, ``I'm not confirming or denying anything at the 
moment.'' 158
            Economic Education Trust
    Still unresolved by the Committee is the identity of the 
backer or backers of the Economic Education Trust. This Trust 
provided $1.79 million to the Triad nonprofits in October 1996. 
Evidence suggests that these funds were given to Triad's two 
nonprofits with the contingency that the trust's own consultant 
oversee the advertising campaign, including selection of where 
ads would air. Even without the benefit of a subpoena for the 
financial records of the Economic Education Trust, 
circumstantial evidence developed by the Minority suggests that 
the trust was financed in whole or in part by Charles and David 
Koch of Wichita, Kansas. The Koch brothers control Koch 
Industries, an oil company with revenues of about $30 billion 
per year. It is believed to be the second-largest privately-
held company in the United States. The Committee's evidence of 
the Koch brothers' involvement includes:
           Many of the candidates who benefitted from 
        attack ads run by Triad also received campaign 
        contributions from Charles Koch, David Koch, and/or 
        their company's political action 
        committee.159
           The Koch brothers have a history of 
        channeling money through nonprofit organizations in 
        order to advance their political interests, including 
        think tanks and term-limits groups.160 In 
        1996, a term-limits group with possible Koch funding 
        ran attack ads under the guise of ``issue advocacy'' 
        (See Chapter 15). Some of the candidates attacked by 
        the term-limits group were also targeted by 
        Triad.161
           A disproportionate amount of the money spent 
        on the attack ads by Triad and by a second group, 
        Coalition for Our Children's Future, benefitted 
        candidates in states where Koch Industries does 
        significant business, most notably Kansas, where the 
        company is headquartered; Minnesota, where Koch 
        Industries owns a major oil refinery; and Arkansas, 
        Louisiana, and Oklahoma, where Koch Industries has 
        refineries and pipelines.162
           Koch Industries gave at least $2,000 
        directly to Triad in October 1996.163
    Koch Industries has refused to say whether it funded the 
Triad-controlled tax-exempts or any other organizations that 
ran attack ads in 1996. A September 30, 1997, letter to Koch 
Industries Chairman Charles Koch from the Committee's Minority 
Chief Counsel, produced no response.164 Questions 
from journalists have been met with ``no comment.'' After the 
Minority learned of the existence of the Economic Education 
Trust, Senator Glenn, the ranking Minority member, asked 
Chairman Thompson to issue a subpoena to the Riggs National 
Bank of Washington, D.C., where the Trust maintained the 
account from which money was wired to the Triad organizations. 
On November 24, Senator Glenn renewed his request for issuance 
of the subpoena. No subpoena was issued.
    Whoever is behind the trust played an active role in the 
crafting of the Triad advertising campaign, as well as 
advertising aired through other organizations. Evidence 
strongly suggests that the trust was also the ``secret 
contributor'' that required a confidentialityagreement from 
Coalition for Our Children's Future, a nonprofit group that also ran 
ads attacking Democrats (see Chapter 13).
    The trust appears to have hired its own vendors to handle 
its advertising campaigns. Documents produced by Triad show 
that Triad's eight most heavily-funded races were handled by a 
New York-based consultant named Dick Dresner, of the political 
consulting firm Dresner Wickers & Associates. The amount 
contributed to the Triad groups by the Economic Education Trust 
roughly corresponds to the amount spent on the production and 
airing of the eight projects overseen by Dresner.165 
Documents produced to the Committee indicate that Dresner was 
not retained by Triad, but by a major contributor who 
controlled the Dresner portion of the advertising. The evidence 
includes:
           An October 22 memorandum from Malenick to 
        Dresner stating, ``the market buys that are being 
        handled by Dresner Wickers & Associates were pre-
        determined before TRIAD was contracted to oversee the 
        projects end.'' 166
           An October 24 memorandum from Triad 
        administrator Kathleen McCann to Peter Flaherty noting 
        that ``based on a client's request, additional vendors 
        have been used to run ads through Citizens for Reform 
        in . . . [the 1st, 2nd, and 3rd districts of Kansas and 
        Montana at large];'' 167
           An October 28 memorandum from Triad 
        bookkeeper Anna Evans to Dick Dresner's assistant 
        Joanne Banks noting, ``After my conversation with you 
        this morning, I spoke with [redacted]. He has requested 
        that to get the media time bought, to separate the 
        media time amounts from production and retainer and 
        other costs. Carolyn and Mr. Braden have agreed to 
        this;'' 168
           A January 21 memorandum from Evans to Banks 
        stating, ``Has Mr. Dresner never informed you of his 
        agreement of a 12% and not 15% commission that he made 
        directly with Triad's client, who preferred using DW&A 
        as a vendor. Let me assure you that this arrangement of 
        vendor selection was an exception, and plans do not 
        call for a repeat;'' 169 and
           A February 7 memorandum from Evans to Banks 
        stating, ``The commission taken based on these 
        affidavits is at 15% instead of the originally agreed 
        12%. The agreement was requested by CFTR and agreed 
        upon by DW&A through an intermediary.'' 170
    Dresner, Malenick, and Braden all either refused to appear 
for deposition or to answer questions. The Committee's 
understanding of the arrangements is, therefore, less than 
complete. However, Dresner also played a role in advertising 
prepared for Coalition for Our Children's Future (``CCF''). On 
September 18, 1997, the Committee deposed Denis Calabrese, a 
political consultant who oversaw the CCF ad campaign. Calabrese 
testified that in mid-1996, he was retained by an individual he 
refused to name, who was a representative for an organization 
he refused to name, for the purpose of overseeing an issue 
advertising campaign consisting of political 
advertisements.171 Calabrese testified that as part 
of his duties he hired a number of other political consultants 
to act as vendors including Dresner, and Dresner's Triad 
subcontractors James Farwell and Steve Sandler.172 
He testified that he initially met Dresner at a meeting with 
the anonymous donor representative and that he attended 
meetings with a variety of organizations, including CCF and 
Triad, in order to determine if they were ``appropriate 
vehicles'' for the issue ad campaign.173 He also 
testified he oversaw a second ad campaign for the anonymous 
donor through another organization which was not 
Triad.174
    Although he failed to appear for a sworn deposition, in a 
January 1998 roundtable discussion, Dick Dresner admitted that 
he helped to coordinate a number of issue advertising campaigns 
in the 1996 election cycle. Dresner said that ``many of the 
people he worked with were most concerned with remaining 
anonymous, while still having a major impact on federal 
elections.'' 175 Dresner confirmed that ``his 
wealthy clients set up a series of foundations, trusts and 
other ``shells'' to pump money into subterranean issue-ad 
campaigns. `They use three or four or five or six different 
ways so they aren't discovered.' '' 176 He went on 
to note that ``his clients seemed to have success with that 
tactic, and most have remained anonymous even now: `Even if 
their names came up once or twice, the extent of their 
activities is underestimated.' '' 177
    Other evidence besides the involvement of the same 
consultants suggests that the donor behind the Economic 
Education Trust whose identity has been concealed from the 
Committee funded not only the Triad advertising campaign but 
also the CCF advertising campaign. In addition:
           Both Triad and CCF representatives confirmed 
        that both organizations executed written 
        confidentiality agreements with a secret 
        contributor.178
           An unnamed former employee of CCF stated in 
        a news article that the entity that funded the CCF 
        advertising campaign was a trust.179
           The funds for the CCF ad campaign were wired 
        from an account at Riggs Bank in Washington, D.C., the 
        same bank where the Economic Education Trust has an 
        account.180
           Barry Bennett, executive director of CCF 
        stated that the confidentiality agreement was drafted 
        by former RNC General Counsel Benjamin Ginsberg. 
        Ginsberg was also consulted on the substance of CCF 
        advertising, and represents both Dick Dresner and James 
        Farwell, both of whom failed to appear for deposition 
        on any of the numerous dates offered to 
        them.181

Triad's impact on the 1996 elections

    While it is impossible to know the full extent of the 
Economic Education Trust's advertising campaign absent a full 
investigation, the election results in Kansas (the home state 
of the Koch brothers) suggest that Dresner was correct in 
noting that his clients had been successful in their attempts 
to covertly influence the outcome of particular federal races. 
Triad advertising aired in four of six federal races in Kansas. 
Two were for open House seats, the third was held by a 
vulnerable freshman Republican, and the fourth was an open 
Senate seat in which a bitter and disruptive Republican primary 
battle had been waged.
    Using television advertising, mailings, telephone calls, 
and radio ads all prepared under the supervision of Dick 
Dresner, Triad spent over $1 million on the four races: 
$420,000 in television advertising in the Senate race between 
Republican Representative Sam Brownback and Democrat Jill 
Docking; $287,000 on television and radio advertising and phone 
calls in the race between Republican Vince Snowbarger and 
Democrat Judy Hancock; $131,000 on phones, mail, and television 
advertising benefitting freshman Republican Representative Todd 
Tiahrt in his campaign against Randy Rathbun; and $133,000 on 
television, radio, phones, and mail in the race between 
Republican Jim Ryun and Democrat John Freidan.182 
Triad's two-week spending spree on behalf of the Republican 
Senate candidate totaled almost a quarter of the amount the 
candidate spent on his own campaign throughout 
1996.183 Triad's two weeks of spending on behalf of 
Vince Snowbarger totaled over half of what he himself spent in 
1996.184 Republican candidates were victorious in 
all four races. Representative Tiahrt was re-elected by a 
margin of less than two percentage points. Vince Snowbarger and 
Jim Ryun were elected by margins of less than five 
points.185

Advertising by other Triad contributors

    Although the multimillion-dollar advertising campaigns 
appear to have been funded largely by Cone and the Koch 
families, the Committee also found evidence that smaller 
contributors made contributions with the intent of financing 
advertising campaigns that targeted specific candidates. For 
example, California agribusinessman Dan Gerawan contributed 
$50,000 to Citizens for Reform. In the primary, Gerawan had 
funded a publicly disclosed advertising campaign attacking one 
of the candidates in the 20th Congressional District in 
California for supporting the Legal Services Corporation, a 
government-funded agency that provides legal services to the 
indigent. In the general election, Citizens for Reform aired an 
advertisement attacking Representative Calvin Dooley's views on 
the Legal Services Corporation.186 After the 
election, Gerawan admitted he paid for the ads.187 
Although the Minority requested a subpoena for Gerawan's 
deposition, no subpoena was ever issued.
    The Committee also found evidence suggesting a direct link 
between a Triad-sponsored advertising campaign and eight checks 
totaling $11,500 received by Citizens for Reform on a single 
day in October 1996. The checks, among the lowest contributions 
received by either nonprofit, all came from people or 
businesses based in the 6th District of Pennsylvania, where 
Republican Christian Leinbach was challenging Representative 
Tim Holden.188 Seven of the eight families who 
contributed to Triad had already made the maximum permissible 
contribution to Leinbach's campaign.189 On September 
11, Carlos Rodriguez had written a report of the Leinbach 
campaign complaining: ``the problems with the campaign became 
obvious once I visited the campaign headquarters. Leinbach has 
been unwilling to make the fund raising calls necessary. . . . 
We should wait for marked improvements on the part of the 
candidate and the consultant before providing them with any 
financial assistance.'' 190 Yet less than a month 
later, Citizens for Reform funded a $17,000 radio campaign 
against Leinbach's opponent.191 Presumably, the 
funds received from Leinbach's supporters were used to pay for 
advertising in a campaign to which Triad consultants were 
unwilling to devote existing resources.

                               Conclusion

    In the end, Triad succeeded in pouring millions of dollars 
into televised advertisements designed to attack particular 
candidates in hotly-contested races, while concealing the 
identities of the individuals and companies that provided the 
monies. Triad's secrecy about its sources of funding, which is 
one of the principal benefits it offers its contributors, was 
accomplished through several means, including its disingenuous 
incorporation as a for-profit business and the establishment of 
sham nonprofit corporations. This secretiveness undermines our 
system of campaign-finance laws. If, as the Minority strongly 
believes, Triad violated campaign-finance laws, it has done so 
with impunity. If, as Triad contends, its activities fell 
within the limits of the law, then the disclosure requirements 
of the campaign-finance laws have proven to be so easily 
circumvented by individuals with wealth that they are 
essentially meaningless. Triad is important not just for the 
ways it bent or broke existing laws, but for the pattern it has 
established for future groups, which will take comfort in 
Triad's successful defiance of this Committee.

                               footnotes

    \1\ Buckley v. Valeo, 426 U.S. 1, 9 (1976).
    \2\ Roll Call, 12/4/97.
    \3\ Roll Call, 12/4/97: Austin-American Statesman, 8/16/95.
    \4\ Roll Call, 12/4/97: U.S. News and World Report, 6/6/94.
    \5\ Roll Call, 12/4/97.
    \6\ See Council for National Policy Unofficial Information Page, 
http://apocalypse. berkshire.net/ifas/cnp/index/html.
    \7\ Roll Call, 12/4/97.
    \8\ National Journal, 9/28/96.
    \9\ Triad records of incorporation TR1 1-5: Anna Evans deposition, 
8/19/97, p. 20.
    \10\ The Hill, 10/8/97.
    \11\ Roll Call, 12/4/97.
    \12\ Memorandum from Carolyn Malenick to Triad employees, 2/22/97, 
TR 20 5.
    \13\ Washington Post, 3/9/97.
    \14\ Committee subpoenas 247-257 for: Cleta Mitchell, Lyn Nofziger, 
Carlos Rodriguez, David Gilliard, Padraic Buckley, Kenneth Boehm, Peter 
Flaherty, Meredith O'Rourke, Carolyn Malenick, Mark Braden, Anna Evans. 
See also subpoena number 346 for Kathleen McCann, 375 for Richard 
Dresner, and 377 for James Farwell.
    \15\ Letter from Richard Hauser to Majority Chief Counsel and 
Minority Chief Counsel, 9/8/97. Those deposed at that point were Peter 
Flaherty and Anna Evans. The deposition of Meredith O'Rourke had been 
adjourned but not completed. Two other directors of Citizens for 
Reform, Kenneth Boehm and Padraic Buckley, had also been deposed to 
establish they had almost no role in the organization.
    \16\ Letter from Richard Hauser to Committee staff, 9/8/97.
    \17\ See 18 U.S.C. sections 1503, 1505.
    \18\ Carolyn Malenick deposition, 9/16/97.
    \19\ Three subpoenas for deposition for individuals involved in the 
AFL-CIO advertising campaign were issued in September but never taken. 
Contrary to public statements, these individuals only refused to appear 
on the date contained in the subpoena because they were given short 
notice and had conflicts. The Majority staff never contacted these 
individuals to reschedule deposition dates. See Committee subpoenas 
399-401; letter to Committee staff from counsel for the AFL-CIO, 9/22/
97. Another individual affiliated with the AFL-CIO did appear pursuant 
to a deposition subpoena. Deposition of Geoffrey Garin, 9/5/97. See 
Chapter 39 of this Minority Report.
    \20\ Associated Press, 11/4/97.
    \21\ The only invoices produced were for ``fees'' Triad charged the 
shell companies, Citizens for Reform and Citizens for the Republic. TR 
8 26, CR 13 1956.
    \22\ Meredith O'Rourke deposition, 9/3/97, pp. 30-33.
    \23\ Meredith O'Rourke deposition, 9/3/97, pp. 30-33.
    \24\ Anna Evans deposition, 8/19/97, pp. 45-46.
    \25\ Staff interviews with PAC contributors, 5/97.
    \26\ Staff interviews with PAC contributors, 5/97.
    \27\ Staff interviews with PAC contributors, 5/97.
    \28\ Anna Evans deposition, 8/19/97, p. 175.
    \29\ Bank statements of Crestar account of Triad Management, 5/31/
95-1/31/96.
    \30\ Deposit records of Crestar bank account of Triad Management.
    \31\ Deposit records of Crestar bank account of Triad Management.
    \32\ See financial records of Crestar account of Triad Management.
    \33\ See financial records of Crestar accounts of Triad Management 
and Triad Management, Inc.
    \34\ Anna Evans deposition, 8/19/97, p. 177.
    \35\ Morning Call, 10/3/93.
    \36\ Boston Globe, 8/23/96.
    \37\ Morning Call, 10/3/93.
    \38\ National Journal, 9/28/96.
    \39\ James McLaughlin deposition, 9/17/97, p. 16.
    \40\ See 2 U.S.C. sections 433 and 434.
    \41\ See 2 U.S.C. section 441 (a)(3); see also FEC public 
disclosure records for federal contributions of Robert Cone. 
Contribution records are available at www.tray.com.
    \42\ See 2 U.S.C. sections 433 and 434.
    \43\ 2 U.S.C. section 441b.
    \44\ 11 C.F.R. section 116.1 (a)(c).
    \45\ Meredith O'Rourke deposition, 9/3/97, p. 53: staff interview 
with Robert Riley, Jr., 9/16/97; Rapid City Journal, 9/20/97.
    \46\ Meredith O'Rourke deposition, 9/3/97, pp. 46, 50.
    \47\ Staff interview with Robert Riley, Jr., 9/16/97.
    \48\ Rapid City Journal, 9/20/97.
    \49\ Los Angeles Times, 11/12/97.
    \50\ Triad invoices, TR 8 35; TR 8 112-114.
    \51\ See Rodriguez reports identified in footnotes 52-58, infra.
    \52\ Minneapolis Star Tribune, 10/29/97.
    \53\ Report of Jay Mathis campaign, TR 15 1170-1172.
    \54\ Report of Vince Snowbarger campaign, TR 15 1206-1207.
    \55\ Report of Christian Leinbach campaign, TR 15 1163-1166.
    \56\ Report of Jim Ryun campaign, TR 15 1197-1199.
    \57\ James McLaughlin deposition, 9/17/97, pp. 13-14.
    \58\ Report of Steve Stockman campaign, TR 15 1210-1212.
    \59\ Report of Mark Sharpe campaign, TR 15 1186-1188.
    \60\ Meredith O'Rourke deposition, 9/3/97, p. 95.
    \61\ ``My understanding of what happened is Meredith [O'Rourke] 
asked Carolyn [Malenick] whether she could go over and help [the Senate 
candidate] dial for dollars.'' Washington Post, 12/12/97; ``O'Rourke 
was simply doing a favor for Brownback, not on Triad's time.'' Kansas 
City Star, 12/5/97.
    \62\ Meredith O'Rourke, deposition, 9/3/97, pp. 94-95.
    \63\ Triad solicitation TR 10 146-147: Rapid City Journal, 9/20/97.
    \64\ Triad 10 0079-10 0081.
    \65\ `` '96 Primary Alert'' Triad Fax Alert 7/18/97, TR 10 218.
    \66\ Massachusetts Citizens for Life v. FEC, 479 U.S. 238 (1986), 
Faucher v. FEC, 928 F. 2d 468 (1st Cir. 1991), Maine Right to Life v. 
FEC, 98 F. 3d 1 (1st Cir. 1997), 11 C.F.R. section 114.4.
    \67\ Triad ``fax alert,'' 10/10/96, TR 10 160-161.
    \68\ Triad fax solicitation, TR 10 146-147.
    \69\ Federal election law severely limits the volunteer activities 
that corporations may engage in, and limits the group of people that 
corporations may solicit for contributions to political campaigns to a 
restricted class of officers and executive employees. In a corporation 
like Triad the restricted class Triad could properly solicit would 
consist only of Carolyn Malenick herself. See 11 C.F.R. section 
114.2(f); 114.1(e)(2).
    \70\ 2 U.S.C. section 441a(a)(8): 11 C.F.R. section 110.6.
    \71\ Triad internal PAC list, TR 15 105-1052.
    \72\ FEC public disclosure reports of: Robert Riley, Jr., 
Conservative Campaign Fund, Americans For Free Enterprise, Citizens 
Allied for Free Enterprise, and Faith, Family, and Freedom. See also 
Wall Street Journal, 4/10/97.
    \73\ Triad ``fax alert,'' 11/14/96, TR 10 83.
    \74\ Kansas City Star, 5/2/97: FEC Public Disclosure records of 
John and Ruth Stauffer.
    \75\ Handwritten note to Triad, TR 15 678.
    \76\ Meredith O'Rourke deposition, 9/9/97, pp. 60-77.
    \77\ Peter Flaherty deposition, 8/22/97, p. 13.
    \78\ Peter Flaherty deposition, 8/22/97, pp. 11, 15.
    \79\ Citizens for the Republic Education Fund Unanimous Consent in 
Lieu of Meeting, CREF 1 4-8.
    \80\ Triad invoices from Gilliard and Associates, CREF 13 1934.
    \81\ James McLaughlin deposition, 9/17/97, p. 13: records of 
incorporation for Huckaby, Rodriguez, Gilliard, Inc.
    \82\ Triad internal PAC list, TR 15 1050-1052.
    \83\ Staff interview with Robert Riley, Jr., 9/16/97.
    \84\ Staff interview with Robert Riley, Jr., 9/16/97.
    \85\ Meredith O'Rourke deposition, 9/9/97, pp. 66, 72.
    \86\ Meredith O'Rourke deposition, 9/9/97, pp. 51, 53, 90.
    \87\ Minneapolis Star Tribune, 10/29/97.
    \88\ Report of Pete Sessions campaign, TR 15 1176.
    \89\ Report of Ed Merritt campaign, TR 15 1183-1185.
    \90\ Memo from Meredith O'Rourke to Mark Braden, 6/13/96, TR 15 
1054.
    \91\ Memo from Meredith O'Rourke to Mark Braden, 6/13/96, TR 15 
1054.
    \92\ Report of Rick Hill campaign, TR 15 1143-1145.
    \93\ In addition to acting as administrator of the PAC and director 
of Citizens for the Republic, Gilliard was also a paid consultant of 
California candidate Linda Wilde. Wilde benefitted from $100,000 in 
mailings and $25,000 in phone calls against Representative George Brown 
funded by Citizens for Reform, over half the amount Wilde spent on her 
own campaign throughout 1996. Wilde also received $6,000 of $21,000 
raised by Citizens Allied for Free Enterprise (``CAFE''). No other 
candidate received more than $1,000. See FEC disclosure reports of 
CAFE. In addition to working directly for Wilde, the PAC and Citizens 
for the Republic, Gilliard was also a paid vendor of Citizens for the 
Republic, and produced at least $75,000 worth of mailings in 
Representative Randy Tate's Washington district.
    \94\ Disclosure reports for Citizens Allied for Free Enterprise; 
see also http://apocalypse. berkshire.net/ifas/cnp/
index.html.
    \95\ FEC public disclosure records of Richard Eckburg, available at 
www.tray.com.
    \96\ FEC disclosure records of Foster Freiss and the Conservative 
Campaign Fund available at www.tray.com: deposit records of Citizens 
for Reform.
    \97\ FEC disclosure records of Peter Cloeren available at 
www.tray.com; bank deposit records of Citizens for Reform.
    \98\ FEC disclosure records of Lorena Jaeb and Citizens United 
available at www.tray.com.
    \99\ Meredith O'Rourke deposition, 9/3/97, p. 102.
    \100\ Peter Flaherty deposition, 8/22/97, p. 13.
    \101\ Kansas City Star, 5/5/97: Meredith O'Rourke deposition, 9/3/
97, pp. 91-92.
    \102\ Meredith O'Rourke deposition, 9/3/97, pp. 99-100.
    \103\ Carolyn Malenick deposition, 9/16/97, p. 20.
    \104\ A disclaimer such as that contained in letters from Triad to 
the PACs does not negate fact. Massachusetts Citizens for Life, 479 
U.S. 238, 249 (1986).
    \105\ Committee list of races where Citizens for Reform and 
Citizens for the Republic were active and the amounts spent.
    \106\ Faucher v. FEC, 928 F. 2d 468 (1st Cir. 1991); 743 F. Supp 64 
(1990); FEC v. Christian Action Network, 92 F.3d 1178 (4th Cir. 1996), 
894 F. Supp 946 (S.D.Va. 1995); Maine Right to Life v. FEC, 98 F.3d 1 
(1st Cir. 1997).
    \107\ Clifton v. FEC, 114 F.3d 1309 (1st Cir. 1997); see also 
Chapter 20: Legal Analysis and Overview.
    \108\ Annenberg Public Policy Center, ``Issue Advocacy Advertising 
During the 1996 Campaign: A Catalog,'' Report Series No. 16, 9/16/97, 
p. 7.
    \109\ Certificate of Incorporation for Citizens for the Republic, 
CREF 1 32: Articles of Incorporation for Citizens for Reform, CR 1 61-
64.
    \110\ Citizens for the Republic marketing brochure, CREF 1 100.
    \111\ Citizens for Reform stated in its application for (c)(4) 
status that it had not spent and did not plan to ``spend any money 
attempting to influence'' an election. IRS Form 1024, item 15, 6/7/96. 
This may be a false statement in violation of 26 U.S.C. Sec. 7206.
    \112\ Roll Call, 10/20/97.
    \113\ Peter Flaherty deposition, 8/22/97, pp. 19-21.
    \114\ Incorporation documents of Citizens for the Republic, CREF 1 
13-14, 33-35.
    \115\ The Citizens for the Republic bank account received $302,548 
in deposits in July and spent $273,114. All the deposits into the 
account were made by transfer from Triad's account at the same bank. 
See bank records of Crestar accounts held by Citizens for the Republic 
and Triad Management, Inc.
    \116\ For example, Evans would generate an invoice for ``management 
fees due to Triad from either Citizens for Reform or Citizens for the 
Republic.'' The invoices (the only ones Triad ever seems to have 
issued) are printed on Triad letterhead, are addressed to the 
respective groups in care of Triad, then seek payment made to Triad--
all at the same address. To actually pay Triad's bill, Evans would 
simply make a bank transfer from one account to another. Invoices from 
Triad to Citizens for Reform and Citizens for the Republic, TR 8 26, TR 
8 22.
    \117\ Consulting agreements between Triad and Citizens for Reform 
and Citizens for the Republic, CREF 1 94-95; CR 1 38-39.
    \118\ October and November 1996 bank statements of Citizens for 
Reform.
    \119\ October and November 1996 bank statements of Citizens for 
Reform.
    \120\ October and November 1996 bank statements of Crestar bank 
accounts of Citizens for the Republic.
    \121\ See note 113 infra; see also bank statements of Citizens for 
Reform and Citizens for the Republic for October and November 1996.
    \122\ December 1996 bank statement of Crestar Bank accounts of 
Citizens for the Republic.
    \123\ Los Angeles Times, 5/5/97.
    \124\ Documents bearing signature of Lyn Nofziger, CREF 1 56, 66, 
94-95.
    \125\ Peter Flaherty deposition, 8/22/97, pp. 54, 62, 70, 83.
    \126\ Committee list of races where Triad was active.
    \127\ Meredith O'Rourke deposition, 9/3/97, pp. 46, 87; See 
Appendix C for reports of Rodriguez visits.
    \128\ Clifton v. FEC, 114 F.3d at 1309, 1316-19 (1st Cir. 1997).
    \129\ Report of Rick Hill campaign, TR 15 1143-1145.
    \130\ Report of Rick Hill campaign, TR 15 1143-1145.
    \131\ Invoice for Yellowtail advertising, CR 13 1179.
    \132\ Script of Yellowtail advertisement, CR 13 0713.
    \133\ Congressional Quarterly 1996 Election Results: report of Rick 
Hill campaign, TR 15 1143-1145.
    \134\ Report of John Thune campaign, TR 15 1141-1142.
    \135\ Report of John Thune campaign, TR 15 1141-1142.
    \136\ Invoice showing funds spent for Thune by Citizens for the 
Republic, CREF 13 0512.
    \137\ Report of Steve Stockman campaign, TR 15 1210-1212.
    \138\ Invoices showing funds spent by Citizens for Reform and 
Citizens for the Republic, CREF 13 512, CR 13 1272.
    \139\ Videotape advertisement produced by Citizens for the 
Republic.
    \140\ Invoice showing funds spent for Wittig race, CR 13 12792.
    \141\ Report of Sue Wittig campaign, TR 15 1136-1139.
    \142\ FEC disclosure reports of Friends of Sue Wittig.
    \143\ Triad fax alert ``The Time for Battle Is Now,'' 9/27/97, TR 
10 191.
    \144\ Los Angeles Times, 5/5/97.
    \145\ Los Angeles Times, 5/5/97.
    \146\ Annenberg Public Policy Center, ``Issue Advocacy Advertising 
During the 1996 Campaign: A Catalog,'' Report Series No. 16, 9/16/97, 
p. 5.
    \147\ National Journal, 9/28/96; Boston Globe, 8/23/96.
    \148\ Letter of 8/27/97 from Majority and Minority Chief Counsels 
to Triad Counsel Richard Hauser.
    \149\ Subpoena of 8/21/97 to Crestar Bank.
    \150\ Letter from Richard to Hauser to Alna Baron and Michael 
Madigan, 9/8/97.
    \151\ Letter of 8/22/97 from Minority Staff Counsel to Mark Braden.
    \152\ Subpoena of 8/21/97 to Crestar Bank.
    \153\ Staff also followed up with the bank holding the Triad 
records leaving two voice mail messages seeking to determine when 
records would be produced. At the same time, the bank holding records 
of Coalition for Our Children's Future, which had received an identical 
subpoena for records that had not yet been produced, was contacted for 
the same purpose. Letter from Minority Chief Counsel to Crestar General 
Counsel John Clark, 10/30/97.
    \154\ Committee staff reviewed such records when they were 
received. Documents revealed the existence of a second account held by 
Triad which was clearly covered in the subpoena. Records for this 
account were also requested and were forwarded without redactions.
    \155\ Letter of 11/24/97 from Senator Glenn to Senator Thompson.
    \156\ New York Times, 10/24/97.
    \157\ Wire transfer receipts of Crestar Bank accounts of Citizens 
for Reform and Citizens for the Republic.
    \158\ Associated Press, 10/29/97.
    \159\ FEC public disclosure records for Charles Koch, David Koch 
and Koch Industries PAC.
    \160\ National Journal 5/16/97: Lewis Charles and the Center for 
Public Integrity, The Buying of the President. New York: Avon Books, 
1996, p. 127.
    \161\ Roll Call 1/26/98.
    \162\ Wichita Business Journal 10/24/97: Minneapolis Star Tribune, 
10/29/97.
    \163\ Deposit records of Crestar account of Triad Management, Inc., 
10/29/96.
    \164\ 9/30/97 Letter from Minority Chief Counsel to Charles Koch.
    \165\ The eight races were: Brownback v. Docking (Kansas Senate); 
Hutchinson v. Bryant (Arkansas Senate); Hill v. Yellowtail (Montana 
House); three Kansas House races: Snowbarger v. Hancock; Tiahrt v. 
Rathbun; and Ryun v. Freidan; Brown v. Wilde (California House); and 
Coburn v. Johnson (Oklahoma House). Invoices for Dresner Wickers & 
Assoc., CR 13 1751, 1755, 1759, 1179, 1017; CREF 13 0009, 0150.
    \166\ 10/22/96 Memo from Malenick to Dresner, CR 13 1748-49.
    \167\ Memo from Triad staff to Peter Flaherty 10/24/96, CR 13 1659.
    \168\ Memo from Triad bookkeeper Anna Evans to Dresner Wickers 
staff Joanne Banks, 10/28/96, CR 13 1780.
    \169\ Memo from Evans to Banks, 1/21/97, CR 13 1819.
    \170\ Memo from Evans to Banks, 2/7/97, CREF 13 0308.
    \171\ Denis Calabrese deposition, 9/18/97, pp. 10-12.
    \172\ Denis Calabrese deposition, 9/18/97, pp. 41-44.
    \173\ Denis Calabrese deposition, 9/18/97, pp. 44, 18-19, 35-37, 
11.
    \174\ Denis Calabrese deposition, 9/18/97, pp. 18-19.
    \175\ Roll Call, 2/2/98.
    \176\ Roll Call, 2/2/98.
    \177\ Roll Call, 2/2/98.
    \178\ New York Times, 10/24/97: Minneapolis Star Tribune, 10/29/97.
    \179\ Minneapolis Star Tribune, 10/29/97.
    \180\ Wire transfer records for deposits received by Coalition for 
Our Children's Future, Citizens for Reform, and Citizens for the 
Republic.
    \181\ Minneapolis Star Tribune, 10/29/97: Letter to Benjamin 
Ginsberg 11/5/97.
    \182\ Invoices from Dresner Wickers to Triad, CREF 13 9, 150; CR 13 
1017, 1735.
    \183\ FEC disclosure report of Sam Brownback for U.S. Senate. 
Senator Brownback's 1996 spending totaled $2.2. million.
    \184\ FEC disclosure report for Snowbarger for Congress. 
Snowbarger's spending totaled $443,000.
    \185\Congressional Quarterly, 1996 Election Results, 11/9/96 pp. 
3250-57.
    \186\ Cox News Service, 7/11/97.
    \187\ Cox News Service, 7/11/97.
    \188\ Deposit records of Crestar account of Citizens for Reform.
    \189\ FEC public disclosure reports for Robert Harris, Gaspari, 
Gensemer, Duquette, Weaber, Doblin, available at www.tray.com.
    \190\ Campaign Report of Christian Leinbach, TR15 1163-1166.
    \191\ Committee list of races where Triad was active.





PART 2  INDEPENDENT GROUPS

Chapter 13: Coalition for Our Children's Future

    Coalition for Our Children's Future (``CCF'') is a 
nonprofit, tax-exempt organization under section 501(c)(4) of 
the tax code, created in mid-1995. Between its 1995 creation 
and the November 1996 election, CCF spent over $5 million 
dollars on advertising in targeted Congressional districts.
    Based on the evidence before the Committee, we make the 
following findings with regard to CCF:

                                findings

    (1) Haley Barbour and others associated with the RNC 
created Coalition for Our Children's Future (``CCF''), as a 
purportedly nonpartisan, tax-exempt social welfare organization 
under 501(c)(4) of the tax code and used CCF to carry out issue 
advocacy campaigns on behalf of Republican candidates and 
against Democratic candidates in 1995 and the first part of 
1996.
    (2) The evidence before the Committee suggests that several 
Republican candidates solicited contributions for CCF from 
their own supporters and coordinated with CCF to secure issue 
ads that they believed would help their candidacy.
    (3) The evidence before the Committee suggests that in 
October 1996, CCF funded televised ads attacking Democratic 
candidates with money donated by a contributor who obtained a 
confidentiality agreement and oversaw development of the ads. 
Based on the evidence before the Committee, it is likely that 
this contributor was the Economic Education Trust, the same 
entity that funded and perhaps controlled the development and 
placement of ads through two tax-exempt organizations operated 
by Triad.

                               background

    Coalition for Our Children's Future is a nonprofit 
organization pursuant to section 501(c)(4) of the Internal 
Revenue Code. As a 501(c)(4) organization, CCF may engage in 
lobbying and other direct political activities so long as 
direct political activity is not the organization's primary 
activity. In fact, CCF, which was incorporated in June 1995, 
was conceived and operated as a political organization. 
Essentially, in 1995 and early 1996, CCF operated as a shadow 
campaign for the Republican National Committee (``RNC''), 
airing advertising in support of the Republican Balanced Budget 
and Medicare legislation at the same time the Democratic 
National Committee (``DNC'') was airing advertising on the same 
subjects. The idea for CCF appears to have been conceived 
within the RNC, and people who either worked for, or with, the 
RNC controlled decision-making by CCF throughout 1995 and 1996. 
In the one-year period between September 1995 and October 1996, 
CCF spent over $5 million on advertising.1 CCF has 
never engaged in any activity other than the creation and 
airing of advertising. CCF has no grassroots support but exists 
largely as a project of Republican fundraising consultants 
Odell Roper & Simms.
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 13.
---------------------------------------------------------------------------
    In 1995 alone, CCF spent $3.18 million on advertisements 
supporting the Republican positions on the Balanced Budget 
Amendment and Medicare. 2 Even after the demise of 
the Republican Balanced Budget legislation prior to the 
government shut-down in 1995, CCF continued to air advertising 
in key congressional races. In several instances, advertising 
appears to have been aired at the request of particular members 
of Congress or their staff, and paid for with funds raised by 
those members.
    In mid-1996, representatives of CCF were approached by a 
``secret'' contributor who required that CCF execute a 
confidentiality agreement before making a contribution. CCF 
witnesses testified that the purpose of the contribution was to 
fund an advertising campaign in the weeks before the 1996 
election. CCF witnesses uniformly refused to disclose the 
identity of this secret contributor, or even the amount of the 
contribution, although they were appearing before the Committee 
pursuant to subpoena. Despite repeated Minority requests, the 
Committee never issued an order compelling witnesses to reveal 
this information.

                            rnc ties to ccf

    Documents produced to the Committee and the testimony of 
various witnesses indicate that Haley Barbour, then-chairman of 
the RNC, together with his close aide Donald Fierce, who held 
the title director of strategic planning, were instrumental in 
the creation of Coalition for Our Children's Future. The 
purpose of CCF was to raise funds from corporate interests to 
fund a media campaign in support of Republican legislation on 
the balanced budget and Medicare reform.3 Barbour 
had publicly insisted that he would not commit RNC funds to 
advertising in support of the legislation, preferring to 
conserve the party's resources for the 1996 
election.4 Instead, the RNC simply created CCF to 
pay for an advertising campaign with undisclosed corporate 
funds. This allowed the RNC to respond to Democratic 
advertising while conserving hard money and permitting business 
interests, including tobacco companies, to fund the advertising 
free from public scrutiny.
    A memo produced to the Committee by the RNC, and written by 
RNC staffer Barry Bennett, makes clear the RNC's involvement in 
creating CCF and other similar groups.5 The undated 
memo states:

          We have three options on placing a USA Today ad. 
        First the Coalition for Our Children's Future can place 
        the ad. The resources and legal structure are in place. 
        The name sounds a little goofy. The existence of such a 
        structure does give us limited protection from a press 
        attack. Second, we can formalize the Committee to Save 
        Medicare. It will take a few days lead time to file the 
        corporate paperwork. If the Seniors Coalition joins the 
        board this entity will have appropriate 
        cover.6

Bennett subsequently left the RNC to become CCF's executive 
director and oversee the CCF advertising campaign. Besides 
Bennett, the RNC also turned to other consultants and to staff 
to get CCF up and running. Documents produced to the Committee 
reflect that the RNC also hired its own fundraising firm, then 
known as Odell Roper & Simms (``ORS''), to oversee the creation 
of and fundraising for CCF. The RNC produced an unsigned copy 
of a contract dated May 1, 1995 from Robert Odell to Haley 
Barbour.7 The cover memo, directed to Barbour, 
states: ``per our conversation Saturday,'' ``Re: Agreement for 
Coalition for America's Future,'' which Odell conceded was the 
same organization that became Coalition for Our Children's 
Future.8 ORS, known primarily for direct mail 
fundraising, also worked directly for the RNC and the Dole 
presidential campaign, and Odell also personally handled 
fundraising for the RNC's annual ``Republican Gala'' 
fundraiser.9
    Barry Bennett testified that he was working for Chuck 
Greener in the RNC's communications office when he was 
approached by the RNC's Donald Fierce about working for 
CCF.10 Two of the individuals who ultimately acted 
as directors of the organization, Gary Andres and Dirk Van 
Dongen, also testified that Fierce had asked them to join the 
board.11 The third director, Deborah Steelman, was 
asked by Barbour to join the Board.12 Van Dongen 
also testified that it was his general understanding that the 
RNC was overseeing the creation of CCF.13 The media 
vendor retained by CCF was Greg Stevens & Co., which, like ORS, 
also worked directly for the RNC.14 Thus, the RNC 
turned to its own fundraising and media consultants, and a 
member of its own staff to run CCF, and to individuals 
personally chosen by high-ranking RNC officials to sit on the 
board of CCF.
    Asked about the May 1, 1995 contract produced by the RNC, 
Odell testified that, while he had no reason to believe that 
such conversations did not occur, he was unable to recall ever 
seeing the document, did not recall having the conversation 
referenced in the cover memo with Barbour, and did not recall 
any discussions of entering into a contract with the RNC for 
CCF.15 Odell did concede that throughout the spring 
of 1995 he was in regular contact with officials at the RNC, 
including Barbour, Fierce, and Greener, as often as two or 
three times a day.16 Sarah Fehrer, Odell's assistant 
who was responsible for the administrative start-up of CCF, 
testified that she received telephone calls from Barbour and 
his assistant Kirk Blalock who were making ``general 
inquiries'' about ``how things were going.'' 17 She 
testified that on at least one occasion Barbour personally 
called her, ``not [about the] creation, just in general once we 
got going with the project.'' 18 While Odell 
confirmed that a contract for the provision of services from 
ORS to CCF probably existed, no contract was produced to the 
Committee.19
    In late May 1995, a few weeks after the date of the 
contract sent from Odell to Barbour, CCF was incorporated by 
attorneys for ORS.20 Documents produced to the 
Committee indicate that CCF may have already had a name before 
it was incorporated. A March 13, 1995 memo, produced by the 
RNC, is directed to the ``Coalition to Save Our Children's 
Future Media and Message Working Group.'' The memo, written on 
Americans for Tax Reform letterhead, contains a series of 
``messages'' built around the theme of ``preserving the 
American dream for our children.'' 21 The RNC also 
produced a number of other documents reflecting an active role 
in CCF. The documents include a memo dated May 23 to Barbour 
and Odell from Barbour's former law partner, Ed Rogers, 
discussing a plan to contact Republican Governors to host 
meetings for Barbour with potential CCF 
contributors.22 Odell testified he could not recall 
seeing this document, although he is certain he did if it was 
directed to him.23 The memo, which bears Barbour's 
handwritten ``Good'' across the top, also appears to have been 
forwarded by Barbour to Fierce and Greener. Questions about 
these documents were never posed to Barbour, Greener, or Fierce 
because, although the Minority requested subpoenas for all 
three, no subpoenas were issued.24
    The RNC also produced two 1995 agendas for ``Coalition 
Meetings'' on July 17 and 19 of 1995 that clearly demonstrate 
RNC control and direction of CCF's creation.25 The 
two agendas, one on ORS letterhead and the other on CCF 
letterhead, include references to fundraising and 
organizational plans such as:

    A. Structure:
          1. Coalition Board
          2. Coalition Advisory List
          3. 501(c)(4) status
    B. Organization (Staff/RNC):
          1. Roles/Authority/Responsibility
          2. Schedule coordination.26

The second agenda also contains a reference under the heading 
``Administration:'' ``approval of updated Coalition briefing 
materials? Haley's approval.'' 27 The agendas also 
discuss fundraising plans for CCF, including redirecting 
tobacco company contributions from Dole's Better America 
Foundation to CCF, and calls by House Speaker Newt Gingrich to 
Merck Pharmaceutical company.28 Speaker Gingrich and 
Haley Barbour also attended fundraising events for CCF in the 
summer of 1995.29 Other documents produced by the 
RNC include a fax from Sarah Fehrer to Greener about a June 2, 
1995 meeting with representatives of five tobacco companies, 
andfundraising material provided by Odell to Philip Anschutz 
that was copied to Greener.30

CCF's 1995 Advertising Campaign

    After a very active fundraising campaign through the summer 
of 1995, CCF commenced its advertising campaign. Between August 
and December 1995, CCF funded four waves of advertising 
totaling at least $3.18 million.31 The 
advertisements aired during this period include a Medicare 
advertisement featuring one Senator, a Balanced Budget ad 
featuring a second Senator, an advertisement entitled ``Meet 
Priscilla,'' which focused on the federal debt and the need for 
a balanced budget for the future, and a fourth advertisement 
urging support for the Republican Medicare plan.32
    Consistent with the plan outlined in Bennett's earlier memo 
referencing the creation of a second group, the Save Medicare 
Project, under the auspices of the Seniors Coalition, Bennett 
testified that both the Medicare ad featuring the Senator and 
the second Medicare ad were paid for by Coalition for Our 
Children's Future but aired with a disclaimer that they were 
paid for by ``the Seniors Coalition: Save Medicare Project.'' 
33 Bennett testified that he worked with staff at 
Greg Stevens & Co, (``Stevens & Co.''). to create the 
advertisements, and that CCF paid for the media time rather 
than contributing the money directly to the Seniors Coalition 
in order to maintain control over the advertising.34 
Bennett also testified that it was Greg Stevens's idea to have 
a seniors group air the Medicare advertising.35
    Most decision-making with regard to advertising appears to 
have been handled by Stevens & Co. According to Bennett, 
Stevens & Co. staff was responsible for recruiting both 
Senators to appear in the CCF advertisements, and Stevens, 
together with Barry Bennett, made the decisions regarding where 
advertising would air.36 Bennett also testified that 
together with Stevens & Co. he prepared another advertisement 
that he could recall only as ``screaming granny'' which aired 
in the spring of 1996.37 This advertisement appears 
to have been financed by two wire transfers from CCF to the 
Seniors Coalition totaling $140,000.38 A memo 
produced by a Stevens & Co. employee contains a list of media 
markets where CCF's 1995 advertising aired. The memo shows that 
ads were targeted to air in particular congressional districts, 
many of which were the districts of vulnerable Republican 
freshman.39
    Essentially, at least at its creation, CCF was largely a 
front for the RNC's advertising in support of the balanced 
budget and Medicare package. Gary Andres, who served as 
president and a director of CCF, testified that the RNC's 
Donald Fierce told him the initial purpose of CCF was to run 
advertisements in support of the Republican Balanced Budget 
plan.40 The purpose of creating an entity like CCF 
is three-fold. First, paying for advertising through a 
nonprofit organization permits the conservation of the party's 
hard dollars. Had advertising created by CCF been aired by the 
RNC itself, in 1995 it would have had to have been paid for 
with a combination of hard and soft dollars.41 DNC 
advertising aired during this period on these same subjects was 
funded partially with hard money. Running the advertising 
through a nonprofit front also allows the party to offer 
contributors freedom from public disclosure while still earning 
the contributors goodwill with members of Congress and party 
officials. And finally, running advertising through an 
apparently autonomous organization also lends more credibility 
to the message. As RNC Coalition Director Curt Anderson 
explained in the Coalition Building Manual used by the RNC in 
the 1996 election cycle, ``Always remember, `What we say about 
ourselves is suspect, but what others say about us is 
credible.' '' 42

CCF and its Exempt Organization Status

    In September 1995, four months after it was incorporated, 
Coalition for Our Children's Future applied for tax-exempt 
status, claiming to be a social welfare organization pursuant 
to section 501(c)(4) of the tax code.43 While a 
501(c)(4) organization is permitted to lobby, the primary 
purpose of the organization must be to promote social welfare 
rather than directly or indirectly participate in political 
campaigns.44 Despite this limitation on political 
activity, as a result of carefully crafted application papers 
and follow-up responses to the Internal Revenue Service 
(``IRS''), on July 30, 1996 CCF was approved by the IRS as a 
501 (c)(4) organization. The approval of CCF for this status 
points to inherent problems in the application process for 
section 501(c)(4) status, and shows how organizations may 
easily disguise their true nature from the IRS. CCF concealed 
information about its ties to political candidates, parties and 
consultants and concealed the partisan nature of its 
advertising from the IRS.
    In the September 1995 application, CCF stated that its 
purpose was to produce non-partisan educational material about 
budget deficits and Medicare reform. It listed the only 
employee of the corporation as Executive Director Barry Bennett 
and placed a great deal of emphasis on the appoint of directors 
Gary Andres, Deborah Steelman and Dirk Van Donegan. No mention 
is made in the application of the Odell fundraising firm even 
though CCF was essentially run out of ORS's offices. According 
to the testimony of ORS employee Sarah Fehrer, in the first 
half of 1995, she handled tasks including ordering stationary 
and a phone line for CCF; that the CCF phone line rang at her 
desk; that she believed ORS also rented a post office box for 
CCF; and that she retrieved mail for CCF.45 Fehrer 
also testified that ORS established a separate fundraising 
office for CCF in the ORS building for a short period in 
1995.46 The application makes no mention of the fact 
that Barbour and Speaker Gingrich were actively raising funds 
for CCF, or that Senator Dole and Speaker Gingrich were 
honorary co-chairs of CCF.47
    Barry Bennett testified that he worked for CCF only 
periodically when advertising buys were being 
prepared.48 When he was not working for CCF, Bennett 
worked for Representative Frank Cremeans, an Ohio 
Republican.49 Many documents produced to the 
Committee bear the fax line of Congressman Cremeans's office, 
and Fehrer testified that she contacted Bennett at that office 
when she could not reach him at the CCF office he 
maintained.50 Bennett also testified that he first 
learned that he was the executive director of the organization 
when he received his business cards and that he regarded Odell 
as having the authority for all financial decisions pertaining 
to CCF.51
    The three CCF directors also testified that they played no 
role in the organization. Steelman, Van Donegan, and Andres 
each testified that from the time they signed paperwork 
becoming directors of the organization in July 1995 until the 
end of 1996, they did not recall attending a board meeting or a 
CCF meeting of any sort, never saw proposed advertising for the 
organization, and never spoke to representatives of 
CCF.52 None of the three ever personally met Barry 
Bennett until 1997, and none of the three was aware of ORS's 
role in running CCF.53 Andres, who was ostensibly 
the president as well as a director of CCF, additionally 
testified that he thought that someone had just designated him 
president, and that he never discussed becoming president with 
anyone.54 When shown the Articles of Incorporation 
of CCF that provide taht ``the President shall be the CEO of 
the Corporation and shall in general supervise and conduct the 
daily affairs of the Corporation,'' Andres testified that he 
had never seen the document before.55 When asked 
what he understood his role in CCF to be, he testified that the 
RNC's Donald Fierce ``never really went into that in any detail 
. . . he just said there would be a board--and we didn't really 
need to go into it.'' 56
    In November 1995, CCF received a follow-up inquiry from the 
IRS seeking additional information about current CCF 
advertising, about CCF's relationship to its media consultants, 
and about its proposed ``programs.'' CCF responded on December 
19, 1995, stating that the only written agreements into which 
CCF had entered were with its law firm, accounting firm, and 
auditors. Thus, CCF once again failed to inform the IRS that it 
retained ORS, a political fundraising firm also employed by the 
RNC and political campaigns, to administer and raise funds for 
the organization, and that Robert Odell exercised decision-
making authority for the organization. While the follow-up 
response forwarded tapes of additional CCF advertising, it did 
not include a memo dated one day earlier outlining 48 media 
markets where advertising buys had been placed and which 
coincided with politically vulnerable Republican districts. The 
response also contained a biography of Barry Bennett which 
noted that prior to CCF he had worked for Representative 
Cremeans. The biography omitted Bennett's brief tenure at the 
RNC in 1995, and also failed to mention that in the three 
months between the filing of the application and the response, 
Bennett had once again been working for Representative 
Cremeans.
    The ability of CCF to obtain section 501(c)(4) status 
despite the fact that it was created by the RNC, run by 
political consultants, and existed to air targeted political 
advertising at least partially in response to DNC advertising, 
highlights the deficiencies of the section 501(c)(4) process. 
The application process completely failed to discover that CCF 
was essentially a name and a bank account through which 
corporate funds were sent for the purpose of airing targeted 
political advertising. The organization has never had a staff 
of its own, has no defining ideology, and is financed not by 
people who believe in CCF's cause, but by large corporate 
contributors solicited by Republican Party fundraisers or 
Republican Party leaders
    In 1996, CCF also made contributions to other Republican 
groups, including a $10,000 contribution to Americans for Tax 
Reform in August 1996, a $150,000 contribution to the National 
Right to Life Committee in October 1996, and the $140,000 
transferred to the Seniors Coalition.57 That CCF was 
able to form and operate under the guise of a social welfare 
organization points to fundamental flaws in the tax-exempt 
application process and the campaign-finance laws that allow 
groups like CCF to evade public disclosure requirements by 
using artfully worded political advertisements.

             ccf 1996 advertising for republican candidates

    In December 1995, CCF aired an advertisement that featured 
clips of President Clinton talking about his plan to balance 
the budget. The advertisement ran:

          Voice over: You've heard a lot of talk from Bill 
        Clinton about balancing the budget. CLINTON: ``I would 
        present a five year plan to balance the budget . . . we 
        could do it in seven years . . . I think we can reach 
        it in 9 years . . . balance the budget in 10 years . . 
        . I think we could reach it in 8 years . . . so we're 
        between 7 and 9 now. . . . 7, 9, 10, 8, 5'' Voice over: 
        No more double talk. Balance the budget.58

    Produced by Stevens & Co., the advertisement was almost 
identical to an advertisement produced by Stevens & Co. and 
aired by the RNC.59 A memo from a Stevens staffer to 
Sarah Fehrer of the Odell fundraising firm specifically notes: 
``The spot which ran [last week] was an edited version of 
Clinton spot the RNC ran last month which shows various clips 
of Clinton commenting on the balanced budget. (10 years, 7 
years, 9 years, etc . . .)'' 60 Hence, Stevens & Co. 
produced two virtually identical advertisements aired almost 
back to back by the RNC and CCF, at the same time that CCF was 
filing its response to the IRS seeking status as a social 
welfare organization not primarily engaged in political 
activity.
    Documents suggest that in January 1996, CCF also aired the 
Clinton advertisement in a few districts at the request of 
particular Republican candidates.Apparently, from the time it 
began its advertising campaign, CCF expected that Republican members of 
Congress would make such requests. In a September 5, 1995 memo to 
Coalition Leaders, Barry Bennett stated:

          Our members need to feel that someone is protecting 
        them during this struggle. It is vitally important that 
        we go up soon after their return . . . . Undoubtedly 
        many will call in the coming week and ask for broadcast 
        in their districts. Those that are not covered might be 
        motivated to make a few solicitations to raise the 
        funds for airing these spot in their 
        districts.61

    No evidence indicates that members of Congress raised funds 
for the September Medicare advertisements that were ultimately 
aired, although CCF did receive $500,000 from the National 
Republican Congressional Committee on September 
15.62 In January 1996, however, evidence suggests 
that at least four members of Congress or their staff actively 
worked to secure CCF advertising in their districts.
    Documents show that in late December 1995, Alex Ray of 
Chesapeake Media--Representative Bill McCollum's media person 
63--was working with CCF to put together a $30,800 
advertising buy in Representative McCollum's Orlando, Florida 
district.64 A December 27 memo from Ray to David 
Bennett, the ORS staffer responsible for administering CCF, 
notes, ``I just hope Bill raises another $280.'' 65 
In another memo to Bennett two days later, Ray exclaims, ``I 
think its over. Bill McCollum raised another $1,000 yesterday 
and the check is in the mail to Doyle's [Congressman McCollum's 
administrative assistant 66] home as is the $5,000. 
. . . This should cover the shortages the Coalition advanced 
towards the buy.'' 67 In a third memo to David 
Bennett upon completion of the buy, Ray noted, ``Every adult in 
central Florida should have seen your spot 3.5 times over the 
five day period.'' 68 Although Barry Bennett 
initially testified that he had no knowledge of any member of 
Congress raising funds to air CCF advertising in his or her 
district, when he was shown the memos, he admitted that he had 
spoken to McCollum staffer Doyle because they ``wanted to 
either donate or raise money I think, for--to run the ad, one 
of our ads in Orlando or something like that.'' 69
    Documents produced by CCF also indicate that Representative 
Jim Kolbe of Arizona raised money for CCF to air ads in his 
district. A letter dated January 18, 1996, to Barry Bennett 
from Representative Kolbe's campaign manager Tori Hellon 
states:

          I am sending $9,750 today so that you can begin the 
        buys. Three of our contributors are out of town and 
        will return this weekend. I will send the balance of 
        $12,000 on Monday. I have not heard back on the 
        availability of RNC funds to be added to this money in 
        order to increase our exposure. I hope you were 
        successful in your efforts to secure additional 
        funding.70

A note handwritten at the bottom adds: ``Please fax a copy of 
the buy immediately so our contributors can know when the ads 
will run.'' 71 Invoices produced to the Committee by 
CCF indicate that CCF made a $12,000 television buy in Tucson, 
Arizona for January 25 to 31.72 Asked about the 
letter, Bennett testified that he recalled having a 
conversation with Kolbe's campaign manager ``about how to go 
about raising money and what kind of money the coalition could 
take.'' He testified that he did not recall ever seeing the 
letter from the campaign manager.73
    CCF documents also indicate similar contacts with 
Representative Van Hilleary of Tennessee. A printout of a 
January 12 telephone message for Barry Bennett from 
Representative Hilleary reads, ``We really need the info on 
your bye [sic] in Nashville for the ad. When and how much?'' 
74 Documents indicate that CCF funded a $20,000 
television buy in Nashville between January 6 and 12, 
1996.75 Asked about the message, David Bennett, an 
ORS staffer, testified that he retrieved it and immediately 
forwarded it to Barry Bennett. Barry Bennett initially 
testified that he had never spoken to a Member of Congress on 
the subject of CCF, but later recalled having spoken to 
Representative Hilleary.76 Documents also reflect 
that Representative Joe Barton of Texas was soliciting 
contributions for CCF in December and January 1996. At least 
one of the contributors, to whom Barton sent a solicitation on 
CCF letterhead, Louis Beecherl, contributed directly to 
Barton's campaign at about the same time he received the 
solicitation.77
    By directing their personal supporters to contribute to 
CCF, these Republican candidates appear to have been engaged in 
an attempt to circumvent contribution limits to their own 
campaigns. Republican Party organizations also appear to have 
been involved in this effort to run ads with the Republican 
message in congressional districts during this period. On 
January 19, CCF received an $85,000 contribution from the 
National Republican Senatorial Committee.78 The 
coordination of the fundraising and strategy for airing CCF 
advertisements between the candidates, the Republican Party, 
and CCF appears to make the cost of the advertising corporate 
contributions from CCF to these candidates. Creation of a 
supposedly nonprofit organization in the anticipation that it 
will be contacted by Members of Congress anxious for the 
organization's advertising dollars shows that undisclosed funds 
from nonprofits are used to influence particular races with the 
full knowledge and cooperation of the candidates who benefit 
from this advertising.

          THE SECRET TRUST AND CCF's 1996 ELECTION ADVERTISING

    In the summer of 1996, Robert Odell, of Odell, Roper and 
Simms, was approached by Denis Calabrese, a political 
consultant he knew from previous work.79 In 
conversations with Odell and his partner John Simms, Calabrese 
inquired whether CCF would be interested in receiving a 
contribution for an advertising campaign.80 
Calabrese testified that before approaching CCF, he had been 
retained by an individual he refused to identify to the 
Committee who represented an organization he refused to 
identify, to oversee an advertising campaign in the weeks prior 
to the 1996 election.81 Sometime in late August of 
early September 1996, the secret contributor provided funds to 
CCF that were used to run advertisements in several parts of 
the country in the weeks prior to the 1996 
election.82 At the request of the contributor, the 
campaign was overseen by Calabrese, and the contributor 
required that a confidentiality agreement be executed by CCF 
prior to making the contribution.83 Amazingly, ORS 
never informed the CCF's board of directors of the impending 
advertising campaign, the confidentiality agreement, the source 
of the funding, or the relationship with 
Calabrese.84 In fact, when questioned in early 1997 
by reporters about those ads, at least one director, Deborah 
Steelman, stated that she thought that the organization had 
disbanded.85
    Advertising funded through CCF in the weeks prior to the 
election included at least $280,000 in television advertising 
in the Louisiana Senate race between Democrat Mary Landrieu and 
Republican Woody Jenkins, $81,000 in advertising and $51,000 in 
phone calls and mail in the Louisiana House race between 
Cooksey and Thompson, an unknown amount for advertising and 
$28,500 on phone calls in a California House race between 
Democrat Representative Cal Dooley and Republican Trice Harvey, 
$35,000 on television advertising and $37,000 on telephone 
calls and mailings in the Oklahoma House race between 
Republican Tom Coburn and Democrat Glen Johnson, and $35,000 on 
radio advertisements and $89,000 on mail and telephone calls in 
seven Minnesota state legislative races.86
    Calabrese testified that in addition to overseeing the 
advertising campaign for CCF, he also oversaw an advertising 
campaign financed by the same contributor through a second 
organization that he refused to name.87 In addition 
to these two organizations, Calabrese testified that he also 
attended meetings with other organizations including Triad (See 
Chapter 12) in order to determine if they were ``appropriate 
vehicles'' for ad campaigns.88 Calabrese almost 
completely controlled the advertising campaign funded through 
CCF. While CCF required that all advertising be approved by 
counsel, and ORS staff provided bookkeeping services and acted 
as a liaison with counsel, Calabrese testified that he hired 
vendors, determined where ads would run, and had general 
oversight for the ad campaign. He also testified that he began 
hiring vendors and getting the advertisements started prior to 
the time a final decision was made by the secret contributor to 
contribute to CCF.89 Among the vendors hired for the 
advertising campaigns of CCF and the unknown organization were 
Dick Dresner, James Farwell, and Steve Sandler, consultants who 
also worked on the Triad advertising campaign.90

Did CCF's secret contributor fund triad attack ads?

    The fact that the three political consultants, two of whom 
are relatively unknown in Washington, D.C., worked on both the 
Triad and CCF advertising campaigns suggests that the two ad 
campaigns were funded by the same contributor, and that the 
contributor, not CCF or Triad, hired the consultants. Bank 
records show that a portion of Triad's advertising campaign 
roughly equivalent to the advertising handled by these 
consultants was provided by a secret entity know as the 
Economic Education Trust. The identity of the persons behind 
this trust, and even the existence of the trust itself, was 
disclosed to the Committee when Triad's attorneys failed to 
redact bank records which were produced to the Committee. 
Evidence also suggests that the Economic Education Trust funded 
the CCF ad campaign.
    Evidence includes the public statement by an unnamed CCF 
employee that the organization that provided the funding for 
the ad campaign was a trust.91 Bank records produced 
by CCF also show that the money for the CCF ad campaign was 
wired to CCF from a branch of Riggs Bank in Washington D.C., 
the same bank where the Economic Education Trust has an 
account.92 Witnesses for CCF admitted that CCF had 
entered into an agreement to keep the identity of the 
contributor secret, but refused to produce a copy of the 
agreement. Barry Bennett stated publicly that this agreement 
was drafted by former RNC General Counsel Benjamin 
Ginsberg.93 Documents produced by CCF indicate that 
counsel for CCF was also in contact with Ginsberg on the 
subject of the CCF advertising campaign.94 Ginsberg 
also represented Dresner and Farwell before the Committee, both 
of whom failed to appear for deposition despite multiple 
attempts to schedule dates with Ginsberg. Moreover, the 
Committee learned that when the Economic Education Trust opened 
its account at Riggs bank, the address provided was in care of 
Ben Ginsburg.
    In addition, although he failed to appear for a sworn 
deposition, Dick Dresner admitted that he helped to coordinate 
a number of issue advertising campaigns in the 1996 election 
cycle during a January 1998 meeting of political consultants. 
Dresner said that ``many of the people he worked with were most 
concerned with remaining anonymous, while still having a major 
impact on federal elections.'' 95 Dresner confirmed 
that ``his wealthy clients set up a series of foundations, 
trusts and other `shells' to pump money into subterranean 
issue-ad campaigns. `They use three or four or five or six 
different ways so they aren't discovered,' '' Dresner 
said.96 He went on to note that ``his clients seemed 
to have success with that tactic, and most have remained 
anonymous even now: `Even if their names came up once or twice, 
the extent of their activities is underestimated.' '' 
97
    Despite two requests from Senator Glenn, no subpoena was 
ever issued for the financial records of the Economic Education 
Trust. Such a subpoena might have permitted the Committee to 
determine whether or not the trust funded the CCF and Triad 
advertising campaigns. Even without the benefit of a subpoena, 
circumstantial evidence developed by the Minority suggests that 
the trust was financed in whole or in part by Charles and David 
Koch, controlling shareholders of Koch Industries, a giant oil 
company (see Chapter 12). The Koch brothers have a history of 
channeling money through nonprofit organizations, including 
think tanks and term-limits groups, in order to advance their 
political interests.98 In 1996, a term-limits group 
with possible Koch funding ran attack ads aimed at some of the 
same candidates who were also targeted by Coalition for Our 
Children's Future.99 Some of the states in which CCF 
advertising was targeted are also states where Koch has 
financial interests. In Louisiana and Oklahoma, Koch has 
pipelines and oil contracts.100 In Minnesota, where 
Calabrese testified CCF funded mailings in an attempt to win a 
Republican majority in the state legislature, Koch owns a huge 
refinery.101 Some of the candidates who benefited 
from attack ads run by CCF also received campaign contributions 
from Charles Koch, David Koch, and/or their company's political 
action committee.102
    Assuming that the Economic Education Trust was behind the 
CCF ad campaign, the trust, through Triad and CCF, funneled at 
least $2.5 million into ads designed to aid candidates in 
states where the Kochs have significant business interests. The 
trust also took calculated steps to prevent public disclosure 
of its existence and its activities. One of the questions that 
remains unanswered at the close of this investigation is how 
many other groups did the Economic Education Trust run 
advertising dollars through? Calabrese testified that the 
secret contributor funded an advertising campaign through at 
least one organization in addition to CCF and Triad. Given the 
remaining questions about the extent of the Economic Education 
Trust's activities, and lacking even definitive knowledge of 
who funded the CCF advertising campaign, this investigation has 
failed in its purpose, to expose illegal and improper 
activities in the 1996 campaign.

                               CONCLUSION

    CCF sets a dangerous precedent for future elections. In 
1995 and 1996, advertising through CCF allowed the RNC to 
conserve hard dollars while responding to Democratic-funded 
advertising. CCF also provided candidates an avenue to fund 
advertising in their districts with contributions from 
supporters who may have made the maximum contribution to their 
campaigns. Finally, CCF permitted a still unknown entity to 
control a high dollar political advertising campaign through 
CCF for still unknown purposes.
    CCF remains in existence today. Robert Odell testified that 
in January 1997, he had a meeting with Haley Barbour, Donald 
Fierce and Dirk Van Dongen to discuss keeping the organization 
alive for future issue campaigns.103 Subsequently, 
the board of CCF was reconstituted to include Barbour, Fierce, 
Odell, and Van Dongen.104 While Van Dongen and, 
reportedly, Fierce have since resigned, so far as this 
Committee is aware, Odell and Barbour remain active members of 
the Coalition for Our Children's Future. Like other 
organizations in the 1996 election, CCF provides a model for 
groups and individuals interested in influencing the political 
process free from disclosure and free from restrictions on how 
much they can spend to do so.

                               FOOTNOTES

    \1\ CCF Profit and Loss sheet for 5/30/95-12/31/96, CCF 213-215.
    \2\ CCF disclosure of expenditures to Greg Stevens & Co., CCF Form 
990, CCF 162-185, pp. 182-83.
    \3\ Washington Times, 8/7/95.
    \4\ Washington Post, 4/30/95; Washington Times, 12/7/95.
    \5\ Barry Bennett deposition, 9/11/97, p. 228.
    \6\ Memorandum regarding Placing Medicare Anniversary Newspaper Ad, 
R 061653.
    \7\ Contract and Cover Memo from ORS to Haley Barbour, 5/1/97, R 
61612-61616.
    \8\ Contract and Cover Memo from Odell Roper & Simms to Haley 
Barbour, 5/1/97, R 61612-61616.
    \9\ Robert Odell deposition, 9/5/97, pp. 31, 41.
    \10\ Barry Bennett deposition, 9/15/97, pp. 5-7.
    \11\ Gary Andres deposition, 8/18/97, p. 6: Dirk Van Dongen 
deposition, 9/4/97, p. 5.
    \12\ Deborah Steelman deposition, 8/25/97, pp. 6-7.
    \13\ Dirk Van Dongen deposition, 9/4/97, p. 6.
    \14\ The Hotline, 10/28/94: The Hotline, 11/17/95: The Hotline, 1/
6/95.
    \15\ Robert Odell deposition, 9/5/97, pp. 35-37.
    \16\ Robert Odell deposition, 9/5/97, pp. 39-40.
    \17\ Sarah Fehrer deposition, 8/21/97, p. 18.
    \18\ Sarah Fehrer deposition, 8/21/97, pp.18-19.
    \19\ Robert Odell deposition, 9/5/97, p. 37. Lawyers for CCF have 
claimed that the contract is not covered in the Committee subpoena 
which calls for all documents referring or relating to payments over 
$5,000 by CCF and all documents referring or relating to formation and 
establishment of CCF. See Committee subpoena 73.
    \20\ CCF Articles of Incorporation and Unanimous Consent in Lieu of 
Initial Meeting, CCF 004-009 and 031-032.
    \21\ Memo from Americans for Tax Reform to CCF Media and Message 
Working Group, 3/13/95, R 27449.
    \22\ Memo from Ed Rogers to Haley Barbour and Bob Odell re CCF 
fundraising with Republican Governors, 5/23/95, R 061609.
    \23\ Robert Odell deposition, 9/5/97, pp. 57-58.
    \24\ Barbour appeared for deposition on the subject of the Ambrous 
Young loan to the National Policy Forum earlier in the investigation 
but was not subsequently recalled.
    \25\ Agendas for CCF meetings of 7/17/95 and 7/19/95, R 61650-652 
and 656-658.
    \26\ Agenda for CCF meeting of 7/17/95, R 61650-652.
    \27\ Agenda of 7/19/95 CCF Meeting, R 61656-658.
    \28\ Agendas of 7/17/95 and 7/19/95, R 061650-652 and 656-658.
    \29\ Washington Times, 8/7/95: Agenda for Gingrich travel, CCF 260.
    \30\ 6/5/95 fax to Chuck Greener from Sarah Fehrer, R 61602-03: 7/
20/95 fax to Chuck Greener from Sarah Fehrer, R 61654, R 5178.
    \31\ Memo from Spring Thompson of Greg Stevens to Sarah Fehrer, 12/
18/95, CCF 574-77.
    \32\ Memo from Spring Thompson of Greg Stevens to Sarah Fehrer, 12/
18/95, CCF 574-77.
    \33\ Barry Bennett deposition, 9/11/97, pp. 253-56: Memorandum from 
Spring Thompson of Greg Stevens to Sarah Fehrer, 12/18/95, CCF 574-77.
    \34\ Barry Bennett deposition, 9/11/97, pp. 253-256.
    \35\ Barry Bennett deposition, Volume II, 9/15/97, pp. 24-25.
    \36\ Barry Bennett deposition, 9/11/97 p. 64: Barry Bennett 
deposition, Volume II, 9/15/97, pp. 27, 29-30.
    \37\ Barry Bennett deposition, 9/11/97, p. 110.
    \38\ CCF 1995 IRS Form 990, CCF 162-185, p. 180.
    \39\ Memorandum from Spring Thompson of Greg Stevens to Sarah 
Fehrer, 12/18/95, CCF 574-77.
    \40\ Gary Andres deposition, 8/18/97, p. 6.
    \41\ FEC Advisory Opinion 1995-25.
    \42\ Coalition Building Manual authored by RNC coalitions director 
Curt Anderson, Exhibit 2367M: R 1824.
    \43\ CCF Application for Exempt Status, 9/12/95, CCF 69-118.
    \44\ Internal Revenue Service Publication 557, Tax Exempt Status 
for Your Organization, p. 43.
    \45\ CCF IRS Application for Exempt Status, 9/12/95, CCF 69-118.
    \46\ Sarah Fehrer deposition, 8/21/97, pp. 32-33, 49, 52.
    \47\ CCF IRS Application for Exempt Status, 9/12/95, CCF 69-118.
    \48\ Barry Bennett deposition, Volume II, 9/15/97, pp. 20-21.
    \49\ Barry Bennett deposition, 9/11/97, pp. 9-11.
    \50\ Draft advertising and wire transfer authorizations with 
Cremeans fax line at top, CCF 529, 312, 314, 316, 335, 326: Sarah 
Fehrer deposition, 8/18/97, pp. 57-58.
    \51\ Barry Bennett deposition, 8/18/97, p. 37.
    \52\ Gary Andres deposition, 11/18/97, pp. 16-18: Dirk Van Dongen 
deposition, 9/4/97, pp. 13-23: Deborah Steelman deposition, 11/25/97, 
p. 41.
    \53\ Gary Andres deposition, 11/18/97, pp. 24: Dirk Van Dongen 
deposition, 9/4/97 pp. 12-14: Deborah Steelman deposition, 11/25/97, 
pp. 13, 22.
    \54\ Gary Andres deposition, 8/1/8/97, p. 15.
    \55\ CCF Articles of Incorporation, CCF 22-23: Gary Andres 
deposition, 8/18/97, p. 15.
    \56\ Gary Andres deposition, 8/18/97, p. 15.
    \57\ Checks and wire transfers from CCF to the National Right to 
Life, Americans for Tax Reform and IYDU, CCF 594, 423, 384.
    \58\ Draft ``Go Along'' script, CCF 499.
    \59\ Videotapes produced to the Committee by CCF: The Hotline, 11/
17/95.
    \60\ Memo from Spring Thompson of Greg Stevens to Sarah Fehrer, 12/
18/95, CCF 574-77.
    \61\ Memo to Coalition Leaders from Barry Bennett, 9/5/95, CCF 512-
513.
    \62\ Wire transfer receipt for $500,000 from the National 
Republican Congressional Committee to CCF, CCF 230.
    \63\ Barry Bennett deposition, 9/11/97, p. 272.
    \64\ Memo from Alex Ray to David Bennett, CCF 561-563.
    \65\ Memo from Alex Ray to David Bennett, CCF 550.
    \66\ David Bennett deposition, 9/6/97, p. 118.
    \67\ Memo from Alex Ray to David Bennett, CCF 561-563.
    \68\ Memo from Alex Ray to David Bennett, CCF 554.
    \69\ Barry Bennett deposition, 9/11/97, pp. 116-17, 271.
    \70\ Letter to Barry Bennett from Tori Hellon of Kolbe '96, 1/18/
96, CCF 231-232.
    \71\ Letter to Barry Bennett from Kolbe '96, 1/18/96, CCF 231-232.
    \72\ Invoice to CCF from National Media, CCF 359.
    \73\ Barry Bennett deposition, 9/11/97, pp. 277-78.
    \74\ Message for Barry Bennett from Representative Van Hilleary, 1/
12/96, CCF 549.
    \75\ Invoice to CCF from National Media, CCF 352.
    \76\ Barry Bennett deposition, 9/11/97, pp. 117, 123.
    \77\ Memo from Congressman Barton to Louis Beecherl, 12/22/95, CCF 
559. FEC public disclosure contribution records of Louis Beecherl.
    \78\ Letter and check to CCF from the NRSC, CCF 233-234.
    \79\ Robert Odell deposition, 9/5/97, pp. 131-32. Odell testified 
that ORS had previously raised funds for Americans for Fair Taxation, a 
Texas-based group in which Calabrese was involved.
    \80\ John Simms deposition, 9/10/97, pp. 40-44.
    \81\ Denis Calabrese deposition, 9/18/95, pp. 13-15.
    \82\ John Simms deposition, 9/10/97, pp. 41-43, 49.
    \83\ John Simms deposition, 9/10/97, p. 48.
    \84\ Barry Bennett has insisted that he was also not aware of the 
advertising campaign but in fact, he signed authorizations for wire 
transfers of the funds for this advertising, signed the confidentiality 
agreement with the secret contributor and, according to documents 
produced to the Committee, was consulted by CCF counsel on matters 
related to the advertising campaign. John Simms deposition, 9/10/97 p. 
48, CCF 386, 401.
    \85\ Deborah Steelman deposition, 8/25/97, p. 42.
    \86\ Invoices from Dresner Wickers & Assoc., the Farwell Group, 
Sandler & Innocenzi, and Omni Information, and Total Media Resources, 
CCF 400, 413, 402, 419, 467.
    \87\ Denis Calabrese deposition, 9/18/97, pp. 18-19.
    \88\ Denis Calabrese deposition, 9/18/97, pp. 44, 18-19, 35-37, 11. 
Although Calabrese testified that he did not believe the secret 
contributor gave money to Triad, he stated that he did not have 
knowledge of everything the secret contributor did in 1996.
    \89\ Denis Calabrese deposition, 9/18/97, pp. 54-55, 65.
    \90\ Invoices from Dresner Wickers & Assoc., the Farwell Group, 
Sandler & Innocenzi, and Omni Information, and Total Media Resources, 
CCF 400, 413, 402, 419, 467.
    \91\ Minneapolis Star Tribune, 10/29/97.
    \92\ Records for Crestar accounts of Citizens for Reform, Citizens 
for the Republic; Riggs Bank records of accord of Coalition for Our 
Children's Future.
    \93\ Minneapolis Star Tribune, 10/29/97: Letter to Benjamin 
Ginsberg 11/5/97.
    \94\ Bill for counsel's services in reviewing CCF ads, CCF 421.
    \95\ Roll Call, 2/2/98.
    \96\ Roll Call, 2/2/98.
    \97\ Roll Call, 2/2/98.
    \98\ National Journal 5/16/97: Lewis Charles and the Center for 
Public Integrity, The Buying of the President. New York: Avon Books, 
1996, p. 127.
    \99\ Roll Call, 1/26/98.
    \100\ Wichita Business Journal, 10/24/97: Minneapolis Star Tribune, 
10/29/97.
    \101\ Denis Calabrese deposition, 9/18/97, p. 125-26.
    \102\ FEC public disclosure records for Charles Koch, David Koch 
and Koch Industries PAC.
    \103\ Bob Odell Deposition, 9/5/97, pp. 199-200, 208.
    \104\ Unanimous Consent in Lieu of Meeting 1/29/97, CCF 46-47.





PART 2  INDEPENDENT GROUPS

Chapter 14: Christian Coalition

    Although the Christian Coalition (``Coalition'') holds 
itself out as a nonpartisan, ``social welfare'' organization, 
compelling evidence suggests that the Coalition functions 
primarily as a political committee by endorsing and supporting 
Republican candidates on the local, state, and federal levels. 
The Coalition has admitted spending at least $22 million on 
1996 federal races and distributing about 45 million voter 
guides to churches on the Sunday before election day. The 
information before the Committee indicates that these voter 
guides were manipulated to advance Republican candidates. The 
Federal Election Commission, in an ongoing federal lawsuit, 
alleges that for three election cycles, the Coalition has 
illegally coordinated its efforts with Republicans.

                                finding

    Although the Christian Coalition has applied for status as 
a 501(c)(4) organization and claims to be a nonpartisan, social 
welfare organization, the evidence before the Committee 
suggests that the Christian Coalition is a partisan political 
organization operating in support of Republican Party 
candidates. The evidence of partisan activity includes: 
spending at least $22 million on the 1996 elections; 
distributing 45 million voter guides manipulated to favor 
Republican candidates; and endorsing Republican candidates at 
organization meetings.

                               background

    The Christian Coalition (``Coalition'') came to the 
Committee's attention for several reasons. First, in July 1996, 
the Federal Election Commission (``FEC'') filed suit against 
the Coalition alleging that the Coalition had coordinated 
expenditures during the 1990, 1992 and 1994 election cycles 
with Republican House, Senate and Presidential candidates and 
their campaigns in violation of federal election 
law.1 That suit is ongoing. Second, the Internal 
Revenue Service continued for a seventh year to delay making a 
final decision regarding the Coalition's application for tax-
exempt status as a social welfare organization. Third, numerous 
Democratic candidates complained publicly that, in the 1994 and 
1996 cycles, the Coalition had distorted their positions on 
issues in order to favor their Republican opponents, suggesting 
that the Coalition was not educating voters on candidate 
positions, but playing a partisan role in federal elections.
    On March 3, 1997, the Minority requested that a Committee 
subpoena be issued to the Christian Coalition for the 
production of documents. The Majority, however, declined to 
include the Coalition in the group of subpoenas issued in March 
1997.2 After significant effort by the Minority, the 
Coalition was included in a group of Committee subpoenas issued 
on July 30.3 However, in response to the July 30 
subpoena, the Coalition produced only a few documents, thereby 
significantly restricting the Committee's ability to 
investigate possible abuses. The Coalition then joined 25 other 
nonprofit groups in refusing to comply with Committee 
subpoenas. Among the defiant entities were the National Right 
to Life Committee, Citizens Against Government Waste, Citizen 
Action, and the AFL-CIO. The groups objected to the subpoenas 
on the ground that they ``pose[d] a substantial threat to free 
speech, free association and privacy rights and the rights of 
other parties to have confidential communications with them.'' 
4 The subpoena directed to the Coalition, however, 
did not seek membership or donor lists, but sought only to 
discover if the Coalition had violated campaign laws by 
coordinating with candidates or parties. Investigation of the 
Coalition was also hindered by the Majority's refusal to issue 
deposition subpoenas to key Coalition personnel who could have 
provided indispensable insight into Coalition activities.
---------------------------------------------------------------------------
    Footnotes appear at the end of chapter 14.
---------------------------------------------------------------------------
    Despite these obstacles, the Minority was able to pursue 
its investigation by reviewing FEC documents, federal court 
records, a limited number of Christian Coalition and RNC 
documents and publications, and by conducting interviews. 
Although severely restricted by the lack of cooperation by the 
Coalition, the RNC and the Dole campaign, the Minority was able 
to uncover much improper and possibly illegal campaign activity 
by the Coalition.
     The evidence before the Committee indicates that the 
Coalition functions primarily as a partisan political 
committee, rather than a social welfare organization, because 
it endorses and supports Republican candidates on the local, 
state, and federal levels. The Coalition's election-related 
activities range from the distortion of candidate positions and 
the manipulation of issues in Coalition voter guides, to the 
outright endorsement of candidates at caucus meetings. The 
actions of the Coalition indicate that its major purpose is the 
election of Republican candidates to public office, and the 
Coalition should therefore be required to register with the FEC 
as a political committee subject to the FEC's reporting and 
disclosure requirements, in conformance with federal election 
law. While the investigation focused on the 1996 campaign, it 
is critical to place the Coalition's activities in the context 
of nearly a decade of partisan political activity.

                      pat robertson and ralph reed

    The Christian Coalition was established in 1989. The 
president and founder of the Coalition is the Rev. Marion G. 
(``Pat'') Robertson. The executive director from 1989 until 
1997 was Ralph Reed. Both men have ongoing close ties to the 
Republican Party. In 1988, Robertson campaigned to win the 
Republican nomination for the presidency.5 
Ultimately, the Republican nomination was won by Vice President 
George Bush, who went on to win the general election in 
November. At Bush's inauguration in January 1989, Robertson 
first met Reed, then a young Republican activist.
    Reed had a great deal of political experience.6 
While attending college, he was elected chairman of the College 
Republican National Committee, part of the Republican National 
Committee (``RNC''). He worked closely with Grover Norquist, 
director of the National College Republican Committee, who went 
on to become a GOP activist in his own right as president of 
Americans for Tax Reform.7 From 1982 to 1984, Reed 
worked directly for the RNC. In 1984, Reed was active in voter 
registration efforts for Republican Senator Jesse Helms of 
North Carolina, and was a founding member of a political-
training group for young conservatives, Students for America. 
Reed also worked on Georgia Republican Matt Mattingly's 
successful Senate campaign, later serving in Washington as a 
summer intern in Mattingly's office. In 1988, he worked on Jack 
Kemp's presidential campaign.
    At their January 1989 meeting, Robertson discussed with 
Reed his plans for the creation of a new political 
organization.8 Robertson saw a political vacuum 
being created on the religious right as the Rev. Jerry 
Falwell's Moral Majority lost influence. Impressed with Reed's 
experience and his perspective on ``building bridges'' within 
the Republican Party, Robertson asked Reed to join him in 
constructing the new organization. Although Reed initially 
declined because he was pursing a doctorate degree at Emory 
University, he reconsidered and accepted Robertson's offer to 
work for him on the new venture, the Christian Coalition.
     In the summer of 1990, officials of the National 
Republican Senatorial Committee (``NRSC''), a division of the 
RNC, apparently requested a meeting with the Coalition and 
offered to contribute start-up funds.9 The NRSC 
provided the Coalition with about $64,000 in seed money. The 
Coalition also purchased a mailing list and office equipment 
from Robertson's presidential campaign.10
    In spite of Reed's Republican political experience, 
Robertson's ties to the Republican Party, and the infusion of 
start-up funds from the RNC, the Coalition did not organize 
itself as a political committee under federal law. Instead, it 
applied for 501(c)(4) tax-exempt status as a ``social welfare 
organization.'' Such organizations are defined as:

          Civic leagues or organizations not organized for 
        profit but operated exclusively for the promotion of 
        social welfare . . . the net earnings of which are 
        devoted exclusively to charitable, educational, or 
        recreational purposes.11

While contributions to 501(c)(4) organizations are not tax 
deductible, such organizations are exempt from paying taxes. In 
addition, there are few restrictions on the entity's freedom to 
lobby or influence legislation.12 An organization 
which has 501(c)(4) status also may engage in campaign 
activities, so long as its primary activities promote social 
welfare and its activities are nonpartisan.13 The 
evidence indicates, however, that the Coalition has engaged 
primarily in partisan campaign activities in disregard of the 
tax code's restrictions on section 501(c)(4) organizations.

                    christian coalition voter guides

    Much of the controversy concerning the Coalition's 
election-related activity has centered on the printing and 
distribution of so-called voter guides. The voter guides 
typically list five to ten issues and reflect the opposing 
candidates' positions as either ``supports'' or ``opposes.'' 
Among issues frequently listed are ``Balanced Budget 
Amendment,'' ``Term Limits For Congress,'' ``Homosexuals in the 
Military,'' and ``Repeal of the Federal Firearm Ban.'' 
14 The voter guides are distributed in selected 
Christian churches the weekend prior to an election and seek to 
provide information that the targeted voters will rely upon in 
casting their ballots.15 The evidence indicates that 
the Coalition often manipulates and distorts the candidates' 
positions, thereby providing the voters with incomplete or 
inaccurate information concerning the candidates.
    The Committee's subpoena required the Christian Coalition 
to produce its voter guides for the 1996 campaign. Even though 
these guides were widely distributed in numerous states and 
districts nationally, the Coalition maintained that the guides 
were privileged under the First Amendment--a patently absurd 
proposition.16 Despite this obstruction by the 
Coalition, the Minority was able to obtain a number of voter 
guides distributed in elections around the country.

Voter guides before 1996 election cycle

    The use and misuse of information included in the voter 
guides and the manipulation of issues to frame positions to 
favor the Coalition's preferred candidate over another 
candidate were reported by Larry Sabato, a professor at the 
University of Virginia, and Glenn Simpson, an investigative 
journalist, in their 1996 book, Dirty Little Secrets: The 
Persistence of Corruption in American Politics. Sabato and 
Simpson reviewed approximately 200 voter guides distributed to 
churches and others by the Coalition in 1994 and concluded that 
the guides ``give every appearance of having been designed with 
the explicit intention of influencing voter decisions in favor 
of Republicans.'' 17 The authors based their 
conclusion on the following observations:
           There was distortion of issues in the voter 
        guides. This distortion was illustrated by a surprising 
        lack of agreement between the positions of Republicans 
        and Democrats on issues mentioned in the Coalition 
        voter guides. In 73 percent of the Senate race voter 
        guides and 74 percent of the House race voter guides 
        reviewed by the authors, the nominees were shown to 
        agree on nothing, which is unusual, even for candidates 
        from different parties. The authors concluded, ``The 
        reason candidates were portrayed as being in almost 
        total conflict was that the coalition manipulated the 
        content of the guides, changing the issues from race to 
        race.'' 18 This form of distortion was 
        designed to create a stark contrast between Democratic 
        and Republican candidates.
           There was selective placement of issues in 
        the voter guides. In almost every voter guide examined 
        in the study, the first issue the Coalition listed was 
        ``Raising Federal Income Taxes,'' while the last was 
        often ``term limits,'' issues that do not have an 
        obvious religious component. The authors observed that, 
        ``A longstanding dictum of marketing science holds that 
        in printed messages, the first thing and the last thing 
        in a list are the ones best remembered.'' Theauthors 
further observed that Republican candidates were almost always listed 
as opposed to raising income taxes and supporting term limits, while 
Democrats were almost always portrayed as having the opposite 
position.19
    Supporting Simpson and Sabato's conclusions, many 
candidates for federal office have complained about the 
distortion of their positions as portrayed in the Coalition's 
voter guides. The distortions cover a wide variety of issues, 
but were often tied to the key issues in an individual race. 
Candidate complaints have ranged from the distortion of issues 
through the use of inflammatory language to the outright 
misrepresentation of a candidate's position on such issues as 
the proposed balanced budget amendment to the Constitution.
           A compelling example of Coalition 
        distortions occurred in the 10th Congressional District 
        in Indiana. The Coalition's 1994 voter guide indicates 
        that Democratic Representative Andy Jacobs opposed a 
        balanced budget amendment, while his opponent favored 
        it. However, Representative Jacobs was a supporter of a 
        balanced budget amendment and has stated, ``I 
        personally started that [balanced budget] movement back 
        in 1976.'' The voter guide also listed him as giving 
        ``no response'' on the term limits for Congress issue, 
        thereby giving the false impression that he had 
        responded to the other questions. According to 
        Representative Jacobs, he had not responded to any 
        portion of the Coalition's questionnaire.20
           In Texas, Representative Martin Frost was 
        not only a victim of distortions of his record, but 
        issues of interest to Coalition members that he 
        supported were omitted from the Coalition's 1994 voter 
        guide. Frost noted, ``I voted in favor of a 
        constitutional amendment requiring a balanced federal 
        budget, and yet the guide falsely states that I opposed 
        a balanced budget constitutional amendment . . . I have 
        consistently voted in favor of voluntary school prayer 
        and in favor of the right of parents to home-school 
        their children, and yet those votes are not even 
        mentioned in the guide.'' 21
           Another example is the 1994 Senate race in 
        Virginia between the Democratic incumbent Charles Robb 
        and Oliver North. The Coalition's voter guide stated 
        that Senator Robb favored banning ownership of legal 
        firearms. According to Senator Robb, ``I have not 
        attempted to ban the ownership of legal firearms at 
        all. I did vote to change the law with respect to some 
        combat assault weapons, and the law would then require 
        that those particular weapons not be owned, produced, 
        whatever the case may be. But nothing that is legal 
        have I voted to ban.'' 22
           Richard Fisher, a Democratic candidate for 
        the Senate in Texas, has stated that a 1994 Coalition 
        voter guide correctly listed his opposition to 
        educational vouchers and his support of abortion 
        rights. However, although he had repeatedly stated his 
        support for term limits, a balanced budget and a line-
        item veto for the President, the guide reflected 
        Fisher's answers to those questions as ``no response.'' 
        23
    In her book analyzing the 1996 elections, Elizabeth Drew 
wrote: ``[T]he idea that the Coalition didn't prefer particular 
candidates was a fiction. It had a clear preference in most of 
the competitive races; the voter guides left no doubt as to the 
preferred candidate. The guides have been found to vary from 
district to district or state to state in the issues they 
raised, enabling preferred candidates to get high scores.'' 
24

Voter guides used during the 1996 election cycle

    In 1996, the Coalition admitted spending at least $22 
million on the elections and working to distribute about 45 
million voter guides in churches on the Sunday before election 
day.25 A review of Coalition voter guides for many 
of the 1996 federal races indicates that much of what was 
reported earlier concerning Coalition abuses in the 1994 
elections applied to the 1996 races. For example, rather than 
providing a complete list of issue positions for each candidate 
so that voters understood the candidates' positions on each 
issue, different issues often appeared in voter guides in House 
and Senate races in the same state. Issues appeared to have 
been changed in an effort to favor the Coalition's preferred 
candidate. Examples involving the 1996 voter guides include the 
following.
           In Georgia, in the Senate and 8th 
        Congressional District races, ``Abortion on Demand'' 
        was an issue listed in the Coalition's voter guides. 
        However, that issue was replaced in Coalition voter 
        guides for the 2nd, 4th, 10th, and 11th District races 
        with the issue ``Banning Partial Birth Abortion'' and 
        ``Taxpayer Funding of Abortion.'' 26 The 
        voter guides thus failed to provide a consistent list 
        of issues to educate the voting public about where 
        Georgia candidates stood on issues of concern; the 
        voter guides instead appeared to alter the issues 
        presented in order to present a favorable image of 
        particular candidates in a particular race.
           In several Coalition voter guides 
        distributed in Iowa, a question concerning a balanced 
        budget amendment to the Constitution was included for 
        the presidential and congressional candidates, but did 
        not appear in the guide for the U.S. Senate race. A 
        possible reason the issue was omitted from the Senate 
        voter guide is that Democratic Senator Tom Harkin had 
        supported a balanced budget amendment, voted for it, 
        and sent the Coalition a letter stating his position on 
        that issue. Apparently, the Coalition chose not to 
        inform Iowa voters of Senator Harkin's 
        position.27
           Voter guides for the 1996 presidential race 
        included the issue ``Banning Partial Birth Abortion.'' 
        The guide stated that President Clinton ``Opposes'' the 
        ban. However, the President had repeatedly stated that 
        he supports such a ban, provided that it includes an 
        exception to protect the life and health of the 
        woman.28
           In Alaska, as well in some other states, the 
        issue of firearms was included in the Coalition voter 
        guide. In the Coalition questionnaire candidates were 
        questioned about repeal of the federal ban on semi-
        automatic firearms. However, the Coalition 
        recharacterized the issue in its voter guides, using 
        imprecise and inflammatory language such as ``Repeal of 
        the Federal Firearm Ban'' on the voter guide for the 
        at-large congressional race. The issue was phrased in 
        the voter guide to give the impression that the federal 
        government had banned ownership of 
        firearms.29
           In Massachusetts, in the 4th, 6th, 7th, 8th, 
        and 9th Congressional Districts, candidates' positions 
        on ``Homosexuals in the Military'' were listed in the 
        Coalition's voter guides, but that issue was replaced 
        in the 10th District voter guide with ``Federal 
        Government Control of Health Care.'' Again, it is 
        unclear why the same issues were not included in all 
        districts so that voters could compare candidates' 
        positions, but instead issues were changed, apparently 
        to favor one candidate over another. Also in 
        Massachusetts, modifying language concerning the 
        balanced budget issue was included in the voter guide 
        regarding Representative Joe Kennedy. The guide stated 
        that Representative Kennedy opposed the ``Balanced 
        Budget Amendment With Tax Limitations.'' Other voter 
        guides reported the issue as ``Balanced Budget 
        Amendment.'' Apparently, the modifying language ``With 
        Tax Limitations'' was included so that the Coalition 
        could report that Representative Kennedy opposed the 
        amendment, even though he was on record as supporting a 
        balanced budget amendment.30
           In a 1996 California Congressional race, 
        Walter Stoermer, a former Christian Coalition official 
        in California, admitted that the Coalition had 
        misrepresented in its voter guides the abortion views 
        of a Republican candidate to make him more acceptable 
        to pro-life voters in comparison to the Democratic 
        candidate. Stoermer said that the 1996 Coalition voter 
        guides portrayed Republican Representative Sonny Bono 
        as against abortion when he actually supported abortion 
        rights.31
    The evidence indicates that Coalition voter guides have 
also been used in Republican primaries to promote candidates 
favored by the Coalition. Below are examples from Republican 
primaries in which the Coalition appeared to be favoring a 
particular candidate rather than simply educating the 
electorate about the candidates' positions.
           On November 27, 1995, Norma Paulus, a 
        candidate for the Senate in Oregon's Republican 
        primary, wrote to Ralph Reed complaining that the 
        Coalition was attempting to hide its support for 
        another candidate and to manipulate ``well-meaning 
        church-goers seeking impartial advice'' by publishing 
        an unfair and inaccurate account of her positions in a 
        voter guide. Paulus wrote, ``For you to suggest that my 
        positions are other than those stated in this letter is 
        a lie. . . [I]t is outrageous and totally irresponsible 
        of you to bear false witness in this manner.'' Paulus 
        demanded, but did not receive, a 
        retraction.32
           In 1997, Virginia State Senator Kenneth 
        Stolle finished third in a Republican primary race for 
        Attorney General. Senator Stolle, a conservative 
        Republican, characterized the portrayal of his 
        positions in the Coalition voter guide as ``inaccurate 
        and misleading.'' 33 For instance, Senator 
        Stolle's opponents, Mark Early and Jerry Kilgore, 
        reportedly were listed in the Coalition voter guide as 
        opposing off-track betting parlors, while Senator 
        Stolle was listed as a supporter. Stolle, however, 
        claimed to have introduced legislation to eliminate or 
        restrict off-track betting. Senator Stolle said that 
        the issue was not included in the Coalition's 
        questionnaire sent to the candidates.
           Finally, in an ``open letter'' to the 
        Coalition's Pat Robertson and Ralph Reed, Republican 
        Senator Arlen Specter of Pennsylvania alleged that the 
        Christian Coalition had excluded him from a forum of 
        GOP presidential contenders because he supports 
        abortion rights:

          You deny the most basic American rights--the right to 
        speak out and the right to be heard as you seek to 
        dominate the political process and dictate the 
        Republican nominee for president for 1996.  . . . Who 
        are you to impose a litmus test and exclude someone 
        because he is the only pro-choice candidate challenging 
        the Republican platform which denies women their 
        consitutional right to choose? . . . Even in repressive 
        Communist China, dissenting views are permitted at the 
        World Conference on Women.34

    Senator Specter was later invited to address the 
Coalition's state and national leadership, but not the general 
session at which the other candidates were invited to speak. 
Senator Specter responded, ``I'm entitled to equal treatment.'' 
35
    The study performed of the Coalition's 1994 voter guides 
together with the evidence obtained regarding the Coalition's 
1996 voter guides indicate that the Coalition uses its voter 
guides, not to educate the electorate about the positions held 
by all candidates in a race, but rather to persuade the 
electorate to support particular candidates that the Coalition 
favors. In the vast majority of cases, these candidates have 
been from the Republican Party and from its most conservative 
wing.

                coalition officials endorsed candidates

     The Coalition engaged in openly partisan activity at its 
1995 ``Road to Victory''conference in Washington, D.C. The 
annual Coalition conference features appearances by invited Republican 
national political candidates who address the attendees regarding 
issues of importance to Coalition supporters. At ``breakout'' sessions 
at the meeting, state caucus groups convene to discuss local Coalition 
issues. Although the Coalition claims not to endorse candidates, 
specific Republican candidates were endorsed during state caucus 
meetings at the 1995 conference, according to press reports. There were 
also discussions of ``stealth'' tactics to be used to identify 
supporters and gain control of local Republican parties.
    One example of the Coalition endorsing a candidate occurred 
during the South Carolina State Caucus meeting in 1995. Roberta 
Combs, director of the South Carolina Christian Coalition, 
stated that Democratic Representative John Spratt ``needs to 
go.'' Combs then introduced Republican candidate Larry Bingham, 
and commented, ``He's going to be our next congressman in the 
5th District.'' Bingham stated, ``Larry Bingham will score 100 
on your scorecard. . . I need your help. I need your support. 
Roberta has given me her personal support. . . . With your 
help, we can defeat John Spratt.'' Combs seemed aware that 
these activities were questionable; she twice demanded that any 
reporters leave the room.36
    Similarly, at the Louisiana State Caucus meeting, Louisiana 
State Coalition Director Sally Campbell openly endorsed the 
gubernatorial candidacy of Republican State Senator Mike 
Foster. Campbell told attendees that Senator Foster promised 
her that if elected, he would call a special session of the 
legislature to mandate a ballot initiative against gambling. 
Reportedly, Senator Foster told Campbell that he could not be 
elected without the Coalition's help. The national Christian 
Coalition, as noted above, claims that it does not endorse 
candidates. To avoid that ban, Campbell suggested that 
Coalition activists endorse candidates, but ensure that every 
time an endorsement appeared in print, the caveat ``Affiliation 
given for identification purposes only'' be 
included.37
    In addition to supporting candidates, in at least one state 
caucus meeting at the 1995 Road to Victory conference, 
Coalition members surreptitiously engaged in political 
activities. Arizona Coalition Field Director Nathan Sproul 
reportedly urged attendees at the Arizona Caucus meeting to 
become precinct committee chairs in the Republican Party, but 
cautioned them not to disclose to anyone that the Coalition was 
behind the effort. Sproul advised the attendees that the 
Coalition needed precinct committee chairs to elect delegates 
to the Republican National Convention.38
    At the 1996 ``Road To Victory'' Conference, candidates were 
again endorsed at individual state caucus meetings:
           Representative David Funderburk (R-N.C.) and 
        his wife Betty appeared at the North Carolina Caucus 
        meeting and appealed for help in his re-election bid. 
        At the meeting, Representative Funderburk commented, 
        ``I wouldn't be a member of Congress if it weren't for 
        the work the Christian Coalition had done for me.'' 
        State Coalition Chairman Sim DiLapp advised Funderburk, 
        ``We want to do what we can for you.'' 39
           In the Texas Caucus meeting, Texas Coalition 
        State Director Jeff Fisher discussed races for the 
        state board of education and noted that one of the 
        candidates, Rich Neill, was present in the room. Fisher 
        advised the attendees to ``forget the top of the 
        ticket,'' and focus on developing a ``farm team of 
        lower office holders.'' Fisher asserted, ``The Rich 
        Neills at the bottom of the ticket are going to run for 
        statewide offices in the future.'' 40
           In the California caucus meeting, California 
        Coalition Chairwoman Sara DiVito Hardman cited a state 
        legislative race in Santa Ana where ``we got our guy 
        elected'' by distributing 30,000 voter guides. Hardman 
        noted that state caucus attendance was down and 
        attributed it to attendance at the Republican National 
        Convention in San Diego in August.41
           South Carolina Coalition Director Roberta 
        Combs commented in the South Carolina Caucus meeting on 
        the state's U.S. Senators, Republican Strom Thurman and 
        Democrat Ernest Hollings, stating, ``Thurmond is good, 
        Hollings is trouble.'' Combs stated that Senator 
        Hollings ``voted wrong'' on recent bills concerning gay 
        rights and abortion restrictions.42
Ralph Reed apparently also used the Road of Victory conference 
to encourage general support for Republican candidates in the 
1996 elections. Reed told the press at the conference:

          If the Republicans hold both houses of Congress, or 
        gain seats in either chamber, regardless of what 
        happens in the presidential race, it will be a major 
        statement that the religious conservative movement has 
        arrived as a permanent and institutionally stronger 
        player that can win victory down the ballot even when 
        the presidential race remains uphill.'' 43

    Most recently, at the 1997 Road to Victory conference held 
in Atlanta in September 1997, Pat Robertson, chairman of the 
Coalition, made remarks which cast doubt on the Coalition's 
position that it does not engage in activities to elect 
candidates. In addressing about 100 members of the Coalition's 
state branches, Robertson made clear his comments were not 
intended for the general public, ``This is sort of speaking in 
the family.  . . . If there's any press here, would you please 
shoot yourself? Leave. Do something.'' 44 Robertson 
spoke in detail about the need for the Coalition to increase 
precinct-level political efforts and suggested that the 
Coalition imitate Tammany Hall and other successful political 
machines. Robertson also commented on the Coalition's part in 
the Republican Party's congressional victories and control of 
Congress, and asserted his expectations that the Republican 
leaders would listen to his agenda. In discussing the 
Republican presidential nominee in the year 2000, Robertson 
said, ``We have absolutely no effectiveness when the primary 
comes. None whatsoever. Because we have split our votes among 
four or five people and the other guy wins. . . . So we need to 
come together on somebody.'' 45 In an apparent 
reference to Vice President Gore, Robertson derided him as 
``ozone Al,'' and said that ``I don't think at this time and 
juncture the Democrats are going to be able to take the White 
House unless we throw it away.'' He also asserted the Coalition 
has the ``possibility'' of selecting the next U.S. 
president.46 By his own words, Robertson confimed 
that the Coalition seeks to influence elections and establish 
itself as a powerful political organization, and that its goal 
is to elect Republicans, not Democrats.
    Finally, there is considerable evidence that the Coalition 
expressed a preference for and worked to ensure the nomination 
of Senator Dole to be the Republican Party's presidential 
nominee in 1996. The media reported that in January 1996, Ralph 
Reed was ``encourag[ing] county and state coalition officers to 
back [Senator] Dole'' for the Republican 
nomination.47 In March 1996, Michael McHardy, 
general manager of religious radio station KSIV in St. Louis, 
Missouri, resigned from the advisory board of the state 
Christian Coalition. He cited Coalition support for Senator 
Dole as a reason for his resignation, stating, ``On the 
national level, they have been working to get Bob Dole 
elected.'' Showing any candidate preference, he said, ran 
counter to the Coalition's stated purpose--``to promote certain 
issues on a local level and to issue objective scorecards 
showing each candidate's stances on those issues.'' McHardy 
cited a ``puff piece'' on Senator Dole that appeared in the 
Coalition's Christian American magazine in late 
February.48 Documentation obtained by the Committee 
reveals that the magazine contacted the Dole campaign just 
before a series of crucial primaries to prepare a ``full length 
cover article on Senator Dole'' for the February 
edition.49 Later, according to one election analyst, 
``Reed's support for Dole would turn out to be crucial in South 
Carolina, where Dole dutifully attended a rally laid on by 
Reed, and wrapped up the nomination.'' 50 In June 
1996, Robertson stated, ``The Christian Coalition, without it 
probably Bob Dole wouldn't be the nominee.'' 51
    The evidence indicates that the Coalition is attempting to 
influence the election of Republican candidates to public 
office and is seeking to further its political goals by 
building a political organization at the precinct level--
activities indicative of a political party, not a social 
welfare organization. These activities demonstrate that the 
Coalition functions primarily as a political committee and its 
major purpose is the nomination and election of Republican 
candidates to public office.

                 coalition ties to the republican party

     The Committee obtained a number of RNC documents which 
reveal close ties between the Coalition and the Republican 
Party, providing further evidence of the Coalition's partisan 
nature. Despite Coalition assertions that it qualifies as a 
social welfare organization, the documents confirm that the 
Coalition works closely with the Republican Party.
    For example, during the 1996 election cycle, the RNC 
supplied Republican candidates with a 29-page ``Coalition 
Building Manual,'' advising them on how to work with nonparty 
organizations to win election.52 The manual provided 
a list of specific organizations that ``have been the most 
active in encouraging their constituents to support Republican 
candidates.'' 53 The list includes the Christian 
Coalition, which is described as a group which conducted ``some 
of the most effective and hard-hitting mail and phone programs 
last cycle.'' 54
    A memorandum dated April 23, 1996, to RNC chairman Haley 
Barbour from RNC political director and head of campaign 
operations Curt Anderson indicates that the RNC routinely 
identified sympathetic outside groups and instructed its 
candidates to develop formal coalition plans with them, 
including the Christian Coalition.55 The memorandum 
states:

          Every [RNC] Regional Field Representative is in the 
        process of putting together the definitive list of the 
        5 top reachable coalition groups in each state, and 
        their approximate size . . . . [Redacted] will be on 
        this list for most states, as will the [redacted], and 
        [National Right to Life]. Christian Coalition will make 
        the list in about \1/2\ of the states.
          At virtually all of our field meetings we have put 
        together day long meetings 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. . . .
          While it has always been true that our coalition 
        groups need direction on how they can best effect 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.56

Another internal RNC memorandum discussing ``Outreach, 
Auxiliaries, Coalitions,'' identified ``five coalition 
organizations that have distinguished themselves and we have to 
pay special attention to,'' including the Christian 
Coalition.57
    Still another internal RNC memorandum, dated March 4, 1996, 
to Barbour from Anderson, placed the Coalition leadership at 
the heart of the Republican Party's strategy for victory in 
1996.58 In response to a request from Barbour, 
Anderson developed a list of persons who should be included in 
a select Republican leadership coalition of outside groups. 
Anderson recommended that Ralph Reed, the Coalition's executive 
director, and Chuck Cunningham, the Coalition's director of 
voter education be included, because they represent a group 
``that actually [has] troops in the field,'' and ``they can 
motivate, activate, and deliver.'' 59 About 40 
individuals were apparently evaluated by Barbour and other top 
RNC officials for inclusion in this select group; Ralph Reed 
was one of only two individuals who received unanimous 
support.60 When Congressman Bill Paxon, head of the 
National Republican Congressional Committee (``NRCC'), was 
asked to ``list the most important people or groups behind the 
Republicans' effort to maintain control of the House'' in 1996, 
he too listed the Christian Coalition.61
    This evidence indicates that the RNC deliberately planned 
to work with independent groups to affect the outcome of the 
1996 elections, and that the Christian Coalition was an 
integral part of this effort. The Minority attempted to clarify 
these documents by taking the deposition of Anderson and others 
named in them, but no one from the RNC or Coalition provided 
any interview or deposition on these matters.62
    Additional documents reveal that, during the 1996 election 
cycle, high-ranking officials of the RNC and the Christian 
Coalition had an ongoing working relationship. A December 15, 
1995, internal RNC memorandum to Anderson from Jack St. Martin, 
RNC director of coalitions, discussed ``Coalition Activities 
Week of Dec. 15.'' St. Martin commented on his ``constructive'' 
meeting with Coalition Director of Voter Education Chuck 
Cunningham and National Field Director D.J. Gribbon, at which 
he ``reassured'' them the RNC would ``work with them.'' 
63 (St. Martin recently resigned his RNC position 
and joined the Christian Coalition.64)
    A memorandum dated September 6, 1995, from St. Martin to 
RNC Chairman Haley Barbour concerned an upcoming speech by 
Barbour to the Coalition.65 St. Martin advised 
Barbour to thank the Coalition for its contribution to the 
Republican victories in 1994. He suggested that Barbour tell 
the Coalition that ``it is not simply a special interest group, 
but a vital part of the Republican base.'' Finally, St. Martin 
recommended that Barbour encourage Coalition members ``to run 
for national delegate slots.''
    A memorandum to Anderson dated March 6, 1996, entitled, 
``Coalitions,'' categorized various outside groups according to 
their issues of concern and apparently discussed how the RNC 
could work with them.66 The first entry states: 
``Family issues/Christian Coalition/Eagle Forum/Pro-Life 
groups/in-state PACS. In this community alone there are 
probably two dozen different organizations. What we ask them to 
do would be very different than what we ask pro-gun groups to 
do.'' This memorandum is additional evidence that the RNC was 
indeed asking groups like the Coalition to take actions on 
behalf of Republicans in connection with the 1996 elections.
    In addition to RNC-Coalition communications, Drew and 
others have described ongoing communications and meetings 
between the Christian Coalition and the Dole 
campaign.67 Drew writes:

          ``Scott has an ongoing relationship with Ralph,'' a 
        Dole adviser said. According to Scott Reed, the two men 
        talked once a week throughout the summer and fall [of 
        1996].68

One series of communications took place around the Coalition's 
1996 annual conference in which Reed allegedly sent written 
memoranda and spoke with Scott Reed, Dole campaign manager, and 
Paul Manafort, a key strategist in the Dole campaign, 
recommending that Senator Dole address the conference. After 
Senator Dole spoke to the conference, Ralph Reed reportedly 
sent Scott Reed another memorandum congratulating the Dole 
campaign on improving poll numbers and recommending ``that Dole 
appear at an evangelical college in the South or a battleground 
Midwestern state. He specifically recommended Wheaton College 
in Illinois, Hillsdale College in Michigan, and several other 
schools. He then called Manafort.'' 69 None of these 
memoranda, however, was produced to the Committee. In fact, 
neither the Dole campaign nor the Christian Coalition produced 
a single memorandum exchanged between the two organizations 
during the whole of the 1996 election cycle.
     Besides describing routine Coalition communications with 
the RNC and Dole campaign, Drew describes routine contacts 
between Ralph Reed and other key players in the Republican 
Party:

          The relentlessly cheerful [Congressman] Bill Paxon 
        [head of the NRCC] by mid-September was still 
        predicting that the Republicans would pick up twenty 
        House seats. In the course of our phone conversation, 
        Paxon told me he had to ring off because Ralph Reed was 
        waiting to see him. Then Paxon tried to pass it off as 
        a once-a-year-or-so friendly visit. In fact, Reed told 
        me later, he talked to Paxon during the election ``a 
        couple of times a month.''
          Ralph Reed also kept in touch with several of the 
        consultants who worked with the Republican leadership 
        and on congressional campaigns. His pollster, Vern 
        Kennedy, also polled for Republican Jeff Sessions's 
        campaign for the Alabama Senate seat. Others Reed kept 
        in touch with were Frank Luntz, the thirty-three-year-
        old Republican pollster, and Joe Gaylord, the political 
        consultant and close adviser to Newt 
        Gingrich.70

    The Coalition also regularly attended weekly meetings held 
throughout 1996 at the headquarters of Americans for Tax 
Reform, attended by 50-70 conservative activists, Republican 
Party representatives, and candidates. 71 Drew 
writes that these meetings often served as strategy sessions 
for the 1996 elections on behalf of Republicans, recounting, 
for example, group discussions of candidates and specific House 
and Senate races, and instances in which Republican candidates 
made formal presentations at the meetings and requested support 
for their election efforts. These meetings are described in 
more detail in Chapter 11 on Americans for Tax Reform.
    Still other Republican Party connections during the 1996 
election cycle emerged during the Republican National 
Convention, held August 12 to 15, 1996, in San Diego. Just 
before the convention, the media reported that Amway 
Corporation had donated $1.3 million to the nonprofit San Diego 
Convention and Visitors Bureau (ConVis) which, in turn, had 
paid the money to the Family Channel to broadcast gavel-to-
gavel, ``unfiltered'' coverage of the Republican 
Convention.72 The Family Channel is controlled by 
Pat Robertson.73 After the Democratic National 
Committee filed an FEC complaint charging Amway with laundering 
an illegal corporate contribution to the Republican Party 
through ConVis, the plan was abandoned. The $1.3 million was 
repaid to Amway, and the RNC instead used taxpayer funds to pay 
for five nights of air time on the Family Channel.74 
This convention coverage was not the first time that 
Robertson's network carried programming favoring the Republican 
Party; in 1990, the Family Channel aired programming from the 
American Citizens'' Television, an effort associated with GOPAC 
and House Speaker Newt Gingrich.75
    The Coalition's actions to support Republican candidates 
and the Republican Party in the 1996 elections was not a new 
development. As recounted in the FEC complaint against the 
Coalition described below, the Coalition has been helping 
Republican candidates in the last three election cycles. For 
example, the Coalition is alleged to have provided direct 
financial assistance to Senator Jesse Helms (R-NC). A $14,000 
Coalition check payable to ``Christian Coalition of North 
Carolina'' is dated October 30, 1990.76 On the check 
is the notation ``GOTV Calls State Project G/L 5710,'' an 
apparent reference to a ``get out the vote'' telephone bank 
operation. The FEC complaint alleged that the Coalition acted 
in concert with Helms's re-election campaign, and ``made 
expenditures directly and/or through its state affiliate to 
make approximately 29,800 telephone calls as part of a get-out-
the-vote telephone bank operation in connection with the 
November 1990 general election in North Carolina.'' 
77
    Rather than provide direct financial assistance, the 
Coalition ``rented'' a mailing list of 36,000 of its supporters 
to Republican candidate Oliver North's campaign during his 1994 
Senate race in Virginia against Senator Chuck Robb. North 
allegedly paid $5,131 for the list in the spring of 1994. 
Coalition communications director Arne Owens acknowledged the 
incident but asserted that the list was rented at fair market 
value. 78
    In 1992, the Coalition apparently received a donation 
``earmarked'' for the Bush presidential campaign. On July 23, 
1992, John Wolfe, a business executive, wrote to Pat Robertson 
that ``a very good friend of mine [Lyn Nofziger] tells me your 
group is very supportive of President Bush and that you will be 
doing a massive distribution of literature on his behalf.'' 
Wolfe wrote that he was advised that ``you could use some 
financial help with that project for the President and 
therefore, on the recommendation of Lyn, I am pleased to send 
you a contribution of $60,000.'' Enclosed with the letter was a 
personal check in that amount dated July 23, 1992. In an August 
3, 1996, interview, Nofziger acknowledged that he had known 
Wolfe for 30 years and recalled discussing the issue with 
him.79

                 coalition activity in state elections

     Although the Committee's mandate focused on the 1996 
federal election, the Coalition's activities in state elections 
are relevant because they show a continuing pattern of partisan 
political activity. In 1991, Virginia Beach Republican Kenneth 
Stolle was supported by the Christian Coalition in his state 
Senate campaign against incumbent Democrat Moody Stallings. 
According to Judy Liebert, the Coalition's former chief 
financial officer, the Coalition mailed thousands of Stolle 
campaign letters from its headquarters.80 The 
Coalition advised that the local Republican committee paid 
$4,742 for the mailing. In defending itself, the Coalition 
pointed out that state elections are not under the jurisdiction 
of the Federal Election Commission, and that state election law 
allows unlimited corporate contributions to state candidates. 
The Coalition asserted that it ``simply functioned as a 
lettershop.'' 81
    Despite its claims that it ``simply functioned as a 
lettershop,'' the Coalition appears to have provided financial 
assistance as well. A Coalition check in the amount of $25,000 
made payable to the 2nd District Republican Committee is dated 
November 12, 1991, one week after the Stolle-Stallings 
election. 82 Reportedly, a factor in Stallings's 
defeat was a ``blitz'' of negative television advertisements in 
the final week of the campaign--bought by the 2nd District 
Republican Committee. Had the Stolle campaign purchased the 
ads, it would have been required to report the contributors. 
Interestingly, Pat Robertson's son, Gordon Robertson, was the 
2nd District Republican chairman at the time, and he refused to 
reveal the source of the money. A state police investigation of 
the matter ensued, after which the Norfolk commonwealth's 
attorney determined that the party was not required to reveal 
the source of the ad money. The $25,000 was characterized by a 
Coalition spokesman as a ``one-time'' contribution for 
``general party-building purposes.'' 83
    Similar to the ``rental'' of a Coalition voter list to 
Oliver North's 1994 U.S. Senate campaign was the ``sale'' of a 
voter list to a Republican candidate in a Florida state race. A 
presentation at the 1993 Coalition ``Road to Victory'' 
conference by Max Karrer, Coalition state coordinator for North 
Florida, revealed how the Christian Coalition of Florida 
assisted a Republican candidate in winning a seat in the state 
legislature. According to Karrer, the Coalition used 
computerized membership lists of conservative churches to build 
a Christian voter data base. The list was then sold to the 
conservative candidate for five dollars. Karrer stated, ``We 
were not allowed to give them away, so we charged him five 
dollars; but we printed labels for him of the Christian voters, 
which enabled him to put out direct mailings to the Christian 
voter, that he would not necessarily do to the general public.  
. . . You want to talk about stealth campaigns; it was quietly 
done, and they didn't realize they were in trouble until it was 
too late.'' Commenting on the Coalition's influence among 
candidates, Karrer stated, ``When someone wants to run for 
office, they come to the Christian Coalition. . . . It gives 
you . . . tremendous lobbying power with the legislator because 
they think you have this huge bloc of votes that you can swing, 
though you can't necessarily.'' 84
    Distortion of candidates'' positions in Coalition voter 
guides is not limited to federal elections. A Florida state 
circuit court barred the Seminole County Christian Coalition 
from distributing copies of its voter guide before the October 
4, 1994 runoff election for the Seminole County 
Commission.85 Adrienne Perry, Democratic candidate 
for Seminole County Commission District 2, had alleged in a 
lawsuit that the voter guide misrepresented her views on 
homosexual marriage. Perry claimed that her support for 
allowing homosexual partners to be included on health plans was 
misrepresented in the guide as a blanket approval of legalizing 
homosexual marriages. The Circuit Court judge ruled that the 
Coalition questionnaire sent to Perry and other candidates and 
the resulting voter guide did not allow for a ``moderate 
view.'' The judge stated, ``It's either one way or another, and 
that's misleading. It doesn't represent Ms. Perry's position.'' 
86
    Candidate endorsement also continues within local Coalition 
circles. In August 1997, Virginia State Delegate Jay Katzen, a 
Fauquier County Republican invited by the Coalition to lead a 
political training session in Fairfax County, urged members to 
work against Democratic gubernatorial candidate Don Beyer. 
Reportedly, Katzen referred to Beyer as a ``dangerous 
opponent,'' but praised Republican Governor George Allen and 
James Gilmore, Beyer's Republican opponent. ``Don Beyer has 
promised. . .to reverse everything that you elected me and 
George Allen and Jim Gilmore to achieve,'' Katzen told the 
Coalition activists. Mark Rozell, a political scientist at 
American University who wrote a book about the religious right, 
commented, ``Jay Katzen's remarks should put to rest the 
argument about whether the ChristianCoalition is really an arm 
of the Republican Party. . . . This is so explicit, it's incredible.'' 
87

                               fec action

    In complaints filed with the FEC since February 1992, the 
Democratic Party of Virginia, and later the Democratic National 
Committee, alleged improper political activity by the 
Coalition. 88 These complaints led to an FEC 
investigation and subsequent suit against the Coalition in 
federal court. On July 30, 1996, the FEC, by affirmative vote 
of four of its members (two Democratic appointees joined by two 
Republican appointees), filed suit against the Coalition, 
alleging the organization improperly provided aid to Republican 
candidates.89
    The FEC complaint alleged, ``During the campaign periods 
prior to the 1990, 1992 and 1994 federal elections, [the] 
Christian Coalition made expenditures, directly from its 
corporate treasury and/or through its subordinate state 
affiliates, to influence the election of candidates for federal 
office.'' 90 Referencing examples of the Coalition's 
work with prominent Republican candidates such as former 
President George Bush, Senator Jesse Helms, former Senate 
candidate Oliver North and House Speaker Newt Gingrich, the FEC 
alleged that the Coalition spent money on voter guides and 
other get-out-the-vote efforts in conjunction with particular 
candidates'' campaigns and engaged in expressly advocating the 
election or defeat of specific candidates. The complaint 
further stated that the Coalition consulted with candidates'' 
campaigns before making the improper expenditures, which are 
considered ``in-kind contributions.'' 91 
Corporations are prohibited by law from making contributions 
from corporate treasury funds to federal 
elections.92 However, corporations may legally 
engage in such activity through a separate, segregated 
political committee fund, subject to federal election law 
registration and reporting requirements.93
    The FEC complaint consists of three causes of 
action.94 The first cause of action alleges 
violations of law for Coalition actions on behalf of the 
following candidates or campaigns:
           Bush/Quayle campaign--The Coalition made 
        expenditures for voter identification and get-out-the-
        vote efforts and for the preparation and distribution 
        of approximately 28 million voter guides in connection 
        with the 1992 election for president and vice president 
        of the United States.95
           Jesse Helms--The Coalition made expenditures 
        directly and/or through its state affiliate to produce 
        and distribute approximately 750,000 voter guides in 
        connection with Senator Helms's November 1990 general 
        election campaign and additionally made expenditures to 
        make approximately 29,800 telephone calls as part of a 
        get-out-the-vote telephone bank operation in connection 
        with the November 1990 general election in North 
        Carolina.96
           Oliver North for U.S. Senate Committee, 
        Inc.--The Coalition made expenditures directly and/or 
        through its state affiliate to produce and distribute 
        approximately 1,750,000 voter guides in connection with 
        the 1994 general election campaign in Virginia and 
        additionally made expenditures for voter identification 
        and get-out-the-vote efforts in connection with the 
        1994 general election campaign in 
        Virginia.97
           Inglis for Congress Committee--The Coalition 
        made expenditures directly and/or through its state 
        affiliates for voter identification and get-out-the-
        vote efforts in connection with the 1992 general 
        election in the Fourth District of South Carolina and 
        also made expenditures to produce and distribute 
        approximately 240,000 voter guides in connection with 
        this election.98
           J.S. Hayworth for Congress--The Coalition 
        made expenditures directly and/or through its state 
        affiliates for voter identification and get-out-the-
        vote efforts in connection with the 1994 general 
        election in the Sixth District of Arizona and also made 
        expenditures to produce and distribute approximately 
        200,000 voter guides in connection with this 
        election.99
    The second cause of action concerns the National Republican 
Senatorial Committee, ``a national party committee dedicated to 
the election of Republican candidates to the United States 
Senate.'' The FEC alleged that ``[d]uring 1990, [the] Christian 
Coalition, acting in coordination, cooperation, and/or 
consultation with the NRSC, made expenditures directly and 
through its state affiliates to produce and distribute between 
five and ten million voter guides in seven states in connection 
with the November 1990 federal elections for the United States 
Senate.'' 100
    The third FEC cause of action alleges that ``[The] 
Christian Coalition made corporate expenditures directly and/or 
through its state affiliates for public communications 
expressly advocating the election or defeat of clearly 
identified candidates for federal office.'' It states that, for 
example, the ``Christian Coalition, through its subordinate 
state affiliate in Montana, made expenditures in excess of $250 
during a calendar year for a two day conference open to the 
public held during January 1992. At this conference, Dr. Ralph 
Reed expressly advocated the defeat of United States 
Representative Pat Williams. Thus, the conference costs were 
independent expenditures by Christian Coalition in opposition 
to the candidacy of Representative Pat Williams.'' It states 
that, in addition, the Coalition may have violated 2 U.S.C. 
Section 434(c) by failing to report the costs of the conference 
as an independent expenditure in opposition to the candidacy of 
Representative Pat Williams.101
    Additionally, the third cause of action alleges that during 
1994, the Coalition made expenditures in excess of $250 during 
a calendar year for the preparation and distribution of a 
direct mail package entitled ``Reclaim America'' which included 
a scorecard and a cover letter signed by Pat Robertson. In the 
letter, Robertson asserted that the enclosed scorecard would be 
an important tool for affecting the outcome of the upcoming 
elections: ``This SCORECARD will give America's Christian 
voters the facts they will need to distinguish between GOOD and 
MISGUIDED Congressmen.'' The scorecard listed and characterized 
many issues voted on in the Senate and House in 1993 and 1994. 
Each Member's votes were reflected as a ``-'' or a ``+'', 
followed by percentages. The scorecard stated: ``A score of 
100% means the Congressman supported Christian Coalition 
position on every vote. A score of 0% means the Congressman 
never supported a Christian Coalition position.'' The FEC 
alleged that the mailed package together constituted express 
advocacy of ``clearly identified candidates for federal 
office,'' and constituted unreported independent expenditures, 
in violation of the law.102
    Finally, the third cause of action alleges that prior to 
the July 9, 1994 primary election in Georgia, the Coalition, 
through its subordinate state affiliate in Georgia, made 
expenditures in excess of $250 during a calendar year for the 
preparation and distribution of a combination Congressional 
Scorecard and cover letter, which stated in part: ``The only 
incumbent Congressman who has a Primary election is Congressman 
Newt Gingrich--a Christian Coalition 100 percenter.'' The FEC 
alleged that the mailing constituted express advocacy of the 
re-election of Gingrich, constituting unreported independent 
expenditures in violation of the law.103
    The FEC asked the court to declare that the Christian 
Coalition violated 2 U.S.C. Section 441b and 434(c). The FEC 
further asked the court to enjoin the Christian Coalition from 
making similar corporate contributions and expenditures in 
violation of 2 U.S.C. Section 441b; and to enjoin the Christian 
Coalition from violating 2 U.S.C. Section 434(c) by failing to 
report its independent expenditures. Additionally, the FEC 
asked the court to assess an appropriate civil penalty against 
the Christian Coalition for each violation found by the Court 
to have been committed by the Corporation, not to exceed the 
greater of $5,000 or the amount of the expenditure involved in 
the violation, and to grant such other relief as may be 
appropriate.104 The FEC suit is ongoing.

                               conclusion

    The evidence shows that the Christian Coalition is closely 
tied to the Republican Party and functions as a partisan 
political committee. The Coalition has been led by persons with 
close ties to the Republican Party, received about $64,000 in 
start-up funds from the National Republican Senatorial 
Committee, and is repeatedly identified in RNC documents as ``a 
vital part of the Republican base.'' Former Coalition officials 
have confirmed that the organization is closely aligned with 
the Republican Party and explained how the Coalition constructs 
its voter guides to favor the candidates the Coalition prefers. 
The fact that the two FEC Republican commissioners joined with 
their two Democratic counterparts in deciding to file suit 
against the Coalition supports the conclusion that the 
Coalition does indeed engage in election activity promoting 
specific Republican candidates.
    The ongoing pattern of distortion of candidates'' positions 
as stated in Coalition voter guides and the above-cited 
examples of candidate endorsements provide evidence that the 
Coalition does not seek merely to inform and educate voters, 
but instead functions to elect specific Republican candidates 
to offices at all levels of government. Another disturbing 
tactic employed by the Coalition is the distribution of voter 
guides in selected churches the weekend prior to an election, 
thus making it difficult for candidates to correct any 
distortions of their positions. The fact that voter guides did 
not address the same issues in the same manner for each 
district, but instead attempted to portray the Coalition's 
favored candidate in the most favorable light, amounted to 
candidate endorsement, not simply informing and educating the 
voter.
    The Coalition voter guides also failed to list positions on 
all surveyed issues for all candidates, thereby precluding the 
voter from a full understanding of the candidates' views on 
each issue. As discussed earlier, issues portrayed in the voter 
guides were reduced to sparsely worded ``sound bites,'' which 
condensed complex political issues into simple phrases, without 
explaining the varying degrees of difference among candidates' 
positions. Apparently, the Coalition does not wish to fully 
inform its constituents of the candidates' positions, 
preferring instead to slant voter guide issues in an effort to 
elect the Republican candidate preferred by the Coalition. In 
the Minority's view, such tactics are employed because the 
Coalition fears that fully informed voters may not support the 
Coalition's candidates.
    The evidence indicates that the Coalition is a partisan 
Republican political committee, whose primary activity and 
major purpose is the election of Republican candidates to 
public office, and should not be granted IRS section 501(c)(4) 
``social welfare organization'' tax exempt status. It is time 
for the IRS to reach a final decision on this matter. In 
addition, the FEC should continue its civil enforcement action 
to require the Coalition to stop making prohibited corporate 
contributions to federal candidates and to report independent 
expenditures to the FEC. More, the Coalition ought to register 
with the FEC as the political committee it is.

                               footnotes

    \1\ FEC v. Christian Coalition, Civil Action No. 96-1781 (U.S.D.C. 
District of Columbia), 7/30/96 (hereinafter ``FEC Complaint'); FEC 
Statement of Reasons, Commissioner Aikens and Elliot, 1/24/96.
    \2\ Letter from Senator Glenn to Chairman Thompson concerning 11 
Minority-drafted subpoenas, 3/3/97.
    \3\ Committee Subpoena to Christian Coalition, 7/30/97.
    \4\ Letter from Christian Coalition, et al, to Committee re: Joint 
Statement of General Objections to Subpoenas, 9/3/97.
    \5\ Sabato, Larry J. and Glenn R. Simpson. Dirty Little Secrets: 
The Persistence of Corruption in American Politics. New York: Times 
Books, 1996, pp. 109-110.
    \6\ Sabato & Simpson, pp. 109-10; see also Drew, Elizabeth. 
Whatever It Takes. United States: Penguin Books USA Inc., 1997, pp. 24-
25.
    \7\ See Chapter 11 on Americans for Tax Reform.
    \8\ Sabato & Simpson, pp. 110-111. See also Drew, p. 24.
    \9\ Ralph Reed's dictated response to Christian Coalition Chief 
Financial Officer Judy Liebert, re: monies received from the NRSC in 
1991.
    \10\ Sabato & Simpson, p. 111.
    \11\. CRS Report, 95-421A, Comparison of 501(c)(3) and 501(C4) 
Organizations, 3/24/95, p. 2; 26 U.S.C. 501(c)(4). See also Chapter 9.
    \12\ CRS Report, 95-421A, p. 1; see Chapter 9.
    \13\ See Chapter 9.
    \14\ See ``Voter Guides In The 1996 Elections'' section of this 
chapter.
    \15\ Church & State, July/August 1996.
    \16\ The Christian Coalition's Specific Objections To Schedule A, 
p. 5.
    \17\ Sabato & Simpson, p. 134.
    \18\ Sabato & Simpson, p. 134.
    \19\ Sabato & Simpson, p. 135.
    \20\ Church & State, 11/94.
    \21\ Ft.Worth Star-Telegram, 11/5/94.
    \22\ Richmond Times Dispatch, 11/3/94.
    \23\ Ft.Worth Star-Telegram, 11/5/94.
    \24\ Drew, p. 26.
    \25\ Gannett News Service, 11/8/96; Roll Call, 12/12/96; Drew, p. 
160.
    \26\ 1996 Christian Coalition Voter Guides--Georgia.
    \27\ 1996 Christian Coalition Voter Guides--Iowa; Letter from 
Senator Harkin to Christian Coalition Director of Voter Education Chuck 
Cunningham, 4/25/96.
    \28\ 1996 Christian Coalition Voter Guide for Presidential Race.
    \29\ 1996 Christian Coalition Voter Guides--Alaska.
    \30\ 1996 Christian Coalition Voter Guides--Massachusetts. In 
Mississippi, the same modifying language concerning the balanced budget 
issue that appeared in the Coalition's Massachusetts guide concerning 
Representative Joe Kennedy, was used by the Coalition in two 
congressional district voter guides, but not in the remaining three 
district guides. 1996 Christian Coalition Voter Guides--Mississippi.
    \31\ Riverside (CA) Press Enterprise, 11/2/96. The guide indicated 
that Representative Bono supported a ban on partial-birth abortions, 
and that his opponent had not responded to the Coalition's survey. 
According to Stoermer, Representative Bono's responses to other 
abortion-related questions in the Coalition's questionnaire indicated 
that he supported abortion in some circumstances. For example, Stoermer 
indicated that Representative Bono did not answer questions about 
whether he supported Roe v. Wade, the landmark U.S. Supreme Court 
decision giving women the right to seek an abortion, or the right to 
abortion on demand during the first trimester of pregnancy. 
Representative Bono had also voted for an amendment in August 1995 that 
would have prevented states from denying the use of Medicaid funds for 
abortions, except in cases where the pregnancy would endanger the 
mother's life. Riverside (CA) Press Enterprise, 11/2/96.
    Stoermer had resigned in a dispute with the Coalition over the 
exclusion of a third party candidate from the same Coalition voter 
guide. Information concerning American Independent Party candidate 
Donald Cochran, who was also running against Representative Bono, was 
excluded from the voter guide. The California Christian Coalition had 
blocked Stoermer from including Cochran in the voter guide because of a 
national policy to feature only viable candidates. Stoermer said 
neither Representative Bono nor his Democratic candidate could claim to 
represent family values because both had been divorced and supported 
abortion rights, while Cochran had never been divorced and opposed 
abortion. When Cochran ran against Democrat Steve Clute in 1994, he 
captured 6.4 percent of all ballots cast in the race. Press Enterprise, 
10/9/96.
    \32\ Letter from Norma Paulus to Ralph Reed, 11/27/95.
    \33\ Norfolk Virginian-Pilot, 8/4/97.
    \34\Ethnic Newswatch, Baltimore Jewish Times, 9/15/95; Associated 
Press, 9/6/95.
    \35\ Ethnic Newswatch, 9/15/95; Associated Press, 9/6/95.
    \36\ Church & State, 10/95, p. 8.
    \37\ Church & State, 10/95, p. 9. Campbell also made a television 
commercial on Foster's behalf, in her capacity as Louisiana Coalition 
Director; but the ad was allegedly pulled when the national Coalition 
office learned of it.
    \38\ Church & State, 10/95, p. 9. Apparently Coalition officials 
were concerned about media scrutiny, as guards were posted at the doors 
to remove anyone not personally approved by the caucus leader.
    \39\ Church & State, 10/96, p. 9.
    \40\ Church & State, 10/96, p. 9.
    \41\ Church & State, 10/96, p. 9.
    \42\ Church & State, 10/96, p. 9.
    \43\ Washington Post, 9/13/96, p. 20.
    \44\ New York Times, 9/18/97.
    \45\ Washington Post, 9/18/97.
    \46\ New York Times, 9/18/97; Washington Post, 9/18/97.
    \47\ Washington Post, 9/13/96, p. 20.
    \48\ St. Louis Post-Dispatch, 3/20/96.
    \49\ Dole Campaign Memorandum from Judy Haynes to Jill Hansen, 12/
14/95.
    \50\ Drew, p. 23.
    51 Associated Press, 7/7/96.
    52 See Chapter 10; Exhibit 2367: Coalition Building 
Manual, authored by Curt Anderson, R01821-49.
    53 Exhibit 2367, at R01841.
    54 Ibid. at Exhibit 2367, at R01847.
    55 Exhibit 2363: memorandum dated 4/23/96 from RNC 
political director and head of campaign operations Curt Anderson to RNC 
chairman Haley Barbour, regarding ``Nuttle's Coalition Plan,'' R06060-
62.
    56 Exhibit 2363.
    57 Exhibit 2353: undated internal RNC memorandum from 
``Blaise'' to ``Pat,'' regarding ``Outreach, Auxiliaries, Coalitions,'' 
R51299-30.
    58 Exhibit 2365: memorandum dated 3/4/96 from RNC 
political director and head of campaign operations Curt Anderson to RNC 
chairman Haley Barbour, regarding ``Group of 12, or Council of Trent, 
or Whatever,'' R006050.
    59 Exhibit 2365.
    60 Hearing exhibit 2366: untitled and undated document 
tallying support for, opposition to and comments by RNC officials on 
proposed members in a coalition of independent group leaders, R021559-
60.
    61 Drew, p. 14.
    62 For example, in early August 1997, Anderson, through 
his attorney, indicated he would voluntarily appear for a deposition. 
Subsequently, he changed his mind, and at the request of the Minority, 
the Majority issued a Subpoena with a September 18 return date. 
Anderson could not be located immediately and the subpoena was served 
on September 19, one day after the return date. Anderson's attorney 
claimed the subpoena was invalid, and the Majority refused the 
Minority's request to issue a second subpoena to Anderson. See also 
Part 7.
    63 Memorandum from RNC coalitions director Jack St. 
Martin to RNC political director and head of campaign operations Curt 
Anderson, 12/15/95.
    64 U.S. Newswire, 11/20/97.
    65 Memorandum from RNC coalitions director Jack St. 
Martin to RNC Chairman Barbour, 9/6/95.
    66 Hearing exhibit 2362: memorandum from ``Hopper'' to 
RNC political director and head of campaign operations Curt Anderson, 
with a copy to RNC coalitions director Jack St. Martin, 3/6/96, 
regarding ``Coalitions,'' R056245.
    67 See, for example, Drew, pp. 14, 105-7, 160-62; 
Associated Press, 7/7/96 (Robertson and Reed met with Dole for 40 
minutes on 6/27/96.).
    68 Drew, p. 106.
    69 Drew, pp. 161-62.
    70 Drew, pp. 164-65.
    71 See Drew, p. 6.
    72 See, for example, San Diego Union-Tribune, 8/9/96, p. 
B1.
    73 See, for example, San Diego Union-Tribune, 8/9/96, p. 
B1.
    74 San Diego Union-Tribune, 8/14/96, p. B1; Los Angeles 
Times, 8/13/96, p. A18; Newsday 8/8/96, p. B4.
    75 Boston Globe, 11/22/96, p. A1; The Village Voice, 8/
6/96, p. 23; Washington Post, 1/7/97, p. A1.
    76 $14,000 Christian Coalition check to Christian 
Coalition of North Carolina, 10/30/90.
    77 FEC Complaint.
    78 AP/Baltimore Sun, 6/5/97; Universal Lists Billing 
invoice #1010, 3/23/94.
    79 Washington Post, 8/4/96; Associated Press, 8/3/96.
    80 Norfolk Virginian-Pilot, 8/4/97.
    81 Norfolk Virginian-Pilot, 8/1/97.
    82 Christian Coalition $25,000 check to the Second 
District Republican Committee, 11/12/91.
    83 Norfolk Virginian-Pilot, 7/27/97.
    84 Freedom Writer, April 1994.
    85 Orlando Sentinel, 9/17/94.
    86 Orlando Sentinel, 9/29/94.
    87 Washington Post, 9/28/97.
    88 FEC Complaint, p. 2.
    89 FEC Complaint, p. 5. At the time of the vote, one 
position on the Commission was vacant, and another member was not 
present.  An earlier vote to require the Coalition to 
register as a political committee did not pass, as it was opposed by 
the two Republican appointees. They contended that within the meaning 
of the law, the Coalition's ``major purpose'' was not the election or 
defeat of a federal candidate. FEC Statement of Reasons, Commissioners 
Aikens & Elliot, 1/24/96, pp. 1, 6.
    90 FEC Complaint, p. 6.
    91 FEC Complaint, pp. 5-12.
    92 FEC Complaint, p. 5; 2 U.S.C. Sec. 441b.
    93 FEC ``Statement of Reasons,'' Commissioners Thomas, 
McGarry, & McDonald, 7/30/96, p.2.
    94 FEC Complaint, pp. 6-10.
    95 FEC Complaint, p. 7.
    96 FEC Complaint, pp. 7-8.
    97 FEC Complaint, p. 8.
    98 FEC Complaint, p. 9.
    99 FEC Complaint, p. 9-10.
    100 FEC Complaint, p. 10.
    101 FEC Complaint, pp. 10-11.
    102 FEC Complaint, pp. 11-12.
    103 FEC Complaint, p. 12.
    104 FEC Complaint, pp. 12-13.





PART 2  INDEPENDENT GROUPS

Chapter 15: Other Republican Groups

    The Committee's investigation of independent groups focused 
mainly on a handful of organizations that played an active role 
in the 1996 election cycle, and the results of this 
investigation are summarized in earlier chapters of the 
Minority Report. This chapter includes brief examinations of 
other nonprofit groups with ties to the Republican National 
Committee, Republican donors, and Republican presidential 
candidates.
    Although these groups were not investigated in depth, the 
Committee did receive some documents, pursuant to subpoenas, 
from nonprofit organizations connected to the presidential 
candidates. Some of the organizations discussed in this chapter 
are also mentioned in documents provided to the Committee by 
the Republican National Committee.

                         seniors organizations

    Documents produced to the Committee by the Republican 
National Committee reveal that the RNC closely coordinated with 
a number of ostensibly nonpartisan organizations during the 
1996 election cycle, including senior citizens' organizations. 
For example, on March 20, 1996, two RNC officials sent a memo 
regarding the party's ties to senior citizens' organizations. 
One portion of the memo discusses a ``Senior Republican Network 
Conference'' scheduled for June 8. According to the memo, one 
of the goals of the conference was ``Establishment of good 
relationships with major conservative senior groups: 60 Plus, 
United Seniors, and Seniors Coalition. Explore ways in which we 
can work together during the campaign.'' 1
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 15.
---------------------------------------------------------------------------
    Ten days later, the Seniors Coalition was mentioned in a 
follow-up memo. According to this memo, the Seniors Coalition 
was ``very interested in sponsorship of our [Republican] 
conference. They offered to help take on some financial 
obligations as well. They asked us to determine where they 
think they should do their next poll (Kellyanne has done 
research in CA & FL on how Medicare and senior issues are 
playing). They indicated a willingness to give us some input 
into the questions asked as well.'' 2
    The Seniors Coalition, which apparently coordinated with 
the RNC, disseminated a press release during the presidential 
campaign which appears to have been aimed at assisting 
Republican candidate Bob Dole. On March 11--the day before the 
Florida primary--the organization announced the results of a 
survey of Florida senior citizens. The press release was 
headlined: ``Florida seniors reject Clinton's leadership, lack 
of optimism about the future according to poll conducted by the 
Seniors Coalition.'' The lead sentence read: ``A new poll of 
seniors in Florida may spell trouble for the White House.'' 
3
    A careful reading of the press release makes clear that the 
Florida seniors who responded to the survey were much more 
favorably disposed to Clinton than the headline and lead 
sentence suggested. For example, 39 percent said that Clinton 
best represents the concerns of senior citizens, compared with 
38 percent for Dole. An equal percentage of respondents--44 
percent--favored Clinton and Dole. Since the margin of error 
was plus or minus 4.7 percent, it is possible that Clinton was 
actually favored by Florida seniors.
    Another group mentioned in RNC memos, the United Seniors 
Association, was also active during the 1996 campaign. The 
organization ``spent $3 million on a direct mail and media 
campaign to rebut Democratic and union Medicare claims,'' 
according to a study of issue advocacy in 1996. ``The targeted 
states were Oklahoma, Iowa, Nebraska, Kentucky, Washington 
state, Arizona and Wisconsin.'' 4
    The Seniors Coalition and the United Seniors Association 
are both registered with the Internal Revenue Service as tax-
exempt, 501(c)(4) ``social welfare'' organizations, and they 
have portrayed themselves as bona fide grassroots 
organizations--conservative versions of the American 
Association of Retired Persons. However, several critics have 
characterized them as organizations that serve mainly to enrich 
professional fundraisers. In the early 1990s, for example, 
these groups were criticized by then-Representative Andy Jacobs 
(Ind.), the Democratic chairman of the Subcommittee on Social 
Security of the House Ways and Means Committee as well as the 
committee's ranking Republican, Jim Bunning (Ky.). ``The motive 
of these groups,'' said Representative Bunting, ``is to raise 
money.'' 5
    The Seniors Coalition was founded by Dan C. Alexander, Jr., 
who had been convicted of extortion in 1987 and sentenced to 12 
years in prison (he served 51 months).6 Alexander 
worked closely with Richard Viguerie, a prominent direct-mail 
fundraiser who has founded and/or worked for several seniors 
groups, including the Seniors Coalition, the United Seniors 
Association, and 60 Plus.
    In late 1992, Alexander was forced out of the Seniors 
Coalition after the board found evidence of financial 
irregularities.7 A new CEO was installed 
8 and the group improved its image. After the mid-
term elections of 1994, Republican congressmen invited 
officials of the Seniors Coalition to testify before 
congressional committees.9 When, in 1995, House 
Speaker Newt Gingrich announced the Republicans'' Medicare 
reform policy, he did so at a conference sponsored by the 
Seniors Coalition.10
    But the Seniors Coalition's growing visibility was not 
entirely appreciated by several mainstream seniors 
organizations. At a May 1994 press conference, representatives 
of the American Association of Retired Persons and the National 
Council of Senior Citizens sharply criticized the Seniors 
Coalition and two other conservative groups: the United Seniors 
Association and the American Council for Health Care Reform. 
According to these critics, the conservative seniors groups, 
including the Seniors Coalition, did not accurately portray 
political issues, but instead sent false and misleading 
``fright mail'' to seniors. For example, a mass mailing by the 
Seniors Coalition made the unsubstantiated claim that ``Bill 
Clinton plans . . . less medical treatment for seniors'' 
because he believes that ``if more seniors die at a younger 
age, then there will be less overall spending on health care.'' 
11
    The Seniors Coalition's credibility suffered a further 
setback in January 1996, when the Virginia Supreme Court ruled 
that the ouster of Dan Alexander was invalid.12 
After the ruling, allies of his regained control of the 
organization.13 Alexander's return prompted several 
executives and lobbyists to resign from the 
organization.14 Even in the eyes of some 
Republicans, the Seniors Coalition was not a credible 
organization. For example, James E. Miller, a Washington lawyer 
who had worked with the Seniors Coalition in the past, told the 
National Journal: ``The Republicans can't possibly want to 
associate themselves with the group at this point.'' 
15
    But other Republicans were willing to work with the Seniors 
Coalition. Steven D. Symms, a former Republican Senator from 
Idaho, was appointed chairman of the Seniors Coalition's board 
of advisers.16 Stan Parris, a former Republican 
Representative from Virginia, became chairman of the 
coalition's congressional affairs committee.17 
During the 1996 campaign, as noted above, the RNC worked 
closely with the Seniors Coalition, in spite of its background 
involving criminal activities and despite the coalition's 
claims to be a nonpartisan social welfare organization.

              term-limits groups as fronts for gop donors

    Since the 1980s, several political activists have called 
for limits on the number of terms that elected officials can 
serve in office. Some of the individuals and groups who favor 
term limits are nonpartisan. Others, however, use the term-
limits issue as a partisan weapon, despite claiming to be 
nonpartisan organizations. Two groups in this category are U.S. 
Term Limits and an affiliated organization called Americans for 
Limited Terms.
    These groups were not subjects of the Commitee's 
investigation. They are mentioned here because the Committee 
learned that they may have been backed by conservative donors 
who financed groups that were investigated by the Committee. If 
these organizations conducted partisan political activity, even 
while claiming to be nonpartisan, tax-exempt groups, they 
served as ways for GOP donors to support Republican candidates 
without adhering to the disclosure requirements or contribution 
limits of the federal election laws. In such cases, the donors 
and the term-limits groups exploited the ``issue advocacy'' 
loophole in order to circumvent the election laws and the 
groups themselves may have violated their tax-exempt status. 
(U.S. Term Limits and Americans for Limited Terms are both tax-
exempt, ``social welfare'' organizations, under section 
501(c)(4) of the tax code.)
    U.S. Term Limits, which was founded in 1992,18 
asks federal candidates to sign a pledge promising that they 
will vote to limit House members to three two-year terms, and 
Senate members to two six-year terms.19
    Americans for Limited Terms, which was established in 1994, 
conducts purported ``issue advocacy'' campaigns targeted at 
candidates who refuse to sign the U.S. Term Limits pledge. 
There are other links between the two organizations: They share 
a website on the Internet20 and they use the same 
advertising agency.21 Moreover, a number of 
activists have been connected to both groups: ALT's founders 
include Howard Rich,22 the president of 
USTL,23 and Paul Farago, a former USTL board 
member.24
    Although Americans for Limited Terms claims to be 
nonpartisan, most of its targets are Democratic candidates. 
During the 1994 election, according to the Wall Street Journal, 
ALT waged a ``$1.3 million mail and media campaign aimed 
primarily at Democrats. In only a handful of cases--Maryland 
and Rhode Island, for example--are Republican incumbents 
targeted.'' Nearly one fourth of that money--$300,000--was 
spent attacking Speaker Tom Foley.25 In their book 
Dirty Little Secrets, Larry Sabato and Glenn Simpson noted that 
``ALT focused mainly on Democrats, despite the fact that many 
Republicans running were term limits opponents.'' 26 
In their view, ``It would be difficult to construe ALT's 
activities as anything other than direct campaign 
expenditures.'' 27 In 1996, according to the Kansas 
City Star, ALT spent $1.8 million ``in campaigns in Wisconsin, 
Texas, Illinois, North Carolina, Virginia, New Hampshire and 
Kansas, aiding chiefly Republicans.'' 28
    Americans for Limited Terms does not identify any of its 
financial backers.29 U.S. Term Limits reveals some 
of its larger donors, but does not provide complete 
information.30 Despite the secrecy of these 
organizations, some information about their donors and 
fundraisers has emerged in the press, and it comes as no 
surprise that many of them are leading contributors to 
Republican candidates.
    In November 1994, the Wall Street Journal reported that ALT 
and other term-limits organizations have received funding from 
individuals who also gave to GOPAC, the ``leadership PAC'' of 
House Speaker Newt Gingrich.31 For example, ALT 
donors Fred Sacher and K. Tucker Anderson had given more than 
$350,000 to GOPAC.32 Sacher, a California 
businessman, has been a major donor to conservative causes over 
the years. Anderson, a portfolio manager in New York, gave 
``tens of thousands of dollars'' to GOPAC, according to the 
Journal.33
    Both term-limits groups may have ties to oil executives 
Charles and David Koch who, as noted in earlier chapters of the 
Minority Report, are likely to have financed Triad and 
Coalition for Our Children's Future. U.S. Term Limits is a 
successor organization to Citizens for Congressional Reform, a 
term-limits group that was funded by the Koch 
brothers.34 When CCR's ties to the Kochs were 
publicized in the early 1990s, the organization disbanded and 
its assets--including its mailing list--were acquired by 
USTL.35 Several key figures in these pro-GOP term-
limits groups have ties to the Cato Institute, a Libertarian 
think tank that has received millions of dollars from the Koch 
brothers over the years.
     Howard Rich, the president of USTL and a co-
founder of ALT, served on Cato's board of 
directors.36 (Rich is also a friend of Charles 
Koch.37)
     Ed Crane, Cato's president, has served on USTL's 
board.38
     K. Tucker Anderson, a major donor to ALT, has 
served on Cato's board. 39
    U.S. Term Limits has denied that the organization received 
any money from the Kochs, according to a September 1996 press 
report.40 Because Americans for Limited Terms 
refuses to disclose its donors, this leaves open the 
possibility that the Kochs provided funding to ALT.
    Although it is not possible to identify the financial 
backers of Americans for Limited Terms, its extensive 
involvement in political campaigns demonstrates how easy it is 
for donors to assist the candidates of their choice by 
contributing to ``nonpartisan'' organizations involved in 
purported ``issue advocacy'' activities.

           nonprofit groups linked to presidential candidates

    During the 1996 election cycle, three Republican 
presidential candidates may have used nonprofit organizations 
as shadow campaign vehicles. Two of the organizations were 
registered with the Internal Revenue Service as a tax-exempt 
``social welfare'' organization, pursuant to section 501(c)(4) 
of the tax code. In exchange for this privileged status, such 
organizations are supposed to be nonpartisan and may not engage 
in political activity as their primary activity. One of the 
organizations was a 501(c)(3) charitable organization, which is 
allowed to receive tax-deductible contributions and is subject 
to even tighter curbs on political activity.
    The three groups in question were:
           the Better American Foundation,41 
        a 501(c)(4) established in 1993 by then-Senator Bob 
        Dole and disbanded in June 1995, just as Senator Dole 
        was starting his official campaign organization;
           the Republican Exchange Satellite 
        Network,42 a 501(c)(4) affiliated with 
        former Governor Lamar Alexander of Tennessee; and
           the American Cause,43 a 501(c)(3) 
        established by Patrick Buchanan in 1993.
    In spite of their tax-exempt status, these three groups 
allegedly assisted the candidates by providing staff, paying 
for travel expenses, scheduling media events, conducting 
polling and issue research, and engaging in other activities 
normally associated with campaigns.44 If these 
allegations are true, the three nonprofits were almost entirely 
political in nature and, thus, may have violated their tax 
status and the federal election laws, since none of them 
registered with the Federal Election Commission as a political 
organization.

                               conclusion

    The evidence before the Committee shows that a myriad of 
tax-exempt organizations assisted Republican candidates during 
the 1996 election cycle, serving variously as tools of 
Republican candidates, conduits for Republican donors, and 
money-making operations for conservative fundraisers. One thing 
they all had in common is that they violated the spirit--and, 
in some cases, probably the letter--of the federal tax and 
election laws.
    If these de facto political organizations are not brought 
under control, they will be used even more extensively in 
future elections. It is possible, for example, that a single 
wealthy donor could influence the outcome of dozens of 
congressional races by channeling millions of dollars through 
tax-exempt organizations. If large donors are allowed to 
operate on that scale--and with no disclosure and no 
accountability--the campaign finance laws will be meaningless.

                               footnotes

    \1\ Memo on RNC letterhead (Office of the Co-Chairman) from Howard 
and Phil to Judy, re Seniors Update, 3/20/96. R 33746-33758.
    The Minority staff believes that ``Howard'' is Howard Leach, who 
was the RNC's finance chairman at the time the memo was written. 
``Judy'' is probably Judy Hughes, who was chief of staff to Evelyn 
McPhail, who was co-chairman of the RNC. ``Phil'' has not been 
identified.
    \2\ Memo on RNC letterhead (Office of the Co-Chairman) from Howard 
& Phil to Evelyn and Judy re Seniors Program, 3/30/96. R 033746.
    \3\ Seniors Coalition press release dated 3/11/96.
    \4\ Annenberg Public Policy Center of the University of 
Pennsylvania: ``Issue Advocacy Advertising During the 1996 Campaign: A 
Catalogue,'' September 16, 1997, citing Washington Times, 11/4/96.
    \5\ New York Times, 11/12/92.
    \6\ New York Times, 11/12/92.
    \7\ Los Angeles Times, 4/2/96.
    \8\ National Journal, 1/27/96.
    \9\ Molly Ivins column in Sacramento Bee, 8/26/95 (citing reporting 
by Jim Drinkard of Associated Press).
    \10\ Los Angeles Times, 4/2/96.
    \11\ Des Moines Register, 5/27/94.
    \12\ Los Angeles Times, 4/2/96.
    \13\ Los Angeles Times, 4/2/96.
    \14\ National Journal, 1/27/96.
    \15\ National Journal, 1/27/96.
    \16\ Idaho Statesman, 3/9/96.
    \17\ National Journal, 1/27/96.
    \18\ Omaha World Herald, 9/16/96.
    \19\ Associated Press, 8/2/96.
    \20\ Kansas City Star, 5/5/97.
    \21\ Kansas City Star, 5/5/97.
    \22\ Kansas City Star, 5/5/97.
    \23\ Roll Call, 9/22/94.
    \24\ Kansas City Star, 5/5/97.
    \25\ Wall Street Journal, 11/4/94.
    \26\ Sabato, Larry J. and Glenn R. Simpson. Dirty Little Secrets: 
The Persistence of Corruption in American Politics. New York: Times 
Books, 1996, p. 144, citing Wall Street Journal, 11/4/94.
    \27\ Sabato/Simpson, p. 144.
    \28\ Kansas City Star, 5/5/97.
    \29\ Kansas City Star, 5/5/97. (On 12/4/97, a Committee staff 
member telephoned Steve Merican, the president of ALT, and he confirmed 
that the organization does not disclose its donors.)
    \30\ Kansas City Star, 5/5/97.
    \31\ Wall Street Journal, 11/4/94.
    \32\ Sabato/Simpson, footnote on p. 372.
    \33\ Wall Street Journal, 11/4/94.
    \34\ Los Angeles Times, 10/31/92; Wall Street Journal, 8/25/83.
    \35\ Wall Street Journal, 8/25/93.
    \36\ Wall Street Journal, 11/4/94.
    \37\ Seattle Times, 11/1/92.
    \38\ Wall Street Journal, 8/25/93.
    \39\ Wall Street Journal, 11/4/94.
    \40\ Omaha World Herald, 9/16/96.
    \41\ Washington Post, 6/21/95, p. A1; Associated Press, 5/25/95 and 
11/5/94.
    \42\ Associated Press, 6/21/95.
    \43\ Associated Press, 2/21/97 and 4/10/97.
    \44\ See, for example, Congressional Quarterly, 2/22/97.





PART 2  INDEPENDENT GROUPS

Chapter 16: Overview of Democratic Independent Groups

    Federal election and tax laws attempt to ensure that groups 
registered as tax-exempt independent organizations are truly 
independent from partisan electioneering. To do so, several 
laws prohibit these organizations from (1) conducting ``issue 
advocacy'' if the advocacy is, in reality, nothing more than 
support for political candidates and (2) coordinating their 
activities with political committees or candidates (See Chapter 
9). The Minority's investigation of independent groups 
associated with the Republican Party, as discussed in Chapters 
10-15 of this Report, focused on whether specific organizations 
violated these laws. The evidence shows that many of them 
clearly circumvented the law and some appear to have violated 
it. Several pro-Republican organizations closely coordinated 
their activities with the Republican Party, and some were 
directly funded by the Republican National Committee. In 1996 
alone, the RNC gave nearly $6 million to supposedly 
``nonpartisan'' groups. Two tax-exempt organizations were even 
established by the RNC.
    The Committee found no evidence that there was this level 
of coordination on the Democratic side. There was nothing in 
the files of the Democratic National Committee to compare with 
RNC memoranda showing close coordination with pro-Republican 
groups. Regarding issue advocacy, the Committee received little 
evidence supporting allegations that pro-Democratic independent 
groups conducted issue advocacy campaigns that served as 
nothing more than partisan electioneering. The evidence also 
shows that independent groups received very little money from 
the DNC. In all of 1996, the DNC contributed less than $185,000 
to independent groups, a tiny fraction of the RNC's 
contributions to such groups. Of course, the Committee does not 
have a full picture of what happened during the 1996 election 
cycle, since many subpoenaed groups--both pro-Democratic and 
pro-Republican--refused to cooperate with the investigation.
    The following chapters explore the Committee's 
investigation of independent groups associated with the 
Democratic Party. The first two chapters discuss the 
Committee's public investigation of these groups, which was 
limited to exploring allegations that Harold Ickes, former 
chief of staff in the White House, directed a potential 
contribution to groups including Defeat 209 and Vote Now '96 
and allegations that two DNC officials directed a potential 
$100,000 contribution to the re-election campaign of former 
Teamsters President Ron Carey's. The last chapter summarizes 
allegations against a variety of other independent groups 
traditionally associated with the Democratic Party.

                                FINDINGS

    (1) During the 1996 election cycle, several independent 
groups spent millions of dollars to promote Democratic issues 
and possibly Democratic candidates through issue advocacy, and 
voter education and registration.
    (2) The evidence before the Committee, however, suggests 
that the Democratic Party did not play a central role in 
financing, or coordinating with, these groups.
PART 2  INDEPENDENT GROUPS

Chapter 17: R. Warren Meddoff

    Shortly before the 1996 election, Florida businessman 
Warren Meddoff approached President Clinton at a Florida 
fundraiser concerning a possible $5 million donation to the 
President's campaign from Meddoff's associate, William Morgan. 
Meddoff told Ickes that Morgan wanted to make at least some of 
his contributions tax deductible, and Ickes prepared a memo 
suggesting some possible tax-exempt and tax deductible 
recipients. After sending the memo to Meddoff, Ickes received 
word that a DNC background check of Meddoff and his associate 
raised serious questions and that it would be better for the 
DNC to decline Meddoff's offer of contributions. Ickes and 
Meddoff dispute what happened next. Meddoff testified that 
Ickes told him to ``shred'' the memo; Ickes testified that he 
merely told Meddoff that the memo ``was inoperative.''
    Based on the evidence before the Committee, we make the 
following findings regarding these events:

                                FINDINGS

    (1) There is no evidence before the Committee suggesting 
that Harold Ickes or any DNC official acted illegally in their 
dealings with Warren Meddoff. Current law does not prohibit a 
federal government employee or party official from directing 
contributions to tax-exempt organizations.
    (2) It would have been more prudent, as Ickes himself 
testified, for Ickes to have immediately referred Meddoff to 
the DNC. Meddoff sought suggestions on how to make a tax-
deductible contribution that would help President Clinton's 
campaign. The Committee does not have sufficient evidence to 
determine whether the organizations recommended by Ickes were 
actually engaged in any partisan political activities. Ickes's 
opinion that a contribution to such groups would benefit the 
President's campaign does not establish that these 
organizations were engaged in any activities that would have 
been inconsistent with their tax-exempt status.
    (3) The DNC acted appropriately by checking the backgrounds 
of Meddoff and his associate and ultimately refusing their 
proposed contribution.
    (4) Meddoff is not a credible witness. His explanation to 
the Committee of two past proposals on behalf of two different 
persons to contribute $5 million to the Republican Party in one 
case and the Democratic Party in the other case; his admission 
of involvement in conduct that appears to be an attempt to 
bribe a federal official; his apparent threats to his former 
employer and a DNC fundraiser; and the fact that he never met 
the person on whose behalf he was allegedly making a $5 million 
contribution to help President Clinton, cast significant doubt 
on his credibility.

                             WARREN MEDDOFF

    Warren Meddoff, described as a ``businessman'' in published 
news reports, has worked at a commodities trading firm, at a 
car dealership as a business manager, and as a real estate 
broker at three different companies.1 From 1983 to 
1988, Meddoff also served as a member of the executive 
committee for the Republican Party in Broward County, 
Florida.2 During that same time period, Meddoff 
registered to run for the Florida State House as a Republican, 
but later withdrew his candidacy.3 Meddoff testified 
that he started his own company in 1989, called R. Warren 
Meddoff, P.A., located in Fort Lauderdale, Florida.4 
Meddoff described his work as a consultant with ``areas of 
involvement in real estate, investment development and 
brokerage, and in consulting on financial matters under 
contract with several foreign governments, those governments 
having been Bulgaria, Romania, the Ukraine, Tajikstan, and 
Moldova.''5 In October 1996, Meddoff was hired as an 
export manager by Bukkehave, Inc., a wholly owned subsidiary of 
a Danish corporation.6
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 17.
---------------------------------------------------------------------------
    Since 1989, Meddoff has also had business dealings with an 
individual named William Morgan.7 These business 
dealings involve gold-backed bearer bonds issued by Germany's 
Weimar Republic before World War II.8 Meddoff has 
sought, so far unsuccessfully, to ``utilize and develop'' these 
bonds as a source of income.9 Meddoff claims that 
Morgan, unlike himself, has been able to ``close transactions'' 
involving these bonds, 10 but Morgan is a 
``mysterious character whose stories don't always quite add 
up,'' according to Vanity Fair.11 Despite dealing 
with him for more than five years, speaking with him up to five 
to ten times a day and entering into contracts with him, 
Meddoff testified that he has never met Morgan.12 
Morgan did not pay Meddoff for his representation, and Meddoff 
said he has never made any money from his association with 
Morgan. Meddoff claims that he has never checked into Morgan's 
background or net worth.13 The little information 
the Committee could garner about Morgan invited considerable 
skepticism about Medoff's claims that Morgan is frequently at 
the center of multi-million dollar business deals. The 
Committee learned that Morgan operates a business out of a 
house which he does not own, that properties he does own have 
had two IRS liens against them, and that he defaulted on a 
personal note in 1988 and was unable to even afford an attorney 
at that time.14

                 MEDOFF AND THE OCTOBER 1996 FUNDRAISER

    On October 22, 1996, according to Meddoff's testimony, 
Meddoff was sent by his employer, Bukkehave, to a Democratic 
fundraiser held at the Biltmore Hotel in Coral Gables, Florida. 
His primary purpose in attending was to assist a client of 
Bukkehave, Catholic Relief Services, in making humanitarian 
flights to Cuba to assist victims of a recent hurricane 
there.15 Administration policy at that time did not 
permit direct flights to Cuba and Meddoff was tasked to seek 
administration support for the charity's proposed relief 
flights.16 Meddoff said he spoke with Morgan earlier 
that day about his forthcoming attendance at the fundraiser 
that night.17 According to news reports, however, 
Morgan has said that Meddoff was the one who originally 
proposed that Morgan propose a contribution.18 
During that conversation, Morgan asked Meddoff to inform the 
President that he wished to make a contribution of $5 million 
to President Clinton.19 At the fundraiser, Meddoff 
handed President Clinton a business card on which he had 
written, ``I have an associate that is interested in donating 
$5 million to your campaign.''20 The President took 
the card, asked for another one for his staff, and indicated 
that someone would get back to him.21 According to 
Meddoff, at ``no time did the President discuss contributions 
or funds'' during this conversation.22
    Instead, during their conversation, which Meddoff said 
lasted between two to five minutes, the President and Meddoff 
discussed the aid flights to Cuba that his employer's client 
wished to undertake. When Meddoff told the President that 
Catholic Relief Services and the Catholic diocese wanted his 
support for those flights, the President, according to Meddoff, 
responded, ``I've made the decision . . . Tell the people 
they'll be able to fly.''23 The White House had 
formally announced that morning, before the President had left 
Washington for Florida, that Catholic Charities would be 
permitted to fly relief supplies to Cuba.24 Meddoff 
testified that he did not believe that the President's decision 
had ``anything to do with me.''25 In addition, 
Meddoff testified in his deposition that Bukkehave's interest 
in the aid flights was ``a humanitarian issue, not one of going 
out for remuneration or trying to get some sort of financial 
benefit from it.''26

                   ICKES'S CONVERSATIONS WITH MEDDOFF

    After the Florida fundraiser, the President asked Harold 
Ickes, White House deputy chief of staff, to contact Meddoff 
concerning the proposed contribution. Pursuant to this 
direction from the President, Ickes had a telephone 
conversation with Meddoff on October 26 in which they discussed 
the possible $5 million contribution.27 These 
contributions were to come from the proceeds of a business deal 
to be completed by November 1 from which Morgan expected to 
realize over $300 million.28 Meddoff explained that 
Morgan, in addition to the proposed $5 million donation, was 
contemplating additional donations over a period of time that 
would total over $50 million.29 Meddoff said he told 
Ickes that the funds were not the product of any criminal 
activity and originated from within the United States, but that 
he did not describe the specific nature of Morgan's pending 
transaction. Meddoff said he did convey to Ickes, however, that 
Morgan wished to get a tax benefit out of the contribution in 
order to reduce his anticipated tax liability on the pending 
deal.30 When asked during his deposition how Morgan 
anticipated making a tax-deductible donation to a political 
campaign, Meddoff testified ``he [Morgan] sometimes has a 
misconception of the reality of our legal system and what works 
and what doesn't work.''31 During this and 
subsequent conversations with Ickes, Meddoff said that he 
``never relayed on a request'' for anything in connection with 
the proposed contributions.32
    During one of these conversations, according to Meddoff, 
Ickes asked whether Morgan would also be willing to make a non-
tax-deductible donation to the DNC.33 Meddoff says 
that, after consulting with Morgan, he informed Ickes that 
Morgan was willing to make such a contribution once the funds 
became available to him.34
    On October 29, according to Meddoff, Ickes telephoned 
Meddoff from Air Force One and said, ``We have an immediate 
need for $1.5 million within the next 24 hours. Do you think 
you could get it to us?''35 After consulting with 
Morgan, Meddoff said he told Ickes that a contribution within 
24 hours would not be possible, but that Morgan was expecting 
to receive some of his money within 48 hours and a contribution 
could be effected within that time frame.36 Meddoff 
says he requested information on where to send the funds and 
how to do so.37 Medoff says that Ickes told him that 
he would be sending information on ``501(c)(3)'s (charitable, 
tax-exempt organizations) that were friendly to the President's 
campaign and supported the same areas, and . . . also what 
would be a non-tax-favorable contribution to the Democratic 
National Committee.''38 Ickes, for his part, does 
not remember this conversation with the same level of detail, 
but confirmed in his deposition that he called Meddoff from Air 
Force One, discussed Morgan's desire to make a tax-deductible 
contribution to assist President Clinton, and promised to 
provide him with information about entities to which such 
contributions could be made.39 Ickes also testified 
that, immediately after speaking with Meddoff, he called Eric 
Berman, head of research at the DNC, and asked him to check the 
background of both Meddoff and Morgan.40
    On October 31, according to the testimony of both Ickes and 
Meddoff, Meddoff received a fax from Ickes providing 
information concerning the following four groups, along with 
proposed contribution amounts: (i) National Coalition of Black 
Voter Participation ($40,000); (ii) Defeat 209 ($250,000); 
(iii) Vote Now '96 ($250,000); and (iv) Democratic National 
Committee ($500,000).41 Meddoff testified that he 
forwarded this fax to Morgan on the assumption that Morgan 
would share the information with his attorneys and accountants 
in order to make the ultimate decisions about which 
organizations would receive the contributions.42 
Ultimately, as explained in more detail below, Morgan made none 
of the suggested contributions.

                  NO EVIDENCE OF ILLEGAL COORDINATION

    Ickes has testified that with hindsight, it would have been 
better if he had not sent the fax, but that he did not believe 
that he did anything improper. In his deposition he stated:

          I'm confident I did nothing illegal . . . it would 
        have been the better part of discretion for me to have 
        handed this whole thing off to the professional 
        fundraisers [at] the DNC to handle, but given the press 
        of time, given the fact that the President asked me to 
        take care of this and he didn't say that I had to make 
        the call, but given the press of time and given the 
        fact that if this money was going to be forthcoming and 
        if it was going to be used for the election, it had to 
        get done quickly, and I knew that I could get it done 
        quickly or that I would get it done quickly. [With] 20/
        20 hindsight, I should have handed it off to the 
        DNC.43

    The Committee agrees that Ickes would have been well-
advised to refrain from providing such information to a 
potential contributor in order to avoid any appearance of 
improper coordination. Nevertheless, the simple fact that Ickes 
identified non-profit groups in response to a desire from a 
potential contributor to make a tax-deductible contribution 
does not establish that improper coordination has occurred. 
There is no evidence, for example, that Ickes or the groups 
proposed that the contributions be spent in coordination with 
the White House or DNC officials.

         ICKES'S ALLEGED DIRECTION TO MEDDOFF TO SHRED THE FAX

    Meddoff has testified that on the afternoon of October 31, 
the same day that Meddoff received the fax from Ickes 
identifying the tax-exempt groups to whom contributions could 
be made, Ickes called Meddoff concerning the fax.44 
During this conversation, according to Meddoff, Ickes explained 
the fax he had sent that morning had been sent ``in error'' and 
asked him to shred it.45 Ickes, for his part, has 
denied that he told Meddoff to shred the fax. Ickes testified 
in his deposition, ``My recollection is that I called Meddoff 
and told him . . . that the memo was inoperative . . . I have 
no recollection of saying that I would shred a memo. I find it 
inconceivable that I would use that kind of language to 
somebody--with somebody that I knew, much less that I had no 
idea who I was talking about.''46
    At the hearing, Senator Nickles indicated that Ickes had 
covered up his actions in light of the fact that the White 
House had been unable to locate an original copy of the 
memorandum faxed to Meddoff. In response, Ickes pointed out 
that he had voluntarily produced to the Committee the identical 
information:

          I have never seen the original of the document, 
        Senator, of the memo. Newsweek did fax that memo or I 
        received a copy of the memo from Newsweek. That was in 
        my files. That was turned over. That is the document 
        that you are referring to here, number one.
          Number two is, every--virtually every pertinent 
        aspect and piece of information that is in the typed 
        memo is also contained in my handwritten notes, which 
        were turned over to the Committee.47

Ickes did not have a copy of the original because he had 
dictated it from Air Force One to the White House, which then 
faxed it to Meddoff. Ickes had only his handwritten notes which 
he kept and produced to the Committee. The fact that Ickes kept 
these handwritten notes in his files belies the contention that 
he either sought to hide the contents of the memo from the 
Committee or even that he asked Meddoff to shred the memo in 
the first place.48

                         MEDDOFF'S CREDIBILITY

    Meddoff's dramatic account of having been instructed by 
Ickes to shred a document made an issue of his credibility. The 
evidence before the Committee raises serious doubts about 
Meddoff's credibility. Moreover, the evidence strongly suggests 
that Meddoff had a personal interest in appearing before the 
Committee--his desire to damage his former employer, Bukkehave, 
Inc.
    Meddoff was fired from his job at Bukkehave in July 
1997.49 Meddoff was terminated for numerous 
violations of company policy for which he had been warned, 
including misuse of company credit cards, mis-allocation of 
resources, habitual tardiness, failing in his duties, and 
making negative comments about the company and its 
officers.50 On September 10, 1997, (the day before 
Meddoff was originally scheduled to testify before the 
Committee), he sent an e-mail to Christian Haar, the CEO at 
Bukkehave, stating:

          The problem with betraying someone's trust and 
        friendship is that the individual that you betrayed 
        will never forgive the betrayal. Tomorrow you and your 
        company will come under international scrutiny and 
        scorn. Prepare to face the [w]rath of an entire 
        country[,] foreigner. I am sure that the President and 
        Vice President, let alone Chrysler, will thank you for 
        the trouble that you have caused and will be caused due 
        to your personal actions.51

This e-mail presented a disturbing picture of a hidden agenda 
behind Meddoff's testimony. In light of these facts, the 
Committee has serious questions about the extent to which 
Meddoff's animosity toward his former employer may have colored 
his hearing testimony.
    Meddoff's character was further tarnished in light of 
information concerning a previous episode wherein Meddoff spun 
a fanciful scenario proposing a huge political contribution on 
behalf of a client to be funded by a not-yet-complete 
transaction. In February 1995--a year and a half before Meddoff 
gave President Clinton his business card at the Biltmore Hotel 
fundraiser--he sent a letter to Senator Dole offering to donate 
$5 million to help the Republican Party win the 1996 
presidential election.52
    In the letter, Meddoff explained that he was representing 
an entity called Jelico Investments, Inc. in connection with a 
project on behalf of the government of Bulgaria that involved 
the exchange of pre-1940 gold-backed German bonds. According to 
Meddoff, his client told him to make the offer of a $5 million 
contribution to the RNC to Senate Majority Leader Dole and 
House Speaker Newt Gingrich in order to influence the U.S. 
Government to ``take a hands-off position'' on the transaction 
so that the deal could go through.53 Meddoff's 
client ``felt that if both parties were cognizant of the fact 
that there was a possibility of such large term donations made 
to them, that the U.S. Government would take a hands-off 
position and not involve itself one way or the other.'' 
54 By Meddoff's own account, his actions on behalf 
of his client in this matter sought to influence public policy 
in exchange for a promised contribution. During the hearing, 
Senator Levin made the following observation about the 
potential seriousness of Meddoff's overture to Dole:

          So you now write the White House and Senator Dole 
        saying you have been notified that U.S. Government 
        employees are interfering with the transaction. You 
        believe that if that interference is removed, it would 
        facilitate that transaction, and you are offering both 
        of them $5 million from the proceeds of that 
        transaction. That comes very, very close, Mr. Meddoff, 
        to being the offer of a bribe.55

The contribution was never made, Meddoff claims, because the 
German bond deal fell through.56
    In February of 1996, Meddoff wrote a letter on his own 
behalf to President Clinton with an exceedingly familiar 
ring.57 Meddoff's letter related that he was 
prepared to make a substantial contribution to President 
Clinton and asked for a meeting with the president during his 
upcoming visit to Washington with his family in 
April.58 In his deposition, Meddoff testified that 
he was involved at that time in a transaction to sell 493,000 
``historical documents,'' i.e. the gold-backed 
bonds.59 Meddoff anticipated closing on the contract 
in mid-March, at which time he would realize over $350 million 
in profit.60 Unsurprisingly, Meddoff testified that 
this deal fell through and the proposed contribution, like the 
other proposed contributions from his clients that were 
supposed to be funded from such deals, was never 
made.61 President Clinton never responded to the 
February letter.62
    Meddoff's claims to have represented two different clients 
who each independently sought to use him to advance identical 
promises of a $5 million political contribution from the 
proceeds of a pending transaction involving gold-backed bonds 
strains any reasonable notion of credibility.63 The 
fact that Meddoff himself proposed a similar contribution, 
contingent on the outcome of a wildly lucrative business deal, 
raises additional doubts about the true purpose of these 
proposed contributions and Meddoff's actual motives. The 
proposed transactions based on the value of ``historical 
documents'' also raise suspicion given that many experts 
consider such ``deals'' to constitute nothing more than 
``securities, mail and wire fraud.'' 64
    Evidence also indicates that, according to Morgan, Meddoff 
sent him a falsified memo in the summer of 1996 which was 
designed to look as if it came from then-White House Chief of 
Staff Leon Panetta.65 Reportedly written on what 
looks like official White House stationery, the memo, dated 
February 8, 1996, purports to advise Meddoff about how one of 
his Weimar bond deals should be handled.66
    These doubts are underscored by Meddoff's threats to a 
Democratic fundraiser concerning his allegations about Ickes. 
In November, about a week after Ickes allegedly asked him to 
shred the memo, Meddoff related his story about the alleged 
direction by Ickes to shred the faxed memorandum to a cousin 
who worked for Newsweek. At the time, Meddoff claims he told 
Newsweek that his information could be used for background 
purposes, but he withheld permission to use his 
name.67 In January 1997, Mitchell Berger, a Florida 
Democratic fundraiser with ties to Vice President Gore, 
solicited a $25,000 contribution related to the presidential 
inauguration from Meddoff's employer, the Bukkehave company. 
When Meddoff, accompanied by the Danish CEO of Bukkehave's 
parent company, traveled to Washington to present the check, 
Meddoff claims that Berger told him that, due to a policy 
change in the administration, the contribution could not be 
accepted since Bukkehave was a U.S. subsidiary of a foreign 
corporation and Bukkehave's CEO was a foreign 
national.68 According to Meddoff, Berger's rebuff 
made him ``contemptuous of the disdain that individuals would 
have for corporations or individuals that are prepared to make 
donations of that type.'' 69 In response, Meddoff 
threatened to go public with his allegations concerning Ickes. 
``I had informed him that, as he well knew, since he had seen 
the documents from Mr. Ickes, he was aware that I had provided 
it to certain people within the media for research purposes; 
that they had from other sources confirmed it and that they 
were prepared to print it. I said to Mitchell, `You know this 
is all going to come out,' and he says, `We don't care. Take 
your best shot.' 70 Meddoff subsequently authorized 
Newsweek to use his name and the story was published in 
February.71 Meddoff's attempt to pressure Berger 
into accepting a political contribution from his employer by 
threatening to ``go public'' with his claims about Icke's 
alleged direction to shred the memorandum reveal another 
potential motivation for Meddoff to embellish the circumstances 
of his conversations with Ickes and cast further doubt on his 
credibility.

              the dnc's refusal of the contribution offer

    The same day that he sent the memorandum identifying tax-
exempt organizations to Meddoff, Ickes referred Meddoff's 
possible contribution to the DNC. A DNC official then contacted 
Meddoff. Meddoff informed the DNC that ``what Mr. Morgan was 
looking for at that time was a letter designating the fact that 
he was supporting the President and the President was thanking 
him.'' 72 Meddoff did receive a letter from DNC 
Chairman Donald Fowler, stating:

          Please accept my deep appreciation for the 
        substantial financial support you have offered the 
        Democratic Party. Your support will help advance 
        President Clinton's agenda for the American people in 
        the 21st Century. We look forward to working with you 
        in the future. Best regards. Don Fowler.73

This letter was not what Morgan wanted, however, because ``the 
letter did not specify that Mr. Morgan was making contributions 
or the fact that it was done in support of the President.'' 
Morgan also ``wanted language to the effect that if there was 
anything that could be done in the future, to please notify 
them.'' 74 Since the letter did not contain what 
Morgan was looking for, Meddoff edited the letter to include 
the changes that Morgan was looking for and faxed it back to 
Fowler.75 Meddoff called DNC Finance Director 
Richard Sullivan three times on October 31 alone, to get the 
letter he was seeking for Morgan.76 Sullivan never 
returned Meddoff's phone calls.77
    The DNC looked into Meddoff and Morgan and found, among 
other things, that Meddoff had sued the government of Romania 
and various Romanian government officials for 
fraud.78 Meddoff later told Newsweek that the ``DNC 
was being so careful and that they weren't circumventing 
anywhere to get large donations. . . . They weren't 
circumventing laws. They weren't cutting any corners. They were 
being very careful in my case, the DNC, to do everything 
properly and to make sure it was done properly.'' 79
    Meddoff spoke to Fowler three to five times.80 
In his deposition, Fowler testified that he told Meddoff that 
unless they could find someone to validate the appropriateness 
of the contribution, it would not be accepted, and he asked for 
references. Meddoff replied, ``[Y]es, here are a few numbers 
that you can call, but if they answer something about the CIA, 
don't be surprised.'' 81 Fowler did not follow up 
with Meddoff any further, and he told Sandler to tell Ickes 
that the DNC was not going to take the money.82 When 
Sandler told Ickes that the contribution was not going to be 
pursued by the DNC, Ickes concurred with the 
decision.83 Fowler and Sullivan cut off 
communications with Meddoff on October 31.84 In May 
of 1997, despite stories that had appeared in the press 
concerning Meddoff's proposed campaign contributions, 
Republican Majority Leader Trent Lott sent a letter to Meddoff 
thanking him for his contribution of $2,500 to the Republican 
Presidential Roundtable and soliciting additional 
contributions.85

                    fundraising on federal property

    The discussions between Ickes and Meddoff also raised the 
issue of whether Ickes's phone calls to Meddoff from Air Force 
One and the White House were illegal or improper instances of 
fundraising on government property. While Ickes's brief 
involvement with a potential contributor before passing 
responsibility to DNC officials raised concerns, the 
Committee's investigation showed that Ickes did not initially 
solicit Meddoff for funds. When Meddoff spoke to Ickes for the 
first time, he made it clear that there was ``absolutely no 
doubt whatsoever'' that Morgan wanted to make a 
contribution.86 Ickes's conversations with Meddoff 
at this point merely concerned the timing and form of the 
proposed contribution that Meddoff's associate was already 
willing to make. Given these circumstances, it is difficult to 
characterize Ickes's initial discussions with Meddoff as a 
solicitation.
    According to Meddoff, however, during one of their 
subsequent discussions, Ickes asked Meddoff whether his 
associate would be willing to make a non-tax-deductible 
donation to the DNC. After Meddoff informed Ickes that this 
would be possible, Ickes sent information to Meddoff concerning 
the DNC's bank account and suggested a contribution amount of 
$500,000. While some allege that Ickes solicited a contribution 
to the DNC, as discussed in other sections of this report, 
there is considerable doubt as to whether a telephone call from 
federal property to someone not on federal property concerning 
soft money contributions constitutes an illegal solicitation 
within the meaning of the Pendleton Act.
    An additional threshold issue is whether the phone line 
that was used by Ickes was a DNC line or a government line. The 
administration took great pains to provide separate lines of 
communication on Air Force One, paid for by the DNC, for 
communications related to the campaign. WHCA Commander Simmons 
testified in his deposition about a separate communication 
system, called INMARSAT, that was installed on Air Force One in 
the late summer or early fall of the 1996 
campaign.87 One of the advantages of the INMARSAT 
system was that it was capable of generating detailed billing 
records to separate political calls from official 
calls.88 Simmons testified that these efforts to 
separate political and officials costs were unprecedented. 
``[T]his administration has gone through more pain than anyone, 
and I give a historical reference because I have people who 
have been here through several administrations. It's never been 
done, where they tried to break down and draw a demarcation 
line and say this is political and this is offical.'' 
89 The Committee's investigation was unable to 
conclusively establish which lines were utilized by Ickes in 
his communications with Meddoff.

                               conclusion

    While the Minority agrees with Ickes's statement that the 
``better part of discretion'' would have been for him to have 
promptly passed the Meddoff matter to the DNC, the Committee 
found no evidence of illegal coordination between the DNC and 
the non-profit groups to which Ickes referred Meddoff. The only 
remaining issue of importance is the truth of Meddoff's 
allegation that Ickes directed him to ``shred'' the memo 
listing the tax-exempt groups. Significantly, Ickes's notes 
upon which the fax were based that Ickes had maintained in his 
files and a copy of the fax itself that was provided to Ickes 
by a news organization, were voluntarily produced to the 
Committee by Ickes without the necessity of a subpoena. It is 
difficult to reconcile Ickes's cooperativeness with the 
Committee and his candid acknowledgement about drafting and 
sending the fax with Meddoff's claim. Most importantly, the 
evidence before the Committee raises grave doubts about 
Meddoff's credibility given the mysterious nature of his 
business dealings and associates, his apparent personal agenda 
in appearing before the Committee, and his apparent attempt at 
bribery in connection with a previous proposed contribution. 
Finally, the DNC, for its part, acted appropriately when it 
checked Meddoff's and Morgan's backgrounds and, rejected 
Meddoff's offer.

                               footnotes

    \1\ R. Warren Meddoff deposition, 8/19/97, pp. 8-10.
    \2\ R. Warren Meddoff deposition, 8/19/97, p. 15.
    \3\ R. Warren Meddoff deposition, 8/19/97, pp. 15-16.
    \4\ R. Warren Meddoff deposition, 8/19/97, p. 7.
    \5\ R. Warren Meddoff deposition, 8/19/97, p. 7.
    \6\ R. Warren Meddoff deposition, 8/19/97, p. 6.
    \7\ R. Warren Meddoff deposition, 8/19/97, p. 11.
    \8\ R. Warren Meddoff deposition, 8/19/97, p. 11.
    \9\ R. Warren Meddoff deposition, 8/19/97, p. 11.
    \10\ R. Warren Meddoff deposition, 8/19/97, p. 12.
    \11\ Exhibit 2014M: Article regarding Harold Ickes which details 
Ickes' communications with Meddoff, Vanity Fair, 9/97; R. Warren 
Meddoff, 9/19/97 Hrg., p. 29.
    \12\ R. Warren Meddoff, 9/19/97 Hrg., p. 27; R. Warren Meddoff 
deposition, 8/18/97, p. 13.
    \13\ R. Warren Meddoff, 9/19/97 Hrg., pp. 117, 119, 126. Senator 
Glenn likened this to the movie, ``The Sting'' (a popular early 1970s 
film about an elaborate con game). Senator Glenn, 9/19/97 Hrg., pp. 
119, 126.
    \14\ R. Warren Meddoff, 9/19/97 Hrg., pp. 71-72, 118.
    \15\ R. Warren Meddoff deposition, 8/19/97, p. 23.
    \16\ R. Warren Meddoff deposition, 8/19/97, p. 23.
    \17\ R. Warren Meddoff deposition, 8/19/97, p. 28.
    \18\ Dallas Morning News, 2/4/97.
    \19\ R. Warren Meddoff deposition, 8/19/97, p. 28.
    \20\ R. Warren Meddoff deposition, 8/19/97, p. 9.
    \21\ R. Warren Meddoff, 9/19/97 Hrg., pp. 7-8. There is a videotape 
of this fundraiser, but Meddoff does not appear on the tape, despite a 
few erroneous press accounts that state that the tape shows President 
Clinton ``being handed a business card by R. Warren Meddoff.'' See, 
e.g., New York Times, 10/15/97.
    \22\ R. Warren Meddoff, 9/19/97 Hrg., pp. 41-42; R. Warren Meddoff 
deposition, 8/18/97, pp. 30, 129.
    \23\ R. Warren Meddoff deposition, 8/18/97, p. 129-30.
    \24\ Exhibit 2016M: Newspaper article regarding U.S. aid flights to 
Cuba, Reuters North American Wire, 10/22/96; see also R. Warren 
Meddoff, 9/19/97 Hrg., p. 41.
    \25\ R. Warren Meddoff, 9/19/97 Hrg., p. 41.
    \26\ R. Warren Meddoff deposition, 8/19/97, p. 133.
    \27\ R. Warren Meddoff, 9/19/97 Hrg., pp. 8-11.
    \28\ R. Warren Meddoff, 9/19/97 Hrg., p. 38; R. Warren Meddoff 
deposition, 8/18/97, p. 53.
    \29\ R. Warren Meddoff deposition, 8/19/97, pp. 44-45.
    \30\ R. Warren Meddoff, 9/19/97 Hrg., pp. 9-11; R. Warren Meddoff 
deposition, 8/18/97, p. 53.
    \31\ R. Warren Meddoff deposition, 8/19/97, pp. 127-128.
    \32\ R. Warren Meddoff deposition, 8/19/97, p. 38.
    \33\ R. Warren Meddoff deposition, 8/19/97, pp. 50, 161.
    \34\ R. Warren Meddoff deposition, 8/19/97, pp. 50, 161.
    \35\ R. Warren Meddoff deposition, 8/19/97, p. 41.
    \36\ R. Warren Meddoff deposition, 8/19/97, p. 41.
    \37\ R. Warren Meddoff deposition, 8/19/97, pp. 41, 135-136.
    \38\ R. Warren Meddoff deposition, 8/19/97, p. 50.
    \39\ Harold Ickes deposition, 6/27/97, pp. 40-42.
    \40\ Harold Ickes deposition, 6/27/97, p. 40.
    \41\ Exhibit 929: Fax from R. Warren Meddoff to Harold Ickes, 10/
31/96; Harold Ickes deposition, 6/27/97, p. 46.
    \42\ R. Warren Meddoff, 9/19/97 Hrg., p. 152.
    \43\ Harold Ickes deposition, 6/27/97, pp. 57-58.
    \44\ R. Warren Meddoff, 9/19/97 Hrg., pp. 16-17.
    \45\ R. Warren Meddoff, 9/19/97 Hrg., pp. 16-17.
    \46\ Harold Ickes deposition, 6/27/97, pp. 42-43.
    \47\ Harold Ickes, 10/8/97 Hrg., pp. 132-33; see also pp. 142-43. 
Ickes also testified at the hearings on October 8, 1997 that Meddoff 
told him that he thought Ickes was being a scapegoat: ``Mr. Meddoff, 
shortly before he testified, called my attorney, Mr. Bennett, and 
explained to him that he thought that Harold Ickes was being a 
scapegoat and he was getting a raw deal and on and on and on.'' Harold 
Ickes, 10/8/97 Hrg., p. 101.
    \48\ Also supporting his contention, Ickes produced to the 
Committee a copy of the memorandum that he had in his files. Exhibit 
929: Fax from R. Warren Meddoff to Harold Ickes, 10/31/96.
    \49\ R. Warren Meddoff, 9/19/97 Hrg., pp. 25-27; R. Warren Meddoff 
deposition, 8/18/97, p. 6. The Associated Press obtained a copy of this 
deposition prior to Meddoff testifying at the hearing. See, e.g., 
Capital Times, 9/19/97.
    \50\ Senator Torricelli, 9/19/97 Hrg., p. 75.
    \51\ Exhibit 2066M: E-mail from R. Warren Meddoff to Christian 
Haar, 9/10/97.
    \52\ Exhibit 2010M. The letter reads:

        Dear Senator Dole:

            This firm is currently representing an American 
        entity in a transaction with and for the Republic of 
        Bulgaria. Upon completion of this transaction we and 
        our client are committing to the donation of 
        $5,000,000 to help the Republican Party during the 
        1996 Presidential election.
            The transaction we are involved in deals with 
        the exchange of Pre-1940 Gold Backed German 
        Government External Loan Documents for the 
        forgiveness of Sovereign debt and hard currency. 
        Upon completion at its fullest extent this 
        transaction could provide the Republic of Bulgaria 
        with a credit against debt of $700,000,000 and hard 
        currency in excess of $2,000,000,000. According to 
        the stated policy of the U.S. Government this, would 
        solidify market reforms and lead to enhanced U.S. 
        security interests in the region.
            You have been previously notified of individual 
        government employees interfering in this 
        transaction, contrary to policy. We thank you for 
        the courtesy exhibited to the Bulgarian delegation 
        during the President's visit of last week. We 
        appreciate your attention to this matter and keep 
        your informed as to our progress.
              Sincerely yours,
                  R. Warren Meddoff, P.A.

    \53\ R. Warren Meddoff, 9/19/97 Hrg., pp. 35-36; R. Warren Meddoff 
deposition, 8/18/97, p. 144-146.
    \54\ R. Warren Meddoff, 9/19/97 Hrg., pp. 35-36; R. Warren Meddoff 
deposition, 8/18/97, p. 144-146.
    \55\ Senator Levin, 9/19/97 Hrg., p. 93.
    \56\ R. Warren Meddoff, 9/19/97 Hrg., p. 35.
    \57\ Exhibit 2005M. The letter reads:

    Dear Mr. President:

            This letter is to advise you that I am 
        considering a large donation to the Democratic 
        National Committee to assist you in the forth coming 
        [sic] Presidential election this fall. Please have 
        your staff contact my offices to coordinate 
        presentation of this donation to you in person 
        during my families [sic] Washington visit scheduled 
        between April 3 and the 12th.
            You have made great strides and accomplished 
        under very difficult circumstances, particularly in 
        the area of foreign affairs. I strongly support your 
        efforts in spite of having been a life time 
        supporter of the Republican Party. During my last 
        visit to the White House, I had the pleasure and 
        honor of observing your representation of our nation 
        during the State visit of President Yeltsin.
            I look forward to your response and wish you 
        success in your future endeavors as President. Thank 
        you for your kind consideration of this matter.
              Sincerely yours,
                  R. Warren Meddoff

    \58\ R. Warren Meddoff deposition, 8/19/97, pp. 16-17.
    \59\ R. Warren Meddoff deposition, 8/19/97, p. 17.
    \60\ R. Warren Meddoff deposition, 8/19/97, p. 17.
    \61\ R. Warren Meddoff deposition, 8/19/97, p. 18.
    \62\ R. Warren Meddoff, 9/19/97 Hrg., pp. 38-39.
    \63\ R. Warren Meddoff, 9/19/97 Hrg., pp. 67, 87-93.
    \64\ Dallas Observer, 1/1-7/98.
    \65\ Dallas Observer, 1/1-7/98.
    \66\ Dallas Observer, 1/1-7/98.
    \67\ R. Warren Meddoff, 9/19/97 Hrg., pp. 80, 86.
    \68\ R. Warren Meddoff, 9/19/97 Hrg., p. 23; see also R. Warren 
Meddoff deposition, 8/18/97, p. 81.
    \69\ R. Warren Meddoff deposition, 8/19/97, p. 154.
    \70\ R. Warren Meddoff, 9/19/97 Hrg., p. 24.
    \71\ R. Warren Meddoff, 9/19/97 Hrg., p. 86; see Newsweek, 2/10/97.
    \72\ R. Warren Meddoff deposition, 8/18/97, p. 56; R. Warren 
Meddoff, 9/19/97 Hrg., pp. 14-15, 99, 101.
    \73\ Exhibit 931: fax from Don Fowler to Warren Meddoff, 10/31/96; 
Exhibit 2008M: fax from Don Fowler to Warren Meddoff, 10/31/96.
    \74\ R. Warren Meddoff, 9/19/97 Hrg., pp. 15, 101.
    \75\ R. Warren Meddoff, 9/19/97 Hrg., pp. 46-47; R. Warren Meddoff 
deposition, 8/18/97, p. 60.
    \76\ R. Warren Meddoff, 9/19/97 Hrg., pp. 49-50. Exhibit 2007M: 
Richard Sullivan's 10/31/96 call sheet, which states:

            Warren Metalf (sic) 12:20 p.m. Received letter. 
        Did not spell his name right. Also, letter did not 
        fulfill his requests.
            Warren Meddoff. 3:30 p.m. Wants to know about 
        revised letter he should be receiving.
            Warren Meddoff 4:35 p.m. Tomorrow morning needs 
        to speak with you right away. Still needs that 
        letter.

    The next day, November 1st, Meddoff called Mr. Sullivan yet again 
and left a message stating: ``Plz call re: people who has (sic) a 
request for POTUS.'' Exhibit 2009M: Richard Sullivan call sheet with 
memorandum of call from Warren Meddoff, 11/1/96; R. Warren Meddoff, 9/
19/97 Hrg., pp. 50-51.
    \77\ R. Warren Meddoff, 9/19/97 Hrg., p. 51.
    \78\ Exhibit 933: fax from Eric Berman/Dan Fee/Rick Hess to Harold 
Ickes/Jessica Fitzgerald regarding Meddoff, Morgan, Valduz and 
Bukkehave, 11/25/96.
    \79\ R. Warren Meddoff, 9/19/97 Hrg., p. 102.
    \80\ R. Warren Meddoff deposition, 8/18/97, p. 56.
    \81\ Donald L. Fowler deposition, 5/21/97, pp. 332-33; see R. 
Warren Meddoff, 9/19/97 Hrg., p. 48. Meddoff did not have a specific 
recollection of telling Fowler not to be deterred if someone mentioned 
the CIA, but he said that he might have mentioned the CIA and suggested 
to Fowler that a reference might have raised his contact with the CIA, 
because he has had contact with that agency. R. Warren Meddoff, 9/19/97 
Hrg., pp. 112-13.
    \82\ Donald L. Fowler deposition, 5/21/97, p. 333; see R. Warren 
Meddoff, 9/19/97 Hrg., p. 48.
    \83\ Donald L. Fowler deposition, 5/21/97, p. 335; see R. Warren 
Meddoff, 9/19/97 Hrg., p. 48.
    \84\ R. Warren Meddoff deposition, 8/18/97, p. 70.
    \85\ Exhibit 2065M: Letter from Majority Leader Trent Lott to R. 
Warren Meddoff thanking him for his $2,500 contribution to the 
Republican Presidential Roundtable, 5/15/97.
    \86\ R. Warren Meddoff, 9/19/97 Hrg., p. 44; R. Warren Meddoff 
deposition, 8/18/97, p. 133.
    \87\ Col. Joseph J. Simmons IV deposition, 10/16/97, p. 134.
    \88\ Col. Joseph J. Simmons IV deposition, 10/16/97, p. 134.
    \89\ Col. Joseph J. Simmons IV deposition, 10/16/97, pp. 134-135.





PART 2  INDEPENDENT GROUPS

Chapter 18: Teamsters

    During the reelection campaign of International Brotherhood 
of Teamsters President Ron Carey, consultants to the campaign, 
including Carey's campaign manager and Martin Davis, launched a 
contribution-swapping scheme to help raise money for the Carey 
campaign. As these consultants have acknowledged in court 
proceedings, they illegally asked a number of groups to donate 
money to Carey's campaign in exchange for donations to those 
groups from the Teamsters. As a small part of this scheme, 
Davis sought the help of DNC officials in locating wealthy 
individuals willing to give money to Carey's campaign and 
promised greater Teamsters donations to the Democratic state 
parties in return. Evidence gathered by the Committee suggests 
that DNC officials took little action in response to this 
request, but that they did make an ultimately unsuccessful 
effort at directing to the Carey campaign the donation of an 
individual who sought to donate to the DNC, but whose foreign 
citizenship made her ineligible to make that donation.

                                Findings

    (1) The evidence before the Committee indicates that the 
DNC's efforts at finding a donor for the Carey campaign were 
limited to exploring the legality of a possible donation from 
one individual to the Carey campaign, but that donation did not 
ultimately occur because the potential donor was not eligible, 
under labor laws and Teamsters'' rules, to contribute to the 
Carey campaign.
    (2) Nevertheless, Martin Davis's comments to DNC officials 
should have led them to suspect that Davis was improperly 
seeking to influence the use of Teamsters funds to benefit the 
Carey campaign. DNC officials should have immediately refused 
to take any action in response to Davis's request.

                         Teamster Contributions

    Martin Davis, a consultant for the reelection campaign of 
Teamster's president Ron Carey, pleaded guilty to participating 
in an illegal scheme to funnel money from the Teamsters union 
treasury to the Carey campaign. In his plea agreement, Davis 
stated, under oath, that he told ``individuals, including a 
former official of the Clinton Campaign '96 Re-election 
Committee and the Democratic National Committee, that I wanted 
to help the DNC with the fundraising from labor groups, 
including the Teamsters'' and that he ``wanted to help raise 
more money from the Teamsters than they originally 
anticipated.'' 1 Jere Nash, who was running Carey's 
campaign and who also pleaded guilty to participating in the 
illegal scheme, stated under oath that Davis told him that he 
had spoken to ``a representative of the Clinton-Gore campaign'' 
and had told this representative that he (Davis) would help 
raise large amounts of money from the Teamsters ``in exchange 
for'' the DNC finding donors for the Carey 
campaign.2
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 18.
---------------------------------------------------------------------------

Martin Davis's initial contacts with DNC officials

    Martin Davis was the part-owner and president of a company 
called the November Group, which provided direct mail services 
for organizations and political candidates. He was also a 
consultant for Ron Carey's campaign to be re-elected president 
of the International Brotherhood of Teamsters. In May or June 
of 1996, Davis contacted Terry McAuliffe, Clinton campaign 
finance chairman. At the time, McAuliffe was helping to raise 
money for the Clinton campaign and the DNC, and he maintained 
an office at Clinton campaign headquarters.3 
McAuliffe had known Davis since approximately 1984.4
    Davis told McAuliffe that he wanted to help raise a half-
million dollars from labor unions for the DNC.5 
McAuliffe does not recall Davis specifically asking for 
assistance in raising money for the Carey campaign,6 
but conceded that Davis might have said something in the nature 
of, ``Terry, I'd love it if you could help me. I am running Ron 
Carey's campaign.'' 7 However, McAuliffe also 
testified that he saw no connection between Davis's offer to 
raise money for the DNC from labor and his suggestion that 
McAuliffe's help in raising money for the Carey campaign would 
be welcome.8 McAuliffe said he thanked Davis for his 
willingness to assist in raising funds from organized labor and 
referred him to Laura Hartigan, who was serving as the Clinton 
campaign finance director. McAuliffe explained to Davis that 
Hartigan could put him in touch with the appropriate people at 
the DNC.9 McAuliffe then brought Davis into 
Hartigan's office,10 where Davis told Hartigan that 
he wanted to be the ``point person'' to coordinate raising 
labor funds for the DNC.11 McAuliffe testified that 
he never spoke with Davis again concerning this subject 
12 and did not pursue it further.13
    In response to this contact, Hartigan told Davis that she 
would speak to someone at the DNC.14 Shortly after 
that meeting, Hartigan called DNC Finance Director Richard 
Sullivan to tell him that Davis would be calling regarding his 
desire to raise labor money for the DNC.15 Hartigan 
did not ask Sullivan to do anything other than talk to 
Davis.16
    Davis then contacted Sullivan directly and indicated that 
he was working to raise money from the Teamsters and asked 
whether the DNC could be helpful in raising money for the Carey 
campaign.17 Sullivan took no immediate action to 
pursue this request.18 In fact, Sullivan testified 
that he was indifferent to Davis's request, in part because he 
was confident that labor would support the DNC regardless of 
whether the party found a donor for the Carey campaign:

          I had no doubt whatsoever that the IBT would support 
        the DNC. It had done so in the past, on the merits of 
        labor issues, and there was no reason whatsoever to 
        believe that would change in 1996. In that sense, Davis 
        wasn't offering much. The IBT was already a DNC 
        supporter. Others were already actively working to 
        raise money from it. Thus, we didn't need Davis to 
        devise ways to entice the IBT as an ally.19

    There is no evidence that anyone suggested to Sullivan that 
Davis's help in raising money for the DNC from the Teamsters 
was conditioned upon or was a quid pro quo for the DNC's 
assistance in raising money for Carey.20 Indeed, it 
was Sullivan's impression that Davis wanted to help the DNC 
regardless of whether the DNC was helpful in finding support 
for the Carey campaign.21 Similarly, it was never 
Hartigan's understanding that Davis was suggesting some sort of 
quid pro quo or a nexus between raising money for Carey and 
raising funds for the DNC.22 Rather, it was her 
feeling that labor was going to donate to the DNC anyway, and 
Davis was not needed to get money from the labor 
unions.23

Judith Vasquez's contribution to Vote Now '96

    On June 9, 1996, a DNC fundraising event was held at the 
home of investment banker Richard Blum in Northern 
California.24 In late June or early July 1996, Mark 
Thomann became the California DNC director and one of his first 
responsibilities was to collect the outstanding contribution 
commitments from the Blum event.25 One of the 
pledges that had not been collected was a $100,000 commitment 
by Judith Vazquez, the chairman and CEO of Duvaz Pacific, a 
Philippine company, to Vote '96, a tax-exempt get-out-the-vote 
organization.26
    When Sullivan asked Thomann about the commitments, Thomann 
told him that a Philippine woman (i.e., Vazquez) was interested 
in contributing, but that Thomann and attorneys for Vasquez had 
determined that, as a foreign national, she was prohibited from 
contributing to the DNC.27 The hosts of the 
fundraiser had not known until shortly before the event that 
Vazquez was not a U.S. resident and therefore not able to 
contribute to the DNC.28 Because she had traveled 
all the way from the Philippines, she was allowed to attend the 
fundraiser without making a contribution.29 Through 
her counsel, Vasquez inquired about the legality of making an 
``in-kind'' contribution to the DNC by underwriting a future 
fundraiser. Thomann researched this possibility by consulting 
the DNC's general counsel's office and the FEC, both of whom 
advised him that even in-kind contributions from foreign 
nationals were prohibited.30
    Several days later, knowing that Thomann was continuing to 
consult with attorneys for Vazquez to see ``what other support 
she might offer,'' Sullivan said he had asked Thomann if 
Vazquez would consider making a contribution to the Carey 
campaign, if such a contribution was appropriate.31 
Sullivan said he did not direct Thomann to solicit the 
contribution, but rather asked him to determine whether such a 
contribution would be legal.32 Sullivan explained to 
Thomann that any contribution to the Carey campaign had to be 
from an individual, and that the individual could not be an 
employer.33
    According to Thomann, Sullivan asked if the contribution 
for Vote '96 had been sent, and when he responded that it had 
not, Sullivan told him that there was ``a change in direction'' 
for the contribution.34 Thomann testified that 
Sullivan did not tell him why Vazquez was to be asked to 
contribute to the Carey campaign.35 Sullivan 
testified that he does not recall whether he ever told Davis he 
thought he could get Vazquez or another individual to 
contribute to the Carey campaign, but acknowledges that he may 
have told Davis that he was having a conversation with 
Thomann.36
    A few days after the call from Sullivan, Thomann was 
contacted by Nathaniel Charney, an attorney for the Teamsters, 
regarding the possible contribution from Vazquez.37 
Thomann felt that Charney was pressuring him to secure this 
contribution immediately, which made him 
uncomfortable.38 It was ultimately determined that 
because Vazquez was an employer, she could not contribute to 
the Carey campaign.39 At that point, Thomann told 
Charney that Vazquez could not make a contribution and that he 
was ``recusing'' himself from the process.40 
According to Thomann, Charney was disappointed and continued to 
pressure him.41
    Thomann also informed Sullivan of his conclusion that 
Vazquez could not contribute, because she had employees, and 
that he was stepping out of the process.42 According 
to Thomann, Sullivan exerted ``absolutely no pressure'' on him 
to come up with the contribution.43 Thomann 
testified that Sullivan did not ask him to find another donor, 
or to find another way to get a contribution to the Carey 
campaign.44 Thomann also testified that Sullivan 
never raised the issue with Thomann again.45 
Sullivan testified that he subsequently told Davis that the DNC 
was not going to be able to refer a contributor to the Carey 
campaign.46 Vazquez ultimately donated $100,000 to 
Vote '96.47

Teamsters' contributions

    In early June, Hartigan was asked by Davis for information 
on how the Teamsters could make contributions to certain 
Democratic state parties. Hartigan obtained information from 
the DNC about contributions that could be legally made and 
forwarded that information to Davis in a memorandum dated June 
12, 1996.48 Davis forwarded the memorandum to 
Teamsters headquarters.49 A June 21 memorandum from 
Bill Hamilton, the Teamsters'' director of government affairs, 
to Greg Mullenholz, the individual responsible for processing 
contribution requests made to the Teamsters, asked Mullenholz 
to have contribution checks issued to certain state Democratic 
parties.50 The parties listed correspond to the 
parties listed in the June 12 Hartigan memorandum.
    That same month, the Teamsters gave $236,000 to state 
Democratic parties. A DNC record of Directed-Donor Checks 
Received to-Date lists several contributions received on June 
26, 1996 credited to McAuliffe: a $25,000 contribution from the 
Teamsters to the Illinois Democratic Party, a $25,000 
contribution from the Teamsters to the California Democratic 
Party, and $5,000 from the Teamsters DRIVE Political Fund to 
the states listed on the two memoranda.51 Mullenholz 
testified that these contributions were made in response to the 
Hartigan memorandum.52
    During this same period of time, Davis continued in his 
unsuccessful efforts to get Sullivan to locate a contributor to 
Carey's re-election campaign. Overall, Davis placed roughly 30 
calls to Sullivan concerning finding a donor for TCFU, but 
Sullivan spoke to Davis on only approximately two or three 
occasions.53 In July or August, Sullivan and Davis 
had a conversation, during which Davis again said he hoped he 
could be helpful in raising labor money for the DNC and that 
the DNC would find a contributor for the Carey 
campaign.54
    Sullivan testified that he told Davis that it was unlikely 
that he would be able to find someone to contribute to 
Carey.55 He gave Davis two tickets to Clinton's 
birthday party at Radio City Music Hall on August 19 as a 
``consolation.'' 56 Sullivan testified that he was 
unaware of anyone else from the DNC soliciting anyone else for 
a contribution to the Carey campaign.57
    Sullivan also testified that he discussed Davis's request 
with others at the DNC, but he did not ask them to take any 
action.58 According to Sullivan, Marvin Rosen, the 
DNC's finance chairman, discouraged the plan but told him to 
see whether the White House had heard anything about 
it.59 Sullivan testified that he did not contact the 
White House,60 and there is no evidence that anyone 
at the White House was contacted by Sullivan or by anyone else 
regarding this issue.
    In August, in response to several telephone calls from 
Davis seeking a list of state parties to which the Teamsters 
could contribute, Hartigan asked Sullivan to compile such a 
list.61 The DNC provided the information to Hartigan 
and on August 10, she forwarded to Davis a memorandum under 
Sullivan's name listing the state parties and seeking 
approximately $1 million in contributions.62 Davis 
sent the memo to Bill Hamilton, the political director for the 
Teamsters, with a cover memo stating that he would let Hamilton 
know when the DNC had ``fulfilled their 
commitment.''63 Hartigan testified, however, that 
she was not aware of any commitments the DNC made to the 
Teamsters or Ron Carey.64 In September and October, 
the Teamsters contributed to state parties and some of the 
contributions correlated with the requests made in the 
memorandum.

                            Sullivan's role

    Some members of the Committee suggested that Sullivan may 
have perjured himself in his September 5, 1997 deposition when 
he disavowed any knowledge of a person named Judith 
Vazquez.65 They point to Sullivan's notes, which 
contain the name Judith Vazquez,66 and Mark 
Thomann's deposition testimony that it was his understanding 
from his conversations with Sullivan that Sullivan knew who 
Vazquez was.
    At the hearing, Sullivan did not dispute Thomann's 
testimony regarding Vazquez, but explained that, at his 
deposition, he had not recalled that name or remembered who she 
was.67 ``I don't deny that I knew about Judith 
Vazquez at the time I talked to Mark Thomann. A year-and-a-half 
later, I didn't remember who she was.'' 68 At his 
deposition, despite not having recognized Vazquez's name, 
Sullivan was forthcoming about all of the relevant 
circumstances surrounding the transaction being examined by the 
Committee, including the fact that he had had a conversation 
with Thomann about a potential donor to Carey's 
campaign,69 that Thomann was working with this 
potential donor's lawyers to determine the legality of the 
proposed contributions,70 and that the potential 
donor was a female with interests in the 
Philippines.71 At the hearing, refreshed with his 
notes and other testimony, Sullivan remembered that the donor's 
name was Vazquez.72 When Sullivan's deposition and 
hearing testimony is viewed in its entirety, given his 
testimony on the underlying facts of what happened, Sullivan's 
failure to recall the specific name of the donor does not 
appear to have been an attempt to mislead the Committee. This 
is reinforced by Sullivan's testimony where he recounted the 
events surrounding this donor.
    Some members of the Committee also questioned whether 
Richard Sullivan may have perjured himself in his September 5, 
1997 deposition when he testified that he did not do anything 
specific to raise money for Ron Carey and did not ask anyone to 
try to raise money for Carey.73 It was suggested 
that this testimony was an attempt to mislead the Committee and 
was contradicted by Thomann's deposition and hearing testimony 
detailing his conversations with Sullivan.74 
However, a complete reading of Sullivan's deposition sheds 
doubt on these allegations.75 Sullivan testified 
about specific conversations with Thomann, but simply disagreed 
with his questioners at both the deposition and in the hearing 
that his request of Thomann to look into the legality of 
Vazquez's potential contribution to the Carey campaign was, in 
fact, an attempt to raise money for Carey. Sullivan testified 
that Thomann ``responded back that [Vasquez's contribution 
would not be] legal, and I said fine. So I did not ask Mark to 
ask her to contribute.'' 76 For his part, Thomann 
agreed with this characterization, testifying at the hearing 
that he had no knowledge of ``any DNC official ever 
solicit[ing] a contribution that was made to the Ron Carey 
Presidential campaign or the Teamsters for a Corruption-Free 
Union.'' 77 Again, in light of the fact that 
Sullivan voluntarily provided the details of his involvement in 
the proposed Vazquez contribution, the questioned statements do 
not appear to have been an attempt to mislead the Committee.

                   Proposed contribution to unity '96

    In October 1996--several months after the possible Vazquez 
contribution to the Teamsters was determined to be 
inappropriate--Martin Davis and Terry McAuliffe discussed the 
possibility of locating an individual willing to donate 
$100,000 to the Carey campaign in exchange for a $500,000 
contribution by the Teamsters to Unity '96,78 a 
joint fundraising effort by the DNC, DSCC, and DCCC to raise 
money for the 1996 elections.79 McAuliffe was one of 
the persons behind the creation of Unity '96 and raised funds 
for it, but played no role in the actual administration of the 
project.80 Each Unity '96 official who was 
subsequently informed about Davis's request to secure a 
contributor for the Carey campaign in order to facilitate a 
contribution to Unity '96 rejected the suggestion out of hand 
and did not pursue the possibility.

DCCC executive director rejected the proposal

    McAuliffe discussed the possibility of locating a 
contributor for Carey's campaign with Matt Angle, the executive 
director of the Democratic Congressional Campaign Committee 
(``DCCC'').81 Angle is also involved in the 
fundraising efforts of the DCCC.82 Around October, 
Angle initiated a discussion with McAuliffe concerning 
fundraising. In the course of the conversation, McAuliffe asked 
if they knew anyone who could or would write a check to Carey. 
He said that if Unity '96 could get someone to donate to the 
Carey campaign, donations might come from the Teamsters to 
Unity '96. Specific amounts were not discussed, nor was it 
suggested that a smaller donation to the Carey campaign might 
result in a larger Teamsters donation to Unity 
'96.83
    Angle testified that he was dismissive of the idea and told 
McAuliffe that he would not take the idea to the chairman of 
the DCCC, Rep. Martin Frost (D-Tex.).84 Angle 
testified in his deposition that the idea did not make sense 
for two reasons. First, the DCCC had made it a practice not to 
get involved in internal union politics.85 Second, 
it was convoluted, in that the DCCC wanted to find donors for 
Unity '96, not some other entity.86 He knew it was 
not something that Frost would be interested in.87 
He did not consider the idea seriously enough to begin to think 
about whether it would be legal or not.88 McAuliffe 
accepted Angle's response and told him to let him know if he 
heard anything.89 McAuliffe did not bring the 
subject up with Angle again.90

DCCC chairman rejected the proposal

    Angle mentioned the conversation with McAuliffe to Frost 
that same day and told him that the DCCC was not interested in 
the idea. Angle said that Frost was also dismissive of the 
idea, for reasons Angle believed were similar to his own. In 
fact, Frost wanted to be sure that Angle had made it clear that 
the DCCC was not interested in the idea.91 Frost did 
not ask how much money was involved. Angle is not aware of 
Frost making telephone calls to any contributors or to anyone 
at the Teamsters concerning the idea.92

DSCC deputy executive director rejected the proposal

    McAuliffe also brought up the idea in October at a Unity 
'96 meeting attended by Rita Lewis, the deputy executive 
director of the DSCC and a director of Unity '96.93 
McAuliffe said that if Unity '96 were able to find money for 
Carey's campaign, the Teamsters would be more likely to give to 
Unity '96. It was not Lewis's understanding that a contribution 
by the Teamsters to Unity '96 was conditional upon efforts to 
find a donor for Carey's campaign, but, rather, that Unity '96 
would be more likely to receive a contribution if Carey were 
helped.94 She characterized it as more of a 
statement of fact than a proposal.95 McAuliffe did 
not indicate the genesis of this idea.96 Lewis does 
not recall McAuliffe mentioning the amount of the contribution 
that Unity '96 might receive from the Teamsters.97
    Lewis dismissed the idea as something Unity '96 could not 
do because of political disagreements the DSCC was having with 
the Teamsters.98 She does not recall anyone else 
reacting to McAuliffe's comment,99 nor does she 
recall anyone being given an assignment in relation to the 
comments made by McAuliffe. She never discussed implementing 
the plan with anyone.100 Lewis, who regularly 
attended Unity '96 meetings, remembers this subject coming up 
only that once.101 Because they did not pursue the 
idea, they did not assess the legality of it.102

DSCC chairman rejected the proposal

    In mid-October, Lewis and Senator Bob Kerrey of Nebraska, 
who is the chairman of the DSCC, were discussing the Teamsters 
campaign contributions and an upcoming vote relating to the 
Federal Express labor dispute, and Lewis brought up the idea 
that McAuliffe had mentioned.103 According to Lewis, 
Senator Kerrey dismissed the idea at that meeting because he 
believed the Teamsters faced more critical 
issues.104
    Senator Kerrey called Bernard Rapoport, a major Democratic 
contributor who is one of his close friends and 
advisors,105 and according to Rapoport, said, ``I 
want your opinion on something.'' 106 Rapoport 
testified that Kerry then explained how the DNC 107 
would benefit from raising funds for the Carey campaign and 
asked Rapoport what he thought.108 Rapoport said, 
``It's a bad idea.'' 109 According to Rapoport, both 
he 110 and Senator Kerrey said they did not like the 
idea, and that was the end of the conversation.111 
Rapoport testified that their discussion of this topic lasted 
no more than a minute-and-a-half to two minutes.112 
That was the only conversation Rapoport had with Senator Kerrey 
concerning Carey's campaign.113 There is no evidence 
that the Senator made any efforts to find a contributor for 
Carey's campaign.114
            The Proposal and Unity '96
    Ultimately, the Teamsters did not contribute to Unity 
'96.115 Other unions and union PACs did contribute 
to the effort.116 Hamilton, the Teamsters' political 
director, had decided against donating to Unity '96 because of 
the recent votes of Democratic senators on labor 
issues.117 An October 23, 1996 memorandum from 
Hamilton to Carey states that Hamilton has ``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 Fed 
Ex vote two weeks ago just before they adjourned.'' 
118

                               conclusion

    During the last election cycle, DNC officials discussed 
attempting to find a contributor to the Carey campaign, and 
undertook a few limited efforts in that regard. There was no 
evidence presented to the Committee, however, that a 
contribution swap ever occurred. Although Davis has suggested 
that his proposal to raise money for the DNC was a quid pro 
quo, all of the Democratic Party officials involved deny any 
contribution swap and the evidence indicates that no swap 
occurred. The Teamsters made initial contributions to State 
Democratic Parties, but stopped after anti-labor votes by 
Senate Democrats.

                               footnotes

    \1\ United States v. Martin Davis and Michael Ansara , 9/18/97, pp. 
25-26.
    \2\ United States v. Jere Nash , 9/18/97, p. 23.
    \3\ Terrence R. McAuliffe deposition, 9/18/97, pp. 7-11.
    \4\ Terrence R. McAuliffe deposition, 9/18/97, p. 51.
    \5\ Terrence R. McAuliffe deposition, 9/18/97, pp. 59, 63.
    \6\ Terrence R. McAuliffe deposition, 9/18/97, p. 62.
    \7\ Terrence R. McAuliffe deposition, 9/18/97, p. 62.
    \8\ Terrence R. McAuliffe deposition, 9/18/97, p. 81.
    \9\ Terrence R. McAuliffe deposition, 9/18/97, p. 59.
    \10\ Laura Hartigan deposition, 9/16/97, pp. 11-12.
    \11\ Laura Hartigan deposition, 9/16/97, p. 13.
    \12\ Terrence R. McAuliffe deposition, 9/18/97, p. 60.
    \13\ Terrence R. McAuliffe deposition, 9/18/97, pp. 88-89.
    \14\ Laura Hartigan deposition, 9/16/97, p. 13.
    \15\ Statement of Richard Sullivan, 10/9/97, p. 3; Laura Hartigan 
deposition, 9/16/97, p. 13.
    \16\ Laura Hartigan deposition, 9/16/97, p. 13.
    \17\ Statement of Richard Sullivan, 10/9/97, p. 4.
    \18\ Statement of Richard Sullivan, 10/9/97, p. 5.
    \19\ Richard Sullivan, 10/9/97 Hrg., p. 91.
    \20\ Richard Sullivan, 10/9/97 Hrg., pp. 90-91.
    \21\ Statement of Richard Sullivan, 10/9/97, p. 4; see also Richard 
Sullivan, 10/9/97 Hrg., pp 144, 178-81.
    \22\ Laura Hartigan deposition, 9/16/97, p. 24.
    \23\ Laura Hartigan deposition, 9/16/97, p. 20.
    \24\ Exhibit 1401.
    \25\ Mark Thomann, 10/9/97 Hrg., p. 7; Richard Sullivan, 10/9/97 
Hrg., p. 127.
    \26\ Mark Thomann, 10/9/97 Hrg., pp. 9 & 122.
    \27\ Statement of Richard Sullivan, 10/9/97, p. 7; Richard 
Sullivan, Hrg., 10/9/97 Hrg., p. 128.
    \28\ Exhibit 1415: Statement of Richard Blum.
    \29\ Exhibit 1415: Statement of Richard Blum.
    \30\ Richard Sullivan, 10/9/97 Hrg., p. 95.
    \31\ Statement of Richard Sullivan, 10/9/97, p. 8.
    \32\ Mark Thomann, 10/9/97 Hrg., p. 38.
    \33\ Mark Thomann deposition, 9/23/97, p. 38.
    \34\ Mark Thomann, 10/9/97 Hrg., pp. 9, 72-73; Mark Thomann 
deposition, 9/23/97, p. 38. Sullivan does not recall using the phrase 
``change of direction.'' Richard Sullivan, 10/9/97 Hrg., p. 129.
    \35\ Mark Thomann, 10/9/97 Hrg., p. 16, 61-62.
    \36\ Mark Thomann, 10/9/97 Hrg., p. 132.
    \37\ Mark Thomann, 10/9/97 Hrg., pp. 17-18.
    \38\ Mark Thomann, 10/9/97 Hrg., pp. 29, 75.
    \39\ Mark Thomann, 10/9/97 Hrg., p. 41.
    \40\ Mark Thomann, 10/9/97 Hrg., pp. 22-24.
    \41\ Mark Thomann, 10/9/97 Hrg., p. 41.
    \42\ Mark Thomann, 10/9/97 Hrg., p. 25.
    \43\ Mark Thomann, 10/9/97 Hrg., p. 25.
    \44\ Mark Thomann, 10/9/97 Hrg., p. 42; Mark Thomann deposition, 9/
23/97, p. 49; Richard Sullivan, 10/9/97 Hrg., p. 146.
    \45\ Mark Thomann, 10/9/97 Hrg., pp. 42-43
    \46\ Richard Sullivan, 10/9/97 Hrg., p. 146.
    \47\ Exhibit 1409.
    \48\ Exhibit 1422.
    \49\ Exhibit 1422.
    \50\ S 004820-004823.
    \51\ Exhibit 15 to Terrence R. McAuliffe deposition, 9/18/97; 
Terrence R. McAuliffe deposition, 9/18/97, p. 112.
    \52\ Gregory C. Mullenholz deposition, 9/15/97, pp. 99-100.
    \53\ Richard Sullivan, 10/9/97 Hrg., p. 113.
    \54\ Statement of Richard Sullivan, 10/9/97, p. 6; Richard 
Sullivan, 10/9/97 Hrg., p. 136; Laura Hartigan deposition, 9/16/97, pp. 
20-21.
    \55\ Statement of Richard Sullivan, 10/9/97, p. 6; Richard 
Sullivan, 10/9/97 Hrg., p. 139.
    \56\ Statement of Richard Sullivan, 10/9/97, pp. 6-7.
    \57\ Richard Sullivan deposition, 9/5/97, pp. 118-119.
    \58\ Richard Sullivan, 10/9/97 Hrg., pp. 144-45.
    \59\ Richard Sullivan deposition, 9/5/97, pp. 181-82.
    \60\ Richard Sullivan deposition, 9/5/97, pp. 183-184, 197.
    \61\ Laura Hartigan deposition, 9/16/97, p. 92.
    \62\ Exhibit 1423.
    \63\ Exhibit 1423.
    \64\ Laura Hartigan deposition, 9/16/97, p. 104.
    \65\ Robert F. Bauer, 10/9/97 Hrg., p. 126.
    \66\ Exhibit 1420: Richard Sullivan's notes regarding Vazquez.
    \67\ Richard Sullivan, 10/9/97 Hrg., pp. 125-26.
    \68\ Richard Sullivan, 10/9/97 Hrg., p. 126.
    \69\ Richard Sullivan deposition, 9/5/97, pp. 95-96.
    \70\ Richard Sullivan deposition, 9/5/97, p. 119.
    \71\ Richard Sullivan, 10/9/97 Hrg., pp. 126, 148-49; Richard 
Sullivan deposition, 9/5/97, p. 134.
    \72\ Richard Sullivan, 10/9/97 Hrg., p. 149.
    \73\ Senator Specter, 10/9/97 Hrg., p. 170.
    \74\ Richard Sullivan, 10/9/97 Hrg., p. 171; Exhibit 1419.
    \75\ Richard Sullivan, 10/9/97 Hrg., pp. 170-73.
    \76\ Richard Sullivan, 10/9/97 Hrg., p. 173.
    \77\ Mark Thomann, 10/9/97 Hrg., pp. 47-48.
    \78\ According to Davis, it was McAuliffe that first approached him 
to ask if he would attempt to raise $500,000 for Unity '96. Davis plea, 
p. 27.
    \79\ Matthew H. Angle deposition, 10/28/97, p. 26.
    \80\ Matthew H. Angle deposition, 10/28/97, p. 27, 33; Rita M. 
Lewis deposition, 10/27/97, pp. 9, 13.
    \81\ Matthew H. Angle deposition, 10/28/97, p. 9.
    \82\ Matthew H. Angle deposition, 10/28/97, p. 9.
    \83\ Matthew H. Angle deposition, 10/28/97, pp. 43-45, 47, 52.
    \84\ Matthew H. Angle deposition, 10/28/97, p. 45. Angle did not 
recall McAuliffe asking him to take the idea to Frost. Matthew H. Angle 
deposition, 10/28/97, p. 45.
    \85\ Matthew H. Angle deposition, 10/28/97, p. 46.
    \86\ Matthew H. Angle deposition, 10/28/97, p. 46-47, 51-52.
    \87\ Matthew H. Angle deposition, 10/28/97, pp. 46-47.
    \88\ Matthew H. Angle deposition, 10/28/97, pp. 64-65. In an 
October 22, 1997 Washington Times article Michael Tucker, a spokesman 
for the DSCC and Senator Kerrey, said that the idea was dismissed 
``largely because it was so impractical.'' He also stated: ``It would 
have been illegal, and that was part of the reason for not acting--for 
dismissing it.''
    \89\ Matthew H. Angle deposition, 10/28/97, p. 46.
    \90\ Matthew H. Angle deposition, 10/28/97, p. 49.
    \91\ Matthew H. Angle deposition, 10/28/97, pp. 50-53.
    \92\ Matthew H. Angle deposition, 10/28/97, p. 67.
    \93\ Rita M. Lewis deposition, 10/27/97, p. 6.
    \94\ Rita M. Lewis deposition, 10/27/97, pp. 15-18, 22-23.
    \95\ Rita M. Lewis deposition, 10/27/97, p. 55.
    \96\ Rita M. Lewis deposition, 10/27/97, p. 57.
    \97\ Rita M. Lewis deposition, 10/27/97, p. 29.
    \98\ Rita M. Lewis deposition, 10/27/97, pp. 17, 54-55.
    \99\ Rita M. Lewis deposition, 10/27/97, p. 17.
    \100\ Rita M. Lewis deposition, 10/27/97, pp. 18, 58.
    \101\ Rita M. Lewis deposition, 10/27/97, pp. 15, 50-51.
    \102\ Rita M. Lewis deposition, 10/27/97, pp. 18, 24-25.
    \103\ Rita M. Lewis deposition, 10/27/97, pp. 18-21.
    \104\ Rita M. Lewis deposition, 10/27/97, pp. 18-21.
    \105\ Rita M. Lewis deposition, 10/27/97, p. 53; Bernard Rapoport 
deposition, 10/20/97, p. 77.
    \106\ Bernard Rapoport deposition, 10/20/97, p. 35.
    \107\ According to Rapoport, Kerrey did not mention Unity '96. 
Bernard Rapoport deposition, 10/20/97, p. 49.
    \108\ Bernard Rapoport deposition, 10/20/97, pp. 35, 48-49.
    \109\ Bernard Rapoport deposition, 10/20/97, p. 89.
    \110\ Bernard Rapoport deposition, 10/20/97, pp. 44 & 83-84.
    \111\ Bernard Rapoport deposition, 10/20/97, p. 35.
    \112\ Bernard Rapoport deposition, 10/20/97, p. 78.
    \113\ Bernard Rapoport deposition, 10/20/97, pp. 39, 66.
    \114\ See, e.g., Matthew H. Angle deposition, 10/28/97, pp. 46, 62; 
Rita Lewis deposition, 10/27/97, pp. 18-21.
    \115\ Rita M. Lewis deposition, 10/27/97, p. 41.
    \116\ Rita M. Lewis deposition, 10/27/97, pp. 41-42
    \117\ U.S. v. Nash, 9/18/97, p. 24.
    \118\ S 004920. The memorandum continues, ``I was asked as recently 
as yesterday by Sen. Kerrey, chairman of the DSCC, to reconsider. He 
asked for $500,000; I said no.'' While the Majority might attempt to 
connect this request by Kerrey--and the amount he requested--to the 
alleged contribution swap scheme, there is no evidence to support this. 
In fact, Lewis testified that Kerrey routinely called PAC contributors 
and national contributors to ask them to give money to the DSCC. Rita 
M. Lewis deposition, 10/27/97, p. 29. According to Lewis, the DSCC 
solicited the Teamsters for a large contribution because they knew that 
the Teamsters had funds readily available. Rita M. Lewis deposition, 
10/27/97, p. 29.





PART 2  INDEPENDENT GROUPS

Chapter 19: The Democratic Party and Other Independent Groups

    During the 1996 federal election cycle, there were 
allegations that ostensibly independent, tax-exempt groups 
engaged in improper or illegal partisan political activity. The 
alleged activity ranged from broadcasting issue ads that in 
reality were candidate ads, to closely coordinating with one of 
the national political parties. Unfortunately, the vast 
majority of allegations against independent groups remain 
unexplored by the Committee because subpoenas issued to most of 
these groups were not complied with or enforced. Despite these 
and other limitations, allegations regarding groups 
traditionally associated with the Republican Party are 
addressed in Chapters 10-15. Allegations regarding groups 
traditionally associated with the Democratic Party, and that 
were explored in public hearings, are addressed in Chapters 17-
18. This chapter addresses, to the extent possible based on 
evidence submitted to the Committee, allegations regarding 
certain other groups traditionally associated with the 
Democratic Party.

                                findings

    (1) During the 1996 election cycle, several independent 
groups spent millions of dollars to promote Democratic issues 
and possibly Democratic candidates through ``issue advocacy,'' 
voter education and voter registration.
    (2) The Committee, however, uncovered no evidence that the 
Democratic Party played a central role in contributing to, or 
coordinating with, these groups. The Democratic National 
Committee contributed only $185,000 to such groups in 1996, 
compared to over $5 million the Republican National Committee 
contributed to conservative groups in the last half of 1996 
alone.

                                overview

    In 1997, the Annenberg Public Policy Center, a nonpartisan 
organization, published a report analyzing issue advocacy ads 
broadcast during the 1996 federal elections. The report found 
that political candidates and their committees spent $400 
million to broadcast candidate ads and that parties and other 
outside groups discussed in the study spent between $135 and 
$150 million to broadcast ``issue ads.'' The report noted that 
the independent and other outside groups claimed that because 
their ads focused on advocating ``issues,'' not candidates, 
there was no obligation to report the ad campaigns to the 
Federal Election Commission as independent 
expenditures.1
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 19.
---------------------------------------------------------------------------
    The Annenberg report made the following comment about the 
role of these issue ads in the 1996 elections:

          This report catalogues one of the most intriguing and 
        thorny new practices to come onto the political scene 
        in many years--the heavy uses of so-called ``issue 
        advocacy'' advertising by political parties, labor 
        unions, trade associations and business, ideological 
        and single-issue groups during the last campaign . . . 
        This is unprecedented and represents an important 
        change in the culture of campaigns.2

    The Minority agrees that the increased use of issue 
advocacy has changed the culture of campaign financing in the 
1990s, as has the increased coordination and financial support 
between certain independent groups and the national political 
parties. As a result, with a few exceptions, the Minority 
actively supported a series of Committee subpoenas issued to 30 
independent groups from April to July of 1997.3 The 
subpoenaed entities ranged from conservative groups such as 
Americans for Tax Reform, the Christian Coalition, and Triad 
Management to pro-Democratic groups such as Vote Now '96, the 
Teamsters and the AFL-CIO. The subpoenas requested that these 
entities provide information about their issue ads and other 
voter education activities, as well as their coordination with 
the national parties.
    The Minority hoped to conduct a thorough investigation of 
these groups in order to understand their effect on the 
campaign finance system and to determine whether they avoided 
or violated current election and tax laws. Such an 
investigation would have assisted in providing guidelines for 
meaningful enforcement of campaign finance laws and regulations 
and could have led to proposals for new legislation. 
Unfortunately, a thorough investigation of these activities 
eluded the Committee because subpoenas to the groups were, in 
large part, not complied with or enforced. The breakdown in 
compliance is explained in detail in Chapter 41 of this 
Minority Report.
    In addition, with very limited exceptions noted earlier in 
this part of the Minority Report, the Committee did not hold 
public hearings focused on the activities of these groups. With 
these limitations in mind, this chapter contains a summary of 
the information obtained regarding the activities of certain 
independent groups associated with the Democratic Party.

                     the dnc and independent groups

    In 1996, the Democratic National Committee (``DNC'') 
contributed a total of $184,500 to several independent, tax-
exempt groups. The two largest recipients were the National 
Coalition of Black Voter Participation, which received 
$117,000, and the African American Institute, which received 
$20,000.4 Neither of these organizations was 
subpoenaed by the Committee and there were no allegations that 
they conducted improper partisan electioneering on behalf of 
the Democratic Party.
    The Committee did examine other potential contacts the DNC 
may have had with independent groups. The Committee subpoenaed 
the DNC and required it to produce, among other things, all 
documents regarding contact with a variety of named independent 
groups. Despite a large production of documents, the Committee 
obtained no evidence that the DNC was involved in establishing, 
structuring, or controlling any independent group.
    Therefore, unlike the evidence demonstrating that the RNC 
contributed nearly $6 million dollars to independent groups and 
documents showing that RNC officials founded, structured or 
financed allegedly independent groups, the Committee obtained 
no evidence that the DNC engaged in similar activities. 
Unfortunately, this disparity between the RNC and DNC 
relationships with independent groups was not explored by the 
Committee.
    The Committee did explore, however, allegations that White 
House and DNC officials directed contributions to certain 
independent groups. These allegations were the subject of 
public hearings where the Committee received testimony about 
Warren Medoff's contact with Harold Ickes, and DNC officials' 
contact with Ron Carey's campaign for reelection as president 
of the Teamsters. There were also hearings where testimony was 
received on Vote Now '96. Additional allegations against 
independent groups traditionally associated with the Democratic 
Party are summarized below.

                    activities of independent groups

The AFL-CIO

    Federal election law permits unions to establish political 
action committees (``PACs'') and the PACs, in turn, are 
permitted to make contributions to candidates. Direct 
contributions by a union to a candidate or to the federal 
account of a political party, however, are prohibited in 
federal elections. This prohibition not only includes cash 
contributions, it prohibits unions from paying for ``express 
advocacy'' expenditures out of their general treasuries. Labor 
organizations, including the AFL-CIO, aired television 
advertisements during the 1996 elections, but maintain that 
they properly avoided this prohibition by airing issue ads that 
did not expressly advocate the election or defeat of specific 
candidates.5 This legal distinction is discussed at 
length in Chapter 9 of this Minority Report.
    The allegations against the AFL-CIO were (1) that by 
spending a substantial amount of money on issue ads and other 
advocacy activities in 1996, the organization had an 
impermissible effect on the 1996 federal elections, and (2) 
that the organization improperly proposed that it coordinate 
its issue ads with the Democratic Party.
    With the caveat that the Committee did not conduct a public 
investigation of the issue advocacy conducted by any 
independent group, the evidence the Committee received does not 
support the allegation that the AFL-CIO's expenditures ran 
afoul of legal prohibitions. Of the $35 million reportedly 
spent by the AFL-CIO during the last election cycle, an 
estimated $25 million went into paid media, and the remainder 
went into direct mail and related organizing activities. The 
AFL-CIO sent coordinators to 102 congressional districts, where 
they engaged in a combination of paid advertising, mail and 
get-out-the-vote activities. The AFL-CIO also ran issue-
advocacy ads in a total of 44 of congressional districts where, 
ultimately, the GOP won 29 races and the Democrats won 
15.6
    The Committee investigated the second allegation--that the 
AFL-CIO impermissibly proposed coordinating its issue ads with 
the Democratic Party. That allegation arose during the 
deposition of Richard Morris, an outside political consultant 
who advised the president during the 1996 campaign. Morris 
claimed that during a meeting held at the White House sometime 
in 1996, an AFL-CIO media consultant proposed that they 
coordinate union advertising with the Clinton 
campaign.7 Following Morris' deposition, the 
Committee deposed several officials who Morris claimed were 
present during that meeting. Those officials, who included 
former White House Chief of Staff Leon Panetta and former White 
House Communications Director George Stephanopoulos, testified 
that they did not recall any discussion of coordination and 
that coordination did not occur.8 The Committee 
received no further evidence to support Morris' assertion that 
coordination was proposed, and Morris himself testified that no 
coordination actually occurred.9
    It is apparent that the Committee's investigation of the 
AFL-CIO's activities, like the investigations of other 
independent groups, was not complete. The AFL-CIO was 
subpoenaed by the Committee in late May 1997, but objected to 
the subpoena in August after unsuccessfully attempting to 
narrow its scope. Several other independent groups also 
objected to subpoenas they received from the Committee, some 
stating that they agreed with the AFL-CIO's objections. These 
objections to the subpoena and the Committee's responses are 
detailed in Chapter 41 of this Minority Report.

Vote Now '96

    The Committee discovered evidence that DNC officials and at 
least one White House official directed contributions to Vote 
Now '96, an independent tax-exempt organization that does not 
broadcast issue ads, but attempts to register new voters in 
minority areas. DNC officials allegedly directed contributions 
to Vote Now '96, including contributions from people who could 
not legally give to the DNC. The DNC apparently considered Vote 
Now '96 an organization worthy of contributions because most 
new minority voters tend to identify with the Democratic Party. 
Among the allegations involving Vote Now '96 were:
           DNC Finance Chairman Marvin Rosen steered a 
        $100,000 contribution from Judith Vasquez, a donor who 
        was not legally permitted to give to the DNC or the Ron 
        Carey campaign to Vote Now '96.10
           DNC donor Yah Lin (``Charlie Trie'') 
        contributed $3,000 to Vote Now '96, and as with several 
        of his political contributions, the source of the funds 
        could not be determined.
           After a fundraising event at the Hay-Adams 
        Hotel in Washington, D.C., DNC fundraiser John Huang 
        indicated to DNC General Counsel Joseph Sandler that 
        two of the contributions that had been made to the DNC 
        were from individuals whose green card status had been 
        approved but were not yet issued. The DNC returned the 
        contributions and the same individuals later 
        contributed to Vote Now '96.11
           In response to a request from businessman 
        Warren Meddoff for recommendations on tax-deductible 
        organizations, White House deputy chief of staff Harold 
        Ickes suggested that Meddoff's associate contribute to 
        Vote Now '96. This allegation is discussed in detail in 
        Chapter 17.
           In the fall of 1996, Vance Opperman, a major 
        contributor to the Democratic Party, offered to 
        contribute $100,000 to the DNC. Mark Thomann, a DNC 
        fundraiser was instructed by Richard Sullivan that even 
        though he could legally contribute to the DNC, he 
        should direct Opperman's contribution to Vote Now 
        '96.12
    Based on these allegations, it appears that DNC officials 
and one White House official steered contributions they could 
not--or did not want to--accept to Vote Now '96. The practice 
of steering contributions to an independent group leads to 
obvious questions regarding the reason for such activities, 
such as, was an attempt being made to conceal the true identity 
of the contributor or to evade the law. The legality of this 
activity, however, depends upon whether the contributions to 
Vote Now '96 served as nothing more than contributions to the 
DNC and were made to circumvent election law restrictions. In 
order to become de facto party contributions, the DNC must have 
in some way controlled or coordinated the contribution and the 
way Vote Now '96 expended its funds. Unlike the evidence 
establishing that the RNC controlled and coordinated with the 
National Policy Forum, Americans for Tax Reform, Coalition for 
Children's Future and other groups, there was no evidence 
presented to the Committee that the DNC coordinated or 
controlled the activities of Vote Now '96, which fully complied 
with this Committee's subpoena by producing documents and 
witnesses to the Committee.

Citizen Action

    Citizen Action is a 501(c)(4) tax-exempt consumer advocacy 
group which spent $7 million on televised ads, direct mail, and 
telephone operations during the 1996 election 
cycle.13 It was targeted for a subpoena primarly due 
to its alleged involvement in a contribution ``swap'' scheme 
devised by consultants to Ron Carey's campaign to be reelected 
president of the International Brotherhood of Teamsters. 
However, beyond issuing a document subpoena, the Committee did 
not investigate the group's activities. A criminal information 
filed against Ron Carey's campaign consultants in the Southern 
District of New York details the allegations against Citizen 
Action. There is no evidence of any connection between the 
activities of Citizen Action and the activities of the DNC and 
Clinton campaign. These matters are further discussed in 
Chapter 17.

National Council of Senior Citizens

    Another entity apparently involved in the allegations 
concerning Ron Carey's campaign consultants was the National 
Council of Senior Citizens (``NCSC''). Federal prosecutors 
alleged in a criminal information against these consultants 
that the consultants arranged for the Teamsters to contribute 
$85,000 to the NCSC, which then sent the same amount to the 
November Group. Part of the NCSC money paid to the November 
Group was allegedly funneled by Davis into the Carey campaign 
in order to finance Carey's direct mail campaign. Beyond 
issuing a subpoena, the Committee did not explore these serious 
allegations.14

                               conclusion

    As the 1997 Annenberg study points out, both pro-Republican 
and pro-Democratic groups conducted costly and partisan issue 
advocacy campaigns during the 1996 federal elections. Although 
the Minority believes that such issue advocacy campaigns as 
well as independent group coordination with both national 
parties merit further investigation, the Committee did not 
receive evidence that the groups summarized above engaged in 
any improper issue advocacy or illegal coordination with the 
Democratic Party. For a list of independent groups subpoenaed 
by the Committee, see Chapters 40 and 41 of this Minority 
Report.

                               footnotes

    \1\ The Annenberg Center for Public Policy, 9/16/97, ``Issue 
Advocacy During the 1996 Campaign: A Catalogue.''
    \2\ Annenberg, p. 3.
    \3\ The Minority believes that the Majority targeted certain 
independent groups solely on the basis that they were pro-Democratic.
    \4\ According to FEC records, in 1996, the DNC gave $117,500 to the 
National Coalition of Black Voter Participation; $20,000 to the African 
American Institute; $10,000 to the Stonewall Gay and Lesbian Club; 
$10,000 to the Congressional Black Caucus; and $4,000 to the Hispanic 
Caucus.
    \5\ Annenberg, p. 5.
    \6\ Annenberg, p. 10.
    \7\ Richard Morris deposition, 8/20/97, p. 217.
    \8\ Leon Panetta deposition, 8/29/97, p. 190; and George 
Stephanopoulos deposition, 9/6/97, p. 98.
    \9\ Richard Morris deposition, 8/20/97, p. 217.
    \10\ Mark Thomann deposition, 9/23/97, pp. 24-29.
    \11\ New York Times, 9/29/97.
    \12\ Mark Thomann deposition, 9/23/97, p. 63.
    \13\ Annenberg, p. 18.
    \14\ See United States v. Davis, U.S.D.C, S.D.N.Y.
PART 3  CONTRIBUTION LAUNDERING/THIRD-PARTY TRANSFERS

Chapter 20: Overview and Legal Analysis

                                FINDING

    A number of individuals in both the Republican and 
Democratic parties made contributions to candidates for federal 
office and political parties through persons who were eligible 
to contribute, in apparent violation of the Federal Election 
Campaign Act.

                     OVERVIEW OF FOLLOWING CHAPTERS

    The Federal Election Campaign Act (``FECA'') mandates 
public disclosure of campaign contributors and their 
contributions, a requirement which the Supreme Court has upheld 
as a constitutional means to deter corruption, inform voters 
and detect violations of law.1 Section 441f of Title 
2 of the U.S. Code provides:
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 20.

          No person shall make a contribution in the name of 
        another person or knowingly permit his name to be used 
        to effect such a contribution, and no person shall 
        knowingly accept a contribution made by one person in 
---------------------------------------------------------------------------
        the name of another person.2

This provision creates three separate prohibitions: (1) it 
prohibits a contributor from disguising a contribution by using 
another person as a conduit; (2) it prohibits anyone from 
knowingly agreeing to serve as a conduit; and (3) it prohibits 
campaign organizations and candidates from knowingly accepting 
a conduit contribution. These prohibitions help guarantee that 
persons barred from making campaign contributions do not evade 
the applicable legal restrictions by making contributions in 
the name of another, and help prevent persons from 
circumventing the public disclosure requirements by offering 
their money in someone else's name rather than their own.
    The Committee investigated a number of allegations that 
contributions made to political parties or candidate committees 
were paid for by hidden donors. As the following chapters 
demonstrate, the investigation gathered convincing evidence 
that, during the 1996 election cycle, a number of individuals 
laundered funds through third parties when making contributions 
to Republicans and Democrats. In some cases, the laundered 
funds came from abroad; in others the laundered funds were 
American dollars. Some contributions were for $1,000; one went 
as high as $500,000. The evidence shows that unpaid fundraisers 
for both parties, such as Charlie Trie and Simon Fireman, 
participated in contribution laundering schemes.
     The following chapters describe a variety of contribution 
laundering schemes. The evidence includes three companies, 
Aqua-Leisure Industries, Empire Sanitary Landfill, and DeLuca 
Liquor and Wine, which appear to have laundered corporate funds 
through employees to make more than $275,000 in contributions 
to the Republican Party. One company, owned by Simon Fireman, 
vice chairman of finance for the Dole for President campaign, 
laundered corporate funds through a secret Hong Kong trust 
before supplying cash to company employees who wrote checks 
made out to the campaigns Fireman selected. Also examined is 
the Hsi Lai Buddhist Temple which appears to have reimbursed 
temple monastics and supporters for contributions totalling 
$65,000 to the Democratic National Committee. Contributions 
orchestrated by a family of Democratic Party supporters, the 
Lums, and their subsequent criminal convictions are examined, 
as well as $253,500 in contributions to the DNC which Pauline 
Kanchanalak held out as her personal contributions when, in 
fact, the funds were provided by her mother-in-law, Praitun 
Kanchanalak (who was also eligible to contribute). The chapters 
also examine contributions from two apparently insolvent 
individuals, Yogesh Gandhi, who gave $325,000 to the DNC, and 
Michael Kojima, who in 1992 gave $500,000 to the Republican 
Party, both of which were apparently financed with foreign 
funds from Japan. Democratic Party contributions totalling 
about $425,000 by the Wiriandinatas may have originally derived 
from abroad, but appear to be legal because they were personal 
funds and no foreign national participated in the contribution 
decisions. Additional information about possible conduit 
contributions from foreign funds is discussed in Part 1 of this 
Minority Report which focuses on foreign influence in the last 
election cycle.
    The Committee received no evidence that any candidate or 
party employee, other than Simon Fireman, Representative Jay 
Kim of California, and possibly John Huang, knowingly solicited 
or accepted a laundered contribution. The evidence also shows 
that, in some instances, fundraisers or party officials had 
warning signs that particular contributions were suspect. In 
too many cases involving large sums of money, these warning 
signs were ignored and inadequate procedures were used to 
verify the contributor and the contribution, resulting in 
improper or illegal contributions entering the campaign finance 
system.
    The basic principle underlying the prohibition on 
contributions in the name of another is that campaign 
contributions must be accurately disclosed to the public. For 
that reason, the prohibition applies even if the underlying 
contribution would have been legal, but for the fact that it 
was disguised as the contribution of another.
    Establishing violations of section 441f often involves 
determining the source of funds used for a contribution, 
ownership of those funds, and whether the funds were provided 
to the contributor of record for the purpose of making a 
disguised contribution. These determinations are sometimes 
straightforward and can be established through the testimony of 
the conduit or through bank records documenting the movement of 
funds from a third party to the contributor of record to the 
campaign organization. Other times, these determinations are 
difficult, particularly if the contributor insists that no 
third party was involved or that the funds used for the 
contribution were validly obtained.
    For example, an American citizen or legal resident who 
earns money working abroad, or receives money from a foreign 
national or foreign corporation in a business transaction, may 
be able to establish that the money was personal income which 
can be lawfully used for a campaign contribution. Similarly, an 
American citizen or legal resident who makes a campaign 
contribution with money received from a family member who is a 
foreign national, may be able to demonstrate that the money was 
a personal gift, the family member played no role in the 
contribution decision, and the contribution was in compliance 
with the law. In contrast, while an American citizen or legal 
resident can establish personal ownership of funds provided 
from abroad and use those funds for a campaign contribution, 
U.S. subsidiaries of foreign corporations are completely barred 
from using foreign money to pay for a corporate 
contribution.3 The FEC requires U.S. subsidiaries to 
be able to ``demonstrate through a reasonable accounting method 
that it has sufficient funds in its account, other than funds 
given or loaned by its foreign national parent,'' to pay for 
its campaign contributions.4 In contrast, U.S. 
corporations that are not subsidiaries of foreign companies may 
use foreign funds to finance their campaign contributions, so 
long as they are not acting as conduits for another.
    One significant problem with the current wording of section 
441f severely limits its usefulness. As currently worded, each 
of the section's prohibitions rely on the word 
``contribution.'' Because ``contribution'' is defined in 2 
U.S.C. 431(8) in terms of hard money contributions, section 
441f's prohibition on contributions in the name of another may 
not apply to any of the soft money conduit contributions 
examined by this Committee. Until corrective legislation is 
enacted, it is not clear that individuals who make soft money 
contributions through conduits could be successfully prosecuted 
or fined under the current law despite the fact that such 
actions violate the intent of existing law.

                               footnotes

    \1\ Buckley v. Valeo, 424 U.S. 1, 66-67 (1976).
    \2\ U.S.C. Sec. 441f.
    \3\ FEC Advisory Opinion 1992-16.
    \4\ Ibid. See also, legal analysis of foreign contributions in Part 
1, supra.
PART 3  CONTRIBUTION LAUNDERING/THIRD-PARTY TRANSFERS

Chapter 21: Contributions to the Democratic Party

    A major focus of the Committee's investigation was the 
allegation that the Democratic National Committee (``DNC'') 
received contributions during the 1996 election cycle that were 
paid for by someone other than the contributor of record and 
possibly with foreign funds. The Committee examined a number of 
these alleged contributions, including those from Keshi Zhan, 
Yue Chu and Xiping Wang; Pauline Kanchanalak; Yogesh Gandhi; 
Arief and Soroya Wiriadinata; the Lum family; and persons 
associated with the Hsi Lai Temple branch of the Fokuangshan 
Buddhist sect. In each case, the Committee attempted to 
determine whether the contributions made in the names of these 
individuals were paid for by another, and whether DNC officials 
knew or should have known of any misconduct.

                                findings

      (1) The evidence before the Committee shows that a number 
of individuals made contributions to the DNC or Democratic 
organizations in the name of others. Some of these were hard 
(restricted) money contributions, in which case they may be 
improper or illegal; some of these were soft (unrestricted) 
money contributions, in which case they may be technically 
legal, but result in inaccurate contribution records at the 
FEC. Among those whose activities the Committee investigated 
are:
          (A) Charlie Trie/Ng Lap Seng (``Wu''): Trie and Wu 
        used Keshi Zahn to arrange to have two legal permanent 
        residents, Yue Chu and Xiping Wang, contribute $28,000 
        in hard (restricted) money to Democratic campaign 
        organizations and reimbursed them. There is no evidence 
        before the Committee to suggest that either Chu or Wang 
        understood that their actions potentially violated 
        campaign finance laws. Trie and Wu also used Zahn to 
        make a $12,500 hard (restricted) money contribution to 
        the DNC.
          (B) Pauline Kanchanalak: Kanchanalak used her mother-
        in-law's money to fund $253,500 in contributions to the 
        DNC, $26,000 of which was hard (restricted) money. 
        Although both Pauline Kanchanalak and her mother-in-law 
        Praitun Kanchanalak were legal permanent residents of 
        the U.S. and each, therefore, lawfully could make 
        contributions in her own name, the $26,000 contribution 
        of her mother-in-law's money in Kanchanalak's name 
        appears to violate Section 441f.
          (C) Yogesh Gandhi: Gandhi, a legal permanent 
        resident, appears to have used an associate's foreign-
        source money to fund a $325,000 contribution in soft 
        (unrestricted) money in connection with a DNC 
        fundraiser. Gandhi's bank records reveal that he would 
        not have been able to make that contribution without 
        significant wire transfers from Yoshio Tanaka, a 
        Japanese national who attended a DNC fundraiser with 
        Gandhi. Evidence before the Committee supports the 
        conclusion that Tanaka transferred the money to fund 
        Gandhi's contribution.
          (D) Arief and Soraya Wiriadinata: The Wiriadinatas, 
        at one time legal permanent residents, made 
        contributions of over $425,000 to the DNC, $20,000 of 
        which appears to be hard (restricted) money 
        contributions. The contributions were made in checks 
        drawn on bank accounts funded with overseas transfers 
        from Soraya Wiriadinata's father. In light of 
        representations from Soraya Wiriadinata that her father 
        transferred Soraya's own money, the evidence before the 
        Committee does not establish that the $20,000 in hard 
        money contributions came from another.
    (2) The evidence before the Committee does not support a 
finding that any DNC official knowingly solicited or accepted 
contributions given in the name of another.

Hsi Lai Temple event

    On April 29, 1996, Vice President Gore attended a DNC-
sponsored and John Huang-organized event at the Hsi Lai Temple 
in Hacienda Heights, California. Vice President Gore's briefing 
papers for the event described it as an outreach event with 
members of the Asian-American community, but much controversy 
has arisen regarding allegations that the DNC improperly used a 
religious institution to host a fundraising event and that the 
Temple funneled money through its monastics to the DNC.
    Based on the evidence before the Committee, we make the 
following findings regarding the event at the Hsi Lai Temple:
    (3) From the perspective of Vice President Gore and DNC 
officals, the Hsi Lai Temple event was not a fundraiser. There 
is no evidence before the Committee that Vice President Gore 
knew that contributions were solicited or received in relation 
to the Temple event. The information received by the Vice 
President regarding the event described it as an opportunity 
for the Vice President to meet with members of the local Asian-
American community. John Huang assured DNC Finance Director 
Richard Sullivan that the event was not a fundraiser, but 
instead would involve community outreach. Moreover, the event 
had none of the features of a fundraiser: no tickets were taken 
or sold at the door; the speakers did not solicit donations; 
and many of those who attended did not contribute to the DNC.
    (4) John Huang and Maria Hsia used Vice President Gore's 
appearance at the Temple to raise money for the DNC. Although 
the event itself was not a fundraiser, Huang and Hsia, 
unbeknownst to DNC officials or the Vice President, used it as 
an opportunity to raise money for the DNC. Both before and 
after the event, they suggested to Temple officials that they 
collect contributions in connection with the Temple event. 
Their efforts eventually yielded $65,000 in contributions from 
persons associated with the Temple.
    (5) There is no evidence before the Committee to suggest 
that the money donated in connection with the Hsi Lai Temple 
event was foreign in origin.
    (6) Many of the donations made in connection with the Hsi 
Lai Temple event appear to have violated federal campaign laws 
prohibiting contributions in the name of another. The Temple 
reimbursed the monastic donors for their contributions. There 
is evidence to suggest that most of those writing the checks 
did not understand that they were potentially violating federal 
election law. Nevertheless, there appears to be little doubt 
that most, if not all, wrote the checks to the DNC only because 
the Temple asked them to do so and with the understanding that 
they would not fund the contributions themselves.
    (7) There is no evidence before the Committee that any DNC 
official knew that contributions made by Hsi Lai Temple 
monastics were of questionable legality.

                  keshi zhan, yue chu and xiping wang

    The Committee examined several contributions made by three 
persons, Keshi Zhan, Yue Chu and Xiping Wang, associated with 
Charlie Trie and Ng Lap Seng (also known as Wu), Trie's Macao-
based business associate.1 All three appear to have 
been reimbursed by Trie and Wu for contributions made to the 
DNC in 1996. The DNC has returned all contributions made by 
Zhan, Chu and Wang.2
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 21.
---------------------------------------------------------------------------
    Keshi Zhan is a legal permanent resident of the United 
States and eligible to make campaign contributions. She is a 
local government employee, but apparently has also worked on 
occasion for Trie and Wu.3 In February 1996, in 
connection with a DNC fundraiser at the Hay Adams Hotel in 
Washington, D.C., co-chaired by Trie, Zhan made a hard money 
contribution of $12,500 to the DNC. Bank records produced to 
the Committee show that Zhan wrote a check to herself for 
$12,500 drawn from a bank account controlled by Trie and Wu, 
and deposited that check into her personal bank account on the 
same day that she wrote the $12,500 check to the DNC. Committee 
investigator Jerry Campane testified before the Committee that 
it was his conclusion that the check from Trie and Wu's account 
was a reimbursement of her contribution.4
    Yue Chu and Xiping Wang are two women who were born in 
China and are now legal permanent residents who have lived in 
the U.S. for several years.5 They are related by 
marriage.6 Chu's husband, Ming Chen, is employed by 
Wu in a restaurant in Beijing.7 Chu and Wang 
testified before the Committee on July 29, 1997, pursuant to a 
grant of immunity from prosecution.8 In sum, Chu and 
Wang testified that they contributed a total of $27,000 to the 
Democratic Party at the request of Chu's husband and Zhan and 
were later reimbursed.
    Chu testified that she first met Zhan in 1991, when Zhan 
was a classmate of Chu's husband at the University of the 
District of Columbia. Chu and Zhan became friends.9 
On November 14, 1995, Zhan asked Chu to write a check for 
$2,000 to the Democratic Senatorial Campaign Committee. She 
also asked Chu to write a $1,000 check to Zhan herself. The 
next day, Zhan repaid Chu with a check for $3,000. Chu 
testified that it was her understanding at the time that Zhan 
wanted Chu to lend her some money, and she did not ask Zhan the 
reason. She also testified that she did not know what the 
initials ``DSCC'' stood for at the time she wrote the $2,000 
check, and that she did not know that this check represented a 
political contribution.10
    In February 1996, Chu's husband, Ming Chen, returned to the 
U.S. from China for the Chinese New Year holidays. According to 
Chu, her husband said that his boss, Wu, wanted to visit the 
White House and needed $25,000 to ``buy a ticket.'' 
11 Chu testified that they had sufficient funds to 
provide only $20,000, and asked Chen's cousin, Xiping Wang, for 
the remaining $5,000. Wang provided a check in that 
amount.12
    On February 19, 1996, Chu gave Zhan two checks which were 
blank except for her signature. Zhan made out both checks to 
the DNC, in the amounts of $12,500 and $7,500. Chu testified 
that she did not know what the initials ``DNC'' 
meant.13 At the time she gave Zhan the two checks, 
Chu was given two checks from Zhan in identical amounts. Chu 
stated that this seemed unusual to her, but that she did not 
ask any questions at the time. She indicated that her primary 
consideration at the time was that her husband's boss needed 
help to buy a ticket and she had been asked to provide that 
help.14 Chu testified that she did not know whose 
money was used to reimburse her.15 She also 
testified that although she had once met Trie, she only knew of 
him as a business associate of Wu.16
    On January 28, 1998, the Department of Justice indicted 
Trie for conspiring to defraud the DNC and FEC, in part, by 
``channel[ing] foreign money to the DNC through the use of 
straw or conduit contributions'; ``conceal[ing] the source of 
the money contributed by reimbursing conduits in cash and using 
multiple bank accounts;'' and ``caus[ing] the DNC tofile false 
campaign finance reports with the FEC.'' 17 The Zhan 
contribution appears to be identified in the Trie indictment as an 
illegal conduit contribution; the Chu and Wang contributions are not 
included, presumably due to the Committee's decision to grant both 
women immunity from prosecution.18
    The evidence before the Committee is convincing that Zhan, 
Chu and Wang were used as conduits for contributions financed 
by Trie and Wu, in connection with a fundraiser co-chaired by 
Trie and attended by Wu as Trie's guest. The evidence suggests 
that while Chu and Wang may have been unaware of their 
participation in a contribution conduit scheme, Trie, Wu and 
Zhan appear to have been aware of the legal prohibition against 
contributions by foreign nationals. The Committee's 
investigation found no evidence that, at the time of the 
contributions, anyone at the DNC knew or had reason to know 
that the Zahn, Chu and Wang contributions were being financed 
by Trie and Wu.19 Zhan, Chu and Wang were legal 
permanent residents eligible to make campaign contributions, 
and their checks were drawn on local U.S. banks in amounts that 
were substantial, but not so large as to trigger special 
inquiry. Neither the DNC nor the White House had access to or 
were aware of the bank records demonstrating the 
reimbursements.20 The Trie indictment does not cite 
any facts suggesting that anyone at the DNC or the White House 
was aware of Trie's misconduct with respect to these or any 
other conduit contributions.21
    In addition to the Zhan contribution, the Trie indictment 
identifies a number of other conduit contributions involving 
Trie, in particular in connection with an August 1996 Radio 
City Music Hall fundraiser in New York celebrating President 
Clinton's 50th birthday.22 The indictment charges 
that $200,000 in funds from abroad were wired transferred into 
a bank account belonging to Trie who then solicited and 
reimbursed two conduit contributions to the DNC totaling 
$20,000.23 The indictment charges that $80,000 was 
also transferred from the Trie account to a California bank 
account, which Trie's business associate then used to solicit 
and reimburse five conduit contributions to the DNC totaling 
$40,000.24 While the Committee did not obtain 
independent evidence on these conduit contributions, the 
charges in the indictment provide additional reason to believe 
that Trie was involved in a number of conduit contributions to 
the DNC utilizing foreign funds. Trie's activities are 
discussed more fully in Chapter 5 of this Minority Report.

                          pauline kanchanalak

    Born in Thailand, Pauline Kanchanalak is a legal permanent 
resident of the United States.25 She earned graduate 
degrees from the University of Pittsburgh and Stanford and, in 
the 1980s, married Chupong ``Jeb'' Kanchanalak, the son of a 
prominent, wealthy Thai family residing in the United States 
since the 1950s.26
    Kanchanalak and her husband began a consulting business 
known as Ban Chang International (``BCI'') in the early 1990s. 
This company sought to develop joint ventures between U.S. and 
Thai companies and to establish franchises of U.S. companies in 
Thailand. Jeb Kanchanalak served as managing director of BCI's 
Thailand operations, while Pauline managed the company's U.S. 
operations. Pauline Kanchanalak is also the Washington 
representative of a Thai conglomerate, the Ban Chang Group. In 
1992, a group of Thai corporations--with the support of the 
Thai government--established an umbrella group called the U.S.-
Thailand Business Council to promote trade with the United 
States. Jeb Kanchanalak was named executive director of the 
Thailand branch of the council. In 1994, the U.S. branch of the 
council was established.27 The president of the U.S. 
branch was Karl D. Jackson, a Republican foreign policy 
expert.28 Pauline Kanchanalak also was active in the 
U.S. branch of the council.
    FEC records list Kanchanalak as having contributed $1,000 
to the DNC in 1993, $62,500 in 1994 and nothing until 1996 when 
she contributed $190,000 for a three-year total of $253,500. 
All but $26,000 were soft money donations.29
    Kanchanalak's contributions brought her status as a DNC 
managing trustee and wide-ranging access to the White House and 
the President.30 A summary document of U.S. Secret 
Service WAVE records shows that in the nearly four-year period 
between January 20, 1993, and November 30, 1996, Kanchanalak 
visited the White House 26 times, including ten visits at which 
the President was present. These visits included such events as 
DNC trustees'' receptions, lunches, dinners, and coffees; a 
presidential radio address; and a meeting of the U.S.-Thai 
Business Council.31 At one coffee, she was permitted 
to bring as her guests a group of visiting Thai 
businessmen.32
    After press reports raised questions about Kanchanalak's 
contributions, the head of the DNC's managing trustee program, 
Ari Swiller, contacted her. In a memorandum dated November 20, 
1996, Swiller describes the substance of his conversation with 
Kanchanalak.33 According to Swiller's memorandum, 
``she stated that she had not made any contributions to the DNC 
and that all contributions came from her mother-in-law, Praitun 
Kanchanalak.'' 34 The memorandum states:

          Pauline explained that this was an arrangement she 
        made with Vic Raiser during the 1992 campaign. I asked 
        her if she ever discussed that arrangement with anyone 
        other than Mr. Raiser, specifically Richard Sullivan, 
        Lauren Supina, John Huang or me. She clearly stated 
        that she never indicated that contributions from P. 
        Kanchanalak were not from her.35

Under this alleged arrangement between Kanchanalak and Raiser, 
the DNC's 1992 finance chair, she was credited with 
contributions made by ``P. Kanchanalak,'' even though the 
contributions were financed with funds belonging to her mother-
in-law, Praitun Kanchanalak. Praitun Kanchanalak is a legal 
permanent resident who is also eligible to contribute.
    A Committee review of the contribution checks credited to 
Kanchanalak confirms that they were each signed ``P. 
Kanchanalak.'' No evidence before the Committee indicates that 
DNC personnel during the 1996 election cycle were aware of 
Kanchanalak's alleged arrangement. Kanchanalak told Swiller 
that she had never discussed the arrangement with anyone other 
than Raiser. She also stated to him that she had never 
indicated that contributions from ``P. Kanchanalak'' were not 
from her. Moreover, there was no reason for DNC officials in 
1996 to suspect that these contributions were not her own, 
since, by then, Pauline Kanchanalak was a wealthy international 
businesswoman and a DNC managing trustee with a history of 
contributions. In addition, separate contributions had been 
received from, and credited to, Pauline's mother-in-law, 
Praitun Kanchanalak. In light of these facts, there would have 
been no reason to suspect that Pauline's contributions 
represented funds from Praitun.
    While questions were raised at the hearing regarding 
whether Kanchanalak or her mother-in-law used foreign funds for 
the contributions, there is no evidence that foreign nationals 
directed the contributions. Moreover, their status as legal 
permanent residents permits them to use their personal funds 
for campaign contributions, even if earned abroad. 
Additionally, as $227,500 of the $253,500 in contributions were 
soft money donations, it is unclear that these contributions 
were made in violation of 2 USC 441f's prohibition against 
contributions in the name of another. Nonetheless, the DNC has 
returned all the contributions to Praitun Kanchanalak.

                             yogesh gandhi

    In May 1996, Yogesh K. Gandhi made a $325,000 contribution 
to the DNC in order to attend an Asian American fundraising 
event at which President Clinton would be present. The evidence 
before the Committee suggests that Gandhi paid for the 
contribution with funds provided by a Japanese national. DNC 
records identifying Trie as the ``solicitor'' of the 
contribution and Huang as the ``DNC contact.'' 36
    Gandhi, born Yogesh Kothari, is a distant relative of 
Mahatma Gandhi.37 In 1983, Kothari changed his name 
to Gandhi, moved to the United States, and became a legal 
permanent resident. He is eligible to make campaign 
contributions. He established the Gandhi Memorial International 
Foundation purportedly to promote the ideas of Mahatma Gandhi. 
An immediate descendant of Mahatma Gandhi, however, has 
publicly stated that Yogesh Gandhi is a ``scam artist'' 
interested primarily in enriching himself.38
    The Gandhi Memorial International Foundation periodically 
presents the Mahatma Gandhi World Peace Award to prominent 
individuals. Past recipients have included Ronald Reagan, 
Corazon Aquino, and Mikhail Gorbachev. In 1987, the award was 
given to Ryochi Sasakawa, a controversial, wealthy Japanese 
businessman who was jailed for suspected war crimes by the 
Americans after World War II and has been accused of links to 
organized crime and extreme rightists. One year after receiving 
the Gandhi award, Sasakawa donated $500,000 to the Gandhi 
Foundation.39
    In 1995, the foundation gave the Gandhi award to Hogen 
Fukunaga, a Japanese multimillionaire who runs a controversial 
religious organization in Japan and faces multiple legal 
problems in Japan from people claiming to have been defrauded 
by his organization.40 Press reports indicate that 
Fukunaga has taken part in a number of highly publicized events 
arranged by Yogesh Gandhi, including an audience with Pope John 
Paul II, a meeting with Mother Teresa and participation in a 
United Nations conference in Turkey. These events were 
apparently funded by a Japanese associate of both Gandhi and 
Fukunaga named Yoshio Tanaka. Tanaka is a businessman who is 
apparently involved in unknown business ventures with Gandhi 
and who brought Gandhi together with Fukunaga.41
    In late September 1995, Gandhi sent letters to President 
and Mrs. Clinton inviting them to attend an October 2, 1995 
ceremony celebrating the 125th anniversary of Mahatma Gandhi's 
birth, at which time the Gandhi Foundation's World Peace Award 
would be presented to Fukunaga.42 The White House 
declined the invitation. On November 12, Gandhi wrote again to 
the President asking for 30 minutes of his time for 
presentation of the gift of a leather-bound collection of the 
writings of Mohandas Gandhi.43 This gift was 
declined by the White House on January 3, 1996.44
    On February 5, 1996, Gandhi wrote to the President once 
again, this time informing him that he had been selected as the 
recipient of the 1996 Mahatma Gandhi World Peace 
Award.45 In a separate letter the same day, Gandhi 
wrote seeking a date to present the award.46 In 
response, the White House scheduling office sent out a routine 
internal inquiry seeking opinions on whether or not the 
President should accept the award.47 Ann Eder of the 
White House Office of Public Liaison testified in a deposition 
that she believed preliminary information was obtained on 
Gandhi and his foundation indicating that the foundation was 
not reputable.48 The White House staff also located 
an article discussing the presentation of the award to the 
controversial Sasakawa.49 On April 17, 1996, the 
scheduling office wrote to inform Gandhi that the President 
would not be able to accept the foundation's 
award.50
    Having been turned down three times in his efforts to gain 
a meeting with the President, Gandhi took a new approach. 
According to an interview Gandhi provided to Committee 
staff,51 a friend of his from Houston alerted him to 
an Asian-American fundraising event that would be taking place 
in Washington, D.C. at which the President would be present. 
Gandhi told Committee staff that on the day of the event, May 
13, 1996, Charlie Trie visited him at his hotel in Washington 
and suggested a contribution of $500,000 for Gandhi and 25 
other individuals to attend the DNC fundraiser at the Sheraton 
Carlton Hotel. According to Gandhi, he negotiated with Trie and 
ultimately gave Trie a check drawn on his personal account for 
$325,000 in exchange for 26 tickets to the event.
    Gandhi's contribution represented tickets to a fundraising 
dinner for 13 couples. Among the guests Gandhi brought to the 
dinner were Fukunaga and Tanaka. Although Gandhi said that his 
attendance at the dinner was not for the purpose of giving the 
Gandhi award to the President, Fukunaga told the media that he 
made the trip to Washington specifically for that 
purpose.52 The entire $325,000 was attributed to a 
soft money account.53
    According to Gandhi, during the dinner he approached 
individuals about presenting theaward to the President. Gandhi 
claims that he contacted Secret Service agents present at the dinner 
and that they set up the award presentation.54 According to 
a deposition provided by the DNC general counsel, the persons 
responsible for allowing the presentation to be made were then White 
House Chief of Personnel Craig Livingstone, who was handling advance 
duties for the event, and John Huang.55 The presentation was 
apparently hastily arranged in a room near the dinner area and lasted 
only a few minutes. The award was presented to President Clinton by 
Gandhi and Fukunaga. Soon thereafter, photographs of Fukunaga and 
Gandhi with the President appeared on Fukunaga's Internet 
website.56
    DNC general counsel Joseph Sandler testified at a 
deposition that, five months after the event, when he asked 
Huang about the Gandhi contribution, Huang told him that Gandhi 
had been referred to him by an Indian American activist, who 
indicated that Gandhi was interested in attending a DNC event 
with the President and presenting the President with an 
award.57 Gandhi stated in his interview that he 
never met or spoke with Huang until the dinner 
itself.58
    DNC finance director Richard Sullivan testified at a 
deposition that after the May 1996 event, he asked Huang about 
the Gandhi check, and Huang told him he wanted to have DNC 
general counsel Sandler look into it.59 Sandler 
testified that Huang did not bring the check to him for 
review.60 According to Sullivan, Huang held the 
check for as long as six days. It is unclear whether Huang held 
the check in order to evaluate Gandhi's eligibility to 
contribute, or because Gandhi had asked him to hold the check 
until additional funds were transferred into the account to 
cover the $325,000 check.61
    Several months later, in October 1996, newspaper articles 
began reporting that Gandhi appeared to be insolvent. One 
article published on October 23, reported an outstanding tax 
lien, revocation of Gandhi's driving license for failure to pay 
traffic fines, unpaid bills, and a divorce petition in which 
Gandhi claimed pauper status to avoid paying a filing 
fee.62 The article reported in particular that in 
August 1996, three months after the DNC fundraiser, Gandhi 
appeared in small claims court in Contra Costa, California, in 
connection with a suit filed by former employees of the 
foundation seeking back wages and testified under oath that he 
had no American bank accounts or other assets, lived overseas 
the majority of his time, and obtained ``all of his funds from 
a family trust in India.''63
    Following publication of these articles, DNC General 
Counsel Sandler made efforts to obtain a copy of the transcript 
of the court proceedings in which Gandhi allegedly stated that 
he lacked assets. On October 25, Sandler instructed DNC staff 
to prepare a return check to Gandhi. Sandler testified at his 
deposition that he decided to wait, however, until he had 
received and reviewed the court transcript before returning the 
funds. According to Sandler, after he received and reviewed the 
transcript, and after Gandhi failed to produce additional 
information regarding his contribution, Sandler ordered the 
return of the contribution. The return was made on November 6, 
1996, about two weeks after the press allegations 
surfaced.64
    During an interview with Committee staff about these 
events,65 Gandhi made contradictory statements and 
also contradicted information he was identified as having 
provided to the media. For example, he told the staff that the 
funds for his contribution had come from a wire transfer from a 
personal friend after the event. He also stated that he had 
asked the DNC to hold his check until he had made sure that the 
funds were available. Upon further questioning, he seemed to 
retract those statements and indicated that he had received a 
series of wire transfers for $500,000 around the time of the 
event. When asked about statements in press accounts that his 
funds had come from a joint venture which had become 
profitable,66 Gandhi characterized those funds as an 
``advance'' on a business deal which had fallen through due to 
adverse publicity surrounding his DNC contribution.
    The Committee subsequently subpoenaed Gandhi's bank account 
records. The bank records show that, in May 1996, the same 
month as the DNC fundraiser, Gandhi received two wire transfers 
of $500,000 and $250,000 through Citibank in New York, from 
Japanese businessman Yoshio Tanaka. Absent these transfers, 
Gandhi's account did not have sufficient funds to cover the 
$325,000 check to the DNC. Tanaka was one of Gandhi's guests at 
the fundraiser. Given Tanaka's past history of making regular 
wire transfers of similar sums to Gandhi, presumably in 
connection with Gandhi and Fukunaga's appearance with 
international figures, it is a logical inference that these 
wire transfers were intended to repay Gandhi for obtaining the 
tickets to the fundraising event at which President Clinton was 
present.
    No evidence before the Committee indicates that anyone from 
the DNC, with the possible exception of Huang, had any 
knowledge that the Gandhi contribution was financed by another 
person and possibly utilized foreign funds. After press 
accounts questioned Gandhi's financial viability, the DNC 
obtained the relevant court transcript and returned his money 
in full.67 On the other hand, the evidence indicates 
that, prior to accepting Gandhi's contribution initially, DNC 
personnel failed to obtain apparently readily available 
information raising concerns about Gandhi and his foundation, 
and never determined that the White House had prior dealings 
with him. Given the size of this contribution and how little 
was known about Gandhi, a more careful evaluation of his 
contribution should have been conducted. For additional 
discussion of this topic see Chapters 4 and 5 of this Minority 
Report.

                        hsi lai temple monastics

    The Hsi Lai Temple in Hacienda Heights, California, is the 
largest U.S. branch of the Fokuangshan Buddhist Order, a 
Taiwan-based Buddhist sect founded and led by the Venerable 
Master Hsing Yun (``Master'' or ``Hsing Yun'). According to its 
literature, the Hsi Lai Temple is the largest Buddhist 
monastery in the Western Hemisphere. It was built in 1988 to 
further ``humanistic Buddhism'' and to serve ``as a spiritual 
and cultural center for those interested in learning more about 
Buddhism and Chinese culture.''68 During the 1996 
election cycle, the Temple abbess was Suh Jen Wu; her assistant 
was Man-Ho Shih; and the Temple bookkeeper was Yi Chu.
    On April 29, 1996, Vice President Gore attended a DNC-
sponsored event at the Temple.69 This event had been 
organized by Maria Hsia, a long-time Democratic activist and 
fundraiser, and a devotee of the Hsi Lai Temple.70 
John Huang was the DNC fundraiser in charge of organizing the 
event. DNC records attributed a total of $159,000 in 
contributions to this event,71 of which $65,000 was 
contributed in the form of personal checks by monastics from or 
devotees associated with the Temple.72 Each of the 
monastics who contributed to the DNC in connection with this 
event received a check from the Temple for the full amount of 
his or her contribution.73
    On September 4, 1997, pursuant to a grant of immunity from 
criminal prosecution, the Committee received testimony 
concerning the event from three monastics, the Venerable Man-Ho 
Shih, assistant to the Temple Abbess; Venerable Yi Chu, the 
Temple bookkeeper; and Venerable Man Ya Shih, abbess of a Texas 
temple who attended the event while visiting the Hsi Lai Temple 
for a seminar with the Master.74 Man-Ho testified 
that $45,000 in contributions was raised prior to the date of 
the event as a result of calls placed by monastics to devotees 
of the Temple.75 She further testified that on the 
day after the event she received a telephone call from Maria 
Hsia informing her that John Huang needed to raise additional 
money in connection with the event to enable him to report 
total contributions of $100,000.76 Because she 
believed the Temple's abbess was already aware of this need, 
Man-Ho spoke with the Temple's bookkeeper, Yi Chu, about 
raising the additional funds.77
    Yi Chu testified that she approached a number of monastics 
at the Temple that day and asked those who had their checkbooks 
if they would be willing to donate $5,000. She said that no one 
refused. She said that she ultimately received checks from 11 
people totaling $55,000.78 These checks were made 
out to the DNC and were provided to John Huang.79
    Yi Chu further testified that she wrote checks totaling 
$10,000 to three individuals--two monastics and one devotee--
who had made contributions prior to the event in order to 
reimburse them for their contributions. In addition, she stated 
that she wrote reimbursement checks to each of the 11 monastics 
who contributed after the event.80 The Temple thus 
reimbursed a total of $65,000 in contributions, all of which 
were hard money contributions. The reimbursements were all made 
from the Temple's general expense account.81
    The evidence before the Committee on whether the Temple and 
its monastics knowingly participated in a conduit contribution 
scheme is mixed. Some monastics apparently were unaware that 
the $5,000 checks they were asked to write were for campaign 
contributions; Yi Chu testified that the name of the Temple's 
security system is ``DNC'' which may have caused some 
confusion,82 and Yi Chu herself did not know that 
the DNC was a political party.83 Temple officials 
also contend that ``reimbursement'' is a misnomer for the 
transfer of funds. They explain that the Temple's lifestyle is 
a communal one in which members view themselves as members of 
one large family. Members often give to the Temple what is 
theirs and they receive from the Temple as they need 
it.84 In such a lifestyle the line between what 
constitutes the personal property of the monastics and what 
constitutes the property of the Temple is not as clearly 
delineated as it is elsewhere in American society. This concept 
was explained in the joint opening statement of the monastics 
who testified before the Committee:

          For instance, individual monastics often share what 
        assets they personally have accumulated with the temple 
        and consider the temple to be their home and provider. 
        Often, monastics will bring and contribute to the 
        temple funds which they have access to or that belong 
        to them from their lay relationships (i.e., 
        inheritances or cash savings accumulated prior to their 
        joining the monastery). While monastics may contribute 
        their own funds to the temple, at the same time funds 
        for their living expenses or for some worthy cause will 
        be provided by the temple. All this is part of the 
        Buddhist tradition[al] custom of helping one another in 
        time of need. Thus, as a consequence[], what Americans 
        call ``reimbursements'' is simply the way by which the 
        temple helps its monastics to meet living expenses or 
        to perform good deeds.85

The testimony indicated that the Temple regularly 
``reimbursed'' monastics for a wide variety of expenses, 
including medical expenses, educational expenses, expenses 
incurred in visiting family, and charitable 
donations.86 Moreover, in an interview with 
Committee staff, Master Hsing Yun indicated that, in his view, 
contributions made in connection with a visit to the Temple by 
the Vice President of the United States were not an effort to 
promote the reelection of a particular candidate, but rather 
were a way of expressing gratitude to the United States for all 
the assistance it has provided to Taiwan over the 
years.87
    On the other hand, the evidence indicates that at least 
some Temple officials were conscious of possible wrongdoing. Yi 
Chu, the Temple bookkeeper, testified that she knew the Temple 
could not contribute directly, in its own name, which is why 
she had to go through the process of finding individuals to 
write checks.88 She and Man-Ho testified that once 
the controversy over the event became public, they destroyed 
certain documents and altered others. Among the documents Man-
Ho destroyed was a list of those individuals who had 
contributed money prior to the Temple event.89 The 
alteration of documents involved Yi Chu's adding the words 
``futien account'' to the bottom of the reimbursement checks 
supplied by the Temple, after those checks had already been 
cashed.90 This alteration was significant, because 
the checks were drawn on the Temple's general expense 
account,91 not the special account used by the 
Temple to manage its monastics' personal funds or ``futien 
accounts.'' If the monastics had been reimbursed from their 
futien or personal accounts, it would have been clear that the 
money they were contributing was their own. By adding the words 
``futien account'' to the reimbursement checks after the fact--
suggesting that the reimbursements were made with each 
monastic's personal funds rather than with the Temple's funds--
Yi Chu seemed to demonstrate an understanding that using the 
Temple's funds was improper.
    Yi Chu's explanation for her action was that she was 
concerned about the press reports concerning the Temple event 
and was worried that negative publicity would hurt the Temple's 
reputation.92 She stated that she did not want to 
embarrass the Vice President or her friend Maria 
Hsia.93 She and Man-Ho each testified that they took 
their respective actions entirely on their own and were not 
instructed to do so by Maria Hsia, John Huang, or anyone else.
    Yi Chu and Man-Ho have also indicated that the April 1996 
event was not the only time that the Temple had asked its 
monastics to make campaign contributions. Man-Ho stated in her 
deposition that the practice dated back to at least 1993, when 
Hsia asked her whether any of the Temple's devotees would like 
to support a fundraiser at which Vice President Gore would be 
appearing.94 She indicated that three Temple 
devotees contributed a total of $5,000 in connection with that 
event, for which the Temple reimbursed them. In 1996, the 
Temple asked its supporters to make contributions not only at 
the April event, but also for DNC fundraisers in Washington and 
Los Angeles,95 a fundraiser for Representative 
Patrick Kennedy of Rhode Island,96 and for an event 
featuring Hillary Rodham Clinton. She indicated that, in each 
case, Hsia requested these contributions, and in each case the 
Temple reimbursed its supporters who made 
contributions.97
    On February 18, 1998, the Department of Justice indicted 
Hsia for conspiring with the Temple, from 1993 to 1996, to 
reimburse persons associated with the Temple for making 
requested campaign contributions. Hsia denies the charges. The 
indictment does not allege any facts indicating that foreign 
money was involved in the contributions. The indictment also 
does not allege any facts indicating the DNC, White House or 
John Huang was aware of the conduit contributions.98
    Section 441f states that ``[n]o person shall make a 
contribution in the name of another person or knowingly permit 
his name to be used to effect such a contribution.'' The 
evidence before the Committee suggests that the donations made 
by the Temple's monastics and devotees appear to have violated 
this prohibition, although many of the persons writing the 
checks apparently did not understand that they were making 
campaign contributions or that they were potentially violating 
federal election law. Nevertheless, the evidence suggests that 
there was little doubt that most, if not all of them, wrote 
checks only because the Temple asked them to do so and did so 
with an expectation of reimbursement similar to many other 
expenditures they might make. There is no evidence before the 
Committee that the Temple used any foreign funds to reimburse 
the contributions.99 There is also no evidence 
before the Committee that Vice President Gore or any DNC 
official knew that the contributions made by persons associated 
with the Temple were of questionable legality. The DNC has 
returned all contributions made by persons associated with the 
Temple.

                      arief and soraya wiriadinata

    Arief and Soraya Wiriadinata were born in Indonesia, became 
legal permanent residents of the United States, and resided in 
the United States until December 1995.100 Arief 
attended graduate school in the U.S. in architectural 
engineering and operated a landscape architecture business. He 
also was a joint owner of a computer business named Geo-Tech in 
Indonesia, a business which he had hoped to develop in the 
United States. Arief's wife, Soraya, is the daughter of Hashim 
Ning, a wealthy Indonesian businessman who was a friend and 
business partner of Mochtar Riady.101
    Arief and Soraya Wiriadinata voluntarily consented to be 
interviewed by Committee staff. Their interview took place on 
June 24, 1997.
    In the interview, Arief stated that he and his wife made 
all of their campaign contributions through John Huang whom 
they first met when Huang visited Soraya's father in the 
hospital during the summer of 1995.102 Arief 
indicated that Huang encouraged the Wiriadinatas to support the 
Democratic Party at that time, although it does not appear that 
Huang directly solicited a specific contribution. Arief stated 
in the interview that a few months later, in October of 1995, 
during a visit to Indonesia, he informed Ning that he intended 
to contribute money to the Democratic Party. He indicated that 
he thought these contributions would help him build 
relationships that would facilitate his business efforts in the 
United States.103
    On November 2, 1995, the Wiriadinatas opened two bank 
accounts--one in each of their names--at First Union Bank. 
Three days later, Soraya's father wired $250,000 from an 
account under his control to Soroya's account. Two days after 
that, he wired another $250,000 to Arief's account. From 
November 1995 until December 1996, Soraya made 11 contributions 
from her account totaling $226,000. During the same time 
period, Arief made ten contributions from his account totaling 
$201,000. With the exception of $2,000 contributed to the 
congressional campaign of Rep. Jesse Jackson, Jr. (D-Ill.), all 
of the Wiriadinatas's contributions were to the DNC and 
provided both hard and soft money.104 Many of these 
contributions were made after the Wiriadinatas left the United 
States and returned to Indonesia in December 1995.
    Soraya stated in her Committee staff interview that the 
$500,000 wired to the two accounts was her own 
money.105 She described it as her portion of the 
family's wealth, which her father, an experienced investor, had 
been managing for her. She also stated that following her 
father's death her brother took on the task of managing her 
money. According to an FBI detailee to the Committee who has 
worked and lived within Asian communities, such a practice is 
not unusual within Asian families.106 No evidence 
has been presented to the Committee which contradicts Soraya's 
characterization of the money in the accounts as her personal 
funds. In addition, the Wiriadinatas voluntarily cooperated 
with the Committee investigation and have no history of 
wrongdoing. If the money wired to the accounts did, in fact, 
belong to Soraya, the Wiriadinatas' contributions would not 
appear to violate the prohibition against contributions in the 
name of another.
    Moreover, as long as the Wiriadinatas were legal permanent 
residents, they were eligible to contribute and the prohibition 
against foreign contributions did not apply to them. Once the 
Wiriadinatas travelled to Indonesia, the law suggests they 
endangered their immigration status but it is unclear whether 
or at what point they may have lost their permanent resident 
status and eligibility to contribute. During their interview, 
the Wiriadinatas said that they travelled to Indonesia in 
December 1995 due to Ning's illness and remained at the request 
of her family after Ning's death, but had ``always planned on 
returning to the United States after a year or 
two.''107 Under federal immigration law and its 
implementing regulations,108 legal permanent 
residents who travel abroad may retain their legal permanent 
resident status so long as they ``departed from the United 
States with the intention of returning'' and the visit abroad 
was ``temporary'' or, if protracted, the length of time was due 
to ``reasons beyond the alien's control and for which the alien 
was not responsible.''109 These determinations are 
to be made by immigration officials on a case-by-case basis 
when a person claiming permanent resident status seeks to 
return to the United States.110 No specific period 
abroad automatically causes legal permanent residents to lose 
their immigration status, although after six months, 
immigration officials typically question individuals claiming 
to be returning legal permanent residents.111 
Despite the fact that it is unclear if and when the 
Wiriadinatas may have lost their permanent legal resident 
status, the DNC chose to return all of the funds they 
contributed.112

                             the lum family

    In May 1997, Nora and Gene Lum, and their daughter, Trisha, 
pleaded guilty to laundering contributions to Democratic 
campaigns in 1994 and 1995.113 Nora and Gene Lum 
pleaded guilty to making $50,000 in illegal conduit 
contributions, primarily through employees and board members of 
their Oklahoma-based company, Dynamic Energy 
Resources.114 Trisha Lum pleaded guilty to making an 
illegal conduit contribution of $10,000 to the Democratic 
Congressional Campaign Committee.115 These 
contributions, which were primarily from the 1994 election 
cycle, demonstrate that contribution laundering is not a new 
practice in the 1996 election cycle.
    Nora and Gene Lum are Asian Americans who, in 1992, moved 
from Hawaii to Los Angeles and launched the Asian Pacific 
American Advisory Council (``Council''), a group seeking to 
increase support for Democratic candidates among Asian 
Americans in Southern California.116 In addition, 
the Lums personally contributed to Democratic candidates, with 
the bulk of their contributions directed to the 1994 re-
election campaign of Senator Edward Kennedy of Massachusetts, 
and an unsuccessful bid for an Oklahoma congressional seat made 
by their business partner and co-owner of Dynamic Energy, 
Stuart Price.
    Beginning in 1994 and continuing for about a year, the Lums 
began to use their personal funds and funds from Dynamic Energy 
to make conduit contributions.117 Between May 1994 
and April 1995, the Lums funneled approximately $50,000 in 
conduit contributions into several Democratic campaigns, 
primarily through company employees. Their daughter Trisha 
served as a conduit for a $10,000 donation to the Democratic 
Congressional Campaign Committee, a division of the DNC, 
financed with funds from her mother. In August 1997, Michael 
Brown, son of the late Secretary of Commerce Ron Brown, a 
friend of the Lums, and acting president of Dynamic Energy, 
pleaded guilty to participating in the Lums' conduit 
scheme.118 After initially donating $1,000 to the 
1994 reelection campaign of Senator Kennedy, Brown admitted 
receiving another $5,000 from Nora Lum. Brown then used those 
funds to make another $1,000 contribution to the Kennedy 
campaign in his own name (reaching the $2,000 legal limit on 
individual contributions), and used the remaining $4,000 to 
reimburse others who made contributions under their 
names.119
    The Justice Department obtained the convictions of the Lum 
family and Michael Brown in 1997.120 To date, the 
Justice Department has apparently found no evidence that the 
DNC, Senator Kennedy, Stuart Price, or any other candidate or 
campaign organization was aware of the Lums' conduit scheme or 
knowingly accepted a laundered contribution. The evidence 
indicates that as soon as the allegations against the Lums 
became known, Democratic party officials and the Kennedy and 
Price campaigns returned all relevant 
contributions.121

                               conclusion

    The evidence before the Committee confirms that the DNC 
received a number of contributions during the 1996 election 
cycle that were paid for by someone other than the contributor 
of record, and that at least of some of these contributions may 
have utilized foreign funds. The evidence did not establish 
that the DNC knew or should have known of this misconduct. The 
example of the Lums shows that conduit contributions were not a 
new practice in the 1996 election cycle.

                               footnotes

    \1\ For more information on Trie and Wu, see Chapter 5: Charlie 
Trie, supra.
    \2\ See Exhibit 62: DNC In-Depth Contribution Review, DNC 0134-145.
    \3\ See Washington Post, 12/18/96.
    \4\ Jerry Campane, 7/29/97 Hrg., pp. 71-72.
    \5\ Hrg., 7/29/97, p. 150.
    \6\ Hrg., 7/29/97, pp. 126-127, 140-141.
    \7\ Hrg., 7/29/97, pp. 127-128.
    \8\ Hrg., 7/29/97, pp. 125-126.
    \9\ Hrg., 7/29/97, p. 128; Yue Chu deposition, 7/9/97, pp. 18-19.
    \10\ Hrg., 7/29/97, pp. 130-133.
    \11\ Hrg., 7/29/97, pp. 134-135; Xiping Wang deposition, 7/9/97, 
pp. 10-16.
    \12\ Hrg., 7/29/97, pp. 134-135; Xiping Wang deposition, 7/9/97, 
pp. 10-16.
    \13\ Yue Chu deposition, 7/9/97, pp. 36-37; Hrg., 7/29/97, p. 137.
    \14\ Hrg., 7/29/97, pp. 137-140.
    \15\ Hrg., 7/29/97, pp. 138-140, 143. See Exhibit 211: $12,500 
check from Keshi Zhan to Ming Chen, 2/19/97; Exhibit 212: $7,500 check 
from Keshi Zhan to Ming Chen, 2/19/97.
    \16\ Hrg., 7/29/97, pp. 129-130.
    \17\ United States v. Yah Lin ``Charlie'' Trie and Yuan Pei 
``Antonio'' Pan, Criminal Case No. 98-0029 (U.S. District Court for the 
District of Columbia), 1/28/98 (hereinafter referred to as the ``Trie 
indictment''), ``Manner and Means of the Conspiracy,'' paragraph 15 
(c), (d), (i).
    \18\ Trie indictment, ``Overt Acts,'' paragraph 34.
    \19\ Jerry Campane, 7/29/97 Hrg., pp. 64-65, 93.
    \20\ Jerry Campane, 7/29/97 Hrg., p. 93.
    \21\ Trie indictment, ``The Conspiracy,'' paragraph 14.
    \22\ See Part 1, Chapter 5: Charlie Trie, for more information.
    \23\ Trie indictment, ``Overt Acts,'' paragraphs 43-45, 52.
    \24\ Trie indictment, ``Overt Acts,'' paragraphs 48-51. See also 
Los Angeles Times, 12/7/97.
    \25\ Washington Post, 7/13/97.
    \26\ Washington Post, 1/27/97; Clark Wallace deposition, 8/27/97, 
pp. 92-93.
    \27\ Clark Wallace deposition, 8/27/97, pp. 6-14.
    \28\ Jackson served in the Bush Administration as the National 
Security Council's chief Asian expert. In 1992, he became Vice 
President Quayle's national security adviser. In August 1993, Jackson 
and Quayle announced formation of FX Strategic Advisors, Inc., a 
consultancy service for foreign-exchange traders and U.S. companies 
looking to invest abroad. See Los Angeles Times, 10/10/94; Financial 
Times, 9/6/93; Business Times, 6/28/94. Jackson testified before the 
Committee on 9/16/97.
    \29\ See FEC records and www.tray.com/cgi-win/allindiv.exe.
    \30\ UST 2013.
    \31\ EOP002958; EOP002959.
    \32\ Richard Sullivan deposition, 6/4/97, pp. 125-127.
    \33\ Memorandum dated 11/20/6, by Ari Swiller, head of the DNC's 
managing trustee program, DNC1143379.
    \34\ Ibid.
    \35\ Ibid.
    \36\ DNC Check Tracking Form, 5/28/96, DNC0829404
    \37\ See Los Angeles Times, 10/23/96.
    \38\ See Los Angeles Times, 10/23/96.
    \39\ Los Angeles Times, 11/2/96 and 10/23/96; EOP 005431.
    \40\ Los Angeles Times, 11/2/96.
    \41\ Los Angeles Times, 11/2/96.
    \42\ EOP 003666 and 003667.
    \43\ EOP 003344.
    \44\ EOP 003345.
    \45\ EOP 005431.
    \46\ EOP 005430.
    \47\ EOP 008846.
    \48\ Eder deposition, 5/28/97, pp. 200-205.
    \49\ EOP 4717, October 14, 1987 UPI article.
    \50\ EOP 003399.
    \51\ Staff interview with Yogesh Gandhi, 3/24/97. Gandhi had 
originally agreed to provide a deposition, but at the beginning of the 
deposition asserted his constitutional rights under the Fifth Amendment 
and refused to provide sworn testimony. He consented to an unsworn, 
untranscribed interview.
    \52\ L.A. Times 11/2/96.
    \53\ See FEC filings.
    \54\ Staff interview with Yogesh Gandhi, 3/24/97.
    \55\ Joe Sandler deposition, 5/15/97, p. 110.
    \56\ Los Angeles Times, 11/2/96.
    \57\ Joseph Sandler deposition, 5/15/97, pp. 107-11.
    \58\ Staff interview with Yogesh Gandhi, 3/24/97.
    \59\ Richard Sullivan deposition, 6/5/97, pp. 34-35.
    \60\ Joseph Sandler, 9/10/97 Hrg., p. 13.
    \61\ Staff interview with Yogesh Gandhi, 3/24/97.
    \62\ Los Angeles Times, 10/23/96.
    \63\ Los Angeles Times, 10/23/96.
    \64\ Joe Sandler deposition, 5/15/97, pp. 113-116.
    \65\ Staff interview with Yogesh Gandhi, 3/24/97.
    \66\ See Los Angeles Times, 10/23/96.
    \67\ Because the $325,000 contribution was attributed entirely to a 
soft money account, section 441f's prohibition on contributions in the 
name of another may not apply. See Chapter 20: Overview and Legal 
Analysis.
    \68\ Hsi Lai Temple Literature, 000860-000865, 861.
    \69\ For a discussion of the event itself and the Vice President's 
role in it, see Part 1's chapter on John Huang, supra.
    \70\ See Howard Hom deposition, 8/27/97.
    \71\ DNC document # D 0000974-977.
    \72\ Yi Chu, 9/4/97 Hrg., p. 74.
    \73\ Yi Chu, 9/4/97 Hrg., p. 44.
    \74\ Man Ya Shih deposition, 8/20/97, pp. 13-14, 28-29.
    \75\ Man-Ho Shih, 9/4/97 Hrg., p. 31.
    \76\ Man-Ho Shih, 9/4/97 Hrg., p. 41.
    \77\ Man-Ho Shih, 9/4/97 Hrg., pp. 41-42.
    \78\ Buddhist nuns, 9/4/97 Hrg., pp.43-45, 160-163.
    \79\ Yi Chu, 9/4/97 Hrg., pp. 46-48.
    \80\ Yi Chu, 9/4/97 Hrg., p. 44.
    \81\Yi Chu, 9/4/97 Hrg., p. 47.
    \82\Yi Chu deposition, 8/7/97, p. 78.
    \83\ Yi Chu deposition, 8/7/97, p. 77.
    \84\ Monastics of the Fokuangshan Order do not take a vow of 
poverty. Although many monastics do turn their wealth over to the sect, 
they are not required to do so. Monastics generally receive a monthly 
allowance from their Temple based upon their seniority and 
responsibilities. Indeed, monastics are allowed to maintain personal 
checking accounts at commercial banks. Some also maintain futien 
accounts with their individual temple. Such futien accounts are managed 
by the Temple on behalf of the monastic. The money from these futien 
accounts is typically held in a common account owned by the Temple. 
Buddhist nuns, 9/4/97 Hrg., pp. 45, 49-51.
    \85\ Buddhist nuns opening statement, 9/4/97 Hrg., p. 195.
    \86\ Man-Ho Shih, 9/4/97 Hrg., pp. 56-57.
    \87\ Statement of the Venerable Master Hsing Yun presented during 
his interview with Committee investigators, 6/17/97.
    \88\ Yi Chu deposition, 8/7/97, p. 31.
    \89\ Man-Ho Shih, 9/4/97 Hrg., pp. 34-35.
    \90\ Yi Chu, 9/4/97 Hrg., p. 64.
    \91\ Yi Chu, 9/4/97 Hrg., pp. 47, 74.
    \92\ Yi Chu, 9/4/97 Hrg., p.65; Man-Ho Shih deposition, 8/6/97, pp. 
155-58; Exhibit 706.
    \93\ Yi Chu, 9/4/97 Hrg., p. 65.
    \94\ Man-Ho Shih deposition, 8/6/97, pp. 74-84.
    \95\ Man-Ho Shih deposition, 8/6/97, pp. 196, 202.
    \96\ Man-Ho Shih deposition, 8/6/97, p. 206.
    \97\ Man-Ho Shih deposition, 8/6/97, pp. 206-213.
    \98\ U.S. v. Maria Hsia, (Criminal Case No.____, D.D.C. 12/18/95).
    \99\ Yi Chu, 9/4/97 Hrg., pp. 52 (Glenn), 99, (Lieberman), 107 
(Durbin), 163 (Nickles).
    \100\ Staff interview of Wiriadinatas, 6/24/97.
    \101\ Staff interview of Wiriadinatas, 6/24/97.
    \102\ Staff interview of Wiriadinatas, 6/24/97.
    \103\ Staff interview of Wiriadinatas, 6/24/97.
    \104\ Staff interview of Wiriadinatas, 6/24/97.
    \105\ Staff interview of Wiriadinatas, 6/24/97.
    \106\ Staff interview of Wiriadinatas, 6/24/97.
    \107\ Staff interview of Wiriadinatas, 6/24/97.
    \108\ 8 USC 1104; 22 CFR 42.22.
    \109\ 22 CFR 42.22(a).
    \110\ 22 CFR 42.22(a).
    \111\ See 8 USC 1101(a)(13)(C).
    \112\ See FEC filings.
    \113\United States v. Nora and Gene Lum, Criminal Case No. 97-0207 
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97.
    \114\ United States v. Nora and Gene Lum, Criminal Case No. 97-0207 
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97; see also Los Angeles Times, 6/30/97.
    \115\ United States v. Nora and Gene Lum, Criminal Case No. 97-0207 
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97; see also Los Angeles Times, 6/30/97; Los Angeles 
Times, 5/22/97.
    \116\ See Los Angeles Times, 6/05/97; and see also Chicago Tribune, 
12/16/97.
    \117\ See Los Angeles Times, 5/22/97.
    \118\ United States v. Michael A. Brown, Plea Agreement, (D.D.C.), 
8/26/97.
    \119\ United States v. Michael A. Brown, Plea Agreement, (D.D.C.), 
8/26/97; see also Washington Post, 8/29/97.
    \120\ United States v. Nora and Gene Lum, Criminal Case No. 97-0207 
(D.D.C.), 5/16/97; United States v. Trisha Lum, Criminal Case No. 97-
0208 (D.D.C.), 5/9/97; see also Washington Post, 2/7/96.
    \121\ See FEC filings. See also Los Angeles Times, 6/5/97.





PART 3  CONTRIBUTION LAUNDERING/THIRD-PARTY TRANSFERS

Chapter 22: Contributions to the Republican Party

    While the Committee spent much time and effort 
investigating allegations of laundered contributions to the 
DNC, it spent little time investigating similar allegations 
with respect to contributions to the Dole for President 
campaign, the RNC, and other Republican campaign organizations. 
The Committee allocated three hours on one Friday morning to 
hearing testimony concerning the admitted laundering scheme of 
Simon Fireman and Aqua Leisure Industries. That testimony 
established the DNC was not the only campaign organization 
which received laundered contributions during the 1996 election 
cycle. The Dole for President campaign and other GOP 
organizations received more than $250,000 in confirmed 
instances of contribution laundering during the same time 
period. Moreover, in 1992--four years before the 
``unprecedented'' activities which became the focus of this 
Committee's investigative efforts--the RNC received $500,000 in 
laundered foreign funds from an individual whose case bears 
many similarities to those for which the DNC has been 
criticized.

                                findings

    (1) Simon Fireman, as a national vice chairman of the Dole 
for President campaign, used his company, Aqua Leisure 
Industries, Inc., to reimburse contributions to several 
Republican Party organizations made in the name of employees of 
Aqua Leisure. Over $100,000 in contributions made by employees 
of Aqua Leisure to the Bush-Quayle campaign, the RNC, and the 
Dole for President campaign were actually corporate 
contributions from Aqua Leisure. Fireman was convicted for his 
offenses.
    (2) Empire Sanitary Landfill, Inc. reimbursed its employees 
for over $110,000 in contributions the employees made to the 
Dole for President campaign and other Republican campaigns. 
Empire was convicted for its offenses.
    (3) DeLuca Liquor & Wine, Ltd. reimbursed five of its 
employees for $10,000 in contributions the employees and their 
spouses made to the Dole for President campaign.
    (4) There is no evidence before the Committee that anyone 
in the Dole for President campaign, the Bush-Quayle campaign or 
the RNC, other than Simon Fireman, knew about the above 
activities.

                             michael kojima

    A complete description of the case of Michael Kojima and 
his contributions to the RNC is provided in Part 1, Chapter 6. 
This discussion will focus solely on his $500,000 contribution 
to the Republican Senate-House Dinner Committee and the 
evidence which suggests that contribution represented laundered 
foreign funds.
    On April 28, 1992, Kojima attended a gala RNC fundraiser 
known as the President's Dinner. As a result of having 
contributed $500,000 to the Dinner Committee, Kojima and his 
wife sat at the head table with President and Mrs. Bush for the 
Dinner.1 In addition, Kojima brought 23 guests with 
him to the Dinner.2 Kojima's $500,000 contribution 
was paid for with three checks--two from a company called IMB, 
of which Kojima was president, and one from Kojima's personal 
account.3
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 22.
---------------------------------------------------------------------------
    At the time Kojima made his $500,000 contribution to the 
RNC, however, he was an individual in deep debt and with few 
apparent assets. As president of a partnership known as 2M 
Management, he had defaulted on a $655,000 loan in 
1989.4 His subsequent business venture, IMB, was 
suspended for nonpayment of taxes in 1992.5 Indeed, 
a 1992 Washington Post article reported that Kojima had ``a 
string of bad debt claims totaling more than $1 million from 
previous business ventures.''6 The New York Times 
reported that one creditor's attorney ``thought Mr. Kojima had 
no assets,'' while another creditor's attorney, after learning 
of the Kojima contribution, said his `blood began to boil'. . . 
since Mr. Kojima had declared bankruptcy to avoid paying his 
debts.'' 7
    In addition to his business debts, Kojima was also in deep 
personal debt at the time of his contribution, owing hundreds 
of thousands of dollars in child support to two former wives. 
One former wife had been searching for Kojima for five years to 
pay $700 per month in court-ordered child support. The other 
former wife told the Los Angeles Times that she had ``given up 
searching for the purportedly poverty-stricken Kojima--until he 
showed up with the President.'' 8 Within a month 
after learning of Kojima's $500,000 contribution to the RNC, 
the Los Angeles County District Attorney issued an arrest 
warrant for Kojima for nonpayment of child support. In 
announcing the warrant, the District Attorney labeled Kojima 
``America's most wanted deadbeat dad.'' 9
    How then did such an individual come up with $500,000 to 
contribute in order to sit at a table with the President of the 
United States? Material initially uncovered by CBS News in July 
1997 reveals that Kojima's guests at the President's Dinner 
included ten Japanese citizens who had flown in from Tokyo just 
for the Dinner. Three of these ten were Japanese businessmen 
who admitted that they had paid Kojima significant sums of 
money in order to attend the President's Dinner. Shuuichi 
Nakagawa told CBS News that he had attended the dinner as a 
Kojima guest and that Kojima had asked him for hundreds of 
thousands of dollars in return. Takashi Kimoto, a real estate 
company owner, stated that he ``knows his money went to the 
GOP'' [emphasis in original].10
    CBS News also released a document apparently provided by 
one or more of the Japanese businessmen. Printed in English and 
Japanese, the English version appears on IMB letterhead and is 
entitled ``Receipt.'' It is addressed to Tsunekasu Teramoto, a 
person known to have worked with Kojima and IMB. 11 
The next line of the document is the word ``Participant:'' 
followed by a blank line. The text states, ``Your Participation 
for 1992 President's Dinner will be the minimum requirement of 
donation at one Hundred Seventy-Five Thousand (US $175,000) 
U.S. Dollars.'' The document instructs the money to be remitted 
to IMB, providing the location and number of IMB's bank 
account. The account number provided is the same account number 
that appears on the two IMB checks providing $400,000 to the 
Republican Dinner Committee. Below the remittance instructions 
is a blank signature line under which is typed ``Michael 
Kojima, Co-Chairman.'' If authentic, the document suggests that 
Kojima was using his status as a Co-Chairman of the President's 
Dinner to obtain huge sums of money from foreign sources in 
exchange for arranging attendance at the dinner.
    The admissions of the Japanese businessmen, their 
attendance at the President's Dinner, and the English/Japanese 
receipt bearing IMB's specific bank account number, when 
combined with Kojima's history of indebtedness and apparent 
lack of assets, provide strong evidence that Kojima's $500,000 
contribution to the RNC represented a laundered contribution of 
foreign funds.
    The Minority found no evidence that the RNC knew at the 
time it accepted Kojima's contribution that it represented 
laundered funds. There is evidence, however, that concerns 
about Kojima's source of funds were brought to the attention of 
RNC officials prior to the date of the President's Dinner and 
that these concerns were sufficient to lead RNC officials to 
question Kojima about his contribution. A memorandum written by 
two fundraisers for the Dinner four days before the Dinner 
itself stated:

    Chuck Babcock of the Washington Post has called numerous 
times, over the past two days, regarding the donations of Mr. 
Kojima. Mr. Kojima is listed as one of the largest donors to 
The Dinner in the FEC report which was filed on April 15. . . .
    Babcock has been unable to find out any information 
regarding Mr. Kojima which raised his interest. . . .
    He had the Post's Los Angeles bureau check Secretary of 
State documents in California and found the only reference to a 
``Michael Kojima'' one who was a chef who owned, at one time, a 
series of restaurants.
    His further research indicated that the address listed as 
the headquarters of International Marketing Bureau was also the 
address of one of the restaurants owned by the Michael Kojima 
he could find. . . .
    His specific concerns . . . ``How do you know whether these 
checks come from the assets of his corporation or whether they 
are the result of laundered money?''
    This question raised our concerns to the point where we 
placed a call to Mr. Kojima and asked him about his business.
     Mr. Kojima, in a phone conversation with Rich and Betsy 
said:
          (1) His business is ``international marketing'';
          (2) He has clients in ``various countries'' 
        including: The USA, Japan, Hong Kong and Israel;
          (3) He is involved in ``organizing consortiums'' for 
        ``national projects'' such as airports and 
        telecommunications systems. . . .
          (4) We specifically asked him the source of funds 
        which are represented by the checks he has sent. He was 
        asked if they were from corporate proceeds or ``from 
        individuals who had chosen to donate to The Dinner.'' 
        His specific answer was that the checks were 
        ``corporate assets, my own corporation assets.''
    We feel much more comfortable now, having spoken to Mr. 
Kojima:
          --That we have taken reasonable steps to ensure the 
        funds he has sent to The Dinner are from a legitimate 
        source;
          --That he understood the nature of our concerns; and,
          --That he answered our questions with no hint of 
        evasion.'' 12

    In light of the questions put to Kojima by the Dinner 
personnel and the assurances received from him, the evidence 
does not support the conclusion that the RNC accepted Kojima's 
contribution with the knowledge that it represented laundered 
funds. However, in light of subsequent evidence, the RNC's 
failure to return the $215,000 it still retains from the Kojima 
contribution is disturbing. Particularly in light of the 
evidence presented in this Minority Report that foreign funds 
were the source of Kojima's contribution, the RNC should 
immediately return the $215,000 it received from Kojima.

                     aqua leisure industries, inc.

    Aqua Leisure Industries, Inc., based in Avon, 
Massachusetts, was founded by Simon Fireman in 1970. Over the 
years, Fireman built Aqua Leisure, a relatively small company, 
into one of the largest distributors of aquatic sports 
equipment in the world. In October 1996, Fireman pleaded guilty 
to eleven counts of a federal criminal information charging him 
with a scheme to funnel over $120,000 in illegal corporate 
contributions from Aqua Leisure to the Bush-Quayle campaign, 
the RNC, the Dole for President campaign, and other campaigns. 
At the same time, his company pleaded guilty to seventy counts 
in connection with the scheme. One month later, Carol A. 
Nichols, Fireman's executive assistant, pleaded guilty to one 
count of conspiracy in connection with the same 
scheme.13
    Fireman has been active in politics since the Carter 
administration. Originally a liberal Democrat, he changed party 
affiliation early in the administration of Ronald Reagan. 
Fireman had been named to several presidential trade committees 
by both Presidents Carter and Reagan. 14 He was also 
appointed to the board of directors of the Export-Import Bank 
by Presidents Reagan and Bush. 15
    In late 1991 and early 1992, Fireman and Nichols provided 
approximately $21,000 to Aqua Leisure employees in order for 
them to make contributions to the Bush-Quayle 
campaign.16 Nichols told Committee investigators 
that she believed Fireman had hoped to be appointed to a 
prominent position within the Bush administration and that he 
had therefore made commitments to raise money for the 1992 
Bush-Quayle campaign committees.17 According 
toNichols, when Fireman found it difficult to raise the money he had 
promised, he devised the scheme to solicit employees of Aqua Leisure 
and to reimburse them for their contributions.18 Fireman and 
Nichols decided upon which employees to solicit and then Nichols made 
the actual solicitation.19 Once an employee agreed to 
contribute, Nichols collected a personal check from the employee and 
reimbursed the employee with cash from an account controlled by 
Fireman.20 In addition to soliciting Aqua Leisure employees, 
Fireman loaned money from Aqua Leisure to an outside individual who 
gave that money to his own set of contributors to make contributions to 
the Bush-Quayle campaign.21
    A similar pattern of soliciting and reimbursing Aqua 
Leisure employees was followed in subsequent years as Fireman 
funneled Aqua Leisure funds to several other campaign 
organizations, including $24,000 to the RNC in 1992, $6,000 to 
the ``Citizens for Joe Kennedy Committee'' in 1993, and $69,000 
to the Dole for President campaign in 1995.22 With 
respect to the contributions to the Dole campaign, Fireman once 
again loaned money to an outside individual in order to 
facilitate contributions from a set of contributors known to 
this individual.23
    At the time of the contributions to the Dole campaign, 
Fireman was a national vice chairman of Dole's campaign finance 
committee. Again, Nichols told Committee investigators that she 
believed Fireman's motive for contributing to the Dole campaign 
was a desire to obtain a position in a future Dole 
administration.24 This belief was confirmed by the 
criminal information, which stated that ``one goal and 
objective, among others, of Simon C. Fireman's secret scheme to 
funnel money to the presidential campaign of Robert Dole was to 
obtain for Simon C. Fireman a position with the United States 
government.'' 25
    What makes Fireman's activities particularly egregious is 
that he not only laundered illegal corporate contributions, but 
that those contributions represented foreign funds. In 
approximately 1985, Fireman formed a trust known as Rickwood 
Ltd. in Hong Kong. The purpose of this trust was to make 
certain expenditures for the benefit of Fireman that Fireman 
wished to conceal.26 According to the criminal 
information, the Rickwood trust maintained a bank account in 
the U.S. and received wire transfers of funds from Hong 
Kong.27 These funds came from a Hong Kong company 
known as Greyland Trading Company, which had been acquired by 
Fireman in 1988.28 All of the money used to 
reimburse contributors came from the bank account of the 
Rickwood trust,29 and was withdrawn in such a manner 
as to avoid detection and reporting by the bank where the 
account was maintained.30
    The U.S. Attorney for the District of Massachusetts has 
noted that there is no evidence to suggest that any of the 
candidates or campaigns who received these laundered 
contributions were aware of Fireman's scheme. Shortly after 
questions about Fireman's contributions first arose, the Dole 
campaign accepted his resignation from its finance committee. 
In addition, the campaign placed all donations involving Mr. 
Fireman into an escrow account pending the outcome of a federal 
inquiry. After Fireman pleaded guilty, the campaign turned 
those contributions over to the U.S. Treasury.31
    In connection with his guilty plea, Fireman agreed to pay a 
total of $6 million in fines. At the time, that represented the 
largest fine ever levied for a violation of campaign finance 
laws.32 That record would soon be eclipsed, however, 
by another illegal corporate contributor to the Dole campaign, 
Empire Sanitary Landfill.

                     EMPIRE SANITARY LANDFILL, INC.

    Empire Sanitary Landfill, Inc., a solid waste transfer, 
disposal and landfill business located in Scranton, 
Pennsylvania, is another company which has admitted to 
illegally funneling corporate contributions through its 
employees and their relatives during the 1996 federal election 
campaign.
    On October 7, 1997, Empire agreed to plead guilty to a 40-
count federal criminal information filed by the United States 
Attorney for the Middle District of Pennsylvania.33 
According to the criminal information, Empire's former upper 
management made campaign contributions themselves and solicited 
such contributions from numerous Empire employees, family 
members, and business associates.34 They then used 
corporate funds to reimburse themselves and those they had 
solicited.35 In connection with this scheme, $80,000 
in laundered corporate contributions was provided to the Dole 
for President campaign.36
    In addition to its contributions to the Dole campaign, 
Empire also admitted to funneling contributions to nine other 
political campaigns, including $10,000 to the ``Arlen Specter 
'96'' campaign, $6,000 to the ``Santorum '94'' campaign, 
$10,000 to the ``Haytian-U.S. Senate '94'' campaign, $3,000 to 
the ``Fox for Congress'' campaign, $1,000 to the ``Paxon for 
Congress'' campaign, $5,000 to the ``Duhaime for Senate'' 
campaign, $3,000 to the ``Pallone for Congress'' campaign, 
$1,000 to the ``Friends of Max Baucus'' campaign, and $10,000 
to the ``Clinton/Gore '96 Primary Committee.'' In announcing 
Empire's plea agreement, the U.S. Attorney noted that there was 
no evidence to suggest that any of the candidates or campaigns 
knew of the illegality of the contributions.37
    Simultaneous to the announcement of Empire's plea 
agreement, the U.S. Attorney also announced that a federal 
grand jury sitting in Scranton, Pennsylvania had returned a 
140-count indictment charging six individuals with a variety of 
criminal offenses arising out of Empire's illegal 
contributions.38 These individuals included several 
former officers and owners of Empire, as well as business 
associates of Empire and a Pennsylvania state representative in 
whose district Empire did business. The indictment provides the 
details of the government's theory as to how Empire's 
contributions were laundered.
    According to the indictment, in April 1995, Empire's former 
president and its former assistant secretary were invited to 
become members of the New Jersey Steering Committee, a 
fundraising arm of the Dole for President 
campaign.39 A Steering Committee luncheon was 
scheduled for April 29, 1995.40 Prior to that 
luncheon, the Empire officials and others solicited numerous 
Empire employees, as well as their own friends and families in 
an effort to raise funds for the Dole campaign.41 
The donors were instructed to issue personal 
checks.42 At the Steering Committee luncheon the 
Empire officials turned over a large envelope containing 
approximately $80,000 in contributions to officials of the Dole 
campaign.43
    The indictment further charges that Empire issued 
approximately nine corporate checks directly reimbursing 
approximately twenty individuals a total of 
$20,000.44 In addition, the indictment charges that 
one of Empire's officials issued approximately 34 personal 
checks reimbursing 53 individuals a total of 
$58,000.45 This official was then issued an Empire 
corporate check for the $58,000, as well as for $2,000 in 
contributions he and a friend had made.46
    The contributions to the other campaigns followed a similar 
pattern. In connection with a fundraising event attended by one 
or more officials of Empire, employees of Empire and others 
were solicited to make contributions. These individuals were 
instructed to write personal checks and were then reimbursed 
either directly by Empire or indirectly through one of Empire's 
officials.
    It should be noted that the defendants charged by the 
indictment have pleaded not guilty to all counts and a trial 
has not yet taken place. Empire has pleaded guilty to its role 
in these activities. In connection with its plea, Empire agreed 
to pay a fine of $8 million, the largest penalty ever for a 
campaign finance violation.47

                       DELUCA LIQUOR & WINE, LTD.

    DeLuca Liquor & Wine, Ltd. (``DeLuca''), located in Las 
Vegas, is one of the largest distributors of liquor, wine, and 
beer in Nevada. In 1995, the company, acting through its vice 
president for operations, funneled $10,000 in corporate 
contributions to the Dole for President campaign through five 
of its employees and their spouses.
    Between May 19 and 22, 1995, five DeLuca employees and 
their spouses each made $1,000 contributions to the Dole for 
President campaign. At least two of those contributors later 
admitted that they had been given money by DeLuca to make the 
contributions.48 According to the Kansas City Star, 
Ray Norvell, DeLuca's vice president in charge of its Nevada 
operations, ``acknowledged that he knew federal law prohibited 
corporate contributions, so he boosted his workers'' pay to 
help them donate.'' 49 The Star quoted Norvell as 
saying, ``I give them $5,000 extra salary to give to political 
campaigns and also to charities. We are prepaying it, 
basically, in front.'' 50 Approximately seven or 
eight DeLuca employees received this ``contribution 
allowance,'' according to Norvell.51
    While stressing to the Star that DeLuca did not reimburse 
its employees for political contributions, Norvell 
``acknowledged that he asked `a few' of his employees to 
contribute, using the portion of their salaries designated for 
political and charitable contributions.'' 52 One of 
the contributors, Michelle McIntire, whose husband Dale works 
for DeLuca, stated that she would not have contributed to the 
Dole campaign if DeLuca had not paid for the 
donation.53 The Star quoted McIntire as saying, 
``they gave us the money. That was something that the company 
wanted him [Dale] to do, and so that's what we did.'' 
54 Dale McIntire also admitted to making his 
contribution using money from DeLuca; however, he would not say 
how the company compensated him.55 Of the other 
eight DeLuca employees who contributed, three denied that the 
company had compensated them and five either refused to discuss 
the matter or stated they did not remember.56
    Documents produced to the Committee by DeLuca and the Dole 
for President campaign, pursuant to subpoena confirm this 
scheme. At the same time, these documents indicate that those 
employees who contributed to the Dole campaign were given money 
specifically for those donations and not as part of some 
general ``contribution allowance.'' The DeLuca documents show 
that on May 18, 1995, five checks for $2,000 each were issued 
to the following DeLuca employees: Ray E. Norvell, Kenneth W. 
Leslie, Dale McIntire, James P. O'Connor, and Bruce 
Kobrin.57 The corporate payment stub attached to the 
check for Norvell actually included the notation ``Campaign--
Dole.'' 58
    Records produced by Dole for President show that on May 19, 
1995, Norvell, McIntire, Kobrin, and each of their wives wrote 
checks for $1,000 to the Dole campaign.59 On May 22, 
1995, Leslie, O'Connor, and both of their wives also wrote 
checks for $1,000 each to ``Dole for President.'' 60 
Thus, within two business days of DeLuca's payments of $10,000 
to five of its employees, the same dollar figure had been 
contributed to Dole's presidential campaign by those employees 
and their wives.
    The Minority is aware of no evidence that the Dole campaign 
had any knowledge of the DeLuca scheme. It is troubling, 
however, that the Dole campaign has never returned the 
contributions of the DeLuca employees, despite the fact that 
information detailing the scheme has been public since at least 
September 1996. Indeed, a Dole campaign spokesperson 
acknowledged at that time that an FEC investigation might be 
warranted.61 In light of the public admissions of 
DeLuca's vice president and the supporting documentation 
uncovered by the Committee, the Dole campaign should 
immediately refund these contributions.

                               CONCLUSION

    The preceding examples of illegally laundered contributions 
making their way into Republican campaign coffers, apparently 
without the knowledge of the campaign organizations involved, 
provides much-needed perspective to the allegations that have 
been raised concerning laundered contributions to Democratic 
candidates and organizations. As was the case with Kojima, 
Fireman, DeLuca, and Empire Landfill, illegal conduct on the 
part of fundraisers for the party does not necessarily mean 
that the recipients of such funds are complicit in a scheme to 
violate campaign finance laws. Instead, as past experience has 
shown, both Republicans and Democratic party organizations or 
campaigns can find that they have been victimized by 
overzealous or unscrupulous fundraisers. Campaigns are likely 
to continue to encounter such difficulties so long as the 
political system's demand for money continues to rise 
unchecked.

                               Footnotes

    \1\ Toronto Star, 10/11/92.
    \2\ Memorandum from Betsy Ekonomou to Michael Kojima, 4/20/92.
    \3\ Check from Michael Kojima to President's Dinner Trust, 3/6/92 ; 
Check from Michael Kojima to President's Dinner Trust, 3/16/92
    \4\ Letter to Michael Kojima from Lippo Group Bank of Trade, 3/3/
87; Lippo Group Bank of Trade Credit Proposal for Michael Kojima, 4/9/
87; Lippo Group Bank of Trade Promissory Note, 4/14/87; Lippo Group 
Bank of Trade memorandum from James Riady to Richard Chen, 8/8/89.
    \5\ State of California Secretary of State Certification, 5/20/97.
    \6\ Washington Post, 5/8/92.
    \7\ New York Times, 5/9/92.
    \8\ Los Angeles Times, 5/9/92.
    \9\ New York Times, 10/11/92; Los Angeles Times, 10/11/92; New York 
Times, 10/18/92; and Daily News, 10/15/96, Dallas Morning News, 10/11/
92.
    \10\ CBS News Story Script, 7/7/97. CBS News has reprinted several 
photographs of Kojima's guests at the President's Dinner on its website 
www.eveningnews.com/moneytrail2.html.
    While Kojima's guest list for the dinner has not been produced to 
the Committee, Kimoto's name does appear in a State Department document 
summarizing a 3/19/92 meeting between Kojima and the U.S. ambassador to 
Japan. The document lists Kimoto as a participant at the invitation of 
Kojima, thereby providing evidence that the two were engaged in 
business dealings in the month before the President's dinner. State 
Department Memorandum of Conversation, 3/19/92.
    \11\ IMB letterhead receipt. Teramoto, for example, attended 
meetings with Kojima and U.S. embassy personnel, and is listed on 
embassy documents summarizing the meetings. State Department Memorandum 
of Conversation, 3/19/92.
    His name also appears in correspondence between Mr. and Mrs. Kojima 
and Harvard University, including a 3/10/92 letter from Mrs. Kojima 
which describes Teramoto as Kojima's ``Japan agent.'' Letter to Leonard 
Houseman from Chiey Nomura, 3/10/92.
    \12\ Memorandum to Senator Howard Baker from Betsy Ekonomou, 4/24/
92. This memorandum is referenced in the Court decision, 858 F.Supp. 
243, 245, footnote 5, and is available in the public file associated 
with the 1992 court case.
    \13\ New York Times, 7/11/96; Kansas City Star, 11/5/96; Plea 
agreement letter re: Aqua Leisure to John Pappalardo from the 
Massachusetts District U.S. Attorney, 6/26/96; Plea agreement letter 
re: Simon Fireman to Thomas Dwyer from the Massachusetts District U.S. 
Attorney, 6/26/96.
    \14\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \15\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \16\ Hrg.,7/25/97, p. 10; Information, United States of America v. 
Simon C. Fireman, Carol A. Nichols, and Aqua Leisure Industries, Inc., 
United States District Court for the District of Massachusetts.
    \17\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \18\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \19\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \20\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \21\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, pp. 8-9.
    \22\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, pp. 5-6.
    \23\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, pp. 8-9.
    \24\ Memorandum of FBI Interview of Carol Nichols, 7/23/97.
    \25\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, p. 4.
    \26\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, p. 8.
    \27\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, p. 8.
    \28\ Memorandum of Interview of Carol Nichols, 7/22/97. See also, 
Notes to Financial Statements, Aqua Leisure Industries, Inc., 12/31/94.
    \29\ Memorandum of Interview of Carol Nichols, 7/22/97; 
Information, United States of America v. Simon C. Fireman, Carol A. 
Nichols, and Aqua Leisure Industries, Inc., United States District 
Court for the District of Massachusetts, 10.
    \30\ Information, United States of America v. Simon C. Fireman, 
Carol A. Nichols, and Aqua Leisure Industries, Inc., United States 
District Court for the District of Massachusetts, pp. 10-11.
    \31\ New York Times, 7/11/97.
    \32\ New York Times, 7/11/97.
    \33\ Plea Agreement, United States of America v. Empire Sanitary 
Landfill, Inc., United States District Court for the Middle District of 
Pennsylvania.
    \34\ Plea Agreement, United States of America v. Empire Sanitary 
Landfill, Inc., United States District Court for the Middle District of 
Pennsylvania, p. 3.
    \35\ Plea Agreement, United States of America v. Empire Sanitary 
Landfill, Inc., United States District Court for the Middle District of 
Pennsylvania, p. 3.
    \36\ Plea Agreement, United States of America v. Empire Sanitary 
Landfill, Inc., United States District Court for the Middle District of 
Pennsylvania., p. 5.
    \37\ Press Release, David M. Barasch, U.S. Attorney, U.S. 
Department of Justice, 10/8/97.
    \38\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini , United States District Court for the Middle 
District of Pennsylvania.
    \39\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 9.
    \40\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 9.
    \41\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 9.
    \42\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 9.
    \43\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 10.
    \44\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 10.
    \45\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 10.
    \46\ Indictment, United States of America v. Renato P. Mariani, 
Michael L. Serafini, Leo R. Del Serra, Alan W. Stephens, Robert Giglio 
and Frank Serafini, United States District Court for the Middle 
District of Pennsylvania, p. 10.
    \47\ Plea Agreement, United States of America v. Empire Sanitary 
Landfill, Inc., United States District Court for the Middle District of 
Pennsylvania; Pittsburgh Post-Gazette,10/22/97.
    \48\ Kansas City Star, 9/29/96.
    \49\ Kansas City Star, 9/29/96.
    \50\ Kansas City Star, 9/29/96.
    \51\ Kansas City Star, 9/29/96.
    \52\ Kansas City Star, 9/29/96.
    \53\ Kansas City Star, 9/29/96.
    \54\ Kansas City Star, 9/29/96.
    \55\ Kansas City Star, 9/29/96.
    \56\ Kansas City Star, 9/29/96.
    \57\ Copies of canceled checks and bank statements produced by 
DeLuca Liquor & Wine, Ltd, DEL-0002, 0004, 0014, 0019, and 0022.
    \58\ Copy of payment stub for a DeLuca check made out to Ray E. 
Norvell in the amount of $2,000, 5/18/95, DEL-0003.
    \59\ Copies of canceled checks and donor records produced by Dole 
for President, DFP-2132, 2141, 2144, 2153, 2156, and 2159.
    \60\ Copies of canceled checks and donor records produced by Dole 
for President, DFP-2135, 2138, 2147, and 2150.
    \61\ Combined News Services, Newsday, 9/30/96.





PART 4  SOFT MONEY AND ISSUE ADVOCACY

Chapter 23: Systemic Problems of the Campaign Finance System

    The Committee's investigation into campaign financing 
during the 1996 election cycle exposed a system in crisis, with 
most problems stemming not from activities that are illegal 
under current law, but from those that are legal. Soft, or 
unrestricted and unregulated, money is a relatively new legal 
loophole in the campaign financing system. Since 1988, however, 
it has become the crux of many of the current problems 
uncovered by the Committee, including the offers of access for 
large contributions and the use of party-run issue ads on 
behalf of candidates.
    Based on the evidence before the Committee, we make the 
following findings with respect to the role of soft money in 
the federal campaign finance system:

                                findings

    (1) The most insidious problem with the campaign finance 
system involved soft (unrestricted) money raised by both 
parties. The soft money loophole, though legal, led to a 
meltdown of the campaign finance system that was designed to 
keep corporate, union and large individual contributions from 
influencing the electoral process.
    (2) The vast majority of issue ads identified specific 
candidates and functioned as campaign ads.
    (3) Both parties went to significant lengths to raise soft 
money, including offering access to party leaders, elected 
officials, and exclusive locations on federal property in 
exchange for large contributions. Both parties used issue ads, 
which were effectively indistinguishable from candidate ads and 
which--unlike candidate ads--can be paid for in part with soft 
(unrestricted) money, to support their candidates.

                              introduction

    The Committee investigation into campaign financing during 
the 1996 election cycle exposed a system in crisis, with most 
of the problems stemming, not from activities that are illegal 
under the current law, but from activities that are legal.
    For four days in September 1997, the Committee heard from 
respected experts who argued the case for campaign finance 
reform and presented recommendations to remedy the problems 
that plagued the 1996 election cycle.1 The witnesses 
were virtually unanimous in declaring that the current campaign 
finance system is broken, that the problems are bipartisan, and 
that there are solutions available if both parties are willing 
to tackle the problem.
    The witnesses included former Vice President Walter Mondale 
and former Senator Nancy Kassebaum Baker, as well as former 
Chairman of the Federal Election Commission (``FEC'') Trevor 
Potter and representatives from the Brookings Institution, 
American Enterprise Institute, Common Cause, the Campaign 
Reform Project, League of Women Voters, Cato Institute, 
Committee for the Study of the American Electorate, Public 
Campaign, Brennan Center for Justice, and professors of law and 
economics from the University of Virginia, Rutgers University 
and Colby College. The witnesses' views ranged from those who 
support unlimited private money to finance campaigns to those 
who advocate public funding of elections on the ground that 
only removal of private money from elections will fix the 
system. Most, however, supported an incremental approach to 
reform falling somewhere between the two poles. With few 
exceptions, the witnesses advocated a soft money ban and 
curtailment of so-called issue advocacy advertisements as 
critical steps to reform. Thomas Mann of the Brookings 
Institution testified that if the system of unlimited soft 
money and unregulated issue advocacy is not reformed soon, 
``[I]t could become much worse. I could imagine a scenario in 
the next presidential election in which we will look back 
fondly on the experience of 1996.'' 2

                               soft money

    Soft money is a relatively new phenomenon in campaign 
financing, not having been raised in large amounts until the 
1988 election cycle. Since then, however, it has become the 
crux of many of the problems with the current campaign finance 
system, including the drive to raise vast sums of money, the 
appearance of party leaders trading favors for contributions, 
and the appearance of wealthy individuals buying access to 
elected officials. Most of the witnesses agreed with the 
sentiment of former Vice President Walter Mondale who 
testified: ``The work of this Committee, as difficult as it has 
been, has established a record that is available for every 
American that demonstrates that at the heart of this crisis in 
American democracy lies this new phenomenon called soft 
money.'' 3

Background on soft money

    Because entities with large concentrations of wealth long 
have been recognized as having the potential to corrupt the 
federal election process, the law has prohibited corporations 
and labor unions from contributing to federal candidates for 
most of the 20th century.4 Contributions from 
individuals likewise have been capped by law in order to 
prevent the corruption or appearance of corruption of the 
electoral process.5 Soft money contributions provide 
corporations, labor unions, and wealthy individuals with a way 
around those legal restrictions.
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 23.
---------------------------------------------------------------------------
    Soft money has been defined as ``contributions to political 
parties'' ``non-federal accounts'' that fall outside the legal, 
``hard money'' limits on contributions to federal candidates.'' 
6 The justification for allowing soft money 
contributions was to permit parties to spend money on state 
elections and so-called ``party building'' activities. The 
campaign finance hearings have demonstrated that this loophole 
is now being used by both parties to spend huge sums of soft 
money to support or defeat federal candidates.
    In the late 1970s, after the passage of the current 
campaign finance laws, soft money did not exist. Former Vice 
President Mondale, who was on the national ticket in the 1976, 
1980, and 1984 presidential elections, recalled that soft money 
at that time was used for the limited purposes of local voter 
registration.7 Mondale recalled that ``during that 
period . . . the federal campaign regulations worked and . . . 
worked quite well.'' Mondale indicated that he believed former 
President Ford shared his views, which would explain why former 
President Ford also supports a soft money ban.8
    The reason soft money was not widely used until roughly a 
decade ago 9 is due in part to the fact that the 
current campaign finance system, including provisions for 
raising and spending soft money, evolved piecemeal out of 
numerous judicial decisions and agency rulings that 
fundamentally altered the campaign finance system originally 
envisioned by Congress. The law was patched together from, 
among other things, the 1976 Buckley decision which struck down 
spending limits that were part of the original campaign finance 
system; 10 the 1978 FEC Advisory Opinion that gave 
political parties the option of spending soft money when a 
federal race coincided with a state race; 11 and 
recent federal court decisions that have expanded the use of 
so-called issue advocacy ads.12 As Mondale noted, 
``what we have here is a new phenomenon, never contemplated or 
adopted into law by the Congress.'' 13
    Both parties have raised and spent increasing amounts of 
soft money with every election cycle. In 1992, the first year 
that parties reported their soft money contributions, FEC 
records indicate that the total soft money raised by both 
parties was $89 million. By 1994, that figure reached nearly 
$107 million. In 1996, the amount of soft money raised by both 
parties more than doubled to $262 million.14 FEC 
figures also indicate that the Republican Party has 
consistently raised more soft money than the Democratic Party. 
In 1992, Republicans raised $15 million more than Democrats; in 
1994, Republicans raised $13 million more; and in 1996, 
Republicans out raised Democrats by $14 million.15 
If Congress does not act, those amounts are likely to continue 
to increase during the 1998 and 2000 election cycles.
    FEC records also show that, while the Republican Party wins 
the overall race for soft money, in many instances both parties 
benefit from soft money contributions by the same donor. In 
1996, for example, corporations such as RJR Nabisco, AT&T, and 
Walt Disney were among the top contributors to both parties. In 
the words of Common Cause President Ann McBride, ``[S]oft money 
is not about ideology. . . . It is about making sure `whoever 
wins, my special interest has a place at the table'. . . . It 
is about gaining access and influence.'' 16

Soft money finds a way into federal elections

    ``When Congress amended the Federal Election Campaign Act 
in 1979 to promote party-building, its purpose was not to allow 
national party committees to receive unlimitedcontributions or 
to accept corporate and labor funds,'' according to Colby College 
Professor Anthony Corrado.17 Nevertheless, party leaders and 
candidates on both sides of the aisle over the years have devised 
numerous ways for millions of dollars in corporate and union money to 
be spent influencing federal elections. The most blatant use of soft 
money for federal purposes involves issue advocacy. Additionally, soft 
money is funneled through state parties, congressional campaign 
committees, and leadership political action committees (``PACs''), 
where its use for federal election activity becomes difficult to trace.
    Political parties have a constitutional right to inform the 
public of their positions on issues. However, in 1996, both 
parties ran televised advertising which they characterized as 
educating the public on issues, but which struck many viewers 
as actually promoting the election of each party's candidates. 
These televised ads were paid for, in part, with soft money.
    The issue ads run in 1995 and 1996 by the Democratic 
National Committee (``DNC'') were ``focused on the Republican 
Congress's role in the government shutdown, the future of 
Medicare, the strength of the economy and the reduction of 
crime in America,'' according to the Annenberg Public Policy 
Center.18 Although these ads discussed pending 
legislative issues, many were designed to and did help 
President Clinton's re-election efforts.19 The 
Annenberg study noted that the Republican National Committee 
(``RNC'') similarly engaged in a calculated effort to use soft 
money ``before the Republican convention for ads that helped 
Bob Dole's campaign.''20 Former RNC Chairman Haley 
Barbour, who was involved in spending soft money on ads that 
told Bob Dole's life story, told the press: ``The law allows 
the party to do advertising on the issues. The Democrats have 
already spent money doing it. It does not have to be 
independent, and it can be candidate-specific. I can mention 
Bob Dole. But I can't say, `Vote for Dole.' ''21
    When national political parties use soft money to pay for 
federal campaign activities such as the ads described above, 
they are required by law to spend a percentage of hard money as 
well.22 In presidential election years, national 
parties must spend a ratio of 65 percent hard money to 35 
percent soft. State parties are also required to spend a 
combination of hard and soft money when paying for certain 
activities such as issue advocacy ads, but are often permitted 
by state law to use a greater proportion of soft money than the 
national parties. In 1996, both parties ``took advantage of the 
more soft money favorable state party allocation formulas [by] 
transferring large sums to state party committees and 
encouraging state parties to pay for expenses so that more soft 
money could be used for their costs,'' according to 
Corrado.23 These transfers meant that more corporate 
and union money was used to pay for advertising when the ads 
were paid for by the state, rather than the national, 
parties.24
    Like the national party committees, the parties' national 
senatorial and congressional campaign committees raise and 
spend soft money in ways that render prohibitions on corporate 
and union contributions virtually meaningless. Senatorial and 
congressional campaign committees are intended, as their names 
imply, to help elect United States Senators and 
Representatives. In 1996, the National Republican Senatorial 
Committee raised over $29 million in soft money, compared with 
$14 million raised by the Democratic Senatorial Campaign 
Committee. The National Republican Congressional Committee 
raised $18.5 million in soft money, while the Democratic 
Congressional Campaign Committee raised $12 
million.25 The amounts of soft money raised by the 
House and Senate committees increased dramatically over 
previous years, demonstrating the greater importance of soft 
money in the last election cycle.26 Like soft money 
raised by the DNC and RNC, soft money raised by the House and 
Senate committees was spent on activities such as issue 
advocacy.27
    Another indication that soft money is infiltrating federal 
elections is that it was raised and spent by at least one 
federal officeholder's ``leadership PAC.'' Leadership PACs are 
established by a Member of Congress to help elect federal 
candidates. In 1996, the media reported that a leadership PAC, 
Americans for a Republican Majority, had raised at least 
$175,000 in corporate money.28 Most of this money 
was reported to have come from tobacco interests and was spent 
in Virginia, although at least $12,000 in corporate money was 
reportedly transferred to the state party's hard money 
account.29 A newspaper editorial noted, ``[E]veryone 
knows that using [soft] money to defray overhead increases the 
non-corporate funds . . . available to help Congressional 
candidates and secure [the leadership PAC Member's] place on 
the House leadership ladder.''30 When a federal 
officeholder raises large sums of corporate money for a 
leadership PAC, it seems evident that such funds may inure to 
the benefit of a federal candidate, rather than for party 
building or state election activities.

Soft money creates appearance of corruption and undermines public 
        financing

    Burt Neuborne of the nonpartisan Brennan Center testified 
that, ``[T]he democratic process is eroded by the desperate 
search for money.''31 The raising and spending of 
tremendous amounts of soft money, in particular, destroys the 
basic tenet of the campaign finance law, which is to deter 
corruption and the appearance of corruption. Additionally, the 
search for soft money undermines the system of presidential 
public funding, which was originally put in place so that 
presidential candidates could rise above the fundraising fray.
    The Supreme Court upheld the campaign finance law's 
contribution limits, in part, by holding that there is 
legitimate cause for concern from ``the appearance of 
corruption stemming from public awareness of the opportunities 
for abuse inherent in a regime of large individual financial 
contributions.''32 The Court went on to say that, 
``Congress could legitimately conclude that the avoidance of 
the appearance of improper influence `is also critical . . . if 
confidence in the system of representative government is not be 
eroded to a disastrous extent.' ''33
    Roger Tamraz, a contributor to both parties, proudly 
extolled the virtues of soft money as the means for providing 
him with access to the White House.34 Videotapes of 
Presidents Clinton and Reagan thanking supporters at the White 
House suggest special access for big donors. Offers of access 
are commonly used as an incentive to obtain large 
contributions. For example, individuals who raised or donated 
$250,000 for the 1997 RNC Annual Gala were promised, among 
other things, ``Breakfast and Photo Opportunity with Senate 
Majority Leader Trent Lott and Speaker of the House Newt 
Gingrich on May 13, 1997; Luncheon with Republican Senate and 
House Leadership and the Republican Senate and House Committee 
Chairmen of your choice.''35
    The appearance of corruption, in which large contributions 
appear to be traded for access to government officials or 
favored treatement, and the resulting loss of public confidence 
in government are two of the most serious consequences of the 
soft money system. Less apparent, but nearly as insidious, is 
the time elected officials must spend raising soft money. 
Former Vice President Mondale testified that, ``[I]t is the 
most degrading and humiliating thing that can happen to a 
public officer to have to spend a substantial chunk of his or 
her time pleading for money in this kind of way. . . . That is 
one of the most powerful arguments for repeal of the soft money 
loophole.''36 Evidence that President Clinton, Vice 
President Gore, and House Speaker Newt Gingrich made 
fundraising telephone calls should concern the American public, 
not because of where the calls originated (on or off federal 
property), but because the three most powerful elected 
officials in the country were spending time fundraising rather 
than focusing on national policy.
    In addition to the corrupting influence of soft money, 
another reason to stem its flow is that it undermines the 
presidential public financing system. The campaign finance law 
provides for full public funding of the general presidential 
election. The law was enacted to prevent even the appearance of 
corruption that results when presidential candidates have to 
raise money from private sources. To qualify for public funds, 
the candidates must agree to spending limits and must swear, 
under penalty of perjury, not to accept contributions during 
the general election. In 1996, each major party nominee 
received $62 million in federal funds, yet each spent countless 
hours fundraising. Scott Reed, the campaign manager for Dole 
for President, acknowledged that part of the Republican 
strategy in 1996 included fundraising to help defray the cost 
of issue ads that would help Bob Dole. In Campaign For 
President '96, Reed was quoted as saying, ``We went out in 
April and May and raised $25 million for the party, of which 
about $17, $18, or $19 million was put into party building ads, 
which were Bob Dole in nature.''37 Tony Fabrizio, a 
Dole pollster, echoed Reed's statement, saying, ``We were 
coming off a primary where we were flat broke. . . . We had a 
candidate who was very sensitive to not having all of the money 
potentially available to him post-convention. So to say that 
[fundraising] wasn't a driving factor, especially since we put 
him out on the road to raise $25 or $30 million for the party, 
would be unfair.''38

Disclosure of soft money

    Disclosure is a bedrock of the campaign finance system. The 
soft money system, however, gives parties a way to make large 
contributions and expenditures almost impossible to trace. One 
way soft money is hidden from public scrutiny is by 
transferring the funds from the national parties to the state 
parties. According to one expert who testified at the hearings:

          Overall, the Democratic committees in 1996 
        transferred over $64 million in soft money to state 
        parties, or almost nine times more than in 1992. The 
        Republican committees transferred $50 million in soft 
        money to state parties, or almost 10 times more than 
        1992. These transfers also serve to further obscure the 
        already inadequate disclosure requirements imposed on 
        national party committees. Because the committees are 
        only required to report the amounts transferred to 
        other committees, they do not have to account for how 
        these funds were ultimately spent. That responsibility 
        rests with state parties, and most state disclosure 
        laws are so inadequate that it is impossible to 
        determine how the funds were expended. By transferring 
        large sums to the state or local level, national 
        parties can avoid effective disclosure.39

    In addition to hiding soft money by funneling it through 
state parties, the RNC has avoided public scrutiny of its soft 
money expenditures by funneling money through tax-exempt 
organizations. (See Chapter 10.) One such organization that 
worked in coordination with the RNC to spend soft money is 
Americans for Tax Reform (``ATR'). (See Chapter 11.) In October 
1996, the RNC gave $4.6 million to ATR. Immediately after the 
contribution was made, ATR used the funds to pay for a direct 
mail campaign that aided Republican candidates in 150 
congressional districts. Evidence suggests that the RNC 
coordinated with ATR on how the money would be spent. This 
coordination may result in a violation of federal election law; 
it also illustrates how soft money expenditures are hidden from 
public scrutiny and used to influence federal elections.

                             issue advocacy

    At the Committee hearings, Daniel Ortiz, a professor of law 
at the University of Virginia, summarized what many of the 
campaign finance experts had to say about issue advocacy:

          In the last election cycle, so-called issue advocacy 
        became one of the most prominent and controversial 
        weapons in the federal campaigns. It provided an easy 
        way for individuals, political committees, 
        corporations, and unions to spend money to influence 
        elections without any regulatory control. Its impact 
        cannot be exaggerated. To 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, PAC spending, or any other perceived problems, 
        will come to naught. Issue advocacy represents a huge, 
        gaping loophole of last resort.40

    As used in 1996, many televised ads were characterized as 
issue ads but appeared to function as attack ads on candidates. 
By claiming the ads to be discussions of issues, the ad 
sponsors were able to evade federal election law contribution 
limits and disclosure requirements applicable to candidate ads. 
In addition to providing a way for unlimited and undisclosed 
amounts of corporate and union money to influence elections, 
the so-called issue ads took control of the election out of the 
hands of the candidates and put it in the hands of the ad 
sponsors. Finally, since no disclosure laws apply, issue ads 
run by unknown organizations leave the public in the dark in 
terms of knowing who is financing candidate attack ads.

Background on issue ads

    Issue ads are, by definition, supposed to be discussions of 
issues rather than candidates. In the leading case of Buckley 
v. Valeo, the Supreme Court held that ads which discuss issues 
are outside the scope of federal election laws, which apply 
only to ``communications that in express terms advocate the 
election or defeat of a clearly identified candidate for 
federal office.'' 41 A footnote to the opinion gives 
examples of terms of express advocacy, such as `vote for,' 
`elect,' `support,' `cast your ballot for,' `Smith for 
Congress,' `vote against,' `defeat,' `reject.' '' These phrases 
have become known as the Buckley ``magic words,'' providing a 
bright line test for when an ad is clearly subject to federal 
election laws. Ads that do not contain any of the Buckley magic 
words are often claimed to be issue ads outside the limitations 
of the campaign finance laws.
    Many of the witnesses testifying before the Committee 
indicated that many of the so-called issue ads functioned as 
candidate ads. Burt Neuborne of the nonpartisan Brennan Center 
testified:

          What we have now is a group of very sophisticated 
        people tiptoeing up to the line and laughing at the 
        process because what they are doing is--they know they 
        are engaged in election speech. Everybody else knows 
        that they are engaged in election speech, but somehow 
        we all have to pretend as though they are involved in 
        educational speech.42

    The most comprehensive study to date of issue ads during 
the 1996 election cycle is the Annenberg Public Policy Center's 
Issue Advocacy During the 1996 Campaign: A Catalog. The 
Annenberg study examined ads broadcast by the political parties 
and at least two dozen groups, estimated to have spent between 
$135 and $150 million on issue advertising. 43 The 
Annenberg study found an even split between ads that generally 
favored Democrats or Democratic issues and those that favored 
Republicans or Republican issues. In addition to representing 
both sides of the aisle, issue ads were determined to be ``the 
highest in pure attack'' compared to presidential candidate ads 
and free air time speeches.44 The study also 
determined that almost 90 percent of these ads named a specific 
candidate.45
    The 1996 election cycle saw numerous groups from across the 
political spectrum broadcasting issue ads. The groups included 
the political parties, unions, corporations and tax-exempt 
organizations.
    Both political parties spent millions of dollars on issue 
advocacy in the 1996 election cycle. Party ads which referred 
to the presidential candidates garnered the most publicity, but 
the parties did not limit their issue ad activity to 
presidential candidates. The National Republican Congressional 
Committee was by far the most active party committee to engage 
in issue advertising outside of the presidential arena, 
conducting a $10 million issue ad campaign for the benefit of 
Republican House freshmen.
    The AFL-CIO was one of the leaders in airing issue advocacy 
ads during the 1996 election cycle. Early in the year it 
announced its plans to spend $35 million to counter the 
Republican ``Contract with America.'' 46 Ultimately, 
the union spent about $25 million on media advertising in 44 
congressional districts. The majority of the ads attacked 
Republican House freshmen who won office in 1994.
    Tax-exempt organizations were also active in televising ads 
that named candidates, but claimed to be issue discussions. 
Some of these organizations were newly established in 1996. 
Viewers of union ads at least knew who was paying for the ads. 
The same was not true of issue ads paid for by new or unknown 
tax-exempt organizations, which enable a corporation or wealthy 
individual to remain out of view behind the sponsoring 
organization. Norman Ornstein noted: ``There seems to be little 
doubt that at least a few of these organizations were set up 
just to run those ads. . . .[I]t is clear most of these ads . . 
. were directly intended and targeted to influence elections, 
and in many, many cases, to blur the lines as to where they 
were coming from.'' 47 See, for example, Chapters 
11, 12 and 13 of this Report discussing Americans for Tax 
Reform, Citizens for Reform, Citizens for the Republic 
Education Fund, and the Coalition for Our Childrens Future, all 
of which ran televised ads attacking candidates by name close 
in time to the 1996 elections, but none of which admitted to 
sponsoring candidate ads subject to federal election laws.
    One of the issue ads discussed at the Committee hearings 
was aired against Bill Yellowtail, a Democratic congressional 
candidate in Montana, and was paid for by Citizens for Reform, 
a tax-exempt organization controlled by Triad Management 
Services. (See Chapter 12.) The ad asks: ``Who is Bill 
Yellowtail? He preaches family values, but he took a swing at 
his wife. And Yellowtail's explanation? He `only slapped her.' 
But her nose was broken.'' This is the kind of personal attack 
ad that candidates shy away from producing themselves, but that 
they might quietly welcome if it is paid for by an outside 
group with which the candidate claims no association.
    Ann McBride, executive director of Common Cause, testified:

          What is happening with issue ads is fundamentally 
        altering the electoral system in this country. This is 
        beyond the corruption issues. And what you will have is 
        a situation if this continues where candidates are bit 
        players in their own campaigns and where the American 
        people in looking at the debate will not know what 
        these candidates stand for because their voices will be 
        muted by all of these interest groups for and against. 
        . .[W]e are really, if we allow this, altering our 
        basic electoral system in a way that is quite dangerous 
        . . . for our democracy.48

    This situation is detrimental to candidates who often lack 
the time or money to respond to attack ads. In addition, 
because the candidates are in the dark about who is attacking 
them, they cannot discredit the ad by exposing the individual 
or corporation behind it. In one case described in Chapter 12 
of this Report, Representative Calvin Dooley of California 
faced televised attack ads paid for by the Triad-run, tax-
exempt organization Citizens for Reform (``CFR''). After the 
election, Dan Gerawan, a California farmer, admitted to a 
newspaper that he had provided CFR with the funds to pay for 
the ads. If he had not made this admission to the media, the 
public and Dooley may not have learned who paid for the 
ad.49 The ads attacked Dooley for spending taxpayer 
money on ``radical lawyers,'' referring to Dooley's support of 
the Legal Services Corporation (``LSC'). Gerawan allegedly 
opposes the LSC after facing a lawsuit brought by indigent 
plaintiffs represented by LSC lawyers. While Dooley won re-
election in spite of the ads, he was forced to spend his 
campaign resources combating, not his opponent in the election, 
but a relatively unknown and unforeseen enemy. 50
    Issue ads have accelerated since the 1996 elections. For 
example, in 1997, the RNC provided $750,000 in funds to pay for 
televised ads in a special election in New York's 13th 
Congressional District. 51 The RNC characterized the 
ads were issue ads, even though they attacked the Democratic 
candidate by name and mirrored campaign ads broadcast by the 
Republican candidate. Apparently, neither the DNC nor the 
Democratic candidate was able to respond to the attacks. The 
Republican candidate won handily, despite earlier polls 
indicating a close race. In 1998, the media reported that a new 
group called Americans for Job Security plans to spend $100 
million in corporate funds over the next five years on a 
variety of issue ads. 52

                          proposals for reform

    The campaign finance experts that testified before the 
Committee have highlighted closing the soft money and issue 
advocacy loopholes as key steps to meaningful campaign finance 
reform:

          Soft money . . . is the most pressing issue facing 
        the political system at this time--Professor Anthony 
        Corrado 53

          It is imperative that we close the major loopholes 
        that make a mockery of [the] law. In particular, the 
        soft money and sham issue advocacy loopholes were 
        exploded on a massive scale.--Becky Cain, President, 
        League of Women Voters 54

          The question we asked ourselves was: ``Do we really 
        want to be part of a system and perpetuate a system in 
        which the only way you can get representation is to buy 
        it?'' Once we got the question right, the answer was 
        easy. No, we do not want to be any part of it.--Douglas 
        Berman, President, Campaign Reform Project 
        55
          [A]ll of these rivers and oceans of money are 
        swamping this system. They are discouraging good people 
        from seeking or holding office. They are converting our 
        most important public officers from officers into 
        essentially fund-raisers, and the spectacle of this 
        massive amount of money being raised is causing an 
        appalling diminution of public trust in the system.''--
        Former Vice President Walter Mondale 56

          [I]t is this nexus of soft money and issue advocacy 
        which is poisoning the system that you value.''--Norman 
        Ornstein, Fellow, American Enterprise Institute 
        57

    Many of the experts who testified provided concrete 
legislative proposals ranging from eliminating all contribution 
limits to enacting a system of public funding. While there are 
some differences of opinion in the reform community, many of 
the specific proposals outlined below contain similar 
recommendations, especially regarding the containment of soft 
money and issue advocacy.
            Kassebaum-Baker/Mondale
    Former Vice President Walter Mondale and former Senator 
Nancy Kassebaum-Baker have joined together in an effort to 
stimulate public support for campaign finance reform. 
Kassebaum-Baker and Mondale strongly believe that reform is 
imperative to restoring public confidence in the electoral 
system. Their efforts have secured the support of three former 
presidents for campaign finance reform: Ford, Carter, and Bush.
    The foundation of the Kassebaum-Baker/Mondale reform model 
is a soft money ban that would prohibit corporations and labor 
unions from contributing to the parties and would cap the 
amount individuals could give to the parties. In addition, they 
would close the issue advocacy loophole. Although they make no 
specific recommendations as to how to achieve this, they 
believe that ``clever scripting'' should not be a way to evade 
the campaign finance restrictions. In addition, they support 
disclosure of sources of money and amounts spent for all 
campaign activity masquerading as issue advocacy.
    The former elected officials also recommend strengthening 
the Federal Election Commission by providing adequate funding 
and limiting commissioners to one term. In addition, they 
acknowledge the importance of immediate disclosure of all last-
minute contributions.
            League of Women Voters
    A number of witnesses who testified over the four days of 
hearings backed a proposal sponsored by the League of Women 
Voters. In addition to Becky Cain, the League's president, 
supporters of the proposal included Thomas Mann of the 
Brookings Institution, Norman Ornstein of the American 
Enterprise Institute, and Professor Anthony Corrado of Colby 
College. The highlights of the league's proposal include a soft 
money ban. The proposal would, however, raise the hard money 
limits by doubling the current $25,000 annual hard money limit, 
thereby permitting individuals to give a maximum $25,000 to 
multiple candidates and $25,000 to the parties.
    The proposal also recommends that any advertisement using a 
candidate's name or likeness within a set number of days of an 
election (proposals range from 60 to 90) be considered a 
candidate ad that falls under the campaign finance law's 
restrictions. This proposal would not preclude the ads from 
being run, but would ensure that such ads would be paid for 
using only disclosed, regulated money. The League proposal also 
suggests strengthening the Federal Election Commission's 
enforcement powers and improving disclosure by requiring 
mandatory electronic filing of campaign finance reports. The 
League would attempt to decrease the cost of campaigns by 
providing that, in exchange for the licenses they receive to 
broadcast over the public airways, television broadcasters 
provide candidates with a certain amount of free air time. To 
encourage participation, the League would also provide a tax 
credit for in-state donors who contribute $100 or less to a 
campaign.
            Common Cause
    Common Cause President Ann McBride and Vice President Don 
Simon also testified before the Committee. Common Cause has 
been an outspoken advocate of S. 25, the McCain-Feingold 
campaign finance reform bill. Another witness, Professor Burt 
Neuborne of the Brennan Center, is also a proponent of S. 25. 
At the time of the hearings, none of the witnesses knew what 
the final version of S. 25 to be voted on by the Senate would 
contain, but all supported the bill's broad framework which 
included a soft money ban, a method to close the issue advocacy 
loophole, and improved disclosure. Common Cause also advocated 
voluntary spending limits for candidates, and would provide 
incentives such as reduced television costs to candidates who 
choose to limit their financial activity.
            Campaign Reform Project
    The Campaign Reform Project, which was represented at the 
hearings by Douglas Berman, has called for a ban of soft money, 
and also supports electronic filing of campaign contributions. 
The group represents members of the business community who 
support a soft money ban.
            Public Campaign
    Ellen Miller is the executive director of Public Campaign, 
which advocates ``clean money'' or public financing of 
elections. Common Cause and the League of Women Voters also 
support public funding as an ultimate goal, but indicated that 
they do not see it as a feasible option in the immediate 
future. By definition, soft money would be banned under a 
public funding system. In addition, issue ads would have to be 
controlled so that private money would not come into the system 
through that devise. And, like other reform proponents, Public 
Campaign supports a stronger Federal Election Commission to 
ensure the campaign finance law is enforced.
            Disclosure only
    Edward Crane and Roger Pilon represented the libertarian 
Cato Institute. The Cato Institute takes the position that any 
limits on contributions or other regulation of the political 
system violate the First Amendment and are unconstitutional. In 
addition to proposing the removal of all limits on 
contributions, the Cato Institute also stands for the 
proposition that the FEC should be abolished. According to 
Crane and Pilon, the government should in no way be involved in 
regulating the political process. The Cato Institute does 
support disclosure of contributions.

                               conclusion

    The Committee investigation has built a strong case for the 
need to close the soft money and issue advocacy loopholes. 
Until these loopholes are closed, the bulk of the problems 
plaguing the campaign finance system will be, not illegal 
conduct, but conduct that is legally permitted by the federal 
election laws.

                               footnotes

    \1\ Committee Hearings on September 23, 24, 25 and 30, 1997.
    \2\ Thomas Mann, 9/24/97 Hrg., p. 32.
    \3\ Vice President Mondale, 9/30/97 Hrg., p. 11.
    \4\ ``It has been policy and law in this country for 90 years that 
corporate money, aggregations of wealth in corporations are banned from 
Federal elections. The Supreme Court has repeatedly upheld that ban as 
serving compelling public purposes.'' Donald Simon, 9/24/97 Hrg., p. 
70.
    \5\ Buckley v. Valeo, 424 U.S. 1 (1976).
    \6\ Rosenberg, Lisa. A Bag of Tricks: Loopholes in the Campaign 
Finance System. Washington, D.C.: Center for Responsive Politics, 1996, 
p. 3.
    \7\ Vice President Mondale, 9/30/97 Hrg., p. 115.
    \8\ Vice President Mondale, 9/30/97 Hrg., p. 114.
    \9\ Because reporting by parties of soft money contributions was 
not required by the FEC until 1992, anecdotal evidence is the primary 
resource available for the claim of soft money's slow growth during the 
1980s.
    \10\ Buckley v. Valeo, 424 U.S. 1 (1976).
    \11\ FEC Advisory Opinion 1978-10, Allocation Costs for Voter 
Registration.
    \12\ See, for example, FEC v. Christian Action Network, 92 F.3d 
1178 (4th Cir. 1996).
    \13\ Vice President Mondale, 9/30/97 Hrg., pp. 17-18. Chairman 
Thompson agreed with Mondale, noting: ``Since Congress last acted in 
this area, things have happened around and outside of Congress that 
have totally changed the system, and we have a totally different system 
today, as I see it, without Congress having acted. So I would think, if 
for no other reason, as a matter of congressional prerogative that the 
laws of this land should be basically addressed by the Congress of the 
United States; that we would want to take a look at it.'' 9/30/97 Hrg., 
p. 15.
    \14\ See Appendix A: National Party Non-Federal Activity. Source: 
Federal Election Commission. In 1996, the Republican Party's national 
committees raised about $138 million, while the Democratic Party's 
national committees raised about $124 million.
    \15\ See Appendix A. The Republican Party also raises more hard 
money than the Democratic Party. In 1996, for example, FEC records 
indicate that Republicans raised $416 million in hard money, compared 
to $221 million raised by Democrats.
    \16\ Ann McBride, 9/24/97 Hrg., p. 38.
    \17\ Anthony Corrado, 9/25/97 Hrg., p. 4.
    \18\ Issue Advocacy Advertising During the 1996 Campaign: A 
Catalog, The Annenberg Public Policy Center, 1997, p.32.
    \19\ See Chapter 32.
    \20\ Annenberg Study, p. 53. See also Chapter 33.
    \21\ Washington Times, 3/5/96. This statement is in sharp contrast 
to Barbour's testimony before this Committee, in which he claimed that 
the RNC did not use soft money to help federal candidates: ``These non-
federal monies, funds, could not be and were not spent for federal 
election purposes.'' Barbour, 7/24/97 Hrg. p. 126. See also Barbour 
deposition, 7/19/97, p. 86, in which Barbour stated, ``The RNSEC [The 
RNC's soft money account] may not pay for any Federal campaign 
activities.'
    \22\ FEC Advisory Opinion 1995-25.
    \23\ Anthony Corrado, 9/25/97 Hrg., p. 7.
    \24\ See The Clinton Ad Campaign Run Through the DNC/The Dole Ad 
Campaign Run Through the RNC, Common Cause, 10/97.
    \25\ See FEC records.
    \26\ See Appendix A.
    \27\ Experts agree that soft money into the House and Senate 
campaign committees stretches to the limit the credibility of the 
argument that the money is being used only for party building and not 
to elect federal candidates. In his testimony, Professor Corrado said, 
``[W]hat you had was this expanding universe of activities that could 
fall under this hard/soft money rule, and they applied it to the 
national committees to the point where...the Senate and congressional 
campaign committees, which the average voter would think basically deal 
with federal elections, since they are designed to elect federal 
officials, actually use soft money now because of the non-Federal 
portion of their activities.'' Anthony Corrado, 9/25/97 Hrg., p. 65.
    \28\ Roll Call, 2/22/96.
    \29\ Roll Call, 2/22/96.
    \30\ Roll Call, 2/22/96.
    \31\ Burt Neuborne, 9/25/97 Hrg., p. 151.
    \32\ Buckley at 27.
    \33\ Buckley at 27 (citations omitted).
    \34\ Roger Tamraz, 9/18/97 Hrg., pp. 81-86.
    \35\ Exhibit 1070-M.
    \36\ Vice President Mondale, 9/30/97 Hrg., p. 20.
    \37\ Campaign for President: The Managers Look at '96, Harvard 
Institute of Politics: Boston, 1996, p. 117.
    \38\ Campaign for President, p. 117.
    \39\ Anthony Corrado, 9/25/97 Hrg., pp. 7-8. See also, for example, 
Roll Call, 10/27/97 (In 1997, RNC gave about $660,000, the NRSC 
$375,000 and the NRCC $1.2 million, to Virginia Republican Party and 
Republican candidates, often without disclosure.).
    \40\ Daniel Ortiz, 9/25/97 Hrg., p. 11.
    \41\ Buckley at 44.
    \42\ Burt Neuborne, 9/25/97 Hrg., p. 136.
    \43\ Annenberg, p. 3.
    \44\ Annenberg, p. 8.
    \45\ Annenberg, p. 7.
    \46\ Rosenberg, p. 11.
    \47\ Norman Ornstein, 9/24/97 Hrg., p. 42.
    \48\ Ann McBride, 9/24/97 Hrg., p. 33.
    \49\ The Committee attempted to interview Gerawan, but he refused 
to provide a voluntary interview. The Majority refused to issue a 
deposition subpoena to Gerawan.
    \50\ The Minority had planned to call Representative Dooley as a 
witness to testify about the way in which the CFR issue ads affected 
his campaign, but the Majority declined to permit the Minority to 
present testimony on Triad and Dooley never testified.
    \51\ See New York Times, 11/5/97.
    \52\ Roll Call, 1/15/98. The new group is allegedly ``run by David 
Carney, a former campaign consultant to GOP presidential candidate Bob 
Dole and Representative Vito Fossella of New York.'' The article cites 
documents in which the group's officials state that the group ``already 
have $7 million committed this year and plan to spend 85 percent of 
their money directly on communications.''
    \53\ 9/25/97 Hrg., p. 3.
    \54\ 9/24/97 Hrg., p. 150.
    \55\ 9/24/97 Hrg., p. 146.
    \56\ 9/30/97 Hrg., p. 12.
    \57\ 9/24/97 Hrg., p. 75.





PART 5  FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES 
        AND ADMINISTRATIONS

Chapter 24: Overview and Legal Analysis

                     OVERVIEW OF FOLLOWING CHAPTERS

    During the 1996 election cycle, spending by candidates, 
their campaign committees, political parties, other political 
committees and persons making independent expenditures totaled 
a record-breaking $2.7 billion.1 Of that amount, the 
Democratic and Republican Parties together spent almost $900 
million, or one-third of the total.2 The two 
presidential candidates, President Clinton and Senator Dole, 
together spent about $232 million, or almost 10 percent of the 
total.3
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 24.
---------------------------------------------------------------------------
    One of the primary objectives of the Committee's 
investigation was to investigate allegations of improper and 
illegal activities associated with fundraising undertaken both 
parties to finance this campaign spending. The allegations 
examined include the alleged misuse of federal property and 
federal employees to raise funds, the sale of access to top 
government officials in exchange for campaign contributions, 
and the circumvention of campaign spending restrictions through 
such devices as issue advocacy and coordination between the 
parties and their presidential nominees.
    The following chapters will show that the evidence amassed 
during the Committee's investigation establishes that both 
political parties engaged in questionable fundraising 
practices. Both parties scheduled events at government 
buildings and promised access to top government officials as 
enticements for donors to attend fundraising activities or make 
contributions. Both parties used their presidential candidates 
to raise millions of dollars in soft money donations in 
addition to the $150 million provided in public financing for 
presidential campaigns.4 Both parties worked with 
their candidates to design and broadcast so-called issue ads 
intended to help their candidates' election 
efforts.5
    Some Members of the Committee charged during the hearings 
that these fundraising practices were clearly illegal. Others 
suggested that the federal election laws contain so many 
ambiguities, and the constitutional protections afforded 
political speech and association are so sweeping, that the 
tactics complained of either did not clearly violate the law or 
could not be legally restricted. The proceedings before the 
Committee repeatedly document confusion over the legal 
restrictions that apply to fundraising, unsettled legal 
questions, and provisions which would benefit from clarifying 
or strengthening legislation.
    During the proceedings, many Committee Members expressed 
the conclusion that, whether or not fundraising practices used 
during the 1996 election cycle were illegal, a number of 
individuals involved exhibited poor judgment and the conduct 
that occurred created an appearance of corruption of the 
political process or misuse of federal resources. Offers of 
meetings with the President, the Speaker of the House, the 
Senate Majority Leader, or House or Senate committee chairs in 
exchange for political contributions created the appearance 
that access to our elected officials was for sale. Allowing 
large contributors to stay overnight in the Lincoln bedroom 
created the appearance that the White House was a campaign 
prize. Raising and spending millions of soft dollars to air 
issue ads designed to affect the presidential race undermines 
the law providing for public funding of presidential elections. 
The activities of 1996 make clear the need for reform.

                             LEGAL ANALYSIS

    The campaign fundraising practices examined in the 
following chapters invoke a number of different federal laws, 
including federal criminal law restrictions on taking official 
action in exchange for money; federal property restrictions, 
primarily in the Pendleton Act, on using government resources 
for campaign purposes; federal personnel law restrictions, 
primarily in the Hatch Act, on employees participating in 
campaign activities; and federal election law restrictions on 
spending and coordination.
    While some of the campaign restrictions set out in these 
laws are clear, other provisions provide insufficient guidance 
on what conduct is lawful, while ambiguities or limitations in 
other provisions may hinder criminal prosecutions and civil 
enforcement actions in this area. Many of these provisions 
would benefit from legislation strengthening and clarifying 
intended prohibitions on fundraising practices in federal 
elections.

Taking official action in exchange for a contribution

    A number of the allegations investigated by the Committee 
involve suggestions that government officials took action 
during the 1996 election cycle to obtain or reward a campaign 
contribution. The alleged actions cover a range of activity, 
from providing a meeting between a contributor and a federal 
official, to advancing the contributor's private business 
interests, to obtaining a change in U.S. policy requested by 
the contributor.6
    Several longstanding federal criminal statutes bar 
government personnel from taking official action in exchange 
for contributions. For example, the federal bribery statute, 18 
U.S.C. Sec. 201, bars ``public officials'' from taking or 
promising to take official acts in exchange for ``anything of 
value,'' including a campaign contribution.7 The 
federal extortion statutes, 18 U.S.C. Sec. 872 and Sec. 1951, 
bar public officials from soliciting funds through a threat of 
violence, under color of official right, or by causing a victim 
to fear economic harm if the funds are not 
provided.8 A provision in the Hatch Act, 18 U.S.C. 
Sec. 600, bars public officials from promising any government 
benefit in exchange for ``support of or opposition to any 
candidate or any political party.'' 9 Each of these 
provisions has its own requirements for proving a quid pro quo 
relationship between the action taken and the campaign 
contribution.10
    The law is also clear that to establish a criminal 
violation, a public official must do more than simply arrange 
or attend a meeting with a contributor. In a recent letter to 
the House Judiciary Committee, Attorney General Janet Reno 
summarized the court decisions holding that public officials 
who grant access, but nothing more, to contributors do not 
violate federal law:

          The courts . . . have held that . . . access in 
        exchange for political contributions is not an 
        ``official act'' that can provide the basis for a 
        bribery or extortion prosecution. [Legal citations 
        omitted.] Indeed one court has focussed on the 
        constitutional right to ``petition the Government for a 
        redress of grievances'' guaranteed by the First 
        Amendment in refusing to find that alleged gifts 
        provided in hopes of access to an elected public 
        official could amount to a scheme to defraud the public 
        of the official's honest services . . . . To the extent 
        that the allegations . . . suggest simply a decision by 
        an elected politician to provide access to political 
        contributors, we conclude that no federal violation is 
        suggested.11

These court decisions mean that fundraising activities that 
promise access to a government official in exchange for a 
campaign contribution, but nothing more, do not constitute 
bribery, extortion or any other violation of federal criminal 
law. In addition, the cases suggest that the courts would 
strike down as unconstitutional any law which attempted to go 
farther, and bar contributors from gaining access to public 
officials, solely due to their contributor status.
    While current law provides that candidates who agree to 
meet personally with contributors solely due to their 
contributions have not committed an illegal act, the 
circumstances surrounding particular meetings may nevertheless 
create an appearance of favoritism or impropriety.

Use of federal property

    A second set of issues involves the use of federal property 
in connection with campaign fundraising, including using 
government telephones to contact contributors or inviting 
contributors to attend events in government buildings.
    The key federal statute is a provision of the Pendleton 
Act, 18 U.S.C. Sec. 607, which states:

          It shall be unlawful for any person to solicit or 
        receive any contribution within the meaning of section 
        301(8) of the Federal Election Campaign Act of 1971 in 
        any room or building occupied in the discharge of 
        official duties by any [federal employee] or in any 
        navy yard, fort or arsenal.

While this provision seems to impose a broad prohibition 
against soliciting campaign contributions on federal property, 
its wording and interpretation by the courts have limited its 
scope.
    First, the statute is limited on its face to contributions 
as defined by section 301(8) of FECA. This definition is a 
narrow one. It encompasses only ``hard money'' contributions in 
connection with a federal election; it does not include, for 
example, donations in connection with state or local elections, 
generic party-building activities, or issue 
advocacy.12
    A second limitation turns upon case law interpreting where 
a campaign solicitation takes place within the meaning of 
section 607. The key case is a ninety-year-old Supreme Court 
decision, United States v. Thayer, 209 U.S. 39 (1908), which 
holds that section 607 is violated by a letter which is written 
and mailed from outside a federal workplace, and delivered to 
an individual in a federal office. The Supreme Court held, in 
an opinion written by Justice Oliver Wendell Holmes, Jr., that 
``the solicitation was in the place where the letter was 
received,'' rather than where the letter was written or 
sent.13 By analogy, a telephone call or fax message 
soliciting a campaign contribution takes place where the call 
or fax is received, rather than where it originated. This 
analysis suggests that a telephone call or fax from a 
government building to a private location would not violate 
section 607, since the solicitation would occur outside of a 
federal workplace. This interpretation makes sense in light of 
the original intent of the Pendleton Act, which was to protect 
federal employees from being pressured to make campaign 
contributions while at work.14
    Federal prosecutions are in line with this interpretation 
of the statute. In a recent report, the American Law Division 
of the Congressional Research Service stated it was unable to 
find any criminal prosecution under section 607 of a campaign 
solicitation made by mail or telephone from a federal building 
to a non-federal building:

          In more than 100 years since its enactment . . . the 
        law appears to have been neither specifically construed 
        by any court nor applied in any prosecution to cover 
        one who solicits a campaign contribution from a federal 
        building by letter or telephone to persons who are not 
        located themselves in a federal building.15 
        [original emphasis]

    A third limitation on section 607 is an exception created 
for residential and ``mixed-use'' areas of the White House. 
Because these areas of the White House serve as the President's 
personal home, the Department of Justice has long held that 
they must be treated differently than federal office space. In 
this context, the Department has held that campaign 
solicitations made from telephones in the residential and 
mixed-use areas of the White House, as well as fundraising 
events held in such areas, do not violate section 607, because 
the activities do not take place in a ``room or building 
occupied in the discharge of official duties.'' 16
    These three limitations on the scope of section 607--that 
it does not apply to soft money donations, solicitations 
directed outside federal buildings, and White House residential 
and mixed-use areas--make this provision inapplicable to a 
number of fundraising incidents before the Committee, such as 
the telephone solicitations made by the President and Vice 
President and the White House coffees. These legal limitations 
are also a primary reason that the Attorney General declined to 
appoint an independent counsel to investigate allegations that 
campaign fundraising calls placed by President Clinton or Vice 
President Gore violated federal law.17
    A second federal statute affecting the use of federal 
property in connection withcampaign fundraising is 18 U.S.C. 
Sec. 641, which bars conversion of government property to personal use. 
The provision prohibits a person from ``knowingly convert[ing] to his 
use or the use of another . . . anything of value of the United 
States.'' This provision also has several limitations. First, federal 
regulations permit incidental use of federal property for otherwise 
lawful personal purposes, and the Justice Department has determined 
that, under these regulations, occasional use of a federal telephone or 
fax machine for a campaign purpose would not amount to a Federal 
crime.18 Second, under 5 U.S.C. Sec. 7324(b)(1) and 5 C.F.R. 
734.503(a), the White House is explicitly authorized to use federal 
property for political activity if there is no cost to the 
government.19 Third, the Justice Department has determined 
that events which take place in the residential and mixed-use areas of 
the White House, such as the White House coffees and Lincoln bedroom 
overnights, cannot, as a matter of law, result in criminal conversion, 
since these areas are provided to the President explicitly for his 
personal use.20
    A third statute of interest concerns the use of 
appropriated funds. While no specific federal statute expressly 
prohibits spending federal funds for partisan campaign 
purposes, 31 U.S.C. Sec. 1301(a) states that monies 
appropriated by Congress may be spent only for the purposes for 
which they were appropriated.21 The Comptroller 
General has interpreted this statute to allow agencies to spend 
federal funds to further agency objectives but not to carry out 
``a propaganda effort designed to aid a political party or 
candidate.'' 22 In evaluating a particular 
expenditure, the Comptroller General defers to an agency 
determination that an expenditure was ``in connection with 
official duties,'' ensuring only that there was ``a reasonable 
basis'' for the agency determination. The Comptroller General 
has also evaluated expenditures by determining whether they 
were ``so devoid of any connection with official functions or 
so political in nature that [the expenditures] are not in 
furtherance of purposes for which Government funds were 
appropriated.'' 23 Violations of 31 U.S.C. 
Sec. 1301(a) are punishable only with administrative or civil 
penalties such as the recovery of misused funds or removal of a 
federal employee from office.24
    The proceedings before the Committee suggest that many 
persons thought federal law barred all use of federal propery 
for campaign purposes, with no exceptions or limitations. 
However, federal law does not presently impose this type of 
absolute ban, and legislation would be required to achieve that 
result.

Use of federal employees

    Another set of issues involves the use of federal personnel 
in connection with campaign fundraising, including to solicit 
contributions, attend fundraising events in a government 
building, or engage in other campaign activities.
    The key federal statute is the Hatch Act, 5 U.S.C. 
Sec. 7321 et seq., which generally permits covered federal 
employees to engage in voluntary partisan political activities 
while away from work, but restricts most partisan ``political 
activity'' while an employee is on duty, in uniform, or in a 
government building or vehicle.25 Section 7323 
imposes a few restrictions that apply at all times to federal 
employees, whether on duty or off. Two of these across-the-
board restrictions are that covered federal employees may not 
``knowingly solicit, accept, or receive a political 
contribution from any person,'' 26 and they are 
prohibited from using their ``official authority or influence 
for the purpose of interfering with or affecting the result of 
an election.'' 27
    The Hatch Act contains a number of exceptions and 
limitations. First, the Act does not apply to federal employees 
in the legislative or judicial branches, including 
Congressional staff.28 Second, it does not apply to 
the President or Vice President.29 Third, its 
prohibition on partisan political activity while on duty does 
not apply to certain White House personnel paid from 
appropriations for the Executive Office of the President, or to 
certain federal officials appointed by the President with the 
advice and consent of the Senate such as members of the 
Cabinet.30 These excepted persons are nevertheless 
subject to the Hatch Act's ban on soliciting or accepting 
contributions, whether on duty or off.31 The Hatch 
Act further requires that political activity performed by a 
Hatch Act-exempt person while on duty, in uniform or in a 
government building or vehicle, must either incur no cost to 
the government or its cost must be reimbursed in accordance 
with federal regulations.32
    Together, the exceptions to the Hatch Act mean that a 
limited number of high-ranking federal officials and White 
House personnel may legally engage in a wide range of political 
activities while in a federal building, during working hours, 
using federal property, so long as the activity does not 
involve soliciting or accepting contributions and either incurs 
no cost to the government or the cost is 
reimbursed.33 The President, Vice President, Members 
of Congress and Congressional staff are not subject to any 
Hatch Act restrictions.
    A key legal issue is distinguishing between ``political 
activity'' and ``official activity.'' Many White House 
employees paid by the Executive Office of the President 
(``EOP'') may, as discussed above, engage in either activity, 
but must ensure that political activity costs are reimbursed. 
Non-EOP White House staff are essentially barred from engaging 
in any political activity while working. Hatch Act regulations 
and opinions prepared by the Department of Jusice's Office of 
Legal Counsel (``OLC'') for the Carter Administration in 1977 
and re-stated by the OLC for the Reagan Administration in 1982 
provide basic guidelines for distinguishing between 
``political'' and ``official'' activity. Hatch Act regulations 
state that, ``[p]olitical activity means an activity directed 
toward the success or failure of a political party, candidate 
for partisan political office, or partisan political group.'' 
34 The OLC defines an activity as ``political'' if 
its primary purpose involves the President's role as a 
candidate or as leader of his political party, such as by 
appearing at party functions, fundraising, or campaigning for 
specific candidates.35 Hatch Act regulations do not 
define ``official'' activity, while OLC opinions indicate that 
an activity is ``official'' if it relates to the President's 
policies, programs or legislative agenda, even if it concerns 
matters on which opinion is politically divided.36 
Travel, appearances, and actions taken by the President and 
Vice President to ``present, explain, and secure public support 
for the Administration's measures'' are considered official 
activities.37 By analogy, staff support of the 
President and Vice President's policies, legislative agenda, 
programs and initiatives would also be reasonably classified as 
``official'' activity.
    Another key legal issue involves determining the costs 
associated with political activities. Hatch Act regulations 
state that certain political activity costs do not have to be 
reimbursed if they are costs that the government has already 
incurred for official purposes.38 Examples of 
political activities that are not considered to incur cost to 
the government because the government has already paid the 
expense for other official purposes include: local phone calls, 
the use of office space and employee salaries.39 
Examples of political activities which do incur costs to the 
government include: faxing, copying, and long-distance 
telephone calls.
    These rules are difficult to apply and, in practice, have 
been applied at times in surprising ways. One key example 
involves the Office of Political Affairs (``OPA'), an office 
within the White House first established in 1981 by President 
Reagan.40 Since its inception, OPA has served as a 
liaison between the President and White House staff, and the 
President's political party and various campaign 
efforts.41 OPA performs a number of election-related 
activities that would appear to meet the definition of 
``political.'' However, in 1991, C. Boyden Gray, counsel to 
President Bush, stated in a memorandum explaining Hatch Act 
restrictions on White House staff that, ``It is important to 
understand that . . . the official responsibilities that 
customarily have been performed by the Office of Political 
Affairs constitute ``official'' and not ``political'' 
activities, and the restraints cited here therefore do not in 
general affect activities and office maintenance or other costs 
undertaken or incurred in the discharge of such 
responsibilities.'' 42 The memorandum cites no 
regulation, OLC opinion or other legal authority in support of 
its determination. A 1994 memorandum on Hatch Act restrictions 
prepared by Lloyd Cutler, special counsel to President Clinton, 
follows the precedent set under President Bush.43
    Violations of these Hatch Act provisions are punishable 
only with administrative or civil penalties such as the removal 
of a federal employee from office.44
    The proceedings before the Committee indicate that many 
persons thought federal law barred federal employees from 
engaging in any campaign activity during work hours. In fact, 
current law explicitly permits the President, Vice President, 
Members of Congress, Congressional staff, and a limited number 
of federal officials and White House personnel, to engage in a 
wide range of partisan political activities while on duty or in 
a federal building or vehicle. One key exception is the broad 
ban placed on executive branch personnel, other than the 
President and Vice President, from soliciting or accepting 
campaign contributions.

Spending limits, coordination and issue advocacy

    A fourth set of issues involves federal election law 
requirements regarding contribution and spending limits, and 
coordination between a party and its candidates.
    Federal election laws impose a variety of contribution and 
spending limits on federal campaigns. Contribution limits apply 
to all federal candidates, including those running for the 
House, Senate and Presidency. These limits include, for example 
with respect to an individual, a $25,000 annual overall limit; 
$20,000 annual limit on contributions to a national political 
party; and a $1,000 limit on contributions to a specific 
federal candidate each election. Parties are limited in the 
amount of direct contributions they can make to federal 
candidates. In addition to direct contributions, political 
parties are allowed under 2 U.S.C. Sec. 441a(d) to make a 
limited amount of coordinated expenditures in connection with a 
federal candidate's general election.45 Statutory 
formulas set the maximum amount of section 441a(d) coordinated 
expenditures that a party can make with respect to a House, 
Senate or Presidential candidate. In 1996, each party was 
limited to spending $12 million on section 441a(d) coordinated 
expenditures made in connection with its presidential 
candidate's general election.46
    In addition to contribution limits, federal election laws 
also impose spending limits on presidential candidates who 
accept public financing.47 These spending limits are 
permitted because candidates must voluntarily agree to accept 
them in exchange for public financing.48 In 1996, 
each presidential candidate who accepted public financing 
agreed to limit expenditures in connection with the primaries 
to $37 million and in connection with the general election to 
$74 million.49
    A key legal issue is whether coordinated efforts between 
candidates and parties are lawful, and whether this 
coordination, particularly with respect to issue advocacy, was 
used unlawfully in the 1996 elections to circumvent federal 
contribution and spending limits.
    The Federal Election Campaign Act (``FECA'') and its 
implementing regulations contain a number of provisions 
indicating that coordination between a party and its candidates 
is expected and appropriate. Permitted candidate-party 
coordinated activities include voter registration drives, get-
out-the-vote efforts, generic advertising, joint fundraising 
events, and the development and distribution of campaign 
materials such as sample ballots, slate cards, brochures, 
bumper stickers and yard signs.50 Each of these 
activities is typically coordinated between a party and its 
candidates, pursuant to the role that political parties 
traditionally play in support of their tickets. With respect to 
a party's coordinated expenditures under 2 U.S.C. Sec. 441a(d), 
the FEC has held explicitly that, ``consultation or 
coordination with the candidate is permissible.'' 51
    Attorney General Janet Reno recently stated in a letter to 
the Senate Judiciary Committee:

          FECA does not prohibit the coordination of 
        fundraising or expenditures between a party and its 
        candidates for office. Indeed, the [FEC], the body 
        charged by Congress with primary responsibility for 
        interpreting and enforcing the FECA, has historically 
        assumed coordination between a candidate and his or her 
        political party.52 [original emphasis]

The FEC made that assumption explicit in a 1988 FEC Advisory 
Opinion stating that a party's ``coordination with candidates 
is presumed.'' 53 Moreover, the recent Supreme Court 
case, Colorado Republican Federal Campaign Committee v. FEC, 
116 S. Ct. 2309 (1996), examining party-candidate coordination, 
contains no hint that such coordination is unlawful, holding 
instead that, in addition to coordinated expenditures, parties 
have a constitutional right to make independent expenditures 
and must be given an opportunity to demonstrate that a 
particular party expenditure was independently made. Some 
Justices suggested, in dicta, that parties should be able to 
make unlimited coordinated expenditures with their 
candidates.54
    With respect to presidential candidates in particular, FECA 
currently permits a presidential candidate to ``designate the 
national committee of [his or her] political party as [his or 
her] principal campaign committee.'' 55 If President 
Clinton or Senator Dole had exercised that option, their 
candidacies would have been not only coordinated with their 
respective political parties, but the party and the candidate 
committees would have merged into one entity. This option is 
additional proof that federal election law contemplates 
coordination between presidential candidates and their parties 
as both lawful and appropriate.
    The close relationship envisioned in FECA between 
candidates and their parties is in sharp contrast to the arms-
length relationship envisioned between candidates and nonparty 
groups like corporations or unions. For example, 2 U.S.C. 
Sec. 441b(a) prohibits direct corporate and union contributions 
to candidates. The Supreme Court has repeatedly upheld federal 
election law provisions erecting barriers between candidates 
and nonparty entities like corporations and unions; no similar 
case law separates candidates from their parties.56
    While coordination between parties and candidates is 
clearly lawful under FECA in many respects, questions have 
arisen as to whether their coordination on activities such as 
raising soft money and broadcasting issue ads constitute a FECA 
violation.
    It is beyond question that raising soft money and 
broadcasting issue ads are not, in themselves, unlawful. FEC 
regulations currently allow political parties to raise and 
spend soft money, and have established an elaborate system for 
allocating and disclosing federal versus non-federal 
funds.57 Candidates are permitted to help their 
parties raise funds.58 The courts have repeatedly 
upheld the right of persons to engage in issue advocacy outside 
the scope of federal election laws, even when those ads mention 
candidates and are broadcast close in time to a federal 
election day.59
    The specific issues that some have posed are: (1) whether a 
candidate's extensive involvement in party efforts to finance, 
develop and place issue ads converts such ads into candidate 
ads that should have been counted against party or candidate 
contribution and spending limits; and (2) whether some of the 
ads that parties labelled as issue ads were really candidate 
ads that should have been counted against the party's section 
441a(d) limit on coordinated expenditures. In particular, some 
have asked whether, due to the involvement of President 
Clinton, Senator Dole and their campaigns in party-sponsored 
issue ads, the cost of those ads--which totaled $44 million for 
the DNC and $24 million for the RNC--should be counted against 
each party's $12 million limit on coordinated expenditures or 
each candidate's spending limits of $37 million during the 
primaries and $74 million during the general election.
    The answer to these questions turns, in part, on the legal 
test for distinguishing between candidate and issue ads. In 
Buckley v. Valeo, the Supreme Court upheld disclosure 
requirements for expenditures by independent groups on 
communications that ``expressly advocate the election or defeat 
of a clearly identified candidate'' and activities coordinated 
with a ``candidate or his agent.'' 60 In a footnote, 
the Court offered specific examples of express advocacy, which 
have come to be known as the Buckley ``magic words.'' The 
footnote listed: `` `vote for,' `elect,' `support,' `cast your 
ballot for,' `Smith for Congress,' `vote against,' `defeat,' 
`reject.' '' 61 A decade later, the Supreme Court 
reaffirmed the Buckley approach, holding that ``a finding of 
`express advocacy' depend[s] upon the use of language such as 
`vote for,' `elect,' `support,' etc.'' 62
    Lower courts and the FEC have since elaborated on the 
Buckley standard. In FEC v. Furgatch, the Ninth Circuit held 
that ``the short list of words included in the Supreme Court's 
opinion in Buckley does not exhaust the capacity of the English 
language to expressly advocate the election or defeat of a 
candidate.'' 63 The court accordingly adopted a 
standard for express advocacy that included not only Buckley's 
magic words, but also communications expressing an unmistakable 
and unambiguous message to vote for or against a clearly 
identified candidate, without using the Buckley magic 
words.64 The FEC subsequently adopted a regulatory 
standard based in part on the Furgatch ruling.65
    Two circuits have recently rejected the FEC's Furgatch-
inspired approach. The First and Fourth Circuits have 
determined that a communication cannot constitute express 
advocacy under FECA unless it contains Buckley's magic words or 
other explicit language urging the election or defeat of a 
candidate.66 The First Circuit took this position 
despite affirming its lower court's decision which described 
the FEC regulation as ``a very reasonable attempt . . . drawn 
quite narrowly to deal with only the `unmistakable' and 
`unambiguous' cases.'' 67 The Supreme Court has yet 
to resolve this split among the circuits.
    While the circuits have split on the precise contours of 
the Buckley standard, all of the courts that have reviewed 
issue or candidate ads under FECA have based their 
determinations on the content of the ad in question. No court 
has looked behind an ad's content to determine, for example, 
the intent of the ad's sponsors, the persons who participated 
in financing, developing or placing the ad, or the ad's 
intended or actual impact on a particular election. Thus, there 
is presently no legal authority which supports the proposition 
that the extent of a candidate's involvement could convert an 
ad from issue advocacy into candidate advocacy, particularly in 
the context of an ad sponsored by a political party.
    Testimony was received by the Committee from several legal 
experts, including the FEC's general counsel Lawrence Noble, 
that issue ads sponsored by an independent group and 
coordinated with a candidate should be treated as a coordinated 
expenditure and candidate contribution, if the ad conveys an 
``electioneering message'' benefiting the 
candidate.68 Former FEC Chairman Trevor Potter 
testified that ``whether it is express advocacy, or issue 
advocacy, or anything else, it is relevant to ask in the case 
of a nonparty organization whether the spending . . . was, in 
fact, directed and controlled by the candidate.'' 69 
However, Noble and Potter both testified that a different legal 
analysis should apply to coordination involving only a party 
and its candidates, due to the longstanding legal presumption 
that party-candidate coordination is permissible and 
appropriate.70 In 1995, the FEC did just that. Asked 
how party issue ads should be treated, the FEC focused on the 
ad's content, rather than on any party-candidate coordination. 
It determined that party ads which address ``national 
legislative activity'' and do not include an ``electioneering 
message'' promoting a particular candidate result in generic 
voter drive or administrative costs to the party payable with a 
mix of federal and nonfederal money--no party contribution to a 
candidate resulted.71 In reaching this decision, the 
FEC analyzed the content of the ad, not who was involved in 
preparing it, or what the party hoped its effect would be on an 
election.
    The Attorney General stated in her recent letter to the 
Senate Judiciary Committee, not only that party-candidate 
coordination does not violate FEC as a general principle, but 
also that party-candidate coordination on a party's issue ads 
do not, as a matter of law, violate FECA.72 She 
wrote:

          With respect to coordinated media advertisements by 
        political parties (an area that has received much 
        attention of late), the proper characterization of a 
        particular expenditure depends not on the degree of 
        coordination, but rather on the content of the message. 
        . . .
          We recognize that there are allegations that both 
        presidential candidates and both national political 
        parties engaged in a concerted effort to take full 
        advantage of every funding option available to them 
        under the law, to craft advertisements that took 
        advantage of the lesser regulation applicable to 
        legislative issue advertising, and to raise large 
        quantities of soft political funding to finance these 
        venture. However, at the present time, we lack specific 
        and credible evidence suggesting that these activities 
        violated the FECA.73

    Coordination between parties and candidates has long been 
an accepted part of federal election law and campaign 
financing. Presidential candidates are considered the leaders 
of their parties.74 Party-candidate coordination 
does not, in and of itself, violate FECA. Party-candidate 
coordination on party ads which expressly advocate the election 
of the candidate must comply with the party's limits on 441a(d) 
coordinated expenditures for that candidate. Party-candidate 
coordination on party ads that contain only a generic voter 
drive or issue message do not, under FEC rulings, have to be 
attributed to a particular candidate--even if a candidate was 
involved in financing, developing or placing the ad; those 
party ads must instead comply with FEC allocation requirements 
for hard and soft money. Each of these areas would benefit from 
clarifying or strengthening legislation. Closing the soft money 
loophole, strengthening and clarifying the definition of 
express advocacy, and imposing disclosure requirements on issue 
ads that name candidates or appear close in time to elections 
are all possible legislative remedies to problems posed in this 
area.75

                               footnotes

    \1\ See FEC filings; see also, for example, Washington Post, 2/9/
97. The $2.7 billion total does not include spending by independent 
groups that did not file with the FEC. The Washington Post estimated 
additional spending by independent groups on the 1996 federal elections 
at $70 million. Washington Post, 2/9/97.
    \2\ See FEC filings. The Democratic Party spent about $336 million, 
and the Republican Party spent about $558 million during the 1996 
election cycle.
    \3\ See FEC filings; see also, for example, Washington Post, 3/31/
97.
    \4\ The Democratic Party's national campaign committees raised 
about $124 million in soft money, while the Republican Party's national 
campaign committees raised about $138 million. See FEC filings; see 
also, for example, Washington Post, 2/9/97, and 3/17/97. Compared to 
the previous presidential election cycle in 1992, the two parties 
raised three times as much soft money during the 1996 election cycle.
    \5\ The DNC spent about $44 million on issue ads, while the RNC 
spent about $24 million on issue ads. See FEC filings; see also, for 
example, Annenberg Public Policy Center, ``Issue Advocacy Advertising 
During the 1996 Campaign: A Catalog,'' Report Series No. 16, 9/16/97, 
pp. 32, 53.
    \6\ See, for example, Letter from House Judiciary Committee 
Republican Members to Attorney General Reno, requesting appointment of 
an independent counsel to investigate possible violations of law in 
connection with the 1996 presidential campaign, 9/4/97.
    \7\ See discussion of this provision, for example, in Congressional 
Research Service Report No. IB97045, 8/12/97, pp. 5-6.
    \8\ See discussion of these provisions, for example, in letter from 
Attorney General Reno to House Judiciary Committee Chairman Henry Hyde 
of New York, 10/3/97, p. 7; and Congressional Research Service Report 
No. IB97045, 8/12/97, p. 6.
    \9\ See discussion of this provision, for example, in letter from 
Attorney General Reno to House Judiciary Committee Chairman Henry Hyde 
of New York, 10/3/97, pp. 5-6.
    \10\ See, for example, Congressional Research Service Report No. 
IB97045, 8/12/97, pp. 5-6.
    \11\ Letter from Attorney General Reno to House Judiciary Committee 
Chairman Henry Hyde of New York, 10/3/97, p. 4.
    \12\ Letter from Attorney General Reno to House Judiciary Committee 
Chairman Henry Hyde of New York, 10/3/97, p. 5; and Congressional 
Research Service Report No. IB97045, 8/12/97, p. 6.
    \13\ 209 U.S. at 44.
    \14\  See, for example, the Senate Ethics Manual (9/96), which 
states: ``The criminal prohibition at section 607 was originally 
intended and was historically construed to prohibit anyone from 
soliciting contributions from federal clerks or employees while such 
persons were in a federal building. In interpretations of this 
provision, the focus of the prohibition has been directed to the 
location of the individual from whom a contribution was requested, 
rather than the location from which the solicitation had originated.'' 
See also United States v. Burleson, 127 F.Supp. 400 (E.D. Tenn. 1954) 
(campaign solicitation of federal employees while at a contractor 
worksite did not occur in a federal building and so did not result in a 
violation).
    \15\ Congressional Research Service Report No. IB97045, 8/12/97, p. 
7; see also memorandum dated 3/6/97, by Jack Maskell, legislative 
attorney, American Law Division, Congressional Research Service, 
``Soliciting Campaign Contributions in a Federal Building: 18 U.S.C. 
607.''
    \16\ 3 Op. Off. Legal Counsel 31, 38-45 (1979); see also 
Congressional Research Service Report No. IB97045, 8/12/97, p. 7.
    \17\ See, for example, Letter to Senate Judiciary Committee 
Chairman Orrin Hatch of Utah from Attorney General Reno, 4/17/97, pp. 
4-5; see also statement by Senator Levin, Congressional Record, 10/1/
97, p. S10277-82.
    \18\ See Letter to Senate Judiciary Committee Chairman Orrin Hatch 
of Utah from Attorney General Reno, 4/14/97, p. 5 (citing 5 C.F.R. 
2635.704 and 41 C.F.R. 201-21.601).
    \19\ See discussion below.
    \20\ See Letter from Attorney General Reno to House Judiciary 
Committee Chairman Henry Hyde of New York, 10/3/97, p. 5.
    \21\ See Congressional Research Service Report No. IB97045, 8/12/
97, pp. 8-9.
    \22\ U.S. General Accounting Office, Principles of Federal 
Appropriations Law (7/91), p. 4-2, cited in memorandum dated 9/6/96 by 
Jack Maskell, legislative attorney, American Law Division, 
Congressional Research Service, ``Use of Federal Appropriations for 
Non-Official, Political Campaign Purposes,'' pp. 3-4.
    \23\ Decision of Comptroller General, B-147578, 11/8/62, p. 5, 
cited in memorandum dated 9/6/96 by Jack Maskell, legislative attorney, 
American Law Division, Congressional Research Service, ``Use of Federal 
Appropriations for Non-Official, Political Campaign Purposes,'' p. 4.
    \24\ Memorandum by Jack Maskell, legislative attorney, American Law 
Division, Congressional Research Service, ``Use of Federal 
Appropriations for Non-Official, Political Campaign Purposes,'' 9/6/96, 
p. 7.
    \25\ 5 U.S.C. Sec. 7324(a); see also Congressional Research Service 
Report No. IB97045, 8/12/97, p. 8.
    26 5 U.S.C. Sec. 7323(a)(2). Section 7323(a)(2) makes an 
exception for the solicitation of contributions in a few limited 
instances involving employee organizations, not relevant here. See also 
5 C.F.R. 734.101(b) which defines accepting a contribution as taking 
``possession . . . officially on behalf of a candidate, a campaign, a 
political party, or a partisan political group, but does not include 
ministerial activities which precede or follow this official act.'' 18 
U.S.C. Sec. 607(b) allows Congressional staff to accept contributions 
in a federal building if the contribution is forwarded within seven 
days to the appropriate campaign committee.
    27 5 U.S.C. Sec. 7323(a)(1).
    28 5 U.S.C. Sec. 7323.
    29 5 U.S.C. Sec. 7323 (Hatch Act applies to ``any 
individual, other than the President and the Vice President, employed 
or holding office in . . . an Executive agency'').
    30 5 U.S.C. Sec. 7324(b)(2)(B)(i); see 5 CFR 734.502; 
Congressional Research Service Report No. IB97045, 8/12/97, p. 8.
    31 5 U.S.C. Sec. 7323(a)(2); see Congressional Research 
Service Report No. IB97045, 8/12/97, p. 8.
    32 5 U.S.C. Sec. 7324(b); 5 C.F.R. 734.503; see 
Congressional Research Service Report No. IB97045, 8/12/97, p. 8.
    33 See, for example, 5 C.F.R. 734.503, Example 3: ``The 
head of an executive department may hold a partisan `political' meeting 
or host a reception which is not a fundraiser in his conference room 
during normal business hours.''
    34 5 C.F.R. 734.101.
    35 6 Off. Legal Counsel 214, 217 (1982).
    36 6 Off. Legal Counsel 214, 217 (1982).
    37 6 Off. Legal Counsel 214, 217 (1982).
    38 5 C.F.R. 734.503.
    39 5 C.F.R. 734.503.
    40 Kathryn Dunn Tenpas, ``Institutionalized Politics: 
The White House Office of Political Affairs,'' Presidential Studies 
Quarterly (Spring 1996).
    41 For the first twelve years under President Reagan and 
President Bush, OPA staff members served as liaisons to the Republican 
national, state and local party organizations; coordinated activities 
with the congressional campaign committees; did political outreach to 
targeted constituency groups; worked to obtain appointments to federal 
positions and offices for political supporters; provided assistance to 
candidates in mid-term elections; and helped plan the president's re-
election campaign. Kathryn Dunn Tenpas, ``Institutionalized Politics: 
The White House Office of Political Affairs,'' Presidential Studies 
Quarterly (Spring 1996) p. 512. OPA staff under President Clinton 
engaged in similar activities. See also Harold Ickes, 10/7/97 Hrg. pp 
85-90.
    42 Memorandum to All White House Staff from C. Boyden 
Gray, Counsel to the President, re ``Political Activity,'' 11/27/91, p. 
4, n. 3.
    43 Memorandum to All White House Staff from L. Cutler & 
C. Mills re: Political Activity, 4/6/94, p. 2, n. 2.
    44 See Memorandum by Jack Maskell, legislative attorney, 
American Law Division, Congressional Research Service, ``Use of Federal 
Appropriations for Non-Official, Political Campaign Purposes,'' 9/6/96, 
p. 7.
    45 The constitutionality of section 441a(d)'s limits on 
coordinated expenditures by parties was questioned by several Supreme 
Court Justices in Colorado Republican Federal Campaign Committee v. 
FEC, 116 S. Ct. 2309 (1996), but no ruling was made by the Court on 
that issue. In Buckley v. Valeo, 424 US 1, 47 (1976), in dicta, the 
Supreme Court analogized coordinated expenditures to contributions 
which it held could be constitutionally limited; in the Colorado case, 
in dicta, some Justices analogized coordinated expenditures to direct 
spending by candidates which Buckley held cannot constitutionally be 
limited.
    46 2 U.S.C. Sec. 441a(d)(2).
    47 2 U.S.C. Sec. 441a(b).
    48 RNC v. FEC, 616 F.2d 1 (2d Cir) (en banc), aff'd 
mem., 445 U.S. 955 (1980) One presidential candidate during 1996, Steve 
Forbes, declined to accept public financing and was not subject to 
spending limits.
    49 See 2 U.S.C. Sec. 441a(c), and 11 C.F.R. 
9035.1(a)(1).
    50 See, for example, 2 U.S.C. Sec. 431(9)(B)(iv) and 
(viii) and 11 C.F.R. 102.17 (joint fundraising by parties and 
candidates, and allocating associated expenses).
    51 FEC Advisory Opinion 1984-15.
    52 Letter to Senate Judiciary Committee Chairman Orrin 
Hatch of Utah from Attorney General Reno, 4/14/97, pp. 6-7.
    53 FEC Advisory Opinion 1988-22.
    54 See, for example, opinion by Justice Kennedy; see 
also footnote 45, supra.
    55 2 U.S.C. Sec. 432(e)(3)(A)(i); 11 C.F.R. 
102.12(c)(1).
    56 See, for example, FEC v. Massachusetts Citizens for 
Life, 479 U.S 238 (1986); Austin v. Michigan State Chamber of Commerce, 
494 U.S. 652 (1990); see also legal analysis in part 2 on independent 
groups, supra.
    57 See 11 C.F.R. 106.5. In a letter dated 6/4/97, 
President Clinton petitioned the FEC to change these regulations and 
prohibit parties from raising and spending soft money.
    58 See 11 C.F.R. 102.17 (joint fundraising by parties 
and candidates, and allocating associated expenses).
    59 See, for example, FEC v. Christian Action Network, 
110 F.3d 1049 (4th Cir 1997).
    60 424 U.S 1, 80 (1976) The Court reached this ruling 
with respect to ``individuals and groups that are not candidates or 
political committees.'' 424 U.S. at 80.
    61 424 U.S. at 44 n.52
    62 FEC v. Massachusetts Citizens for Life, 479 U.S 238, 
248-49 (1986) (quoting Buckley).
    63 807 F.2d 857, 863 (9th Cir. 1987).
    64 807 F.2d at 864.
    65 11 C.F.R. 100.22(b) (``Expressly advocating means any 
communication that . . . could only be interpreted by a reasonable 
person as containing advocacy of the election or defeat of one or more 
clearly identified candidate(s) because--(1) [t]he electoral portion of 
the communication is unmistakable, unambiguous, and suggestive of only 
one meaning; and (2) [r]easonable minds could not differ as to whether 
it encourages actions to elect or defeat one or more clearly identified 
candidate(s) or encourages some other kind of action.'') (original 
emphasis).
    66 See FEC v. Christian Action Network, 110 F.3d 1049, 
1055 (4th Cir 1997) (holding that Buckley requires express or explicit 
words of advocacy of election or defeat of a candidate); Maine Right to 
Life Committee. v. FEC, 98 F.3d 1 (1st Cir 1996) (invalidating FEC 
regulation).
    67 Maine Right to Life Committee v. FEC, 914 F Supp 8, 
10 (D. Me. 1996), aff'd, 98 F.3d 1 (1st Cir. 1996) (per curiam).
    68 Lawrence Noble, 9/25/97 Hrg. Pp. 34-40. The FEC is 
currently in litigation to determine whether this position--that issue 
ads sponsored by an independent group, coordinated with a candidate, 
and containing an electioneering message result in a contribution to 
the candidate--is correct See also legal analysis of independent groups 
coordinating with candidates in Part 2, supra.
    69 Trevor Potter, 9/25/97 Hrg. P. 36.
    70 Lawrence Noble and Trevor Potter, 9/25/97 Hrg. Pp. 
35-36, 39-40. Potter testified that the FEC had traditionally 
``presumed all party spending was coordinated with candidates'' and had 
deemed coordination between the two irrelevant, concentrating instead 
on determining whether specific party expenditures were generic party-
building efforts that could not be attributed to individual candidates 
or candidate-specific spending subject to contribution limits. Trevor 
Potter, 9/25/97 Hrg. P. 22. See also legal analysis of independent 
groups coordinating with candidates in Part 2, supra.
    71 FEC Advisory Opinion 1995-25; see also FEC Advisory 
Opinion 1985-14; and letter to Senate Judiciary Committee Chairman 
Orrin Hatch of Utah from Attorney General Reno, 4/14/97, p. 7.
    72 Letter to Senate Judiciary Committee Chairman Orrin 
Hatch of Utah from Attorney General Reno, 4/14/97, pp. 6-7.
    73 Letter to Senate Judiciary Committee Chairman Orrin 
Hatch of Utah from Attorney General Reno, 4/14/97, p 7. 
    74 See, for example, Harold Ickes, 10/7/97 Hrg. P. 85.
    75 S. 25, the McCain-Feingold campaign finance reform 
bill, proposes a variety of legislative remedies on soft money, issue 
advocacy and coordination.





PART 5  FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES 
        AND ADMINISTRATIONS

Chapter 25: DNC and RNC Fundraising Practices and Problems

    The 1996 federal election cycle set a record for the amount 
of money raised and spent by federal candidates and their 
parties in the quest to obtain victory at the polls. During the 
election cycle, both parties leveled well worn allegations at 
each other of improper or illegal fundraising practices and 
other wrongdoings, proclaiming that they were shocked at the 
opposing party's activities. In past election cycles, these 
allegations were largely forgotten after the electoral dust 
settled. After the 1996 election, however, allegations against 
candidates and national parties persisted and escalated.
    The Committee investigated a number of the allegations 
against the DNC during the last election cycle, taking 38 days 
of depositions, conducting 14 interviews,1 receiving 
5 days of public testimony,2 and receiving over 
450,000 pages of unredacted DNC documents.3 The 
Committee focused on how the DNC had performed its primary 
functions of (1) soliciting campaign contributions, (2) 
organizing fundraising and other events, and (3) spending its 
funds to promote the Democratic Party. After a thorough 
investigation, several serious problem areas emerged, which are 
set forth below.
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 25.
---------------------------------------------------------------------------
    Allegations against the RNC were not fully explored by the 
Committee, which took only two depositions 4 and one 
day of public testimony from one RNC official.5 Even 
then, the Committee strictly limited the testimony to issues 
involving the National Policy Forum. In addition, the Committee 
only received 70,000 pages of RNC documents, many of which were 
heavily redacted, despite the fact that the RNC received a 
virtually identical subpoena as the one issued to the 
DNC.6 As discussed elsewhere in this report, the 
lack of information on the operations of the RNC leaves a major 
hole in the Committee's analysis of the 1996 election cycle. 
However, the sparse information that the Committee did receive 
strongly indicates that the RNC engaged in many of the same 
practices as the DNC and, as with the DNC, these practices were 
not new or unique in 1996.
    The primary fundraising and spending activities of the DNC 
and the RNC during the last election cycle are addressed in 
this chapter. The remaining sections of Part 5 discuss in more 
detail both parties' practices of soliciting funds from federal 
property; organizing events for contributors which, in exchange 
for those contributions, often provided access to elected 
officials; and spending party funds by conducting political 
advertising.

                                findings

    (1) The evidence before the Committee establishes that both 
political parties engaged in questionable fundraising 
practices. Both parties scheduled events at government 
buildings and promised access to top government officials as 
enticements for donors to attend fundraising activities or make 
contributions. Both parties used their presidential candidates 
to raise millions of dollars in soft money donations in 
addition to the $150 million provided in public financing for 
presidential campaigns. Both parties worked with their 
candidates to design and broadcast issue ads intended to help 
their candidates' election efforts.
    (2) The RNC's activities were subject to some of the same 
or similar problems as the DNC's activities. The RNC received 
foreign contributions, gave access to top Republican leaders 
for large contributions, held fundraising-related events on 
federal property, engaged in coordination between the 
Presidential campaign and the national party and used 
supposedly nonpartisan, tax-exempt organizations for partisan 
purposes.
    (3) The compliance systems of the DNC in the 1996 campaign 
were flawed. Although the evidence before the Committee 
indicates that the DNC fundraising staff as a whole attempted 
to do their job in accordance with the law, isolated failures 
of supervision coupled with a compelling desire to raise more 
money led the DNC to accept hundreds of thousands of dollars in 
contributions it otherwise would not have accepted. Despite 
these problems, the overwhelming majority of contributions 
received by the DNC appear to have been legal and appropriate.
    (4) The position taken by the Republican Party in the 1992 
and 1994 election cycles that it had no obligation to 
investigate contributions or contributors is troubling. The 
evidence before the Committee is insufficient to evaluate the 
compliance procedures of the RNC during the 1996 election 
cycle. Because the Committee did not have the full cooperation 
of the RNC in complying with the Committee's subpoenas and 
requests for information (and the Committee failed to enforce 
the subpoenas), the Committee failed to fully assess the RNC's 
practices and procedures for insuring the legality and 
propriety of major contributions.

                              introduction

    In September 1996, just weeks before the November 1996 
election, the Los Angeles Times published an article that 
raised questions about the legality of a contribution to the 
DNC from Cheong Am America, a California subsidiary of a South 
Korean corporation.7 The article alleged that the 
contribution may have been illegal because the subsidiary did 
not have sufficient domestic revenues to support its 
contribution of $250,000. The DNC reviewed the circumstances 
surrounding the contribution, which had been solicited by a DNC 
fundraiser named John Huang, and returned the entire $250,000 
after determining that it failed to meet the Federal Election 
Commission's (FEC) criteria for contributions from domestic 
subsidiaries of foreign corporations.8
    Following this event, the news media increasingly published 
allegations that contributions made to the DNC were illegal or 
improper. Beginning in November 1996, with the assistance of 
outside law and accounting firms, the DNC conducted an internal 
review of the 1200 contributions over $10,000 it had received 
in the 1996 election cycle. In addition, contributions 
solicited by Huang and Charlie Trie and those made by Trie, 
Johnny Chung or in connection with the Hsi Lai Temple or other 
Asian Pacific American Leadership Council events were also 
reviewed.9 By June 1996, before the Committee's 
hearings began, the DNC had returned 172 of those 
contributions, which represented .006% of the number of 
contributions made to the DNC. By September 1996, the total 
amount of contributions returned by the DNC for legal reasons 
amounted to .04% of the total raised by the DNC for the 
relevant 1994-1996 period.10 The internal review and 
returned contributions pointed to a number of problems within 
the DNC and focused attention on Huang--both on the 
contributions he solicited and the fundraising events he helped 
to organize. In turn, questions were raised about the 
fundraising practices and guidelines of the DNC and about 
whether top DNC and White House officials had actively ignored 
those guidelines or federal law as they strove to raise money.
    The fundraising practices examined by the media and 
explored by the Committee did not begin with this past election 
cycle. However, the amount of money--especially large soft 
money contributions--raised by both parties in 1995 and 1996 
was unprecedented. In order to raise such large sums, both 
parties had dramatically increased their fundraising efforts.
    The DNC stepped up its drive to raise money in the fall of 
1995, when White House and DNC officials decided that the party 
would conduct a massive ``media'' campaign starting a full year 
before the presidential election.11 According to 
White House Deputy Chief of Staff Harold Ickes, the media buy 
was designed to carry the Democratic Party's message to the 
American people, and the increased funds were designed to keep 
up with the Republican Party. He testified:

          From the outset, moreover, we Democrats knew that we 
        would have to do all that we could within the bounds of 
        the law to get our message out to the American people. 
        We knew that the Republican money machine would raise 
        more than we could and would outspend us.
          And guess what? They did--by about $222 million. The 
        three major Republican national committees [the RNC, 
        the National Republican Senatorial Committee and the 
        National Republican Congressional Committee] spent over 
        $558 million in the 1996 election cycle, compared to 
        approximately $336 raised by their Democratic 
        counterparts [the DNC, the Democratic Senatorial 
        Campaign Committee and the Democratic Congressional 
        Campaign Committee].12

    In order to keep up with ``the Republican money machine,'' 
the DNC took aggressive fundraising steps, which included 
reaching out to new communities and soliciting contributions 
from donors that had not previously been tapped by Democrats 
for large contributions; organizing fundraising and other 
events to entice new donors; and spending the funds raised on 
media ads that supported the Democratic Party and its 
candidates. The DNC activities that later created controversy 
were its receipt of contributions from questionable sources; 
its use of the President and Vice President as part of its 
fundraising efforts; its organization of events that were 
controversial because of their location or the political access 
they afforded big contributors; and its coordination of media 
ads with White House and Clinton campaign staff.
    Similarly, the Republican Party, which has out-raised the 
Democratic Party in every recent election, also undertook 
aggressive fundraising measures during the 1996 election cycle. 
The RNC solicited and received questionable contributions; 
organized events in order to promote contributions; and 
purchased media ads that supported the Republican Party and its 
candidates. The RNC activities that later created controversy 
were its use of tax-exempt organizations to raise money; its 
decision not to investigate or return certain questionable 
contributions; its use of federal property to court 
contributors; its organization of events that promised 
contributors access to Republican leadership; and its 
coordination of media ads with Dole for President staff.
    These fundraising activities by both national parties were 
encouraged by the ability under current law to raise unlimited 
amounts of both hard and soft money and to legally spend this 
money in the proper hard-to-soft proportions to promote their 
issues as well as their candidates. The quest for money, and 
the practices used to acquire that money, will control our 
electoral system until meaningful campaign finance reform is 
enacted.
    In examining the problems of the fundraising practices of 
the last few years, the Committee, over the strenuous 
objections of the Minority Members, chose to focus almost 
exclusively on the Democratic Party's activities. Consequently, 
the evidence presented to the Committee was lopsided, coming 
primarily from the DNC, which cooperated with the Committee, 
spending over $4.75 million (not including legal fees) to 
respond to the Committee's requests.13 As a result, 
our description of how the parties operated during the last 
election cycle is heavily weighted to the DNC. Many questions 
about the internal workings of the RNC remain unanswered.

                   structure of the national parties

The Democratic National Committee

    During the 1996 election cycle and after the devastating 
1994 mid-term elections, the DNC implemented a new, bifurcated 
chairman arrangement whereby Donald Fowler was the National 
Chairman, responsible for the day to day activities of the 
party, and Senator Christopher Dodd was the General Chairman, 
acting as the official spokesman for the party.14 
The DNC's executive director was Bobby Watson who served in 
this position until December 1995.15 In March 1996, 
B.J. Thornberry, former Deputy Chief of Staff at the Department 
of the Interior, took his place.16 The DNC's 
executive director functioned as a ``staff director'' and was 
responsible for the overall management of the personnel who 
work for the party.17
    During the course of the 1996 election cycle, the DNC 
fundraising division employed anywhere from 50 to as many as 
100 fundraisers.18 The fundraisers were supervised 
by a Finance Director who was a paid, full-time employee of the 
DNC and a Finance Chairman who was considered an officer of the 
party. Through January 1995 they were supervised by Laura 
Hartigan, Finance Director,19 and Terry McAuliffe, 
Finance Chairman 20 who left their respective DNC 
positions to assume the same positions at the Clinton 
campaign.21 In April 1995, Richard Sullivan took 
over as Finance Director for the remainder of the 1996 
cycle.22 Truman Arnold, a Texas businessman and 
long-time DNC donor, took over for McAuliffe for a period of 
several months,23 and Marvin Rosen took over for the 
remainder of the term.24 Sullivan and Rosen 
testified that they reported and coordinated the activities of 
the Finance Division with Fowler.25 Fowler, however, 
testified that he felt the Finance Division was too independent 
and that, as National Chairman, he was not able to oversee it 
as well as he would have liked.26
    Other key fundraising staff were the Deputy Finance 
Directors, David Mercer 27 (one of Charlie Trie's 
contacts 28) and Erica Payne;29 the 
Director of the DNC's Managing Trustee Program, its highest 
dollar donor council, was Ari Swiller 30 and his 
Deputy Ann Braziel.31 Due to their sizable 
donations, many of the donors questioned during the Committee's 
investigation were members of the DNC Managing Trustee Program, 
members of which must either donate $100,000 or raise 
$250,000.32
    Joseph Sandler has been General Counsel of the DNC since 
February 1993.33 His deputy, and the only other 
attorney in the DNC's Office of General Counsel during the 
1995-96 cycle, was Neil Reiff.34 Reiff had been with 
the DNC's Office of General Counsel since the spring of 
1993.35
    In most cases, these individuals were interviewed and 
deposed for multiple days during the course of the 
investigation.

The Republican National Committee

    During the 1996 election cycle, the chairman of the RNC was 
Haley Barbour and its executive director was Sanford 
McAllister. McAllister's immediate predecessor was Scott Reed 
who left the RNC in February 1995 to become Senator Dole's 
campaign manager.36 The RNC's top political 
operative was Curt Anderson, whose title has been listed as 
both Political Director and Campaign Operations Director. 
Anderson and his assistant Ruth Kistler supervised the RNC's 
coordination of political activities with the Dole for 
President campaign as well as with independent 
groups.37
    The RNC's top fundraiser was RNC Finance Director Albert 
Mitchler. In March 1996, Mitchler was joined by Jo-Anne Coe, 
who was named RNC Deputy National Finance Chair. Coe is a 
longtime aide to Senator Dole, served as top fundraiser of the 
Dole for President committee until it raised the maximum funds 
permitted under FECA for presidential candidates who accept 
public financing, and also served as executive director of 
Senator Dole's tax-exempt organization, Campaign America. Coe 
now works with Senator Dole at a private law firm. Coe directed 
fundraising for media ads which the RNC produced in 
coordination with the Dole campaign.38
    Other key RNC fundraisers included Howard Leach, national 
finance chair; John Moran, a national finance chair and head of 
Victory '96, a key Republican Party fundraising organization; 
Tim Barnes, who served as chair of Team 100, a premier RNC 
donor program; and Karen Kessenich, chair of the Eagles, 
another top RNC donor program.39
    The RNC's general counsel was David Norcross. Its chief 
counsel was Thomas Josefiak. The RNC's communications and 
congressional affairs director was Ed Gillespie. Rich Galen was 
a frequent RNC spokesperson.
    Because the Committee's attempts to depose Mitchler, Coe, 
Anderson, Kistler, and other RNC officials were not successful, 
it did not explore the structure of the RNC.

                           fundraising drives

    In the fall of 1995, White House officials, political 
advisors, and DNC officials decided to pursue a strategy that 
involved an extensive ``media'' campaign to communicate the 
message of the Administration and the Party.40 
Fowler set a goal for the DNC to raise a total of $120 million 
over the course of 1996.41 In response, the DNC 
fundraising staff--led by Rosen and Sullivan--formulated a plan 
to raise the money using a variety of methods, including direct 
mail solicitations, major donor contribution packages, and 
fundraising and other events designed to encourage 
contributions of both hard and soft money. The DNC and the 
White House recognized that to meet this goal, tremendous 
pressure would be placed on all DNC staff, particularly the 
fundraisers, and that the involvement of the President and Vice 
President would be necessary. The plan proposed that the 
President or Vice President attend 100 to 150 events around the 
country in the next year and that the DNC organize a variety of 
fundraisers and other events, some within the White House 
complex.42
    The Committee was not afforded the opportunity to depose 
RNC officials or Republican political consultants, and 
therefore was not able to explore the special fundraising 
initiatives planned and implemented by the Republican Party in 
the 1996 election cycle. However, the Committee learned that, 
for many years, the Republican Party has solicited 
contributions through two principal donor programs: Team 100 
and the Republican Eagles. Team 100 membership requires ``an 
initial contribution of $100,000'' and contributions of $25,000 
per year for the next 3 years. Republican Eagle membership 
requires contributionsof $15,000 annually. To encourage 
individuals to join these programs, the RNC distributes promotional 
material describing the benefits of membership, which include meetings 
and dinners with high-ranking Republican elected officials. This 
fundraising practice of exchanging access for contributions is 
discussed in Chapter 28. In addition, the 1996 election cycle witnessed 
a new Republican donor program which offered a variety of benefits to 
donors informally called ``season ticket holders,'' who contributed 
$250,000 or more to the Republican Party.43

                        Soliciting Contributions

    A fundraising organization's primary goal is to solicit and 
receive contributions for its cause. As part of its fundraising 
organization, the DNC had a staff structure that would (1) 
train and monitor its fundraisers and (2) screen incoming 
contributions for legality and appropriateness.44 
The Minority assumes the RNC had a similar structure, but was 
unable to investigate its existence or effectiveness.
    During the 1996 cycle, however, both parties undertook 
their largest fundraising drives in history. In fact, both 
national parties more than doubled the amount they had raised 
just two years before: the DNC went from $85.7 million to 
$210.3 million and the RNC went from $132.3 million to $306.1 
million.45 Considering such a dramatic increase in 
fundraising, the national parties, particularly the DNC did not 
adequately respond to such enormous pressure by improving old 
training and compliance systems to ensure against problems. The 
Committee found these problems in the DNC in particular, in 
light of the chosen focus of the investigation.

Training fundraisers

            The DNC's training procedures and problems
    From 1993 to 1996, the DNC general counsel's office, headed 
by Joseph Sandler and his deputy, Neil Reiff, worked with the 
Finance Division to ensure that the fundraisers were trained in 
the legal and appropriate way to solicit and accept 
contributions and to identify contributions which might not be 
legal or appropriate. The general counsel's office conducted 
approximately eight separate group training sessions and 
numerous special sessions with groups of Finance Division 
staff.46 At those sessions, the counsel's office 
distributed and explained the DNC's manual, written by the 
Office of General Counsel, which contained the legal 
restrictions for national party fundraising as well as the 
DNC's own policies and guidelines. The general counsel's office 
emphasized to the fundraisers that as they worked and talked to 
contributors, they should obtain an understanding of the 
contributors' backgrounds and ability to comply with applicable 
laws and guidelines. Sandler and Reiff also emphasized to staff 
at these sessions that questions and problems should be brought 
to the attention of someone in the counsel's office. The 
testimony and evidence received by the Committee demonstrate 
that the DNC manuals and training sessions were comprehensive 
and that Finance Division staff routinely sought the advice of 
the counsel's office.47
    The DNC's training program seemed adequate: the program and 
manual were updated appropriately, and all DNC fundraisers who 
testified before the Committee stated that they went through 
the training and received the manuals.48 However, 
with the large fundraising goal the DNC undertook to meet, this 
program could have used some strengthening as more fundraisers 
were hired.49 A larger general counsel's office 
might have allowed for more active oversight of fundraisers' 
activities by attorneys familiar with nuances of the law. More 
frequent training sessions in smaller groups might have allowed 
for more personal contact with the lawyers. And, as the DNC 
reached out to new communities and contributors unfamiliar to 
the DNC, more diligent checks should have been conducted on 
new, large-dollar contributors. These types of improvements 
have since been made by the DNC.50
    John Huang was hired by the DNC in late 1995 to target the 
Asian-Pacific American community for Democratic fundraising. 
The evidence establishes that Huang attended a training 
session, a manual was found in his files, and after his first 
event he brought checks to Sandler for review which led Sandler 
to testify that he believed that Huang had a satisfactory 
knowledge of the laws and DNC guidelines under which he was to 
raise money.51 Shortly after this meeting, Huang 
initiated the return of two checks based on the questionable 
citizenship status of the donors.52 However, after 
this event, Huang solicited and accepted numerous contributions 
that later had to be returned by the DNC. The evidence 
presented to the Committee does not establish that these 
problems were indicative of the practices of the vast Majority 
of other DNC fundraisers during the 1995-96 cycle. See Chapter 
4: John Huang.
            The RNC's training procedures and problems
    The Committee was not afforded the opportunity to depose 
RNC officials, and, therefore, was not able to explore the 
procedures involved or the appropriateness of the training that 
the RNC provided to its fundraisers.

Contribution compliance

    Another aspect of the solicitation and acceptance of 
contributions by the national parties were the compliance 
systems established to screen incoming contributions for 
legality and appropriateness.
            The DNC's contribution compliance and problems
      According to Sandler, the DNC's review for legality had 
two basic elements:

          [O]ne, review of the contribution check and 
        accompanying information; and two, training of the 
        fund-raising staff to spot potential legal problems and 
        to bring them to the attention of the office of the 
        general counsel.53

    Sandler explained that the general counsel's office would 
review all incoming checks as well as the accompanying 
information provided by the contributors and consult the DNC 
donor database. Sandler or Reiff would then determine, in the 
case of ``hard'' money, whether the strict limitations on the 
source and amount of money had been met. The office would 
review similar information for ``soft'' money 
contributions.54
    The second element of screening checks for legality, as 
outlined by Sandler, was training the fundraising staff to spot 
problems and bring them to the attention of the general 
counsel's office.55 Although this two-part system 
worked in the vast majority of cases, the training of 
fundraisers, particularly Huang, and the response to problems 
spotted by DNC staff generally, were not vigorously pursued.
    Contributions to the DNC were also generally checked for 
appropriateness. From the spring of 1993 through May 1994, a 
DNC Research Department staff member was assigned to run public 
database searches to discover any controversial information 
regarding individuals who were to become substantial 
contributors. Sometime in May 1994, however, the staff person 
assigned to this task left the DNC, and the DNC Research 
Department did not reassign responsibility for conducting these 
searches to another staff member. Although public data searches 
were periodically conducted on new contributors, the screening 
system developed a hole that was not patched until after the 
1996 elections.56 However, had these searches 
continued, it is unclear whether the problems which led to the 
return of the majority of the returned contributions, such as 
Gandhi's $325,000, Kanchanalak's $190,000, Chung's $275,000, or 
the Wiriadinatas' $425,000 would have been 
detected.57 However, in the case of the Gandhi 
contribution, information was available and was one reason the 
White House had initially declined to accept an award Gandhi 
had offered to the President.58
    In general, most of the contributions that were returned by 
the DNC were returned because the information provided was 
insufficient to determine the source of the funds for the 
contributions.59 Some of these contributions are 
associated with individuals who were originally from a number 
of different Asian countries and whose citizenship or residency 
status was in question. Although there is no evidence that the 
DNC encouraged or was aware of the problems with these 
contributions or that they were associated with any one 
country, it is also clear that the DNC should have been more 
diligent in monitoring an inexperienced fundraiser who was 
placed in charge of tapping substantial contributions from a 
new community.60
    Monitoring the origins of campaign contributions is 
difficult because of the necessity for the national parties, as 
well as candidates' campaign committees, to rely on information 
presented by the contributor. In fact, several of the 
problematic contributions received by the DNC appeared at first 
to be entirely legal and appropriate and were only discovered 
to be problematic after a thorough investigation and audit; 
others involved the contributors giving false certifications to 
the DNC which were discovered and returned later.61 
Currently, contributors are not required to certify at the time 
that they make a contribution that the information they have 
provided is accurate. Amending the law to require contributors 
tocertify that they are U.S. citizens or permanent residents 
and that they are contributing their own money, accompanied by 
penalties for false certification, would assist the parties and 
campaigns in complying with legal requirements.
    The DNC has since improved many of its procedures. Among 
the changes the DNC made were (1) adding to the Office of 
General Counsel a compliance director with full responsibility 
to ensure contributions and solicitations comply with law and 
internal procedure; (2) creating Executive Compliance and 
Contribution Review Committees and; (3) requiring fundraisers 
to submit an annual certification of compliance. On the 
processing side of fundraising, the DNC has improved and 
specified the research to be done on donors and the process to 
be followed for returns. Finally, the DNC laid out new, 
detailed procedures for screening proposed guests at DNC 
events.62
            The RNC's contribution compliance and problems
    The Committee was not afforded the opportunity to depose 
RNC officials or receive a meaningful production of documents 
in order to explore the legality or propriety of the procedures 
the RNC used and the contributions the RNC solicited and 
accepted in the 1996 election cycle. This problem was 
aggravated by the RNC's failure to conduct a thorough 
investigation of its contributions and make that information 
available to the public.
    Evidence was obtained by the Committee indicating that, 
during the 1992 and 1994 election cycles, the Republican Party 
took the position that it had no duty to investigate or verify 
any contributions or contributors. Rich Galen, a Republican 
Party spokesperson, told the press in 1992, ``There's no 
requirement in practice or in law that a political organization 
or charitable organization get any kind of statement from a 
donor as to the origins of the money.'' 63 In 1993, 
deposition testimony provided by a top Republican fundraiser, 
Elizabeth Ekonomou, in connection with a questioned 
contribution provided by Michael Kojima, indicates that 
Republican fundraising committees believed they had no legal 
obligation to investigate any contributor or contribution, and 
provides no evidence of any standing policy or procedure to 
conduct such investigations.64 Ekonomou stated under 
oath:

          Q. Did the Dinner Committee do any kind of background 
        search or verification regarding its top fundraisers?
          A. No.
          Q. Do you believe that the Dinner Committee has 
        responsibility to do any kind of background 
        verification or search about its fundraisers or top 
        fundraisers?
          A. No.
          Q. In light of your experience and the concern that 
        was raised in you after revelations of Mr. Kojima's 
        outside activities, you continue to have no belief that 
        the Dinner Committee has any kind of obligation to do 
        any verification of the background of its top 
        fundraisers?
          A. I do not believe that the President's Dinner has 
        any obligation to get background information on its top 
        fundraisers.65
    Jan Baran, long-time legal counsel to the RNC and other 
Republican Party organizations, put it even more forcefully in 
1993 legal pleadings filed with the U.S. District Court for the 
District of Columbia:

          [P]olitical organizations such as the [Republican 
        Dinner] Committee must be able to receive and use 
        contributions. If they were required to investigate all 
        contributors and establish a pedigree for all 
        contributions, their First Amendment protected 
        activities would be seriously handicapped. . . . The 
        Federal Election Campaign Act of 1971, as amended, 
        imposes no burden upon political organizations to 
        investigate the solvency of contributors.66

The unequivocal position of the Republican Party's longtime 
legal counsel, experienced fundraiser and designated 
spokesperson suggests that, in the years leading up to the 1996 
election cycle, the Republican Party's policy was that it had 
no legal obligation to investigate either contributors or 
contributions, even if questions were raised about a particular 
donation. In addition, neither the civil litigation over the 
Kojima contribution nor subsequent investigative efforts by 
this Committee produced any evidence that standard procedures 
are in place in Republican fundraising organizations requiring 
the investigation and evaluation of large contributions from 
unfamiliar donors. Moreover, due to the failure of RNC 
officials to provide deposition testimony or cooperate with the 
Committee's investigation into RNC procedures, there is no 
evidence before the Committee which suggests that the 
Republican Party changed the policy it espoused in the 1992 and 
1994 election cycles, or adopted another position during the 
1996 election cycle.
    There is also evidence before the Committee that the RNC 
has solicited and received funds that were possibly illegal or 
inappropriate and which should be refunded. As explored in 
Chapter 6, the RNC received funds in 1992 from Michael Kojima 
that were likely illegal. Kojima contributed a total of 
$500,000 at a time when he was known to have meager resources 
and was being pursued by creditors. His contributions were 
likely derived directly from Japanese businessmen, and 
constituted one of the largest direct foreign contributions to 
a national party. Even though, in 1992, there were strong 
indications that Kojima's contribution was being financed by 
foreign money, the RNC to date has declined to return the 
funds. Other examples discussed elsewhere in this report 
include funding from the National Policy Forum, an arm of the 
RNC, that originated in Hong Kong, Taiwan and China, and direct 
contributions to the RNC of funds from German and Taiwanese 
nationals. The Minority believes that the RNC should return the 
funds from Kojima and the National Policy Forum and that a 
thorough public investigation of its other contributions is 
overdue.67

Telephone solicitations from federal property

    The practice of soliciting political contributions by 
telephone, undertaken by current and former Presidents, Vice 
Presidents, and other elected politicians, is discussed in 
Chapter 26 of the Minority report.

                Organizing Fundraisers and Other Events

    The national parties also organized fundraisers and other 
events for their high dollar contributors and took steps to 
``service'' them by intervening on their behalf for meetings 
with elected officials and providing other ``political'' access 
benefits. These practices are outlined below and discussed in 
more detail in Chapter 28 of the Minority Report.

DNC events and contributor services

     The Committee fully explored the DNC's practice of 
organizing events in the White House complex, such as coffees 
with the President and Vice President; inviting a small number 
of individuals to attend those events that later generated 
controversy; and making requests on behalf of contributors to 
the executive branches.
    During the 1996 cycle, it was unclear who was responsible 
for screening individuals proposed by the DNC to be guests at 
events to be attended by the President or Vice President. 
Richard Sullivan testified that he understood that the Finance 
Department was supposed to raise potential problems regarding 
these guests with White House personnel.68 During 
the last election cycle, the DNC staff did raise such questions 
with White House staff. These questions, particularly those 
about foreign nationals who were proposed to be guests of 
contributors at DNC events, were then addressed on a case-by-
case basis, primarily by White House personnel consulting with 
the relevant staff of the National Security Council. The 
Committee received evidence that when asked, the NSC staff 
provided more than adequate input on the appropriateness of the 
individual attending an event with the President or Vice 
President and, with a few notable exceptions addressed in 
detail later in this Minority Report, the recommendations were 
followed by the DNC. Problems arose, however, when the DNC did 
not raise questions to White House officials. In those cases, 
the White House and the NSC were not consulted and the DNC 
alone made the determination about whether the individuals were 
appropriate guests at events to be attended by a 
principal.69
    Although the White House has established new procedures to 
screen White House guests, during the 1996 election cycle, a 
number of individuals who later generated controversy attended 
events in the White House with the President or Vice President. 
These individuals, and the circumstances involved in their 
invitations to these events, are discussed in Chapters 29-31 of 
this Minority Report. In general, the Committee discovered that 
the DNC failed to heed warning signs about certain DNC 
contributors. Despite warnings about guests invited by John 
Huang and Johnny Chung, as well as those about Roger Tamraz, 
the DNC continued to invite these and other individuals to 
events in the White House. DNC Chairman Donald Fowler also was 
found to have contacted Executive Branch officials to promote 
contributors. His contacts on behalf of contributors included 
contacting Harold Ickes on behalf of the Chippewa Indian tribe, 
and the Treasury Department on behalf of an issue generally 
affecting Indian tribes, the Commerce Department on behalf of 
an individual who wanted to go on a Commerce Department trade 
mission and an individual who was interested in information on 
Minority business programs.70
    When questioned by the Committee about these practices, 
Fowler testified that although DNC employees are forbidden to 
intercede with the Administration on behalf of contributors, he 
confirmed that he did so on a regular basis. Fowler asserted 
that he did not believe that the DNC policy applied to him in 
his position as National Chairman.71 Further, Fowler 
admitted that many administration and DNC officials admonished 
him not to pursue these activities, but his contacts did not 
cease.72 Fowler's actions may not have been illegal, 
but they were clearly inappropriate.
    The Committee also investigated allegations that the DNC 
rewarded contributors with spots on trade missions arranged by 
the Commerce Department. Despite numerous depositions and 
thousands of documents on this matter, these allegations were 
not substantiated by the evidence before the 
Committee.73
    The DNC has now adopted a system that requires several 
staff members located in different DNC divisions to conduct 
thorough database searches to both assess the appropriateness 
of accepting contributions from specific individuals or 
companies, and of inviting these individuals and their 
associates to attend fundraisers or other events sponsored by 
the DNC.74 Likewise, the NSC has adopted a 
structured and thorough process that requires certain 
individuals invited to attend events at the White House to be 
screened by knowledgeable NSC staff.75

RNC events and contributor services

    Despite repeated requests by the Minority, the Committee 
chose not to conduct depositions of RNC officials or require 
the RNC to conduct a meaningful document production regarding 
the Republican Party's organization of events and servicing of 
contributors. However, the Committee learned that during 
previous administrations, the RNC organized events inside the 
White House with contributors who raised issues of 
appropriateness, and made requests to Executive Branch 
officials on behalf of contributors. Those activities, which 
are similar to the DNC activities at issue, are discussed in 
detail in Chapter 28 of this Minority Report.76
    The evidence shows that since the 1970s, the RNC has 
routinely arranged for contributors to attend events held in 
the White House and to arrange events between contributors and 
Republican presidents, presidential candidates, and leaders in 
Congress. In addition, when inviting contributors to such 
events, the RNC has included several individuals who later 
generated controversy.77 This is not surprising 
considering that Judith Spangler, a White House career employee 
testified that during her 18 year tenure, administrations have 
handled invitations to RNC and DNC events at the White House in 
the same way as the current Administration handled similar 
invitations from 1993 to 1997.78
    Not surprisingly then, the Committee received evidence that 
several controversial RNC contributors attended private dinners 
or meetings inside the White House where President Bush was in 
attendance. These individuals include Michael Kojima, whose 
foreign contributions to the RNC afforded him the opportunity 
to sit next to President Bush at an RNC fundraiser in 1992; 
Yung Soo Yoo who attended a state dinner at the White House 
with President Bush in 1991, despite being a convicted felon 
with known ties to the Korean Central Intelligence Agency; and 
James Elliott, who attended private White House meetings in 
1992, despite having been convicted of bank fraud in 
1986.79
    The Committee learned that the RNC contacted Bush 
Administration officials on behalf of substantial contributors. 
For example, in the late 1980s and early 1990s, then RNC 
Chairman Lee Atwater and Team 100 Chairman Alec Courtelis 
forwarded the names of several substantial contributors to 
President Bush's Commerce Department Secretary Robert 
Mosbacher. Mosbacher, who had been President Bush's campaign 
manager in 1988, rewarded these contributors by appointing them 
to positions with such government entities as the President's 
Export Council.80
    Both parties use federal property to hold events for, 
provide political access for, and contact administration 
officials on behalf of, substantial contributors. These are 
well-known and common practices in Washington and can be 
accomplished without violating any law.

                          SPENDING PARTY FUNDS

    In addition to soliciting political contributions and 
organizing events and other perks for contributors, both 
national parties spent their funds with the intent of 
furthering their issues and their candidates. Such expenditures 
are legal, but federal law limits to $12 million the amount a 
party can spend ``in connection'' with its presidential 
candidates. That $12 million limitation applies only to those 
party funds that carry an ``electioneering message'' advocating 
the election or defeat of a clearly identified candidate. 
Therefore, when the DNC and RNC spent millions of dollars on 
``issue ads'' in the last election cycle, they argued that 
because the ads focused on issues, and did not advocate the 
election or defeat of a clearly identified candidate, they did 
not count toward the $12 million limit.81
    Presidential campaign committees that accept matching funds 
are also limited in the amount of money they can spend in 
connection with the nomination of their presidential 
candidates. In 1995, both the Clinton Campaign and the Dole for 
President campaign accepted matching funds and therefore were 
limited to spending $37 million in federal dollars in 
connection with the nomination of their candidate, and $74 
million in connection with the general election. Both campaigns 
claimed that the issue ads run by their parties did not 
advocate the election of their candidates and therefore fell 
outside the $37 million and $74 million limits.82
    The Committee heard allegations that the DNC, the RNC, the 
Clinton Campaign, and the Dole for President campaign all 
violated these federal restrictions on expenditures. The 
allegations were based on two assumptions: (1) that the DNC and 
RNC issue ads, in reality, carried electioneering messages 
advocating the election or defeat of a clearly identified 
candidate and that, therefore, the funds expended on these ads 
should have been counted toward the parties' $12 million limit 
and the presidential campaigns' $37 and $74 million limits, and 
(2) that because both the DNC and RNC coordinated with their 
candidates, all ``issue ads'' that had input from the 
candidates--regardless of the content of the ads--should be 
counted toward the party's $12 million limit and the 
presidential campaigns' $37 and $74 million 
limits.83
    These two assumptions formed much of the public debate on 
this issue, but are either not valid, or not clear, under 
current federal election law, as explained in detail in the 
legal analysis in Chapter 24. Parties are allowed to coordinate 
with their candidates, in particular their presidential 
candidates, and may work closely with their candidates to 
develop, finance and place issue ads.84 Coordination 
between a national party and its candidates does not turn 
``issue ads'' into ``candidate ads'' simply because 
coordination occurred.85
    Chapters 32 and 33 of this Minority Report set forth the 
DNC and RNC activities in coordinating with its candidates and 
broadcasting issue ads. Both parties made use of the existing 
legal loopholes for soft money and issue ads to bypass the 
spending limits that apply to presidential campaigns that 
accept federal funds. Although neither party broke the law, the 
RNC came closer to crossing the line between issue ads and 
candidate ads.

   DNC'S SPLITTING CONTRIBUTIONS BETWEEN HARD AND SOFT MONEY ACCOUNTS

    As discussed in greater detail in Chapter 26, the Committee 
investigated the legality and appropriateness of the telephone 
solicitations made by the Vice President. In the course of that 
investigation, the Committee discovered that some of the 
contributions solicited by the Vice President were diverted 
into hard money accounts by DNC officials. Specifically, 
according to FEC records, 20 individuals called by the Vice 
President made contributions to the DNC within 30 days of 
receiving a phone call from him.86 The DNC received 
$737,750 from these 20 individuals and deposited $605,750 into 
its non-federal soft money account. The DNC deposited $132,000 
donated by eight of the 20 individuals into its federal hard 
money account.87 The Minority found that the Vice 
President was not aware of these diversions, and that the DNC's 
practice of diverting soft money contributions into hard money 
accounts without the knowledge or permission of the original 
contributor was clearly inappropriate.

                               CONCLUSION

    After media attention and its own internal review, the DNC 
returned less than 200 contributions out of more than 3 million 
it had received during the 1996 election cycle. The 
contributions that were returned based on legality totaled just 
over $1 million, as did the contributions returned based on the 
DNC's inability to verify their legality or based on the DNC's 
determination that they were inappropriate. Thus, the 
contributions that generated the campaign finance fundraising 
scandal of 1996, and investigated by the Committee, totaled 
approximately $2.8 million and represented .006% of the 
contributions received by one national party. As of September 
1997, the total amount of contributions returned by the DNC for 
legal reasons amounted to .04% of the total raised by the DNC 
during the relevant 1994-1996 period.

                               footnotes

    \1\ Interviews and Depositions by Committee Staff as of 1/24/98.
    \2\ See http://www.senate.gov/gov--affairs/witness.htm, 
witnesses who have testified during the Special Investigation hearings.
    \3\ Letter from Chairman Thompson to Roy Romer, 7/23/97; Minority 
staff telephone conversation with Paul Palmer of Debevoise & Plimpton, 
counsel to the DNC.
    \4\ Interviews and Depositions by Committee Staff as of 1/24/98.
    \5\ See http://www.senate.gov/gov--affairs/witness.htm, 
witnesses who have testified during the Special Investigation hearings.
    \6\ Subpoena # 64 (DNC) and # 65 (RNC), http://www.senate.gov/
gov--affairs/subpoena.htm.
    \7\ Los Angeles Times, 9/21/96.
    \8\ Los Angeles Times, 9/21/96. The test for a contribution to a 
national political party from a domestic subsidiary of a foreign 
corporation is discussed in Chapter 1, and the Cheong Am America 
contribution is discussed in Chapter 4.
    \9\ Exhibit 62: DNC In-Depth Contribution Review, 2/28/97, DNC 
0134-145.
    \10\ DNC press release, ``DNC Refunds Contributions,'' 6/27/97; 
Joseph Sandler, 9/10/97 Hrg., p. 3.
    \11\ Donald L. Fowler deposition, 5/21/97, pp. 291-294.
    \12\ Harold Ickes, 10/7/97 Hrg., p. 84. The $558 million of 
spending by the Republican national committees included spending by the 
RNC, the NRSC, and the NRCC. The $336 million of spending by the 
Democratic national parties includes spending by the DNC, the DSCC, and 
the DCCC.
    \13\ The Washington Post, 1/19/98.
    \14\ Donald L. Fowler deposition, 5/21/97, p. 23.
    \15\ Staff interview with Bobby Watson, 4/25/97.
    \16\ B.J. Thornberry deposition, 5/20/97, pp. 6-7.
    \17\ B.J. Thornberry deposition, 5/20/97, pp. 16-17.
    \18\ Richard L. Sullivan deposition, 6/4/97, pp. 75.
    \19\ Laura Hartigan deposition, 9/16/97, p. 7.
    \20\ Terence McAuliffe deposition, 6/6/97, p. 8.
    \21\ Laura Hartigan deposition, 9/16/97, pp. 7-8; Terence McAuliffe 
deposition, 6/6/97, p. 9.
    \22\ Richard L. Sullivan deposition, 6/4/97, p. 32.
    \23\ Truman Arnold deposition, 5/16/97, p. 8.
    \24\ Marvin S. Rosen deposition, 5/19/97, pp. 12-13.
    \25\ Richard L. Sullivan deposition, 6/4/97, p. 62-66; Marvin S. 
Rosen deposition, 5/19/97, p. 27.
    \26\ Donald L. Fowler deposition, 5/21/97, pp. 45-46.
    \27\ Mercer was deposed by the Committee on 5/14/97, 5/27/97 and 6/
11/97.
    \28\ David Mercer deposition, 5/27/97, p. 7.
    \29\ Payne was deposed by the Committee on 5/7/97.
    \30\ Swiller was deposed by the Committee on 5/6/97 and 5/7/97.
    \31\ Ann Brazil deposition, 5/13/97.
    \32\ Jacob Aryeh Swiller deposition, 5/6/97, p. 16.
    \33\ Joseph E. Sandler deposition, 5/15/97, p. 16.
    \34\ Neil Paul Reiff deposition, 6/20/97, p. 11.
    \35\ Neil Paul Reiff deposition, 6/20/97, p. 6.
    \36\ Scott Reed deposition, 7/11/97, p. 8.
    \37\ See Chapters 10 and 33.
    \38\ See Chapter 33.
    \39\ See Chapter 28.
    \40\ Donald L. Fowler, 9/9/97 Hrg., pp. 118-122.
    \41\ Richard L. Sullivan deposition, 6/4/97, p. 77.
    \42\ Richard Sullivan deposition, 6/4/97, pp. 77-78.
    \43\ Washington Post, 1/27/97.
    \44\ See Joseph E. Sandler deposition, 5/15/97 and Neil Reiff 
deposition, 6/20/97.
    \45\ FEC press release, 3/19/97, ``FEC Reports Major Increase in 
Party Activity For 1995-96.
    \46\ Donald L. Fowler, 9/9/97 Hrg., p. 75; Richard L. Sullivan, 7/
9/97 Hrg., p. 33; Joseph Sandler, 9/10/97 Hrg., p. 6.
    \47\ See Joseph E. Sandler deposition, 8/21/97; Neil Paul Reiff 
deposition, 6/20/97, Exhibits 6-14: DNC 1484624--627; DNC 1484604--610; 
DNC 1484892--903; DNC 1485662--675; DNC 1680464--465; DNC 1679038--041; 
DNC 1679913--917; EOP 053158--161; Memorandum which includes rules 
governing contributions from foreign sources, 11/27/95. This memo 
underscores, among other things, that each potential contribution from 
a U.S. subsidiary of a foreign-owned company must be examined on a 
case-by-case basis by the general counsel's office; List of ``Questions 
to Ask Before Accepting Contributions from Foreign Nationals.''
    \48\ Donald L. Fowler, 9/9/97 Hrg., p. 75; Richard L. Sullivan, 7/
9/97 Hrg., p. 33.
    \49\ Richard L. Sullivan, 7/9/97 Hrg., p. 32. Sullivan testified 
that at the peak, there were as many as 100 fundraisers on staff.
    \50\ See Joseph Sandler deposition, 8/21/97, Exhibit 11: ``Policies 
and Procedures of the Democratic National Committee Regarding 
Compliance with Campaign Finance Laws,'' DNC 0132-0161.
    \51\ There was a dispute that arose during the testimony regarding 
the method of training for Huang. No one maintained that Huang was not 
trained--indeed, the testimony has been unequivocal that every DNC 
fundraiser was in fact trained. However, Sullivan testified that he 
believed that Huang was trained in a private one-on-one training 
session, while Sandler stated that he believed Huang was trained in a 
group training session, as was done for every other fundraiser. Richard 
L. Sullivan, 7/9/97 Hrg., p. 138; Joseph E. Sandler, 9/10/97 Hrg., p. 
12-13.
    Testimony from Sam Newman, head of the DNC's National Finance 
Council, supports Sandler's recollection of the training of Huang, 
having testified that he saw Huang at a group training session. Sam 
Newman deposition, 7/17/97, p. 142.
    Moreover, Sullivan's recollection of a private training session for 
Huang may stem from a meeting Sandler had with Huang after his first 
fundraiser in February 1996 at which Sandler reviewed contributions 
that Huang received from the event and reviewed with Huang the rules 
relating to contributions. Joseph E. Sandler deposition, 8/21/97, pp. 
16-21.
    \52\ Joseph E. Sandler deposition, 8/21/97, pp. 21-28.
    \53\ Joseph E. Sandler, 9/10/97 Hrg., p. 4.
    \54\ Joseph Sandler deposition, 8/21/97, Exhibit 9: Checklist used 
by DNC staff during 1995 and 1996. It outlines at least 40 separate 
steps that were required to ensure the proper screening and processing 
of contributions. The steps included examining the check and tracking 
form information for possible prohibited sources, including foreign 
nationals.
    \55\ Joseph E. Sandler, 9/10/97 Hrg., p. 8. Richard Sullivan and 
Donald Fowler confirmed that they believed that all DNC fundraisers 
were trained. Richard L. Sullivan, 7/9/97 Hrg., p. 138.
    \56\ Joseph E. Sandler, 9/7/97 Hrg., pp. 7-8; See also Rumi 
Matsuyama deposition, 6/10/97.
    \57\ Joseph E. Sandler, 9/10/97 Hrg., pp. 9-10. John Huang admitted 
to Joseph Sandler that he failed to ask the correct questions in 
connection with the Cheong Am contribution. Joseph E. Sandler, 9/10/97 
Hrg., p. 13; See also, Chapter 4.

    Joseph Sandler testified:

            Pauline Kanchanalak was known to be and is a 
        legal permanent resident with substantial business 
        interests, income, and assets. We had no reason to 
        question her contributions at the time they were 
        received. Neither Nexis nor any other database 
        research would have revealed anything untoward. She 
        deliberately deceived the DNC for at least 4 years. 
        Only in November 1996 did she suggest that the funds 
        she had contributed to the DNC really came from her 
        mother-in-law. No system we reasonably could have 
        maintained would have caught that deception. 
        Although her mother-in-law herself is apparently a 
        legal permanent resident and the contributions may 
        well have been lawful, we determined not to retain 
        them in view of the deception.

                * * * * * * *

    Joseph Sandler testified:

            The Wiriadinatas first contributed to the DNC in 
        November 1995, and Mrs. Wiriadinata at that time, I 
        believe, contributed $15,000. They lived in Virginia 
        when that first contribution was made. After John 
        Huang came to the DNC, he continued to solicit them. 
        Soraya Wiriadinata was known by Mr. Huang to be the 
        daughter of a billionaire. The Wiriadinatas' checks 
        continued to bear that same Virginia address. A 
        Nexis search would have revealed nothing. No one at 
        the DNC, except perhaps Mr. Huang, knew that the 
        Wiriadinatas had left the United States in December 
        1995. Even if we had known that and undertook the 
        same legal analysis we later undertook, it's very 
        likely we would have concluded--we would have 
        accepted their contributions since, when we later 
        did that analysis, we concluded that legal permanent 
        residents may lawfully contribute to non-Federal 
        accounts of political parties even if they are 
        temporarily absent from the U.S.

                * * * * * * *

    Joseph Sandler testified in hearings before this 
Committee on September 10, 1997:

                * * * * * * *

            Johnny Chung is a U.S. citizen. He was known to 
        have a blast fax business, which has been used, 
        apparently successfully, by California Governor Pete 
        Wilson, among others. Had we run a Nexis check of 
        Mr. Chung throughout the period he contributed up 
        until May 1996, it would have revealed nothing more 
        of great interest than the fact that Mr. Chung's 
        business had, as of 1994, government and political 
        clients in 39 States, that Mr. Chung had lived in 
        the United States for many years and had owned other 
        successful businesses, and that, like many U.S. 
        businessmen, he had visited China to promote his 
        business. Joseph E. Sandler, 9/10/97 Hrg., pp. 8-11.

    Joseph Sandler also explained in his deposition on May 
30, 1997:

            Johnny Chung's name may have come up, and it's 
        hard for me to distinguish it from conversations 
        with them and conversations that I had with people 
        at the DNC. But there was--there was a--I don't know 
        if I discussed this with them, but there were 
        conversations that I recall that took place about a, 
        for lack of a better word, a brochure or scrapbook 
        that Johnny Chung maintained with pictures of 
        himself with Governor Wilson and with Newt Gingrich 
        and Bob Dole and the President and various other--
        the Vice President and various other administration 
        officials, and that there was concern about the 
        appropriateness of his maintaining that book for 
        business purposes. Joseph Sandler deposition, 5/30/
        97, p. 46.

                * * * * * * *

    Joseph Sandler testified:

            In May 1996, when his contribution was made, 
        Yogesh Gandhi had an internationally renowned 
        foundation dedicated to promoting the principles of 
        Mahatma Gandhi, whom Yogesh Gandhi claimed was his 
        relative. A Nexis search as of May 1996 would have 
        revealed that the foundation's world peace and 
        humanitarian awards had been presented to former 
        Presidents Ronald Reagan and Jimmy Carter, Mother 
        Teresa, Mikhail Gorbachev, Shirley Temple Black, and 
        former Philippine President Corazon Aquino, among 
        others. A Lexis check would have revealed a small 
        claims court judgment and a routine State tax lien 
        for a few thousand dollars. In other words, there 
        was no real reason to question Gandhi's contribution 
        until a newspaper story in late October 1996, citing 
        the transcript of a small claims court proceeding in 
        California in which Mr. Gandhi stated that he had no 
        assets in the U.S. That proceeding itself didn't 
        take place until August 1996--3 months after Mr. 
        Gandhi's contribution was made. The text of this 
        transcript was unavailable through any database 
        research. Joseph E. Sandler, 9/10/97 Hrg., pp. 9-10.

    \58\ See Chapter 21.
    \59\ DNC Press Release, ``DNC Refunds Contributions'', 6/27/97.
    \60\ Huang was the DNC contact for many of the returned 
contributions; however, he was not necessarily the person who 
introduced these contributors to the DNC. At least half of the amount 
of the returned contributions is attributable to four sources: Pauline 
Kanchanalak who had been contributing to the DNC long before Huang 
started working there; Yogesh Gandhi who was solicited directly by 
Charlie Trie (whose involvement with the DNC predates Huang); Johnny 
Chung, with whom Huang has no connection; and Arief and Soraya 
Wiriadinata, whom Huang met due to Soraya's father's relationship the 
Riadys. While Huang may be credited as the DNC contact for these 
contributions based on his responsibility for Asian American 
fundraising and their attendance at events he organized, only the 
Wiriadinatas are contributors he introduced to the DNC. Huang's 
activities are examined in detail in Part 1 of this report. See Chapter 
4.
    \61\ DNC Press Release, ``DNC Refunds Contributions,'' 6/27/97; 
Joseph E. Sandler, 9/10/97 Hrg., pp. 1-17.
    \62\ Joseph Sandler deposition, 5/15/97, Exhibit 11: ``Policies and 
Procedures of the Democratic National Committee Regarding Compliance 
with Campaign Finance Laws,'' DNC 0132-0161.
    \63\ Column by Laws-Erik Nelson in San Diego Union-Tribune, 5/14/
92.
    \64\ See Chapter 6 on Michael Kojima, supra.
    \65\ Elizabeth Ekonomou deposition, 4/8/92, pp. 102-103. For more 
information, see Chapter 6 on Michael Kojima.
    \66\ Pleading filed by Baran on July 22, 1993, on behalf of the 
Republican Senate-House Dinner Committee. For more information, see 
Chapter 6 on Michael Kojima.
    \67\ See Chapters 3 and 6.
    \68\ Richard L. Sullivan deposition, 6/4/97, p. 106.
    \69\ Sullivan deposition, 6/4/97, pp. 105-108; Hancox deposition, 
6/9/97, pp. 58-59. Interestingly, as with the screening of 
contributions, the problems that arose may not have been rectified by 
the improved procedures that are now in place. While it is clear in 
retrospect that Roger Tamraz should not have been permitted to attend 
events at the White House, the fundraising staff did raise questions 
relating to Mr. Tamraz and disinvited him from a coffee as a result of 
the negative information that was received from the NSC. However, the 
DNC did continue to invite him to events largely based on Fowler's 
activities. Exhibit 1117: Memorandum to DNC Chairman Donald Fowler from 
DNC Finance Division staff member Alejandra Y. Castillo, 7/12/95, DNC 
3116351-53; Exhibit 1127: Memorandum to Vice President from Leon 
Fuerth, 9/13/95, EOP 45766-67; Roger Tamraz deposition, 5/13/97, pp. 
31-33.
    \70\ See generally Donald L. Fowler, 9/9/97 Hrg. and Donald L. 
Fowler deposition, 5/21/97.
    \71\ Donald L. Fowler, 9/9/97 Hrg., p. 214.
    \72\ The General Counsel to the Treasury Department contacted the 
DNC (Joe Sandler) and asked that he stop Fowler's practice of writing 
letters to Secretary Rubin. Donald L. Fowler deposition, 5/21/97, 
Exhibit 33. The Chief of Staff of the Department of Commerce told 
Fowler that his contact on behalf of the Hathaway Shirt Company was 
inappropriate. Joseph Sandler deposition, 5/15/97, Exhibit 38. Sosnik 
told Fowler that he should not contact Administration officials on 
behalf of donors. Douglas Sosnik deposition, 6/20/97, pp. 209-210.
    \73\ See Melissa Moss deposition, 6/11/97.
    \74\ Joseph Sandler deposition, 5/15/97, Exhibit 11: ``Policies and 
Procedures of the Democratic National Committee Regarding Compliance 
with Campaign Finance Laws,'' DNC 0132-0161.
    \75\ See Chapter 26.
    \76\ See Chapter 28.
    \77\ See Chapter 31.
    \78\ Judith Spangler deposition, 5/9/97, pp. 39-40.

            Q: In the Reagan-Bush White House, did the 
        Office of Political Affairs from time to time 
        provide lists of people to be invited?
            A: Yes.
            Q: Did it do so frequently?
            A: May I explain?
            Q: Yes.
            A: That for almost every event, different 
        offices within the White House submit names to the 
        social secretary; names of people that they would 
        like to have invited to a dinner or a luncheon or 
        some type of reception, or an event.
            Q: Has that been so in every White House in 
        which you have worked?
            A: Yes.
            Q: That for events, receptions, dinners, 
        lunches, events of every kind, the Office of 
        Political Affairs in those White Houses has 
        submitted lists of invitees?
            A: Yes.
            Q: So that the Clinton-Gore White House is not 
        the first White House which has done that?
            A: No.
            Q: In earlier administrations did it 
        occasionally occur that the Republican National 
        Committee would supply names of invitees?
            A: Yes, they did.
            Q: Was that so in the Reagan-Bush White House?
            A. Yes.
            Q: Was it so in the Bush-Quayle White House?
            A: Yes.

    \79\ See Chapter 31. See also, for example, Washington Post, 4/28/
92.
    \80\ See Chapter 28.
    \81\ See Chapters 24, 32 and 33.
    \82\ See Chapters 24, 32 and 33.
    \83\ See Chapters 24, 32 and 33.
    \84\ See Chapters 24, 32 and 33.
    \85\ See Chapters 24, 32 and 33.
    \86\ Summary of Vice President Al Gore's phone call records, 
Appendix.
    \87\ There is evidence which suggests that only 6 of the 8 
individuals who gave a donation that was subsequently deposited, in 
part, into the DNC's Federal hard money account made their contribution 
in response to a phone call from Vice President Gore. John Catsimatidis 
donated $10,000 to the DNC that was subsequently deposited in a Federal 
hard money account two days after records show him receiving a call 
from the Vice President. However, Thomas Galvin, of the New York Daily 
News, wrote on August 5, 1997, that ``Catsimatidis said he never spoke 
with Gore--`I talk with the No. 1 guy, not the No. 2 guy,' he said.'' 
Catsimatidis's statement that he never spoke to the Vice President 
combined with the fact that the phone records indicate that the Vice 
President only left a message for Catsimatidis strongly indicates that 
he did not make the contribution in response to the Vice President's 
phone call. N.Y. Daily News, 8/5/97.





PART 5  FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES 
        AND ADMINISTRATIONS

Chapter 26: Telephone Solicitations on Federal Property

    Documents produced to the Committee by both the DNC and the 
White House indicate that on a number of occasions the DNC 
requested the President to make telephone calls to solicit 
funds for the DNC. The Committee reviewed evidence, including 
testimony and documents relating to the circumstances and 
applicable law surrounding these calls. The Committee also 
investigated fundraising telephone calls made by the Vice 
President from his office in the White House. The Committee 
also investigated whether past Republican presidents, and other 
Republican officials, had made fundraising phone calls from 
government buildings.
    Based on the evidence before the Committee, we make the 
following findings with respect to these fundraising calls:

                                findings

    (1) Telephone calls made on federal property to solicit 
contributions from persons neither on federal property or 
employed by the federal government have been made by elected 
officials from both parties and prior administrations.
    (2) There was nothing illegal about the one solicitation 
telephone call known to the Committee made by the President.
    (3) There was nothing illegal about the solicitation 
telephone calls made by the Vice President.

                      presidential telephone calls

    At a news conference on March 7, 1997, President Clinton 
was asked whether he had ever made fundraising telephone calls 
while President, and he responded:

          I can't say, over all the hundreds and hundreds and 
        maybe thousands of phone calls I've made in the last 
        four years, that I never said to anybody while I was 
        talking to them, ``Well, we need your help,'' or ``I 
        hope you'll help us.'' . . .
          I simply can't say that I've never done it. But it's 
        not what I like to do, and it wasn't a practice of 
        mine. And once I remembered in particular I was asked 
        to do it and I just never got around to doing it.
          . . . I don't want to flat out say I never did 
        something that I might in fact have done just because I 
        don't remember it.1
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 26.

    Documents produced to this Committee by both the Democratic 
National Committee (``DNC'') and the White House indicate that 
on a number of occasions the DNC requested that the President 
make telephone calls to solicit funds for the DNC.2 
Many deposition witnesses testified that they were aware of the 
President being asked to make calls.3 The only 
witness who testified that he believed the President had, in 
fact, made at least some calls was Harold Ickes, White House 
deputy chief of staff.
    Ickes testified that he had asked the President to make 
fundraising telephone calls on several occasions after he 
checked with White House counsel who advised him that there was 
no legal barrier to making such calls.4 Ickes also 
testified that the President usually did not make fundraising 
calls, not because they were illegal or improper, but because 
he did not like making them. Ickes further testified that on 
one occasion, during 1994, the President made a few fundraising 
calls from the residential area of the White House.5
    FBI agents detailed to the Committee were asked to 
interview people whose names appeared on a series of call lists 
submitted by the DNC to the White House and other documents. 
6 They were able to confirm that out of 55 people 
interviewed, only three received calls from the President and 
only one, businessman Richard Jenrette, was asked by the 
President to make a contribution.
    Minority exhibit 2504M is a summary of the FBI's 
investigation (consisting of interviews) as of October 29, 1997 
concerning the President's telephone calls. The exhibit 
illustrates the fact that the FBI contacted 55 individuals 
listed in various call lists, and 52 individuals stated that 
they did not receive a call from the President.7 Two 
individuals stated that they did receive calls from the 
President thanking them for contributions they had already 
pledged to the DNC.8 Jenrette was the only 
individual interviewed who stated that he received a call in 
which the President solicited a campaign contribution.
    The Committee also examined the contributions made by the 
people whose names appeared on the telephone lists, including 
an October 18, 1994, memorandum to Harold Ickes from Terry 
McAuliffe, the then-Finance Chair of the DNC, that contained 
Ickes's handwriting.9 Six of the nine people circled 
by Ickes on the memo (including Jenrette) made a contribution 
to the DNC within one month of October 18, 1994.10 
Moreover, Ickes's handwritten notations of money amounts 
correlate with the amounts ultimately contributed by only two 
of the listed potential contributors.11 The FBI 
detailees interviewed five of these six contributors, and only 
Jenrette recalled receiving a solicitation from the 
President.12
    In the final analysis, the evidence submitted to this 
Committee suggests that, as Ickes testified, on one occasion in 
1994, the President made a few telephone calls to contributors, 
including Richard Jenrette. These calls were made on October 
18, 1994, and, most likely, were made to some of the people 
listed in Exhibit 1653. Ickes's handwritten notations on this 
exhibit may have been made while the President was making the 
calls. Other than this one series of calls, there is no 
evidence that the President made any fundraising calls from 
1993 through 1996.

Richard Jenrette

    As part of the Committee's investigation, Richard Jenrette 
was interviewed by FBI detailees. He stated that he did receive 
a fundraising call from the President.13 He was 
called as a hearing witness to testify about this 
call.14
    Jenrette is a retired Wall Street investment banker who has 
been contributing to political parties and committees since the 
1970s.15 According to Federal Election Commission 
(``FEC'') records, he contributed to the DNC either personally 
or through his companies between $30,000 and $60,000 each year 
from 1993 to 1996.16 He has also contributed to the 
RNC and to Republican candidates including Senator Alphonse 
D'Amato of New York, Senator Lauch Faircloth of North Carolina, 
and former Massachusetts Governor and Senatorial candidate 
William Weld.17 Since 1991, FEC records show that he 
contributed approximately $170,000 to the Democratic Party or 
committees and approximately $40,000 to the Republican 
Party.18 Jenrette first contributed to President 
Clinton in August 1992.19 Since that time he has 
spoken to the President approximately six or seven times at 
fundraisers and other events, usually about the 
economy.20
    An AT&T telephone bill for the White House indicates that 
the call to Jenrette was made on the President's private 
residence line on October 18, 1994.21 The White 
House also produced records to the Committee that establishes 
that, at the time of the call to Jenrette, the President was in 
the residential portion of the White House.22 
Jenrette testified that the call was placed by one of the 
President's secretaries. The White House secretary informed 
Jenrette's secretary that the President would call Jenrette 
back on his ``private'' line.23
    Following his conversation with the President, Jenrette 
sent a letter to the President confirming his contribution. In 
testimony before the Committee, Jenrette stated that the letter 
reflected his best recollection of the telephone call. The 
letter reads:

          In response to your request, I wanted you to know 
        that I am sending checks totaling $50,000 to the 
        Democratic National Committee. You said you wanted to 
        raise $2 million from 40 good friends--by my Wall 
        Street math, this comes out to $50,000 that you 
        requested from each. I hope this will be of assistance 
        to the DNC in its final pre-election push.24

Jenrette testified that his review of this letter had 
``triggered'' his recollection of the call,25 and 
said, ``If I hadn't had that letter, I would have had trouble 
recalling anything.''26
    Jenrette testified that he did not feel that the President 
had pressured him to make contributions that were out of the 
ordinary;27 indeed, he stated that the President did 
not exert any pressure.28 The telephone records show 
that the call lasted 11 minutes and 18 
seconds.29According to Jenrette, the fundraising part of the 
call was ``fairly minimal'' and was only a small part of the 
conversation.30
    The President did not specifically request that Jenrette's 
contribution be directed to either hard money or soft money 
accounts, according to Jenrette.31 Subsequently, one 
$10,000 check that made up Jenrette's $50,000 contribution was 
changed--with Jenrette's knowledge and approval--from a soft 
money contribution to a hard money contribution.32 A 
DNC employee spoke to Joe Hillis, Jenrette's assistant, to ask 
if $10,000 could be directed to a hard money account. Jenrette 
agreed, because he was still within his annual $25,000 
limit.33
    While some Members of the Committee told Jenrette that his 
candid testimony had cast doubt on the President's 
forthrightness,34 Jenrette's testimony is, in fact, 
entirely consistent with the President's statements about his 
fundraising calls. The President has never denied that he may 
have made fundraising calls. In addition, the President's 
private attorney has said that although the President doesn't 
remember calling Jenrette, he has ``no reason to question Mr. 
Jenrette's recollection.''35
    Jenrette also testified that he received a fundraising 
phone call from Vice President Gore, as discussed below.
    The Justice Department has long held the view that calls 
made from the White House residence are not covered by 18 
U.S.C. Sec. 607.36 As such, there was nothing 
illegal about President Clinton's call to Jenrette.
    The evidence submitted to the Committee indicates that the 
President made a series of calls to contributors on October 18, 
1994, in which he solicited at least one person for a 
contribution to the DNC. There was nothing illegal or improper 
about these calls: they were made from the residential portion 
of the White House; the President did not did pressure or 
coerce the recipient of the call to contribute; and the 
President did not request hard money.

                   vice presidential telephone calls

    In September 1995, DNC and White House officials, including 
the President and the Vice President, agreed that the DNC would 
undertake an extensive media project, paying for issue 
television advertisements to communicate the message of the 
administration and the party to the American 
people.37 The President and Vice President agreed to 
spend more time fundraising for the DNC in order to generate 
funds for the media project.38 Shortly thereafter, 
DNC officials began formulating fundraising plans to raise 
money for a ``media fund'' that included fundraising telephone 
calls by the President and the Vice President.39 
During the Committee's investigation, numerous witnesses were 
asked about the proposed fundraising calls. Several witnesses 
had knowledge of the Vice President making phone calls to 
assist with fundraising for the media fund. Vice President Gore 
personally acknowledged at a press conference in March 1997 
that he made such calls:

          I participated in meetings of our top campaign 
        advisors where it became clear that in order to achieve 
        the President's goals of getting a balanced budget, 
        passing these measures to protect Medicare and Medicaid 
        and education and the environment and so forth, that 
        the DNC needed a larger budget to put advertisements on 
        television. And I volunteered to raise--to help in the 
        effort to raise money for the Democratic National 
        Committee.40

    The people called by the Vice President were suggested by 
DNC fundraisers who prepared 190 call sheets identifying 161 
potential contributors. The Vice President used the DNC call 
sheets to make fundraising-related calls from his office of the 
White House to 61 individuals on 11 occasions between November 
28, 1995, and May 2, 1996:

------------------------------------------------------------------------
                                                              Number of 
                Date                     Time of call/s      individuals
                                                                called  
------------------------------------------------------------------------
Nov. 28, 1995 \41\.................  Unavailable...........            1
Dec. 1, 1995 \42\..................   3:00-3:45 p.m........            7
Dec. 11, 1995 \43\.................  9:00-9:45 a.m.........            8
Dec. 18, 1995 \44\.................  1:30-2:30 p.m.........            7
                                     5:00-6:00 p.m.........  ...........
Feb. 2, 1996 \45\..................  2:30-3:00 p.m.........            1
Feb. 5, 1996 \46\..................  12:30-1:00 p.m........           13
                                     3:00-4:00 p.m.........  ...........
                                     4:00-5:00 p.m.........  ...........
Feb. 6, 1996 \47\..................  11:30 am-12:00 p.m....            2
Feb. 9, 1996 \48\..................  2:50-3:40 p.m.........            2
March 13, 1996 \49\................  Unavailable...........            6
April 26, 1996 \50\................  12:30-1:00 p.m........           11
                                     3:30-4:00 p.m.........  ...........
May 2, 1996 \51\...................  11:45 a.m.-12:00 p.m..            3
------------------------------------------------------------------------

    These calls were initially placed by staff who were 
instructed to charge the calls to a Democratic Party credit 
card, not to the federal government.52 Once the 
calls were placed, the Vice President would speak to the 
potential contributor. According to Federal Election Commission 
records, 20 of the 61 individuals called by the Vice President 
contributed to the DNC within 30 days of receiving a phone call 
from him.53 These contributions totaled $757,500.
    The documentary and testimonial evidence submitted to the 
Committee demonstrates that during the period that the Vice 
President was making fundraising phone calls, the DNC was 
expressly focused on raising soft money for the media fund. 
Moreover, the documents submitted to the Vice President 
indicate that he knew that the DNC needed soft, not hard, 
money, for the media fund and the evidence supports the 
conclusion that he intended to raise soft money when he was 
making the calls. All telephone solicitations made by the Vice 
President were directed to private individuals who were not on 
federal property when they received the calls. According to the 
call sheets, each of the 61 individuals contacted by the Vice 
President was a private citizen and the telephone numbers on 
the call sheets were for their private offices or homes. 
Finally, documents submitted to the Committee indicate that the 
thank-you notes sent by the Vice President were prepared by the 
DNC, on DNC stationary, and were returned to the DNC for 
mailing after the Vice President signed them. These 
circumstances demonstrate that the Vice President's calls did 
not run afoul of the Pendleton Act's prohibitions on 
fundraising activity on federal property as explained in 
Chapter 24.

Purpose of the phone calls

    The Committee examined documents produced by the DNC and 
the White House to determine whether the Vice President knew--
or should have known--that any of the money he helped to raise 
was being deposited in DNC hard money accounts. Some Members of 
the Committee have contended that the Vice President knew or 
should have known, pointing to a February 21, 1996, memo from 
Bradley Marshall, the DNC's chief financial officer, that was 
attached to a February 22 memo from Harold Ickes to the 
President and Vice President. The Marshall memo briefly 
summarized the law in a short paragraph near the end of the 
lengthy document. He wrote:

          Federal money is the first $20,000 given by an 
        individual ($40,000 from a married couple). Any amount 
        over this $20,000 from an individual is considered Non-
        Federal Individual.54

    Marshall has confirmed that this paragraph was intended to 
be a brief summary of the law and not a description of DNC 
policies or practices relating to depositing contributions into 
the various DNC accounts. In an affidavit to the Committee, he 
stated:

          This paragraph was a shorthand description by me of 
        federal contribution limits to national political 
        parties and the possible sources of federal and non-
        federal funds. That's all it was, period. To put it 
        another way, I did not intend this memorandum to serve 
        as an explanation of or reference to the DNC's policies 
        andprocedures with regard to the deposit of portions of 
major donor contributions to the federal or ``hard money'' 
accounts.55

    The primary message of the Marshall memo and the other 
documents included in the February 22 package is to alert Ickes 
and others to the DNC's need for ``soft'' (nonfederal) money to 
pay for issue ads. The memo states that the average 1996 media 
buys were paid for with a mix of federal and non-federal 
dollars (34 percent federal, 31 percent non-federal corporate, 
and 35 percent non-federal individual), but that the DNC had 
$675,000 in federal money, $100,000 in non-federal corporate 
money, and $0 in non-federal individual money. Accordingly, the 
DNC could not make additional media buys because it had 
relatively little non-federal corporate money and no non-
federal individual money in its accounts.
    On February 22, 1996, Ickes sent Marshall's memo to the 
President and Vice President with a short cover memo restating 
Marshall's concern that the DNC did not have enough non-federal 
soft money in its accounts and warning that, ``until the 
amounts of non federal individual [money] is replenished, the 
DNC cannot buy media time.'' 56 Ickes did not 
mention Marshall's simplified definition of federal and non-
federal monies in his cover memorandum.
    When asked about his February 22 memorandum, Ickes 
testified to the Committee that the purpose of the memo ``was 
alerting the president and the Vice president and others that 
we were, in fact, short of soft money. . . .'' 57 
Joseph Sandler, general counsel of the DNC, also testified that 
he understood the primary purpose of the memo was to alert the 
President and Vice President of the urgent need for non-federal 
soft money. Sandler testified that it ``is a memo clearly from 
Harold [Ickes] addressed to the president and vice president 
that is saying until the amounts of non-Federal [money] is 
replenished we are out of business on the generic media 
program.'' 58
    It is noteworthy that the February 22 memo was written 
three months after the Vice President began making fundraising 
calls in late 1995. Given that the memo had not been written 
when the phone calls began, it could not possibly be probative 
of the Vice President's state of mind at the time he started 
making the calls. Uncontroverted evidence indicates that, at 
the time the calls started and throughout the period of time 
they were being made, the information given to the Vice 
President was that the DNC needed to raise soft money, not hard 
money, to fund its media efforts.
    Even prior to the first discussion of the Vice President 
making fundraising calls, DNC and White House documents 
relating to the DNC budget clearly indicate that the DNC needed 
soft money. An October 23, 1995 memorandum to Harold Ickes from 
Don Fowler, the National Chairman of the DNC, Marvin Rosen, the 
Finance Chair of the DNC, and Richard Sullivan, the Finance 
Director of the DNC regarding ``1995 DNC Sources of Funds for 
DNC Operating Budget and Media Fund'' states that the DNC 
intended to raise $3,600,000 non-federal soft money by the end 
of the year to meet its goal of raising $6,600,000 for the 
DNC's issue-oriented media campaign. This memorandum explains 
that the plan was to raise the soft money needed for the media 
campaign and to borrow the federal hard money needed to pay for 
the media efforts.59 Accordingly, the budget summary 
attached to the October 23 memorandum indicates that the DNC 
needed to raise non-federal money, not federal money, for the 
DNC Media Fund. The budget's bottom line states:

Total to be raised for media fund.......................      3,600,000 
Federal.................................................             (0)
Non-Federal.............................................  60 (3,600,000)
                                                                        

    A November 9, 1995 memorandum to DNC Chairman Christopher 
Dodd and DNC Chairman Fowler from Harold Ickes regarding the 
DNC 1995 Budget Analysis reiterates that the DNC media 
fundraising needs were exclusively for soft money.61 
This memo and the attached budgets show that all of the money 
to be raised for the DNC Media Fund was non-federal soft 
money.62
    A November 20, 1995, Ickes memo to the President and the 
Vice President again informed them that the DNC needed to raise 
$3,600,000 soft money for the media campaign.63
    It was in the context of the well-documented need to raise 
soft money that the Vice President was asked to make 
fundraising calls. To reach the ambitious fundraising goals set 
for the television advertising campaign, the DNC proposed in a 
November 20, 1995 memo to Ickes that the President and Vice 
President make fundraising phone calls.64 Fowler, 
Rosen, Scott Pastrick, the Treasurer of the DNC, and Sullivan 
recommended to Ickes that the President make 18 to 20 calls and 
that the Vice President make ten calls to raise a total of 
$1,200,000 ``to be applied to paid television.'' 65 
Sullivan confirmed in his June 1997 deposition that the reason. 
Fowler, Rosen, Pastrick and Sullivan made this recommendation 
was to ``fund these media buys.'' 66
    The week after the phone calls were proposed by the DNC 
leadership in November 1995, Ickes confirmed that all of the 
money to be raised for the DNC media fund was non-federal soft 
money. In a November 28, 1995, memorandum to the President and 
the Vice President, Ickes described his meeting with Marvin 
Rosen, Scott Pastrick, Richard Sullivan, Terry McAuliffe, Laura 
Hartigan (all DNC officials), and Karen Hancox and Doug Sosnik, 
White House Political Director, regarding DNC fundraising 
efforts for the media fund.67 Ickes reported in this 
memorandum that Rosen believed $1.2 million could be raised 
only if the President and Vice President made telephone calls 
to solicit funds for the DNC's media fund. Ickes attached 
budget projections that show all of the money to be raised for 
the media fund was non-federal soft money.68 
Similarly, a December 20, 1995 Ickes memo to the President and 
the Vice President again confirmed that all of the money to be 
raised for the DNC's media fund was nonfederal soft 
money.69
    Accordingly, the evidence clearly demonstrates that the DNC 
needed to raise non-federal soft money beginning in October 
1995. To meet this urgent need, the DNC asked the President and 
Vice President to make fundraising phone calls starting in 
November 1995. The DNC's need for non-federal soft money to 
fund its media campaign continued beyond February 1996, 
throughout the period of time in which the Vice President made 
fundraising-related phone calls.
    The last fundraising calls by the Vice President were made 
on May 2, 1996. Through this date, the evidence outlined above 
demonstrates that the DNC was in dire need of non-federal soft 
money to fund its media campaign. Later in the campaign, in 
approximately June 1996, after the Vice President stopped 
making fundraising calls, the DNC began to suffer a shortfall 
of federal (``hard'') money. In June 1996, Ickes informed the 
President and the Vice President that the DNC was beginning to 
have a federal hard money short fall. In a June 3, 1996 memo to 
the President and the Vice President from Ickes regarding ``DNC 
budget/fundraising,'' Ickes reported that a lack of federal 
hard money was ``beginning to present a very serious problem.'' 
70 On the second page of his memo, Ickes concluded, 
``Thus, the remainder of the fundraising efforts between now 
and the end of October will have to focus very much on 
increasing the amount of federal dollars raised . . . . Richard 
Sullivan is preparing a plan to specifically address this 
problem which will be ready on 3 June.'' 71 During 
this period, when hard money became the focus of the DNC's 
fundraising efforts, there is no evidence that the Vice 
President made any fundraising phone calls.

Raising soft money

    The fact that the Vice President was asked on one occasion 
to make 28 to 30 telephone calls with a goal of raising 
$1,200,000, or $40,000 to $43,000 per person--more than twice 
the federal hard money limit of $20,000 per person--further 
confirms that he believed that he was raising soft money. 
Testimony by Peter Knight, who was present when the Vice 
President made approximately 30 fundraising calls in 1995 and 
1996,72 supports this conclusion. Knight stated:

          Now, if you refer back to the memorandum that Harold 
        Ickes sent to the president and vice president, you can 
        see that what is being requested is funds to purchase 
        media. And the very last line of this says: ``Thus, 
        until amounts of non-federal individual is replenished, 
        the DNC cannot buy media time.'' What he's saying is 
        that what you need to do is make soft money calls to 
        individuals, i.e., big checks to individuals.
          So if you put this together with the media, it was 
        always understood, and I understood at the time, that 
        the media calls were soft money calls.
          Now, I don't think that there is any reason to 
        necessarily draw that distinction, because the phone 
        calls I assumed were legal. However, there would be two 
        reasons why they would be considered as soft money in 
        my mind and in helping him to think it through. One 
        was, as I had indicated, that when you write a check, 
        one check, and it is over $20,000, you are writing a 
        soft money check; that had always been my understanding 
        of whatwas occurring. And number two, although I did 
not ever see this memo, I was generally aware that what was needed was 
to raise money for media, and media was very heavily oriented toward 
non-Federal soft money. [emphasis added] 73

    The only recipient of a call by the Vice President who 
testified at a hearing of this Committee also confirmed that 
the Vice President asked for a soft money contribution in the 
call. Richard Jenrette, who received a call from Vice President 
Gore in February 1996, testified that the Vice President was 
soliciting non-federal soft money for the DNC's issue-oriented 
media campaign.74 Jenrette testified that his call 
with the Vice President was very brief and that he recalls the 
Vice President told him he wanted to ``get an early start in 
getting some of the issues out.'' 75
    Jenrette confirmed that the Vice President was raising non-
federal soft money for the DNC's media fund in a letter written 
to Donald Fowler on February 20, 1996.76 Jenrette 
wrote:

          Vice President Al Gore called me last week and asked 
        if I would help in assembling funds totaling $25,000 
        for the Democratic National Committee's media fund 
        campaign. I told him I would be glad to do what I could 
        and therefore I am enclosing the following checks which 
        have been made payable to the ``DNC Non-Federal 
        Account.'' 77

    Some of the call sheets themselves, supplied by the DNC to 
the Vice President, request the Vice President to raise money 
for the media fund.78
    The evidence, from Jenrette's recollection of his telephone 
conversation with the Vice President and his letter to Fowler, 
and also the call sheets, illustrates that the Vice President 
was soliciting non-federal soft money for the DNC's media fund. 
Jenrette's testimony to the Committee and his letter add to the 
great weight of evidence that supports the reasonable 
conclusion that the Vice President was asked to, and did, 
solicit non-federal soft money from November 1995 to May 1996 
to fund the DNC's issue-oriented advertising campaign.

DNC splitting contributions between hard and soft money accounts

    This Committee discovered that the DNC deposited a portion 
of the money contributed by some individuals who received a 
call from the Vice President into the DNC's federal hard money 
account. The evidence indicates that neither the Vice 
President, nor anyone else at the White House, knew about the 
deposits of a portion of some contributions into a hard money 
account.
    According to FEC records, 20 individuals called by the Vice 
President made contributions to the DNC within 30 days of 
receiving the phone call as noted above.79 The DNC 
received $737,750 from these 20 individuals and deposited 
$605,750 into its non-federal soft money account. The DNC 
deposited $132,000 donated by eight of the 20 individuals into 
its federal hard money account.80
    Joseph Sandler, general counsel of the DNC, confirmed that 
the Vice President was raising non-federal soft money but that 
the DNC, without the Vice President's knowledge, deposited some 
of the money donated by individuals called by the Vice 
President in its federal hard money account. Sandler stated to 
the Committee:

          [A]ll the materials that we have seen clearly 
        indicate that the vice president was soliciting non-
        Federal money. And that's true even though, because of 
        internal DNC procedures of which the vice president 
        would have no reason to be aware, the DNC--after the 
        fact and without the vice president's knowledge--
        deposited a small percentage of a portion of those 
        contributions that he had solicited into our Federal 
        account.81

    Peter Knight, who as noted above, was present when the Vice 
President made several of the calls, confirmed that neither he 
nor the Vice President was aware that the DNC might allocate 
some of the money he raised as federal hard money.

          Q: And to your knowledge, did the vice president have 
        any knowledge of the fact that the DNC was splitting 
        off money without consulting with the donors?
          A: No.82

    Furthermore, Knight explained that in his experience, 
whenever a donor makes a contribution to the DNC above $20,000 
it is ``automatically'' non-federal soft money.83 He 
explained that a contributor would have to affirmatively state 
that they were making a federal hard-money donation before the 
DNC could properly deposit the funds in its federal money 
account. Knight testified:

          In my experience, you have to have a conversation 
        with the contributor to make the switch. If you have a 
        check that says ``$100,000'' on it, written, that to me 
        is a soft money check by definition--in my definition--
        and that if you for some reason want to take $20,000, 
        then it was always my understanding that a conversation 
        had to be had with the contributor to redo it, which is 
        consistent with what [Bradley Marshall is] saying 
        here--``Federal money is the first $20,000 by an 
        individual''--well, the first $20,000 that one gives 
        is, if it's designated as Federal, as hard. But you 
        know, I--what was different about this account that I 
        learned later was that you would designate it without 
        any--consultation with the donor.84

    Sandler and Knight confirmed that the Vice President was 
not aware that the DNC deposited some of the non-federal soft 
money he raised into its federal hard money account. No 
evidence has been presented to the Committee that indicates 
that the Vice President knew or should have known that the DNC 
deposited some of the funds he solicited into its federal hard 
money accounts. Clearly, however, officials at the DNC should 
not have unilaterally split contributions between federal and 
non-federal accounts.

Applicability of the Pendleton Act

    As discussed in Chapter 24, the Pendleton Act forbids 
anyone to solicit a federal (hard-money) contribution on 
federal property. The law has been interpreted to mean that the 
person solicited must not be on federal property when the 
solicitation occurs. The Committee received no evidence--
whether documents, sworn testimony or reports of interviews by 
FBI detailees--that shows or suggests in any way that any 
individuals called by the Vice President were on federal 
property when they were solicited.
    In his March 3, 1997, press conference, the Vice President 
confirmed that he did not solicit a donation from anyone who 
was on federal property at the time of the solicitation. The 
Vice President stated that he ``never solicited a contribution 
from any federal employee, nor would I. Nor did I ever ask for 
a campaign contribution from anyone who was in a government 
office or on federal property.'' 85
    The great weight of the evidence reviewed by this 
Committee, clearly shows that the Vice President did not 
violate the Pendleton Act because he did not solicit federal 
hard money and the individuals he called were not on federal 
property when they received his calls.

The contributors

    A review was undertaken of the 190 call sheets prepared for 
the 169 individuals identified by the DNC for the Vice 
President to call. Each call sheet included: the person's name, 
title, company, the spouse's name, addresses, telephone 
numbers, contributor history, and the reason for the Vice 
President to call, and personal notes such as noting that one 
couple had their first child about 8 months ago.86
    The review found that most of the people on the call sheets 
had previously contributed money to the DNC or had indicated an 
intent to make a large contribution to the DNC. Of the 190 DNC 
call sheets prepared for the Vice President, 134 included 
contributor history information and 43 others indicated that 
the person intended to make a large contribution to the 
DNC.87 Only 13 call sheets did not include any 
contributor history or any information regarding the 
individual's intent to contribute.88 This 
information indicates that 93 percent of the persons contacted 
had contributed to the DNC in the past or had expressed an 
intent to contribute to the DNC in the future.
    These figures indicate that the Vice President was not 
being asked to ``strong-arm'' individuals who were not inclined 
to contribute to the DNC. And, in fact, the Committee found no 
evidence that anyone called by the Vice President felt 
pressured to contribute.

Payment for the phone calls

    Vice President Gore was aware that any fundraising calls he 
made from his office at the White House should be paid for by 
the DNC. The Vice President and another person, usually Peter 
Knight, sat together in a separate office from the staff person 
who placed the calls to individuals listed on the DNC call 
sheets. Heather Marabeti, executive assistant to the Vice 
President, explained that a staff person who sat in the outer 
office of the Vice President's office at the White House, 
placed the calls.89 David Strauss, the Vice 
President's Deputy Chief of Staff, was present on one occasion 
when the Vice President made fundraising-related calls in late 
1995, and he confirmed that this was how the calls were 
made.90 The staff people who placed the fundraising-
related calls were instructed to use a credit card to pay for 
them. Marabeti, one of the staff people who placed calls for 
the Vice President testified, ``We were instructed to use the 
credit card.'' 91 She explained that it was the 
staff's ``intent'' to use the credit card each time they placed 
a fundraising-related phone call for the Vice 
President.92
    In 1995, the Vice President discussed with his staff the 
use of the credit card to pay for the cost of the fundraising 
calls. Marabeti testified, ``I remember that he [the Vice 
President] asked me how the phone calls were being placed, 
whether or not a credit card was being used, and I told him 
that a credit card was being used.'' 93
    In his March 3, 1997, press conference, the Vice President 
confirmed that he knew the staff was supposed to use a credit 
card to pay for the costs associated with the calls. The Vice 
President said, ``On a few occasions I made some telephone 
calls from my office in the White House, using a DNC credit 
card.'' 94 Shortly after the White House discovered 
that some of the calls were not paid for with the credit card, 
the DNC reimbursed the U.S. Treasury $24.20 for the cost of 
those calls.

Payment for the thank-you notes

    The White House and the DNC produced copies of thank-you 
letters signed by the Vice President and sent to individuals 
who had made commitments to donate to the DNC during telephone 
conversations with the Vice President from late 1995 to May 
1996.95 All of the thank-you notes were printed on 
DNC letterhead with the disclaimer ``Paid for by the Democratic 
National Committee'' prominently displayed on the bottom of the 
page. David Strauss, the Vice President's Deputy Chief of 
Staff, testified that the thank-you notes were prepared at the 
DNC, by DNC employees, on stationery paid for by the 
DNC.96
    Heather Marabeti confirmed that the DNC stationery was not 
used at the Vice President's White House office. She testified 
that DNC stationery was not even kept in the official 
office.97 She testified that the notes were sent to 
Gore for his signature and then returned to the DNC for 
mailing.98

No other costs to the government

    The Vice President, his staff, and the DNC attempted to 
ensure that the entire cost of the calls made by the Vice 
President for the DNC were paid for by the DNC. The staff 
person who placed the phone calls for the Vice President was 
instructed to use a credit card to pay for the calls. The 
thank-you letters signed by the Vice President were prepared on 
DNC stationery, at the DNC and mailed by the DNC. Because of 
these careful efforts, the U.S. Government did not incur any 
additional costs resulting from the fundraising-related calls 
made by the Vice President in 1995 and 1996.

                         Republican Phone Calls

    President Clinton was not the first president asked by his 
party to make fundraising calls. The evidence before the 
Committee establishes that, from 1982-88, President Reagan was 
asked to make fundraising calls to and from federal property. 
Unlike the calls made by Vice President Gore, many of these 
calls were designed specifically to raise hard money.
           May 17, 1988: President Reagan was asked to 
        make a call from the White House to House Minority 
        Leader Bob Michel (R-Ill.) which was to be broadcast to 
        over 275 attendees at an event designed to raise hard 
        money for Michel's campaign.99
           September 28, 1986: President Reagan was 
        asked to make a call from Camp David to Rep. John 
        Rowland (R-Conn.) which was to be broadcast to 600 
        attendees at an event designed to raise hard money for 
        Rowland's campaign.100
           September 7, 1982: President Reagan was 
        asked to call a Republican Eagles event, which was held 
        on federal property. Reagan was to tell the Eagles, 
        ``Let me say to you Eagles how important your 
        contributions are to the Republican Party. . . . We are 
        so appreciative. You are pillars of the party.'' 
        101
           March 2, 1981: President Reagan was 
        requested to call Amway President Richard DeVos from 
        the White House and to request DeVos to recruit 335 new 
        Eagles members, which would raise $3,350,000 for the 
        RNC.102
    Congressman Newt Gingrich requested that President Reagan 
make at least one of these calls. A memorandum in connection 
with the Rowland fundraiser stated: ``At the request of 
Congressman Newt Gingrich and the NRCC, it was agreed to try, 
as an `experiment,' a presidential phone call to fundraisers 
for selected Congressmen and challengers in their districts.'' 
These calls were designed to raise hard money.103
    President Reagan's White House Counsel's office approved 
his fundraising calls. In a May 1988 memorandum on the legality 
of President Reagan's call to the Michel fundraiser, which was 
designed to raise hard money, Associate White House Counsel 
Robert Kruger wrote:

          Counsel's office has reviewed the attached scheduling 
        proposal and has no objection to it from a legal 
        perspective. Incremental costs associated with the 
        call, if any, should be billed to the appropriate RNC 
        account.104

    The Minority attempted to review records related to 
President Bush to determine if he, too, made fundraising calls 
while President, but Chairman Thompson did not concur in the 
request to the Bush Library, and the Library did not permit a 
search of President Bush's records.
    The evidence presented to the Committee indicating that 
most of the people on Vice President Gore's call sheets had 
previously contributed money to the DNC or had indicated an 
intent to make a large contribution to the DNC contrasts with 
evidence uncovered by this Committee relating to phone calls 
Speaker Newt Gingrich was asked to make to persons who were not 
inclined to contribute to the RNC. The RNC produced documents 
indicating that Speaker Gingrich was asked in 1996 to solicit 
contributions from several corporations whose executives had 
expressly indicated that they did not want to contribute 
corporate funds to the host committee for the Republican 
National Convention.
    In a May 23, 1996, memorandum from Fred Bush, finance 
chairman for the RNC Convention's host committee, to Gingrich 
aide Joseph Gaylord, regarding ``Phone calls for Speaker 
Gingrich,'' Bush requested that Gingrich call the chief 
executive officers of six companies and solicit $250,000 to 
help pay for the convention.105 The comments 
included on the call sheet notes that three of the six 
companies--Boeing, Coca Cola and Hewlett Packard--had recently 
expressed an intent not to donate money to help pay for the 
convention.106 The RNC documents strongly suggest 
that the Republican Party intended to use the Speaker to 
convince these corporations to make contributions that they 
otherwise would not make.

                               Conclusion

    The practice of politicians making fundraising calls from 
federal property is by no means rare. For example, Senator Phil 
Gramm said of fundraising calls: ``I do it wherever I am. . . . 
I can use a credit card. . . . As long as I pay for the calls, 
I can make calls wherever I want to call.'' 107 Dick 
Morris, who has been a political consultant for both 
Republicans and Democrats, acknowledged that this practice is 
widespread: ``Would you like me to embarrass 15 of my former 
clients by telling you when I sat in their office(s) and they 
made fund-raising phone calls?'' 108

                               footnotes

    \1\ New York Times, 7/24/97.
    \2\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and 
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285; Memorandum from 
Harold Ickes to the President and the Vice President, 11/28/95, SCGA 
00342-43.
    \3\ Richard Sullivan deposition, 6/4/97, pp. 181-97; Marvin Rosen 
deposition, 5/19/97, pp. 107-29; Donald Fowler deposition, 5/21/97, pp. 
289-304.
    \4\ Harold Ickes, 10/8/97 Hrg. pp. 210, 215-17.
    \5\ Harold Ickes, 10/8/97 Hrg. pp. 124-25, 208-19.
    \6\ These documents were Exhibit 1653: Memorandum from Harold Ickes 
to Terence McAuliffe and Laura Hartigan, 10/18/94, EOP 036557-64; 
Memorandum from Harold Ickes to Terence McAuliffe and Laura Hartigan, 
10/21/94, EOP 035494-97; list of names, EOP 036569-74; and DNC Finance 
Call Sheets.
    \7\ Exhibit 2504M: Summary of Senate FBI Agent's Investigation into 
the President's Phone Calls; see Minority counsel, 10/29/97 Hrg. Pp. 
22-23, 35-36.
    \8\ Exhibit 2504M: Summary of Senate FBI Agent's Investigation into 
the President's Phone Calls. Because solicitation means asking for 
something, such a call is outside the plain meaning of ``soliciting] or 
receiving] any contribution within the meaning of . . . the Federal 
Election Campaign Act'' and therefore not prohibited by section 607. In 
re William Jefferson Clinton, Notification of the Court Pursuant to 28 
U.S.C. Sec. 592(b) of Results of Preliminary Investigation, at 9-10 
(D.C. Cir. Dec. 2, 1997) (citing Wisconsin Dep't of Revenue v. William 
Wrigley, Jr., Co., 505 U.S. 214, 223 (1992)).
    \9\ Exhibit 1653: Memorandum from Terence McAuliffe and Laura 
Hartigan to Harold Ickes, 10/18/94, EOP 036557-64.
    \10\ Exhibit 1656: Statement of Jerome Campane, 10/28/97. Exhibit 
1656 was prepared by Committee Investigator Jerry Campane as an 
analysis of certain interviews of potential contributors. This exhibit 
was not provided to the Minority until 9:15 a.m. on the morning of the 
hearing. Minority counsel, 10/29/97 Hrg. P. 35.
    \11\ Exhibit 1656: Statement of Jerome Campane, 10/28/97.
    \12\ Exhibit 1656: Statement of Jerome Campane, 10/28/97. Some 
Members of the Committee have questioned the credibility of the other 
five contributors but without affording them the opportunity to testify 
at a hearing. It is possible that these people received phone calls but 
do not recall the calls or that a call was placed but the contributor 
was not reached. It is also possible that Mr. Ickes's handwritten 
notations came from a source other than the President calling the 
contributor. For example, Mr. Ickes may have been told some of these 
contributors had already contributed or pledged a contribution and thus 
there was no reason to call.
    \13\ Exhibit 1652: FBI Interview of Richard Jenrette.
    \14\ Jenrette was not deposed by the Committee. Early in the week 
of October 20, the Majority Chief Counsel spoke to Jenrette. In 
contravention of the Committee's protocols, the Minority Staff was not 
notified in advance of the Majority Chief Counsel's intention to speak 
with a witness. Jenrette then retained an attorney, and the attorney 
left a message for the Majority Chief Counsel indicating that he had 
been retained. On October 29, the Majority Chief Counsel called 
Jenrette directly and they had a half hour conversation about the 
issues to which he would testify. The Majority Chief Counsel also met 
with Jenrette later that day. Again, Minority Staff was neither 
informed in advance of these discussions nor allowed to participate. 
Staff interview with Jenrette's attorney, as noted in memorandum of 
Minority Counsel.
    \15\ Richard Jenrette, 10/29/97 Hrg. Pp. 16-17.
    \16\ Richard Jenrette, 10/29/97 Hrg. P. 17; FEC records.
    \17\ Jenrette personally or through one of his companies 
contributed $1,000 to D'Amato in 1995, $1,000 to Faircloth in 1993, 
$1,000 to Faircloth in 1995, and $1,000 to Weld in 1996. FEC records.
    \18\ Richard Jenrette, 10/29/97 Hrg. Pp. 17-18; FEC records.
    \19\ Richard Jenrette, 10/29/97 Hrg. P. 18.
    \20\ Richard Jenrette, 10/29/97 Hrg. Pp. 18, 19.
    \21\ Exhibit 2500M: AT&T billing records for the White House for 
10/18/94; see Minority counsel, 10/29/97 Hrg. P. 23. Exhibit 2500M was 
redacted to remove the President's private phone number, due to obvious 
privacy concerns. Senator Glenn, 10/29/97 Hrg. P. 60.
    \22\ Exhibit 2500M: AT&T billing records for the White House for 
10/18/94.
    \23\ Richard Jenrette, 10/29/97 Hrg. Pp. 3-4, 23; Exhibit 1652: FBI 
Interview of Richard Jenrette.
    \24\ Exhibit 1652: Letter from Richard Jenrette to President 
Clinton, 10/24/94; Richard Jenrette, 10/29/97 Hrg. P. 3. The Majority 
questioned why the White House did not produce this document to the 
Committee. Richard Jenrette, 10/29/97 Hrg. Pp. 4-5. They introduced 
phone records produced by the White House on October 27 reflecting the 
call to Jenrette (and others), Exhibit 1657, and pointed to this as an 
example of the White House's late production of records. Richard 
Jenrette, 10/29/97 Hrg. P. 5. The White House did, however, produce in 
June 1997 a document identifying Jenrette as a potential contributor. 
Exhibit 1653: Memorandum from Ickes to McAuliffe and Hartigan, 10/18/
94, EOP 036557-64; see Richard Jenrette, 10/29/97 Hrg. Pp. 19-20, 38. 
The White House has not been able to locate a copy of Exhibit 1652 in 
the White House's files, Newsweek, 10/27/97, and does not believe that 
one exists.
    \25\ Richard Jenrette, 10/29/97 Hrg. P. 68.
    \26\ Richard Jenrette, 10/29/97 Hrg. P. 3.
    \27\ Richard Jenrette, 10/29/97 Hrg. P. 24.
    \28\ Richard Jenrette, 10/29/97 Hrg. P. 24; see also Richard 
Jenrette, 10/29/97 Hrg. P. 30. Jenrette was asked:

            Senator Torricelli. . . . . Mr. Jenrette, you do 
        not appear to me, even though we do not know each 
        other, to be a man who is easily intimidated. If the 
        President of the United States had called and asked 
        you for a contribution, and you did not believe he 
        was a good President, you did not want to support 
        his campaign, you did not otherwise want to be 
        involved, would you have hesitated to tell him, No, 
        I will not contribute to you?
            Mr. Jenrette. I'd say sorry.
            Senator Torricelli. You would not have 
        contributed to him?
            Mr. Jenrette. No.
            Senator Torricelli. In any way based on the 
        business of your firm, activities of the Federal 
        Government, did you find something inappropriate 
        about the timing, the conduct of the phone call, in 
        any way that would have compromised the integrity of 
        the firm or yourself or the President in any ongoing 
        business that was being conducted at that time?
            Mr. Jenrette. No.
            Senator Torricelli. All right. So there was 
        nothing intimidating and there was nothing 
        inappropriate.

    Richard Jenrette, 10/29/97 Hrg. Pp. 55-56.
    \29\ Exhibit 2500M: AT&T billing records for the White House for 
10/18/94.
    \30\ Richard Jenrette, 10/29/97 Hrg. Pp. 42, 43.
    \31\ Richard Jenrette, 10/29/97 Hrg. Pp. 24-25, 57-58.
    \32\ Exhibit 1655: Contribution checks, p. 3. The $50,000 was 
contributed in five separate checks. Exhibit 1655: Contribution checks.
    \33\ Richard Jenrette, 10/29/97 Hrg. P. 51.
    \34\ Senator Nickles, 10/29/97 Hrg. Pp. 47-48; Chairman Thompson, 
10/29/97 Hrg. Pp. 63-65; Senator Smith, 10/29/97 Hrg. P. 66.
    \35\ Newsweek, 10/27/97.
    \36\ See Memorandum Opinion for the Assistant Attorney General, 
Criminal Division, from Larry A. Hammond, Acting Assistant Attorney 
General, Office of Legal Counsel, 3 Op. O.L.C. 31 (1979) (hereinafter 
``OLC Opinion'') (the discrete residential portion of the White House 
is not a ``room or building occupied in the discharge of official 
duties'' within the meaning of section 607); see also Letter from Janet 
Reno, Attorney General of the United States, to Henry J. Hyde, 
Chairman, House Judiciary Committee, in accordance with 28 U.S.C. 
Sec. 592(g)(2) at 5 (Oct. 3, 1997) (``Section 607 does not apply to 
events occurring within the residential areas of the White House.'').
    \37\ Donald Fowler deposition, 5/21/97, pp. 292-95.
    \38\ Donald Fowler deposition, 5/21/97, p. 295.
    \39\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and 
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285.
    \40\ White House Office of the Press Secretary, press briefing by 
the Vice President, 3/3/97, p. 4.
    \41\ Notations on call sheets indicate that a message was left for 
two individuals on November 28, 1995. DNC Finance Call Sheet, EOP 
49257; DNC Finance Call Sheet, EOP 49258.
    \42\ Vice President's schedule, 12/1/95, EOP 49147-49.
    \43\ Vice President's schedule, 12/11/95, EOP 57207.
    \44\ Vice President's schedule, 12/18/95, EOP 57209-11.
    \45\ Vice President's schedule, 2/2/96, EOP 57212-14.
    \46\ Vice President's schedule, 2/5/96, EOP 57216-18.
    \47\ Vice President's schedule, 2/6/96, EOP 57219-21.
    \48\ Vice President's schedule, 2/9/96, EOP 49143-45.
    \49\ A notation on a call sheet indicates that a message was left 
for Ms. Carol Pensky on March 13, 1996. DNC Finance Call Sheet, EOP 
063253. Phone bill records confirm that a 30 second call was placed to 
Ms. Pensky's phone number on March 13, 1996. Phone records, EOP 063275-
82.
    \50\ Vice President's schedule, 4/26/96, EOP 56527-29.
    \51\ Vice President's schedule, 5/2/96, EOP 57227-28.
    \52\ Despite these instructions to the staff, some of the calls 
were not made on a credit card; however, the DNC reimbursed the U.S. 
Treasury for the cost of these calls. Payment Authorization from Moe 
Vela, Finance Manager, Office of the Vice President, to the DNC, 6/27/
97, EOP 063283-84.
    \53\ Summary of Vice President Al Gore's phone call records, 
Appendix.
    \54\ Exhibit 1065: Memorandum from Harold Ickes to the President 
and the Vice President, 2/22/96, attaching Memorandum from Bradley 
Marshall to Harold Ickes, 2/21/96.
    \55\ Exhibit 2381M: Affidavit of Bradley K. Marshall, 10/6/97.
    \56\ Exhibit 1065: Memorandum from Harold Ickes to the President 
and the Vice President, 2/22/96, attaching Memorandum from Bradley 
Marshall to Harold Ickes, 2/21/96.
    \57\ Harold Ickes, 10/8/97 Hrg. P. 122.
    \58\ Joseph Sandler, 9/10/97 Hrg. P. 142.
    \59\ Memorandum from Don Fowler, Marvin Rosen, and Richard Sullivan 
to Harold Ickes, 10/23/95, CGRO 0361.
    \60\ Budget summary, CGRO 0362-64.
    \61\ Memorandum from Harold Ickes to Chairman Dodd and Chairman 
Fowler, 11/9/95, CGRO 0310-13.
    \62\Memorandum from Harold Ickes to Chairman Dodd and Chairman 
Fowler, 11/9/95, CGRO 0310-13.
    \63\ Memorandum from Harold Ickes to the President and the Vice 
President, 11/20/95, with attachments, CGRO 0191-96.
    \64\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and 
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285.
    \65\ Memorandum from Don Fowler, Marvin Rosen, Scott Pastrick, and 
Richard Sullivan to Harold Ickes, 11/20/95, EOP 027285.
    \66\ Richard L. Sullivan deposition, 6/4/97, p. 180.
    \67\ Memorandum from Harold Ickes to the President and the Vice 
President, 11/28/95, SCGA 00342-43.
    \68\ DNC 1995 Budget Analysis, 11/21/95, p. 3, SCGA 00344-46.
    \69\ Memorandum to the President, Vice President, et al., from 
Harold Ickes, 12/20/95, with attachment, EOP 027959-65.
    \70\ Exhibit 1066: Memorandum from Harold Ickes to the President 
and the Vice President, et al., 6/3/96, with attachment, SCGA 00846-53 
(emphasis added).
    \71\ Exhibit 1066: Memorandum from Harold Ickes to the President 
and the Vice President, et al., 6/3/96, with attachment, SCGA 00846-53 
(emphasis added).
    \72\ Peter Sage Knight deposition, 9/17/97, p. 208.
    \73\ Peter Sage Knight deposition, 9/17/97, pp. 214-15 (emphasis 
added).
    \74\ Richard Jenrette, 10/29/97 Hrg. pp. 12, 28, 71.
    \75\ Richard Jenrette, 10/29/97 Hrg. pp. 21, 71.
    \76\ Exhibit 1652: Letter from Jenrette to Fowler, p. 2, 2/20/96.
    \77\ Exhibit 1652: Letter from Jenrette to Fowler, p. 2, 2/20/96 
(emphasis added).
    \78\ DNC Finance Call Sheets, e.g., EOP 049237-91, EOP 063413-17.
    \79\ Summary of Vice President Al Gore's phone call records, 
Appendix.
    \80\ There is evidence which suggests that only 6 of the 8 
individuals who gave a donation that was subsequently deposited, in 
part, into the DNC's Federal hard money account made their contribution 
in response to a phone call from Vice President Gore.
    John Catsimatidis donated $10,000 to the DNC that was subsequently 
deposited in a Federal hard money account two days after records show 
him receiving a call from the Vice President. However, Thomas Galvin, 
of the New York Daily News, wrote on August 5, 1997 that ``Catsimatidis 
said he never spoke with Gore--`I talk with the No. 1 guy, not the No. 
2 guy,' he said.'' Catsimatidis's statement that he never spoke to the 
Vice President combined with the fact that the phone records indicate 
that the Vice President only left a message for Catsimatidis strongly 
indicates that he did not make the contribution in response to the Vice 
President's phone call. N.Y. Daily News, 8/5/97.
    Michael Adler received a call from Vice President Gore on December 
11, 1995, and contributed $5000 four days later. However, the 
contribution was attributed to a December 15, 1995, fundraising event 
for Jewish contributors.
    \81\ Joseph Sandler, 9/10/97 Hrg. Pp. 15-16. The DNC has 
acknowledged that ``splitting'' contributions in this way without the 
contributor's permission was not appropriate. Joseph Sandler, 9/10/97 
Hrg. P. 87.
    \82\ Peter Sage Knight deposition, 9/17/97, p. 206.
    \83\ Peter Sage Knight deposition, 9/17/97, p. 205.
    \84\ Peter Sage Knight deposition, 9/17/97, pp. 204-05.
    \85\ White House Office of the Press Secretary, Press Briefing by 
the Vice President, 3/3/97, p. 2.
    \86\ DNC Finance Call Sheet, 2/29/96, DNC 3113672.
    \87\ Minority Summary Appendix.
    \88\ Minority Summary Appendix.
    \89\ Heather Marabeti deposition, 9/3/97, p. 15.
    \90\ David Strauss deposition, 6/30/97, pp. 190-94, 197.
    \91\ Heather Marabeti deposition, 9/3/97, p. 16.
    \92\ Heather Marabeti deposition, 9/3/97, p. 17.
    \93\ Heather Marabeti deposition, 9/3/97, p. 17.
    \94\ White House Office of the Press Secretary, Press Briefing by 
the Vice President, 3/3/97, p.1.
    \95\ EOP 49171; EOP 53178-82; EOP 53199-211; DNC 3063789-91; DNC 
3063793-800.
    \96\ David Strauss deposition, 8/14/97, pp. 233-34.
    \97\ Heather Marabeti deposition, 9/3/97, pp. 91-92.
    \98\ Heather Marabeti deposition, 9/3/97, p. 59.
    \99\ Exhibit 2321M: Memorandum from Alan Kranowitz to Rep. Bob 
Michel, 5/4/88.
    \100\ Memorandum from Mitchell Daniels to Frederick Ryan, Director 
Presidential Appointments and Scheduling, 9/12/86.
    \101\ Memorandum from A. Morgan Mason to Michael K. Deaver, 9/16/
82; Presidential Talking Points: Phone Call to Eagles Meeting September 
17, 1982, 10:45 A.M.
    \102\ Memorandum from Gregory Newell to President Reagan, 3/2/81.
    \103\ Memorandum from Mitchell Daniels to Frederick Ryan, 9/12/86.
    \104\ Memorandum from Robert Kruger to Rhett Dawson, 5/6/88.
    \105\ Memorandum from Fred Bush to Joe Gaylord, 5/23/96, R047170-
72.
    \106\ Memorandum from Fred Bush to Joe Gaylord, 5/23/96, R047170-
72.
    \107\ AP, 9/8/97.
    \108\ Sacramento Bee, 10/5/97.





PART 5  FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES 
        AND ADMINISTRATIONS

Chapter 27: White House Coffees and Overnights

    Many political supporters of President Clinton have 
attended so-called ``coffees'' at the White House arranged by 
the Democratic National Committee. Others have stayed at the 
White House as overnight guests, often in the historic Lincoln 
Bedroom. The coffees and ``overnights'' have prompted 
widespread criticism of the DNC and the administration. To the 
extent that issues have arisen over whether persons with 
questionable backgrounds gained inappropriate access to the 
White House by attending coffees, those topics are addressed in 
Chapters 29, 30 and 31. This chapter discusses allegations that 
White House and/or DNC officials improperly used the White 
House as a fundraising tool.

                                findings

    (1) Telephone calls made on federal property to solicit 
contributions from persons neither on federal property or 
employed by the federal government have been made by elected 
officials from both parties and prior administrations.
    (2) There was nothing illegal about the one solicitation 
telephone call known to the Committee made by the President.
    (3) There was nothing illegal about the solicitation 
telephone calls made by the Vice President.

                     dnc coffees at the white house

    During the 1996 election cycle, the Democratic National 
Committee arranged for more than 1,000 individuals to attend 
so-called ``coffees''--get-togethers with President Clinton or 
Vice President Gore--many of which were held at the White 
House. Many of the attendees were Democratic campaign 
contributors, prompting allegations that the coffees were 
fundraising events on federal property and, as such, were 
illegal and improper.
    The Committee took testimony from, among others, DNC and 
White House personnel, coffee attendees, and reviewed documents 
produced to the Committee. FBI agents detailed to the Committee 
also questioned several individuals who had attended coffees. 
When a public hearing was held on the coffees on September 18, 
the Majority called as a ``summary witness'' Jerry Campane, the 
head of the team of FBI detailees. During his testimony, 
Campane presented charts which highlighted political 
contributions by some of the coffee attendees.
    The evidence shows that the coffees were prompted by a 
January 5, 1995, memo to Nancy Hernreich, director of Oval 
Office operations, (and given to President Clinton) from Terry 
McAuliffe, who served as finance chair of the DNC until the end 
of that month, when he became finance chair of the Clinton re-
election campaign.1 In the memo, which was sent 
after McAuliffe met with the President, McAuliffe expressed his 
concern that--in light of the Democratic defeat in the 1994 
mid-term elections--the President needed to ``energize'' his 
supporters. McAuliffe suggested that small groups of supporters 
be invited to the White House to meet with the 
President.2
---------------------------------------------------------------------------
     Footnotes appear at end of chapter 27.
---------------------------------------------------------------------------
    McAuliffe's suggestion was accepted and, on January 11, the 
DNC held the first of a series of coffees. By August 23, 1996, 
103 coffees had been held at the White House--60 of them 
organized by the DNC Finance Division.3 The coffees 
were attended by a total of 1,241 people who were afforded an 
opportunity to meet with the President or the Vice 
President.4
    The Clinton Administration and the DNC clearly hoped that 
the coffees organized by the DNC Finance Division would assist 
in the DNC's fundraising efforts. They were arranged by the 
DNC's Finance Division and, after the coffees were publicized 
in the press, the White House and DNC acknowledged that many of 
the coffees had a fundraising component. The coffees were aimed 
at encouraging and motivating ``supporters'' of the party, 
including both financial and political supporters.5 
In February 1997, the President's press secretary stated: 
``Obviously, the coffees were held in the hopes that people who 
talk with the President about these ideas and goals would share 
them and would continue to be or become political and financial 
supporters of the President.'' 6

The coffees and fundraising

    DNC finance personnel and others active in political 
fundraising define a fundraising event''--which they call a 
``fundraiser''--as an event with a ``ticket price'': attendees 
are obliged to contribute a certain sum in order to 
attend.7 The evidence examined by the Committee 
establishes that the coffees were not fundraisers in that 
sense.
    To begin with, they were not conceived as fundraisers. The 
McAuliffe memo does not suggest that attendees be obliged to 
contribute a certain amount of money--or, indeed, any amount of 
money. The memo makes clear that McAuliffe, at least, did not 
see the coffees as a way to raise money for the Democratic 
Party or for the president's re-election campaign. Harold 
Ickes, deputy chief of staff in the White House, testified that 
they were originally designed to help the President 
``reconnect'' with his constituents and to reenergize 
them.8
    More importantly, the coffees did not, in fact, operate 
like traditional fundraisers. McAuliffe, for example, 
testified:

          Did we recommend . . . people whom we hoped would be 
        helpful or had been helpful? You bet, but I always 
        ended every phone call with you don't--there's no quid 
        pro quo, and you talk to the hundreds of thousands of 
        donors that I dealt with . . . People were invited to 
        spend time. You understand, people didn't care.
          They all talk about this White House. It wasn't the 
        White House. It was people to spend time with the 
        president. They get an idea of what his policies were, 
        are, were going to be, to get them energized. That's 
        what it was all about.
          As I've always said, I could[n't] have cared less if 
        those first 10 coffees were done at McDonald's. It 
        didn't matter to me. I needed people to see the 
        President and get his vision for the future to get them 
        energized, and that's what this was all 
        about.9

    As part of an effort to demonstrate that the coffees were 
fundraisers, some Committee members drew attention to DNC 
documents suggesting that every coffee was expected to, and 
did, raise $400,000 and that DNC fundraising personnel 
sometimes credited contributions to specific coffees. For 
example, the DNC produced documents listing all the attendees 
at particular coffees that tally the contributions made by 
these individuals.
    Although those documents would seem to suggest that the 
coffees were fundraising events, the Committee also found 
considerable evidence undermining that allegation. For example, 
the $400,000 figure was arbitrary; it was used for every single 
coffee organized by the DNC regardless of the number of 
attendees or their identities.10 According to FBI 
agent Campane's testimony, only one of the 103 coffees actually 
resulted in $400,000 being contributed by the attendees. With 
three exceptions, most contributions made by attendees around 
the time of the coffees were not attributed to the coffees. 
Finally, the evidence indicates that of the approximately 1600 
contributions made by people who attended coffees, less than 5 
were credited on the DNC check-tracking forms to the 
coffee.11
    Numerous DNC fundraisers were asked under oath whether the 
fundraiser had ever told a contributor that he or she could 
attend a coffee in exchange for a contribution. The DNC 
witnesses were also asked whether there was a specific amount 
of total contributions that were required for a contributor to 
receive a coffee invitation--specifically, whether there was a 
$50,000 ticket price to attend the coffees. The DNC fundraisers 
denied these charges: they all stated that no contribution was 
required to attend the event and no specific level of 
contributions was received from coffee attendees.12
    Coffee attendees were also asked whether they were told 
that a specific contribution would allow them to attend a 
coffee at the White House. Every attendee deposed or 
interviewed by the Committee denied this charge. Roger Tamraz--
a witness who testified quite explicitly that he gave money in 
order to gain access to the White House 13--stated 
that he was not asked to and did not make a political 
contribution to enable him to attend a coffee on April 1, 
1996.14 FEC records support this claim, showing that 
his last large contribution to the DNC was in October of 
1995.15 Similarly, Beth Dozoretz, Robert Belfer, 
Karl Jackson, and Clark Wallace, all of whom attended a coffee 
on June 18, 1996, testified that they were not asked to make a 
specific contribution to attend this coffee.16 
Richard Jenrette, who attended a coffee on September 7, 1995, 
testified in a similar fashion.17
    The testimony is supported by documentary evidence. The 
records show that 466 of the 1,063 people who attended White 
House coffees--44 percent of the total--contributed nothing to 
the DNC during the 1995/96 election cycle.18 In the 
case of several of the coffees, the majority of the attendees 
did not contribute. For example, Minority Exhibit 2049M 
(reproduced in the endnotes to this chapter) shows that only 
three of the eight people who attended a coffee on November 9, 
1995, contributed to the DNC during the 1995/96 
cycle.19

The coffees as DNC events

    Although the coffees were not traditional fundraisers, they 
were certainly related to Democratic fundraising. The coffees 
organized by the Finance Division of the DNC were intended to 
motivate and encourage political and financial supporters of 
the president. For example, when Harold Ickes testified before 
this Committee, he said, ``There's no question that those 
coffees helped facilitate fund-raising. There's no question 
about that, Senator. Nobody denies that, and anybody who denies 
that is sort of goofy, in my view.'' 20 In February 
1997, the President Clinton's press secretary made the point 
this way: ``Obviously, the coffees were held in the hope that 
people who talk to the President about these ideas and goals 
would share them and would continue to be or become political 
and financial supporters of the president.'
    Other witnesses used a variety of terms to describe the 
link between the coffees and party fundraising. Karen Hancox, 
deputy director of the White House political office, called 
them ``fundraising tools.'' 21 DNC officials Marvin 
Rosen and Ari Swiller said there was a ``fundraising 
component.'' 22 Donald Fowler, former DNC chairman, 
said the coffees had a ``fundraising aspect.'' 23 
Richard Sullivan, former DNC finance director, said that the 
coffees were helpful to the DNC's overall ``fundraising goal.'' 
24
    Sullivan's testimony about the coffees being helpful to 
reach DNC fundraising goals seems to be the best description. 
DNC records produced to this Committee show clearly that 
although there was no ``admission price''--as in a traditional 
fundraising event--the party did hope to raise money from 
coffee attendees. The documents show that there were periods 
during which the DNC and the White House were keeping track of 
how much money was contributed by coffee attendees, making it 
possible to determine whether the coffees were helping with 
overall fundraising.25
    No convincing evidence was presented to the Committee 
indicating that campaign contributions were solicited or 
received during White House coffees, which could have violated 
the Pendleton Act. All but one of the coffees was held in an 
area of the White House which is exempt from the Pendelton 
Act's restrictions. In addition, campaign solicitations were 
not a feature of the coffees.26 The only coffee 
attendee who claims he heard a solicitation is Karl Jackson, a 
former aide to Vice President Dan Quayle. According to Jackson, 
DNC fundraiser John Huang observed that elections are costly 
and then encouraged attendees at one coffee to ``support the 
president.'' 27 It is worth noting that Jackson is 
the only one of the more than 1,000 coffee attendees to make 
such an allegation and that even Jackson did not state that 
financial support or contributions were mentioned by Huang. 
Other witnesses who attended the coffee with Jackson also 
contradict him in important respects as explained in Chapter 
4.28 Jackson's allegation that solicitation occurred 
at White House coffees is also undermined by videotapes of the 
opening segments of the coffees. None of the tapes contains any 
evidence of a solicitation. In fact, one tape shows an attendee 
attempting to give a contribution to DNC Chairman Donald Fowler 
and Fowler refusing to accept it.29

The law and precedent

    Under current law, it is not illegal for the President to 
invite supporters to the White House, or any other federal 
building, or even to hold a fundraising event in certain areas 
of the White House. As Harold Ickes told the Committee:

          [A] president may entertain and meet with friends and 
        political supporters, contributors, fund-raisers, and 
        otherwise, as well as with members of Congress and 
        heads of state in the White House. He may have coffee 
        or even tea with his friends and political supporters, 
        and it is perfectly permissible for them to stay 
        overnight . . . [A] President and a Vice President, and 
        certainly Senators and members of Congress, may--
        indeed, it is a custom of longstanding that they do--
        meet with supporters, including contributors and fund-
        raisers, as well as ordinary citizens, be gracious to 
        them, discuss matters of public policy with them, and, 
        yes, listen to their concerns. It simply is not illegal 
        or untoward for a President or a Vice President to 
        grant access to supporters any more than it is illegal 
        or inappropriate for United States Senators or members 
        of Congress to grant access to their supporters, 
        constituents, political leaders, contributors, and 
        fund-raisers alike, or any more than it is illegal or 
        improper [for] the RNC to thank its members of its Team 
        100 or its Eagles Club by inviting them to dine at the 
        Capitol to meet with congressional 
        leaders.30

    Even the Majority's summary witness on the subject of the 
coffees--FBI detailee Jerome Campane--did not assert that the 
coffees were illegal or even improper. ``I am not suggesting 
they are improper,'' he testified. ``I am not suggesting 
anything illegal.'' His only conclusion, based on his analysis, 
was that the coffees were ``in the nature of fund-raising 
tools.'' 31 Morever, many of President Clinton's 
predecessors have used the White House for political gatherings 
resembling the coffees, including former Presidents Gerald 
Ford, Ronald Reagan, and George Bush.32

                         white house overnights

    The Clinton Administration has been heavily criticized for 
apparently using overnight visits to the White House to reward 
contributors. In late 1996, it was reported in the press that 
large numbers of campaign contributors had been invited to stay 
overnight at the White House, often in the Lincoln Bedroom. 
These reports prompted allegations that the Lincoln Bedroom 
was, in effect, being ``rented'' to contributors.
    Although such allegations received widespread attention, 
the Committee found no evidence of a systematic scheme to trade 
overnight visits to the White House for campaign contributions. 
Most of the visitors were longtime friends and supporters of 
the president; 33 continuing a practice of both 
Presidents Reagan and Bush. The Committee found no evidence 
that visits were tied to specific contributions.34 
Morever, the Committee found no evidence that any of the 
overnight visitors was solicited for a contribution during the 
visit.
    The use of the overnights as a fundraising tool was not 
illegal--and was not nearly as extensive as alleged by the 
Majority. As in the case of the White House coffees, the DNC 
and the administration used access to the White House and to 
the president as a way of cementing ties to campaign 
contributors.

                               conclusion

    The evidence presented to this Committee shows that the 
coffees were not traditional fundraising events, that money was 
not solicited or received at the coffees, and that the Lincoln 
Bedroom was not rented out to contributors.

                               footnotes

    \1\ Exhibit 1217: Memorandum from Terence McAuliffe to Nancy 
Hernreich, 1/5/93 [sic], CGRO 1569-70.
    \2\ Terence McAuliffe deposition, 6/6/97, pp. 98-99.
    \3\ Exhibit 1238: White House Political Coffees.
    \4\ Jerome Campane, 9/18/97 Hrg., p. 184.
    \5\ Exhibit 1238: White House Political Coffees.
    \6\ Senator Levin, 9/18/97 Hrg., p. 227.
    \7\ As explained by Richard Sullivan in his deposition and affirmed 
by him during the hearings: ``The coffees weren't fundraisers per se, 
they were not, I consider a fundraiser to be a--my general description 
of a fundraiser is we are holding a dinner at the Hilton Hotel; to have 
a seat we need to contribute a $1,000 for a ticket or $15,000 for a 
table. We would like your money to be in hand or to have a general 
commitment. That was not what they were.'' Richard Sullivan deposition, 
6/4/97, p. 91; Richard Sullivan, 7/9/97 Hrg., p. 82.
    \8\ Harold Ickes, 10/8/97 Hrg., pp. 144-145; Harold Ickes 
deposition, 6/26/97, pp. 64-65.
    \9\ Terence McAuliffe deposition, 6/6/97, p. 99.
    \10\ Richard Sullivan deposition, 6/4/97, pp. 86-89.
    \11\ Jerome Campane, 9/18/97 Hrg., p. 208.
    \12\ Ann Braziel deposition, 5/13/97, pp. 117, 126; Ari Swiller 
deposition, 5/6/97, p. 148; Terence McAuliffe deposition, 6/6/97, pp. 
98-99.
    \13\ Senator Levin, 9/18/97 Hrg., p. 63: ``Was one of the reasons 
that you made these contributions because you believed it might get you 
access? That is my question.

            Mr. Tamraz. Senator, I'm going even further. 
        It's the only reason to get access . . .''

    \14\ Referring to Tamraz's last substantial contribution to the 
DNC, Minority Chief Counsel asked Tamraz: ``[W]hen you made the 
$100,000 contribution you knew that you had no expectation at that time 
of going to an event at the White House, right?'' Tamraz replied: ``No, 
but the way I view my relationship with the DNC or the RNC is not one 
or two years. It's a life-long relationship.'' Roger Tamraz deposition, 
5/13/97, p. 139.
    \15\ FEC records.
    \16\ Beth Dozoretz, 9/16/97 Hrg., pp. 129-32; Robert Belfer 
deposition, 9/6/97, pp. 9-10; Karl Jackson, 9/16/97 Hrg., pp. 43-44; 
Clark Wallace, 9/16/97 Hrg., pp. 127-28.
    \17\ Jenrette was asked: ``Were you asked to contribute a certain 
amount of money in order to attend this event?'' and he responded, 
``No.'' Richard Jenrette, 10/29/97 Hrg., p. 74.
    \18\ This analysis was based on records of coffee attendees. 
Duplicate names were counted once. Spouses who attended a coffee were 
counted separately. All employees of the DNC and White House, including 
those in the offices of the President and the Vice-President were not 
counted. Soft money contributions to the DNC from coffee attenders or 
organizations with which they were affiliated were reviewed.
    The Minority found that 1063 different people attended the 103 
coffees. This figure includes 537 people at the 60 DNC-sponsored 
coffees; 422 people at the 32 Political and Community Leaders Coffees; 
and 104 people at the 11 Clinton sponsored coffees. (At the hearing, 
the Majority found that 532 individuals attended the 60 DNC-sponsored 
coffees, a difference of five people compared to the Minority 
analysis.)
    Regarding coffee attendees who did not contribute to the DNC, the 
Minority found that 41 individuals, or 39 percent, of the Clinton 
campaign sponsored coffees did not contribute. For the Political and 
Community Leaders Coffees, the total was 313, or 74 percent who did not 
contribute to the DNC. For the DNC-sponsored coffees, the total was 
112, or 21 percent who did not contribute to the DNC in the 1996 
election cycle. Overall, 466 coffee attendees, or 44 percent of the 
1,063 total attendees did not appear to have contributed personally or 
through their organizations to the DNC in the 1996 election cycle. It 
is possible that coffee attendees may have contributed directly to 
other Democratic party committees, such as the DCCC or the DSCC, or to 
President Clinton's re-election campaign.
    The Majority did not do a similar analysis.
    \19\ Minority Exhibit 2049M describes a DNC-sponsored coffee at the 
White House that was held on November 9, 1995:

        NOVEMBER 19, 1995 DNC-SPONSORED COFFEE AT THE WHITE HOUSE       
------------------------------------------------------------------------
                                                               Total    
                                           Contributions   contributions
               Contributor                  within one        in 1996   
                                          week of Coffee  election cycle
------------------------------------------------------------------------
David F. Babensee.......................              $0              $0
Joe Barreto.............................               0               0
Javier Bianco...........................               0               0
Greg Cortes.............................               0          26,000
Maxinne Lausell.........................               0               0
Miguel D. Lausell.......................         100,000         100,000
Fernanco Lloveras.......................               0               0
Richard Machado.........................               0          52,100
------------------------------------------------------------------------

    \20\ Harold Ickes, 10/8/97 Hrg., p. 170.
    \21\ Karen Hancox deposition, 6/9/97, p. 64.
    \22\ Marvin Rosen deposition, 5/19/97, p. 35; Jacob Aryeh Swiller 
deposition, 5/6/97, p. 141.
    \23\ Donald Fowler deposition, 5/21/97, p. 111.
    \24\ Richard Sullivan, 7/9/97 Hrg., p. 86.
    \25\ Jerome Campane, 9/18/97 Hrg., p. 182.
    \26\ See Chapter 24, supra.
    \27\ Karl Jackson, 9/16/97 Hrg., p11.
    \28\ Beth Dozoretz, 9/16/97 Hrg., p. 119; Robert Belfer deposition, 
9/6/97, pp. 77, 81-82. For more information, see Chapter 4 on Huang.
    \29\ 12/13/95 Coffee tape.
    \30\ Harold Ickes, 10/7/97 Hrg., pp. 91-92 (emphasis added).
    \31\ Jerome Campane, 9/18/97 Hrg., p. 218.
    \32\ See Chapter 28: Republican Use of Federal Property and 
Contributor Access.
    \33\ New York Times, 3/2/97; SUP 005303; Exhibit 1229: Overnight 
Guests in Response to Request, EOP 029074.
    \34\ During testimony to the Committee, Special Agent Campane 
presented an analysis of 38 persons who stayed overnight from 1993 
through 1996. He testified that he did not examine the other 13 
overnight guests. He indicated that of the 38 persons he examined, 37 
combined to contribute more than $4 million to the DNC in the 1996 
election cycle and 21 of the 38 contributed more than $880,000 to the 
DNC within one month of the stay. This chart was based on Exhibit 1229 
which identifies 51 individuals and the specific dates on which they 
stayed overnight at the White House.
    Mr. Campane did not attempt to determine whether the contributions 
were, in fact, linked to the overnight stays or were instead attributed 
to other events or corporate contributions. He also did not attempt to 
determine whether any of the persons had personal or professional 
relationships with the President beyond that of political donors. As 
Mr. Campane admitted:

              Q: So Roy Furman, who appears as a former 
        finance chair of the DNC; Mr. Grossman is the 
        current national chair of the DNC; Mr. Solomont is 
        the current finance chair of the DNC--these are all 
        people who have other relationships with the 
        President than simply giving money; isn't that 
        right? There might be other reasons why he would ask 
        them to stay at the White House.
              A: Yes, there may be other relationships other 
        than just giving money.
            Jerome Campane, 9/18/97 Hrg., p. 214.

    Exhibit 2051M also demonstrates that individuals who stayed 
overnight at the White House did not contribute solely to the DNC. This 
chart lists two individuals who stayed overnight at the White House and 
contributed both to the DNC and the RNC. One of them, Carl H. Lindner, 
contributed more to the RNC than to the DNC and gave $35,000 to the RNC 
and nothing to the DNC within one month of his overnight stay. Campane 
conceded that he did not analyze if any White House coffee or overnight 
guests contributed to the RNC. Jerome Campane, 9/18/97 Hrg., p. 215.





PART 5  FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES 
        AND ADMINISTRATIONS

Chapter 28: Republican Use of Federal Property and Contributor Access

    In response to claims that practices under the Clinton 
Administration were ``unprecedented,'' this Chapter examines 
how the Republican Party and preceding Republican 
Administrations have used the White House as a fundraising 
tool, provided access to elected officials for large 
contributors, and appointed large contributors to positions 
within the government.

                                findings

    (1) In the 1996 election cycle, the Republican Party 
continued its longstanding practice of raising money by 
offering, and providing, major contributors with access to top 
Republican federal officials. These offers of access are 
central components of Republican donor programs such as Team 
100 and the Republican Eagles. They started in the 1970s and 
continue today.
    (2) Federal property has routinely been used by the 
Republican Party in its fundraising efforts. The RNC has hosted 
fundraising events on Capitol Hill, at the Bush White House, 
the Pentagon, and at other federal government locations.
    (3) The Bush Administration rewarded major contributors 
with significant government positions, including 
ambassadorships.

             major contributor access to elected officials

    The Republican National Committee's two principal donor 
programs are Team 100, which requires ``an initial contribution 
of $100,000 upon joining, and $25,000 in the subsequent 3 
years,'' 1 and the Republican Eagles, which requires 
members to contribute $15,000 annually.2 To recruit 
members, the RNC's promotional materials promised that 
participants in the Team 100 and Eagles programs would receive 
special access to high-ranking Republican elected officials, 
including governors, senators, and representatives.
---------------------------------------------------------------------------
    Footnotes appear at end of chapter 28.
---------------------------------------------------------------------------

Republican Eagles

    Since its inception, the Republican Eagles program has 
granted its members special access to top Republican officials. 
In 1975, the Eagles held their very first meeting in the 
Roosevelt Room of the White House with President Gerald 
Ford.3 Eagles' access to elected officials continued 
throughout the Reagan Administration. For example, a September 
16, 1982, memorandum on White House stationery indicates that, 
in 1982, President Reagan made a fundraising-related phone call 
to an RNC event for the Eagles held in an auditorium at the 
Department of Commerce.4 President Reagan's talking 
points for this call illustrate the perks provided to the RNC's 
largest donors and verify that the President made the phone 
call from the White House with full knowledge that this 
particular event was directly related to the RNC's fundraising 
efforts on federal property:

    Hello to all of you high flying Eagles. I am genuinely 
sorry I couldn't be there in person with you today. Events here 
at the White House and the trip to New Jersey this afternoon 
have prevented me from coming over. But we have the Eagles down 
to the White House quite often so I will be seeing you soon.
    In the meantime, I'm sending Secretary Shultz, Secretary 
Regan and other members of the Cabinet over to keep you abreast 
of what's going on. In fact, you will be seeing more of my 
Cabinet today than I will.

           *         *         *         *         *

    Let me say to you Eagles how important your contributions 
are to the Republican Party. I know a lot of people must tell 
you that, but we tell you so often because it is so true. We 
are so appreciative. You are pillars of the party.5 
[emphasis added]

It is clear that this reception was designed to reward and 
encourage RNC donors; that large donors were given special 
access to members of the President's cabinet; that President 
Reagan made the call to the event from the White House; and 
that the RNC fundraising-related event was held on federal 
property.
    The practice of granting access to Eagles members continued 
throughout the 1996 election cycle. For example, a 1995 Eagles 
brochure contains photographs of Eagles members meeting with 
former President George Bush, former Vice President Dan Quayle, 
Governor Pete Wilson, Senators Connie Mack and Kay Bailey 
Hutchison, and Mayor Rudolph Giuliani.6 The brochure 
states:

          Each year Eagles receive invitations to four national 
        meetings. At least two of these meetings take place in 
        Washington, D.C., and feature strategy and issue 
        committee sessions with prominent elected Party leaders 
        from the U.S. Senate and House on such topics as the 
        budget and tax reform, international trade and 
        regulatory reform, health care and foreign policy. 
        Other participants have included Republican Presidents 
        (at the White House), Governors and former 
        Administration officials.7 [emphasis added]

On January 24, 1996, Eagles members attended a ``legislative 
update'' by Senate Majority Leader Bob Dole and House Speaker 
Newt Gingrich, a ``private pre-Gala cocktail reception'' with 
Republican governors, and ``Eagles Issues Discussions'' with 
six senators and eight representatives.8
    Eagles members were granted access not just to American 
officials, but to foreign officials as well. The 1995 Eagles 
brochure explains that ``International Trade Missions'' are 
arranged to allow Eagles to meet foreign government and 
business officials:

          Reflecting the unequaled position enjoyed by 
        Republican Eagles, foreign economic and trade missions 
        to Europe and Asia are also periodically scheduled. We 
        have been welcomed enthusiastically by heads of state, 
        such as Premier Li Peng of the People's Republic of 
        China and King Carl XVI Gustaf of Sweden, as well as 
        high-ranking government and business officials in 
        London, Paris, Budapest, Vienna, Beijing, Taipei, and 
        Hong Kong.9

    Membership in the Eagles also entitles contributors to sit 
on ``Eagles Issues Committees'' which, according to the Eagles 
brochure, ``provide members the opportunity to communicate 
their views directly to the elected leadership of the Party and 
the Congress.'' 10 The Eagles Issues Committees 
prepare reports which are ``distributed to the leadership of 
the Republican National Committee, members of the United States 
Senate and House of Representatives, Republican Governors, the 
National Policy Forum and the 1996 Republican Platform 
Committee.'' 11

Team 100

    Team 100 membership conferred similar benefits. A 1994 RNC 
Team 100 brochure promised that RNC contributors who meet the 
Team 100 $100,000 threshold contribution level would get 
meetings with :

          Former Presidents Gerald Ford and George Bush, Dan 
        Quayle, Bob Dole, Phil Gramm, Trent Lott, Newt 
        Gingrich, Dick Armey, Lamar Alexander, Richard Lugar, 
        Jack Kemp, Dick Cheney, and other Republican leaders. 
        Past participants include: Connie Mack, Bob Packwood, 
        Alfonse D'Amato, Thad Cochran, Pete Wilson, Bill Paxon, 
        Bill Archer, Susan Molinari.12
          The RNC also promised Team 100 members:
          [E]xclusive missions abroad including meetings in 
        China, Rome, Paris, Moscow, St. Petersburg, Prague, 
        Vienna, Warsaw and Madrid. Team 100's stature enables 
        them to meet with some of the highest ranking 
        government and business officials during these 
        international exchanges.13

    DNC fundraisers saw this brochure and decided to make a 
similar brochure to compete with the RNC's fundraising. 
However, the DNC brochure was never used because the President 
determined that the written promise of access to large 
contributors was offensive and should not be published. As DNC 
Finance Director Richard Sullivan explained in his testimony:

    Senator Torricelli. In 1994, were you aware that the 
Republican National Committee had produced an Eagles and a Team 
100 brochure outlining activities, perks, that contributors 
would have if they gave $25,000 or other significant sums to 
the Republican National Committee?
    Mr. Sullivan. Yes. Not only in 1994, but over the course of 
the last 10 years.
    Senator Torricelli. And at that point, in fact, the 
Democratic National Committee had no similar brochure outlining 
its programs?
    Mr. Sullivan. That's correct . . .
    Senator Torricelli. And as a result of this, the Democratic 
National Committee decided to issue a brochure of its own?
    Mr. Sullivan. That's correct.

           *         *         *         *         *

    Senator Torricelli. And when Bill Clinton received this 
Democratic National Committee brochure, which by your own 
authorship was reduced in its scope and its promises because 
you found a similar program by the Republican National 
Committee offensive, Bill Clinton was not pleased with this 
brochure; is that accurate?
    Mr. Sullivan. That's what I understand.

           *         *         *         *         *

    Senator Torricelli. Right. And, in fact, the president 
ordered that these not be distributed and they be destroyed 
because he found them offensive.
    Mr. Sullivan. That's correct.14
    Although the Democratic Party decided not to use similar 
promotional material, RNC promotional materials promising 
access to large contributors were distributed throughout the 
1996 election cycle and into the 1998 cycle. For example, on 
December 15, 1995, RNC Chairman Haley Barbour wrote a letter to 
Republican members of the Senate Finance Committee that stated:

    [T]he RNC's premier fundraising organization, Team 100, 
will hold its Winter National Meeting on [January 24, 1996]. 
The members of Team 100 have requested to meet with the Senate 
Finance Committee. I hope you will plan to participate in this 
discussion on the budget from 10:00 a.m. to 11:00 a.m. in the 
Dirksen Senate Office Building, Room 106. You are also invited 
to attend a luncheon hosted by Speaker Newt Gingrich and Senate 
Majority Leader Bob Dole following the discussion.15

The RNC arranged for Team 100 members to meet with Republican 
senators on the Finance Committee, and with Senator Dole, 
Speaker Gingrich, Republican presidential candidates, and 
Republican members of the House Ways and Means Committee on 
January 24, 1996.16 Following this meeting, at least 
one Team 100 member boasted about the access he had bought. In 
a July 10, 1996, letter to a prospective Team 100 member, John 
Palmer of Mobile Telecommunication Technologies wrote:

          I feel we have a rare opportunity with Haley 
        [Barbour], Trent [Lott], and Thad [Cochran] in the 
        positions they are [in] today.
          Ed Lupberger, CEO of Entergy, joined Team 100 earlier 
        this year, and this past Spring, I saw Haley escort him 
        on four appointments that turned out to be very 
        significant in the legislation affecting public utility 
        holding companies. In fact, it made Ed a hero in his 
        industry.
          If you have been considering this or if there is a 
        chance you might, I feel it significant to Haley and 
        the Senators if you could do this . . .17

Other Republican events and meetings for contributors

    In addition to Team 100 and the Eagles, the Republican 
Party sponsored a number of other donor organizations and 
programs that offered contributors access to top Republican 
elected officials. During the Reagan and Bush years, the RNC 
sponsored ``President's Dinners,'' which offered contributors a 
menu of access that they could buy. For example, a document 
entitled ``Benefits for Tablebuyers and Fundraisers'' describes 
the access that contributors purchased during a Bush 
Administration President's Dinner. ``Tablebuyers'' were 
entitled to:
           ``[p]rivate reception hosted by President 
        and Mrs. Bush at the White House'' or a ``[r]eception 
        hosted by The President's Cabinet.''
           ``[l]uncheon at the Vice President's 
        Residence hosted by Vice President and Mrs.Quayle''
           ``Senate-House Leadership Breakfast hosted 
        by Senator Bob Dole and Congressman Bob Michel''
           ``Option to request a Member of the House of 
        Representatives to complete the table of ten. With the 
        purchase of a second table, option to request one 
        Senator or one Senior Administration Official.'' 
        18
``Top Fundraisers'' got the ``[o]pportunity to be seated at a 
head table with The President or Vice President based on ticket 
sales.'' 19 The document did not try to conceal the 
fact that the Republican Party was rewarding major contributors 
with access. It concluded by saying, ``Benefits based on 
receipts.'' 20
    The Republican Senate Council, which is a fundraising arm 
of the National Republican Senatorial Committee, offers 
contributors access to Republican senators. According to a 1993 
Senate Council fundraising letter:

          The standard membership in the Republican Senate 
        Council is $5,000 a year and the Policy Board is 
        $15,000. The standard membership entitles you to 
        monthly meetings while the Senate is in sesssion. Our 
        program generally consists of discussion on current 
        pending legislation with the ranking Republican on the 
        pertinent committee addressing the membership.
          The Policy Board level is entitled to all the 
        standard membership benefits in addition to quarterly 
        dining with this smaller group and the Republican 
        Senators. The meetings serve as a virtual one-on-one as 
        the Senators may outnumber the Policy Board 
        members.21

    The National Republican Congressional Committee (``NRCC'') 
promises contributors to its Congressional Forum and House 
Council donor programs access to key House Republicans. 
Congressional Forum membership, which requires a $15,000 annual 
contribution for individuals and PACs and a $25,000 annual 
contribution for corporations, confers the following benefits:
           ``Monthly private dinners with the Chairmen 
        and Republican Members of key Congressional 
        Committees''
           ``Private dinner with Speaker Newt Gingrich 
        and the GOP House Leadership''
           ``Private dinner with House Committee 
        Chairmen''
           ``An invitation to the Chairman's Skeet and 
        Trap Shoot''
           ``VIP preference at House Council and NRCC 
        events.''22
    The Republican House Council, membership in which cost 
$5,000 per year for individuals and Political Action Committees 
(``PACs'') and $10,000 per year for corporations, offers 
members:
           Regular briefings with key Republican 
        members and staff who work directly on the discussion 
        topic
           Regular political briefings focusing on 
        national trends and activities crucial to maintaining 
        Republican control of the House in 1996
           Invitations to the NRCC Winter and Summer 
        Meetings. Each two-day event features political and 
        legislative discussions with key House members and 
        keynote addresses by prominent GOP leaders. 
        23
    The RNC also organized ad hoc fundraising events that 
offered donors access to politicians. At its 1996 Annual Gala, 
the RNC invited those who had raised or contributed $250,000 
to:
           a private reception and photo opportunity 
        with the Republican presidential candidates;
           lunch and photo opportunity with the Speaker 
        of the House of Representatives Newt Gingrich and 
        Senate Majority Leader Bob Dole;
           a ``[p]rivate meeting'' with members of 
        selected Senate and House of Representatives 
        Committees; and
           an ``[e]xclusive reception with Governor 
        Pete Wilson and Republican Governors in private 
        residence/yacht.'' 24
The invitation to the 1997 Annual Gala promised those raising 
$250,000 similar benefits, including a separate lunch with the 
``Republican Senate and House Committee Chairmen of your 
choice.'' 25
    Similarly, on February 9, 1995, the RNC held the ``Official 
1995 Republican Inaugural.'' For $150,000, contributors were 
offered:
           a ``private reception'' and photo 
        opportunity with U.S. Senate and House Leadership;
           an invitation to a ``Speaker of the House 
        VIP reception;'' and
           breakfast in the U.S. Capitol with Senate 
        Majority Leader Bob Dole and Speaker of the House Newt 
        Gingrich.26
    One of the more glaring examples of a Republican sale of 
access is memorialized in an undated memo from an RNC aide to 
Tim Barnes, the chairman of Team 100, relating to Ole Nilssen, 
a contributor Barnes referred to as ``hot.'' In the memo, the 
aide informed Barnes, ``We are working on getting him an 
appointment with [Representative] Dick Armey, so we can get his 
other $50,000. We had a meeting set up for this week, but Armey 
canceled his Florida leg of his trip.'' 27 The 
implication of the memo is clear--to raise money for the RNC, 
the Team 100 Chairman would arrange one-on-one meetings with 
the House Majority Leader.
    The RNC arranged for major contributors to gain special 
access to Senate Majority Leader Bob Dole. In a memo to an RNC 
fundraiser, Tim Barnes wrote:

          Kim White of Mr. Louis Bacon's office (Moore Capital 
        Management) has been trying to reach Dennis Shea 
        recently with no success. Kim is trying to establish a 
        contact in Senator Dole's office for Mr. Bacon. As you 
        know, Mr. Bacon has been very generous to the RNC. If 
        there is any way you can assist, it would be greatly 
        appreciated.28

    Also, as shown in Chapter 3, the Republican Party offered 
Ambrous Young, the Chairman of Young Brothers Development 
Corporation (``YBD'') access to Speaker Gingrich and Senator 
Dole as an incentive for YBD's $2.1 million loan guarantee to 
the National Policy Forum (``NPF''). On August 15, 1994, Fred 
Volcansek, an NPF fundraiser, wrote a memo to Ambrous Young 
asking that YBD extend NPF a loan guarantee. The memo 
concludes: ``The timing of this effort is crucial. The loan 
needs to be arranged and funded in the next two weeks. Chairman 
Barbour, Senator Dole and Congressman Gingrich, who are 
committed to the NPF, will make themselves available to express 
their support for your participation on this project.'' 
29 After YBD provided the loan guarantee, Young did 
meet with and have his photograph taken with Speaker Gingrich 
and Senator Dole.30 Following the visit, Chairman 
Barbour wrote to Young, ``I am delighted you were able to meet 
with both Senator Dole and Speaker Gingrich. They were pleased 
to hear your views on developments in Asia. . . . Your role as 
a key advisor on Asian policy is essential to both me and the 
NPF.'' 31
    These meetings are not unlike the meetings with Clinton 
Administration officials arranged by DNC Chairman Donald Fowler 
that have been publicly criticized by members of both political 
parties. In fact, the DNC policies and procedures manuals 
prohibited the DNC staff from arranging meetings with officials 
on behalf of contributors. But, while members of this Committee 
were criticizing Fowler for violating DNC policy, the RNC 
continued to arrange for large contributors to meet with 
elected officials. On February 27, 1997, Senate Majority Leader 
Trent Lott sent out a fundraising letter on behalf of the 
National Republican Senatorial Committee (``NRSC'') promising 
contributors ``plenty of opportunities to share [their] 
personal ideas and vision with some of our top Republican 
leaders, senators, and panel members.'' Failure to contribute 
meant that ``you could lose a unique chance to be included in 
current legislative policy debates--debates that will affect 
your family and your business for many years to come.'' 
32 This year, Senator Mitch McConnell of Kentucky, 
the leading Republican opponent of campaign-finance reform, 
sent out an NRSC fundraising letter filled with promises to 
contributors:

          You'll be invited twice a year to attend high-level 
        Washington policy briefings, receptions and special 
        dinners with my Republican Senate colleagues as well as 
        the top leaders of our Republican Party. These are 
        names you know well . . . Senator Lott and the entire 
        leadership of Senate Chairmen and Subcommittee Chairmen 
        who are driving the national Republican agenda . . . . 
        By signing on today, you will also be able to join in 
        our Fall Briefing and attend one of our small dinners 
        hosted by Republican Senators and dignitaries. Over the 
        years, these intimate gatherings have become the 
        hallmark events of our Inner Circle 
        membership.33

    As explained in Chapter 24, it is not illegal to reward 
contributors with access to politicians. The current laws 
regulating fundraising do not prohibit providing access to 
elected officials in exchange for contributions, as long as 
policy decisions are not ``sold.'' These Republican practices 
simply demonstrate that both parties provided access to elected 
officials in exchange for contributions and neither can claim 
the practices of 1996 were unprecedented or confined to one 
party.

                use of federal property for fundraising

    A significant amount of public attention has focused on the 
use of coffees at the White House as a fundraising tool. While 
the use of the White House and other federal buildings as a 
fundraising tool has been the subject of significant scrutiny 
and criticism, it is a longstanding practice that has been 
exploited by both political parties. Republicans have 
frequently held fundraising-related events on federal property. 
These events have occurred in venues such as Capitol Hill and 
the White House.
    The RNC has frequently sponsored events on federal property 
for its Team 100 and Eagles members. For example, on January 
23, 1996, Team 100 sponsored a ``Senate/House Leadership 
Reception'' at the Library of Congress. 34 A day 
later, the RNC invited Team 100 members to meetings at the 
Dirksen Senate Office Building with Republican members of the 
Senate Finance and House Ways and Means Committees as noted 
above. 35 At the RNC's February 9, 1995, ``Official 
1995 Republican Inaugural,'' those who contributed $150,000 
were invited to ``[b]reakfast in the U.S. Capitol with Senate 
Majority Leader Bob Dole and Speaker of the House Newt 
Gingrich.'' 36
    Moreover, as demonstrated by the chronology in the Appendix 
to this chapter, the Republican Party held numerous fundraising 
events at the White House during both the Bush and Reagan 
Administrations. Even though the Minority was not permitted 
access to the Bush Library or testimony from Bush 
Administration officials or RNC personnel, the Minority was 
able to identify multiple events at the Bush and Reagan White 
Houses for Republican Eagles or Team 100 members that appeared 
to use the White House as a fundraising tool. The Team 100 
brochure used during the 1996 election cycle even predicted, 
``Team 100 will be entertaining in the White House again in 
January, 1997.'' 37
    The Minority was also able to obtain videotapes of a number 
of Reagan White House events in which President Reagan thanked 
donors for giving money to the Republican Party and asked them 
for additional contributions:
    At a September 30, 1987, White House reception for the 
Eagles, President Reagan said, ``I will campaign hard for the 
nominee of our party and let me ask you now--I know this is 
silly, but can I count on you to help?'' 38
           On April 29, 1987, President Reagan told 
        guests at a White House reception for the President's 
        Dinner: I want each of you to know how grateful we are 
        for your generous support to our cause. When we get to 
        the dinner, you'll hear me give credit for all that's 
        been accomplished . . . I don't know if I'm jumping the 
        gun or not, but if it's finally official and the last 
        thing has been tallied, I am expecting tonight that 
        they will tell us that last year we set the record for 
        a political fundraising event and tonight we're going 
        to break that all-time record.39
           On September 12, 1985, President Reagan told 
        guests at a White House Eagles reception: ``Yes, I'm 
        grateful for all you've done in the past, but now that 
        we have the chance, now that we know the American 
        people are with us, join me in leaving America and the 
        world a legacy of prosperity and freedom that future 
        generations will honor and thank us for. Please just 
        don't keep up your tremendous work, redouble your 
        efforts. Make the Eagles even bigger and better than 
        they are now.'' 40
           On April 22, 1985, President Reagan remarked 
        to guests at a White House meeting for the Republican 
        Congressional Leadership Council, ``Many of you were 
        instrumental in giving us the means to keep control of 
        the Senate. I hope I can count on all of you next time 
        around.'' 41
           At a May 10, 1984, White House reception for 
        the President's Dinner committee, President Reagan 
        said, ``We still have a lot to do and that's why your 
        support in this campaign was so vital. This year, we 
        must keep the White House, retain our majority in the 
        Senate and increase our seats in the House.'' 
        42
    The RNC played a significant role in determining who would 
attend dinners and other events at the Reagan and Bush White 
Houses. Judith Spangler, the assistant chief for arrangements 
at the White House, who has been a White House employee for 18 
years, testified that the RNC supplied the names of invitees to 
White House events during the Reagan and Bush 
presidencies.43
    During the Bush Administration, Republicans also held 
fundraising events at other federal venues. For example, on 
August 19, 1992, Secretary of Defense Richard Cheney met at the 
Pentagon with members of the Presidential Roundtable, a 
Republican donor program.44 That month, the 
Presidential Roundtable held ``[b]riefings and tours of the 
NASA Center limited to Roundtable members and their guests, 
hosted by Senators from the Committee on Commerce, Science, and 
Transportation.'' 45 On October 15, 1992, the 
``House Council,'' afundraising arm of the National Republican 
Congressional Committee, invited members to a luncheon with Vice 
President Quayle at the ``Vice President's House.'' 46 In 
August 1990, Senator Don Nickles, chairman of the Republican ``Inner 
Circle,'' invited contributors to the Vice President's Mansion. ``It's 
one of the most historic homes in America,'' the letter began. ``And 
because it's also the home of one of America's most famous families, 
few individuals decline an invitation to attend an event there.'' The 
letter was accompanied by an appeal for money.47
    These uses of the White House and other federal buildings 
were not necessarily illegal. The Minority was unable to 
determine whether there were solicitations or receipts of 
contributions at these events because the Majority refused to 
require individuals who would not voluntarily appear for 
depositions to do so. Hence, we cannot say with certainty 
whether these events were ``fundraisers'' or fundraising tools 
similar to the coffees at the White House organized by the DNC 
during the 1996 election cycle. However, there is no doubt that 
these events had a fundraising component; the invitation of 
contributors to the Bush and Reagan White Houses was obviously 
designed to aid fundraising efforts. Indeed, the Majority's 
summary witness, FBI detailee Jerome Campane, who analyzed the 
coffees in testimony before the Committee agreed that these 
Republican events were the same as the coffees--fundraising 
tools designed to encourage contributions.48 He 
testified:

          Q: [L]et me read to you from the Republican Eagles 
        document produced to the Committee. The Bates number is 
        R3188: ``Befitting its unequaled stature within our 
        party, exclusive activities are reserved solely for the 
        Republican Eagles. National meetings. Each year, Eagles 
        receive invitations to four national meetings. At least 
        two of these meetings take place in Washington, D.C. 
        and feature strategy sessions with prominent elected 
        party leaders from the U.S. Senate and House. Other 
        participants have included Republican Presidents, 
        Governors and former administration officials.'' Would 
        that meet your notion of a fundraising tool?
          A: I speak of it very broadly. So I would--I concede 
        that I would characterize that as a fundraising tool; 
        yes, sir. 49

       political appointments awarded to republican contributors

    Republicans have also used political appointments as a 
fundraising tool. Secretary of Commerce Robert Mosbacher turned 
this practice into an art form in President George Bush's 
administration. In 1989, Mosbacher, who had been finance 
chairman of George Bush's 1988 campaign, complained that not 
enough campaign fundraisers had been rewarded with political 
appointments. Mosbacher said that there were ``several 
hundred'' fundraisers who deserved appointments to 
ambassadorships, sub-Cabinet posts, or lower-level jobs on 
commissions who were being neglected. Mosbacher apparently 
stated at the time that, ``[t]here's this perception in 
Washington and politics, and to some degree in Government, that 
fund-raisers and fund-givers are nice, interesting people to be 
sort of patted on the head when you need them and ignored the 
rest of the time because they don't really understand the 
process.'' 50 He also reportedly complained that 
``at least 50 percent'' of ``those who [had] been helpful'' had 
not received appointments.'' 51
    Mosbacher filled the Commerce Department with appointees 
whose main credential was that they were major Republican 
fundraisers or contributors. One of Mosbacher's favorite ways 
to reward top fundraisers and contributors was to appoint them 
to the President's Export Council, a quasi-official panel that 
advised the White House on trade matters. Mosbacher solicited 
recommendations for appointments to the Export Council from RNC 
Chairman Lee Atwater and Team 100 Chairman Alec 
Courtelis.52 Six of President Bush's appointees to 
the Council were Team 100 members.53 Mosbacher also 
appointed four Team 100 members to the Industry Policy Advisory 
Committee for Trade Policy Matters, which advised the Commerce 
Department and the U.S. trade representative.54
    The Bush Administration also appears to have rewarded major 
contributors with ambassadorships. President Bush nominated for 
ambassadorships 11 people who had each given the Republican 
Party over $100,000.55 Three of these eleven were 
rated ``unqualified'' by the American Academy of Diplomacy, a 
nonpartisan organization of former senior diplomats, including 
all living former secretaries of state. 56 The Bush 
nomination for the ambassador to Australia was particularly 
egregious. The nominee admitted that he and his wife had 
``never even been to Australia. When the president told me he 
had Australia in mind for me, at first I thought he meant 
Austria.'' 57 The Bush nominee to be ambassador to 
Barbados and seven other Caribbean nations, whom the Senate 
refused to confirm, was even less qualified. That nominee had 
no foreign-policy experience, no college degree, and no job 
history. She told the Senate that her most recent employment 
was helping her husband ``by planning and hosting corporate 
functions.'' 58
    One Bush appointee candidly admitted that his fundraising 
was key to getting his appointment. In 1989, George Bush's 
nominee to head the United States Information Agency reportedly 
conceded that were it not for the fact that he had helped raise 
$3 million for Bush's campaign, he might ``have been selected 
to be dog catcher.'' 59

                               conclusion

    For years, the Republican Party has rewarded campaign 
contributors with appointments and with access to top 
Republican politicians and used federal property for 
fundraising and campaign-related activities. The Republicans 
have continued these practices at the same time that they have 
criticized the Democratic Party for its fundraising practices 
and adamantly opposed Democratic efforts to reform the campaign 
finance system.

                               footnotes

    \1\ Republican National Finance Committee Summary of Programs, p. 
1, R 003169-70.
    \2\ Republican National Finance Committee Summary of Programs, p. 
2, R 003169-70.
    \3\ 1995 Republican Eagles Manual, p. 3, R 000848-69.
    \4\ Memorandum from A. Morgan Mason to Michael K. Deaver, 9/16/82; 
Presidential Talking Points: Phone Call to Eagles Meeting, 9/17/82 
(emphasis added).
    \5\ Presidential Talking Points: Phone Call to Eagles Meeting, 9/
17/82 (emphasis added).
    \6\ 1995 Republican Eagles Manual, pp. 6-14, R 000848-69.
    \7\ 1995 Republican Eagles Manual, p. 16, R 000848-69 (emphasis 
added).
    \8\ Republican Eagles 1996 Annual Gala Agenda, R 00386-89. The 
participants were Senators Pete Domenici, Nancy Kassebaum, Dan Coats, 
John McCain, Richard Lugar, and Kit Bond, and Congressmen John Kasich, 
John Boehner, Roger Wicker, Benjamin Gilman, Larry Combest, Jan Meyers, 
and Robert Walker.
    \9\ 1995 Republican Eagles Manual, p. 17, R 000848-69.
    \10\ 1995 Republican Eagles Manual, p. 6, R 000848-69.
    \11\ 1995 Republican Eagles Manual, p. 6, R 000848-69.
    \12\ 1994 Team 100 Brochure, CGRO-2112-27.
    \13\ 1994 Team 100 Brochure, CGRO-2112-27.
    \14\ Richard Sullivan, 7/9/97 Hrg. Pp. 110-11.
    \15\ Letter from Haley Barbour to Bob Dole, 12/15/96, R 048192.
    \16\ Team 100 Gala Speakers Agenda, R 003195-97.
    \17\ Letter from John N. Palmer (addressee redacted), 7/10/96, R 
015772.
    \18\ Benefits for Tablebuyers and Fundraisers for the President's 
Dinner.
    \19\ Benefits for Tablebuyers and Fundraisers for the President's 
Dinner.
    \20\ Benefits for Tablebuyers and Fundraisers for the President's 
Dinner.
    \21\ Letter from Senator Christopher Bond, Vice Chairman, NRSC, 7/
1/93.
    \22\ Congressional Forum and House Council Announcement.
    \23\ Congressional Forum and House Council Announcement.
    \24\ 1996 RNC Annual Gala: Benefits for Gala Leadership, R 003186-
89.
    \25\ 1997 RNC Annual Gala, 5/13/97.
    \26\ Tentative Structure and Benefits for the Official 1995 
Republican Inaugural, R 003161.
    \27\ Memorandum from Kevin Kellum to Tim Barnes and Kelley 
Goodsell, R 003152.
    \28\ Memorandum from Tim Barnes to Royal Roth, 3/2/95, R 15029.
    \29\ Exhibit 278M: National Policy Forum Proposal for Ambrous 
Young.
    \30\ Ambrous Young deposition, 6/24/97, pp. 50-51, 71.
    \31\ Letter to Ambrous Young from Haley Barbour, January 31, 1995, 
NPF 000199.
    \32\ Associated Press, 3/11/97.
    \33\ Fort Worth Star Telegram, 9/21/97.
    \34\ Team 100 Gala Speakers Agenda, R 3195-97.
    \35\ Team 100 Gala Speakers Agenda, R 3195-97.
    \36\ Tentative Structure and Benefits for the Official 1995 
Republican Inaugural, R 3161.
    \37\ 1995 Team 100 Brochure, Membership Benefits Section.
    \38\ Videotape of 9/30/87 Reception for the Republican Eagles.
    \39\ Videotape of 4/29/87 Reception for President's Dinner.
    \40\ Videotape of 9/12/85 Reception for the Republican Eagles.
    \41\ Videotape of 4/22/85 Meeting for the Republican Congressional 
Leadership Council.
    \42\ Videotape of 5/10/84 Reception for President's Dinner 
Committee.
    \43\ Deposition of Judith Spangler, 5/9/97, pp. 39-40.
    \44\ 1997-98 Republican Presidential Roundtable Membership 
Prospectus.
    \45\ 1997-98 Republican Presidential Roundtable Membership 
Prospectus.
    \46\ Memorandum from Guy Vander Jagt to Members of the House 
Council, 10/9/92.
    \47\ Letter from Senator Don Nickles to Inner Circle Nominee, 8/31/
90; Fort Worth Star Telegram, 9/21/97.
    \48\ Jerry Campane, 9/18/97 Hrg., p. 225.
    \49\ Jerry Campane, 9/18/97 Hrg., p. 217.
    \50\ New York Times, 2/20/89.
    \51\ New York Times, 2/20/89.
    \52\ Common Cause Report, 4/92.
    \53\ Houston Chronicle, 8/21/92; Common Cause Report, 4/92.
    \54\ Common Cause Report, 4/92.
    \55\ Los Angeles Times, 7/6/92.
    \56\ Seattle Times, 5/26/92.
    \57\ St. Petersburg Times, 4/26/92.
    \58\ Newsday, 11/9/92.
    \59\ New York Times, 2/20/89.





                          
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