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105th Congress
; 2nd Session

Senate Report 105-167 Part 5

105 S. Rpt. 167; Prt. 5

INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996 FEDEELECTION CAMPAIGNS

DATE: Ordered to be printed March 10, 1998

SPONSOR: Mr. Thompson submitted the following report

COMMITTEE: from the Committee on Governmental Affairs

TEXT:
PREFACE

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.'' (note - 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. (note - 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. (note - 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. (note - 9Triad 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. (note - 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. (note - 12The 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 32) Between January and September 1996, Triad received a total of $1 (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 53Another 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.'' (note - 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.'' (note - 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. (note - 62)

In addition to providing advice and fundraising assistance to candidates, Triad worked to raise funds for individual candidates. (note - 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. (note - 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.'' (note - 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.'' (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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.'' (note - 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. (note - 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. (note - 95Foster 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. (note - 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. (note - 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. . .'' (note - 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?'' (note - 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. (note - 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. (note - 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. (note - 108) The majority of groups that aired such advertisements, produced mailings, and made telephone calls 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. (note - 111While 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. (note - 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. (note - 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].'' (note - 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.'' (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 147As 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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 (note - 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. (note - 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. (note - 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. (note - 162) Koch Industries gave at least $2,000 directly to Triad in October 1996. (note - 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 confidentiality agreement 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. (note - 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.'' (note - 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];'' (note - 16An 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;'' (note - 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.'' (note - 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. (note - 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.''' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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, and fundraising material provided by Odell to Philip Anschutz that was copied to Greener. (note - 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 (note - 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. (note - 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. (note - 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. (note - 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. ''' (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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?'' (note - 7Documents 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. (note - 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. (note - 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. (note - 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. (note - 94Ginsberg 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.''' (note - 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. (note - 102)

Assuming that the Economic Education Trust was behind the CCF ad campaign, the trust, through Triad and CCF, funneled at least $2 (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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.'' The authors 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. (note - 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. (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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]. (note - 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. (note - 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. (note - 72The 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. (note - 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.'' (note - 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. (note - 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. (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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 Christian Coalition is really an arm of the Republican Party. . . . This is so explicit, it's incredible.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. 51Associated Press, 7/7/96. 52See Chapter 10; Exhibit 2367: Coalition Building Manual, authored by Curt Anderson, R01821 49. 53Exhibit 2367, at R01841. 54Ibid. at Exhibit 2367, at R01847. 55Exhibit 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. 56Exhibit 2363. 57Exhibit 2353: undated internal RNC memorandum from ''Blaise'' to ''Pat,'' regarding ''Outreach, Auxiliaries, Coalitions,'' R51299 30. 58Exhibit 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. 59Exhibit 2365. 60Hearing 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. 61Drew, p. 14. 62For 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. 63Memorandum 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. 65Memorandum from RNC coalitions director Jack St. Martin to

RNC Chairman Barbour, 9/6/95. 66Hearing 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. 67See, 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.). 68Drew, p. 106. 69Drew, pp. 161 62. 70Drew, pp. 164 65. 71See Drew, p. 6. 72See, for example, San Diego Union-Tribune, 8/9/96, p. B1. 73See, 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. 77FEC 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. 80Norfolk Virginian-Pilot, 8/4/97. 81Norfolk Virginian-Pilot, 8/1/97. 82Christian Coalition $25,000 check to the Second District Republican Committee, 11/12/91. 83Norfolk 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. 88FEC Complaint, p. 2. 89FEC 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. 90FEC Complaint, p. 6. 91FEC Complaint, pp. 5 12. 92FEC Complaint, p. 5; 2 U.S.C. 441b. 93FEC ''Statement of Reasons,'' Commissioners Thomas, McGarry, & McDonald, 7/30/96, p.2. 94FEC Complaint, pp. 6 10. 95FEC Complaint, p. 7. 96FEC Complaint, pp. 7 8. 97FEC Complaint, p. 8. 98FEC Complaint, p. 9. 99FEC Complaint, p. 9 10. 100FEC Complaint, p. 10. 101FEC Complaint, pp. 10 11. 102FEC Complaint, pp. 11 12. 103FEC Complaint, p. 12. 104FEC 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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.'' (note - 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. (note - 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.'' (note - 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.'' (note - 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. (note - 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 Internet 20 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.'' (note - 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. (note - 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. (note - 38) K. Tucker Anderson, a major donor to ALT, has served on Cato's board. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 24Meddoff 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.'' (note - 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. (note - 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. (note - 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. (note - 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?'' (note - 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. (note - 37Medoff 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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. (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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.'' (note - 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. (note - 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. (note - 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.

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