Did Gingrich bend campaign laws with his 'independent' committee?

McClatchy NewspapersDecember 19, 2011 

WASHINGTON — Newt Gingrich helped bankroll his resurrection from a has-been to a Republican presidential frontrunner by exploiting a gap in federal campaign finance laws to create a political money machine that raised $54 million over five years.

The former House speaker appears to have made unprecedented use of a supposedly independent political committee that collected unlimited donations, financing a coast-to-coast shadow campaign that raised his profile and provided a launch pad for his presidential run.

Gingrich's American Solutions for Winning the Future, which he shuttered in July, shelled out at least $8 million for the chartered jets in which he hop-scotched the nation for public appearances while weighing whether to enter the 2008 and 2012 presidential races.

The committee's acceptance of huge cash donations — including $7.65 million from Sheldon Adelson, a pro-Israel, billionaire Las Vegas casino owner, and more than $2 million from five energy companies — has sewn concerns that Gingrich would be beholden to his benefactors if he won the White House.

It also highlights what critics call another ugly downside of a 5-4 Supreme Court decision last year allowing corporations and unions to donate unlimited sums to political committees as long as they're independent of candidates.

A Gingrich spokesman said the donors merely gave because they agree with Gingrich's ideas.

Now two new pro-Gingrich independent groups, known as "super PACs," say they will similarly raise unlimited donations in an apparent bid to rapidly narrow the cash and advertising advantages of his well-heeled chief GOP rival, Mitt Romney, heading into the party's caucuses and primary elections.

But it was American Solutions that gave Gingrich his springboard.

"The guy's clever," Lawrence Jacobs, director of the Center for the Study of Politics at the University of Minnesota's Humphrey Institute, said of Gingrich and his use of the committee. "Looking back, and now seeing Gingrich as the frontrunner ... it's an ingenious, diabolical scheme to circumvent what's left of the campaign finance regime."

"The money wasn't used literally to finance a campaign for a particular office," Jacobs said. "It was used for a general, over-time campaign to keep Gingrich alive politically — an enormously luxurious campaign operation to sustain his political viability for the right time to jump into the presidential race. It's no accident that he's popped in in 2012."

Larry Sabato, a University of Virginia political science professor, said that the committee "played a major role" in Gingrich's comeback 13 years after he left Congress, chastened by his scandal-driven ouster as speaker and two divorces that further hurt his image. He also had depleted his financial assets.

With American Solutions, Sabato said, Gingrich created a new type of informal candidacy, one that serves as the latest example of the breakdown of campaign finance laws aimed at ensuring that "nobody could give so much money that they would become too influential, too powerful."

Like similar committees, American Solutions was required by law to be independent of any political campaign. Gingrich, however, eliminated its outside board of directors by 2009 and took on the title of general chairman. Unlike many other presidential candidates, he never formed an exploratory committee before declaring his candidacy for president.

None of his Republican presidential rivals, nor any other federal candidate for that matter, is known to have operated such a committee before formally declaring his or her candidacy.

Gingrich's chief campaign spokesman, R.C. Hammond, said that the former Georgia congressman didn't start exploring a presidential campaign until April, shortly before he joined the presidential race, and that all of his committee activities were "legitimate."

"The purpose of American Solutions was to advance an agenda of free enterprise and tri-partisan solutions," Hammond said. "Those were the activities he (Gingrich) was undertaking."

Spokesmen for two rival campaigns, former Massachusetts Gov. Romney's and Texas Rep. Ron Paul's, had no immediate comment on Gingrich's use of the committee.

The University of Minnesota's Jacobs said, however, that Gingrich's use of the committee appears to be "right on the line" defining what's legal.

American Solutions was among a maze of entities that Gingrich created over the last decade while enriching himself with lucrative fees from speeches; strategic consulting for largely undisclosed health care industry clients; and sales of historical documentaries and his nearly two dozen books.

Called a 527 group, for the federal tax code provision that permits committees operating independently from candidates to accept unlimited sums from individuals and corporations, American Solutions raised $28.2 million during the two-year period ending Dec. 31, 2010.

That was nearly double the total donations garnered by the next closest 527, according to the Center for Responsive Politics, a campaign watchdog group.

In a letter to potential backers after the group's formation in the fall of 2006, Gingrich called it a unique organization "designed to rise above traditional gridlocked partisanship" and to develop "breakthrough solutions to the most important issues facing this country."

Vin Weber, a former Minnesota congressman and longtime Gingrich friend who served on American Solutions' board for a couple of years, said that the group "certainly helped build his path back into political prominence."

"They basically sent Newt around the country promoting American Solutions," Weber said.

Weber, who is supporting Romney for the Republican nomination, said that the committee had "not gotten really up to speed in terms of programming" when he received a call, apparently in 2008, advising him that the board was being abolished. Gingrich soon took over as the group's general chairman.

Besides holding jobs summits in nine cities, the committee pursued several initiatives that would appeal to conservative donors: a "drill now" movement for increased U.S. oil exploration, an attempt to rally opposition to President Barack Obama's health care overhaul; and a campaign to fight climate change legislation that would set targets and timetables for industrial firms to reduce carbon emissions.

But of $37.9 million raised from 2006 through 2009, the committee spent just $7.2 million on programs, according to its filings with the Internal Revenue Service.

Most of American Solutions' money went toward the costly task of paying for telemarketers and direct mail appeals to develop a loyal pool of contributors. Ohio-based InfoCision, a telemarketing firm that specializes in building lists of small donors, was paid upward of $30 million of the $54 million raised over the group's life, exhausting most of the money contributed.

Hence, about $17 million collected from contributors of at least $25,000 was crucial to financing Gingrich's travel.

Top donor Adelson — who owns two of Las Vegas' premier hotel-casinos, the Venetian and the Palazzo, and is No. 16 on Forbes' 2011 list of the world's wealthiest people — gave the group $1 million in seed money in the fall of 2006 and kept the big checks flowing into last year. Adelson's $7.65 million in total donations roughly match the amount that Gingrich's cash-hungry presidential campaign had raised through mid-November, according to Hammond. Adelson and his wife, Miriam, have been limited to donating $2,500 each to the official campaign for the GOP nomination.

A staunch backer of Israeli Prime Minister Benjamin Netanyahu's hard-line policies toward a Palestinian state, Adelson publishes a free newspaper in Israel touted to be the most widely read in the Jewish state.

Ron Reese, a spokesman for Adelson and the Las Vegas Sands Corp. that he runs, said that "he and Speaker Gingrich go back a number of years."

Reese declined to explain Adelson's donations to American Solutions, but Gingrich's provocative comments about Israel in exchanges with Jewish groups over the last two weeks seem to leave little mystery.

Gingrich told Jewish activists that he's counted Netanyahu as a friend since the 1980s. On The Jewish Channel, he said that the Palestinians are an "invented" people "who are in fact Arabs." He told the activists that he'd move the U.S. embassy to Jerusalem on his first day in the Oval Office; that Netanyahu should encourage continued building of Jewish settlements on the West Bank as a bargaining chip and that, if elected, he would end aid to the Palestinian Authority if it incited acts against Israel.

A second early donor, Charlotte, N.C., real estate investor Fred Godley, gave $1.1 million to the committee in 2007 and another $100,000 in 2009.

Energy firms that backed American Solutions as it fought legislation restricting carbon emissions include two St. Louis-based coal industry giants. Peabody Energy, the world's largest private coal producer, and its chief lobbyist, Fred Palmer, gave $825,000, while Arch Coal, the No. 2 U.S. coal company, gave $100,000.

In addition, Oklahoma-based Devon Energy, an independent oil and gas exploration company, donated $400,000; Columbus, Ohio-based American Electric Power Co. and its chairman, Michael Morris, gave $400,000; and Houston-based Plains Exploration Co. kicked in $200,000. Other leading six-figure donors included: the late Cincinnati billionaire Carl Lindner ($690,000); Dallas real estate giant Crow Holdings ($600,000); Minnesota broadcasting magnate Stanley Hubbard ($385,000); Wisconsin businessman and onetime GOP senatorial candidate Terry Kohler ($328,082); California businessman Fred Sacher ($275,000); NASCAR president James France ($264,000); Home Depot co-founder Bernie Marcus ($250,000); Las Vegas casino patriarch Frank Fertitta Jr., who died a year after his 2008 donation, and his sons Frank III and Lorenzo, who are majority owners of Ultimate Fighting Championship and part owners of Station Casinos ($250,000); former CarMax and Circuit City chief Richard Sharp ($150,000); discount brokerage titan Charles Schwab ($150,000), and Cincinnati Reds owner Robert Castellini ($146,000).

Sabato said he's disturbed by such large donations to a committee run by Gingrich pending his return to politics. After receiving a six- or seven-figure check, he said, "there's no way that any politician is going to deny you much of anything that you want."

Gingrich spokesman Hammond stressed that the former speaker could have established American Solutions as a nonprofit that wasn't required to identify its donors, but instead he chose "the most transparent (type of) committee that exists in law today."

As for the high-dollar donations, Hammond said that Gingrich has merely voiced his ideas "and money is following to support those ideas."

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