[House Report 105-1]
[From the U.S. Government Publishing Office]
House Calendar No. 1
105th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 105-1
_______________________________________________________________________
IN THE MATTER OF REPRESENTATIVE NEWT GINGRICH--pages 1 to 128
----------
R E P O R T
of the
SELECT COMMITTEE ON ETHICS
January 17, 1997.--Referred to the House Calendar and ordered to be
printed
IN THE MATTER OF REPRESENTATIVE NEWT GINGRICH
House Calendar No. 1
105th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 105-1
_______________________________________________________________________
IN THE MATTER OF
REPRESENTATIVE NEWT GINGRICH
__________
R E P O R T
of the
SELECT COMMITTEE ON ETHICS
January 17, 1997.--Referred to the House Calendar and ordered to be
printed
LETTER OF TRANSMITTAL
----------
Congress of the United States,
Washington, DC, January 17, 1997.
Hon. Robin Carle,
Clerk, House of Representatives,
Washington, DC.
Dear Madam Clerk: Pursuant to clause 4(e)(3) of Rule 10,
and by direction of the Select Committee on Ethics, I herewith
submit the attached report, ``In the Matter of Representative
Newt Gingrich.''
Sincerely,
Nancy L. Johnson,
Chairman.
C O N T E N T S
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Page
I. Introduction.....................................................1
A. Procedural Background................................. 1
B. Investigative Process................................. 3
C. Summary of the Subcommittee's Factual Findings........ 4
1. AOW/ACTV.......................................... 4
2. Renewing American Civilization.................... 5
3. Failure to Seek Legal Advice...................... 7
4. Mr. Gingrich's Statements to the Committee........ 8
D. Statement of Alleged Violation........................ 9
II. Summary of Facts Pertaining to American Citizens Television......9
A. GOPAC................................................. 9
B. American Opportunities Workshop/American Citizens
Television........................................... 11
1. Background........................................ 11
2. Planning and Purpose for AOW/ACTV................. 13
3. Letters Describing Partisan, Political Nature of
AOW/ACTV......................................... 16
4. AOW/ACTV in Mr. Gingrich's Congressional District. 18
5. GOPAC's Connection to ALOF and ACTV............... 19
6. GOPAC Funding of ALOF and ACTV.................... 20
III. Summary of Facts Pertaining to ``Renewing American Civilization'22
A. Genesis of the Renewing American Civilization Movement
and Course........................................... 22
B. Role of the Course in the Movement.................... 24
C. GOPAC and Renewing American Civilization.............. 30
1. GOPAC's Adoption of the Renewing American
Civilization Theme............................... 30
2. GOPAC'S Inability To Fund Its Political Projects
in 1992 and 1993................................. 31
3. GOPAC's Involvement in the Development, Funding,
and Management of the Renewing American
Civilization Course.............................. 32
a. GOPAC Personnel............................... 32
b. Involvement of GOPAC Charter Members in Course
Design....................................... 35
c. Letters sent by GOPAC......................... 35
D. ``Replacing the Welfare State with an Opportunity
Society'' as a Political Tool........................ 38
E. Renewing American Civilization House Working Group.... 44
F. Marketing of the Course............................... 46
G. Kennesaw State College's Role in the Course........... 51
H. Reinhardt College's Role in the Course................ 53
I. End of Renewing American Civilization Course.......... 55
IV. Ethics Committee Approval of Course.............................55
V. Legal Advice Sought and Received................................58
VI. Summary of the Report of the Subcommittee's Expert..............63
A. Introduction.......................................... 63
B. Qualifications of the Subcommittee's Expert........... 63
C. Summary of the Expert's Conclusions................... 64
1. The American Citizens Television Program.......... 65
a. Private Benefit Prohibition................... 65
b. Campaign Intervention Prohibition............. 66
2. The Renewing American Civilization Course......... 67
a. Private Benefit Prohibition................... 67
b. Campaign Intervention Prohibition............. 69
D. Advice Ms. Roady Would Have Given..................... 70
VII. Summary of Conclusions of Mr. Gingrich's Tax Counsel............70
A. Introduction.......................................... 70
B. Qualifications of Mr. Gingrich's Tax Counsel.......... 70
C. Summary of Conclusions of Mr. Gingrich's Tax Counsel.. 71
1. Private Benefit Prohibition....................... 72
2. Campaign Intervention Prohibition................. 75
D. Advice Mr. Holden Would Have Given.................... 76
VIII.Summary of Facts Pertaining to Statements Made to the Committee.77
A. Background............................................ 77
B. Statements Made by Mr. Gingrich to the Committee,
Directly or Through Counsel.......................... 78
1. Mr. Gingrich's December 8, 1994 Letter to the
Committee........................................ 78
2. March 27, 1995 Letter of Mr. Gingrich's Attorney
to the Committee................................. 79
C. Subcommittee's Inquiry Into Statements Made to the
Committee............................................ 80
D. Creation of the December 8, 1994 and March 27, 1995
Letters.............................................. 81
1. Creation of the December 8, 1994 Letter........... 82
2. Bases for Statements in the December 8, 1994
Letter........................................... 85
3. Creation of the March 27, 1995 Letter............. 87
4. Bases for Statements in the March 27, 1995 Letter. 89
IX. Analysis and Conclusion.........................................89
A. Tax Issues............................................ 89
B. Statements Made to the Committee...................... 90
C. Statement of Alleged Violation........................ 91
1. Deliberations on the Tax Counts................... 92
2. Deliberations Concerning the Letters.............. 92
3. Discussions with Mr. Gingrich's Counsel and
Recommended Sanctions............................ 93
D. Post-December 21, 1996 Activity....................... 96
X. Summary of Facts Pertaining to Use of Unofficial Resources......96
XI. Availability of Documents to Internal Revenue Service...........97
Appendix......................................................... 99
Index to Appendix
Summary of Law Pertaining to Organizations Exempt From Federal Income
Tax Under Section 501(c)(3) of the Internal Revenue Code
A. Introduction.................................................. 99
B. The Organizational Test and the Operational Test.............. 99
1. Organizational Test....................................... 99
2. Operational Test.......................................... 100
a. ``Educational'' Organizations May Qualify for
Exemption Under Section 501(c)(3).................... 101
b. To Satisfy the Operational Test, an Organization Must
Not Violate the ``Private Benefit'' Prohibition...... 102
c. To Satisfy the Operational Test, an Organization Must
Not Be an ``Action'' Organization.................... 110
(i) If an Organization Participates in a Political
Campaign, It Is an Action Organization Not
Entitled to Exemption Under Section 501(c)(3).... 110
(a) The Prohibition is ``Absolute''.............. 113
(b) Section 501(c)(3) Organizations May Not
Establish or Support a PAC................... 115
(c) ``Express Advocacy'' Is Not Required, and
Issue Advocacy Is Prohibited if Used To
Convey Support for or Opposition to a
Candidate.................................... 115
(d) Educational Activities May Constitute
Participation or Intervention................ 116
(e) Nonpartisan Activities May Constitute
Prohibited Political Campaign Participation.. 118
(f) The IRS Has Found Violations of the
Prohibition on Political Campaign
Participation When an Activity Could Affect
or Was Intended To Affect Voters' Preferences 118
(ii) If a Substantial Part of an Organization's
Activities Is Attempting To Influence
Legislation, or Its Primary Goal Can Only Be
Accomplished Through Legislation, It Is an
``Action'' Organization.......................... 121
(a) Definition of ``Legislation''................ 122
(b) Definition of ``Attempting To Influence
Legislation''................................ 122
(c) Definition of ``Substantial''................ 124
(d) Circumstances Under Which an Organization's
``objectives can be achieved only through the
passage of legislation''..................... 125
d. To Satisfy the Operational Test, an Organization Must
Not Violate the ``Private Inurement'' Prohibition.... 126
Exhibits......................................................... 129
House Calendar No. 1
105th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 105-1
_______________________________________________________________________
IN THE MATTER OF REPRESENTATIVE NEWT GINGRICH
_______
January 17, 1997.--Referred to the House Calendar and ordered to be
printed
_______________________________________________________________________
Mrs. Johnson from the Select Committee on Ethics, submitted the
following
R E P O R T
I. Introduction
A. Procedural Background
On September 7, 1994, a complaint was filed with the
Committee on Standards of Official Conduct (``Committee'')
against Representative Newt Gingrich by Ben Jones, Mr.
Gingrich's opponent in his 1994 campaign for re-election. The
complaint centered on a course taught by Mr. Gingrich called
``Renewing American Civilization.'' Among other things, the
complaint alleged that Mr. Gingrich had used his congressional
staff to work on the course in violation of House Rules. The
complaint also alleged that Mr. Gingrich had created a college
course under the sponsorship of 501(c)(3) organizations in
order ``to meet certain political, not educational,
objectives'' and, therefore, caused a violation of section
501(c)(3) of the Internal Revenue Code to occur. In partial
support of the allegation that the course was a partisan,
political project, the complaint alleged that the course was
under the control of GOPAC, a political action committee of
which Mr. Gingrich was the General Chairman.
Mr. Gingrich responded to this complaint in letters dated
October 4, 1994, and December 8, 1994, but the matter was not
resolved before the end of the 103rd Congress. On January 26,
1995, Representative David Bonior filed an amended version of
the complaint originally filed by Mr. Jones. It restated the
allegations concerning the misuse of tax-exempt organizations
and contained additional allegations. Mr. Gingrich responded to
that complaint in a letter from his counsel dated March 27,
1995.
On December 6, 1995, the Committee voted to initiate a
Preliminary Inquiry into the allegations concerning the misuse
of tax-exempt organizations. The Committee appointed an
Investigative Subcommittee (``Subcommittee'') and instructed it
to: determine if there is reason to believe that Representative
Gingrich's activities in relation to the college course
``Renewing American Civilization'' were in violation of section
501(c)(3) or whether any foundation qualified under section
501(c)(3), with respect to the course, violated its status with
the knowledge and approval of Representative Gingrich * * *.
The Committee also resolved to appoint a Special Counsel to
assist in the Preliminary Inquiry. On December 22, 1995, the
Committee appointed James M. Cole, a partner in the law firm of
Bryan Cave LLP, as the Special Counsel. Mr. Cole's contract was
signed January 3, 1996, and he began his work.
On September 26, 1996, the Subcommittee announced that, in
light of certain facts discovered during the Preliminary
Inquiry, the investigation was being expanded to include the
following additional areas:
(1) Whether Representative Gingrich provided accurate,
reliable, and complete information concerning the course
entitled ``Renewing American Civilization,'' GOPAC's
relationship to the course entitled ``Renewing American
Civilization,'' or the Progress and Freedom Foundation in the
course of communicating with the Committee, directly or through
counsel (House Rule 43, Cl. 1);
(2) Whether Representative Gingrich's relationship with the
Progress and Freedom Foundation, including but not limited to
his involvement with the course entitled ``Renewing American
Civilization,'' violated the foundation's status under
501(c)(3) of the Internal Revenue Code and related regulations
(House Rule 43, Cl. 1);
(3) Whether Representative Gingrich's use of the personnel
and facilities of the Progress and Freedom Foundation
constituted a use of unofficial resources for official purposes
(House Rule 45); and
(4) Whether Representative Gingrich's activities on behalf
of the Abraham Lincoln Opportunity Foundation violated its
status under 501(c)(3) of the Internal Revenue Code and related
regulations or whether the Abraham Lincoln Opportunity
Foundation violated its status with the knowledge and approval
of Representative Gingrich (House Rule 43, Cl. 1).
As discussed below, the Subcommittee issued a Statement of
Alleged Violation with respect to the initial allegation
pertaining to Renewing American Civilization and also with
respect to items 1 and 4 above. The Subcommittee did not find
any violations of House Rules in regard to the issues set forth
in items 2 and 3 above. The Subcommittee, however, decided to
recommend that the full Committee make available to the IRS
documents produced during the Preliminary Inquiry for use in
its ongoing inquiries of 501(c)(3) organizations. In regard to
item 3 above, the Subcommittee decided to issue some advice to
Members concerning the proper use of outside consultants for
official purposes.
On January 7, 1997, the House conveyed the matter of
Representative Newt Gingrich to the Select Committee on Ethics
by its adoption of clause 4(e)(3) of rule X, as contained in
House Resolution 5.
On January 17, 1997, the Select Committee on Ethics held a
sanction hearing in the matter pursuant to committee rule 20.
Following the sanction hearing, the Select Committee ordered a
report to the House, by a roll call vote of 7-1, recommending
that Representative Gingrich be reprimanded and ordered to
reimburse the House for some of the costs of the investigation
in the amount of $300,000. The following Members voted aye:
Mrs. Johnson of Connecticut, Mr. Goss, Mr. Schiff, Mr. Cardin,
Ms. Pelosi, Mr. Borski, and Mr. Sawyer. The following Member
voted no: Mr. Smith of Texas.
The adoption of this report by the House shall constitute
such a reprimand and order of reimbursement. Accordingly, the
Select Committee recommends that the House adopt a resolution
in the following form.
house resolution --
Resolved, That the House adopt the report of the Select
Committee on Ethics dated January 17, 1997, In the Matter of
Representative Newt Gingrich.
Statement Pursuant to Clause 2(l)(3)(A) of Rule XI
No oversight findings are considered pertinent.
B. Investigative Process
The investigation of this matter began on January 3, 1996,
and lasted through December 12, 1996. In the course of the
investigation, approximately 90 subpoenas or requests for
documents were issued, approximately 150,000 pages of documents
were reviewed, and approximately 70 people were interviewed.
Most of the interviews were conducted by Mr. Cole outside the
presence of the Subcommittee. A court reporter transcribed the
interviews and the transcripts were made available to the
Members of the Subcommittee. Some of the interviews were
conducted before the Members of the Subcommittee primarily to
explore the issue of whether Mr. Gingrich had provided the
Committee, directly or through counsel, inaccurate, unreliable,
or incomplete information.
During the Preliminary Inquiry, Mr. Cole interviewed Mr.
Gingrich twice and Mr. Gingrich appeared before the
Subcommittee twice. Several draft discussion documents, with
notebooks of exhibits, were prepared for the Subcommittee in
order to brief the Members on the findings and status of the
Preliminary Inquiry. After receiving the discussion documents,
the Subcommittee met to discuss the legal and factual questions
at issue.
In most investigations, people who were involved in the
events under investigation are interviewed and asked to
describe the events. This practice has some risk with respect
to the reliability of the evidence gathered because, for
example, memories fade and can change when a matter becomes
controversial and subject to an investigation. One advantage
the Subcommittee had in this investigation was the availability
of a vast body of documentation from multiple sources that had
been created contemporaneously with the events under
investigation. A number of documents central to the analysis of
the matter, in fact, had been written by Mr. Gingrich. Thus,
the documents provided a unique, contemporaneous view of
people's purposes, motivations, and intentions with respect to
the facts at issue. This Report relies heavily, but not
exclusively, on an analysis of those documents to describe the
acts, as well as Mr. Gingrich's purpose, motivations, and
intentions.
As the Report proceeds through the facts, there is
discussion of conservative and Republican political philosophy.
The Committee and the Special Counsel, however, do not take any
positions with respect to the validity of this or any other
political philosophy, nor do they take any positions with
respect to the desirability of the dissemination of this or any
other political philosophy. Mr. Gingrich's political philosophy
and its dissemination is discussed only insofar as it is
necessary to examine the issues in this matter.
C. Summary of the Subcommittee's Factual Findings
The Subcommittee found that in regard to two projects, Mr.
Gingrich engaged in activity involving 501(c)(3) organizations
that was substantially motivated by partisan, political goals.
The Subcommittee also found that Mr. Gingrich provided the
Committee with material information about one of those projects
that was inaccurate, incomplete, and unreliable.
1. aow/actv
The first project was a television program called the
American Opportunities Workshop (``AOW''). It took place in May
1990. The idea for this project came from Mr. Gingrich and he
was principally responsible for developing its message. AOW
involved broadcasting a television program on the subject of
various governmental issues. Mr. Gingrich hoped that this
program would help create a ``citizens' movement.'' Workshops
were set up throughout the country where people could gather to
watch the program and be recruited for the citizens' movement.
While the program was educational, the citizens' movement was
also considered a tool to recruit non-voters and people who
were apolitical to the Republican Party. The program was
deliberately free of any references to Republicans or partisan
politics because Mr. Gingrich believed such references would
dissuade the target audience of non-voters from becoming
involved.
AOW started out as a project of GOPAC, a political action
committee dedicated to, among other things, achieving
Republican control of the United States House of
Representatives. Its methods for accomplishing this goal
included the development and articulation of a political
message and the dissemination of that message as widely as
possible. One such avenue of dissemination was AOW. The
program, however, consumed a substantial portion of GOPAC's
revenues. Because of the expense, Mr. Gingrich and others at
GOPAC decided to transfer the project to a 501(c)(3)
organization in order to attract tax-deductible funding. The
501(c)(3) organization chosen was the Abraham Lincoln
Opportunity Foundation (``ALOF''). ALOF was dormant at the time
and was revived to sponsor AOW's successor, American Citizens'
Television (``ACTV''). ALOF operated out of GOPAC's offices.
Virtually all its officers and employers were simultaneously
GOPAC officers or employees. ACTV had the same educational
aspects and partisan, political goals as AOW. The principal
difference between the two was that ACTV used approximately
$260,000 in tax-deductible contributions to fund its
operations. ACTV broadcast three television programs in 1990
and then ceased operations. The last program was funded by a
501(c)(4) organization because the show's content was deemed to
be too political for a 501(c)(3) organization.
2. renewing american civilization
The second project utilizing 501(c)(3) organizations
involved a college course taught by Mr. Gingrich called
Renewing American Civilization. Mr. Gingrich developed the
course as a subset to and tool of a larger political and
cultural movement also called Renewing American Civilization.
The goal of this movement, as stated by Mr. Gingrich, was the
replacement of the ``welfare state'' with an ``opportunity
society.'' A primary means of achieving this goal was the
development of the movement's message and the dissemination of
that message as widely as possible. Mr. Gingrich intended that
a ``Republican majority'' would be the heart of the movement
and that the movement would ``professionalize'' House
Republicans. A method for achieving these goals was to use the
movement's message to ``attract voters, resources, and
candidates.'' According to Mr. Gingrich, the course was, among
other things, a primary and essential means to develop and
disseminate the message of the movement.
The core message of the movement and the course was that
the welfare state had failed, that it could not be repaired but
had to be replaced, and that it had to be replaced with an
opportunity society based on what Mr. Gingrich called the
``Five Pillars of American Civilization.'' These were: (1)
personal strength; (2) entrepreneurial free enterprise; (3) the
spirit of invention; (4) quality as defined by Edwards Deming;
and (5) the lessons of American history. The message also
concentrated on three substantive areas. These were: (1) jobs
and economic growth; (2) health; and (3) saving the inner city.
This message was also Mr. Gingrich's main campaign theme in
1993 and 1994 and Mr. Gingrich sought to have Republican
candidates adopt the Renewing American Civilization message in
their campaigns. In the context of political campaigns, Mr.
Gingrich used the term ``welfare state'' as a negative label
for Democrats and the term ``opportunity society'' as a
positive label for Republicans.
As General Chairman of GOPAC, Mr. Gingrich decided that
GOPAC would use Renewing American Civilization as its political
message and theme during 1993-1994. GOPAC, however, was having
financial difficulties and could not afford to disseminate its
political messages as it had in past years. GOPAC had a number
of roles in regard to the course. For example, GOPAC personnel
helped develop, manage, promote, and raise funds for the
course. GOPAC Charter Members helped develop the idea to teach
the course as a means for communicating GOPAC's message. GOPAC
Charter Members at Charter Meetings helped develop the content
of the course. GOPAC was ``better off'' as a result of the
nationwide dissemination of the Renewing American Civilization
message via the course in that the message GOPAC had adopted
and determined to be the one that would help it achieve its
goals was broadcast widely and at no cost to GOPAC.
The course was taught at Kennesaw State College (``KSC'')
in 1993 and at Reinhardt College in 1994 and 1995. Each course
consisted of ten lectures and each lecture consisted of
approximately four hours of classroom instruction, for a total
of forty hours. Mr. Gingrich taught twenty hours of each course
and his co-teacher, or occasionally a guest lecturer, taught
twenty hours. Students from each of the colleges as well as
people who were not students attended the lectures. Mr.
Gingrich's 20-hour portion of the course was taped and
distributed to remote sites, referred to as ``site hosts,'' via
satellite, videotape and cable television. As with AOW/ACTV,
Renewing American Civilization involved setting up workshops
around the country where people could gather to watch the
course. While the course was educational, Mr. Gingrich intended
that the workshops would be, among other things, a recruiting
tool for GOPAC and the Republican Party.
The major costs for the Renewing American Civilization
course were for dissemination of the lectures. This expense was
primarily paid for by tax-deductible contributions made to the
501(c)(3) organizations that sponsored the course. Over the
three years the course was broadcast, approximately $1.2
million was spent on the project. The Kennesaw State College
Foundation (``KSCF'') sponsored the course the first year. All
funds raised were turned over to KSCF and dedicated exclusively
for the use of the Renewing American Civilization course. \1\
KSCF did not, however, manage the course and its role was
limited to depositing donations into its bank account and
paying bills from that account that were presented to it by the
Dean of the KSC Business School. KSCF contracted with the
Washington Policy Group, Inc. (``WPG'') to manage and raise
funds for the course's development, production and
distribution. Jeffrey Eisenach, GOPAC's Executive Director from
June 1991 to June 1993 was the president and sole owner of WPG.
WPG and Mr. Eisenach played similar roles with respect to AOW/
ACTV.
---------------------------------------------------------------------------
\1\ As general management and support fees, KSCF kept 2.5% of any
money raised and KSC's Business School kept 7.5% of any money raised.
---------------------------------------------------------------------------
When the contract between WPG and KSCF ended in the fall of
1993, the Progress and Freedom Foundation (``PFF'') assumed the
role WPG had with the course at the same rate of compensation.
Mr. Eisenach was PFF's founder and president. Shortly after PFF
took over the management of the course, the Georgia Board of
Regents passed a resolution prohibiting any elected official
from teaching at a Georgia state educational institution. This
was the culmination of a controversy that had arisen around the
course at KSC. A group of KSC faculty had objected to the
course being taught on the campus because of a belief that it
was an effort to use the college to disseminate a political
message. Because of the Board of Regent's decision and the
controversy, it was decided that the course would be moved to a
private college.
The course was moved to Reinhardt for the 1994 and 1995
sessions. While there, PFF assumed full responsibility for the
course. PFF no longer received payments to run the course but,
instead, took in all contributions to the course and paid all
the bills, including paying Reinhardt for the use of the
college's video production facilities. All funds for the course
were raised by and expended by PFF under its tax-exempt status.
3. failure to seek legal advice
Under the Internal Revenue Code, a 501(c)(3) organization
must be operated exclusively for exempt purposes. The presence
of a single non-exempt purpose, if more than insubstantial in
nature, will destroy the exemption regardless of the number or
importance of truly exempt purposes. Conferring a benefit on
private interests is a non-exempt purpose. Under the Internal
Revenue Code, a 501(c)(3) organization is also prohibited from
intervening in a political campaign or providing any support to
a political action committee. These prohibitions reflect
congressional concerns that taxpayer funds not be used to
subsidize political activity.
During the Preliminary Inquiry, the Subcommittee consulted
with an expert in the law of tax-exempt organizations and read
materials on the subject. Mr. Gingrich's activities onbehalf of
AOW/ACTV and Renewing American Civilization, as well as the activities
of others on behalf of those projects done with Mr. Gingrich's
knowledge and approval, were reviewed by the expert. The expert
concluded that those activities violated the status of the
organizations under section 501(c)(3) in that, among other things,
those activities were intended to confer more than insubstantial
benefits on GOPAC, Mr. Gingrich, and Republican entities and
candidates, and provided support to GOPAC.
At Mr. Gingrich's request, the Subcommittee also heard from
tax counsel retained by Mr. Gingrich for the purposes of the
Preliminary Inquiry. While that counsel is an experienced tax
attorney with a sterling reputation, he has less experience in
dealing with tax-exempt organizations law than does the expert
retained by the Subcommittee. According to Mr. Gingrich's tax
counsel, the type of activity involved in the AOW/ACTV and
Renewing American Civilization projects would not violate the
status of the relevant organizations under section 501(c)(3).
He opined that once it was determined that an activity was
``educational,'' as defined by the IRS, and did not have the
effect of benefiting a private interest, it did not violate the
private benefit prohibition. In the view of Mr. Gingrich's tax
counsel, motivation on the part of an organization's principals
and agents is irrelevant. Further, he opined that a 501(c)(3)
organization does not violate the private benefit prohibition
or political campaign prohibition through close association
with or support of a political action committee unless it
specifically calls for the election or defeat of an
identifiable political candidate.
Both the Subcommittee's tax expert and Mr. Gingrich's tax
counsel, however, agreed that had Mr. Gingrich sought their
advice before embarking on activities of the type involved in
AOW/ACTV and the Renewing American Civilization course, each of
them would have advised Mr. Gingrich not to use a 501(c)(3)
organization as he had in regard to those activities. The
Subcommittee's tax expert said that doing so would violate
501(c)(3). During his appearance before the Subcommittee, Mr.
Gingrich's tax counsel said that he would not have recommended
the use of 501(c)(3) organizations to sponsor the course
because the combination of politics and 501(c)(3) organizations
is an ``explosive mix'' almost certain to draw the attention of
the IRS.
Based on the evidence, it was clear that Mr. Gingrich
intended that the AOW/ACTV and Renewing American Civilization
projects have substantial partisan, political purposes. In
addition, he was aware that political activities in the context
of 501(c)(3) organizations were problematic. Prior to embarking
on these projects, Mr. Gingrich had been involved with another
organization that had direct experience with the private
benefit prohibition in a political context, the American
Campaign Academy. In a 1989 Tax Court opinion issued less than
a year before Mr. Gingrich set the AOW/ACTV project into
motion, the Academy was denied its exemption under 501(c)(3)
because, although educational, it conferred an impermissible
private benefit on Republican candidates and entities. Close
associates of Mr. Gingrich were principals in the American
Campaign Academy, Mr. Gingrich taught at the Academy, and Mr.
Gingrich had been briefed at the time on the tax controversy
surrounding the Academy. In addition, Mr. Gingrich stated
publicly that he was taking a very aggressive approach to the
use of 501(c)(3) organizations in regard to, at least, the
Renewing American Civilization course.
Taking into account Mr. Gingrich's background, experience,
and sophistication with respect to tax-exempt organizations,
and his status as a Member of Congress obligated to maintain
high ethical standards, the Subcommittee concluded that Mr.
Gingrich should have known to seek appropriate legal advice to
ensure that his conduct in regard to the AOW/ACTV and Renewing
American Civilization projects was in compliance with
501(c)(3). Had he sought and followed such advice--after having
set out all the relevant facts, circumstances, plans, and goals
described above--501(c)(3) organizations would not have been
used to sponsor Mr. Gingrich's ACTV and Renewing American
Civilization projects.
4. mr. gingrich's statements to the committee
In responding to the complaints filed against him
concerning the Renewing American Civilization course, Mr.
Gingrich submitted several letters to the Committee. His first
letter, dated October 4, 1994, did not address the tax issues
raised in Mr. Jones' complaint, but rather responded to the
part of the complaint concerning unofficial use of official
resources. In it Mr. Gingrich stated that GOPAC, among other
organizations, paid people to work on the course. After this
response, the Committee wrote Mr. Gingrich and asked him
specifically to address issues related to whether the course
had a partisan, political aspect to it and, if so, whether it
was appropriate for a 501(c)(3) organization to be used to
sponsor the course. The Committee also specifically asked
whether GOPAC had any relationship to the course. Mr.
Gingrich's letter in response, dated December 8, 1994, was
prepared by his attorney, but it was read, approved, and signed
by Mr. Gingrich. It stated that the course had no partisan,
political aspects to it, that his motivation for teaching the
course was not political, and that GOPAC neither was involved
in nor received any benefit from any aspect of the course. In
his testimony before the Subcommittee, Mr. Gingrich admitted
that these statements were not true.
When the amended complaint was filed with the Committee in
January 1995, Mr. Gingrich's attorney responded to the
complaint on behalf of Mr. Gingrich in a letter dated March 27,
1995. His attorney addressed all the issues in the amended
complaint, including the issues related to the Renewing
American Civilization course. The letter was signed by Mr.
Gingrich's attorney, but Mr. Gingrich reviewed and approved it
prior to its being delivered to the Committee. In an interview
with Mr. Cole, Mr. Gingrich stated that if he had seen anything
inaccurate in the letter he would have instructed his attorney
to correct it. Similar to the December 8, 1994 letter, the
March 27, 1995 letter stated that the course had no partisan,
political aspects to it, that Mr. Gingrich's motivation for
teaching the course was not political, and that GOPAC had no
involvement in nor received any benefit from any aspect of the
course. In his testimony before the Subcommittee Mr. Gingrich
admitted that these statements were not true.
The goal of the letters was to have the complaints
dismissed. Of the people involved in drafting or editing the
letters, or reviewing them for accuracy, only Mr. Gingrich had
personal knowledge of the facts contained in the letters
regarding the course. The facts in the letters that were
inaccurate, incomplete, and unreliable were material to the
Committee's determination on how to proceed with the tax
questions contained in the complaints.
D. Statement of Alleged Violation
On December 21, 1996, the Subcommittee issued a Statement
of Alleged Violation stating that Mr. Gingrich had engaged in
conduct that did not reflect creditably on the House of
Representatives in that by failing to seek and follow legal
advice, Mr. Gingrich failed to take appropriate steps to ensure
that activities with respect to the AOW/ACTV project and the
Renewing American Civilization project were in accordance with
section 501(c)(3); and that on or about December 8, 1994, and
on or about March 27, 1995, information was transmitted to the
Committee by and on behalf of Mr. Gingrich that was material to
matters under consideration by the Committee, which
information, as Mr. Gingrich should have known, was inaccurate,
incomplete, and unreliable.
On December 21, 1996, Mr. Gingrich filed an answer with the
Subcommittee admitting to this violation of House Rules.
The following is a summary of the findings of the
Preliminary Inquiry relevant to the facts as set forth in the
Statement of Alleged Violation.
II. Summary of Facts Pertaining to American Citizens Television
A. GOPAC
GOPAC was a political action committee organized under
Section 527 of the Internal Revenue Code. As such,
contributions to GOPAC were not tax-deductible.\2\ GOPAC's goal
was to attract people to the Republican party, develop a ``farm
team'' of Republican state and local public officials who might
one day run for Congress and, ultimately, create a Republican
majority in the United States House of Representatives. (12/7/
96 Callaway Tr. 9; 7/12/96 Eisenach Tr. 21; 7/17/96 Gingrich
Tr. 17-20).\3\ GOPAC did not undertake any projects that were
not directed toward achieving that goal. (7/18/96 Gingrich Tr.
362; 12/7/96 Callaway Tr. 33).
---------------------------------------------------------------------------
\2\ See September 6, 1996 letter from the tax counsel Mr. Gingrich
hired during the Preliminary Inquiry, James Holden, at page 41:
``Contributions made to organizations described in section 501(c)(3)
qualify generally as charitable deductions under section 170(c)(2). In
contrast, contributions made to section 501(c)(4) and section 527
organizations do not qualify as charitable deductions. For this reason,
exempt organizations that are described in section 501(c)(3) enjoy the
substantial advantage of being able to attract donations that are
deductible on the tax returns of contributors.''
\3\ Citations containing a ``Tr.'' indicate the page of the
transcript from a witness's interview. The date of the interview is
also provided in the citation.
---------------------------------------------------------------------------
GOPAC's mission was defined as follows:
GOPAC's mission for the 1990's is to create and
disseminate the doctrine which defines a caring,
humanitarian reform Republican Party in such a way as
to elect candidates, capture the United States House of
Representatives and become a governing majority at
every level of Government.
(Ex. 1, GOPAC3 137). This aspect of GOPAC's activities was
further explained in a draft document from November 1989:
As important as the creation of new doctrine is its
dissemination. During the 1980s GOPAC and Newt Gingrich have
led the way in applying new technology, from C-SPAN to video
tapes, to disseminate information to Republican candidates and
political activists.
* * * * * * *
But the Mission Statement demands that we do much more. To
create the level of change needed to become a majority, the new
Republican doctrine must be communicated to a broader audience,
with greater frequency, in a more usable form. GOPAC needs a
bigger ``microphone.'' (emphasis in the original).
(Ex. 2, 283). GOPAC continued to support this approach to
achieving its goals in subsequent years. For example, as stated
in its Report to Shareholders dated April 26, 1993:
While both ``message'' and ``mechanism'' are
important, GOPAC's comparative advantage lies in
developing new ideas--i.e. in the ``message'' part of
the equation. GOPAC will thus continue to focus its
efforts on developing and communicating our values in a
way voters can understand and support.
(Ex. 3, Eisenach 2539).
From approximately 1986 through 1995, Mr. Gingrich served
as the General Chairman of GOPAC. (7/17/96 Gingrich Tr. 15). In
this role he came up with the ideas GOPAC used for its
political messages and themes, as well as its vision, strategy,
and direction. (7/17/96 Gingrich Tr. 20; 7/15/96 Gaylord Tr.
21-22; 6/26/96 Hanser Tr. 81; 7/12/96 Eisenach Tr. 22-23; 7/3/
96 Rogers Tr. 54-56; 6/27/96 Nelson Tr. 22-23; 12/7/96 Callaway
Tr. 6, 9).
B. American Opportunities Workshop/American Citizens Television
1. background
In early 1990, GOPAC embarked on a project to produce a
television program called the American Opportunities Workshop
(``AOW''). The idea for this project came from Mr. Gingrich and
he was very involved in developing the message it used. (12/7/
96 Callaway Tr. 11, 12, 14; 7/12/96 Eisenach Tr. 16; 12/5/96
Eisenach Tr. 10; 12/9/96 Riddle Tr. 14; 12/9/96 Gingrich Tr.
12).\4\ AOW was broadcast on May 19, 1990, on the Family
Channel and was hosted by Mr. Gingrich. (Ex. 4, GOPAC3 181).
---------------------------------------------------------------------------
\4\ The Committee's Special Counsel, James Cole, interviewed Mr.
Gingrich on July 17, 1996; July 18, 1996; and December 9, 1996. Mr.
Gingrich appeared before the Investigative Subcommittee to give
testimony on November 13, 1996, and December 10, 1996.
---------------------------------------------------------------------------
One of the purposes of the program was to build a citizens'
movement that would communicate the principles of
Entrepreneurial Free Enterprise, Basic American Values, and
Technological Progress. (Ex. 5, FAM 0011; 12/7/96 Callaway Tr.
14). These principles were called the ``Triangle of American
Success.'' (Ex. 4, GOPAC3 181). AOW consisted of workshops set
up throughout the country where activists could gather to watch
the broadcast and, in the words of those responsible for AOW,
help build a citizens' movement and increase citizen
involvement. (12/7/96 Callaway Tr. 14, 15; 12/9/96 Riddle Tr.
12, 13). Approximately 600 workshop cites were established
where approximately 20,000 people watched the program. (Ex. 6,
Eisenach 0359). The target group for the program was non-
voters. (Ex. 7, WGC2-01025).
As stated by GOPAC's then-Executive Director, Kay Riddle,
the purpose of creating the citizens' movement and attempting
to increase citizen involvement was to get people to solve
their own community problems and not look to the federal
government for help. (12/9/96 Riddle Tr. 13). Ms. Riddle went
on to say, ``Another product of that would be, of course, if we
got people interested * * *, we hoped and believed that
eventually they would vote Republican.'' (12/9/96 Riddle Tr.
13). ``[W]e [at GOPAC] truly believed that the more we could
involve people and educate people, the more likely we were to
have people vote Republican.'' (12/9/96 Riddle Tr. 14-15).
Similarly, Mr. Callaway characterized the message of AOW as
follows:
But I think, fundamentally * * * it was a message
that Republican principles are sound principles, that
everything does not need to be done by government, that
you can do better by trusting individuals to act for
themselves than you can by having government tell
individuals what they must do, that a smaller
government is frequently better than a larger
government, that it is better to reduce taxes than
raise taxes. I think it is Republican kinds of issues.
(12/7/96 Callaway Tr. 12-13).
Producing AOW was very expensive. (12/7/96 Callaway Tr. 16;
6/14/96 Callaway Tr. 21-22). It cost over $500,000 and consumed
approximately 62% of GOPAC's budget for the first half of 1990.
(Ex. 8, 1273). It was envisioned that the project would
continue beyond May 19, 1990 (12/5/96 Eisenach Tr. 46; Ex. 4,
GOPAC3 181) and prior to its airing, Mr. Gingrich, Mr. Callaway
and others decided to have the project's follow-on activities
transferred to a 501(c)(3) organization. (Ex. 9, Eisenach 3909;
12/5/96 Eisenach Tr. 49; 12/7/96 Callaway Tr. 80). The
organization chosen was the Abraham Lincoln Opportunity
Foundation (``ALOF''). The project was transferred to ALOF so
that it could be funded with tax-deductible money. (12/9/96
Riddle Tr. 19).
ALOF was established in 1984 in Colorado by Mr. Callaway to
fund programsfor inner city youth. (6/14/96 Callaway Tr. 26).
It had been inactive for some time prior to 1990 and was revived for
the purpose of taking over the successor activities of AOW. (12/7/96
Callaway Tr. 84). Under ALOF the project became know as American
Citizens' Television (``ACTV''). Mr. Callaway was the President of ALOF
and Kay Riddle was the Secretary. Mr. Callaway was also GOPAC's
Chairman and Ms. Riddle was also GOPAC's Executive Director. ALOF hired
some GOPAC employees on a full-time basis, used other GOPAC employees
and consultants on a part-time basis, and used GOPAC offices and
facilities. (12/7/96 Callaway Tr. 7, 11, 13, 14, 73-75).
ACTV was designed to continue AOW's work of building a
citizens' movement based on the ``Triangle of American
Success'' and had the same goals as AOW. (Ex. 5, FAM 0011; 12/
7/96 Callaway Tr. 14; 12/9/96 Riddle Tr. 16; 12/9/96 Gingrich
Tr. 8). In order to ensure a smooth transition, materials
concerning ACTV were given to all AOW participants on May 19,
1990. (Ex. 6, Eisenach 0361).
ACTV produced three television programs in 1990--one on
July 21 which discussed the use of local access cable
television for activist movements; one on September 29 which
discussed educational choice;\5\ and one on October 27 which
was about Taxpayers' Action Day. The last program was primarily
the responsibility of the Council for Citizens Against
Government Waste (``CCAGW''), a 501(c)(4) organization. This
was due to the fact that the content of the program was deemed
to be inappropriate for ALOF to sponsor as a 501(c)(3)
organization. (Ex. 10, FAM 0024). While CCAGW paid for all of
the out-of-pocket expenses (e.g., production expense and
broadcast time), ALOF still provided support through its staff.
(Ex. 11, Eisenach 4254; 12/5/96 Eisenach Tr. 5, 67). Each
program was broadcast on the Family Channel.
---------------------------------------------------------------------------
\5\ A 1989 draft GOPAC document indicates that one of GOPAC's
projects designed to ``create and disseminate the new Republican
doctrine for the 1990's'' would be the Education Choice Coalition. (Ex.
2, 284).
---------------------------------------------------------------------------
In setting up ACTV it was understood that Mr. Gingrich
would maintain his involvement and control over the programs.
(Ex. 12, WGC2-01337). While some say that he was not very
involved when it became ACTV, (e.g., 12/7/96 Callaway Tr. 14),
there is evidence that his involvement continued. Mr. Gingrich
hosted the first ACTV program. Mr. Gingrich also introduced and
closed the second program in September. The host was Pete
DuPont, but Mr. Gingrich was featured for a significant portion
of the program. While the last program in October was paid for
primarily by CCAGW, Mr. Gingrich approved its use on ACTV. (Ex.
11, Eisenach 4254).
Both AOW and ACTV were described to the public as non-
partisan. (Ex. 6, Eisenach 0361). Much of the documentation
that was either internal to GOPAC or sent to its supporters,
however, indicates a partisan, political purpose. While GOPAC,
as a political action committee, could freely engage in
partisan, political activity, ALOF, as a 501(c)(3) organization
could not. Because ACTV was described as a continuation of the
activities of AOW (12/7/96 Callaway Tr. 13-15; 12/5/96 Eisenach
Tr. 8; Ex. 5, FAM 0011), documents were reviewed during the
Preliminary Inquiry relating to both projects to determine what
the goals were for the two projects.
GOPAC contracted with an organization called the Washington
Policy Group (``WPG'') to manage AOW. (7/12/96 Eisenach Tr.
298). Jeffrey Eisenach was president and sole owner of WPG and
the project coordinator for AOW. (7/12/96 Eisenach Tr. 298).
Mr. Eisenach was also responsible for managing ALOF's ACTV
programs. (12/7/96 Callaway Tr. 16). WPG was essentially Mr.
Eisenach's ``personal consulting firm'' and usually had two or
three employees. (7/12/96 Eisenach Tr. 9). WPG used GOPAC
office space and equipment as part of its compensation. (11/14/
96 Eisenach Tr. 60). In addition to its work on AOW and ACTV,
WPG had a consulting contract with GOPAC from January 1989
through September 1993. (7/12/96 Eisenach Tr. 9, 10, 298).
Through WPG's contract with GOPAC, Mr. Eisenach ``provided
research assistance and advice to Mr. Gingrich, strategic
advice to GOPAC and worked on some specific projects, focus
groups and so forth, for GOPAC.'' (7/12/96 Eisenach Tr. 9). Mr.
Eisenach was also the Executive Director of GOPAC from June
1991 to June 1993. (7/12/96 Eisenach Tr. 8).
2. Planning and Purpose for AOW/ACTV
A document entitled ``Key Factors in a House GOP Majority''
appears to be one of the earliest documents pertaining to the
purpose of AOW and ACTV. A typed version and a handwritten
version of the document were produced during the Preliminary
Inquiry. The handwritten version is in Mr. Gingrich's
handwriting. In it he wrote:
1. The fact that 50% of all potential voters are currently
outside politics (non-voters) creates the possibility that a
new appeal might alter the current balance of political power
by bringing in a vast number of new voters.
* * * * * * *
3. It is possible to articulate a vision of ``an America
that can be'' which is appealing to most Americans, reflects
the broad values of a governing conservatism (basic American
values, entrepreneurial Free Enterprise and Technological
progress), and is very difficult for the Democrats to co-opt
because of their ideology and their interest groups.
4. It is more powerful and more effective to develop a
reform movement parallel to the official Republican Party
because:
* * * * * * *
b. the non-voters who are non-political or anti-
political will accept a movement more rapidly than they
will accept an established party;
* * * * * * *
5. As much as possible, the House Republican Party, the
Bush Administration, Senate Republicans, incumbent Republicans
across the country, the NRCC, RNC, SRCC and the conservative
movement should be briefed on movement developments; conflict
within this broad group should be minimized and coordination
maximized.
6. The objective measurable goal is the maximum growth of
news coverage of our vision and ideas, the maximum recruitment
of new candidates, voters and resources, and the maximum
electoral success in winning seats from the most local office
to the White House and then using those victories to implement
the values of a governing conservatism and to create the best
America that can be.
(Ex. 13, Eisenach 4838-4839 (typed version) and Eisenach 4832-4834
(handwritten version)).
When asked about AOW and ACTV, Mr. Gingrich said he had
very little recollection of the projects. He said he was
distracted by other events at the time such as his re-election
efforts, legislative issues, and becoming Republican Whip. (12/
9/96 Gingrich Tr. 19, 39, 43). He said he had no recollection
of the ``Key Factors in a House GOP Majority'' document, did
not know if it related to AOW or ACTV, and did not know the
purpose for which it was written. (12/9/96 Gingrich Tr. 31). An
analysis of other documents, however, shows its relationship to
the AOW/ACTV projects. Mr. Callaway said in his interview that
the goalsset forth in the ``Key Factors in a House GOP
Majority'' document were the same as those for AOW and ACTV. (12/7/96
Callaway Tr. 37-38).
As stated above, AOW was targeted to non-voters. (Ex. 7,
WGC2-01025). The ``Key Factors in a House GOP Majority''
document notes that non-voters are the ones to appeal to in
order to change the balance of power. AOW/ACTV based the
citizens' movement on the ``Triangle of American Success''
which was made up of basic American values, entrepreneurial
free enterprise, and technological progress. (Ex. 5, FAM 0011;
12/7/96 Callaway Tr. 14). The ``Key Factors in a House GOP
Majority'' document indicates that it will use those same three
principles to appeal to non-voters. AOW/ACTV was focused on
building a non-partisan citizens' movement. (Ex. 6, Eisenach
0358-0359; Ex. 5, FAM 0011). In the ``Key Factors in a House
GOP Majority'' document, Mr. Gingrich states that ``[i]t is
more powerful and more effective to develop a reform movement
parallel to the official Republican Party because . . . the
non-voters who are non-political or anti-political will accept
a movement more rapidly than they will accept an established
party.'' (Ex. 13, Eisenach 4838 and Eisenach 4832).
In a congressional briefing Mr. Gingrich gave concerning
AOW on March 30, 1990, he described AOW/ACTV as follows:
It is our goal to define our position as a caring
humanitarian reform party applying the triangle of
American success and applying common sense focused on
success and opportunities to explain in general terms
for the whole fall campaign, and again some Democrats
will pick up the language and this is open to
everybody, this is a free country, we think on balance
it is vastly more advantageous to us than it is to the
left since they are the party of big city machines,
they are the party of the unions, they're much more
tied to the bureaucratic welfare state.
(Ex. 15, WGC2 06081, pp. 17-18). The ``Key Factors in a House
GOP Majority'' document notes that the message of the citizens'
movement is designed not to be useful for Democrats because it
will be ``very difficult for [them] to co-opt [the ideas]
because of their ideology and their interest groups.'' (Ex. 13,
Eisenach 4838 and 4832-4833).
At the congressional briefing, Mr. Gingrich spoke of a
focus group that was commissioned to assist in the AOW/ACTV
effort. He described it as ``the largest focus group project
ever undertaken by the Republican Party.'' (Ex. 14, WGC2 06081,
p. 8). He said it concentrated on non-voters under 40 years of
age (Ex. 14, WGC2 06081, p. 8) and tested negative language
like ``the bureaucratic welfare state'' and positive language
like the ``Triangle of American Success,'' ``Entrepreneurial
Free Enterprise,'' ``Technological Progress and Innovation,''
and ``Basic American Values.'' (Ex. 14, WGC2 06081, pp. 10-11).
Near the end of the briefing Mr. Gingrich explained the
reasons for having the program labeled as non-partisan:
Lastly I was going to make the point one of the
reasons we are reaching out and we really urge people
to be nonpartisan and be wide open. But we have two
reasons. First, there are a lot of former Democrats.
Andy Ireland, Ronald Reagan, Phil Gramm, Jean
Kirkpatrick, Connie Mack, you go down the list, a
surprising list of people who looked at both sides and
decided we were right. That we were more open, we were
moving in the right direction.
But second, most young people under 40 are not
politicized. The minute you politicize this and you
make it narrow and you make it partisan--you lose them.
(Ex. 14, WGC2 06081, pp. 23-24).
The focus group Mr. Gingrich referred to was commissioned
by GOPAC in early 1990. It was performed by Market Strategies,
Inc. The July 10, 1990 report on the results of the focus group
described the project as follows:
This research project is part of an overall effort to
build a new governing majority in the United States
formed around conservative principles. Historically,
building a new majority has involved three essential
tasks: activating a group of non-participating citizens
to support an existing party (or form a new party),
constructing a theory or explanation of what is right
and wrong in society with which the non-participating
citizens agree, and developing the right language
(political rhetoric) to communicate that theory to the
non-participating citizens. This project is the first
of several research projects to be sponsored by GOPAC
to help achieve these three tasks in this decade.
(Ex. 15, MSI 0030). The report then describes the specific
language it tested as follows:
The theory's explanation of what is wrong in society
was put in terms of ``the bureaucratic welfare state''
and the ``values of the left.'' The theory's
explanation of what is good in society was put in terms
of ``technological progress,'' ``entrepreneurial free
enterprise,'' and ``basic American values'' which were
summarized as ``the Triangle of American Success.''
(Ex. 15, MSI 0030).
In describing the target group for building the new
governing majority, the report states:
The potential for a new governing majority exists because
of the large and growing numbers of non-participating citizens
in our political system.
* * * * * * *
Consequently, a major premise for the research project is
that younger citizens are the right target group for a new
majority strategy and that a political theory and language
needs to be effective with them if it is to be effective at
all. Supporting this premise is an additional opportunity (to
their not voting now) about younger voters--they are already
predisposed to vote Republican.
(Ex. 15, MSI 0031-0032).
3. Letters Describing Partisan, Political Nature of AOW/ACTV
A number of GOPAC letters also indicate the purpose behind
AOW/ACTV. Some are signed, some are not, but the ones that are
not signed were apparently in GOPAC's files for some years,
indicating that they were probably sent out. For example, in a
signed letter dated February 21, 1990, to members of GOPAC's
Executive Finance Committee, Mr. Callaway wrote that:
The next two years are absolutely critical to all
that we hope to accomplish. Our May 19 project [AOW]
will go a long way toward helping Republicans set an
agenda and persuading Americans to realign with us.
(Ex. 16, GOPAC3 484). A copy of this letter was sent to Mr.
Gingrich. Written across the top of his copy, in his
handwriting, is ``Newt 2/20/90.'' (Ex. 16, WGC2-03992).
According to Mr. Gingrich this probably meant he had seen the
letter (12/9/96 Gingrich Tr. 36-37); however, he did not recall
the content of this letter during an interview with Mr. Cole.
(12/9/96 Gingrich Tr. 35).
An unsigned letter, apparently prepared for Mr. Callaway's
signature,6 dated March 7, 1990, states:
---------------------------------------------------------------------------
\6\ According to Mr. Callaway this letter may have been sent out,
but he did not have a specific recollection of it. (12/7/96 Callaway
Tr. 49).
Our May 19th American Opportunities Workshop is the single
most exciting project I've ever undertaken. I consider this
program critical to our efforts to become a Republican
majority.
* * * * * * *
In order to encourage Americans to vote--and vote
Republican--so that we may enact our policies of opportunity,
we must reach them with our vision of hope.
It is time for our message and program, now proven among
those in the trenches, to be shared with the Americans who are
not motivated by our current government to go to the polls or
get involved.
* * * * * * *
The American Opportunities Workshop is GOPAC's answer to
teaching and empowering the American people. We hope that the
citizen movement launched by this project will be the key to a
future of Republican governance.
(Ex. 17, 425-426).
A March 16, 1990 GOPAC letter over Mr. Gingrich's name
discusses the purpose behind AOW.
Through the use of satellite hook-ups, not only can we
reach new groups of voters not traditionally associated with
our Party, but we'll be able to give them our message straight,
without it being filtered and misinterpreted by liberal
elements in the media.
* * * * * * *
Because I believe it has such great potential for helping
President Bush, our candidates and our Party, I told Bo to move
ahead with planning the workshop.
* * * * * * *
I truly believe that our Party and our President stand on
the verge of a tremendous success this year, and that this
workshop can be a great election year boost to us.
(Ex. 18, 2782-2783). Mr. Gingrich did not recall this document.
When asked whether AOW was intended to be an election year
boost, he said that it may have been, but he also thought it
was idea oriented. (12/9/96 Gingrich Tr. 39-40).
In an unsigned letter addressed to Mr. Thorton Stearns,
apparently written for Mr.Callaway's signature,7 the AOW
project and its purpose were described as follows:
\7\ According to Mr. Callaway this letter may have been sent out,
but he again did not have a specific recollection of it. (12/7/96
Callaway Tr. 58).
With more than 600 workshop sites across the country,
30,000 participants, and extensive media coverage, AOW
was a significant success on its own terms. However,
the real reason GOPAC took on AOW was to explore an
innovative new mechanism for creating and motivating
the new Republican majority of the 1990s.
(Ex. 19, GOPAC3 467).
In a letter over Mr. Gingrich's name dated June 21, 1990,
AOW and ACTV are explicitly tied together in an effort to
achieve the same goal of building the Republican Party and
trying to have an impact on political campaigns. The letter
states:
These are exciting times at GOPAC and we have been
quite busy lately. I am excited about [the] progress of
the ``American Citizens' Television'' project, which
will carry the torch of citizen activism begun by our
American Opportunities Workshop on May 19th. We
mobilized thousands of people across the nation at the
grass roots level who as a result of AOW, are now
dedicated GOPAC activists. We are making great strides
in continuing to recruit activists all across America
to become involved with the Republican party. Our
efforts are literally snowballing into the activist
movement we need to win in '92.
(Ex. 20, GOPAC3 224). Mr. Gingrich said that the signature on
the letter was not his. (12/9/96 Gingrich Tr. 40). Mr. Gingrich
said that the above statement did not reflect the purpose of
AOW or ACTV. (12/9/96 Gingrich Tr. 41).
Finally, an August 27, 1990 memorandum from Mr. Callaway to
Mr. Gingrich and Jim Tilton 8 gives insight to the goals
of the AOW/ACTV projects. (Ex. 21, Eisenach 3950-3959). The
memorandum discusses a meeting the three men had five days
earlier. Based on the memorandum, the main topic focused on how
GOPAC should proceed in the future. The problems addressed in
the meeting concerned the fact that AOW/ACTV had diverted too
much money and attention from traditional GOPAC efforts. This
caused erosion in support from GOPAC members. The three men
decided to try one more ACTV program on September 29, 1990. If
additional funding was not available beyond that point, the
project would not be continued. They decided that it needed to
be ``a very strong program that is controversial enough to stir
up our Charter members and other constituents.'' (Ex. 21,
Eisenach 3951). The show that was chosen was on educational
choice, which was a specific GOPAC project.
---------------------------------------------------------------------------
\8\ Jim Tilton was an unpaid senior advisor to GOPAC. He was an
attorney and a close friend of Mr. Gingrich. (12/10/96 Gingrich Tr. 10,
11, 56, 57).
---------------------------------------------------------------------------
The memorandum recounted that Mr. Gingrich had reviewed all
the options set forth and concluded the following:
Newt then stated firmly that he feels we need to go
back to basics for now through 1992. That the only
special projects for 1992 should be 1992 election
oriented projects. Newt has now concluded that you
can't really affect 1992 elections indirectly--we must
do it directly through political programs.
(Ex. 21, Eisenach 3950).9 Mr. Callaway said that this
paragraph could have been referring to ACTV, but he did not
have a clear recollection. (12/5/96 Callaway Tr. 62).
---------------------------------------------------------------------------
\9\ A GOPAC statement of ``Revenue and Expenses'' attached to this
memorandum shows a single line item for ``AOW/ACTV.'' (Ex. 21, Eisenach
3957).
---------------------------------------------------------------------------
4. AOW/ACTV in Mr. Gingrich's Congressional District
While AOW/ACTV was supposed to be non-partisan, two
memoranda indicate that there was some effort to ensure that
workshops were set up in Mr. Gingrich's congressional district.
In a memorandum to Mr. Callaway, dated February 8, 1990, Mr.
Eisenach wrote:
An area for immediate attention is ``targets of
opportunity''--e.g. Georgia's 6th District, Colorado,
and the D.C. area. We need to identify resources to
ensure that we maximize our returns in these three
areas, and other specific target areas we might add
later. In particular, we need to put very high on our
agenda the task of identifying a 6th District
Coordinator.
(Ex. 22, Eisenach 3811). Similarly, in a March 30, 1990
memorandum from Mr. Gingrich to Joe Gaylord and Mary Brown, the
following is written:
The GOPAC print-out shows only one very tentative
(Clay Davis) site in my district. Time is getting short
for finding sites and GOPAC needs to have the hosts
identified as soon as possible to get materials to them
to make the workshops a success.
Please make this a high priority.
(Ex. 23, GOPAC3 460). Mr. Gingrich did not recall this
memorandum and said that there was an effort to target the 6th
District--his congressional district--``only in the sense that
we hosted [AOW] from there.'' (12/9/96 Gingrich Tr. 19).
5. GOPAC's Connection to ALOF and ACTV
As has been previously discussed, ACTV was a continuation
of AOW and ALOF used GOPAC's offices and facilities. In his
interview, Mr. Callaway stated a number of times that GOPAC was
separate from ALOF. (12/7/96 Callaway Tr. 64, 65-66, 68-69,
73). A number of documents, however, from 1990 indicate that
ALOF and ACTV had significant connections to GOPAC.
In a June 26, 1990 memorandum to Mr. Callaway, Mr. Eisenach
recounts a discussion the two men had that morning with Mr.
Gingrich. During that discussion, Mr. Gingrich gave them a
handout that ``identified three GOPAC/ALOF zones: 1. Local
Elections, 2. Planning/R&D, 3. Movement.'' (Ex. 24, Eisenach
4039). The memorandum goes on to discuss how GOPAC and ALOF
will relate to each other.
During the Preliminary Inquiry GOPAC produced copies of its
``Confidential Masterfile Reports'' that were used to keep
track of contributors. Under the section entitled ``Giving
History'' the 1990 reports list two entities: GOPAC and ALOF.
(Ex. 25, GOPAC3 0510). Attached to these reports are copies of
correspondence from both GOPAC and ALOF to contributors. (Ex.
25, GOPAC3 0511-0515).
An August 13, 1990 memorandum from Mr. Callaway to Mr.
Gingrich lists the three broad things GOPAC does. The third one
listed is ``Projects such as ACTV, AOW and focus groups.'' (Ex.
26, Eisenach 4251).10
---------------------------------------------------------------------------
\10\ According to Mr. Callaway, the listing of ACTV was a ``bad
choice of words.'' (12/7/96 Callaway Tr. 70).
---------------------------------------------------------------------------
GOPAC's Report to Charter Members dated November 11, 1990,
includes a section on Community Activism. (Ex. 4, GOPAC3 180-
188). In that section it discusses AOW and ACTV. While it
states that ACTV is ``legally no longer a GOPAC project,'' it
goes on to discuss ACTV in terms which indicate that it
continued to be treated as a GOPAC project. For example it
states that ``Our mission is to establish ACTV as a new,
interactive information network.'' (Ex. 4, GOPAC3 181). The
Charter Member Report is worded in a manner that indicates ACTV
was considered a GOPAC project. For example, it uses phrases
like ``Our goal'' with ACTV, ``Our next ACTV program,'' and
``Our program was hosted by * * *.'' (Ex. 4, GOPAC3 181-182).
At the end of the report under the heading ``Getting Out the
Message,'' there is a chart showing the AOW and ACTV programs.
It then lists how many workshopswere set up for each program
and what the estimated attendance was for these workshops. (Ex. 4,
GOPAC3 183).
6. gopac funding of alof and actv 11
---------------------------------------------------------------------------
\11\ There is no evidence that Mr. Gingrich had any significant
involvement with this level of the financial aspects of the operations
of ALOF. However, because these facts form part of the basis for a
recommendation by the Subcommittee that the relevant materials gathered
during the preliminary inquiry be made available to the Internal
Revenue Service, the matter is set forth in some detail.
---------------------------------------------------------------------------
When ALOF began to operate in June 1990 it had less than
$500 in its bank account. (Ex. 27, CNB 006). It obtained a loan
for $25,000 from the Central Bank of Denver in late June and
received some direct contributions. These came from a
foundation associated with Mr. Callaway, the Family Channel,
and at least one other GOPAC supporter. (Ex. 28, ALOF 0050). In
addition, GOPAC loaned ALOF $45,000 in 1990, and $29,500 in
early 1991 to pay for production expenses. The total of loans
from GOPAC to ALOF was $74,500. (Ex. 35, ALOF 0030).
ALOF's last program was broadcast in October 1990. In 1991
and 1992 it did not engage in any activities. In 1991, Citizens
Against Government Waste contributed $37,000 to ALOF and Mr.
Callaway's foundation contributed $10,000. (Ex. 28, ALOF 0090).
The total, $47,000, was given to GOPAC to be applied to the
debt. (Ex. 37, CNB 0426, CNB 0428, CNB 0430, CNB 0432). After
the $47,000 payment, ALOF owed GOPAC $27,500. (Ex. 28, ALOF
0064).12
---------------------------------------------------------------------------
\12\ The original debt from GOPAC listed on ALOF's tax returns was
for $45,247. This is not supported by the checks from GOPAC to ALOF
which only reflect $45,000. This additional $247 continued to be listed
for the remaining years and was reflected in the ultimate forgiveness
of a portion of this debt in 1993. It is not clear what the $247
represents.
---------------------------------------------------------------------------
In late 1991 and 1992, ALOF received contributions from a
number of GOPAC supporters totalling $80,000. (Ex. 28, ALOF
0078). $70,000 of that amount was given to GOPAC. GOPAC's then-
Executive Director, Mr. Eisenach, was involved in soliciting a
number of these donations.
On February 27, 1992, Mr. Eisenach wrote to R. Randolph
Richardson to ask him to become a Charter Member of GOPAC. In
order to be a Charter Member, a person must contribute at least
$10,000. In the letter Mr. Eisenach states:
With respect to foundation funds, it is of course not
appropriate for GOPAC to accept 501(c)(3) money.
However, Bo Callaway does have a foundation, the
Abraham Lincoln Opportunity Foundation (ALOF), which
owes GOPAC a substantial sum of money. You might
consider a contribution to ALOF, which would enable it
to pay down its GOPAC debt, and thus be of enormous
help in our efforts to change the Congress in 1992.
(Ex. 29, Eisenach 4652). Mr. Richardson's foundation, the Grace
Jones Richardson Trust, wrote a $25,000 check to ALOF on April
14, 1992, and ALOF wrote a $25,000 check to GOPAC on April 23,
1992. (Ex. 38, CNB 0449, CNB 0445).
On March 16, 1992, Mr. Eisenach wrote a memorandum to June
Weiss, GOPAC's Finance Director, concerning Mr. Callaway's
Charter Member dues. The memorandum states:
Bo has offered us a choice of (1) $10,000 from him or
(2) $20,000 from ALOF. I indicated to him on the phone
today I would tend to go for $20,000 over $10,000--in
part, frankly, because I think we ought to go ahead and
get the ALOF loan repaid and be done with it, as
opposed to having it hanging around for another year.
(Ex. 30, Eisenach 3725). On March 23, 1992, Mr. Callaway's
foundation donated $20,000 to ALOF. (Ex. 39, CNB 0443). On the
same day, ALOF wrote a check to GOPAC for $20,000. (Ex. 39, CNB
0447). A letter was sent to Mr. Callaway on ALOF stationery
thanking him for the contribution. It was signed by numerous
members of GOPAC's staff. (Ex. 31, GOPAC2 0012).
Two other GOPAC Charter Members made contributions to ALOF
which were immediately turned over to GOPAC. (Ex. 40, CNB 0217,
CNB 0439, CNB 0441, CNB 0459). Handwritten notes relating to
one of them indicates that a tax-deductible option for his
contribution to GOPAC was discussed before the contribution to
ALOF was made. (Ex. 32, GOPAC2 2424-2426).
As of 1993 ALOF had relocated its offices to Colorado. Its
Colorado accountant was preparing the tax return for 1992 and
saw the payments to GOPAC. In November she wrote to Kay Riddle,
ALOF's Secretary, and asked for invoices from GOPAC to ALOF to
support these payments. (Ex. 33, Newbill 0119). In December,
Ms. Riddle wrote to GOPAC's accountant asking for those
invoices. (Ex. 34, ALOF 0028). Several days later the
accountant provided Ms. Riddle with a summary memorandum and a
number of invoices. (Ex. 35, ALOF 0029-0030, ALOF 0027-0028,
GOPAC3 0811). Some were undated. Some were dated in 1991. All
concerned activities which were stated to have taken place in
1990 and there is no evidence that the invoices were written
contemporaneously with the events for which they billed.13
---------------------------------------------------------------------------
\13\ Because of her assertion of a Constitutional privilege, the
Subcommittee was unable to interview the accountant for GOPAC and ALOF.
---------------------------------------------------------------------------
The invoices, along with the previously mentioned loans,
totaled $160,537.70. This consisted of rent ($12,718.08),
postage and office supplies ($8,455.08), services of staff and
consultants ($64,864.54), and the loans ($74,500).14 (Ex.
35, ALOF 0029, ALOF 0027, ALOF 0026, GOPAC3 0811). The time for
the staff was apportioned to reflect the percentage of their
work spent on ALOF business. Some of the consultants listed,
however, did not keep any records reflecting the percentage of
time they spent on specific projects and did not recall doing
any work for ALOF. (12/2/96 Hanser Tr. 25; 12/5/96 Mahe Tr.
31). Records of one consultant did record the time he spent on
ALOF business, but it was substantially less than the time
listed in the invoice. (Ex. 35, ALOF 0029; Ex. 36, WGC2-01378-
01379, Eisenach 4276-4277, Eisenach 4302-4303). According to
Ms. Riddle, she did not attempt to apportion time based on the
actual hours spent by these people on ALOF business. Instead,
she said she determined the percentages before any of the
people had done any work based on her best guess of the time
they would spend. (12/9/96 Riddle Tr. 69-70).
---------------------------------------------------------------------------
\14\ In the tax return for ALOF for 1990, Part VII asks, among
other things, whether ALOF had any transactions with a political action
committee involving loans, shared facilities, equipment, or paid
employees. Even though GOPAC was a political action committee the
return answers ``no'' to all those questions. (Ex. 28, ALOF 0056). The
accountant for ALOF, who was also the accountant for GOPAC, said that
she had answered those questions in the negative based on her belief
that these questions specifically excluded any transactions with
political action committees. (10/31/96 Gilbert Tr. 18-20). She did not
discuss this reading of the tax return with anyone at ALOF, but she did
fill the form out in this way and they signed it without any questions.
(10/31/96 Gilbert Tr. 21). This same error occurred in the tax return
for 1991. (Ex. 28, ALOF 0069).
---------------------------------------------------------------------------
Of the total amount listed on the invoices of $160,537.70,
ALOF paid GOPAC $117,000 between 1991 and 1992. (Ex. 35, ALOF
0029). This left a balance of $43,537.70, which, according to
ALOF's 1993 tax return, was forgiven by GOPAC. (Ex. 28, ALOF
0089).15
---------------------------------------------------------------------------
\15\ The amount listed on the Return was $43,785. As referred to
earlier, it is unclear what the $247 difference represents.
---------------------------------------------------------------------------
According to Kathleen Taylor, a current employee of the
Speaker's Office and the former Political Services Director for
GOPAC, the lessons learned from AOW and ACTV were used for the
Renewing American Civilization course discussed below. (6/28/96
Taylor Tr. 45). Those lessons were ``[h]ow to get workshops
sites, how to disseminate information, [and] mass-marketing the
ideas.'' (6/28/96 Taylor Tr. 45). In the same vein, a letter
from Mr. Eisenach to Mr. Mescon containing the terms and
conditions under which WPG would manage the Renewing American
Civilization course states:
Among our most significant project management
undertakings was the 1990 ``American Opportunities
Workshop'' and its successor, American Citizens'
Television. Both of these projects bear significant
similarities to the project you have asked us to get
involved with, ``Renewing American Civilization.''
Thus, we enter this undertaking with both enthusiasm
and a full understanding of the enormity and complexity
of the undertaking.
(Ex. 41, Mescon 0651).
III. Summary of Facts Pertaining to ``Renewing American Civilization''
A. Genesis of the Renewing American Civilization Movement and Course
In his interview with the Special Counsel, Mr. Gingrich
said the idea for the course was first developed while he was
meeting with Owen Roberts, a GOPAC Charter Member and advisor,
for two days in December 1992. (7/17/96 Gingrich Tr. 11-12, 23-
24; 7/15/96 Gaylord Tr. 23-24; Ex. 42, GOPAC2 2492). Mr.
Gingrich wrote out notes at this meeting and they were
distributed to some of his advisors. (Ex. 42, HAN 02103-02125;
6/26/96 Hanser Tr. 28; 7/15/96 Gaylord Tr. 24-25; 7/12/96
Eisenach Tr. 108-109).16 A review of those notes indicates
that the topic of discussion at this meeting centered mostly on
a political movement. The notes contain limited references to a
course and those are in the context of a means to communicate
the message of the movement.
---------------------------------------------------------------------------
\16\ Among the people who received copies of the notes were Mr.
Hanser, Mr. Gaylord and Mr. Eisenach. In a subsequent memorandum to Gay
Gaines and Lisa Nelson, as Ms. Gaines and Ms. Nelson were about to take
over the management of GOPAC in October 1993, Mr. Gingrich described
the roles each of the three men played in his life as follows:
---------------------------------------------------------------------------
1. Joe Gaylord is empowered to supervise my activities, set
my schedule, advise me on all aspects of my life and career. He
is my chief counselor and one of my closest friends. * * *
2. Steven Hanser is my chief ideas adviser, close personal
friend of twenty years, and chief language thinker. * * *
* * * * * * *
4. Jeff Eisenach is our senior intellectual leader and an
entrepreneur with great talent and determination. * * *
---------------------------------------------------------------------------
Ex. 43, GDC 11551, 11553).
---------------------------------------------------------------------------
The movement was to develop a message and then disseminate
and teach that message. (Ex. 42, HAN 02109). One of the
important aspects of the movement was the creation of
``disseminating groups and [a] system of communication and
education.'' (Ex. 42, HAN 02109). It also sought to
``professionalize'' the House Republicans by using the
``message to attract voters, resources and candidates'' and
develop a ``mechanism for winning seats.'' (Ex. 42, HAN 02110).
The ultimate goal of the movement was to replace the welfare
state with an opportunity society, and all efforts had to be
exclusively directed to that goal. (Ex. 42, HAN 02119).
Ultimately, it was envisioned that ``a Republican majority
[would be] the heart of the American Movement * * *''. (Ex. 42,
HAN 02117).17 Mr. Gingrich's role in this movement was to
be the ``advocate of civilization,'' the ``definer of
civilization,'' the ``teacher of the rules of civilization,''
the ``arouser of those who form civilization,'' the ``organizer
of the pro-civilization activists,'' and the ``leader
(possibly) of the civilizing forces.'' (Ex. 42, HAN 02104). In
doing this, he intended to ``retain a primary focus on elected
political power as the central arena and fulcrum by which a
free people debate their future and govern themselves.'' (Ex.
42, HAN 02104). The support systems for this movement included
GOPAC, some Republican international organizations, and
possibly a foundation. (Ex. 42, HAN 02121). There was
substantial discussion of how to disseminate the message of the
movement. (Ex. 42, HAN 02109, 02110, 02111). Some of the
methods discussed for this dissemination included, ``Possibly a
series of courses with audio and videotape followons''/
``Possibly a text-book (plus audio, video, computer) series''/
``Campus (intellectual) appearances on `the histories' Gingrich
the Historian applying the lessons of history to public life.''
(Ex. 2, HAN 02118). One of the tasks listed for 1993 is
``Design vision and its communication and communicate it with
modification after feedback.'' (Ex. 2, HAN 02120). According to
Mr. Gingrich, the course was to be a subset of the movement and
was to be a primary and essential means for developing and
disseminating the message of the movement. (7/17/96 Gingrich
Tr. 42, 58; 11/13/96 Gingrich Tr. 126-127).
---------------------------------------------------------------------------
\17\ Mr. Gingrich said that he intended the movement to be
international in scope. Until some point in 1995, however, its scope
was only national. (7/17/96 Gingrich Tr. 33).
---------------------------------------------------------------------------
Another description of the Renewing American Civilization
movement is found in notes of a speech Mr. Gingrich gave on
January 23, 1993, to the National Review Institute. (Ex. 44,
PFF 14473-14477, PFF 38279-38288).18 In those notes, Mr.
Gingrich wrote that ``our generation's rendezvous with history
is to launch a movement to renew American civilization.'' (Ex.
44, PFF 14474). He noted that a majority of Americans favor
renewing American civilization and that ``[w]e are ready to
launch a 21st century conservatism that will renew American
civilization, transform America from a welfare state into an
opportunity society and create a conservative governing
majority.'' (Ex. 44, PFF 14475). Mr. Gingrich then goes on to
describe the five pillars of American civilization and the
three areas where the movement needs to offer solutions.19
He then wrote that if they develop solutions for those three
areas they ``will decisively trump the left. At that point
either Clinton will adopt our solutions or the country will
fire the president who subsidizes decay and blocks progress.''
(Ex. 44, PFF 14476). The notes end with the following:
\18\ This appears to be the earliest example of Mr. Gingrich
speaking about the Renewing American Civilization movement. A draft of
this document in Mr. Gingrich's handwriting is attached to the typed
version of the notes.
\19\ Although not mentioned in this speech, those five pillars and
three areas are each separate lectures in what became the course.
---------------------------------------------------------------------------
We must renew American civilization by studying these
principles, networking success stories, applying these
success stories to develop programs that will lead to
dramatic progress, and then communicating these
principles and these opportunities so the American
people have a clear choice between progress, renewal,
prosperity, safety and freedom within America [sic]
civilization versus decay, decline, economic weakness,
violent crime and bureaucratic dominance led by a
multicultural elite.
Given that choice, our movement for renewing American
civilization will not just win the White House in 1996,
we will elect people at all levels dedicated to
constructive proposals.
(Ex. 44, PFF 14477). (Emphasis in the original).20
\20\ Two days later Mr. Gingrich delivered a Special Order on the
House floor concerning Renewing American Civilization. In this speech
he described a movement to renew American civilization, but did not
mention the course. He did discuss the five pillars of American
civilization and the three areas where solutions needed to be
developed. (Ex. 45, LIP 00036-00045).
---------------------------------------------------------------------------
In a draft document entitled ``Renewing American
Civilization Vision Statement,'' written by Mr. Gingrich and
dated March 19, 1993, he again described the movement in
partisan terms and emphasized that it needed to communicate the
vision of renewing American civilization on very large scale.
(Ex. 46, WGC 00163-00171, WGC 00172-00191). He wrote that
renewing American civilization will require ``a new party
system so we can defeat the Democratic machine and transform
American society into a more productive, responsible, safe
country by replacing the welfare state with an opportunity
society.'' (Ex. 46, WGC 00163).
B. Role of the Course in the Movement
Mr. Gingrich was asked about the role of the course in the
movement. He said that the course was ``the only way actually
to develop and send * * * out'' the message of the movement.
(7/17/96 Gingrich Tr. 42). In a later interview, he modified
this statement to saythat the course was ``clearly the primary
and dominant method; it was not the only way one could have done it.
But I think it was essential to do it, to have the course.'' (11/13/96
Gingrich Tr. 126-127).
The earliest known documentary reference to the course in
the context of the movement is in an agenda for a meeting held
on February 15, 1993, at GOPAC's offices. The meeting had two
agenda items: ``I. General Planning/Renewing American
Civilization'' and ``II. Political/GOPAC Issues.'' (Ex. 47, JR-
0000645-0000647). Under the first category, one topic listed is
``American Civilization Class/Uplink.'' (Ex. 47, JR-0000645).
Under the second category two of the items listed are ``GOPAC
Political Plan & Schedule'' and ``Charter Meeting Agenda.''
(Ex. 47, JR-0000645). 21 Attached to the agenda for this
meeting is a ``Mission Statement'' written by Mr. Gingrich
which applied to the overall Renewing American Civilization
movement, including the course. (7/12/96 Eisenach Tr. 248-249;
7/17/96 Gingrich Tr. 145-146). It states:
---------------------------------------------------------------------------
\21\ It is not clear whether the meeting was exclusively a GOPAC
meeting, but at least part of the agenda explicitly concerned GOPAC
projects. As will be discussed later, GOPAC's political plan for 1993
centered on Renewing American Civilization. As also discussed below,
GOPAC's April 1993 Charter Meeting was called ``Renewing American
Civilization'' and employed breakout sessions for Charter Members to
critique and improve individual components of the course on Renewing
American Civilization. (7/17/96 Gingrich Tr. 69-70; 7/12/96 Eisenach
Tr. 144-146; 7/15/96 Gaylord Tr. 46).
We will develop a movement to renew American civilization
using the 5 pillars of 21st Century Freedom so people
understand freedom and progress is possible and their
practical, daily lives can be far better.* As people become
convinced American civilization must and can be renewed and the
5 pillars will improve their lives we will encourage them and
help them to network together and independently, autonomously
initiate improvements wherever they want. However, we will
focus on economic growth, health, and saving the inner city as
the first three key areas to improve. Our emphasis will be on
reshaping law and government to facilitate improvement in all
of [A]merican society. We will emphasize elections, candidates
and politics as vehicles for change and the news media as a
primary vehicle for communications. To the degree Democrats
agree with our goals we will work with them but our emphasis is
on the Republican Party as the primary vehicle for renewing
---------------------------------------------------------------------------
American civilization.
*Renewing American Civilization must be communicated as an
intellectual-cultural message with governmental-political consequences.
(footnote in original)
(Ex. 47, JR-0000646).
In February 1993, Mr. Gingrich first approached Mr. Mescon
about teaching the course at KSC. (Ex. 48, Mescon 0278; 6/13/96
Mescon Tr. 26-27). Mr. Gingrich had talked to Dr. Mescon in
October or November 1992 about the general subject of teaching,
but there was no mention of the Renewing American Civilization
course at that time. (6/13/96 Mescon Tr. 12-14). The early
discussions with Mr. Mescon included the fact that Mr. Gingrich
intended to have the Renewing American Civilization course
disseminated through a satellite uplink system. (Ex. 49, Mescon
0664; 6/13/96 Mescon Tr. 29-30).
Shortly before this discussion with Mr. Mescon, in late
January 1993, Mr. Gingrich met with a group of GOPAC Charter
Members. In a letter written some months later to GOPAC Charter
Members, Mr. Gingrich described the meeting as follows:
During our meeting in January, a number of Charter
Members were kind enough to take part in a planning
session on ``Renewing American Civilization.'' That
session not only affected the substance of what the
message was to be, but also how best the new message of
positive solutions could be disseminated to this
nation's decision makers--elected officials, civic and
business leaders, the media and individual voters. In
addition to my present avenues of communication I
decided to add an avenue close to my heart, that being
teaching. I have agreed with Kennesaw State College, *
* * to teach ``Renewing American Civilization'' as a
for-credit class four times during the next four years.
Importantly, we made the decision to have the class
available as a ``teleseminar'' to students all across
the country, reaching college campuses, businesses,
civic organizations, and individuals through a live
``uplink,'' video tapes and audio tapes. Our hope is to
have at least 50,000 individuals taking the class this
fall and to have trained 200,000 knowledgeable citizen
activists by 1996 who will support the principles and
goals we have set.
(Ex. 50, Kohler 137-138). 22 During an interview with the
Special Counsel, Mr. Gingrich said he doubted that he had
written this letter and said that the remark in the letter that
the Charter Members' comments played a large role in developing
the course ``exaggerates the role of GOPAC.'' The letter was
written to ``flatter'' the Charter Members. (11/13/96 Gingrich
Tr. 129-130).
---------------------------------------------------------------------------
\22\ The letter goes on to state that: [L]et me emphasize very
strongly that the ``Renewing American Civilization'' project is not
being carried out under the auspices of GOPAC, but rather by Kennesaw
State College and the Kennesaw State College Foundation. We will not be
relying on GOPAC staff to support the class, and I am not asking you
for financial support.
(Ex. 50, Kohler 138) (emphasis in the original).
---------------------------------------------------------------------------
In a March 29, 1993 memorandum, Mr. Gingrich specifically
connects the course with the political goals of the movement.
The memorandum is entitled ``Renewing American Civilization as
a defining concept'' and is directed to ``Various Gingrich
Staffs.'' 23 The original draft of the memorandum is in
Mr. Gingrich's handwriting. (Ex. 51, GDC 08891-08892, GDC
10236-10238). In the memorandum, Mr. Gingrich wrote:
---------------------------------------------------------------------------
\23\ At the top of this memorandum is a handwritten notation (not
Mr. Gingrich's) stating: ``Tuesday 4 p.m. GOPAC Mtg.'' (Ex. 51, GDC
08891).
I believe the vision of renewing American
civilization will allow us to orient and focus our
activities for a long time to come.
At every level from the national focus of the Whip
office to the 6th district of Georgia focus of the
Congressional office to the national political
education efforts of GOPAC and the re-election efforts
of FONG 24 we should be able to use the ideas,
language and concepts of renewing American
civilization.
---------------------------------------------------------------------------
\24\ ``FONG'' stands for Mr. Gingrich's campaign organization,
``Friends of Newt Gingrich.''
---------------------------------------------------------------------------
(Ex. 51, GDC 08891).
In the memorandum, he describes a process for the
dissemination of the message of Renewing American Civilization
to virtually every person he talks to. This dissemination
includes a copy of the Special Order speech and a one-page
outline of the course. He then goes on to describe the role of
the course in this process:
The course is only one in a series of strategies
designed to implement a strategy of renewing American
civilization.
(Ex. 51, GDC 08891). Another strategy involving the course is:
Getting Republican activists committed to renewing
American civilization, to setting up workshops built
around the course, and to opening the party up to every
citizen who wants to renew American civilization.
(Ex. 51, GDC 08892). 25 Jana Rogers, the Site Host
Coordinator for the course in 1993, was shown a copy of this
memorandum and said she had seen it in the course of her work
at GOPAC. (7/3/96 Rogers Tr. 64). She said that this
represented what she was doing in her job with the course. (7/
3/96 Rogers Tr. 67-69). Steve Hanser, a paid GOPAC consultant
and someone who worked on the course, also said that the
contents of the memorandum were consistent with the strategy
related to the movement. (6/28/96 Hanser Tr. 42-45).
---------------------------------------------------------------------------
\25\ The ``party'' referred to in the quote is the Republican
Party. (11/13/96 Gingrich Tr. 80).
---------------------------------------------------------------------------
The most direct description of the role of the course in
relation to the movement to renew American civilization is set
out in a document which Mr. Gingrich indicates he wrote. (7/17/
96 Gingrich Tr. 162-163). The document has a fax stamp date of
May 13, 1993 and indicates it is from the Republican Whip's
Office. (Ex. 52, GDC 10639-10649). The document has three parts
to it. The first is entitled ``Renewing America Vision'' (Ex.
52, GDC 10639-10643); the second is entitled ``Renewing America
Strategies'' (Ex. 52, GDC 10644-10646); and the third is
entitled ``Renewing American Civilization Our Goal.'' (Ex. 52,
GDC 10647-10649). Mr. Gingrich said that the third part was
actually a separate document. (7/17/96 Gingrich Tr. 162-164).
While all three parts are labeled ``draft,'' the document was
distributed to a number of Mr. Gingrich's staff members and
associates, including Mr. Hanser, Ms. Prochnow, Ms. Rogers, Mr.
Gaylord, Mr. Eisenach, and Allan Lipsett (a press secretary).
Each of the recipients of the document have described it as an
accurate description of the Renewing American Civilization
movement. (6/28/96 Hanser Tr. 48, 53; 7/10/96 Prochnow Tr. 70-
71; 7/3/96 Rogers Tr. 71-75; 7/15/96 Gaylord Tr. 66-67; 7/12/96
Eisenach Tr. 148-149, 272-275; Lipsett Tr. 30-31). 26 In
the first section, Mr. Gingrich wrote:
---------------------------------------------------------------------------
\26\ Mr. Eisenach apparently sent a copy of this to a GOPAC
supporter in preparation for a meeting in May of 1993. (7/12/96
Eisenach Tr. 146-149). In the accompanying letter, Mr. Eisenach said:
``The enclosed materials provide some background for our discussions,
which I expect will begin with a review of the Vision, Strategies and
Goals of our efforts to Renew American Civilization. The class Newt is
teaching at Kennesaw State College this Fall is central to that effort,
and GOPAC and the newly created Progress & Freedom Foundation both play
important roles as well. (Ex. 13, GOPAC2 2337).''
The challenge to us is to be positive, to be
specific, to be intellectually serious, and to be able
to communicate in clear language a clear vision of the
American people and why it is possible to create that
America in our generation.
Once the American people understand what they can
have they will insist that their politicians abolish
the welfare state which is crippling them, their
children, and their country and that they replace it
with an opportunity society based on historically
proven principles that we see working all around us.
(Ex. 52, GDC 10643).
In the second portion of the document, Mr. Gingrich
describes how the vision of renewing America will be
accomplished. He lists thirteen separate efforts that fall into
categories of communication of the ideas in clear language,
educating people in the principles of replacing the welfare
state with an opportunity society, and recruiting public
officials and activists to implement the doctrines of renewing
American civilization. (Ex. 52, GDC 10644-10646).
In the third section, Mr. Gingrich explicitly connects the
course to the movement. First he starts out with three
propositions that form the core of the course: (1) a refrain he
refers to as the ``four can'ts;'' 27 (2) the welfare state
has failed; and (3) the welfare state must be replaced because
it cannot be repaired. (Ex. 52, GDC 10647; see also Ex. 54, PFF
18361, 18365-18367). He then described the goal of the
movement:
---------------------------------------------------------------------------
\27\ This refrain goes as follows: ``You cannot maintain a
civilization with twelve-year-olds having babies, fifteen-year-olds
shooting each other, seventeen-year-olds dying of AIDS, and eighteen-
year-olds getting diplomas they can't read.''
Our overall goal is to develop a blueprint for renewing
America by replacing the welfare state, recruit, discover,
arouse and network together 200,000 activists including
candidates for elected office at all levels, and arouse enough
volunteers and contributors to win a sweeping victory in 1996
and then actually implement our victory in the first three
months of 1997.
Our specific goals are to:
1. By April 1996 have a thorough, practical blueprint
for replacing the welfare state that can be understood
and supported by voters and activists.
We will teach a course on Renewing American
civilization on ten Saturday mornings this fall and
make it available by satellite, by audio and video tape
and by computer to interested activists across the
country. A month will then be spent redesigning the
course based on feedback and better ideas. Then the
course will be retaught in Winter Quarter 1994. It will
then be rethought and redesigned for nine months of
critical re-evaluation based on active working groups
actually applying ideas across the country the course
will be taught for one final time in Winter Quarter
1996.
2. Have created a movement and momentum which require
the national press corps to actually study the material
in order to report the phenomenon thus infecting them
with new ideas, new language and new perspectives.
3. Have a cadre of at least 200,000 people committed
to the general ideas so they are creating an echo
effect on talk radio and in letters to the editor and
most of our candidates and campaigns reflect the
concepts of renewing America.
Replacing the welfare state will require about
200,000 activists (willing to learn now [sic] to
replace the welfare state, to run for office and to
actually replace the welfare state once in office) and
about six million supporters (willing to write checks,
put up yard signs, or do a half day's volunteer work).
(Ex. 52, GDC 10647-10649). The ``sweeping victory'' referred to
above is by Republicans. (11/13/96 Gingrich Tr. 86). The
reference to ``our candidates'' above is to Republican
candidates. (11/13/96 Gingrich Tr. 90). According to Mr.
Gingrich, Mr. Gaylord, and Mr. Eisenach, the three goals set
forth above were to be accomplished by the course. (7/17/96
Gingrich Tr. 174-179; 7/15/96 Gaylord Tr. 66-67; 7/12/96
Eisenach Tr. 225; Ex. 55, GOPAC2 2419; Ex. 56, GOPAC2 2172-
2173; Ex. 57, Mescon 0626).
In various descriptions of the course, Mr. Gingrich stated
that his intention was to teach it over a four-year period.
After each teaching of the course he intended to have it
reviewed and improved. The ultimate goal was to have a final
product developed by April of 1996. (7/17/96 Gingrich Tr. 109;
Ex. 56, GOPAC2 2170). An explanation of this goal is found in a
three-page document, in Mr. Gingrich's handwriting, entitled
``End State April 1996.'' (Ex. 58, PFF 20107-20109). Mr.
Gingrich said he wrote this document early in the process of
developing the movement and described it as a statement of
where he hoped to be by April 1996 in regard to the movement
and the course. (7/17/96 Gingrich Tr. 108-115). On the first
page he wrote that the 200,000 plus activists will have a
common language and general vision of renewing America, and a
commitment to replacing the welfare state. In addition,
``[v]irtually all Republican incumbents and candidates [will]
have the common language and goals.'' (Ex. 58, PFF 20107). On
the second page he wrote that the ``Republican platform will
clearly be shaped by the vision, language, goals and analysis
of renewing America.'' (Ex. 58, PFF 20108). In addition,
virtually all Republican Presidential candidates will broadly
agree on that vision, language, goals and analysis. (Ex. 58,
PFF 20108). The Clinton administration and the Democratic Party
will be measured by the vision, principles and goals of
renewing America and there will be virtual agreement that the
welfare state has failed. (Ex. 58, PFF 20108). On the last page
Mr. Gingrich wrote a timeline for the course running from
September of 1993 through March of 1996. At the point on the
timeline where November 1994 appears, he wrote the word
``Election.'' (Ex. 58, PFF 20109). When Mr. Hanser was asked
about this document he said that the vision, language, and
concepts of the Renewing American Civilization movement
discussed in the document were being developed in the course.
(6/28/96 Hanser Tr. 53). He went on to say that ``End State''
was ``an application of those ideas to a specific political
end,which is one of the purposes, remember, for the course.''
(6/28/96 Hanser Tr. 54). There was an appreciation that this would be
primarily a Republican endeavor. (6/28/96 Hanser Tr. 30).
C. GOPAC and Renewing American Civilization
As discussed above, GOPAC was a political action committee
dedicated to, among other things, achieving Republican control
of the United States House of Representatives. (11/13/96
Gingrich Tr. 169; 7/3/96 Rogers Tr. 38-40). One of the methods
it used was the creation of a political message and the
dissemination of that message. (7/12/96 Eisenach Tr. 18-19; 6/
28/96 Hanser Tr. 13-14; 7/3/96 Rogers Tr. 36). The tool
principally used by GOPAC to disseminate its message was
audiotapes and videotapes. These were sent to Republican
activists, elected officials, potential candidates, and the
public. The ultimate purpose of this effort was to help
Republicans win elections. (6/27/96 Nelson Tr. 21-22; 7/15/96
Gaylord Tr. 37, 39; 7/3/96 Rogers Tr. 35-36).
1. GOPAC's Adoption of the Renewing American Civilization Theme
At least as of late January 1993, Mr. Gingrich and Mr.
Eisenach had decided that GOPAC's political message for 1993
and 1994 would be ``Renewing American Civilization.'' 28
(Ex. 59, PFF 37584-37590; 11/13/96 Gingrich Tr. 157; 7/17/96
Gingrich Tr. 61-62, 74; 7/15/96 Gaylord Tr. 35-36, 42-43; 7/3/
96 Rogers Tr. 35, 54-56; 6/28/96 Taylor Tr. 26; 6/27/96 Nelson
Tr. 34, 46). As described in a February 1993 memorandum over
Mr. Gingrich's name to GOPAC Charter Members:
---------------------------------------------------------------------------
\28\ As mentioned above, the earliest mention of the Renewing
American Civilization course was in February 1993. (Ex. 47, JR-
0000646).
GOPAC's core mission--to provide the ideas and the
message for Republicans to win at the grass roots--is
now more important than ever, and we have important
plans for 1993 and for the 1993-1994 cycle. The final
enclosure is a memorandum from Jeff Eisenach outlining
our 1993 program which I encourage you to review
---------------------------------------------------------------------------
carefully and, again, let me know what you think.
(Ex. 60, PFF 37569). The attached memorandum, dated February 1,
1993, is from Mr. Eisenach to Mr. Gingrich and references their
recent discussions concerning GOPAC's political program for
1993. (Ex. 59, PFF 37584-37590). It then lists five different
programs. The fourth one states:
(4) Message Development/''Renewing American
Civilization''--focus group project designed to test
and improve the ``Renewing American Civilization''
message in preparation for its use in 1993 legislative
campaigns and 1994 Congressional races.
(Ex. 59, PFF 37584) (emphasis in original). Of the other four
programs listed, three relate directly to the use of the
Renewing American Civilization message. The fourth--the ``
`Tory (Franchise) Model' R & D''--was not done. (7/12/96
Eisenach Tr. 188). This same political program was also listed
in two separate GOPAC documents dated April 26, 1993. One is
entitled ``1993 GOPAC POLITICAL PROGRAM'' (Ex. 61, PP001187-
00193) and the other is the ``GOPAC Report to Shareholders.''
(Ex. 62, Eisenach 2536-2545). The first page of the Report to
Shareholders states:
The challenge facing Republicans, however, is an
awesome one: We must build a governing majority,
founded on basic principles, that is prepared to do
what we failed to do during the last 12 years: Replace
the Welfare State with an Opportunity Society and
demonstrate that our ideas are the key to progress,
freedom and the Renewal of American Civilization.
(Ex. 62, Eisenach 2536).
In describing the political programs, these documents
provide status reports that indicate that the Renewing American
Civilization message is at the center of each project. Under
``Off-Year State Legislative Races (New Jersey, Virginia)'' the
project is described as ``Newt speaking at and teaching
training seminar for candidates at [a June 5, 1993] Virginia
Republican Convention.'' (Ex. 61, PP001187; Ex. 62, Eisenach
2540). 29 As discussed below, that speech and training
session centered on the Renewing American Civilization message.
Under ``Ongoing Political Activities'' the first aspect of the
project is described as sending tapes and establishing a
training module on Renewing American Civilization and health
care. (Ex. 61, PP001187; Ex. 62, Eisenach 2540). Under
``Curriculum Update and Expansion'' the project is described as
the production of new training tapes based on Mr. Gingrich's
session at the Virginia Republican Convention. (Ex. 61,
PP01189; Ex. 62, Eisenach 2541). 30
---------------------------------------------------------------------------
\29\ It is not clear whether any work was done in New Jersey
because that state had a Republican legislature and did not need
GOPAC's help. (7/15/96 Gaylord Tr. 42).
\30\ GOPAC later produced two tapes from the session. One was
called ``Renewing American Civilization'' and was mailed to 8,742
people. (Ex. 63, JG 000001693). The other was called ``Leading the
Majority'' and became a major training tool for GOPAC, used at least
into 1996. (6/27/96 Nelson Tr. 18). Both are based on the Renewing
American Civilization message and contain the core elements of the
course. The ``Renewing American Civilization'' tape contains more of
the RAC philosophy than the ``Leading the Majority'' tape, however,
both contain the basics of the course that Mr. Gingrich describes as
the ``central proposition'' or ``heart of the course.'' (Ex. 56, GOPAC2
2146-2209; Ex. 64, PP000330-000337; Ex. 54, PFF 18361, 18365-18367).
---------------------------------------------------------------------------
2. GOPAC'S Inability to Fund Its Political Projects in 1992 and 1993
At the end of 1992, GOPAC was at least $250,000 short of
its target income (Ex. 65, PFF 38054) and financial problems
lasted throughout 1993. (7/15/96 Gaylord Tr. 71-72). Because of
these financial shortfalls, GOPAC had to curtail its political
projects, particularly the tape program described above. (Ex.
65, PFF 38054-38060; Ex. 66, WGC 07428; 7/15/96 Gaylord Tr. 71-
72, 76). For example, according to Mr. Gaylord, GOPAC usually
sent out eight tapes a year; however, in 1993, it only sent out
two. (7/15/96 Gaylord Tr. 76). One of these was the ``Renewing
American Civilization'' tape made from Mr. Gingrich's June 1993
training session at the Virginia Republican Convention (Ex. 63,
JG 000001693). Accompanying the mailing of this tape was a
letter from Joe Gaylord in his role as Chairman of GOPAC. That
letter states:
Ideas matter, and replacing the welfare state with an
Opportunity society is so important that Newt is
developing a college course that he'll be teaching this
fall on this subject, Renewing American Civilization.
I wanted you to hear his initial thoughts because it
seems to me that we can't answer the question ``What
does the Republican Party stand for?'' without
considering the issues Newt has raised in this speech.
(Ex. 67, WGC 06215).
In light of GOPAC's poor financial condition, the
dissemination of the Renewing American Civilization message
through the course was beneficial to its political projects. In
this regard, the following exchange occurred with Mr. Gingrich:
Mr. Cole: [I]s one of the things GOPAC wanted to have
done during 1993 and 1994 was the dissemination of its
message; is that correct?
Mr. Gingrich: Yes.
Mr. Cole: GOPAC also did not have much money in those
years; is that correct?
Mr. Gingrich: That is correct. Particularly--it gets
better in '94, but '93 was very tight.
Mr. Cole: That curtailed how much it could spend on
disseminating its message?
Mr. Gingrich: Right.
Mr. Cole: The message that it was trying to
disseminate was the Renewing American Civilization
message; is that right?
Mr. Gingrich: Was the theme, yes.
(11/13/96 Gingrich Tr. 157-158). With respect to whether
the dissemination of the course benefited GOPAC, the following
exchange occurred:
Mr. Cole: Was GOPAC better off in a situation where
the message that it had chosen as its political message
for those years was being disseminated by the course?
Was it better off?
Mr. Gingrich: The answer is yes.
(11/13/96 Gingrich Tr. 167).
3. GOPAC's Involvement in the Development, Funding, and Management of
the Renewing American Civilization Course
a. GOPAC personnel
Starting at least as early as February 1993, Mr. Eisenach,
then GOPAC's Executive Director, was involved in developing the
Renewing American Civilization course. Although Mr. Eisenach
has stated that Mr. Gaylord was responsible for the development
of the course until mid-May 1993 (7/12/96 Eisenach Tr. 71-75;
Ex. 68, Eisenach Testimony Before House Ethics Committee at Tr.
142; Ex. 69, PFF 1167), Mr. Gaylord stated that he never had
such a responsibility. (7/15/96 Gaylord Tr. 15-18).
Additionally, Mr. Gingrich and others involved in the
development of the course identified Mr. Eisenach as the person
primarily responsible for the development of the course from
early on. (7/17/96 Gingrich Tr. 117, 121; 6/13/96 Mescon Tr.
30-31; 6/28/96 Hanser Tr. 74-75; 7/3/96 Rogers Tr. 17-18, 22).
31 Several documents also establish Mr. Eisenach's role in
the development of the course starting at an early stage. One
document written by Mr. Eisenach is dated February 25, 1993,
and shows him, as well as others, tasked with course
development and marketing. (Ex. 70, PFF 16628). A memorandum
from Mr. Gingrich to Mr. Mescon, dated March 1, 1993, describes
how Mr. Eisenach is involved in contacting a number of
institutions in regard to funding for the course. (Ex. 71, KSC
3491).
---------------------------------------------------------------------------
\31\ The February 15, 1993, agenda for the meeting where the RAC
course and other GOPAC issues were discussed, lists Mr. Eisenach as an
attendee, but does not list Mr. Gaylord as being present. (Ex. 47, JR-
0000645).
---------------------------------------------------------------------------
Aside from Mr. Eisenach, other people affiliated with GOPAC
were involved in the development of the course. Mr. Gingrich
was General Chairman of GOPAC and had a substantial role in the
course. Jana Rogers served as Mr. Eisenach's executive
assistant at GOPAC during the early part of 1993 and in that
role worked on the development of the course. (7/3/96 Rogers
Tr. 16-17). In June 1993, she temporarily left GOPAC at Mr.
Eisenach's request to become the course's Site Host
Coordinator. As a condition of her becoming the site host
coordinator, she received assurances from both Mr. Eisenach and
Mr. Gaylord that she could return to GOPAC when she had
finished her assignment with the course. (7/3/96 Rogers Tr. 12-
16). After approximately five months as the course's Site Host
Coordinator, she returned to GOPAC for a brief time. (7/3/96
Rogers 24-25). Steve Hanser, a member of the GOPAC Board and a
paid GOPAC consultant, helped develop the course. (6/28/96
Hanser Tr. 10, 19-21). Mr. Gaylord was a paid consultant for
GOPAC and had a role in developing the course. (7/15/96 Gaylord
Tr. 15).
Pamla Prochnow was hired as the Finance Director for GOPAC
in April 1993. 32 Ms. Prochnow spent a portion of her
early time at GOPAC raising funds for the course. (7/10/96
Prochnow Tr. 14-16; 6/13/96 Mescon Tr. 63-67, 82; Ex. 74,
Documents produced by Prochnow). 33 A number of the people
and entities she contacted were GOPAC supporters. In fact,
according to Mr. Eisenach, approximately half of the first
year's funding for the course came from GOPAC supporters. (Ex.
69, PFF 1168-1169). Some of those people also helped fund the
course in 1994. (See attachments to Ex. 69, PFF 1252-1277) (the
documents contain Mr. Eisenach's marks of ``G'' next to the
people, companies, and foundations that were donors or related
to donors to GOPAC.))
---------------------------------------------------------------------------
\32\ During her interviewing process, Ms. Prochnow was provided
with materials to help her understand the goals of GOPAC. (Ex. 72,
GOPAC2 0529). Although she has no specific recollection as to what
these materials were, she believes they were materials related to the
Renewing American Civilization movement. (7/10/96 Prochnow Tr. 18-19;
Ex. 73, PP000459-000463; PP00778).
\33\ Mr. Eisenach has stated that he did not ask Ms. Prochnow to do
this fundraising work, but rather Mr. Gaylord did. (7/12/96 Eisenach
Tr. 71, 75; Ex. 65, PFF 1168). However, both Mr. Gaylord and Ms.
Prochnow clearly state that it was Mr. Eisenach, not Mr. Gaylord, who
directed Ms. Prochnow to perform the fundraising work. (7/15/96 Gaylord
Tr. 16, 17; 7/10/96 Prochnow Tr. 14, 73-74; Ex. 71, Letter dated July
25, 1996, from Prochnow's attorney).
---------------------------------------------------------------------------
When Mr. Eisenach resigned from GOPAC and assumed the title
of the course's project director, two GOPAC employees joined
him in his efforts. Kelly Goodsell had been Mr. Eisenach's
Administrative Assistant at GOPAC since March of 1993 (7/9/96
Goodsell Tr. 8, 11), and Michael DuGally had been an employee
at GOPAC since January 1992. (7/19/96 DuGally Tr. 9-10). Both
went to work on the course as employees of Mr. Eisenach's
Washington Policy Group (``WPG'').34 In the contract
between WPG and KSCF, it was understood that WPG would devote
one-half of the time of its employees to working on the course.
WPG had only one other client at this time--GOPAC. In its
contract with GOPAC, WPG was to receive the same monthly fee as
was being paid by KSCF in return for one-half of the time of
WPG's employees. (Ex. 76, PFF 37450-37451). The contract also
stated that to the extent that WPG did not devote full time to
KSCF and GOPAC projects, an adjustment in the fee paid to WPG
would be made. (Ex. 76, PFF 37450). Neither Ms. Goodsell nor
Mr. DuGally worked on any GOPAC project after they started
working on the course in June of 1993. (7/9/96 Goodsell Tr. 8,
10-11; 7/19/96 DuGally Tr. 14). Mr. Eisenach said that he spent
at the most one-third of his time during this period on GOPAC
projects. (7/12/96 Eisenach Tr. 36-37). No adjustment to WPG's
fee was made by GOPAC. (7/12/96 Eisenach Tr. 44).35
---------------------------------------------------------------------------
\34\ As discussed earlier, WPG was a corporation formed by Mr.
Eisenach which had a contract with KSCF to run all aspects of the
course.
\35\ The only other person who was involved in the early
development of the course was Nancy Desmond. She did not work for
GOPAC, but had been a volunteer at Mr. Gingrich's campaign office for
approximately a year before starting to work on the course. (6/13/96
Desmond Tr. 15-16). She continued to work as a volunteer for Mr.
Gingrich's campaign until July of 1993, when she was told to resign
from the campaign because of the perceived negative image her two roles
would project. (6/13/96 Desmond Tr. 37-38; Ex. 77, PFF 38289).
---------------------------------------------------------------------------
The February 15, 1993, agenda discussed above also gives
some indication of GOPAC's role in the development of the
Renewing American Civilization course. (Ex. 47, JR-0000645-
0000647). Of the eight attendees at that meeting, five worked
for or were closely associated with GOPAC (Mr. DuGally, Mr.
Eisenach and Ms. Rogers were employees, Mr. Hanser was a member
of the Board and a paid GOPAC consultant, and Mr. Gingrich was
the General Chairman). Furthermore, the agenda for that meeting
indicates that GOPAC political issues were to be discussed as
well as course planning issues. Two of the GOPAC political
issues apparently related to: (1) the political program
described in the February 1, 1993,memorandum which lists four
of GOPAC's five political projects as relating to Renewing American
Civilization (Ex. 60, PFF 37569-37576), and (2) GOPAC's Charter Meeting
agenda entitled ``Renewing American Civilization.'' As discussed below,
this Charter Meeting included breakout sessions to help develop a
number of the lectures for the course, as well as GOPAC's message for
the 1993-1994 election cycle. (Ex. 78, PP00448-PP000452). As Mr.
Gingrich stated in his interview, his intention was to have GOPAC use
Renewing American Civilization as its message during this time frame.
(7/17/96 Gingrich Tr. 74; 7/3/96 Rogers Tr. 54-56).
In 1993 Mr. Eisenach periodically produced a list of GOPAC
projects. The list is entitled ``Major Projects Underway'' and
was used for staff meetings. (7/12/96 Eisenach Tr. 213; 7/15/96
Gaylord Tr. 79-80; 6/28/96 Taylor Tr. 43-44). Items related to
the Renewing American Civilization course were listed in
several places on GOPAC's project sheets. For example, from
April 1993 through at least June 1993, ``Renewing American
Civilization Support'' is listed under the ``Planning/Other''
section of GOPAC's projects sheets. (Ex. 79, JG 000001139, JG
000001152, JG 000001173, JG 000001270). Another entry which
appears a number of times under ``Planning/Other'' is ``RAC
Pert Chart, etc.'' (Ex. 79, JG 000001152, JG 000001173, JG
000001270). It refers to a time-line Mr. Eisenach wrote while
he was the Executive Director of GOPAC relating to the
development of the various components of the course, including
marketing and site coordination, funding, readings, and the
course textbook. (Ex. 80, PFF 7529-7533; 7/12/96 Eisenach Tr.
212-213). Finally, under the heading ``Political'' on the May
7, 1993, project sheet, is listed the phrase ``CR/RAC Letter.''
(Ex. 79, JG 000001152). This refers to a mailing about the
course sent over Mr. Gingrich's name by GOPAC to approximately
1,000 College Republicans. (Ex. 81, Mescon 0918, 0915, 0914 and
Meeks 0038-0040; 7/15/96 Gaylord Tr. 81-82).
b. Involvement of GOPAC charter members in course design
As discussed earlier, Mr. Gingrich had a meeting with GOPAC
Charter Members in January 1993 to discuss the ideas of
Renewing American Civilization. (11/13/96 Gingrich Tr. 132).
According to a letter written about that meeting, the idea to
teach arose from that meeting. In April 1993, GOPAC held its
semi-annual Charter Meeting. Its theme was ``Renewing American
Civilization.'' (Ex. 78, PP000448-PP000452). Mr. Gingrich gave
the keynote address, entitled ``Renewing American
Civilization,'' and there were five breakout sessions entitled
``Advancing the Five Pillars of Twenty-first Century
Democracy.'' (Ex. 78, PP000449). Each of the breakout sessions
was named for a lecture in the course, and these sessions were
used to help develop the content of the course (11/13/96
Gingrich Tr. 164-165; 7/17/96 Gingrich Tr. 69-70; 7/12/96
Eisenach Tr. 144-146; 7/15/96 Gaylord Tr. 46) as well as
GOPAC's political message for the 1993 legislative campaigns
and the 1994 congressional races. (11/13/96 Gingrich Tr. 164-
165; Ex. 62, Eisenach 2540). As stated in a memorandum from Mr.
Eisenach to GOPAC Charter Members, these breakout sessions were
intended to ``dramatically improve both our understanding of
the subject and our ability to communicate it.'' (Ex. 82,
Roberts 0045-0048).
c. Letters sent by GOPAC
In June of 1993, GOPAC sent a letter over Mr. Gingrich's
signature stating that ``it is vital for Republicans to now
DEVELOP and put forward OUR agenda for America.'' (Ex. 83,
PP000534) (emphasis in original). In discussing an enclosed
survey the letter states:
It is the opening step in what I want to be an
unprecedented mobilization effort for Republicans to
begin the process of replacing America's failed welfare
state.
And the key political component of that effort will
be an all-out drive to end the Democrat's 40 year
control of the U.S. House or Representatives in 1994!
(Ex. 83, PP000535).36 The letter then states that it is
important to develop the themes and ideas that will be needed
to accomplish the victory in 1994. (Ex. 83, PP000536). In
language that is very similar to the core of the course, but
with an overtly partisan aspect added to it, the letter states:
---------------------------------------------------------------------------
\36\ The copy of the letter produced is a draft. While Mr. Gingrich
was not able to specifically identify the letter, he did state that the
letter fit the message and represented the major theme of GOPAC at that
time. (7/17/96 Gingrich Tr. 60-61).
Personally, I believe we can and should turn the 1994
midterm elections into not just a referendum on President
Clinton, but on whether we maintain or replace the welfare
state and the Democratic Party which supports it.
I believe the welfare state which the Democrats have
created has failed.
In fact, I challenge anyone to say that it has succeeded,
when today in America twelve year olds are having children,
fifteen year olds are killing each other, seventeen year olds
are dying of AIDS and eighteen year olds are being given high
school diplomas they cannot even read.
* * * * * * *
And what I want to see our Party work to replace it with is
a plan to renew America based on what I call ``pillars'' of
freedom and progress:
(1) Personal strength;
(2) A commitment to quality in the workplace;
(3) Spirit of American Inventiveness;
(4) Entrepreneurial free enterprise applied to both
the private and public sectors;
(5) Applying the lessons of American history as to
what works for Americans to proposed government
solutions to our problems.
After being active in politics for thirty years, and being
in Congress for fourteen of them, I firmly believe these five
principles can develop a revolutionary change in government.
Properly applied, they can dramatically improve safety, health,
education, job creation, the environment, the family and our
national defense.
(Ex. 83, PP000536).
In other letters sent out by GOPAC, the role of the
Renewing American Civilization course in relation to the
Republican political goals of GOPAC were described in explicit
terms. A letter to Neil Gagnon, dated May 5, 1993, over Mr.
Gingrich's name, states:
As we discussed, it is time to lay down a blue
print--which is why in part I am teaching the course on
Renewing American Civilization. Hopefully, it will
provide the structure to build an offense so that
Republicans can break through dramatically in 1996. We
have a good chance to make significant gains in 1994,
but only if we can reach the point where we are united
behind a positive message, as well as a critique of the
Clinton program.37
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\37\ Jana Rogers had not seen this letter before her interview, but
after reading it she said that through her work on the course, she
believed the contents of the letter set out one of the goals of the
Renewing American Civilization course. (7/3/96 Rogers Tr. 75-76).
---------------------------------------------------------------------------
(Ex. 84, GOPAC2 0003).
In a letter dated June 21, 1993, that Pamla Prochnow,
GOPAC's new finance director, sent to Charter Members as a
follow-up to an earlier letter from Mr. Gingrich, she states:
As the new finance director, I want to introduce
myself and to assure you of my commitment and
enthusiasm to the recruitment and training of
grassroots Republican candidates. In addition, with the
course Newt will be teaching in the fall--Renewing
American Civilization--I see a very real opportunity to
educate the American voting population to Republican
ideals, increasing our opportunity to win local, state
and Congressional seats.38
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\38\ Both Dr. Mescon and Dr. Siegel of KSC were shown some of these
letters. They both said that had they known of this intention in regard
to the course, they would not have viewed it as an appropriate project
for KSC. (6/13/96 Mescon Tr. 84-87; 6/13/96 Siegel Tr. 60-62).
---------------------------------------------------------------------------
(Ex. 85, PP000194).
On January 3, 1994, Ms. Prochnow sent another letter to the
Charter Members. It states:
As we begin the new year, we know our goals and have
in place the winning strategies. The primary mission is
to elect Republicans at the local, state and
congressional level. There, also, is the strong
emphasis on broadcasting the message of renewing
American civilization to achieve peace and prosperity
in this country.
(Ex. 86, PP000866).
In another letter sent over Mr. Gingrich's name, the course
is again discussed. The letter, dated May 12, 1994, is
addressed to Marc Bergschneider and states:
I am encouraged by your understanding that the
welfare state cannot merely be repaired, but must be
replaced and have made a goal of activating at least
200,000 citizen activists nationwide through my course,
Renewing American Civilization. We hope to educate
people with the fact that we are entering the
information society. In order to make sense of this
society, we must rebuild an opportunistic country. In
essence, if we can reach Americans through my course,
independent expenditures, GOPAC and other strategies,
we just might unseat the Democratic majority in the
House in 1994 and make government accountable again.
(Ex. 87, GDC 01137).
Current and former GOPAC employees said that before a
letter would go out over Mr. Gingrich's signature, it would be
approved by him. (7/3/96 Rogers Tr. 88; 6/27/96 Nelson Tr. 56-
60). According to Mr. Eisenach, Mr. Gingrich ``typically''
reviewed letters that went out over his signature, but did not
sign all letters that were part of a mass mailing. (7/12/96
Eisenach Tr. 35). With respect to letters sent to individuals
over Mr. Gingrich's name, Mr. Eisenach said the following:
Mr. Eisenach: [Mr. Gingrich] would either review
those personally or be generally aware of the content.
In other words, on rare, if any, occasions, did I or
anybody else invent the idea of sending a letter to
somebody, write the letter, send it under Newt's
signature and never check with him to see whether he
wanted the letter to go.
There were occasions--now, sometimes that would be--
Newt and I would discuss the generic need for a letter.
I would write the letter and send it and fax a copy to
him and make sure he knew that it had been sent.
Mr. Cole: Would you generally review the contents of
the letter with him prior to it going out?
Mr. Eisenach: Not necessarily word for word. It would
depend. But as a general matter, yes.
(7/12/96 Eisenach Tr. 36). Mr. Gingrich's Administrative
Assistant, Rachel Robinson, stated that in 1993 and 1994
whenever she received a letter or other document for Mr.
Gingrich that was to be filed, she would sign Mr. Gingrich's
name on the document and place her initials on it. This
``usually'' meant that Mr. Gingrich had seen the letter. (9/6/
96 Robinson Tr. 4). The letter sent to Mr. Bergschneider on May
12, 1994, was produced from the files of Mr. Gingrich's
Washington, D.C. office and has Ms. Robinson's initials on it.
(9/6/96 Robinson Tr. 4).
The letters sent out over Mr. Gingrich's signature were
shown to Mr. Gingrich during an interview. He said that none of
them contained his signature, he did not recall seeing them
prior to the interview, and said he would not have written them
in the language used. (7/17/96 Gingrich Tr. 77-78, 140-141).
Mr. Gaylord said that ``it seemed to [him] there was a whole
series of kind of usual correspondence that was done by the
staff'' that Mr. Gingrich would not see. (7/15/96 Gaylord Tr.
77). The content of the letters listed above, however, are
quite similar to statements made directly by Mr. Gingrich about
the movement and the role of the course in the movement. (See,
e.g., Ex. 47, JR-0000646 (``emphasis is on the Republican Party
as the primary vehicle for renewing American civilization'');
Ex. 52 GDC 10639-10649 (``sweeping victory'' will be
accomplished through the course); Ex. 88, GDC 10729-10733
(``Democrats are the party of the welfare state.'' ``Only by
voting Republican can the welfare state be replaced and an
opportunity society be created.''))
D. ``Replacing the Welfare State With an Opportunity Society'' as a
Political Tool
According to Mr. Gingrich, the main theme of both the
Renewing American Civilization movement and the course was the
replacement of the welfare state with an opportunity society.
(7/17/96 Gingrich Tr. 52, 61, 170; 11/13/96 Gingrich Tr. 85).
Mr. Gingrich also said, ``I believe that to replace the welfare
state you almost certainly had to have a [R]epublican
majority.'' (7/17/96 Gingrich Tr. 51). ``I think it's hard to
replace the welfare state with the [D]emocrats in charge.'' (7/
17/96 Gingrich Tr. 62). The course was designed to communicate
the vision and language of the Renewing American Civilization
movement and ``was seen as a tool that could be used to replace
the welfare state.'' (7/17/96 Gingrich Tr. 159-160; see also
11/13/96 Gingrich Tr. 47, 76).39
---------------------------------------------------------------------------
\39\ During his interview, the following exchange occurred
regarding the movement:
Mr. Cole: Yet there was an emphasis in the movement on the
Republican Party?
Mr. Gingrich: There certainly was on my part, yes.
Mr. Cole: You were at the head of the movement, were you not?
Mr. Gingrich: Well, I was the guy trying to create it.
Mr. Cole: The course was used as the tool to communicate the
message of the movement, was it not?
Mr. Gingrich: Yes, it was a tool, yes.
(11/13/96 Gingrich Tr. 76).
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In addition to being the title of a movement, the course,
and GOPAC's political message for 1993 and 1994, ``Renewing
American Civilization'' was also the main message of virtually
every political and campaign speech made by Mr. Gingrich in
1993 and 1994. (7/17/96 Gingrich Tr. 69).40 According to
Mr. Gingrich, there was an effort in 1994 to use the ``welfare
state'' label as a campaign tool against the Democrats and to
use the ``opportunity society'' label as an identification for
the Republicans. (7/17/96 Gingrich Tr. 113). Mr. Gingrich made
similar comments in a subsequent interview:
---------------------------------------------------------------------------
\40\ According to Ms. Rogers, the course's Site Host Coordinator,
there was coordination between the message, the movement, and
activists. ``They were extensions of Newt and each had to make--each
group had to make sure--what I mean specifically is GOPAC and the class
had to make sure that they were using the same message that Newt was
trying to disseminate, that it was identical.
(7/3/96 Rogers Tr. 54).
---------------------------------------------------------------------------
Mr. Cole: During [1993-1994] was there an effort to
connect the Democrats with the welfare state?
Mr. Gingrich: Absolutely; routinely and repetitively.
Mr. Cole: And a campaign use of that?
Mr. Gingrich: Absolutely.
Mr. Cole: A partisan use, if you will?
Mr. Gingrich: Absolutely.
Mr. Cole: And was there an effort to connect the
Republicans with the opportunity society?
Mr. Gingrich: Absolutely.
Mr. Cole: A partisan use?
Mr. Gingrich: Yes, sir.
Mr. Cole: And that was the main theme of the course,
was it not, replacement of the welfare state with the
opportunity society?
Mr. Gingrich: No. The main theme of the course is
renewing American civilization and the main subset is
that you have--that you have to replace the welfare
state with an opportunity society for that to happen.
(11/13/96 Gingrich Tr. 79-80).
As referred to above, Mr. Gingrich held a training seminar
for candidates on behalf of GOPAC at the Virginia Republican
Convention in June 1993. (7/15/96 Gaylord Tr. 29-30). He gave a
speech entitled ``Renewing American Civilization'' which
described the nature of the movement and the course. (Ex. 56,
GOPAC2 2146-2209). Near the beginning of his speech, Mr.
Gingrich said:
What I first want to suggest to you [is] my personal
belief that we are engaged in a great moral and
practical effort, that we are committed to renewing
American civilization, and I believe that's our battle
cry. That we want to be the party and the movement that
renews American civilization and that renewing American
civilization is both an idealistic cause and a
practical cause at the same time.
(Ex. 56, GOPAC2 2146).
He then told the audience that he has four propositions
with which 80% to 95% of Americans will agree. These are: (1)
there is an American civilization; (2) the four can'ts; (3) the
welfare state has failed; and (4) to renew American
civilization it is necessary to replace the welfare state. (Ex.
56, GOPAC2 2149-2153). \41\ Mr. Gingrich then went on to relate
the principles of renewing American civilization to the
Republican party:
---------------------------------------------------------------------------
\41\ These four propositions were used as the ``central
propositions'' or ``heart'' of the course to introduce each session in
1993 and 1994. (Ex. 54, PFF 18361, 18365-18367).
We can't do much about the Democrats. They went too
far to the left. They are still too far to the left.
That's their problem. But we have a huge burden of
responsibility to change our behavior so that every one
who wants to replace the welfare state and every one
who wants to renew American civilization has a home,
and it's called being Republican. We have to really
learn how to bring them all in.
And I think the first step of all that is to insist
that at the core of identification the only division
that matters is that question. You want to replace the
welfare state and renew American civilization. The
answer is just fine, come and join us. And not allow
the news media, not allow the Democrats, not allow
interest groups to force us into fights below that
level in terms of defining who we are. That in any
general election or any effort to govern that we are
every one who is willing to try to replace the welfare
state, and we are every one who is willing to renew
American civilization.
Now, that means there is a lot of ground in there to
argue about details. Exactly how do you replace the
welfare state. Exactly which idea is the best idea. But
if we accept every one coming in, we strongly change
the dynamics of exactly how this country is governed
and we begin to create a majority Republican party that
will frankly just inexorably crow[d] out the Democrats
and turn them into minority status.
(Ex. 56, GOPAC2 2155-2156).
Mr. Gingrich told the audience that he would discuss three
areas in his remarks: (1) the principles of renewing American
civilization; (2) the principles and skills necessary to be a
``renewing candidate'' and then ultimately a ``renewing
incumbent;'' and (3) the concept and principles for creating a
community among those who are committed to replacing the
welfare state and renewing American civilization. (Ex. 56,
GOPAC2 2168). In speaking of the first area, Mr. Gingrich said
that it is a very complicated subject. Because of this he was
only going to give a ``smattering'' of an outline at the
training seminar. (Ex. 56, GOPAC2 2170). He said, however, that
in the fall he planned to teach a twenty-hour course on the
subject, and then refine it and teach it again over a four-year
period. (Ex. 56, GOPAC2 2170). He then described the three
goals he had for the course:
First, we want to have by April of '96 a genuine
intellectual blueprint to replace the welfare state
that you could look at as a citizen and say, yeah, that
has a pretty good chance of working. That's
dramatically better than what we've been doing.
Second, we want to find 200,000 activist citizens,
and I hope all of you will be part of this, committed
at every level of American life to replacing the
welfare state. Because America is a huge decentralized
country. You've got to have school boards, city
councils, hospital boards, state legislatures, county
commissioners, mayors, and you've got to have
congressmen and senators and the President and
governors, who literally [sic] you take all the elected
posts in America and then you take all the people
necessary to run for those posts and to help the
campaigns, etc., I think it takes around 200,000 team
players to truly change America.
(Ex. 56, GOPAC2 2170-2171).
Third, we create a process--and this is something you
can all help with in your own districts--we create a
process interesting enough that the national news media
has to actually look at the material in order to cover
the course.\42\
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\42\ These are the same three specific goals that were listed in
the document entitled ``Renewing American Civilization Our Goal'' that
referred to achieving a ``sweeping victory in 1996'' as the overall
goal. (Ex. 52, GDC 10647-10648).
---------------------------------------------------------------------------
(Ex. 56, GOPAC2 2173).
The transcript of his speech goes on for the next 30 pages
to describe the five pillars of American civilization that form
the basis of the course, and how to use them to get supporters
for the candidates' campaigns. In discussing this Mr. Gingrich
said:
Now, let me start just as [a] quick overview. First, as I
said earlier, American civilization is a civilization. Very
important. It is impossible for anyone on the left to debate
you on that topic.
* * * * * * *
But the reason I say that is if you go out and you campaign
on behalf of American civilization and you want to renew
American civilization, it is linguistically impossible to
oppose you. And how is your opponent going to get up and say
I'm against American civilization?
(Ex. 56, GOPAC2 2175-2176). Near the end of the speech he said:
I believe, if you take the five pillars I've
described, if you find the three areas that will really
fit you, and are really in a position to help you, that
you are then going to have a language to explain
renewing American civilization, a language to explain
how to replace the welfare state, and three topics that
are going to arouse volunteers and arouse contributions
and help people say, Yes, I want this done.
(Ex. 56, GOPAC2 2207).\43\
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\43\ As discussed above, this speech was used by GOPAC to produce
two training tapes. One was called ``Renewing American Civilization''
and the other was called ``Leading the Majority.'' (7/15/96 Gaylord Tr.
31).
In a document that Mr. Gingrich apparently wrote during
this time (Ex. 89, Eisenach 2868-2869), the course is related
to the Renewing American Civilization movement in terms of
winning a Republican majority. The ``House Republican Focus for
1994'' is directed at having Republicans communicate a positive
message so that a majority of Americans will conclude that
their only hope for real change is to vote Republican. In
---------------------------------------------------------------------------
describing that message, the document states:
The Republican party can offer a better life for
virtually every one if it applies the principles of
American civilization to create a more flexible,
decentralized market oriented system that uses the
Third Wave of change and accepts the disciplines of the
world market.
These ideas are outlined in a 20 hour intellectual
framework ``Renewing American Civilization'' available
on National Empowerment Television every Wednesday from
1 pm to 3 pm and available on audio tape and video tape
from 1-800-TO-RENEW.
(Ex. 89, Eisenach 2869).
In a document dated March 21, 1994, and entitled ``RENEWING
AMERICA: The Challenge for Our Generation,'' \44\ Mr. Gingrich
described a relationship between the course and the movement.
(Ex. 90, GDC 00132-00152). Near the beginning of the document,
one of the ``key propositions'' listed is that the welfare
state has failed and must be replaced with an opportunity
society. (Ex. 90, GDC 00136). The opportunity society must be
based on, among other things, the principles of American
civilization. (Ex. 90, GDC 00136). The document states that the
key ingredient for success is a movement to renew American
civilization by replacing the welfare state with an opportunity
society. (Ex. 90, GDC 00137). That movement will require at
least 200,000 ``partners for progress'' committed to the goal
of replacing the welfare state with an opportunity society and
willing to study the principles of American civilization, work
on campaigns, run for office, and engage in other activities to
further the movement. (Ex. 90, GDC 00138).\45\ Under the
heading ``Learning the Principles of American Civilization''
the document states, ``The course, `Renewing American
Civilization', is designed as a 20 hour introduction to the
principles necessary to replace the welfare state with an
opportunity society.'' (Ex. 90, GDC 00139). It then lists the
titles of each class and the book of readings associated with
the course. The next section is titled ``Connecting the
`Partners' to the `Principles'.'' (Ex. 90, GDC 00140). It
describes where the course is being taught, including that it
is being offered five times during 1994 on National Empowerment
Television, and states that, ``Our goal is to get every
potential partner for progress to take the course and study the
principles.'' (Ex. 90, GDC 00140).\46\ The document then lists
a number of areas where Republicans can commit themselves to
``real change,'' including the Contract with America and a
concerted effort to end the Democratic majority in the House.
(Ex. 90, GDC 00144-00150).
---------------------------------------------------------------------------
\44\ Mr. Gingrich at least wrote the first draft of this document
and stated that it was compatible with what he was doing at that time.
It was probably a briefing paper for the House Republican members. (Ex.
90, GDC 00132-00152; 7/17/96 Gingrich Tr. 203-204).
\45\ In this section he defines the ``partners for progress'' as
``citizens activists.''
\46\ The course was broadcast twice each week on National
Empowerment Television. In light of it being a ten-week course, and
being offered five times during 1994 on NET, it ran for 50 weeks during
this election year. In addition to being on NET, it was also on a local
cable channel in Mr. Gingrich's district in Georgia. (Ex. 91, DES
01048; 7/18/96 Gingrich Tr. 257-259).
---------------------------------------------------------------------------
A May 10, 1994 document which Mr. Gingrich drafted (7/18/96
Gingrich Tr. 234-235; 7/15/96 Gaylord Tr. 70) entitled ``The 14
Steps[:] Renewing American Civilization by replacing the
welfare state with an opportunity society,'' he notes the
relationship between the course and the partisan aspects of the
movement. (Ex. 88, GDC 10729-10733). After stating that the
welfare state has failed and needs to be replaced (Ex. 88, GDC
10729), the document states that, ``Replacing the welfare state
will require a disciplined approach to both public policy and
politics.'' (Ex. 88, GDC 10730). ``We must methodically focus
on communicating and implementing our vision of replacing the
welfare state.'' (Ex. 88, GDC 10730). In describing the
replacement that will be needed, Mr. Gingrich says that it:
must be an opportunity society based on the principles
of American civilization * * *.
These principles each receive two hours of
introduction in `Renewing American Civilization', a
course taught at Reinhardt College. The course is
available on National Empowerment Television from 1-3
P.M. every Wednesday and by videotape or audiotape by
calling 1-800-TO-RENEW.
(Ex. 88, GDC 10730).
This document goes on to describe the 200,000 ``partners
for progress'' as being necessary for the replacement of the
welfare state and how the Contract with America will be a first
step toward replacing the welfare state with an opportunity
society. (Ex. 88, GDC 10731). The document then states:
The Democrats are the party of the welfare state. Too
many years in office have led to arrogance of power and
to continuing violations of the basic values of self-
government.
Only by voting Republican can the welfare state be
replaced and an opportunity society be created.
(Ex. 88, GDC 10731).
On November 1, 1994, Mr. Gingrich attended a meeting with
Ms. Minnix, his co-teacher at Reinhardt, to discuss the
teaching of the course in 1995. (Ex. 92, Reinhardt 0063-0065).
Also at that meeting were Mr. Hanser, Ms. Desmond, Mr.
Eisenach, and John McDowell. One of the topics discussed at the
meeting was Mr. Gingrich's desire to teach the course on a
second day in Washington, D.C. According to notes of the
meeting prepared by Ms. Minnix, Mr. Gingrich wanted to teach
the course in D.C. in an effort:
to attract freshman congresspeople, the press--who will
be trying to figure out the Republican agenda--and
congressional staff looking for the basis of Republican
doctrine. `Take the course' will be suggested to those
who wonder what a Republican government is going to
stand for.
(Ex. 92, Reinhardt 0064).\47\ Later in the meeting Mr. Gingrich
said that his chances of becoming Speaker were greater than 50
percent and he was making plans for a transition from
Democratic to Republican rule. Ms. Minnix wrote that Mr.
Gingrich ``sees the course as vital to this--so vital that no
one could convince him to teach it only one time per week and
conserve his energy.'' (Ex. 92, Reinhardt 0065).\48\
---------------------------------------------------------------------------
\47\ Ms. Minnix stated that the word ``Republican'' may not have
been specifically used by Mr. Gingrich, but that it was the context of
his remark. (6/12/96 Minnix Tr. 54-56).
\48\ The other participants at this meeting were asked about this
conversation. To the extent they recalled the discussion, they
confirmed that it was as related in Ms. Minnix's memorandum. No one had
a recollection that was contrary to Ms. Minnix's memorandum. (6/12/96
Minnix Tr. 54-56; 6/28/96 Hanser Tr. 71-72; 6/13/96 Desmond Tr. 76-78;
7/12/96 Eisenach Tr. 270-271; 7/17/96 Gingrich Tr. 211-215).
---------------------------------------------------------------------------
A number of other documents reflect a similar partisan,
political use of the message and theme of Renewing American
Civilization. (Ex. 93, LIP 00602-00610, (``Renewing American
Civilization: Our Duty in 1994,'' a speech given to the
Republican NationalCommittee January 21, 1994 Winter
Breakfast); Ex. 94, GDC 11010-11012, (``Whip Office Plan for 1994''
with the ``vision'' of ``Renew American civilization by replacing the
welfare state which requires the election of a Republican majority and
passage of our agenda''); Ex. 95, GDC 10667-10670, (``Planning
Assumptions for 1994''); Ex. 96, Eisenach 2758-2777, (untitled); Ex.
97, PFF 2479-2489, (seminar on Renewing American Civilization given to
the American Legislative Exchange Council); Ex. 98, PFF 37179-37188,
(``House GOP Freshman Orientation: Leadership for America's 21st
Century.''))
E. Renewing American Civilization House Working Group
As stated in Mr. Gingrich's easel notes from December 1992,
one goal of the Renewing American Civilization movement was to
``professionalize'' the House Republicans. (Ex. 42, HAN 02110).
His intention was to use the message of Renewing American
Civilization to ``attract voters, resources and candidates''
and to develop a ``mechanism for winning seats.'' (Ex. 42, HAN
02110). In this vein, a group of Republican House Members and
others formed a working group to promote the message of
Renewing American Civilization. Starting in approximately June
1993, Mr. Gingrich sponsored Representative Pete Hoekstra as
the leader of this group and worked with him. (7/18/96 Gingrich
Tr. 279).49 According to a number of documents associated
with this group, a goal was to use the theme of renewing
American civilization to elect a Republican majority in the
House. (Ex. 99, Hoekstra 0259; Ex. 101, Hoekstra 0264; Ex. 102,
Gregorsky 0025). According to notes from a July 23, 1993
meeting, Mr. Gingrich addressed the group and made several
points:
---------------------------------------------------------------------------
\49\ Mr. Gingrich provided Mr. Hoekstra with some materials to
explain the movement. (See Ex. 99, Hoekstra 0259). Apparently, this
material included the May 13, 1993, three part document entitled
``Renewing America Vision,'' ``Renewing America Strategies,'' and
``Renewing American Civilization Our Goal.'' (Ex. 52, GDC 10639-10649).
In a memorandum from one of Mr. Hoekstra's staffers analyzing the
material, he lists the thirteen items that were to be done to further
the movement. (Ex. 100, Hoekstra 0140b). They are the same thirteen
items that are listed in the ``Renewing America Strategies'' portion of
the May 13, 1993 document.
1. Renewing American Civilization (RAC) is the basic
theme;
2. RAC begins with replacing the welfare state, not
improving it;
3. RAC will occur by promoting the use of the five
pillars of American civilization;
4. Use of the three key policy areas of saving the
inner city, health, and economic growth and jobs.
(Ex. 101, Hoekstra 0264). The meeting then turned to a
discussion of possible ways to improve these points. (Ex. 101,
Hoekstra 0264).
On July 30, 1993, another meeting of this group was held.
According to notes of that meeting, the group restated its
objectives as follows:
a. restate our objective: Renewing American Civilization by
replacing the paternalistic welfare state
--GOP majority in the House ASAP
--nationwide GOP majority ASAP
* * * * * * *
--objective: create ``echo chamber'' for RAC
* * * * * * *
i. develop RAC with an eye toward marketability
* * * * * * *
ii. promote message so that this defines many 1994
electoral contests at the congressional level and
below, and defines the 1996 national election.
(Ex. 102, Gregorsky 0025).50
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\50\ Mr. Gingrich reviewed notes similar to these and though he did
not specifically recall them, he said they were compatible with the
activities of that time. (7/18/96 Gingrich Tr. 283-284).
---------------------------------------------------------------------------
The goal of the group was further defined in a memorandum
written by one of Mr. Hoekstra's staffers in September of 1993.
(Ex. 103, Hoekstra 0266-0267). In that memorandum, the staff
member said the group's goal had changed ``from one of
promoting the Renewing American Civilization course to one of
proposing a `political platform' around which House Republican
incumbents and candidates can rally.'' (Ex. 103, Hoekstra
0266). The group's ``underlying perspective'' was described as
follows:
To expand our party, it is important that Republicans
develop, agree on and learn to explain a positive
philosophy of government.
At the core of that philosophy is the observation
that the paternalistic welfare state has failed, and
must be replaced by alternative mechanisms within and
outside of government if social objectives are to be
achieved.
Fundamental to developing a new philosophy is the
idea that traditions in American civilization have
proven themselves to be powerful mechanisms for
organizing human behavior. There are working principles
in the lessons of American history that can be
observed, and should be preserved and strengthened.
These working principles distinguish the Republican
party and its beliefs from the Democratic party, which
remains committed to the welfare state even though
these policies are essentially alien to the American
experience.
(Ex. 103, Hoekstra 0266-0267).
This group began to develop a program to incorporate
Renewing American Civilization into the House Republican party.
The program's goals included a House Republican majority, Mr.
Gingrich as Speaker, and Republican Committee Chairs. (Ex. 104,
Hoekstra 0147-0151). To accomplish this goal, there were
efforts to have candidates, staffers and members use Renewing
American Civilization as their theme. (Ex. 104, Hoekstra 0148).
One proposal in this area was a training program for staffers
in the principles of Renewing American Civilization for use in
their work in the House. (Ex. 104, Hoekstra 0148). A memorandum
from Mr. Gingrich to various members of his staffs 51
asked them to review a plan for this training program and give
him their comments. (Ex. 105, WGC 03732-03745).
---------------------------------------------------------------------------
\51\ This included his congressional office, his WHIP office, RAC,
and GOPAC.
---------------------------------------------------------------------------
During his interview, Mr. Hoekstra stated that Renewing
American Civilization and the concept of replacing the welfare
state was intended as a means of defining who Republicans were;
however, the group never finalized this as a project. (7/29/96
Hoekstra Tr. 47-48). In talking about this group, Mr. Gingrich
said that he wanted the Republican party to move toward
Renewing American Civilization as a theme and that he would
have asked the group to study the course, understand the ideas,
and use those ideas in their work. (7/18/96 Gingrich Tr. 284-
286). It is not known what became of this group. Mr. Hoekstra
said that the project ended without any closure, but he does
not recall how that happened. (7/29/96 Hoekstra Tr. 46).
F. Marketing of the Course
As discussed above, Mr. Gingrich wrote in his March 29,
1993 memorandum that he wanted ``Republican activists committed
* * * to setting up workshops built around the course, and to
opening the party up to every citizen who wants to renew
American civilization.'' (Ex. 51, GDC 08892). There is evidence
of efforts being made to recruit Republican andconservative
organizations into becoming sponsors for the course. These sponsors
were known as ``site hosts.'' One of the responsibilities of a site
host was to recruit participants. (Ex. 106, PFF 8033). Jana Rogers was
the Site Host Coordinator for the course when it was at Kennesaw State
College. She stated that part of her work in regard to the course
involved getting Republican activists to set up workshops around the
course to bring people into the Republican party. (7/3/96 Rogers Tr.
67-68). She said there was an emphasis on getting Republicans to be
site hosts. (7/3/96 Rogers Tr. 69).
In an undated document entitled ``VISION: To Obtain Site
Hosts for Winter 1994 Quarter,'' three ``projects'' are listed:
(1) ``To obtain site hosts from conservative organizations;''
(2) ``To secure site hosts from companies;'' (3) ``To get cable
companies to broadcast course.'' (Ex. 107, PFF 7526). The
``strategies'' listed to accomplish the ``project'' of
obtaining site hosts from conservative organizations are listed
as:
Mailing to State and local leaders through lists from
National Republican Committee, Christian Coalition,
American Association of Christian Schools, U.S. Chamber
of Commerce, National Right to Life, Heritage
Foundation, Empower America, National Empowerment
Television, Free Congress, etc.
(Ex. 107, PFF 7526). One of the tactics listed to accomplish the goal of
obtaining more site hosts is to:
Contact National College Republican office to obtain
names and addresses of all presidents country-wide.
Develop letter to ask college republicans to try to
obtain the class for credit on their campus or to
become a site host with a sponsor group. Also, ask them
to contact RAC office for a site host guide and
additional information.
(Ex. 107, PFF 7527).
In a memorandum written by Nancy Desmond concerning the
course, among the areas where she suggested site host
recruiting should be directed were to ``NAS members,'' 52
``schools recognized as conservative'' and ``national
headquarters of conservative groups.'' (Ex. 108, PFF 37328-
37330). In a number of the project reports written by employees
of the course in 1993, there are notations about contacts with
various Republicans in an effort to have them host a site for
the course. There are no similar notations of efforts to
contact Democrats. (Ex. 109, Multiple Documents). 53
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\52\ According to Mr. Gingrich, the NAS (National Association of
Scholars) is a conservative organization. (7/18/96 Gingrich Tr. 345-
346).
\53\ Mr. DuGally said that he made an effort to contact the Young
Democrats, but they did not show any interest. (7/19/96 DuGally Tr. 31-
32).
---------------------------------------------------------------------------
In several instances mailings were made to Republican or
conservative activists or organizations in an effort to recruit
them as site hosts. In May of 1993 a letter was sent over Mr.
Gingrich's signature to approximately 1,000 College Republicans
regarding the course. 54 That letter states that:
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\54\ Mr. Gingrich was shown this letter and he said that while he
was not familiar with it, nothing in it was particularly new. (7/17/96
Gingrich Tr. 87). Jeff Eisenach, GOPAC's Executive Director and then
the coordinator of the course, either wrote the letter or edited it
from a draft written by another GOPAC employee. (7/12/96 Eisenach Tr.
200-201).
[C]onservatives today face a challenge larger than stopping
President Clinton. We must ask ourselves what the future would
be like if we were allowed to define it, and learn to explain
that future to the American people in a way that captures first
their imagination and then their votes.
In that context, I am going to devote much of the next four
years, starting this Fall, to teaching a course entitled
``Renewing American Civilization.'' I am writing to you today
to ask you to enroll for the class, and to organize a seminar
so that your friends can enroll as well.
* * * * * * *
Let me be clear: This is not about politics as such. But I
believe the ground we will cover is essential for anyone who
hopes to be involved in politics over the next several decades
to understand. American civilization is, after all, the
cultural glue that holds us all together. Unless we can
understand it, renew it and extend it into the next century, we
will never succeed in replacing the Welfare State with an
Opportunity Society.
* * * * * * *
(Ex. 81, Mescon 0915; Meeks 0039). The letter ends by stating:
I have devoted my life to teaching and acting out a
set of values and principles. As a fellow Republican, I
know you share those values. This class will help us
all remember what we're about and why it is so
essential that we prevail. Please join me this Fall for
``Renewing American Civilization.''
(Ex. 81, Mescon 0914; Meeks 0040). GOPAC paid for this mailing
(7/12/96 Eisenach Tr. 200; 7/15/96 Gaylord Tr. 82) and it was
listed as a ``political'' project on GOPAC's description of its
``Major Projects Underway'' for May 7, 1993. (Ex. 79, JG
000001152). At the top of a copy of the letter to the College
Republicans is a handwritten notation to Mr. Gingrich from Mr.
Eisenach: ``Newt, Drops to 1000+ C.R. Chapters on Wednesday. JE
cc: Tim Mescon.'' (Ex. 81, Mescon 0915, Meeks 0039).
During an interview with Mr. Cole, Mr. Eisenach was asked
about this letter.
Mr. Eisenach: Use of the course by political
institutions in a political context was something that
occurred and was part of Newt's intent and was part of
the intent of other partisan organizations, but the
intent of the course and, most importantly, the
operation of the course and its use of tax-exempt funds
was always and explicitly done in a nonpartisan way.
Political organizations--in this case, GOPAC--found
it to their advantage to utilize the course for a
political purpose, and they did so.
Mr. Cole: Were you involved in GOPAC?
Mr. Eisenach: At this time I was involved in GOPAC,
yes.
Mr. Cole: And in making the decision that GOPAC would
utilize the course?
Mr. Eisenach: Yes.
(7/12/96 Eisenach Tr. 203).
Mr. DuGally worked with Economics America, Inc. to have
them send a letter to the members of the groups listed in The
Right Guide as part of an effort to recruit them as site hosts.
The first paragraph of the letter states:
Newt Gingrich asked that I tell the organizations
listed in The Right Guide about his new nationally
broadcast college course, ``Renewing American
Civilization.'' It promises to be an important event
for all conservatives, as well as many young people who
are not yet conservatives. You and your organization
can be part of this project.
(Ex. 110, PFF 19821). The letter goes on to say, ``And
remember, since you are a team teacher you can use the course
to explain and discuss your views.'' (Ex. 110, PFF 19821).
In the fall of 1993, Mr. DuGally arranged for a letter to
be sent by Lamar Alexander on behalf of the Republican
Satellite Exchange Network promoting the course and asking its
members to serve as site hosts. (Ex. 111, PFF 19795-19798). In
addition, a letter was prepared for mailing to all chairmen of
the Christian Coalition asking them to serve as site hosts.
(Ex. 112, PFF 19815). In June of 1993, Mr. DuGally worked with
the Republican National Committee to have a letter sent by
Chairman Haley Barbour to RNC Members informing them of the
course. (Ex. 113, RNC 0094). This letter did not solicit people
to be site hosts.
Jana Rogers, the Site Host Coordinator for the course,
attended the College Republican National Convention. Her weekly
report on the subject said the following:
The response to Renewing American Civilization at the
College Republican National Convention was overwelming
[sic]. In addition to recruiting 22 sites and possibly
another 30+ during follow-up, I was interviewed by MTV
about the class and learned more about RESN [Republican
Exchange Satellite Network] from Stephanie Fitzgerald
who does their site coordination. I also handed out 400
Site Host Guides to College Republicans and about 600
registration flyers. NCRNC says it will work
aggressively with their state chairmen to help us set
up sites know [sic] that the convention is over.
(Ex. 114, PFF 7613). She made no effort to contact any
Democratic groups. (7/3/96 Rogers Tr. 78).
In notes provided by Mr. Mescon from a meeting he attended
on the course, he lists a number of groups that would be
targeted for mailings on the course. They include mostly
elected or party officials and the notation ends with the words
``25,000/total Republican mailing.'' (Ex. 115, Mescon 0263).
According to Mr. Mescon, the course was being marketed to
Republicans as a target audience and he knew of no comparable
mailing to Democrats. (6/13/96 Mescon Tr. 112-113). 55
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\55\ Others who worked on the course also said it was marketed to
Republican and conservative groups. (7/3/96 Rogers Tr. 62-63; 6/13/96
Stechschulte Tr. 21-22, 57-58; 6/13/96 Desmond Tr. 66).
---------------------------------------------------------------------------
In an August 11, 1993, memorandum from Mr. DuGally, a WPG
employee who worked on the course, he lists the entities where
mailings for the course had been sent or were intended to be
sent up to that point. They are as follows:
1. GOPAC farm team--9,000
2. Cong/FONG/Whip offices--4,000
3. Sent to site hosts--5,500
4. College Republicans--2,000
5. American Pol Sci Assoc.--11,000
6. Christian Coalition leadership--3,000
7. The Right Guide list--3,000
(Ex. 116, PFF 19794).
In June of 1994, John McDowell wrote to Jeff Eisenach with
his suggestions about where to market the course during that
summer. The groups he listed were the Eagle Forum Collegians;
the National Review Institute's Conservative Summit; Accuracy
in Academia; Young Republicans Leadership Conference (Mr.
McDowell was on their Executive Board); Young America's
Foundation, National Conservative Student Conference; College
Republican National Conference; the American Political Science
Association Annual Meeting; 56 and the Christian
Coalition, Road to Victory. (Ex. 117, PFF 3486-3489). At a
number of these meetings, Mr. Gingrich was scheduled to be a
speaker. (Ex. 117, PFF 3486-3489).
---------------------------------------------------------------------------
\56\ This is the only meeting where there is not a suggestion to
have a Renewing American Civilization or PFF employee attend
personally. Instead, Mr. McDowell apparently only intended to find an
attendee who would be willing to pass out Renewing American
Civilization materials.
---------------------------------------------------------------------------
A site host listing dated August 18, 1994, identifies the
approximately 100 site hosts as of that date. (Ex. 118, PFF
7493-7496). These include businesses, community groups, cable
stations, and others. In addition, some colleges offered the
course either for credit, partial credit or no credit. (Ex.
119, Reinhardt 0160-0164). Based on their names, it was not
possible to determine whether all of the site hosts fell within
the goals set forth in the above-described documents. Some of
them, however, were identifiable. For example, of the 28
``community groups'' listed on the August 18, 1994 ``Site Host
Listing,'' 11 are organizations whose names indicate they are
Republican or conservative organizations--Arizona Republican
Party; Athens Christian Coalition; Conservative PAC; Henry
County Republicans; Houston Young Republicans; Huron County
Republican Party; Las Rancheras Republican Women; Louisiana
Republican Legislative Delegation; Northern Illinois
Conservative Council; Republican Party Headquarters (in
Frankfort Kentucky); Suffolk Republican Party. The list does
not indicate whether the remaining groups--e.g., the Alabama
Family Alliance; the Family Foundation (Kentucky); Leadership
North Fulton (Georgia); the North Georgia Forum; Northeast
Georgia Forum; the River of Life Family Church (Georgia)--are
nonpartisan, Democratic, Republican, liberal or conservative.
The list does not contain any organizations explicitly
denominated as Democratic organizations. Similarly, it is not
clear whether there was a particular political or ideological
predominance in the businesses, cable stations and individuals
listed.57
---------------------------------------------------------------------------
\57\ Patti Hallstrom, an activist in the Arizona Republican Party,
was instrumental in recruiting host sites in Arizona, such as the
Arizona Republican Party and various cable television stations. (Ex.
120, PFF 7362). She prepared part of a training manual on how to
recruit cable companies as host sites. (Ex. 120, DES 00999-01007). She
also provided the Renewing American Civilization project with
information about which radio and talk shows in Arizona were the most
conservative as possible shows where Mr. Gingrich could appear. She
said the more conservative shows would allow for a ``more amenable
discussion.'' (Ex. 120, DES 00262-00264; 6/20/96 Hallstrom Tr. 41-43).
---------------------------------------------------------------------------
Mr. Gingrich said that the efforts to recruit colleges to
hold the course had been ``very broad.'' ``I talked, for
example, with the dean of the government school at Harvard.
Berkley [sic] actually was offering the course.'' (7/18/96
Gingrich Tr. 346). The course at Berkeley, however, did not go
through the regular faculty review process for new courses,
because it was initiated by a student. (7/12/96 Eisenach Tr.
316-317). Such courses were not conducted by a professor, but
could be offered on campus for credit if a faculty member
sponsored the course and the Dean approved it. The student site
host coordinator at Berkeley was named Greg Sikorski. (Ex. 121,
JR-0000117). In the June 20, 1994 memorandum from John McDowell
to Mr. Eisenach, the following is written under the heading
``College Republican National Conference:'' ``RAC Atlanta
representative to attend and staff a vendor booth. These 1,000
college students represent a good source of future `Greg
Sikorskis' * * * in the sense that they can promote RAC on
their campus!'' (Ex. 117, PFF 3488). The faculty sponsor for
the student-initiated Renewing American Civilization course was
William Muir, a former speechwriter for George Bush. (Ex. 121,
JR-0000117). Aside from Mr. Sikorski and Mr. Muir, Mr. Eisenach
did not know if the RAC course at Berkeley had any additional
university review. (7/12/96 Eisenach Tr. 319).
The site host for the Renewing American Civilization course
at Harvard was Marty Connors. (Ex. 122, LIP 00232). According
to Mr. Gingrich, Marty Connors is a conservative activist. (7/
18/96 Gingrich Tr. 266). In a memorandum dated October 13,
1993, from Marty Connors to Lamar Alexander, Newt Gingrich, Ed
Rogers, Jeff Eisenach, Paul Weyrich, Mike Baroody, and Bill
Harris, he wrote about a ``series of ideas (that included the
Renewing American Civilization course) that could have
significant consequences in building a new `Interactive'
communication system and message for the Republican Party and
the conservative movement.'' (Ex. 123, WGC 06781). He goes on
to write that he was working on a project to take the concept
of the Republican Exchange Satellite Television, National
Empowerment Television and ``Newt Gingrich's `Renewing American
Civilization' lectures and make them ``more interactive and
user friendly.'' (Ex. 123, WGC 06781). The purpose for this is
to have a ``far greater ability for `participatory' party
building in the immediate future.'' (Ex. 123, WGC 06781-06782).
He goes on to write, ``Friends, I truly believe the next major
political advantage will go to the group that figures out how
to use `interactive' communications inbuilding a new Republican
coalition.'' (Ex. 123, WGC 06782).58
---------------------------------------------------------------------------
\58\ This memorandum was faxed to Mr. Gingrich. The fax cover sheet
has Mr. Gingrich's name and the date ``10/15/93'' on it in his
handwriting. As Mr. Gingrich has said, this probably indicates that he
had seen this memorandum. (12/98/96 Gingrich Tr. 36-37).
---------------------------------------------------------------------------
G. Kennesaw State College's Role in the Course
Renewing American Civilization was taught at Kennesaw State
College (``KSC'') in 1993. The sponsoring organization for the
course was the Kennesaw State College Foundation (``KSCF''), a
501(c)(3) organization dedicated to promoting projects at KSC.
The approximate expenditures for the course at KSC was
$300,000. This represented 29-33% of KSCF's program
expenditures for 1993. The funds raised for the course and
donated to KSCF were tax-deductible.
KSCF had no role in raising funds for the course. (6/13/96
Fleming Tr. 33-36). Mr. Mescon, the course's co-teacher and
Dean of KSC's Business School, wrote some letters with the help
of Ms. Prochnow, GOPAC's Finance Director (6/13/96 Mescon Tr.
65-68, 71-74; 7/10/96 Prochnow Tr. 58-62, 66; 7/12/96 Eisenach
Tr. 69), but most of the fundraising was coordinated by Mr.
Eisenach, Ms. Prochnow, and Mr. Gingrich. (7/12/96 Eisenach Tr.
68-71, 84, 97, 99; 7/17/96 Gingrich Tr. 123, 136, 137).
The course as offered at KSC was a forty-hour classroom
lecture. Twenty hours were taught by Mr. Gingrich and twenty
hours were taught by Mr. Mescon. While officials of KSC and
KSCF considered the course to include the full forty hours of
lecture (6/13/96 Mescon Tr. 38; 6/13/96 Fleming Tr. 23), only
the twenty hours taught by Mr. Gingrich were taped and
disseminated. (6/13/96 Siegel Tr. 25-26; 6/13/96 Mescon Tr. 35;
6/13/96 Fleming Tr. 23). The funds raised for the course were
primarily used for the dissemination of Mr. Gingrich's portion
of the course to the various site host locations. (6/13/96
Fleming Tr. 22, 24; 6/13/96 Mescon Tr. 55-56). No one at KSC or
KSCF had any role in deciding which portions of the course
would be taped and disseminated or even knew the reasons for
doing it. (6/13/96 Mescon Tr. 36, 44-45, 58-59; 6/13/96 Fleming
Tr. 23; 6/13/96 Siegel Tr. 78-79).
KSCF did not manage the course. It contracted with Mr.
Eisenach's Washington Policy Group, Inc. (``WPG'') to manage
and raise funds for the course's development, production and
distribution. In return, WPG was paid $8,750 per month.
The contract between WPG and KSCF ran from June 1, 1993,
through September 30, 1993.59 All funds raised were turned
over to KSCF and dedicated exclusively for the use of the
Renewing American Civilization course. KSCF's only role was to
act as the banker for the funds for the course and disburse
them upon a request from Mr. Mescon. (6/13/96 Fleming Tr. 24-
25; 6/13/96 Mescon Tr. 103; Ex. 124, KSF 001269, Mescon 0454,
KSF 003804, PFF 16934, KSF 001246). Mr. Mescon did not engage
in a detailed review of the bills. He merely reviewed the bills
that were provided by Mr. Eisenach or his staff and determined
whether the general nature of the bills fell within the
parameters of the project of dissemination of the course. (6/
13/96 Mescon Tr. 61-63).
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\59\ The contract between WPG and KSCF was never signed by KSCF. It
was directed to Dr. Mescon, but he was not an authorized agent of KSCF.
According to Jeffery Eisenach, President of WPG, even though the
contract was not signed, it memorialized the terms of the relationship
between WPG and KSCF. (Ex. 41, Mescon 0651-0652; 7/12/96 Eisenach Tr.
42; 11/14/96 Eisenach Tr. 11).
---------------------------------------------------------------------------
When the contract between WPG and KSCF ended, the Progress
and Freedom Foundation (``PFF'') assumed the role WPG had with
the course at the same rate of compensation. 60 PFF was
also a 501(c)(3) tax exempt organization, but its status as
such was not used while the course was at KSC. Mr. Eisenach was
the founder and president of PFF.
KSCF and KSC had little or no role in supervising the
course or its dissemination. Since the course was a ``Special
Topics'' course, it did not need to go through formal approval
by a curriculum committee at KSC--it only required Mr. Mescon's
approval. (6/13/96 Siegel Tr. 15-16, 30, 32, 76-77). While Mr.
Mescon was given advance copies of Mr. Gingrich's lectures, he
had little input into their content. (6/28/96 Hanser Tr. 22; 6/
13/96 Desmond Tr. 63). Mr. Mescon described his role more in
terms of having his own 20 hours to put forth any counterpoint
or objection to any of the material in Mr. Gingrich's lectures.
(6/13/96 Mescon Tr. 40-41).61
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\60\ Prior to assuming control of the course PFF was tasked with
putting together the book of readings that were to be used for the
course. This entailed Mr. Eisenach and Mr. Hanser editing the writings
of others. Mr. Hanser was paid $5,000 or $10,000 for this work, but Mr.
Eisenach was not separately compensated for his role in this. (7/12/96
Eisenach Tr. 68). Mr. Eisenach was president of PFF, WPG, former
Executive Director of GOPAC, and advisor to Mr. Gingrich. Mr. Hanser
was a close friend, confidant, and at times a congressional employee of
Mr. Gingrich. He was also a board member and consultant to GOPAC and a
board member and consultant to the Progress and Freedom Foundation. (6/
28/96 Hanser Tr. 6-10, 14). He had a substantial role in developing the
course. (6/28/96 Hanser Tr. 19-20).
\61\ The December 8, 1994 letter from Mr. Gingrich to the Committee
states that, ``Respected scholars such as James Q. Wilson, Everett Carl
Ladd, and Larry Sabato continue to contribute to and review course
content.'' (Ex. 138, p. 3). The same reference to Mr. Wilson's and Mr.
Sabato's review of the course is contained in a September 3, 1993
memorandum sent out over Jana Rogers' name to site hosts. (Ex. 125, PFF
22963). However, in a letter from James Q. Wilson to Mr. Eisenach dated
September 28, 1993, Mr. Wilson wrote:
---------------------------------------------------------------------------
Perhaps I don't understand the purpose of the course, but
if it is to be a course rather [than] a series of sermons,
this chapter won't do. It is bland, vague, hortatory, and
lacking in substance. (emphasis in original)
* * * * * * *
I could go on, but I dare not for fear I have
misunderstood what this enterprise is all about. I am a
professor, and so I bring the perspectives (and
limitations) of a professor to bear on this matter. If this
is not to be a course but instead a sermon, then you should
get a preacher to comment on it.
(Ex. 126, PFF 5994-5995). Also, in a book co-written by Larry Sabato,
the following statements are made:
In late 1992 and early 1993, Gingrich began conceiving a
new way to advance those political goals--a nationally
broadcast college course, ambitiously titled ``Renewing
American Civilization,'' in which he would inculcate
students with his Republican values. (p. 94).
* * * * * * *
Nominally an educational enterprise, internal course
planning documents revealed the true nature of the course
as a partisan organizing tool. (p. 95).
Sabato, L. and Simpson, G., ``Dirty Little Secrets: The Persistence of
Corruption in American Politics,'' Times Books (1996).
Shortly after PFF took over the management of the course,
the Georgia Board of Regents passed a resolution prohibiting
any elected official from teaching at a Georgia state
educational institution. This was the culmination of a
controversy that had arisen around the course at KSC. The
controversy pertained to objections voiced by KSC faculty to
the course on the grounds that it was essentially political.
(Ex. 127, KSC 3550-3551, 3541, 3460, 3462). Because of the
Board of Regent's decision and the controversy, it was decided
that the course would be moved to a private college. (7/12/96
Eisenach Tr. 47-50).62
---------------------------------------------------------------------------
\62\ Near the end of his interview, Mr. Mescon expressed
embarrassment in regard to his participation in the course. He became
involved in the course in order to raise the profile of the school, but
now believes that his efforts have had severe repercussions. (6/13/96
Mescon Tr. 136-137).
---------------------------------------------------------------------------
H. Reinhardt College's Role in the Course
Reinhardt College was chosen as the new host for the course
in part because of its television production facilities. (6/12/
96 Falany Tr. 14). The 1994 and 1995 courses tookplace at
Reinhardt. While there, PFF assumed full responsibility for the course.
It no longer received payments to run the course. Rather, it paid
Reinhardt to use the college's video production facilities. All funds
for the course were raised by and expended by PFF under its tax-exempt
status. The approximate expenditures for the course were $450,000 in
1994 and in $450,000 in 1995. At PFF this represented 63% of its
program expenditures for its first fiscal year (which ended March 31,
1994) and 35% of its program expenditures for its second fiscal year
(which ended March 31, 1995). 63
---------------------------------------------------------------------------
\63\ As of November 1996, PFF's tax return (Form 990) for its third
fiscal year (which ended March 31, 1996) had not been filed.
---------------------------------------------------------------------------
Reinhardt had a curriculum committee review the content of
the course before deciding to have it presented on its campus.
(6/12/96 Falany Tr. 15-16). The controversy over the course at
KSC, however, affected the level of involvement Reinhardt was
willing to assume in regard to the course. (6/12/96 Falany Tr.
44-48, 51-53, 59-66; 6/12/96 Minnix Tr. 26-27). In this regard,
Reinhardt's administration saw a distinction between the
``course'' and a broader political ``project.'' As stated in a
memorandum from Mr. Falany, Reinhardt's President, to Mr.
Eisenach dated November 11, 1993:
First, there seems to be a ``project'', which is
Renewing American Civilization, of which the ``course''
is a part. This distinction is blurred at times in the
Project Overview. When you refer to the ``project'' it
seems to imply a broader political objective (a non-
welfare state). This is not to say that this political
objective should be perceived as being negative, but it
should, in fact, be seen as broader than and distinct
from the simpler objective of the ``course.''
(Ex. 128, Reinhardt 0225).64 Because of this concern, Reinhardt
administrators agreed to be involved only in the actual teaching of the
course on its campus and would not participate in any other aspects of the
project. (6/12/96 Falany Tr. 51-53, 59-66; 6/12/96 Minnix Tr. 26-
27).65 In this regard, Mr. Falany made it clear to the faculty and
staff at the college that:
---------------------------------------------------------------------------
\64\ Reinhardt saw the ``project'' as essentially dealing with the
dissemination of the course outside of Reinhardt's campus. (6/12/96
Falany Tr. 48-50, 54-66, 84-85).
\65\ All of the funds for the course while at Reinhardt were raised
by PFF under its tax exempt status.
It is important to understand that, for the Winter
Quarter 1994, the College will offer the course and
teach it--that is the extent of our commitment. At the
present time, the Progress and Freedom Foundation will
handle all of the fund raising associated with the
course; the distribution of tapes, text and materials;
the broadcasting; and the handling of all information
including the coordination of off-campus sites.
(Ex. 129, Reinhardt 0265). 66
---------------------------------------------------------------------------
\66\ Reinhardt College did rent its television production
facilities to PFF for its use in the dissemination in the course, and
was paid separately for this in the amount of $40,000. All production
beyond that was handled by PFF. (6/12/96 Falany Tr. 27-28).
---------------------------------------------------------------------------
As was the case at KSC, Reinhardt administrators considered
the course to be the forty hours of lecture by both Mr.
Gingrich and Ms. Minnix. (6/12/96 Falany Tr. 74-76). Again,
only Mr. Gingrich's portion of the course was disseminated
outside of Reinhardt. (6/12/96 Falany Tr. 53-54; 6/12/96 Minnix
Tr. 48-49). Ms. Minnix had little contact with Mr. Gingrich,
and no input into the content of the course in 1994. In 1995
she had only limited input into the content of the course. (6/
12/96 Minnix Tr. 20-22). Similarly, Mr. Gingrich and his
associates provided no input as to Ms. Minnix's portion of the
course. (6/12/96 Minnix Tr. 31-32).
While Mr. Falany did not know the purpose for disseminating
the course, and made no inquiries in that regard (6/12/96
Falany Tr. 48-50; 54-66; 84-85), Ms. Minnix did have some
knowledge in this area. Based on her contacts with the people
associated with the course, she believed Mr. Gingrich had a
global vision of getting American civilization back ``on
track'' and that he wanted to shape the public perception
through the course. (6/12/96 Minnix Tr. 59-60). She felt there
was an ``evangelical side'' to the course, which she described
as an effort to have people get involved in politics, run for
office, and try to influence legislation. (6/12/96 Minnix Tr.
70-71). Ms. Minnix felt uncomfortable with this ``evangelical
side.'' (6/12/96 Minnix Tr. 70). Furthermore, as reflected in
her memorandum of the November 1, 1994 meeting with Mr.
Gingrich and others, she was aware that the course was to be
used to let people know what Mr. Gingrich's political agenda
would be as Speaker. (6/12/96 Minnix Tr. 53-59; Ex. 92,
Reinhardt 0064). As with KSC, one of the reasons Reinhardt
administrators wanted to have the course taught on its campus
was to raise profile of the school. (6/12/96 Falany Tr. 112-
113).
I. End of Renewing American Civilization Course
Although Mr. Gingrich had intended to teach the course for
four years, through the 1996 Winter quarter, he stopped
teaching it after the 1995 Winter quarter. According to most of
the witnesses interviewed on this subject, the reason for this
was that he had run out of time in light of the fact that he
had become Speaker. (7/12/96 Eisenach Tr. 280; 6/28/96 Hanser
Tr. 52-53). On the other hand, Mr. Gingrich says that he had
learned all he could from teaching the course and had nothing
new to say on the topics. (7/18/96 Gingrich Tr. 364). Mr.
Gingrich refused to support the efforts of PFF in regard to the
course at that point, largely because he was disappointed with
Mr. Eisenach's financial management of the course. (7/18/96
Gingrich Tr. 365-366). Mr. Eisenach had indicated to Mr.
Gingrich that the course was $250,000 in debt and that PFF had
used its own resources to cover this shortfall. (Ex. 130, GDC
11325). Mr. Gingrich was skeptical of this claim, offered to
have the records reviewed, and stated that he would help raise
any amount that the review disclosed was needed. According to
Mr. Gingrich, this offer was not pursued by Mr. Eisenach. (7/
18/96 Gingrich Tr. 367-368).
IV. Ethics Committee Approval of Course
On May 12, 1993, Mr. Gingrich wrote the Committee asking
for ``guidance on the development of an intellectual approach
to new legislation that will be different from our normal
activities.'' (Ex. 131, p. 1). He said that he wanted ``to make
sure that [his] activities remain within a framework that meets
the legitimate ethics concerns of the House.'' (Ex. 131, p. 1).
He went on to describe a course he was planning to teach in the
fall of 1993 at Kennesaw State College.
The course would be based on his January 25, 1993 Special
Order entitled ``Renewing American Civilization.'' (Ex. 131, p.
2). It would be ``completely non-partisan'' and, he hoped,
would include ideas from many people, including politicians
from both parties and academics. (Ex. 131, p. 2). He stated
that he believed the development of ideas in the course was a
``crucial part'' of his job as a legislator. (Ex. 131, p. 3).
He ended his letter with a request to the Committee to meet to
discuss the project if the Committee had any concerns. (Ex.
131, p. 3).
In June 1993, counsel for the Committee, David McCarthy,
met with Mr. Gingrich, two people from his staff (Annette
Thompson Meeks and Linda Nave) and Mr. Eisenach to discuss the
course. (7/18/96 McCarthy Tr. 7; 7/10/96 Meeks Tr. 13). Mr.
McCarthy's initial concern was whether Mr. Gingrich could
qualify for a teaching waiver under the House ethics rules. (7/
18/96 McCarthy Tr. 16). When he learned Mr. Gingrich was
teaching without compensation, the issue of a teaching waiver
became, in his opinion, irrelevant. (7/18/96 McCarthy Tr. 16).
Mr. McCarthy then asked questions regarding whether any
official resources would be used to support the course and
whether Mr. Gingrich planned to use any unofficial resources to
subsidize his official business. Mr. McCarthy did not see any
problems pertaining to these issues. Mr. Gingrich indicated
that he might repeat the lectures from the course as Special
Orders on the floor of the House. Mr. McCarthy suggested that
Mr. Gingrich consult with the House Parliamentarian on that
subject. (Ex. 132, p. 1).
One issue raised with Mr. McCarthy was whether the House
Ethics Rules permitted Mr. Gingrich to raise funds for a tax-
exempt organization. Mr. McCarthy's conclusion was that since
KSCF was a qualified tax-exempt organization, Mr. Gingrich
could raise funds for KSCF as long as he complied with the
relevant House rules on the subject. (7/18/96 McCarthy Tr. 17).
Mr. Eisenach raised the issue concerning the propriety of his
being involved in fundraising for the course in light of the
fact that he also worked for GOPAC. According to Mr. McCarthy,
his response to the issue was as follows:
[T]o my knowledge of tax law, the issue of whether
the contributions in support of the course would keep
their tax-deductible status would turn not on who did
the fundraising but on how the funds were spent, and
that the educational nature of the course spoke for
itself. I told him that I was aware of no law or IRS
regulation that would prevent Eisenach from raising
charitable contributions, even at the same time that he
was raising political contributions. In any event, I
advised him, I expected the Committee to stick by its
advisory opinion in the Ethics Manual and not get into
second-guessing the IRS on its determinations of tax-
exempt status.
(Ex. 132, p. 2).
Mr. McCarthy said in an interview that his statement
regarding the Committee's ``stick[ing]'' by its advisory
opinion pertained only to whether Mr. Gingrich could raise
funds for the course. (7/18/96 McCarthy Tr. 19). The discussion
did not relate to any other 501(c)(3) issues. (7/18/96 McCarthy
Tr. 19). While Mr. McCarthy was aware that the course lectures
would be taped and broadcast (7/18/96 McCarthy Tr. 16), neither
Mr. Gingrich nor his staff asked for Mr. McCarthy's advice
regarding what activities in that regard were permissible under
501(c)(3) and Mr. McCarthy did not discuss such issues. (7/18/
96 McCarthy Tr. 19; 7/18/96 Gingrich Tr. 375-376; 7/10/96 Meeks
Tr. 15). Mr. McCarthy did not recall any discussion regarding a
Renewing American Civilization movement. (7/18/96 McCarthy Tr.
16). Mr. McCarthy did not recall any discussion of GOPAC's use
of the Renewing American Civilization message. (7/18/96
McCarthy Tr. 12-13). The discussion pertaining to Mr. Eisenach
and GOPAC was brief. (Ex. 132, p. 2).
During the meeting with Mr. McCarthy, there were no
questions posed about 501(c)(3) or what could be done in regard
to the course, aside from the fund-raising issue under
501(c)(3). (7/18/96 Gingrich Tr. 375-376). Mr. Gingrich did not
believe that it was necessary to explain to Mr. McCarthy his
intended use for the course.
Mr. Cole: We are focusing, however, on your intended
use of the course. And your intended use of the course
here was in a partisan political fashion; is that
correct?
Mr. Gingrich: My intended use was, but I am not sure
I had any obligation to explain that to the
[C]ommittee. As long as the course itself was
nonpartisan and the course itself was legal and the
course itself met both accreditation and tax status, I
don't believe I had an obligation to tell the Ethics
Committee what my political strategies were. I think
that's a retrospective comment. And maybe I am wrong.
I don't think--the questions were: Was it legal? Did
I use official funds? Had we gotten approval? Was
GOPAC's involvement legitimate and legal? Was it an
accredited course? Was I getting paid for it?
I mean, none of those questions require that I
explain a grand strategy, which would have seemed crazy
in '94. If I had wandered around and said to people,
hi, we are going to win control, reshape things, end
the welfare entitlement, form a grand alliance with
Bill Clinton, who is also going to join us in renewing
America, how would I have written that?
(11/13/96 Gingrich Tr. 89-90).
On July 21, 1993, Mr. Gingrich wrote the Committee to
provide additional information about the course he planned to
teach at KSC. The letter did not discuss how the course was to
be funded or that there was a plan to distribute the course
nationally via satellite, videotape, audiotape and cable, or
that GOPAC's main theme was to be ``Renewing American
Civilization.'' The letter also did not discuss GOPAC's role in
the course. (Ex. 133).67
---------------------------------------------------------------------------
\67\ The information Mr. Gingrich provided to the Committee was
that the Kennesaw State College Foundation, a 501(c)(3) organization
affiliated with Kennesaw State College, was providing him with a
``Content Coordinator to coordinate the videotape inserts and other
materials that will be used in the presentations.'' (Ex. 133, pp. 1-2).
He also wrote that none of his staff would perform tasks associated
with the course and that the course material would not be based on
previous work of his staff. (Ex. 133, p. 1). Finally, he wrote that
much of the material from the course would be presented in Special
Orders, although the presentations would have some differences. (Ex.
133, p. 2).
---------------------------------------------------------------------------
On August 3, 1993, the Committee, in a letter signed by Mr.
McDermott and Mr. Grandy, responded to Mr. Gingrich's letters
of May 12, 1993 and July 21, 1993, regarding his request to the
teach the course and his request to present the course
materials in Special Orders. (Ex. 134, p. 1). The Committee's
letter also notes that Mr. Gingrich had asked if he could help
KSC raise funds for the course. The Committee's guidance was as
follows:
1. Since Mr. Gingrich was teaching the course without
compensation, he did not need the Committee's approval
to do so;
2. It was within Mr. Gingrich's ``official
prerogative'' to present the course materials in
Special Orders;
3. Mr. Gingrich was permitted to raise funds for the
course on behalf of charitable organizations,
``provided that no official resources are used, no
official endorsement is implied, and no direct personal
benefit results.''
(Ex. 134, p. 1). The Committee, however, advised Mr. Gingrich
to consult with the FEC regarding whether election laws and
regulations might pertain to his fundraising efforts. The
Committee's letter to Mr. Gingrich did not discuss any matters
relating to the implications of 501(c)(3) on the teaching or
dissemination of the course or GOPAC's relationship to the
course. (Ex. 134, p. 1).
V. Legal Advice Sought and Received
As described in greater detail in the Appendix, section
501(c)(3) requires, among other things, that an organization be
organized and operated exclusively for one or more exempt
purposes. Treas. Reg. 1.501(c)(3)-1(d)(1)(ii) provides that an
organization does not meet this requirement: Unless it serves a
public rather than a private purpose. It is necessary for an
organization to establish that it is not organized or operated
for the benefit of private interests such as designated
individuals, the creator or his family, or persons controlled,
directly or indirectly, by such private interests.
The purpose of the ``private benefit'' prohibition is to
ensure that the public subsidies flowing from section 501(c)(3)
status, including income tax exemption and the ability to
receive tax-deductible charitable contributions, are reserved
for organizations that are formed to serve public, not private
interests. Treas. Reg. 1.501(c)(3)-1(c)(1) defines the
application of the private benefit prohibition in the context
of the operational test: An organization will be regarded as
``operated exclusively'' for one or more exempt purposes only
if it engages primarily in activities which accomplish one or
more of such exempt purposes specified in section 501(c)(3). An
organization will not be so regarded if more than an
insubstantial part of its activities is not in furtherance of
an exempt purpose.
Although cases on the private benefit doctrine date back to
1945, 68 a more recent, significant case on the subject is
the 1989 Tax Court opinion in American Campaign Academy v.
Commissioner, 92 T.C. 1053 (1989). That case discusses the
doctrine in terms of conferring an impermissible private
benefit on Republican candidates and entities.
---------------------------------------------------------------------------
\68\ Better Business Bureau of Washington, D.C. v. United States,
326 U.S. 279 (1945).
---------------------------------------------------------------------------
Prior to his involvement in both AOW/ACTV and the Renewing
American Civilization course, Mr. Gingrich was aware of the tax
controversy pertaining to the American Campaign Academy
(``ACA'' or ``Academy''). In his interview with Mr. Cole he
said, ``I was aware of [ACA] because * * * the staff director
of the [ACA] had been totally involved. I was aware of his
briefings and what was involved. * * * I was aware of them at
the time and I was aware of them during the court case.'' (7/
18/96 Gingrich Tr. 375-376). ``I lived through that case. I
mean, I was very well aware of what the [American Campaign
Academy] did and what the ruling was.'' (11/13/96 Gingrich Tr.
61). 69
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\69\ His adviser, Mr. Gaylord, was a director of the Academy. (12/
9/96 Gingrich Tr. 57; American Campaign Academy v. Commissioner, 92
T.C. 1053, 1056 (1989)). As referred to above, Mr. Gaylord was one of
the ``five key people'' Mr. Gingrich relied on most. (Ex. 3, GDC 11551,
GDC 11553).
---------------------------------------------------------------------------
Responding to the question of whether he had any
involvement with the Academy, Mr. Gingrich said: ``I think I
actually taught that [sic], but that's the only direct
involvement I had.'' (12/9/96 Gingrich Tr. 58). In an undated
document on GOPAC stationery entitled ``Offices of Congressman
Newt Gingrich,'' three offices are listed: GOPAC, FONG, and the
American Campaign Academy. (Ex. 143, Kohler 285). Mr. Gingrich
did not believe that he had an office at the Academy, but
thought it possible that his press secretary, Rich Galen, had
an office there. (12/9/96 Gingrich Tr. 58-59).
In speaking about the Renewing American Civilization
course, Mr. Gingrich told the New York Times that he acted very
aggressively in regard to 501(c)(3) law:
``Whoa,'' [Mr. Gingrich] said, when asked after class
one recent Saturday if the course nears the edge of
what the law allows. ``Goes right up to the edge.
What's the beef? Doesn't go over the edge, doesn't
break any law, isn't wrong. It's aggressive, it's
entrepreneurial, it's risk taking.''
New York Times, section A, page 12, column 1 (Feb. 20, 1995).
(Ex. 144). In addition, Mr. Gingrich has had involvement with a
number of tax-exempt organizations. As Mr. Gingrich's tax
lawyer stated, politics and 501(c)(3) organizations are an
``explosive mix.'' (12/12/96 Holden Tr. 132-134, 146).
Despite all of this, he did not seek specific legal advice
concerning the application of section 501(c)(3) with respect to
AOW/ACTV or the Renewing American Civilization course.
Furthermore, he did not know if any one did so on his behalf.
With respect to the course, the following exchange occurred:
Mr. Cole: Were you involved in seeking any legal
advice concerning the operation of the course under
501(c)(3)?
Mr. Gingrich: No. We sought legal advice about
ethics.
Mr. Cole: Did you seek any legal advice concerning
the 501(c)(3) issues involving the course?
Mr. Gingrich: No. I did not.
Mr. Cole: Do you know if anybody did on your behalf?
Mr. Gingrich: No.
(7/17/96 Gingrich Tr. 140). With respect to AOW/ACTV, Mr.
Gingrich said that he did not get any legal advice regarding
the projects. (12/9/96 Gingrich Tr. 54). He said that he
assumed Mr. Callaway sought such legal advice. (12/9/96
Gingrich Tr. 54).
Mr. Gingrich said two attorneys involved with GOPAC at the
time, Jim Tilton and Dan Swillinger, monitored all GOPAC
activities and would have told him if the projects violated the
law. (12/9/96 Gingrich Tr. 54-56). Mr. Callaway said neither
Mr. Swillinger nor Mr. Tilton was ever told that one of the
purposes of ACTV was to recruit people to the Republican party.
(12/7/96 Callaway Tr. 41, 47). 70
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\70\ A document dated November 13, 1990, entitled Campaign For A
Successful America, was reviewed by the Subcommittee. (Ex. 145,
Eisenach 3086-3142). In a section drafted by Gordon Strauss, an
attorney in Ohio, for a consulting group called the Eddie Mahe Company,
the following is written:
[S]ome educational organizations, tax exempt under Section
501(c)(3) of the Internal Revenue Code, have engaged in
activities which affect the outcome of elections, though
---------------------------------------------------------------------------
that is theoretically not supposed to occur.
(Ex. 145, Eisenach 3132). The document also contains the following:
A very controversial program is being undertaken by a
(c)(3), indicating that it may have involvement in the
electorial process, notwithstanding the express prohibition
on it. At this time, a (c)(3) is not recommended because it
would have to be truly independent of the (c)(4) and its
PAC.
(Ex. 145, Eisenach 3134).
---------------------------------------------------------------------------
There was substantial inquiry about this document during the
Preliminary Inquiry. No evidence was uncovered to indicate that Mr.
Gingrich had any exposure to this document. (12/5/96 Mahe Tr. 34-35;
12/9/96 Gingrich Tr. 52-54; 12/5/96 Eisenach Tr. 59-61). Mr. Strauss
was interviewed and stated that the document had nothing to do with
AOW/ACTV, the 501(c)(3) organization referred to in the document was
merely one he had heard of in an IRS Revenue Ruling, and that he never
gave Mr. Gingrich any advice on the law pertaining section 501(c)(3) in
regard to AOW/ACTV, the Renewing American Civilization course, or any
other projects. The only legal advice he gave Mr. Gingrich pertained to
need for care in the use of official resources for travel expenses.
---------------------------------------------------------------------------
Mr. Gingrich explained to the Subcommittee in November 1996
that, in his opinion, there were no ``parallels'' between the
American Campaign Academy and the Renewing American
Civilization course. (11/13/96 Gingrich Tr. 61). After this
explanation, Mr. Schiff and Mr. Gingrich had the following
exchange:
Mr. Schiff: Did you go to a tax expert and say, here
is what I have in mind; do you agree that there are no
parallels and that there's no problem with the American
Campaign Academy case in terms of what I am doing here?
I am just asking if you did that?
Mr. Gingrich: The answer is, no. I just want to
assert the reason I wouldn't have done it is as a
college teacher who had taught on a college campus I
didn't think the two cases--I also didn't ask them if
it related to spouse abuse. I mean, I didn't think the
two cases had any relationship.
(11/13/96 Gingrich Tr. 61-62). During his testimony before the
Subcommittee in December, Mr. Schiff raised similar questions
with Mr. Gingrich.
Mr. Schiff: What strikes me is without trying to
resolve that at this minute, the possibility is out
there, the possibility that a violation of 501(c)(3) is
very much in evidence to me. And it seems to me that is
true all the way along. You did have the American
Campaign Academy case of 1989, which you have indicated
you were aware of. It's true the facts were different,
but nevertheless something sprung up that told somebody
there was a 501(c)(3) problem here if you get too close
to political entities.
What I am getting at is this, and again to answer any
way you wish, wasn't it, if not intentional, wasn't it
reckless to proceed with your involvement as a Member
of the House of Representatives into at least a couple
of--involvements with the 501(c)(3) organizations,
whether it was Progress & Freedom or Kennesaw State or
Abraham Lincoln Opportunity Foundation, without getting
advice from a tax attorney to whom you told everything?
You said, this is the whole plan, this is the whole
movement of Renewing American Civilization. * * *
Shouldn't that have been presented to somebody who is
a tax attorney, and said, now, am I going to have any
problems here? Is this okay under the 501(c)(3) laws?
(12/10/96 Gingrich Tr. 32-33). In response to Mr. Schiff's
question, Mr. Gingrich explained why he thought there was no
need to seek legal advice because the facts of American
Campaign Academy and Renewing American Civilization were
inapposite. (12/10/96 Gingrich Tr. 34-36).
Mr. Gingrich: The facts are the key. I was teaching
at an accredited university; [ACA] was an institution
being set up as basically a politically training
center. My course was open to everybody; [ACA] was a
Republican course. My course says nothing about
campaigns; [ACA] was a course specifically about
campaigns.
There are four standards * * * none of which apply to
Renewing American Civilization. * * * Just at an
objective level you are going to put these [ACA and
RAC] up on a board and say that is not a relevant
question.
(12/10/96 Gingrich Tr. 35). After Mr. Gingrich's explanation, Mr. Schiff
said the following:
Mr. Schiff: I understand how you distinguish the
facts between the American Campaign Academy case and
your course. There are those that would argue that the
legal holding applies equally to both. In other words,
that which brings you to the legal conclusion of not
complying with the 501(c)(3) laws, for various reasons
that I'd rather not get into now--discuss with Mr.
Holden, perhaps--that those are in common even if
certain peripheral facts are different.
What I'm getting at is, excuse me for using your own
words, but you're not a lawyer. Knowing that there was
an attempt to set up a 501(c)(3) training and education
academy which floundered in the courts because of
something, wouldn't that motivate particularly a Member
of the House to want to say, before you start into
another one, maybe I ought to sit down with somebody
who is a tax expert and tell them the whole plan here,
not just course content, but where the course fits into
all the strategies here and say, now, do you think I've
got a problem? And I don't think you did that. If you
did, tell me you did. * * *
(12/10/96 Gingrich Tr. 36-37). Mr. Gingrich's response was three-fold:
Mr. Gingrich: [First,] [i]f you read the speech I
gave in January of 1993, which was the core document
from which everything else comes, I talk very
specifically about a movement in the speech. I talk
very simply about 2 million, not 200,000, volunteers,
citizen activists, in the speech. I describe it as a
cultural movement that has a political component in the
speech.
That's the core document I gave to everyone when I
would say, here's what I want to try to teach about.
Here is what I want to try to do. That document clearly
says there is a movement, and this course is designed
to outline the principles from which the movement
comes. And so, if everybody who was engaged in looking
at the course, whether it was Kennesaw Foundation's
lawyers or it was Progress & Freedom's lawyers or it
was Reinhardt's lawyers, and the president of the
college in both cases, everybody had a chance to read
the core document which has movement very specifically
in it.
Second, the reason I didn't seek unique legal counsel
is as a Ph.D. teaching in a State college in an
accredited setting, it never occurred--I mean, if I had
thought--this is another proof of my ignorance or proof
of my innocence, I'll let you decide--it never occurred
to me that this is an issue. * * *
[Third,] I think everybody who has actually seen my
course will tell you * * * I was very careful.
Ironically, Max Cleland, who won the Senate seat, is
the only current politician used in the course other
than John Lewis.
And so the course was clearly not Republican. It was
clearly not designed to send a partisan message. No one
I know of who has actually seen the course thinks that
it was a partisan vehicle. It has no relationship to
the American Campaign Academy.
(12/10/96 Gingrich Tr. 37-39).
Officials at KSC and Reinhardt did not seek legal advice
pertaining to the application of 501(c)(3) to the course. The
only such advice ever sought was by KSCF in connection with the
agreement to transfer the course to PFF in November 1993 and in
asking its outside lawyers to render a legal opinion concerning
the course in 1995. Citing the attorney/client privilege, KSCF
officials have refused to disclose to the Subcommittee the
advice KSCF received in both instances. (6/13/96 Mescon Tr. 60;
6/13/96 Siegel Tr. 36-37; 6/12/96 Falany Tr. 50-51; 6/13/96
Fleming Tr. 46-48).
In his July 1996 interview, Mr. Eisenach said that he did
not seek legal advice pertaining to the application of
501(c)(3) to the course. (7/12/96 Eisenach Tr. 236). In his
November 1996 interview, Mr. Eisenach said that he had worked
with many attorneys who had experience in 501(c)(3) law. (11/
14/96 Eisenach Tr. 84-88). But he was not able to point to any
specific consultation with a tax attorney where the entire
relationship between the course, the movement, and political
goals were fully set forth and found to be within the bounds of
501(c)(3). (11/14/96 Eisenach Tr. 88-91).
VI. Summary of the Report of the Subcommittee's Expert
A. Introduction
Because of differences of opinion among the Members of the
Subcommittee regarding the tax issues raised in the Preliminary
Inquiry, the Subcommittee determined that it would be helpful
to obtain the views of a recognized expert in tax-exempt
organizations law, particularly with respect to the ``private
benefit'' prohibition. The expert, Celia Roady, reviewed Mr.
Gingrich's activities on behalf of ALOF and the activities of
others on behalf of ALOF with Mr. Gingrich's knowledge and
approval. She also reviewed Mr. Gingrich's activities on behalf
of KSCF, PFF, and Reinhardt College in regard to the Renewing
American Civilization course and the activities of others on
behalf of those organizations with Mr. Gingrich's knowledge and
approval. The purpose of this review was to determine whether
those activities violated the status of any of these
organizations under section 501(c)(3) of the Internal Revenue
Code.
B. Qualifications of the Subcommittee's Expert
Ms. Roady is a partner in the Washington, D.C. office of
the law firm Morgan, Lewis & Bockius LLP where she specializes
full-time in the representation of tax-exempt organizations.
Her practice involves the provision of advice on all aspects of
section 501(c)(3). Ms. Roady has written many articles on tax-
exempt organization issues for publication in legal periodicals
such as the ``Journal of Taxation of Exempt Organizations'' and
the ``Exempt Organization Tax Review.'' She is a frequent
speaker on exempt organizations topics, regularly lecturing at
national tax conferences such as the ALI/ABA conference on
charitable organizations and the Georgetown University Law
Center conference on tax-exempt organizations, as well as at
local tax conferences and seminars on tax-exempt organization
issues. In 1996, she was named the Program Chair of the
Georgetown University Law Center's annual conference on tax-
exempt organizations. (11/15/96 Roady Tr. 2-7).
Ms. Roady is the immediate past Chair of the Exempt
Organizations Committee of the Section of Taxation of the
American Bar Association, having served as Chair from 1993 to
1995. She is currently serving a three-year term as a member of
the Council of the ABA Section of Taxation, and is the Council
Director for the Section's Exempt Organizations Committee. She
also serves on the Legal Section Council of the American
Society of Association Executives, and is a Fellow of the
American College of Tax Counsel. (11/15/96 Roady Tr. 2-7).
Ms. Roady served a three-year term as the Co-Chair of the
Exempt Organizations Committee of the District of Columbia
Bar's Tax Section from 1989 to 1991. She also served on the
Steering Committee of the D.C. Bar's Tax Section from 1989 to
1995, and as Co-Chair of the Steering Committee from 1991 to
1993. (11/15/96 Roady Tr. 2-7).
Each of the attorneys interviewed for the position of
expert for the Subcommittee highly recommended Ms. Roady. She
was described as being impartial and one of the leading people
in the field of exempt organizations law. (11/15/96 Roady Tr.
2).71
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\71\ The one known public comment on the matter by Ms. Roady is
found in the following paragraph from a New York Times article:
``Clearly, it's an aggressive position,'' said Celia Roady, a
Washington lawyer and chairwoman of the American Bar Association's
committee on tax-exempt organizations, who stressed that she was not
talking for the association. ``Whether it's too aggressive and crosses
the line, I don't know. Clearly, it's more aggressive than many exempt
organizations would go forward with.''
New York Times, section A, page 12 (Feb. 20, 1995). (Ex. 144). In
the same article, Mr. Gingrich is quoted as saying that he acted
aggressively in regard to 501(c)(3) law: ``Whoa,'' [Mr. Gingrich] said,
when asked after class one recent Saturday if the course nears the edge
of what the law allows. ``Goes right up to the edge. What's the beef?
Doesn't go over the edge, doesn't break any law, isn't wrong. It's
aggressive, it's entrepreneurial, it's risk taking.''
New York Times, section A, page 12, column 1 (Feb. 20, 1995).
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Ms. Roady is a 1973 magna cum laude graduate of Duke
University. She received her law degree from Duke Law School,
with distinction, in 1976. She received a masters degree in
taxation from the Georgetown University Law Center in 1979.
C. Summary of the Expert's Conclusions
Ms. Roady considered the following issues in her review:
1. whether the content of the television programs
broadcast by ALOF or the Renewing American Civilization
course were ``educational'' within the meaning of
section 501(c)(3);
2. whether one of the purposes of the activities with
respect to the television programs or the course was to
provide more than an incidental benefit to GOPAC, Mr.
Gingrich, or other Republican entities and candidates
in violation of the private benefit prohibition in
section 501(c)(3);
3. whether the activities with respect to the
television programs or the course provided support to
GOPAC or a candidate for public office in violation of
the campaign intervention prohibition in section
501(c)(3);
4. whether the activities with respect to the
television programs or the course violated the private
inurement prohibition in section 501(c)(3); and
5. whether the activities with respect to the
television programs or the course violated the lobbying
limitations applicable to section 501(c)(3)
organizations.
(11/15/96 Roady Tr. 7).72
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\72\ A detailed discussion of the law pertaining to organizations
exempt from federal income tax under section 501(c)(3) of the Internal
Revenue Code is attached as an Appendix to this Report.
---------------------------------------------------------------------------
With respect to the last two issues, Ms. Roady did not
conclude that the activities with respect to the television
programs or the course resulted in impermissible private
inurement or violated the lobbying limitations applicable to
section 501(c)(3) organizations. Similarly, with respect to the
first issue, Ms. Roady concluded that the television programs
and the course met the requirements of the methodology test
described in Rev. Proc. 86-43 and were ``educational'' within
the meaning of section 501(c)(3) even though they advocated
particular viewpoints and positions. Accordingly, Ms. Roady
concluded that the activities with respect to the television
programs and the course served an educational purpose and would
be appropriate activities for section 501(c)(3) organizations,
as long as there was no violation of the private benefit
prohibition or the campaign intervention prohibition. She found
substantial evidence, however, of violations of both such
prohibitions and therefore concluded that Mr. Gingrich's
activities on behalf of the organizations and the activities of
others on behalf of the organizations with Mr. Gingrich's
knowledge and approval violated the organizations' status under
section 501(c)(3). (11/15/96 Roady Tr. 7). The basis for her
conclusions may be summarized briefly as follows:
1. The American Citizens Television Program of ALOF 73
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\73\ After Ms. Roady met with the Subcommittee to discuss the tax-
exempt organizations law and her conclusions regarding Renewing
American Civilization, she met with the Special Counsel to discuss the
ACTV project. Although she did not formally present her conclusions to
the Subcommittee, the legal principles she explained during her
meetings with the Subcommittee with respect to Renewing American
Civilization were equally applicable to the facts surrounding the ACTV
project and support her conclusions set forth in this section of the
Report.
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a. Private benefit prohibition
Under section 501(c)(3) and the other legal authorities
discussed above, the analysis of whether there is a violation
of the private benefit prohibition does not depend on whether
the activities at issue--the television programs--served an
exempt purpose. Even though the television programs met the
definition of ``educational,'' there is a violation of section
501(c)(3) if another purpose of the activities was to provide
more than an insubstantial or incidental benefit to GOPAC or
any other private party. As the Supreme Court stated in Better
Business Bureau v. United States, 326 U.S. 276, 283 (1945),
``the presence of a single noneducational purpose, if
substantial in nature, will destroy the exemption regardless of
the number or importance of truly educational purposes.'' In
making such a determination, the Tax Court has held that the
proper focus is ``the purpose towards which an organization's
activities are directed and not the nature of the activities
themselves.'' American Campaign Academy, 92 T.C. at 1078-79.
The determination as to whether there is a violation of the
private benefit prohibition cannot, therefore, be made solely
by reference to the content of the television programs or
whether the activities in relation to the programs served an
educational purpose. Rather, the determination requires a
factual analysis to determine whether the organization's
activities also had another, nonexempt purpose to provide more
than an incidental benefit to a private party such as GOPAC or
Republican entities and candidates. In this case, there is
substantial evidence that these parties were intended to and
did receive more than an incidental benefit from the activities
conducted by ALOF.
In summary, according to Ms. Roady, the evidence shows that
the ACTV project was a continuation of GOPAC's AOW project, and
had the same partisan, political goals as AOW. These goals
included, among other things, reaching ``new groups of voters
not traditionally associated with [the Republican] party;''
``mobiliz[ing] thousands of people across the nation at the
grass roots level [to become] dedicated GOPAC activists;'' and
``making great strides in continuing to recruit activists all
across America to become involved with the Republican party.''
The persons who conducted the ACTV project on behalf of ALOF
were GOPAC officers, employees, or consultants. In essence, the
transfer of the AOW project from GOPAC to ALOF was more in name
than substance, since the same activities were conducted by the
same persons in the same manner with the same goals. Through
the use of ALOF, however, these persons were able to raise tax-
deductible charitable contributions to support the ACTV
project, funding that would not have been available to GOPAC on
a tax-deductible basis.
Taken together, according to Ms. Roady, the facts as
described above show that in addition to its educational
purpose, another purpose of the ACTV project was to benefit
GOPAC and, through it, Republican entities and candidates, by
continuing to conduct the AOW project under a new name and
through a section 501(c)(3) organization that could raise
funding for the project through tax-deductible charitable
contributions. This benefit was not merely incidental. To the
contrary, the evidence supports a finding that one of the main
purposes for transferring the project to ALOF was to make
possible the continuation of activities that substantially
benefited GOPAC and Republican entities and candidates.
For these reasons, Ms. Roady concluded that one of the
purposes of Mr. Gingrich's activities on behalf of ALOF and the
activities of others on behalf of ALOF with Mr. Gingrich's
knowledge and approval was to provide more than an incidental
benefit to GOPAC and Republican entities and candidates in
violation of the private benefit prohibition.
b. Campaign intervention prohibition
As with respect to the private benefit prohibition, the
legal authorities discussed above make it clear, according to
Ms. Roady, that the analysis of whether there is a violation of
the campaign intervention prohibition does not turn on whether
the television programs had a legitimate educational purpose.
In the IRS CPE Manual, the IRS explained that ``activities that
meet the [educational] methodology test * * * may nevertheless
constitute participation or intervention in a political
campaign.'' IRS CPE Manual at 415. See also New York Bar, 858
F.2d 876 (2d Cir. 1988); Rev. Proc. 86-43. Nor does the
analysis turn on the fact that the television programs did not
expressly urge viewers to ``support GOPAC,'' ``vote
Republican,'' or ``vote for Mr. Gingrich.'' The IRS does not
follow the express advocacy standard applied by the FEC, and it
is not necessary to advocate the election or defeat of a
clearly identified candidate to violate the campaign
intervention prohibition. IRS CPE Manual at 413. The
determination as to whether there is a violation of the
campaign intervention prohibition requires an overall ``facts
and circumstances'' analysis that cannot be made solely by
reference to the content of the television programs.
The central issue is whether the television programs
provided support to GOPAC. When Congress enacted section 527 in
1974, the legislative history explained that the provision was
not intended to affect the prohibition against electioneering
activity contained in section 501(c)(3). The IRS regulations
under section 527 provide that section 501(c)(3) organizations
are not permitted to establish or support a PAC. Treas. Reg.
Sec. 1.527-6(g). Under the applicable legal standards, there is
a violation of the campaign intervention prohibition with
respect to ALOF if the evidence shows that the ACTV project
provided support to GOPAC, even though the television programs
were educational and were not used as a means to expressly
advocate the election or defeat of a particular candidate.
According to Ms. Roady, there is substantial evidence of
such support in this case. As discussed above, the evidence
shows that the ACTV project conducted by ALOF was a
continuation of AOW, a partisan, political project undertaken
by GOPAC. Mr. Gingrich himself described ACTV as a continuation
of the AOW project. The activities conducted by ALOF with
respect to the ACTV project were the same as the activities
that had been conducted by GOPAC with respect to the AOW
project. The persons who conducted the ACTV project on behalf
of ALOF were GOPAC officers, employees, or consultants.
Shifting the project to ALOF allowed the parties to raise some
tax-deductible charitable contributions to conduct what
amounted to the continuation of a GOPAC project for partisan,
political purposes. For these reasons, Ms. Roady concluded that
Mr. Gingrich's activities on behalf of ALOF and the activities
of others on behalf of ALOF with Mr. Gingrich's knowledge and
approval provided support to GOPAC in violation of the campaign
intervention prohibition.
2. The Renewing American Civilization Course
a. Private benefit prohibition
The determination of whether there is a violation of the
private benefit prohibition does not depend on whether the
teaching and dissemination of the course served an educational
purpose, and cannot be made simply by analyzing the content of
Mr. Gingrich's lectures. The course met the definition of
``educational'' under section 501(c)(3) and served an
educational purpose. (11/15/96 Roady Tr. 7). Nevertheless,
there is a violation of section 501(c)(3) if another purpose of
the course was to provide more than an incidental private
benefit. (11/15/96 Roady Tr. 17). Making this determination
requires an analysis of the facts to find out whether Mr.
Gingrich's activities on behalf of KSCF, PFF, and Reinhardt and
the activities of others with his knowledge and approval had
another nonexempt purpose to provide more than an incidental
benefit to private parties such as Mr. Gingrich, GOPAC, and
other Republican entities and candidates. In this case, there
is substantial evidence that these parties were intended to and
did receive more than an incidental benefit from the activities
conducted with respect to the course. (11/15/96 Roady Tr. 78,
123, 124, 130, 131, 142-145, 173, 195).
In summary, according to Ms. Roady, the evidence shows that
the course was developed by Mr. Gingrich in the context of a
broader movement. (11/15/96 Roady Tr. 127-130, 134-135, 196).
This movement was intended to have political consequences that
would benefit Mr. Gingrich in his re-election efforts, GOPAC in
its national political efforts, and Republican party entities
and candidates in seeking to attain a Republican majority. The
goals of the movement were expressed in various ways, and
included arousing 200,000 activists interested in renewing
American civilization by replacing the welfare state with an
opportunity society and having the Republican party adopt the
message of Renewing American Civilization so as to attract
those activists to the party. It was intended that a Republican
majority would be part of the movement, and that the Republican
party would be identified with the ``opportunity society'' and
the Democratic party with the ``welfare state.'' (11/15/96
Roady Tr. 128, 130, 142, 145-148, 217-218; 11/19/96 Roady Tr.
35, 41).
The movement, the message of the movement, and the course
were all called ``Renewing American Civilization.'' Mr.
Gingrich's lectures in the course were based on the same
principles as the message of the movement, and the course was
an important vehicle for disseminating the message of the
movement. Mr. Gingrich stated that the course was ``clearly the
primary and dominant method [of disseminating the message of
the movement.]'' Mr. Gingrich used the Renewing American
Civilization message in almost every political and campaign
speech he made in 1993 and 1994. He was instrumental in
determining that virtually the entire political program for
GOPAC for 1993 and 1994 would be centered on developing,
disseminating, and using the message of Renewing American
Civilization. (11/15/96 Roady Tr. 125-127, 144-145, 148-149,
153, 177, 218).
Although GOPAC's financial resources were not sufficient to
enable it to carry out all of the political programs at its
usual level during this period, it had many roles in regard to
the course. These roles included development of the course
content which was coordinated in advance with GOPAC charter
members, fundraising for the course on behalf of the section
501(c)(3) organizations, and promotion of the course. GOPAC
envisioned a partisan, political role for the course. (11/15/96
Roady Tr. 197-202, 208-209).
From 1993 to 1995, KSCF and PFF spent most of the money
they had raised for the course on the dissemination of the 20
hours taught by Mr. Gingrich. These funds were raised primarily
through tax-deductible charitable contributions to KSCF and to
PFF,74 funding that would not have been available had the
project been conducted by GOPAC or another political or
noncharitable organization.
---------------------------------------------------------------------------
\74\ Some funding came from the sale of videotapes and audiotapes
of the course. (7/12/96 Eisenach Tr. 283).
---------------------------------------------------------------------------
According to Ms. Roady, the facts as set forth above show
that, although the Renewing American Civilization course served
an educational purpose, it had another purpose as well. (11/19/
96 Roady Tr. 37, 40). The other purpose was to provide a means
for developing and disseminating the message of Renewing
American Civilization by replacing the welfare state with an
opportunity society. That was the main message of GOPAC and the
main message of virtually every political and campaign speech
made by Mr. Gingrich in 1993 and 1994. Through the efforts of
Mr. Gingrich and others acting with his knowledge and approval,
tax-deductible charitable contributions were raised to support
the dissemination of a course in furtherance of Mr. Gingrich's
political strategies. (11/19/96 Roady Tr. 37, 38). Mr. Gingrich
encouraged GOPAC, House Republicans and other Republican
entities and candidates to use the course in their political
strategies as well. (11/15/96 Roady Tr. 145, 152, 173).
The partisan, political benefit to these parties was
intended from the outset, and this benefit cannot be considered
merely incidental. To the contrary, the evidence supports a
finding that one of Mr. Gingrich's main purposes for teaching
the course was to develop and disseminate the ideas, language,
and concepts of Renewing American Civilization as an integral
part of a broad movement intended to have political
consequences that would benefit him in his re-election efforts,
GOPAC in its political efforts, and other Republican entities
and candidates in seeking to attain a Republican majority. For
these reasons, Ms. Roady concluded that one of the purposes of
Mr. Gingrich's activities on behalf of KSCF, PFF and Reinhardt
in regard to the course entitled ``Renewing American
Civilization'' and the activities of others on behalf of those
organizations with Mr. Gingrich's knowledge and approval was to
provide more than an incidental benefit to Mr. Gingrich, GOPAC,
and other Republican entities and candidates in violation of
the private benefit prohibition. (11/15/96 Roady Tr. 122, 125,
127, 143-145, 148, 152, 153, 187-189, 213-217).
b. Campaign intervention prohibition
As discussed above, neither the fact that the content of
the Renewing American Civilization course is educational within
the meaning of section 501(c)(3) nor the fact that the course
lectures do not contain expressions of support or opposition
for a particular candidate precludes a finding that there is a
violation of the campaign intervention prohibition. Section
501(c)(3) organizations are prohibited from establishing or
supporting PACs, and from providing support to candidates in
their campaign activities. The relevant issue is whether the
course provided support to GOPAC or to Mr. Gingrich in his
capacity as a candidate.
According to Ms. Roady, there is substantial evidence of
such support in this case. As discussed above, the evidence
shows that the course was developed by Mr. Gingrich as a part
of a broader political movement to renew American civilization
by replacing the welfare state with an opportunity society. The
course was an important vehicle for disseminating the message
of that movement. The message of replacing the welfare state
with the opportunitysociety was also used in a partisan,
political fashion. The ``welfare state'' was associated with Democrats
and the ``opportunity society'' was associated with Republicans. The
message of the course was also the main message of GOPAC during 1993
and 1994 and the main message of virtually every political and campaign
speech made by Mr. Gingrich in 1993 and 1994. Through the use of
section 501(c)(3) organizations, Mr. Gingrich and others acting with
his knowledge and approval raised tax-deductible charitable
contributions which were used to support a course designed, developed
and disseminated in a manner that provided support to GOPAC in its
political programs and to Mr. Gingrich in his re-election campaign. For
these reasons, Ms. Roady concluded that Mr. Gingrich's activities on
behalf of KSCF, PFF and Reinhardt and the activities of others on
behalf of those organizations with Mr. Gingrich's knowledge and
approval provided support to GOPAC and to Mr. Gingrich in violation of
the campaign intervention prohibition. (11/15/96 Roady Tr. 171-175,
194).
D. Advice Ms. Roady Would Have Given
Had Mr. Gingrich or others associated with ACTV or Renewing
American Civilization consulted with Ms. Roady prior to
conducting these activities under the sponsorship of 501(c)(3)
organizations, she would have advised that they not do so for
the reasons set forth above. During her testimony before the
Subcommittee, she was asked what her advice would have been to
Mr. Gingrich and others associated with ACTV and Renewing
American Civilization. She said that she would have recommended
the use of a 501(c)(4) organization to pay for the
dissemination of the course, as long as the dissemination was
not the primary activity of the 501(c)(4) organization. If this
had been done, contributions for ACTV and the course would not
have been tax-deductible. (11/15/96 Roady Tr. 207-208).
VII. Summary of Conclusions of Mr. Gingrich's Tax Counsel
A. Introduction
During the Preliminary Inquiry, Mr. Gingrich's lawyer
forwarded to the Subcommittee a legal opinion letter and
follow-on letter regarding the tax questions at issue. The
letters were prepared by attorney James P. Holden. At Mr.
Gingrich's request, Mr. Holden and his partner who helped him
prepare the letters, Susan Serling, met with the Subcommittee
on December 12, 1996, to discuss his conclusions. The purpose
of the letters was to express Mr. Holden's conclusions
regarding whether any violation of section 501(c)(3) occurred
with respect to the Renewing American Civilization course.
His understanding of the facts of the matter was based on a
review of the course book prepared for the course, videotapes
of the course, documents produced by KSC pursuant the Georgia
Opens Records Act, PFF's application to the IRS for exemption,
newspaper articles, discussions with Mr. Baran, Mr. Eisenach,
and counsel to PFF and KSCF.\75\
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\75\ Mr. Holden and his partner conferred with Mr. Eisenach for
about three hours. (12/12/96 Holden Tr. 38). The conversation with KSCF
counsel, via telephone, lasted about 30 minutes. (12/12/96 Holden Tr.
39). The conversation with PFF's counsel lasted about two hours. (12/
12/96 Holden Tr. 38-39). Mr. Holden did not talk to Mr. Gingrich prior
to writing the opinion. (12/12/96 Holden Tr. 43). He also did not talk
to anyone else involved in the course, such as Mr. Hanser, Ms. Rogers,
Ms. Nelson, Mr. Mescon, or Ms. Minnix. (12/12/96 Holden Tr. 43-44).
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B. Qualifications of Mr. Gingrich's Tax Counsel
Mr. Holden is a partner at the Washington, D.C. law firm of
Steptoe and Johnson. He was an adjunct professor at Georgetown
University Law Center from 1970 to 1983. He is co-author of
``Ethical Problems in Federal Tax Practice'' and ``Standards of
Tax Practice.'' He is the author of numerous tax publications
and a speaker at numerous tax institutes. He was chair of the
American Bar Association Section of Taxation from 1989 to 1990;
chair of the Advisory Group to the Commissioner of Internal
Revenue from 1992 to 1993; and chair of the IRS Commissioner's
Review Panel on Integrity Controls from 1989 to 1990. He was a
trustee and president of the American Tax Policy Institute from
1993 to 1995 and a regent of the American College of Tax
Counsel. He is or was a member of the following organizations:
American Law Institute (consultant, Federal Income Tax
Project); Advisory Group to Senate Finance Committee Staff
regarding Subchapter C revisions (1984-1985); Board of
Advisors, New York University/Internal Revenue Service
Continuing Professional Education Program (1987-1990); and BNA
Tax Management Advisory Board. He received a J.D. degree from
Georgetown University Law Center in 1960 and a B.S. degree from
the University of Colorado in 1953.
His experience in 501(c)(3) law stems principally from one
client and one case that has been before the IRS for the past
six years. (12/12/96 Holden Tr. 21).\76\ He said during his
testimony, ``I don't pretend today to be a specialist in exempt
organizations. * * * I pretend to be an expert in the political
aspects of such organizations.'' (12/12/96 Holden Tr. 21). The
one case Mr. Holden worked on has not been resolved and he has
spent, on average, about 30 percent of his time for the last
six years on this case. (12/12/96 Holden Tr. 24). He has never
been a member of any organization or committee concerned
principally with tax-exempt organizations law. (12/12/96 Holden
Tr. 25). He does not have any publications in the exempt
organizations field. (12/12/96 Holden Tr. 25). He has never
given any speeches on exempt organizations law nor has he been
an expert witness with respect to exempt organizations law.
(12/12/96 Holden Tr. 26).
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\76\ Although Mr. Holden declined to identify the client in this
case, he said that the case ``is perhaps the largest case the Internal
Revenue Service has before it on this whole issue.'' (12/12/96 Holden
Tr. 20-21).
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When Mr. Baran asked Mr. Holden to prepare his opinion
letter, Mr. Baran did not ask what qualifications Mr. Holden
had in the exempt organizations area. (12/12/96 Holden Tr. 32).
Mr. Holden did not give Mr. Baran any information regarding his
background in exempt organizations law other than the names of
two references. (12/12/96 Holden Tr. 33).
Mr. Holden's partner who helped prepared the opinion, Susan
Serling, does not have experience in the exempt organizations
field other than with respect to the one case referred to above
that is still before the IRS. (12/12/96 Holden Tr. 27). She is
not a member of the ABA Exempt Organizations Committee and does
not have any publications in the exempt organizations field.
She has never given any speeches pertaining to exempt
organizations law and has never testified as an expert witness
with respect to exempt organizations law. (12/12/96 Holden Tr.
27).
C. Summary of Conclusions of Mr. Gingrich's Tax Counsel
As set forth in Mr. Holden's opinion letter, his follow-on
letter, and in his testimony, it was Mr. Holden's opinion,
based on his review of the facts available to him, that ``there
would be no violation of section 501(c)(3) if an organization
described in that section were to conduct `Renewing American
Civilization' as its primary activity.'' (9/6/96 Holden Ltr.
4). In arriving at this opinion, Mr. Holden evaluated the facts
in light of the requirements:
1. that a section 501(c)(3) organization be operated
exclusively for an exempt purpose;
2. that the organization serve a public rather than a
private interest;
3. that the earnings of an organization not inure to
the benefit of any person;
4. that no substantial part of the activities of the
organization consist of attempting to influence
legislation; and
5. that the organization not participate or intervene
in any political campaign in support of or in
opposition to any candidate for public office.
(9/6/96 Holden Ltr. 4). A discussion of Mr. Holden's views on
the two principal tax questions at issue before the
Subcommittee--the private benefit prohibition and campaign
intervention prohibition--is set forth below.
1. Private Benefit Prohibition
With respect to whether Renewing American Civilization
violated the private benefit prohibition described above, Mr.
Holden's opinion and follow-on letter focused exclusively on
the American Campaign Academy case. His letters did not refer
to other precedent or IRS statements pertaining to the private
benefit prohibition. In evaluating whether Renewing American
Civilization created any discernible secondary benefit, in the
terms used by the Court in American Campaign Academy, Mr.
Holden considered whether the course provided an ``identifiable
benefit'' to GOPAC or the Republican party. He concluded that
it did not.
Following our review of the course materials, the
course syllabi, and video tapes of the course lectures,
we have not been able to identify any situation in
which students of the course were advised to vote
Republican, join the Republican party, join GOPAC, or
support Republicans in general. Rather, the course
explored broad aspects of American civilization through
Mr. Gingrich's admittedly partisan viewpoint.
(9/17/96 Holden Ltr. 5). Mr. Holden also wrote:
From our review of the course materials * * * and
their presentation, it appears to us that the
educational message was not narrowly targeted to
benefit particular organizations or persons beyond the
students themselves.
(9/6/96 Holden Ltr. 58). During his testimony before the
Subcommittee, Mr. Holden said that because the course was
educational within the meaning of the ``methodology test''
referred to above, he could not ``conceive'' of how the broad
dissemination of its message could violate 501(c)(3). (12/12/96
Holden Tr. 71).
Now, when we get into the course--and I am saying I
am going to look at the activities, and if I have a
clean educational message, then my organization is
entitled to disseminate that message as broadly as we
have the resources to do [for any purpose as long as it
is] serving the public with that in the sense that this
message has utility to the public.
(12/12/96 Holden Tr. 113-114).
In coming to his conclusion that the course did not violate
the private benefit prohibition, Mr. Holden made several
findings of fact and several assumptions. For example, he wrote
that he considered the facts that established a close
connection between individuals who were active in GOPAC and the
development and promotion of the course. As he characterized
it, GOPAC's former Executive Director and GOPAC employees
became employees or contractors to the organizations that
conducted the course. Individuals, foundations, and
corporations that provided financial support for the course
were also contributors to GOPAC or Mr. Gingrich's political
campaigns. GOPAC employees solicited contributions for the
course. (9/6/96 Holden Ltr. 4). Furthermore, documents he
reviewed:
provide[d] evidence that the course was developed in a
political atmosphere and as part of a larger political
strategy. The documents indicate that Mr. Gingrich and
GOPAC evolved a political theme that they denominated
``Renewing American Civilization'' and that, in their
political campaign capacities, they intended to press
this theme to the advantage of Republican candidates.
(9/17/96 Holden Ltr. 2).
Mr. Holden assumed a political motivation behind the
development of the course. As described in his opinion letter:
[T]he individuals who controlled GOPAC and who
participated in promoting the course viewed the course
as desirable in a political context, and many of their
expressions and comments evidence a political motive
and interest. * * * Mr. Gingrich is a skilled
politician whose ideology finds expression in a
political message, and he is interested in maximum
exposure of that message and in generating interest in
those who might be expected to become advocates of the
message. In sum, we have not assumed that the
development and promotion of the course were free from
political motivation.
(9/6/96 Holden Ltr. 4-5). Furthermore, Mr. Holden said that
when preparing his opinion, he made the ``critical assumption
that the interests of the political persona surrounding GOPAC
were advanced by creating this course.'' (12/12/96 Holden Tr.
72). In this regard, Mr. Holden also said during his testimony:
We have taken as an assumption that the intent [of
the course] was to benefit the political message. If
someone told me that teaching the course actually
resulted in the benefit, I guess I wouldn't be
surprised because that was our understanding of the
objective. * * * I accept[ed] for purposes of our
opinion that there was an intent to advance the
political message by utilizing a (c)(3).
(12/12/96 Holden Tr. 83).
In Mr. Holden's opinion, however, the political motivation
or strategy behind the creation of the course is irrelevant
when determining whether a violation of the private benefit
prohibition occurred.
It is not the presence of politicians or political
ideas that controls. The pertinent law does not turn on
the political affiliations or political motivations of
the principal participants.
(9/6/96 Holden Ltr. 6). According to Mr. Holden, the issue of
whether a violation of 501(c)(3) occurred ``may not be resolved
by a determination that the individuals who designed and
promoted the course acted with political motivation.'' (9/17/96
Holden Ltr. 4). In his opinion, when determining whether an
organization violated the private benefit prohibition, it is
necessary to determine whether an organization's activities in
fact served a private interest. (12/12/96 Holden Tr. 80). What
motivates the activities is irrelevant.
I'm saying it's irrelevant to look to what caused an
individual or group of individuals to form a (c)(3) or
to utilize a 501(c)(3) organization. The question
instead is on the activities--the focus instead is on
the activities of the organization and whether they
violated the operational test. I think that's a
critical distinction.
(12/12/96 Holden Tr. 61). He said that he was ``aware of no
authority that would hold that because one is motivated to
establish a 501(c)(3) organization by business, political, or
other motivation, that means that the organization cannot
operate in a manner that satisfies 501(c)(3), because we are
talking about an operational test.'' (12/12/96 Holden Tr. 17-
18). Mr. Holden cited American Campaign Academy as an authority
for his conclusion that an organization's activity must itself
benefit a targeted group and that motivation of an
organization's agents in conducting that activity is
irrelevant. Mr. Holden said:
[In American Campaign Academy] [t]he focus was,
instead, on the operational test and whether the
activities of the organization evidenced a purpose to
serve a private interest. But you have to find that in
the activities of the organization and not in some
general notion of motivation or background purpose.
(12/12/96 Holden Tr. 61).
In light of these and similar comments made by Mr. Holden,
the Special Counsel asked Mr. Holden to comment on statements
found in the American Campaign Academy case at page 1064. The
statements are in a section of the case under the heading
``Operational Test'' and are as follows:
The operational test examines the actual purpose for
the organization's activities and not the nature of the
activities or the organization's statement of purpose.
(citations omitted). (emphasis supplied).
In testing compliance with the operational test, we
look beyond the four corners of the organization's
charter to discover ``the actual objects motivating the
organization and the subsequent conduct of the
organization.'' (citations omitted). (emphasis
supplied).
What an organization's purposes are and what purposes
its activities support are questions of fact.
(citations omitted).
(12/12/96 Holden Tr. 75-76). After the Special Counsel brought
these sections of the case to Mr. Holden's attention, the
following exchange occurred:
Mr. Holden: May I refer you to the last sentence
before the next heading, ``Operating Primarily for
Exempt Purposes.'' The last sentence before that says:
``The sole issue for declaration [sic] is whether
respondent properly determined that petitioner failed
to satisfy the first condition of the operational test
by not primarily engaging in activities, which is not
for exempt purposes.''
It's an activities test. And this is where the courts
say this is the sole issue. The stuff before, they're
just kind of reciting the law. When he gets to this, he
said this is what we have to determine.
Mr. Cole: But in reciting the law, don't they say, in
testing compliance with the operational test, we look
beyond the four corners of the organization's charter
to discover the actual objects motivating the
organization? Prior to that, they say the operational
test examines the actual purpose for the organization's
activities, not the nature of the activities or the
organization's statement of purpose.
I grant you that is the statement of the law, but you
are saying that has no significance?
Mr. Holden: That's not the case Judge Nims decided. *
* *
(12/12/96 Holden Tr. 77).
2. campaign intervention prohibition
In his opinion letter, Mr. Holden wrote that it was
``important to note that section 501(c)(3) does not, as is
often suggested, bar `political activity' [by 501(c)(3)
organization].'' (9/6/96 Holden Ltr. 68). The prohibition is
more limited and prohibits an organization from participating
in or intervening in any political campaign on behalf of or in
opposition to any candidate for public office. In order for an
organization to violate this prohibition, there must exist a
campaign, a candidate, a candidate seeking public office, and
an organization that participates or intervenes on behalf of or
in opposition to that candidate. (9/6/96 Holden Ltr. 68-69).
Mr. Holden concluded that the course did not violate this
prohibition.
The [course] materials contain no endorsement of or
opposition to the candidacy of any person, whether
expressed by name or through the use of a label that
might be taken as a stand-in for a candidate. While the
materials are critical of what is referred to as the
``welfare state'' and laudatory of what is described as
an ``opportunity society,'' none of this is properly
characterized as personalized to candidates, directly
or indirectly.
(9/6/96 Holden Ltr. 72). During his testimony before the
Subcommittee, Mr. Holden said that the course contained issue
advocacy in the sense that it called for the replacement of the
welfare state with the opportunity society. (12/12/96 Holden
Tr. 103-104). He also said that this issue--the replacement of
the welfare state with an opportunity society--was closely
identified with Mr. Gingrich and his political campaigns. (12/
12/96 Holden Tr. 104). He, however, did not see this as a basis
for concluding that the course violated the prohibition on
intervention in a political campaign because ``Mr. Gingrich
[had not] captured [this issue] to the point where it is not a
legitimate public interest issue for discussion in a purely
educational setting, even where he is the instructor.'' (12/12/
96 Holden Tr. 104).77
---------------------------------------------------------------------------
\77\ See also 12/12/96 Holden Tr. 103:
Mr. Schiff: But if you are providing 501(c)(3) raised money to pay
for that candidate to give the same message, which is his political
message, I think, for all substantial purposes, aren't you then, in
effect, intervening or even endorsing the candidate by using that type
of money to allow him to get his message further than it would get in
the absence of that money?
Mr. Holden: I go back to the fact that we have a clean curriculum
that we were talking about in a hypothetical and in the judgment that
we reached about this case, and I don't believe that merely because a
political figure takes a particular set of values and articulates them
as a political theme, that that so captures that set of values that a
501(c)(3) organization cannot legitimately educate people about that
same set of values.
Mr. Schiff: With the same messenger?
Mr. Holden: It doesn't seem to me that that compels a conclusion
that there's a violation of 501(c)(3).
---------------------------------------------------------------------------
D. Advice Mr. Holden Would Have Given
During his appearance before the Subcommittee, Mr. Holden
was asked about what type of organization he would have advised
Mr. Gingrich and others to use in order to conduct and
disseminate Renewing American Civilization had he been asked in
advance. He said that he would not have advised the use of a
501(c)(3) organization because the mix of politics and tax-
deductible funds is too ``explosive.''
I would have advised them not to do the activity
through a (c)(3). I have already expressed that view to
the Speaker. He didn't consult me in advance, but I
said, if I had been advising you in advance. He said,
why not. I said, because the intersection of political
activity and 501(c)(3) is such an explosive mix in
terms of the IRS view of things that I would not advise
you to move that close to the issue. You should find a
way of financing the course that doesn't involve the
use of 501(c)(3) funds. That would have been my advice
to him.
I said, that doesn't mean I conclude that what you
did is a violation. In fact, I think we are kind of
fairly far out beyond the frontiers of what has been
decided in the past in this area. We are looking at the
kind of case that I do not think has ever been
presented. I do not see how anyone can conclude that
this is an open and shut case. It just is not of that
character.
(12/12/96 Holden Tr. 132-134). Mr. Holden said that an
appropriate vehicle for the course might have been a 501(c)(4)
organization because such an organization can engage in some
political activity and the activity would not have used tax-
deductible funds. (12/12/96 Holden Tr. 132-134). Later, Mr.
Holden re-iterated that he would have not recommended that
Renewing American Civilization be sponsored and funded by a
501(c)(3) organization and pointed out such activities are
highly likely to attract the attention of the IRS.
[T]hose funds are deductible and the conjunction of
politics and a (c)(3) organization is so explosive as a
mix that it is bound to attract the attention of the
Internal Revenue Service. I wouldn't have been thinking
about this committee. I would have been thinking about
whether the Internal Revenue Service would have been
likely to challenge.
(12/12/96 Holden Tr. 146). After Mr. Holden made this comment, the
following exchange occurred:
Ms. Pelosi: So it would have raised questions[?]
Mr. Holden: Yes.
Mr. Goss: Isn't that a little bit akin to having a
yacht and an airplane on your tax return for business
purposes[?]
Mr. Holden: It is one of those things that stands
out.
(12/12/96 Holden Tr. 146-147).
VIII. Summary of Facts Pertaining to Statements Made to the Committee
A. Background
On or about September 7, 1994, Ben Jones, Mr. Gingrich's
Democratic opponent in 1994, filed with the Committee a
complaint against Mr. Gingrich. The complaint centered on the
course. Among other things, it alleged that Mr. Gingrich had
used his congressional staff to work on the course and that he
had misused organizations that were exempt from taxation under
section 501(c)(3) of the Internal Revenue Code because the
course was a partisan, political project, with significant
involvement by GOPAC, and was not a permissible activity for a
section 501(c)(3) organization. (Ex. 135).
On or about October 4, 1994, Mr. Gingrich wrote the
Committee in response to the complaint and primarily addressed
the issues concerning the use of congressional staff for the
course. In doing so he stated:
I would like to make it abundantly clear that those
who were paid for course preparation were paid by
either the Kennesaw State Foundation, [sic] the
Progress and Freedom Foundation or GOPAC. * * * Those
persons paid by one of the aforementioned groups
include: Dr. Jeffrey Eisenach, Mike DuGally, Jana
Rogers, Patty Stechschultez [sic], Pamela Prochnow, Dr.
Steve Hanser, Joe Gaylord and Nancy Desmond.
(Ex. 136, p. 2).
After the Committee received and reviewed Mr. Gingrich's
October 4, 1994 letter, it sent him a letter dated October 31,
1994, asking for additional information concerning the
allegations of misuse of tax-exempt organizations in regard to
the course. The Committee also asked for information relating
to the involvement of GOPAC in various aspects of the course.
As set forth in the letter, the Committee wrote:
There is, however, an allegation which requires explanation
before the Committee can finalize its evaluation of the
complaint. This is the allegation that, in seeking and
obtaining funding for your course on Renewing American
Civilization, you improperly used tax-exempt foundations to
obtain taxpayer subsidization of political activity.
* * * * * * *
Your answers to [questions set forth in the letter] would
be helpful to the Committee in deciding what formal action to
take with respect to the complaint.
* * * * * * *
A number of documents submitted by Ben Jones, however,
raise questions as to whether the course was in fact
exclusively educational in nature, or instead constituted
partisan political activity intended to benefit Republican
candidates.
(Ex. 137, pp. 1-2).
B. Statements Made by Mr. Gingrich to the Committee, Directly or
Through Counsel
1. Mr. Gingrich's December 8, 1994 Letter to the Committee
In a letter dated December 8, 1994, Mr. Gingrich responded
to the Committee's October 31, 1994 letter. (Ex. 138). In that
letter, Mr. Gingrich made the following statements, which he
has admitted were inaccurate, incomplete, and unreliable.
1. [The course] was, by design and application,
completely non-partisan. It was and remains about
ideas, not politics. (Ex. 138, p. 2).
2. The idea to teach ``Renewing American
Civilization'' arose wholly independent of GOPAC,
because the course, unlike the committee, is non-
partisan and apolitical. My motivation for teaching
these ideas arose not as a politician, but rather as a
former educator and concerned American citizen * * *.
(Ex. 138, p. 4).
3. The fact is, ``Renewing American Civilization''
and GOPAC have never had any official relationship.
(Ex. 138, p. 4).
4. GOPAC * * * is a political organization whose
interests are not directly advanced by this non-
partisan educational endeavor. (Ex. 138, p. 5).
5. As a political action committee, GOPAC never
participated in the administration of ``Renewing
American Civilization.'' (Ex. 138, p. 4).
6. Where employees of GOPAC simultaneously assisted
the project, they did so as private, civic-minded
individuals contributing time and effort to a 501(c)(3)
organization. (Ex. 138, p. 4).
7. Anticipating media or political attempts to link
the Course to [GOPAC], ``Renewing American
Civilization'' organizers went out of their way to
avoid even the appearances of improper association with
GOPAC. Before we had raised the first dollar or sent
out the first brochure, Course Project Director Jeff
Eisenach resigned his position at GOPAC. (Ex. 138, p.
4).
The goal of the letter was to have the complaint dismissed. (11/13/96
Gingrich Tr. 36).
2. March 27, 1995 Letter of Mr. Gingrich's Attorney to the Committee
On January 26, 1995, Representative Bonior filed with the
Committee an amended version of the Ben Jones complaint against
Mr. Gingrich. (Ex. 139). Among other things, the complaint re-
alleged that the Renewing American Civilization course had
partisan, political purposes and was in violation of section
501(c)(3). The complaint also alleged substantial involvement
of GOPAC in the course. (Ex. 139, pp. 1-7). In a letter dated
March 27, 1995, Mr. Baran, Mr. Gingrich's attorney and a
partner at the law firm of Wiley, Rein and Fielding, filed a
response on behalf of Mr. Gingrich to the amended complaint.
(Ex. 140, PFF 4347). Prior to the letter being delivered, Mr.
Gingrich reviewed it and approved its submission to the
Committee. (7/18/96 Gingrich Tr. 274-275).
Mr. Cole: If there was anything inaccurate in the
letter, would you have told Mr. Baran to change it?
Mr. Gingrich: Absolutely.
(7/18/96 Gingrich Tr. 275).
The letter contains the following statements, which Mr.
Gingrich has admitted were inaccurate, incomplete, and
unreliable.
1. As Ex. 13 demonstrates, the course solicitation *
* * materials are completely non-partisan. (Ex. 140, p.
19, fn. 7).
2. GOPAC did not become involved in the Speaker's
academic affairs because it is a political organization
whose interests are not advanced by this non-partisan
educational endeavor. (Ex. 140, p. 35).
3. The Renewing American Civilization course and
GOPAC have never had any relationship, official or
otherwise. (Ex. 140, p. 35).
4. As noted previously, GOPAC has had absolutely no
role in funding, promoting, or administering Renewing
American Civilization. (Ex. 140, pp. 34-35).
5. GOPAC has not been involved in course fundraising
and has never contributed any money or services to the
course. (Ex. 140, p. 28).
6. Anticipating media or political attempts to link
the course to GOPAC, course organizers went out of
their way to avoid even the appearance of associating
with GOPAC. Prior to becoming Course Project Director,
Jeffrey Eisenach resigned his position at GOPAC and has
not returned. (Ex. 140, p. 36).
The purpose of Mr. Baran's letter was to have the Committee
dismiss the complaints against Mr. Gingrich. (11/13/96 Gingrich
Tr. 35-36).
C. Subcommittee's Inquiry Into Statements Made to the Committee
On September 26, 1996, the Subcommittee expanded the scope
of the Preliminary Inquiry to determine:
[w]hether Representative Gingrich provided accurate,
reliable, and complete information concerning the
course entitled ``Renewing American Civilization,''
GOPAC's relationship to the course entitled ``Renewing
American Civilization,'' or the Progress and Freedom
Foundation in the course of communicating with the
Committee, directly or through counsel * * *.
On October 1, 1996, the Subcommittee requested that Mr.
Gingrich produce to the Subcommittee all documents that were
used or relied upon to prepare the letters at issue--the
letters dated October 4, 1994, December 8, 1994 and March 27,
1995. Mr. Gingrich responded to the Committee's request on
October 31, 1996. (Ex. 141). In his response, Mr. Gingrich
described how extremely busy he was at the time the October 4,
1994, and December 8, 1994 letters were prepared. He said, the
October 4, 1994 letter was written ``in [the] context of
exhaustion and focused effort'' on finishing a congressional
session, traveling to over a hundred congressional districts,
tending to his duties as Whip, and running for re-election in
his district. (Ex. 141, p. 1). At the time of the December 8,
1994 letter, he said that he and his staff were ``making
literally hundreds of decisions'' as part of the transition in
the House from Democratic to Republican Control. (Ex. 141, p.
2; 11/13/96 Gingrich Tr. 6, 10, 26). With respect to his level
of activity at the time the March 27, 1995 letter was created
Mr. Gingrich said the following:
[W]e were going through passing the Contract with
America in a record 100 days in what many people
believe was a forced march. I was, in parallel,
beginning to lay out the base for the balanced budget
by 2002, and I was, frankly, being too noisy publicly
and damaging myself in the process.
I had three projects--four; I was writing a book. So
those four projects were ongoing as I was going home to
report to my district, and we were being battered as
part of this continuum by Bonior and others, and we
wanted it handled in a professional, calm manner. We
wanted to honor the Ethics process.
(11/13/96 Gingrich Tr. 33-34).
Mr. Gingrich wrote in his October 31, 1996 response to the
Subcommittee that ``although [he] did not prepare any of the
letters in question, in each case [he] reviewed the documents
for accuracy.'' (Ex. 141, p. 3). Specifically, with respect to
the October 4, 1994 letter, his assistant, Annette Thompson
Meeks, showed him the draft she had created and he ``read it,
found it accurate to the best of [his] knowledge, and signed
it.'' (Ex. 141, p. 2). With respect to the December 8, 1994
letter, he wrote, ``Again I would have read the letter
carefully and concluded that it was accurate to the best of my
knowledge and then signed it.'' (Ex. 141, p. 2). With respect
to the March 27, 1995 letter, he wrote that he ``read [it] to
ensure that it was consistent with [his] recollection of events
at that time.'' (Ex. 141, p. 3).
D. Creation of the December 8, 1994 and March 27, 1995 Letters
Mr. Gingrich appeared before the Subcommittee on November
13, 1996 to testify about these letters.\78\ He began his
testimony by stating that the ``ethics process is very
important.'' (11/13/96 Gingrich Tr. 4). He then went on to
state:
---------------------------------------------------------------------------
\78\ Mr. Gingrich appeared twice before the Subcommittee to discuss
these letters. The first time was on November 13, 1996, in response to
a request from the Subcommittee that he appear and testify about the
matter under oath. The second time was on December 10, 1996, as part of
his opportunity to address the Subcommittee pursuant to Rule 17(a)(3)
of the Committee's Rules. Pursuant to Committee Rules, that appearance
was also under oath.
On Monday I reviewed the 380-page [July 1996]
interview with Mr. Cole, and I just want to begin by
saying to the [C]ommittee that I am very embarrassed to
report that I have concluded that reasonable people
could conclude, looking at all the data, that the
letters are not fully responsive, and, in fact, I think
do fail to meet the standard of accurate, reliable and
---------------------------------------------------------------------------
complete.
(11/13/96 Gingrich Tr. 5). Mr. Gingrich said several times that
it was only on the Monday before his testimony--the day when he
reviewed the transcript of his July interview with Mr. Cole--
that he realized the letters were inaccurate, incomplete, and
unreliable. (11/13/96 Gingrich Tr. 5, 8, 10, 149, 150, 195; 12/
10/96 Gingrich Tr. 75). In his testimony before the
Subcommittee the next month, Mr. Gingrich ``apologized for what
was clearly a failure to communicate accurately and completely
with this [C]ommittee.'' (12/10/96 Gingrich Tr. 5). Mr.
Gingrich said the errors were a result of ``a failure to
communicate involving my legal counsel, my staff and me.''
(12/10/96 Gingrich Tr. 5). Mr. Gingrich went on to say:
After reviewing my testimony, my counsel's testimony, and
the testimony of two of his associates, the ball appears to
have been dropped between my staff and my counsel regarding the
investigation and verification of the responses submitted to
the [C]ommittee.
As I testified, I erroneously, it turns out, relied on
others to verify the accuracy of the statements and responses.
This did not happen. As my counsel's testimony indicates, there
was no detailed discussion with me regarding the submissions
before they were sent to the [C]ommittee. Nonetheless, I bear
responsibility for them, and I again apologize to the
[C]ommittee for what was an inadvertent and embarrassing
breakdown.
* * * * * * *
At no time did I intend to mislead the [C]ommittee or in
any way be less than forthright.
(12/10/96 Gingrich Tr. 5-7). Of all the people involved in
drafting, reviewing, or submitting the letters, the only person
who had first-hand knowledge of the facts contained within them
with respect to the Renewing American Civilization course was
Mr. Gingrich.
1. Creation of the December 8, 1994 Letter
According to Mr. Gingrich, after he received the
Committee's October 31, 1994 letter, he decided that the issues
in the letter were too complex to be handled by his office and
he sought the assistance of an attorney. (11/13/96 Gingrich Tr.
11). Mr. Gaylord, on behalf of Mr. Gingrich, contacted Jan
Baran and the Mr. Baran's firm began representing Mr. Gingrich
on November 15, 1994. (11/14/96 Gaylord Tr. 16; 79 11/13/
96 Baran Tr. 4; 80 12/10/96 Gingrich Tr. 5). The response
prepared by Mr. Baran's firm became the letter from Mr.
Gingrich to the Committee dated December 8, 1994.
---------------------------------------------------------------------------
\79\ Mr. Gaylord was the one to contact the firm because his
position was ``advisor to Congressman Gingrich'' and he coordinated
``all of the activities that were outside the official purview of [Mr.
Gingrich's] congressional responsibilities.'' (11/14/96 Gaylord Tr. 19;
11/13/96 Baran Tr. 7).
\80\ Mr. Gingrich waived his attorney/client privilege and asked
Mr. Baran to testify before the Committee. (11/13/96 Gingrich Tr. 5).
---------------------------------------------------------------------------
According to Mr. Baran, he did not receive any indication
from Mr. Gaylord or Mr. Gingrich that Mr. Baran was to do any
kind of factual review in order to prepare the response. (11/
13/96 Baran Tr. 47-48). 81 Mr. Baran and his staff did not
seek or review documents other than those attached to the
complaint of Mr. Jones and the Committee's October 31, 1994
letter to Mr. Gingrich 82 and did not contact GOPAC,
Kennesaw State College, or Reinhardt College. (11/13/96 Baran
Tr. 13, 15, 18). Mr. Baran did not recall speaking to Mr.
Gingrich about the letter other than possibly over dinner on
December 9, 1994--one day after the letter was signed by Mr.
Gingrich. (11/13/96 Baran Tr. 18, 33). Mr. Baran did contact
Mr. Eisenach, but did not recall the ``nature of the contact.''
(11/13/96 Baran Tr. 16). Mr. Eisenach said he had no record of
ever having spoken to Mr. Baran about the letter and does not
believe that he did so. (11/14/96 Eisenach Tr. 18-19, 22). The
conversation he had with Mr. Baran concerned matters unrelated
to the letter. (11/14/96 Eisenach Tr. 17-18). Mr. Eisenach also
said that no one has ever given him a copy of the December 8,
1994 letter and asked him to verify its contents. (11/14/96
Eisenach Tr. 22).
---------------------------------------------------------------------------
\81\ Mr. Gaylord said that he did not give any instructions to Mr.
Baran about how the response should be prepared. (11/14/96 Gaylord Tr.
16-17). Mr. Baran, however, recalled that Mr. Gaylord said that the
response should be completed quickly ``because there was hope that the
Ethics Committee would meet before the end of the year to consider this
matter'' and that it should not be too expensive. (11/13/96 Baran Tr.
7, 46-48).
\82\ The attachments to the October 31, 1994 letter were selected
from materials that were part of the complaint filed by Mr. Jones.
---------------------------------------------------------------------------
The other attorney at Wiley, Rein and Fielding involved in
preparing the response was Bruce Mehlman. (11/13/96 Baran Tr.
19; 11/19/96 Mehlman Tr. 17). He was a first-year associate who
had been at Wiley, Rein and Fielding since September 1994. (11/
19/96 Mehlman Tr. 5). 83 Mr. Mehlman's role was to create
the first draft. (11/19/96 Mehlman Tr. 15). The materials Mr.
Mehlman had available to him to prepare the draft were:
---------------------------------------------------------------------------
\83\ Mr. Mehlman left Wiley, Rein & Fielding in February 1996 and
is now an attorney with the National Republican Congressional
Committee. (11/19/96 Mehlman Tr. 5).
1. correspondence between Mr. Gingrich and the
Committee, including the October 4, 1994 letter;
2. course videotapes;
3. the book used in the course called ``Renewing
American Civilization'';
4. a course brochure;
5. the complaint filed by Ben Jones against Mr.
Gingrich; and
6. documents produced pursuant to a Georgia Open
Records Act request.
(11/19/96 Mehlman Tr. 15-16, 20). Mr. Mehlman said that he did
not attempt to gather any other documents because he did not
see a need to go beyond these materials in order to prepare a
response. (11/19/96 Mehlman Tr. 19-20). With the exception of
contacting his brother, who had taken the course,84 Mr.
Mehlman did not make any inquiries of people regarding the
facts of the matter. (11/19/96 Mehlman Tr. 18). He did not, for
example, contact GOPAC or Mr. Eisenach. (11/19/96 Mehlman Tr.
28). After he completed his first draft, he gave it to Mr.
Baran. (11/19/96 Mehlman Tr. 22). He assumed that Mr. Baran
would make sure that any factual questions would have been
answered to his satisfaction before the letter went out. (11/
19/96 Mehlman Tr. 51). However, Mr. Mehlman did not know what,
if anything, Mr. Baran did with the draft after he gave it to
him. (11/19/96 Mehlman Tr. 22).
---------------------------------------------------------------------------
\84\ The information obtained from his brother used as the basis of
the statement in Mr. Gingrich's response that the course contained ``as
many references to Franklin Roosevelt, Jimmy Carter, and Martin Luther
King, Jr. as there are to Ronald Reagan or Margaret Thatcher.'' (11/19/
96 Mehlman Tr. 20). Mr. Mehlman, however, personally reviewed only one
course videotape. (11/19/96 Mehlman Tr. 21).
---------------------------------------------------------------------------
When Mr. Gaylord asked Mr. Baran to prepare the letter, it
was Mr. Baran's understanding that Annette Thompson Meeks, an
Administrative Assistant for Mr. Gingrich's office, would help.
(11/13/96 Baran Tr. 5, 7). According to Mr. Baran, Ms. Meeks'
role was:
basically to take a draft product from us and review it
for accuracy [from] her personal knowledge and
basically make sure that it was acceptable. And in that
regard, I believed that she may have spoken with other
people to confirm that, but you will be talking to her,
and you will have to confirm it with her. I tried to
not talk to her about that.
(11/13/96 Baran Tr. 10). Mr. Baran described the process for reviewing the
letter as follows:
Well, you know, as a counsel who was retained
relatively late in that process at that time and as
someone who had no firsthand knowledge about any of the
underlying activities and with a marching order of
trying to prepare a draft that was usable by the staff,
we were pretty much focused on getting something
together and over to Annette Meeks so that it could be
used. Verification was something that would have been
available through those who had firsthand knowledge
about these facts, who had reviewed the draft.
(11/13/96 Baran Tr. 15). Mr. Baran did not, however, know
whether the letter was reviewed by others to determine its
accuracy. (11/13/96 Baran Tr. 48).
Ms. Meeks said that at the time the letter was being
prepared, she had no knowledge of whether:
1. the course was a political or partisan activity by
design or application;
2. GOPAC was involved in the course;
3. GOPAC was benefited by the course;
4. GOPAC created, funded, or administered the course;
5. the idea to teach the course arose wholly
independent of GOPAC;
6. Mr. Gingrich's motivation for teaching the course
arose not as a politician but rather as a historian;
7. Mr. Eisenach resigned his position at GOPAC.
(11/14/96 Meeks Tr. 45-47). Ms. Meeks also said she was unaware
that GOPAC's theme was Renewing American Civilization. (11/14/
96 Meeks Tr. 88).
Ms. Meeks said she had no role in drafting the letter, did
not talk to anyone to verify that the facts in the letter were
accurate, and had no knowledge of how the facts in the letter
were checked for accuracy. (11/14/96 Meeks Tr. 39, 48, 51). She
did not indicate to Mr. Baran that she had given the letter to
anyone for the purpose of checking its accuracy. (11/14/96
Meeks Tr. 87). In this regard, Ms. Meeks said:
I will be very frank and tell you I don't know how
[Mr. Baran] composed this information as far as who he
spoke with. I was not privy to any of that. The only
thing I could add to my answer is that once counsel is
retained, we were kind of out of the picture as far as
the process, other than typing and transmitting.
(11/14/96 Meeks Tr. 92). She said her role was to provide Mr.
Baran with: background information about Mr. McCarthy (the
Committee's counsel who had conferred with Mr. Gingrich about
the course in 1993); a copy of the October 4, 1994 letter from
Mr. Gingrich to the Committee; copies of papers relating to Mr.
Hanser's employment with Mr. Gingrich's congressional office;
and copies of the course videotapes. (11/14/96 Meeks Tr. 36-
37).
Mr. Gaylord had a similar expectation in that, by retaining
Wiley, Rein and Fielding, the firm was:
both protecting us and had done the proper and correct
investigation in the preparation of the letters and
that they, in fact, did their job because that's what
they were paid to do. And I presumed that they had
extracted the information from Dr. Eisenach and others
who were involved specifically in the course.
(11/14/96 Gaylord Tr. 62). Mr. Gaylord, however, did not know
what inquiry Mr. Baran made in order to prepare the letter.
(11/14/96 Gaylord Tr. 17).
After Mr. Baran sent Ms. Meeks a draft of the letter, Ms.
Meeks re-typed the letter and sent the new version to Mr. Baran
to verify that it was identical to what he had sent her. She
then recalled faxing a copy to Mr. Gaylord and to Mr.
Gingrich's executive assistant ``to get Newt to take a look at
it.'' (11/14/96 Meeks Tr. 43-44). Mr. Gingrich said about his
review of the letter:
And I think in my head, I was presented a document--I
am not trying to blame anybody, or I am not trying to
avoid this, I am trying to explain how it happened. I
was presented a document and told, this is what we have
collectively decided is an accurate statement of fact.
I read the document, and it did not at any point leap
out to me and say, boy, you had better modify paragraph
3, or that this phrase is too strong and too
definitive. I think I read it one time, so that seems
right to me, and I signed it.
(11/13/96 Gingrich Tr. 11). See also 11/13/96 Gingrich Tr. 10
(at the time he read the letter, ``nothing leaped out at [him]
and said, `this is wrong' '') and 11/13/96 Gingrich Tr. 16 (the
letter``seemed accurate'' to him).85
---------------------------------------------------------------------------
\85\ In early July 1993, Mr. Gingrich was interviewed about the
course by a student reporter with the KSC newspaper. In that interview
the following exchange took place:
Interviewer: And how is GOPAC involved in this?
Mr. Gingrich: It's not involved in this at all.
Interviewer: Are you going to bring a lot of your ideas to GOPAC
though?
Mr. Gingrich: Absolutely. Every single one of them.
(Ex. 142, p. 10).
In other interviews over the past few years, Mr. Gingrich has made
other statements about GOPAC's involvement in the course. They have
included, for example, the following:
1.``GOPAC had the most incidental involvement at the very beginning
of the process.'' (Atlanta Constitution, section A, page 1 (Sept. 19,
1993)).
2.``GOPAC provided some initial ideas on who might be interested in
financing the course; that's all they did.'' (Associated Press, AM
cycle, (Sept. 2, 1993)).
3.``The initial work was done before we talked with Kennesaw State
College at GOPAC in organizing our thoughts.'' (The Hotline, American
Political Network, Inc. (Sept. 7, 1993)).
---------------------------------------------------------------------------
Mr. Gaylord did not recall whether he reviewed the letter
prior to its being sent to the Committee. (11/14/96 Gaylord Tr.
18). Mr. Gaylord said that the statement that GOPAC had no role
in the administration of the course was incorrect. (11/14/96
Gaylord Tr. 30-31). Mr. Gaylord said that the statement that
GOPAC employees contributed time as private, civic-minded
people was incorrect. (11/14/96 Gaylord Tr. 31). Mr. Gaylord
was not asked to verify the facts in the letters. (11/14/96
Gaylord Tr. 20, 33).
2. Bases for Statements in the December 8, 1994 Letter
During their testimony, those involved in the creation of
the letter were unable to explain the bases for many of the
statements in the letter. Explanations were, however, given for
the bases of some of the statements. A summary of those bases
is set forth below.
1. [The course] was, by design and application,
completely non-partisan. It was and remains about
ideas, not politics. (Ex. 138, p. 2).
Mr. Baran said that the basis for this statement was his
review of the course tapes and course materials. (11/13/96
Baran Tr. 19). Mr. Mehlman said the following about his
understanding of the basis of this statement:
Well, I don't specifically recall. If I had to
assume, it would be some of the [Georgia Open Records
Act] documents or some of the course materials that
purport to be nonpartisan, or to have created a course
that was nonpartisan, that certainly would explain
design.
As far as in application, probably the reference made
by my brother who had seen the course, who had
participated in it, I suppose, and my general basic
review of the initial writings about the course and
viewing the first videotape of the course, suggested
that the course was nonpartisan.
(11/19/96 Mehlman Tr. 24-25).
According to Mr. Baran, the letter to the College
Republicans--which was one of the attachments to the September
7, 1994 Jones complaint (Ex. 81)--did not raise a question in
his mind that the course was partisan or about politics. (11/
13/96 Baran Tr. 23).
2. ``The idea to teach `Renewing American
Civilization' arose wholly independent of GOPAC,
because the course, unlike the committee, is non-
partisan and apolitical. My motivation for teaching
these ideas arose not as a politician, but rather as a
former educator and concerned American citizen * * *.''
(Ex. 138, p. 4).
Mr. Baran said that the basis of this statement was a
review of the course tapes and the belief that the course had
originated from a January 25, 1993 speech Mr. Gingrich had
given on the House floor. (11/13/96 Baran Tr. 24-25). At the
time the letter was drafted, Mr. Baran was unaware of Mr.
Gingrich's December 1992 meeting with Owen Roberts where Mr.
Gingrich first laid out his ideas for the Renewing American
Civilization movement and course. (11/13/96 Baran Tr. 25). Mr.
Mehlman did not speak with Mr. Gingrich about his motivations
for the course and did not know if Mr. Baran had spoken with
Mr. Gingrich about his motivations for teaching the course.
(11/19/96 Mehlman Tr. 27).
3. ``The fact is, `Renewing American Civilization'
and GOPAC have never had any official relationship.''
(Ex. 38, p. 4).
Mr. Baran said about this statement:
Well, I think the basis of [this] statement[] [was]
essentially the characterizations that had been placed
on the relationship between the course and GOPAC by
people like Jeff Eisenach 86 at that time, and it
was consistent with my limited knowledge of GOPAC's
association with the course at that time. . . .
---------------------------------------------------------------------------
\86\ Earlier in his testimony and as described above, Mr. Baran
said that he had contacted Mr. Eisenach at the time the letter was
being prepared, but did not recall the ``nature of the contact.'' (11/
13/96 Baran Tr. 16). As also discussed above, Mr. Eisenach recalled
having a discussion with Mr. Baran at the time the letter was being
prepared, but about topics unrelated to the letter. (11/14/96 Eisenach
Tr. 17-18).
---------------------------------------------------------------------------
You know, the various materials, some of which we
went through this morning, were items that came to my
attention in the course of the document production,
which commenced, I think, around April of this year and
took quite a bit of time, or that came up in the course
of your interviews with Mr. Gingrich.
* * * * * * *
Well, I think the basis is that these statements were being
reviewed by people who would presumably be in a position to
correct me if there [sic] was wrong.
(11/13/96 Baran Tr. 36-37).
When asked about the appearance of GOPAC fax cover sheets
on documents pertaining to the course, Mr. Baran said that such
faxes raised questions in his mind but that he``had an
understanding at that time that those questions were addressed by an
explanation that there were either incidental or inadvertent uses of
GOPAC resources or there were uses of GOPAC resources that were
accounted for by Mr. Eisenach.'' (11/13/96 Baran Tr. 21). Mr. Baran
could not recall how he came to this understanding. (11/13/96 Baran Tr.
21-22).
With respect to whether Mr. Baran knew that GOPAC was
involved in raising funds for the course, Mr. Baran said:
At that time my recollection of quote, GOPAC being
involved in fund-raising [unquote] was focused on Ms.
Prochnow, the finance director who I don't know and
have never met, but whose role was characterized, I
believe, by Jeff Eisenach to me at some point, as
having helped raise a couple of contributions, I think,
Cracker Barrel was one of them, that is a name that
sticks in my mind. But it was characterized as being
sort of ancillary and just really not material.
(11/13/96 Baran Tr. 41).
3. Creation of the March 27, 1995 Letter
In addition to the associate, Mr. Mehlman, who had worked
with Mr. Baran in drafting Mr. Gingrich's December 8, 1994
letter to the Committee, another associate, Michael Toner,
helped Mr. Baran draft what became the March 27, 1995
letter.87 (11/19/96 Toner Tr. 10-11). As with the December
8, 1994 letter, Mr. Baran did not receive any indication from
Mr. Gaylord or Mr. Gingrich that Mr. Baran was to do any kind
of factual review in order to prepare the March 27, 1995
letter. (11/13/96 Baran Tr. 48). Mr. Baran did not recall
contacting anyone outside the law firm for facts relevant to
the preparation of the letter with respect to the course. He
said that ``the facts about the course, frankly, didn't seem to
have changed any from the December period to the March period.
And our focus seemed to be elsewhere.'' (11/13/96 Baran Tr.
28). Both Mr. Mehlman and Mr. Toner said that they did not
contact anyone with knowledge of the facts at issue in order to
prepare the letter. (11/19/96 Toner Tr. 21-22, 38; 11/19/96
Mehlman Tr. 38).
---------------------------------------------------------------------------
\87\ Mr. Toner has been an associate attorney with Wiley, Rein and
Fielding since September 1992, except for a period during which we he
worked with the Dole/Kemp campaign. (11/19/96 Toner Tr. 6).
---------------------------------------------------------------------------
Ms. Meeks said that she had no role in the preparation of
the letter. (11/14/96 Meeks Tr. 50). She saw it for the first
time one day prior to her testimony before the Subcommittee in
November 1996. (11/14/96 Meeks Tr. 50). Mr. Eisenach said that
he did not have any role in the preparation of the letter nor
was he asked to review it prior to its submission to the
Committee. (11/14/96 Eisenach Tr. 24-25). Mr. Gaylord said that
he had no role in the preparation of the letter and did not
provide any information that is in the letter. (11/14/96
Gaylord Tr. 20). He also said that he did not discuss the
letter with Mr. Gingrich or Mr. Baran at the time of its
preparation. (11/14/96 Gaylord Tr. 21). Mr. Gaylord said that
he did not know where Baran obtained the facts for the letter.
He ``presumed'' that Mr. Baran and his associates had gathered
the facts. (11/14/96 Gaylord Tr. 21-22).
Mr. Baran said that his role in creating the letter was to
meet with Mr. Mehlman and Mr. Toner, review the status of their
research and drafting and review their drafts. (11/13/96 Baran
Tr. 28). Mr. Mehlman and Mr. Toner divided responsibility for
drafting portions of the letter. (11/19/96 Toner Tr. 12-14; 11/
19/96 Mehlman Tr. 36, 37, 40). Mr. Baran also made edits to the
letter. (11/19/96 Mehlman Tr. 40). During his interview, Mr.
Toner stressed that there were many edits to the letter by Mr.
Baran, Mr. Mehlman, and himself and he could, therefore, not
explain who had drafted particular sentences in the letter.
(see, e.g, 11/19/96 Toner Tr. 34).
After the letter was drafted, Mr. Baran said that Mr. Baran
and his associates then ``would have sent a draft that they
felt comfortable with over to the Speaker's office.'' (11/13/96
Baran Tr. 28). Mr. Baran, Mr. Toner, and Mr. Mehlman each said
during their testimony that they assumed that Mr. Gingrich or
someone in his office reviewed the letter for accuracy before
it was submitted to the Committee. (11/19/96 Toner Tr. 16, 40,
44; 11/13/96 Baran Tr. 32-33, 37-38; Mehlman Tr. 41). They,
however, did not know whether Mr. Gingrich or anyone in his
office with knowledge of the facts at issue ever actually
reviewed the letter prior to its submission to the Committee.
(11/19/96 Toner Tr. 17, 40, 44; 11/13/96 Baran Tr. 37-38;
Mehlman Tr. 41).
With respect to Mr. Baran's understanding of whether Mr.
Gingrich reviewed the letter, the following exchange occurred:
Mr. Cole: Did you have any discussions with Mr. Gingrich
concerning this letter prior to it going to the committee?
Mr. Baran: I don't recall any. I just wanted to make sure
that he did review it before it was submitted.
Mr. Cole: How did you determine that he had reviewed it?
Mr. Baran: I don't recall today, but I would not file
anything until I had been assured by somebody that he had read
it.
Mr. Cole: Would that assurance also have involved him
reading it and not objecting to any of the facts that are
asserted in the letter?
Mr. Baran: I don't know what his review process was
regarding this letter.
* * * * * * *
Mr. Cole: If he just read it, you may still be awaiting
comments from him. Would you have made sure that he had read it
and approved it, or just the fact that he read it is all you
would have been interested in, trying to make sure that we
don't blur that distinction?
Mr. Baran: No, I would have wanted him to be comfortable
with this on many levels.
Mr. Cole: And were you satisfied that he was comfortable
with it prior to filing it with the committee?
Mr. Baran: Yes.
Mr. Cole: Do you know how you were satisfied?
Mr. Baran: I can't recall the basis upon which that
happened.
(11/13/96 Baran Tr. 32-33).
4. Bases for Statements in the March 27, 1995 Letter
With respect to the bases for the statements in the letter
in general, Mr. Baran said that it was largely based on the
December 8, 1994 letter and any information he and his
associates relied on to prepare it. (11/13/96 Baran Tr. 37-38).
IX. Analysis and Conclusion
A. Tax Issues
In reviewing the evidence concerning both the AOW/ACTV
project and the Renewing American Civilization project, certain
patterns became apparent. In both instances, GOPAC had
initiated the use of the messages as part of its political
program to build a Republican majority in Congress. In both
instances there was an effort to have the material appear to be
non-partisan on its face, yet serve as a partisan, political
message for the purpose of building the Republican Party.
Under the ``methodology test'' set out by the Internal
Revenue Service, both projects qualified as educational.
However, they both had substantial partisan, political aspects.
Both were initiated as political projects and both were
motivated, at least in part, by political goals.
The other striking similarity is that, in both situations,
GOPAC was in need of a new source of funding for the projects
and turned to a 501(c)(3) organization for that purpose. Once
the projects had been established at the 501(c)(3)
organizations, however, the same people continued to manage it
as had done so at GOPAC, the same message was used as when it
was at GOPAC, and the dissemination of the message was directed
toward the same goal as when the project was at GOPAC--building
the Republican Party. The only significant difference was that
the activity was funded by a 501(c)(3) organization.
This was not a situation where one entity develops a
message through a course or a television program for purely
educational purposes and then an entirely separate entity
independently decides to adopt that message for partisan,
political purposes. Rather, this was a coordinated effort to
have the 501(c)(3) organization help in achieving a partisan,
political goal. In both instances the idea to develop the
message and disseminate it for partisan, political use came
first. The use of the 501(c)(3) came second as a source of
funding.
This factual analysis was accepted by all Members of the
Subcommittee and the Special Counsel. However, there was a
difference of opinion as to the result under 501(c)(3) when
applying the law to these facts. Ms. Roady, the Subcommittee's
tax expert, was of the opinion that the facts presented a clear
violation of 501(c)(3) because the evidence showed that the
activities were intended to benefit Mr. Gingrich, GOPAC, and
other Republican candidates and entities. Mr. Holden, Mr.
Gingrich's tax attorney, disagreed. He found that the course
was non-partisan in its content, and even though he assumed
that the motivation for disseminating it involved partisan,
political goals, he did not find a sufficiently narrow
targeting of the dissemination to conclude that it was a
private benefit to anyone.
Some Members of the Subcommittee and the Special Counsel
agreed with Ms. Roady and concluded that there was a clear
violation of 501(c)(3) with respect to AOW/ACTV and Renewing
American Civilization. Other Members of the Subcommittee were
troubled by reaching this conclusion and believed that the
facts of this case presented a unique situation that had not
previously been addressed by the legal authorities. As such,
they did not feel comfortable supplanting the functions of the
Internal Revenue Service or the Tax Court in rendering a ruling
on what they believed to be an unsettled area of the law.
B. Statements Made to the Committee
The letters Mr. Gingrich submitted to the Committee
concerning the Renewing American Civilization complaint were
very troubling to the Subcommittee. They contained definitive
statements about facts that went to the heart of the issues
placed before the Committee. In the case of the December 8,
1994 letter, it was in response to a direct request from the
Committee for specific information relating to the partisan,
political nature of the course and GOPAC's involvement in it.
Both letters were efforts by Mr. Gingrich to have the
Committee dismiss the complaints without further inquiry. In
such situations, the Committee does and should place great
reliance on the statements of Members.
The letters were prepared by Mr. Gingrich's lawyers. After
the Subcommittee deposed the lawyers, the reasons for the
statements being in the letters was not made any clearer. The
lawyers did not conduct any independent factual research.
Looking at the information the lawyers used to write the
letters, the Subcommittee was unable to find any factual basis
for the inaccurate statements contained therein. A number of
exhibits attached to the complaint were fax transmittal sheets
from GOPAC. While this did not on its face establish anything
more than GOPAC's fax machine having been used for the project,
it certainly should have put the attorneys on notice that there
was some relationship between the course and GOPAC that should
have been examined before saying that GOPAC had absolutely no
involvement in the course.
The lawyers said they relied on Mr. Gingrich and his staff
to ensure that the letters were accurate; however, none of Mr.
Gingrich's staff had sufficient knowledge to be able to verify
the accuracy of
the facts. While Mr. Gaylord and Mr. Eisenach did have
sufficient knowledge to verify many of the facts, they were not
asked to do so. The only person who reviewed the letters for
accuracy, with sufficient knowledge to verify those facts, was
Mr. Gingrich.
The Subcommittee considered the relevance of the reference
to GOPAC in Mr. Gingrich's first letter to the Committee dated
October 4, 1994. In that letter he stated that GOPAC was one of
the entities that paid people to work on the course. Some
Members of the Subcommittee believed that this was evidence of
lack of intent to deceive the Committee on Mr. Gingrich's part
because if he had planned to hide GOPAC's involvement, he would
not have made such an inconsistent statement in the subsequent
letters. Other Members of the Subcommittee and the Special
Counsel appreciated this point, but believed the first letter
was of little value. The statement in that letter was only
directed to establishing that Mr. Gingrich had not used
congressional resources in developing the course. The first
letter made no attempt to address the tax issues, even though
it was a prominent feature of the complaint. When the Committee
specifically focused Mr. Gingrich's attention on that issue and
questions concerning GOPAC's involvement in the course, his
response was not accurate.
During his testimony before the Subcommittee, Mr. Gingrich
stated that he did not intend to mislead the Committee and
apologized for his conduct. This statement was a relevant
consideration for some Members of the Subcommittee, but not for
others.
The Subcommittee concluded that because these inaccurate
statements were provided to the Committee, this matter was not
resolved as expeditiously as it could have been. This caused a
controversy over the matter to arise and last for a substantial
period of time, it disrupted the operations of the House, and
it cost the House a substantial amount of money in order to
determine the facts.
C. Statement of Alleged Violation
Based on the information described above, the Special
Counsel proposed a Statement of Alleged Violations (``SAV'') to
the Subcommittee on December 12, 1996. The SAV contained three
counts: (1) Mr. Gingrich's activities on behalf of ALOF in
regard to AOW/ACTV, and the activities of others in that regard
with his knowledge and approval, constituted a violation of
ALOF's status under section 501(c)(3); (2) Mr. Gingrich's
activities on behalf of Kennesaw State College Foundation, the
Progress and Freedom Foundation, and Reinhardt College in
regard to the Renewing American Civilization course, and the
activities of others in that regard with his knowledge and
approval, constituted a violation of those organizations'
status under section 501(c)(3); and (3) Mr. Gingrich had
provided information to the Committee, directly or through
counsel, that was material to matters under consideration by
the Committee, which Mr. Gingrich knew or should have known was
inaccurate, incomplete, and unreliable.
1. Deliberations on the Tax Counts
There was a difference of opinion regarding whether to
issue the SAV as drafted on the tax counts. Concern was
expressed about deciding this tax issue in the context of an
ethics proceeding. This led the discussion to the question of
the appropriate focus for the Subcommittee. A consensus began
to build around the view that the proper focus was on the
conduct of the Member, rather than a resolution of issues of
tax law. From the beginning of the Preliminary Inquiry, there
was a desire on the part of each of the Members to find a way
to reach a unanimous conclusion in this matter. The Members
felt it was important to confirm the bipartisan nature of the
ethics process.
The discussion turned to what steps Mr. Gingrich had taken
in regard to these two projects to ensure they were done in
accord with the provisions of 501(c)(3). In particular, the
Subcommittee was concerned with the fact that: (1) Mr. Gingrich
had been ``very well aware'' of the American Campaign Academy
case prior to embarking on these projects; (2) he had been
involved with 501(c)(3) organizations to a sufficient degree to
know that politics and tax-deductible contributions are, as his
tax counsel said, an ``explosive mix;'' (3) he was clearly
involved in a project that had significant partisan, political
goals, and he had taken an aggressive approach to the tax laws
in regard to both AOW/ACTV; and (4) Renewing American
Civilization projects. Even Mr. Gingrich's own tax lawyer told
the Subcommittee that if Mr. Gingrich had come to him before
embarking on these projects, he would have advised him to not
use a 501(c)(3) organization for the dissemination of AOW/ACTV
or Renewing American Civilization. Had Mr. Gingrich sought and
followed this advice, he would not have used the 501(c)(3)
organizations, would not have had his projects subsidized by
taxpayer funds, and would not have created this controversy
that has caused significant disruption to the House. The
Subcommittee concluded that there were significant and
substantial warning signals to Mr. Gingrich that he should have
heeded prior to embarking on these projects. Despite these
warnings, Mr. Gingrich did not seek any legal advice to ensure
his conduct conformed with the provisions of 501(c)(3).
In looking at this conduct in light of all the facts and
circumstances, the Subcommittee was faced with a disturbing
choice. Either Mr. Gingrich did not seek legal advice because
he was aware that it would not have permitted him to use a
501(c)(3) organization for his projects, or he was reckless in
not taking care that, as a Member of Congress, he made sure
that his conduct conformed with the law in an area where he had
ample warning that his intended course of action was fraught
with legal peril. The Subcommittee decided that regardless of
the resolution of the 501(c)(3) tax question, Mr. Gingrich's
conduct in this regard was improper, did not reflect creditably
on the House, and was deserving of sanction.
2. Deliberations Concerning the Letters
The Subcommittee's deliberation concerning the letters
provided to the Committee centered on the question of whether
Mr. Gingrich intentionally submitted inaccurate information.
There was a belief that the record developed before the
Subcommittee was not conclusive on this point. The Special
Counsel suggested that a good argument could be made, based on
the record, that Mr. Gingrich did act intentionally, however it
would be difficult to establish that with a high degree of
certainty.
The culmination of the evidence on this topic again left
the Subcommittee with a disturbing choice. Either Mr. Gingrich
intentionally made misrepresentations to the Committee, or he
was again reckless in the way he provided information to the
Committee concerning a very important matter.
The standard applicable to the Subcommittee's deliberations
was whether there is reason to believe that Mr. Gingrich had
acted as charged in this count of the SAV. All felt that this
standard had been met in regard to the allegation that Mr.
Gingrich ``knew'' that the information he provided to the
Committee was inaccurate. However, there was considerable
discussion to the effect that if Mr. Gingrich wanted to admit
to submitting information to the Committee that he ``should
have known'' was inaccurate, the Subcommittee would consider
deleting the allegation that he knew the information was
inaccurate. The Members were of the opinion that if there were
to be a final adjudication of the matter, taking into account
the higher standard of proof that is involved at that level,
``should have known'' was an appropriate framing of the charge
in light of all the facts and circumstances.
3. Discussions with Mr. Gingrich's Counsel and Recommended Sanction
On December 13, 1996, the Subcommittee issued an SAV
charging Mr. Gingrich with three counts of violations of House
Rules. Two counts concerned the failure to seek legal advice in
regard to the 501(c)(3) projects, and one count concerned
providing the Committee with information which he knew or
should have known was inaccurate.
At the time the Subcommittee voted this SAV, the Members
discussed the matter among themselves and reached a consensus
that it would be in the best interests of the House for the
matter to be resolved without going through a disciplinary
hearing. It was estimated that such a hearing could take up to
three months to complete and would not begin for several
months. Because of this, it was anticipated that the House
would have to deal with this matter for another six months.
Even though the Subcommittee Members felt that it would be
advantageous to the House to avoid a disciplinary hearing, they
all were committed to the proposition that any resolution of
the matter had to reflect adequately the seriousness of the
offenses. To this end, the Subcommittee Members discussed and
agreed upon a recommended sanction that was fair in light of
the conduct reflected in this matter, but explicitly recognized
that the full Committee would make the ultimate decision as to
the recommendation to the fullHouse as to the appropriate
sanction. In determining what the appropriate sanction should be in
this matter, the Subcommittee and Special Counsel considered the
seriousness of the conduct, the level of care exercised by Mr.
Gingrich, the disruption caused to the House by the conduct, the cost
to the House in having to pay for an extensive investigation, and the
repetitive nature of the conduct.
As is noted above, the Subcommittee was faced with
troubling choices in each of the areas covered by the Statement
of Alleged Violation. Either Mr. Gingrich's conduct in regard
to the 501(c)(3) organizations and the letters he submitted to
the Committee was intentional or it was reckless. Neither
choice reflects creditably on the House. While the Subcommittee
was not able to reach a comfortable conclusion on these issues,
the fact that the choice was presented is a factor in
determining the appropriate sanction. In addition, the
violation does not represent only a single instance of reckless
conduct. Rather, over a number of years and in a number of
situations, Mr. Gingrich showed a disregard and lack of respect
for the standards of conduct that applied to his activities.
Under the Rules of the Committee, a reprimand is the
appropriate sanction for a serious violation of House Rules and
a censure is appropriate for a more serious violation of House
Rules. Rule 20(g), Rules of the Committee on Standards of
Official Conduct. It was the opinion of the Subcommittee that
this matter fell somewhere in between. Accordingly, the
Subcommittee and the Special Counsel recommend that the
appropriate sanction should be a reprimand and a payment
reimbursing the House for some of the costs of the
investigation in the amount of $300,000. Mr. Gingrich has
agreed that this is the appropriate sanction in this matter.
Beginning on December 15, 1996, Mr. Gingrich's counsel and
the Special Counsel began discussions directed toward resolving
the matter without a disciplinary hearing. The discussions
lasted through December 20, 1996. At that time an understanding
was reached by both Mr. Gingrich and the Subcommittee
concerning this matter. That understanding was put on the
record on December 21, 1996 by Mr. Cole follows:
Mr. Cole: The subcommittee has had an opportunity to
review the facts in this case, and has had extensive
discussion about the appropriate resolution of this
matter.
Mr. Cardin: If I might just add here to your next
understanding, the Members of the subcommittee, prior
to the adoption of the Statement of Alleged Violation,
were concerned that the nonpartisan deliberations of
the subcommittee continue beyond the findings of the
subcommittee. Considering the record of the full Ethics
Committee in the 104th Congress and the partisan
environment in the full House, the Members of the
subcommittee felt that it was important to exercise
bipartisan leadership beyond the workings of the
subcommittee. * * *
Mr. Cole: It was the opinion of the Members of the
subcommittee and the Special Counsel, that based on the
facts of this case as they are currently known, the
appropriate sanction for the conduct described in the
original Statement of Alleged Violations is a reprimand
and the payment of $300,000 toward the cost of the
preliminary inquiry.
In light of this opinion, the subcommittee Members
and the Special Counsel intend to recommend to the full
committee that this be the sanction recommended by the
full committee to the House. The Members also intend to
support this as the sanction in the committee and on
the Floor of the House.
However, if new facts are developed or brought to the
attention of the Members of the subcommittee, they are
free to change their opinions.
The Subcommittee, through its counsel, has
communicated this to Mr. Gingrich, through his counsel.
Mr. Gingrich has agreed that if the subcommittee will
amend the Statement of Alleged Violations to be one
count, instead of three counts, however, still
including all of the conduct described in the original
Statement of Alleged Violations, and will allow the
addition of some language which reflects aspects of the
record in this matter concerning the involvement of Mr.
Gingrich's counsel in the preparation of the letters
described in the original Count 3 of the Statement of
Alleged Violations,88 he will admit to the entire
Statement of Alleged Violation and agree to the view of
the subcommittee Members and the Special Counsel as to
the appropriate sanction.
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\88\ These changes included the removal of the word ``knew'' from
the original Count 3, making the charge read that Mr. Gingrich ``should
have known'' the information was inaccurate.
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In light of Mr. Gingrich's admission to the Statement
of Alleged Violation, the subcommittee is of the view
that the rules of the committee will not require that
an adjudicatory hearing take place; however, a sanction
hearing will need to be held under the rules.
The subcommittee and Mr. Gingrich desire to have the
sanction hearing concluded as expeditiously as
possible, but it is understood that this will not take
place at the expense of orderly procedure and a full
and fair opportunity for the full committee to be
informed of any information necessary for each Member
of the full committee to be able to make a decision at
the sanction hearing.
After the subcommittee has voted a new Statement of
Alleged Violation, Mr. Gingrich will file his answer
admitting to it. The subcommittee will seek the
permission of the full committee to release the
Statement of Alleged Violation, Mr. Gingrich's answer,
and a brief press release which has been approved by
Mr. Gingrich's counsel. At the same time, Mr. Gingrich
will release a brief press release that has been
approved by the subcommittee's Special Counsel.
Both the subcommittee and Mr. Gingrich agree that no
public comment should be made about this matter while
it is still pending. This includes having surrogates
sent out to comment on the matter and attempt to
mischaracterize it.
Accordingly, beyond the press statements described
above, neither Mr. Gingrich nor any Member of the
subcommittee may make any further public comment. Mr.
Gingrich understands that if he violates this
provision, the subcommittee will have the option of
reinstating the original Statement of Alleged
Violations and allowing Mr. Gingrich an opportunity to
withdraw his answer.
And I should note that it is the intention of the
subcommittee that ``public comments'' refers to press
statements; that, obviously, we are free and Mr.
Gingrich is free to have private conversations with
Members of Congress about these matters.89
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\89\ It was also agreed that in the private conversations Mr.
Gingrich was not to disclose the terms of the agreement with the
Subcommittee.
After the Subcommittee voted to issue the substitute SAV,
the Special Counsel called Mr. Gingrich's counsel and read to
him what was put on the record concerning this matter. Mr.
Gingrich's counsel then delivered to the Subcommittee Mr.
Gingrich's answer admitting to the Statement of Alleged
Violation.
D. Post-December 21, 1996 Activity
Following the release of this Statement of Alleged
Violation, numerous press accounts appeared concerning this
matter. In the opinion of the Subcommittee Members and the
Special Counsel, a number of the press accounts indicated that
Mr. Gingrich had violated the agreement concerning statements
about the matter. Mr. Gingrich's counsel was notified of the
Subcommittee's concerns and the Subcommittee met to consider
what action to take in light of this apparent violation. The
Subcommittee determined that it would not nullify the
agreement. While there was serious concern about whether Mr.
Gingrich had complied with the agreement, the Subcommittee was
of the opinion that the best interests of the House still lay
in resolving the matter without a disciplinary hearing and with
the recommended sanction that its Members had previously
determined was appropriate. However, Mr. Gingrich's counsel was
informed that the Subcommittee believed a violation of the
agreement had occurred and retained the right to withdraw from
the agreement with appropriate notice to Mr. Gingrich. To date
no such notice has been given.
X. Summary of Facts Pertaining To Use of Unofficial Resources
The Subcommittee investigated allegations that Mr. Gingrich
had improperly utilized the services of Jane Fortson, an
employee of the Progress in Freedom Foundation (``PFF''), in
violation of House Rule 45, which prohibits the use of
unofficial resources for official purposes.
Ms. Fortson was an investment banker and chair of the
Atlanta Housing Project who had experience in urban and housing
issues. In January 1995 she moved to Washington, D.C., from
Atlanta to work on urban and housing issues as a part-time PFF
Senior Fellow and subsequently became a full-time PFF Senior
Fellow in April, 1995.
The Subcommittee determined that Mr. Gingrich sought Ms.
Fortson's advice on urban and housing issues on an ongoing and
meaningful basis. During an interview with Mr. Cole, Mr.
Gingrich stated that although he believed he lacked the
authority to give Ms. Fortson assignments, he often requested
her assistance in connection with urban issues in general and
issues pertaining to the District of Columbia in particular.
The investigation further revealed that Ms. Fortson appeared to
have had unusual access to Mr. Gingrich's official schedule and
may have occasionally influenced his official staff in
establishing his official schedule.
In her capacity as an unofficial policy advisor to Mr.
Gingrich, Ms. Fortson provided ongoing advice to Mr. Gingrich
and members of Mr. Gingrich's staff to assist Mr. Gingrich in
conducting official duties related to urban issues. Ms. Fortson
frequently attended meetings with respect to the D.C. Task
Force during which she met with Members of Congress, officials
of the District of Columbia, and members of their staffs.
Although Mr. Gingrich and principal members of his staff
advised the Subcommittee that they perceived Ms. Fortson's
assistance as limited to providing information on an informal
basis, the Subcommittee discovered other occurrences which
suggested that Mr. Gingrich and members of his staff
specifically solicited Ms. Fortson's views and assistance with
respect to official matters.
The Subcommittee acknowledges that Members may properly
solicit information from outside individuals and organizations,
including nonprofit and for-profit organizations. Regardless of
whether auxiliary services are accepted from a nonprofit or
for-profit organization, Members must exercise caution to limit
the use of outside resources to ensure that the duties of
official staff are not improperly supplanted or supplemented.
The Subcommittee notes that although Mr. Gingrich received two
letters of reproval from the Committee on Standards regarding
the use of outside resources, Ms. Fortson's activities ceased
prior to the date the Committee issued those letters to Mr.
Gingrich. While the Subcommittee did not find that Ms.
Fortson's individual activities violated House Rules, the
Subcommittee determined that the regular, routine, and ongoing
assistance she provided Mr. Gingrich and his staff over a ten-
month period could create the appearance of improper
commingling of unofficial and official resources. The
Subcommittee determined, however, that these activities did not
warrant inclusion as a Count in the Statement of Alleged
Violation.
XI. Availability of Documents to Internal Revenue Service
In light of the possibility that documents which were
produced to the Subcommittee during the Preliminary Inquiry
might be useful to the IRS as part of its reported ongoing
investigations of various 501(c)(3) organizations, the
Subcommittee decided to recommend that the full Committee make
available to the IRS all relevant documents produced during the
Preliminary Inquiry. It is the Committee's recommendation that
the House Committee on Standards of Official Conduct in the
105th Congress establish a liaison with the IRS to fulfill its
recommendation and that this liaison be established in
consultation with Mr. Cole.
A P P E N D I X
----------
Summary of Law Pertaining to Organizations Exempt from Federal Income
Tax Under Section 501(c)(3) of the Internal Revenue Code
A. Introduction
Section 501(a) of the Internal Revenue Code generally
exempts from federal income taxation numerous types of
organizations. Among these are section 501(c)(3) organizations
which include corporations: Organized and operated exclusively
for religious, charitable, scientific * * * or educational
purposes * * * no part of the net earnings of which inures to
the benefit of any private shareholder or individual, no
substantial part of the activities of which is carrying on
propaganda, or otherwise attempting, to influence legislation,
* * * and which does not participate in, or intervene in * * *
any political campaign on behalf of (or in opposition to) any
candidate for public office.
I.R.C. Sec. 501(c)(3). Organizations described in section
501(c)(3) are generally referred to as ``charitable''
organizations and contributions to such organizations are
generally deductible to the donors. I.R.C. Sec. 170(a)(1),
(c)(2).
B. The Organizational Test and the Operational Test
The requirement that a 501(c)(3) organization be
``organized and operated exclusively'' for an exempt purpose
has given rise to an ``organizational test'' and an
``operational test.'' Failure to meet either test will prevent
an organization from qualifying for exemption under section
501(c)(3). Treas. Reg. Sec. 1.501(c)(3)-1(a); Levy Family Tribe
Foundation v. Commissioner, 69 T.C. 615, 618 (1978).
1. Organizational Test
To satisfy the organizational test, an organization must
meet three sets of requirements. First, its articles of
organization must: (a) limit its purposes to one or more exempt
purposes, and (b) not expressly permit substantial activities
that do not further those exempt purposes. Treas. Reg.
Sec. 1.501(c)(3)-1(b)(1). Second, the articles must not permit:
(a) devoting more than an insubstantial part of its activities
to lobbying, (b) any participation or intervention in the
campaign of a candidate for public office, and (c) objectives
and activities that would characterize it as an ``action''
organization. Treas. Reg. Sec. 1.501(c)(3)-1(b)(3). Third, the
organization's assets must be dedicated to exempt purposes.
Treas. Reg. Sec. 1.501(c)(3)-1(b)(4). The IRS determines
compliance with the organizational test solely by reference to
an organization's articles of organization.
2. Operational Test
To satisfy the operational test, an organization must be
operated ``exclusively'' for an exempt purpose. Though
``exclusively'' in this context does not mean ``solely,'' the
presence of a substantial nonexempt purpose will cause an
organization to fail the operational test. Treas. Reg.
Sec. 1.501(c)(3)-1(c)(1); The Nationalist Movement v.
Commissioner, 102 T.C. 558, 576 (1994). The presence of a
single non-exempt purpose, if substantial in nature, will
destroy the exemption regardless of the number or importance of
truly exempt purposes. Better Business Bureau of Washington,
D.C. v. United States, 326 U.S. 276, 283 (1945); Manning
Association v. Commissioner, 93 T.C. 596, 611 (1989).
To meet the operational test under section 501(c)(3)
organization, the organization must satisfy the following
requirements: 90
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\90\ 501(c)(3) organizations must also: (a) not be operated
primarily to conduct an unrelated trade or business (Treas. Reg.
Sec. 1.501(c)(3)-1(e)(1)), and (b) not violate ``public policy.'' See
Bob Jones University v. United States, 461 U.S. 574 (1983) (educational
organization's tax-exempt status denied because of its racially
discriminatory policies).
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1. The organization must be operated for an exempt
purpose, and must serve a public benefit, not a private
benefit. Treas. Reg. Sec. 1.501(c)(3)-1(d)(1)(ii).
2. It must not be an ``action'' organization. Treas.
Reg. Sec. 1.501(c)(3)-1(c)(3). An organization is an
``action'' organization if:
a. it participates or intervenes in any
political campaign (Treas. Reg.
Sec. 1.501(c)(3)-1(c)(3)(iii));
b. a substantial part of its activities
consists of attempting to influence legislation
(Treas. Reg. Sec. 1.501(c)(3)-1(c)(3)(ii)); or
c. its primary objective may be attained:
only by legislation or defeat of proposed
legislation, and it advocates the attainment of
such primary objective (Treas. Reg.
Sec. 1.501(c)(3)-1(c)(3)(iv)).
3. Its net earnings must not inure to the benefit of
any person in a position to influence the
organization's activities. Treas. Reg.
Sec. 1.501(c)(3)-1(c)(2).
``[F]ailure to satisfy any of the [above] requirements is fatal
to [an organization's] qualification under section 501(c)(3).''
American Campaign Academy v. Commissioner, 92 T.C. 1053, 1062
(1989).
The application of these requirements, moreover, is a
factual exercise. Id. at 1064; Christian Manner International
v. Commissioner, 71 T.C. 661, 668 (1979). Thus, in testing
compliance with the operational test, courts look ``beyond the
four corners of the organization's charter to discover `the
actual objects motivating the organization and the subsequent
conduct of the organization.' '' American Campaign Academy, 92
T.C. at 1064 (citing Taxation with Representation v. United
States, 585 F.2d 1219, 1222 (4th Cir. 1978)); see also Sound
Health Association v. Commissioner, 71 T.C. 158, 184 (1978)
(``It is the purpose toward which an organization's activities
are directed that is ultimately dispositive of the
organization's right to be classified as a section 501(c)(3)
organization.'')
``What an organization's purposes are and what purposes its
activities support are questions of fact.'' American Campaign
Academy, 92 T.C. at 1064 (citing Christian Manner International
v. Commissioner, 71 T.C. 661, 668 (1979)). Courts may ``draw
factual inferences'' from the record when determining whether
organizations meet the requirements of the tax-exempt
organization laws and regulations. Id. (citing National
Association of American Churches v. Commissioner, 82 T.C. 18,
20 (1984)).
a. ``Educational'' Organizations May Qualify for Exemption Under
Section 501(c)(3)
As discussed above, an organization may qualify for
exemption under section 501(c)(3) if it is ``educational.''
91 The Regulations define the term ``educational'' as
relating to:
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\91\ An organization may also qualify for section 501(c)(3)
exemption if it is organized and operated for, e.g., ``religious,''
``charitable,'' or ``scientific'' purposes. The other methods by which
an organization can qualify for exemption are not discussed in this
summary.
(a) [t]he instruction or training of the individual
for the purpose of improving or developing his
capabilities; or
(b) [t]he instruction of the public on subjects
useful to the individual and beneficial to the
community.
Treas. Reg. Sec. 1.501(c)(3)-1(d)(3)(i). The Regulations continue:
An organization may be educational even though it
advocates a particular position or viewpoint so long as
it presents a sufficiently full and fair exposition of
the pertinent facts as to permit an individual or the
public to form an independent opinion or conclusion. On
the other hand, an organization is not educational if
its principal function is the mere presentation of
unsupported opinion.
Id. Guidance on the phrase ``advocates a particular position or
viewpoint'' can be found in the preceding section in the
Regulations pertaining to the definition of ``charitable.''
The fact that an organization, in carrying out its
primary purpose, advocates social or civil changes or
presents opinion on controversial issues with the
intention of molding public opinion or creating public
sentiment to an acceptance of its views does not
preclude such organization from qualifying under
section 501(c)(3) so long as it is not an ``action''
organization.* * *
Treas. Reg. Sec. 1.501(c)(3)-1(d)(2).
In applying the Regulations under section 501(c)(3)
pertaining to educational organizations, the IRS has stated
that its goal is to eliminate or minimize the potential for any
public official to impose his or her preconceptions or beliefs
in determining whether the particular viewpoint or position is
educational. Rev. Proc. 86-43, 1986-2 C.B. 729. IRS policy is
to ``maintain a position of disinterested neutrality with
respect to the beliefs advocated by an organization.'' Id. The
focus of the Regulations pertaining to educational
organizations and of the IRS's application of these Regulations
``is not upon the viewpoint or position, but instead upon the
method used by the organization to communicate its viewpoint or
positions to others.'' Id.
Two court decisions considered challenges to the
constitutionality of the definition of ``educational,'' in the
Regulations cited above. One decision held that the definition
was unconstitutionally vague. Big Mama Rag, Inc. v. United
States, 631 F.2d 1030 (D.C. Cir. 1980). In National Alliance v.
United States, 710 F.2d 868 (D.C. Dir. 1983), the court
upheldthe IRS's position that the organization in question was not
educational. Without ruling on the constitutionality of the
``methodology test'' used by the IRS in that case to determine whether
the organization was educational, the court found that the application
of that test reduced the vagueness found in Big Mama Rag. The IRS later
published the methodology test in Rev. Proc. 86-43 in order to clarify
its position on how to determine whether an organization is educational
when it advocates particular viewpoints or positions. As set forth in
the Revenue Procedure:
The presence of any of the following factors in the
presentations made by an organization is indicative
that the method used by the organization to advocate
its viewpoints or positions is not educational.
(a) The presentation of viewpoints or
positions unsupported by facts is a significant
portion of the organization's communications.
(b) The facts that purport to support the
viewpoints or positions are distorted.
(c) The organization's presentations make
substantial use of inflammatory and disparaging
terms and express conclusions more on the basis
of strong emotional feelings than of objective
evaluations.
(d) The approach used in the organization's
presentations is not aimed at developing an
understanding on the part of the intended
audience or readership because it does not
consider their background or training in the
subject matter.
According to Rev. Proc. 86-43, the IRS uses the methodology
test in all situations where the educational purpose of an
organization that advocates a viewpoint or position is in
question. However, ``[e]ven if the advocacy undertaken by an
organization is determined to be educational under [the
methodology test], the organization must still meet all other
requirements for exemption under section 501(c)(3) * * *'' Rev.
Proc. 86-43. That is, organizations deemed to be
``educational'' must also abide by the section 501(c)(3)
prohibitions on: (a) private benefit, (b) participating or
intervening in a political campaign, (c) engaging in more than
insubstantial lobbying activities, and (d) private inurement.
b. To Satisfy the Operational Test, an Organization Must Not Violate
the ``Private Benefit'' Prohibition
Section 501(c)(3) requires, inter alia, that an
organization be organized and operated exclusively for one or
more exempt purposes. Treas. Reg. 1.501(c)(3)-1(d)(1)(ii)
provides that an organization does not meet this requirement:
unless it serves a public rather than a private
purpose. Thus, * * * it is necessary for an
organization to establish that it is not organized or
operated for the benefit of private interests such as
designated individuals, the creator or his family,
shareholders of the organization, or persons
controlled, directly or indirectly, by such private
interests.
The ``private benefit'' prohibition serves to ensure that
the public subsidies flowing from section 501(c)(3) status,
including income tax exemption and the ability to receive tax-
deductible charitable contributions, are reserved for
organizations that are formed to serve public and not private
interests. Treas. Reg. 1.501(c)(3)-1(c)(1) defines the
application of the private benefit prohibition in the context
of the operational test:
An organization will be regarded as ``operated
exclusively'' for one or more exempt purposes only if
it engages primarily in activities which accomplish one
or more of such exempt purposes specified in section
501(c)(3). An organization will not be so regarded if
more than an insubstantial part of its activities is
not in furtherance of an exempt purpose.
The Regulations and cases applying them make it clear that
the private benefit test focuses on the purpose or purposes
served by an organization's activities, and not on the nature
of the activities themselves. See, e.g., B.S.W. Group, Inc. v.
Commissioner, 70 T.C. 352 (1978). Where an organization's
activities serve more than one purpose, each purpose must be
separately examined to determine whether it is private in
nature and, if so, whether it is more than insubstantial.
Christian Manner International v. Commissioner, 71 T.C. 661
(1979).
The leading case on the application of the private benefit
prohibition in the context of an organization whose activities
served both exempt and nonexempt purposes is Better Business
Bureau v. United States, 326 U.S. 279 (1945). Better Business
Bureau was a nonprofit organization formed to educate the
public about fraudulent business practices, to elevate business
standards, and to educate consumers to be intelligent buyers.
The Court did not question the exempt purpose of these
activities. The Court found, however, that the organization was
``animated'' by the purpose of promoting a profitable business
community, and that such business purpose was both nonexempt
and more than insubstantial. The Court denied exemption,
stating (in language that is cited in virtually all later
private benefit cases), that:
[I]n order to fall within the claimed exemption, an
organization must be devoted to educational purposes
exclusively. This plainly means that the presence of a
single noneducational purpose, if substantial in
nature, will destroy the exemption regardless of the
number or importance of truly educational purposes.
Id. at 283.
Many of the cases interpreting the private benefit
prohibition involve private benefits that are provided in a
commercial context--as in the Better Business Bureau case.
Impermissible private benefit, however, need not be financial
in nature. Callaway Family Association v. Commissioner, 71 T.C.
340 (1978), involved a family association formed as a nonprofit
corporation to study immigration to and migration within the
United States by focusing on its own family history and
genealogy. The organization's activities included researching
the genealogy of Callaway family members in order to publish a
family history. The organization argued that its purposes were
educational and intended to benefit the general public,
asserting that its use of a research methodology focusing on
one family's development was a way of educating the public
about the country's history.
In Callaway, the court noted (and the IRS conceded) that
the organization's activities served an educational purpose.
The issue was not whether the organization had any exempt
purposes, but whether it also engaged in activities that
furthered a nonexempt purpose more than insubstantially.
Agreeing with the IRS that ``petitioner aimed its
organizational drive at Callaway family members, and appealed
to them on the basis of their private interests,'' the court
concluded that the organization ``engages in nonexempt
activities serving a private interest, and these activities are
not insubstantial.'' Id. at 343-44. Accordingly, the court held
that the organization did not qualify for exemption under
section 501(c)(3).
Kentucky Bar Foundation v. Commissioner, 78 T.C. 921
(1982), is one of the relatively few cases in which a court
found private benefit to be insubstantial and therefore not to
preclude exemption under section 501(c)(3). The Kentucky Bar
Foundation was formed to conduct a variety of activities
recognized by the IRS to serve exclusively educational
purposes, including a continuing legal education program and
the operation of a public law library. The IRS, however,
asserted that the Foundation's operation of statewide lawyer
referral service also served private purposes. Through the
referral service, a person seeking a lawyer was referred to an
attorney selected on a rotating basis within a convenient
geographic area. The fee for an initial half-hour consultation
was $10; any charge for further consultation or work had to be
agreed upon by the attorney and the client. The court found
that the purposes of the referralservice were to assist the
general public in locating an attorney to provide a consultation for a
reasonable fee, to encourage lawyers to recognize the obligation to
provide legal services to the general public, and to acquaint people in
need of legal services with the value of consultation with a lawyer to
identify and solve legal problems.
The IRS asserted that a purpose of the referral service was
to benefit lawyers, particularly to help young law school
graduates establish a practice, and that this was a substantial
nonexempt purpose. Based on a careful examination of the facts,
however, the court found that:
[t]he referral service is open to all responsible
attorneys, and there is no evidence a selected group of
attorneys are the primary beneficiaries of the service.
The referral service is intended to benefit the public
and not to serve as a source of referrals. We find any
nonexempt purpose served by the referral service and
any occasional economic benefit flowing to individual
attorneys through a referral incidental to the broad
charitable purpose served.
Id. at 926.
Reiterating the proposition that ``the proper focus is the
purpose or purposes toward which the activities are directed,''
the court found that the purpose of the legal referral service
was to benefit the public, that any private benefit was broadly
distributed, not conferred on any select group of attorneys and
incidental to the public purpose, and that the organization
qualified for exemption under section 501(c)(3). Id. at 923,
925-26 (citing B.S.W. Group v. Commissioner, 70 T.C. 352, 356-
57 (1978)).
As the cases described above show, the determination as to
whether private benefit is incidental (and therefore
permissible) or more than incidental (and therefore prohibited)
is inherently factual, and each case must be decided on its own
facts and circumstances. See also Manning Association v.
Commissioner, 93 T.C. 596 (1989). The IRS has issued several
published and private rulings and general counsel memoranda
92 that further explain the private benefit prohibition.
For example, in Rev. Rul. 70-186, 1970-1 C.B. 128, an
organization was formed to preserve a lake as a public
recreational facility and to improve the lake water's
condition. Although the organization's activities benefited the
public at large, there were necessarily significant benefits to
the individuals who owned lake-front property. The IRS,
however, determined that the private benefit to the lake-front
property owners was incidental because:
\92\ Private letter rulings and general counsel memoranda are made
available to the public under section 6110 of the Code. These documents
are based on the facts of particular cases, and may not be relied on as
precedent. However, they provide useful insights as to how the IRS
interprets and applies the law in particular factual situations.
[t]he benefits to be derived from the organization's
activities flow principally to the general public
through the maintenance and improvement of public
recreational facilities. Any private benefits derived
by the lakefront property owners do not lessen the
public benefits flowing from the organization's
operations. In fact, it would be impossible for the
organization to accomplish its purposes without
providing benefits to the lakefront property owners.
Id.
In Rev. Rul. 75-196, 1975-1 C.B. 155, the IRS ruled that a
501(c)(3) organization operating a law library whose rules
essentially limited access and use to local bar association
members conferred only incidental benefits to the bar
association members. The library's availability only to a
designated class of persons was not a bar to recognition of
exemption because:
[w]hat is of importance is that the class benefited be
broad enough to warrant a conclusion that the
educational facility or activity is serving a broad
public interest rather than a private interest, and is
therefore exclusively educational in nature.
Id. The library was available to a significant number of people, and the
restrictions on the library's use were due to the limited size of its
facilities. Although attorneys who used the library might derive personal
benefit in their practice, the IRS ruled that this benefit was incidental
to the library's exempt purpose and a ``logical by-product of an
educational process.''
Id.
Two other revenue rulings with similar fact patterns are
also helpful in understanding the application of the
``incidental benefits'' concept. In one ruling, the IRS ruled
that an organization that limited membership to the residents
of one city block did not qualify as a 501(c)(3) organization
because the organization's members benefited directly, thus not
incidentally, from the organization's activities. Rev. Rul. 75-
286, 1975-2 C.B. 210. In another, the IRS ruled that an
organization dedicated to beautification of an entire city
qualified as a 501(c)(3) organization because benefits flowed
to the city's entire population and were not targeted to the
organization's members. Rev. Rul. 68-14, 1968-1 C. B. 243. The
benefits to the organization's members of living in a cleaner
city were considered incidental.
The IRS issued a recent warning about the importance of the
private benefit prohibition in Rev. Proc. 96-32, 1996-20 I.R.B.
14, a Revenue Procedure issued for the purpose of establishing
standards as to whether organizations that own and operate low
income housing (an activity conducted by both nonprofit and
for-profit organizations) may qualify for exemption under
section 501(c)(3). After reviewing the substantive criteria
that must be present to establish that the organization is
formed for a charitable purpose, the IRS added a final caution:
If an organization furthers a charitable purpose such
as relieving the poor and distressed, it nevertheless
may fail to qualify for exemption because private
interests of individuals with a financial stake in the
project are furthered. For example, the role of a
private developer or management company in the
organization's activities must be carefully scrutinized
to ensure the absence of inurement or impermissible
private benefit resulting from real property sales,
development fees, or management contracts.
Id.
One of the most detailed explanations of the private
benefit prohibition is contained in G.C.M. 39862 (Nov. 22,
1991), involving the permissibility of a hospital's transaction
with physicians. In the G.C.M., the IRS explained the
prohibition as follows:
Any private benefit arising from a particular
activity must be ``incidental'' in both a qualitative
and quantitative sense to the overall public benefit
achieved by the activity if the organization is to
remain exempt. To be qualitatively incidental, a
private benefit must occur as a necessary concomitant
of the activity that benefits the public at large; in
other words, the benefit to the public cannot be
achieved without necessarily benefiting private
individuals. Such benefits might also be characterized
as indirect or unintentional. To be quantitatively
incidental, a benefit must be insubstantial when viewed
in relation to the public benefit conferred by the
activity.
Id.
The IRS also explained that the insubstantiality of the
private benefit is measured only in relationship to activity in
which the private benefit is present, and not in relation to
the organization's overall activities:
It bears emphasis that, even though exemption of the
entire organization may be at stake, the private
benefit conferred by an activity or arrangement is
balanced only against the public benefit conferred by
that activity or arrangement, not the overall good
accomplished by the organization.
Id.
In G.C.M. 39862, the IRS balanced the private benefits to
the physicians from the transaction at issue with the public
purposes served by that particular activity--and not the public
purposes served by the hospital as a whole. Finding the private
purposes from the activity at issue to be more than incidental
in relation to the public purposes, the IRS determined that the
hospital had jeopardized its exemption under section 501(c)(3).
Although most of the cases and IRS rulings (both public and
private) follow the general analysis described above in
determining whether or not private benefit is insubstantial, a
fairly recent Tax Court case, American Campaign Academy v.
Commissioner, 92 T.C. 1053 (1989) adopts a slightly different
approach. In that case, the primary activity of American
Campaign Academy (``ACA'' or ``the Academy'') was the operation
of a school to train people to work in political campaigns. The
IRS denied ACA's application for exemption under section
501(c)(3), and ACA appealed the denial to the Tax Court. The
Tax Court upheld the IRS's denial of ACA's application for
exemption because ACA's activities conferred an impermissible
private benefit on Republican candidates and entities.
The school operated by ACA was an ``outgrowth'' of programs
the National Republican Congressional Committee (``NRCC'') once
sponsored to train candidates and to train campaign
professionals for Republican campaigns. The Academy program,
however, differed from its NRCC predecessor in that it limited
its students to ``campaign professionals.'' Id. at 1056.
Without discussion, the IRS stated that the Academy did not
train candidates, participate in any political campaign or
attempt to influence legislation. Id. at 1056-57. The Academy
did not use training materials developed by the NRCC, generally
did not use NRCC faculty, and developed its own courses. Id. at
1057. Students were not explicitly required to be affiliated
with any particular party, nor were they required to take
positions with partisan organizations upon graduation. Id. at
1058.
The Academy had a number of direct and indirect
connections to Republican organizations. The NRCC contributed
furniture and computer hardware to the Academy. Id. at 1056.
One of the Academy's three directors, Joseph Gaylord, was the
Executive Director of the NRCC; another director, John
McDonald, was a member of the Republican National Committee.
Id. Jan Baran, General Counsel of the NRCC at the time of the
Academy's application to IRS, incorporated the Academy. Id. at
1070. The National Republican Congressional Trust funded the
Academy. Id. The Academy curriculum included studies of the
``Growth of NRCC, etc.'' and ``Why are people Republicans,''
but did not contain comparable studies pertaining to the
Democratic or other political parties. Id. at 1070-71. People
on the admissions panel were affiliated with the Republican
Party. Id. at 1071. Furthermore, while the applicants were not
required to declare a party affiliation on their application,
the political references students were required to submit
``often permit[ted] the admission panel to deduce the
applicant's political affiliation.'' Id. Finally, the Court
found that all but one of the Academy graduates who could be
identified as later serving in political positions ended up
serving Republican candidates or Republican organizations. Id.
at 1060, 1071, 1072.
In light of these facts, the Tax Court upheld the IRS's
denial of the Academy's application for exemption under section
501(c)(3) because the Academy ``conducted its educational
activities with the partisan objective of benefiting Republican
candidates and entities.'' Id. at 1070. Any one of the facts
listed in the previous paragraph did not alone support the
IRS's finding or the court's holding that the Academy was
organized for a non-exempt purpose. The IRS did not argue, and
the court did not hold, for example, that individuals who are
all members of the same political party are prohibited from
operating a 501(c)(3) organization, or that an organization may
not receive an exemption under section 501(c)(3) if a partisan
organization funds it. Rather, the Tax Court focused on the
purpose behind ACA's activities. In determining this, it drew
``factual inferences'' from the record to discern that purpose.
Those inferences led to the court's conclusion that the Academy
``targeted Republican entities and candidates to receive the
secondary benefit through employing its alumni * * *.'' Id. at
1075.
The Tax Court's analysis distinguished between ``primary''
private benefit and ``secondary'' private benefit, and made
clear that the latter can be a bar to section 501(c)(3)
qualification. In this case, the students received the primary
private benefit of the Academy, and this benefit was
permissible and consistent with the Academy's educational
purposes. The students' ultimate employers, Republican
candidates and entities, received the secondary benefits of the
Academy. ``[W]here the training of individuals is focused on
furthering a particular targeted private interest [e.g.,
Republican candidates and entities], the conferred secondary
benefit ceases to be incidental to the providing organization's
exempt purposes.'' Id. at 1074.
For the Academy to have prevailed, according to the Tax
Court, it needed to demonstrate: (1) that the candidates and
entities who received the benefit of trained campaigned workers
possessed the characteristics of a ``charitable class,''
93 and (2) that it did not distribute benefits among that
class in a select manner. Id. at 1076. The Academy argued that
Republican candidates and entities were ``charitable'' because
the Republican party consists of millions of people with ``like
`political sympathies' '' and their activities benefited the
community at large. Id. The Court ruled, however, that size
alone does not transform a benefited class into a charitable
class and that ACA had failed to demonstrate that political
entities and candidates possessed the characteristics of a
charitable class. Id. At 1077. Moreover, the Tax Court held
that even if political candidates and entities could be found
to constitute a ``charitable class,'' ACA's benefits were
distributed in a select manner to Republican candidates and
entities. Id.
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\93\ This part of the Tax Court's analysis in American Campaign
Academy has been criticized by a few commentators, who have disagreed
with the court's application of the ``charitable class'' doctrine in
the context of an educational organization. See, e.g., Bruce R.
Hopkins, Republican Campaign School Held Not Tax Exempt, The Nonprofit
Counsel, July 1989, at 3; Laura B. Chisolm, Politics and Charity: A
Proposal for Peaceful Coexistence, 58 Geo. Wash. L. Rev. 308, 344 n.159
(1990).
Typically an educational organization is expected to serve a broad
class representative of the public interest, but not a ``charitable
class'' per se. The court's consideration of the question as to whether
political candidates and entities could constitute a charitable class
might be misplaced, but is not critical to its holding. As the court
notes, ``even were we to find political entities and candidates to
generally comprise a charitable class, petitioner would bear the burden
of proving that its activities benefited the members of the class in a
nonselect manner.'' The court's finding that such benefits were
conferred in a select manner--to Republican candidates and entities--
was the basis for its holding that the organization served private
purposes more than incidentally and, therefore, failed to qualify for
exemption under section 501(c)(3).
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Finally, the Academy argued that although it hoped that
alumni would work in Republican organizations or for Republican
candidates, it had no control over whether they would do so.
Absent an ability to control the students' employment, the
Academy argued, it lacked the ability to confer secondary
benefits to Republican candidates and entities. Id. at 1078.
The Court found that there was no authority for the proposition
that the organization must be able to control non-incidental
benefits. Furthermore, the Court reiterated that the record
supported the IRS's determination that the Academy was formed
``with a substantial purpose to train campaign professionals
for service in Republican entities and campaigns, an activity
previously conducted by NRCC.'' Id. According to the Court,
accepting the Academy's argument regarding its inability to
control non-incidental benefits would ``cloud the focus of the
operational test, which probes to ascertain the purpose towards
which an organization's activities are directed and not the
nature of the activities themselves.'' Id. at 1078-79 (citing
B.S.W. Group v. Commissioner, 70 T.C. 352, 356-57 (1978)). The
Court noted that had the record demonstrated that ``the
Academy's activities were nonpartisan in nature and that its
graduates were not intended to primarily benefit Republicans,''
the Court would have found for the Academy. Id. at 1079.
The American Campaign Academy case follows existing
precedent. In reaching its decision, the court relies on Better
Business Bureau and Kentucky Bar Foundation, among other cases,
for the legal standards governing the private benefit
prohibition. The court recognizes that the ACA's activities
were intended to serve multiple purposes, including the
education of students (the permissible primary benefit) and the
provision of trained campaign professionals for candidates and
entities (the secondary benefit). Finding the secondary benefit
to be targeted to a select group--Republican candidates and
entities--the court concludes that such benefit is more than
incidental and therefore precludes exemption under section
501(c)(3).
c. To Satisfy The Operational Test, An Organization Must Not Be An
``Action'' Organization
An organization is not operated exclusively for one or more
exempt purposes if it is an ``action'' organization. Treas.
Reg. Sec. 1.501(c)(3)-1(c)(3). Such an organization cannot
qualify for exemption under section 501(c)(3). Treas. Reg.
Sec. 1.501(c)(3)-1(c)(3)(v). An organization is an action
organization if:
(i) It ``participates or intervenes, directly or
indirectly, in any political campaign on behalf of or
in opposition to any candidate for public office;''
(ii) a ``substantial part'' of its activities
consists of ``attempting to influence legislation by
propaganda, or otherwise;'' or
(iii) its primary objective may be attained ``only by
legislation or a defeat of proposed legislation,'' and
``it advocates, or campaigns for, the attainment'' of
such primary objective.
Treas. Reg. Sec. 1.501(c)(3)-1(c)(3).
(i) If an Organization Participates in a Political Campaign, It is an
Action Organization Not Entitled to Exemption Under Section
501(c)(3)
Section 501(c)(3) provides that an organization is not
entitled to exemption if it ``participate[s] in, or
intervene[s] in (including the publishing or distributing of
statements) any political campaign on behalf of (or in
opposition to) any candidate for public office.'' The reason
for this prohibition is clear. Contributions to section
501(c)(3) organizations are deductible for federal income tax
purposes, but contributions to candidates and political action
committees (``PACs'') are not. The use of section 501(c)(3)
organizations to support or oppose candidates or PACs would
circumvent federal tax law by enabling candidates or PACs to
attract tax-deductible contributions to finance their election
activities. As the U.S. Court of Appeals for the Tenth Circuit
explained, ``[t]he limitations in Section 501(c)(3) stem from
the congressional policy that the United States Treasury should
be neutral in political affairs and that substantial activities
directed to attempts to * * * affect a political campaign
should not be subsidized.'' Christian Echoes National Ministry,
Inc. v. United States, 470 F.2d 849, 854 (1972), cert. denied,
419 U.S. 1107 (1975) (emphasis in original).
The prohibition on political campaign intervention was
added to the Internal Revenue Code as a floor amendment to the
1954 Revenue Act offered by Senator Lyndon Johnson, who
believed that a section 501(c)(3) organization was being used
to help finance the campaign of an opponent. In introducing the
amendment, Senator Johnson said that it was to ``deny[] tax-
exempt status to not only those people who influence
legislation but also to those who intervene in any political
campaign on behalf of any candidate for any public office.''
100 Cong. Rec. 9604 (1954) (discussed in Bruce R. Hopkins,
``The Law of Tax-Exempt Organizations,'' 327 (6th ed. 1992)).
No congressional hearing was held on the subject and the
conference report did not contain any analysis of the
provision. Judith E. Kindell and John F. Reilly, ``Election
Year Issues,'' 1993 Exempt Organizations Continuing
Professional Education Technical Instruction Program 400, 401
(hereinafter ``IRS CPE Manual''). 94
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\94\ The 1993 Exempt Organizations Continuing Professional
Education (CPE) Technical Instruction Program text was prepared by the
IRS Exempt Organizations Division for internal training purposes.
---------------------------------------------------------------------------
Although the prohibition on political campaign intervention
was not formally added to section 501(c)(3) until 1954, the
concept that charities should not participate in political
campaigns was not new. As the Second Circuit noted, ``[t]his
provision merely expressly stated what had always been
understood to be the law. Political campaigns did not fit
within any of the specified purposes listed in [Section
501(c)(3)].'' The Association of the Bar of the City of New
York v. Commissioner, 858 F.2d 876, 879 (2d Cir. 1988)
(hereinafter ``New York Bar'') (quoting 9 Mertens, Law of
Federal Income Taxation Sec. 34.05 at 22 (1983)). 95
Furthermore, congressional concerns that the government not
subsidize political activity have existed since at least the
time when Judge Learned Hand wrote ``[p]olitical agitation * *
* however innocent the aim * * * must be conducted without
public subvention * * *.'' Slee v. Commissioner, 42 F.2d 184,
185 (2d Cir. 1930), quoted in New York Bar, 858 F.2d at 879.
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\95\ Indeed, under the common law of charitable trusts--the genesis
of modern day section 501(c)(3)--it was recognized that ``a trust to
promote the success of a particular political party is not
charitable,'' for the reason that ``there is no social interest in the
underwriting of one or another of the political parties.'' Restatement
(Second) of Trusts Sec. 374 (1959). The continued importance of the
common law doctrine of ``charitability'' to the standards for exemption
under section 501(c)(3) is reflected in the Supreme Court decision in
Bob Jones University v. United States, 461 U.S. 574 (1983), in which
the Supreme Court denied exemption to a private university that
practiced racial discrimination, on the ground that racial
discrimination was contrary to public policy and therefore inconsistent
with the common law standards for charitability.
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In 1987, Congress amended section 501(c)(3) to clarify that
the prohibition on political campaign activity applied to
activities in opposition to, as well as on behalf of, any
candidate for public office. Omnibus Budget Reconciliation Act,
Pub. L. No. 100-203, Sec. 10711, 101 Stat. 1330, 1330-464
(1987). The House Report accompanying the bill stated that
``[t]he prohibition on political campaign activities * * *
reflect[s] congressional policies that the U.S. Treasury should
be neutral in political affairs * * *.'' H.R. Rep. No. 100-391,
at 1625 (1987); see also S. Rep. No. 91-552, at 46-49 (Tax
Reform Act of 1969) (interpreting section 501(c)(3) to mean
that ``no degree of support for an individual's candidacy for
public office is permitted'').
The scope of the prohibition on political campaign
intervention has been the subject of much discussion. While
certain acts are clearly proscribed, others may be permissible
or prohibited, depending on the purpose and effect of the
activity. The regulations interpreting the prohibition add
little to the statutory definition:
Activities which constitute participation or
intervention in a political campaign on behalf of or in
opposition to a candidate include, but are not limited
to, the publication or distribution of written or
printed statements or the making of oral statements on
behalf of or in opposition to such a candidate.
Treas. Reg. Sec. 1.501(c)(3)-1(c)(3)(iii). Under this
provision, a section 501(c)(3) organization is prohibited from
making a written or oral endorsement of a candidate and from
distributing partisan campaign literature. IRS CPE Manual at
410. Following the enactment of section 527 of the Code in 1974
(governing the federal tax treatment of PACs), the prohibition
also prevents section 501(c)(3) organizations from establishing
or supporting a PAC. IRS CPE Manual at 437. (The application of
the prohibition in this context is discussed further below.)
It is clear, however, that section 501(c)(3) organizations
also may violate the prohibition by engaging in activity that
falls short of a direct endorsement, and even may--on its
face--appear neutral, if the purpose or effect of the activity
is to support or oppose a candidate. The IRS CPE Manual
describes a variety of situations in which section 501(c)(3)
organizations may violate the prohibition without engaging in a
direct candidate endorsement, including inviting a particular
candidate to make an appearance at an organization event,
holding candidate forums or distributing voter guides which
evidence a bias for or against a candidate, and similar
activities that may support or oppose a particular candidate.
IRS CPE Manual at 419-424, 430-432. In a recent election year
news release, the IRS reminded 501(c)(3) organizations of the
breadth of the prohibition, stating not only that they cannot
endorse candidates or distribute statements in support of or
opposition to candidates, but also that they cannot ``become
involved in any other activities that may be beneficial or
detrimental to any candidate.'' IRS News Release IR-96-23 (Apr.
24, 1996).
While it is easy for the IRS to determine whether the
prohibition on political campaign intervention has been
violated when a section 501(c)(3) organization endorses a
candidate or distributes partisan campaign literature, it is
more difficult to determine whether there is a violation if the
activity at issue is not blatant or serves a nonpolitical
purpose as well. The IRS relies on a ``facts and
circumstances'' test in analyzing ambiguous behavior to
determine whether there has been a violation. According to the
IRS:
[i]n situations where there is no explicit endorsement
or partisan activity, there is no bright-line test for
determining if the IRC 501(c)(3) organization
participated or intervened in a political campaign.
Instead, all the facts and circumstances must be
considered.
IRS CPE Manual at 410.
Despite the lack of bright-line standards concerning all
aspects of the prohibition, there is a substantial body of
authority concerning what section 501(c)(3) organizations can
and cannot do, and many section 501(c)(3) organizations have
little difficulty applying existing precedents to develop
internal guidelines for what activities are permissible and
prohibited. For example, the Office of General Counsel of the
United States Catholic Conference issued guidelines on
political activities to Catholic organizations on February 14,
1996, in anticipation of the 1996 election season. 96 The
guidelines outline the parameters of permissible activity,
including unbiased voter education, nonpartisan get-out-the-
vote drives, and nonpartisan public forums. They also describe
what activity is prohibited, including the endorsement of
candidates, the distribution of campaign literature in support
or opposition to candidates, and the provision of financial and
in-kind support to candidates or PACs. With respect to the
latter, the guidelines state flatly that:
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\96\ Some churches assert that they have a First Amendment right to
participate in political campaign activities where doing so furthers
their religious beliefs. However, courts have ruled that tax exemption
is a privilege and not a right, and that section 501(c)(3) does not
prohibit churches from participating in political campaigns but merely
provides that they will not be entitled to tax exemption if they do so.
See, e.g., Christian Echoes National Ministry, Inc. v. United States,
470 F.2d 849 (10th Cir. 1972).
[A] Catholic organization may not provide financial
support to any candidate, PAC, or political party.
Likewise, it may not provide or solicit in-kind
support, such as free or selective use of volunteers,
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paid staff, facilities, equipment, mailing lists, etc.
``Political Activity Guidelines for Catholic Organizations''
(United States Catholic Conference, Office of the General
Counsel, Washington, D.C.), Feb. 14, 1996, reprinted in Paul
Streckfus' EO Tax Journal, November 1996 at 35, 42.
The generally accepted aspects of the campaign intervention
prohibition, as well as some areas of uncertainty, are
discussed below.
(a) The Prohibition Is ``Absolute''
The prohibition on political campaign intervention or
participation is ``absolute.'' IRS CPE Manual at 416. Unlike
the prohibition on lobbying, there is no requirement that
political campaign participation or intervention be
substantial. New York Bar, 858 F.2d at 881. It is, therefore,
irrelevant that the majority, or even all but a small portion,
of an organization's activities would, by themselves, support
exemption under section 501(c)(3). United States v. Dykema, 666
F.2d 1096, 1101 (7th Cir. 1981); see also G.C.M. 39694 (Jan.
22, 1988) (``An organization described in section 501(c)(3) is
precluded from engaging in any political campaign activities'')
and P.L.R. 9609007 (Dec. 6, 1995). (``For purposes of section
501(c)(3), intervention in a political campaign may be subtle
or blatant. It may seem to be justified by the press of events.
It may even be inadvertent. The law prohibits all forms of
participation or intervention in `any' political campaign.'')
\97\
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\97\ See also G.C.M. 38137 (Oct. 22, 1979): [T]he prohibition on
political activity makes no reference to the intent of the
organization. An organization can violate the proscription even if it
acts for reasons other than intervening in a political campaign. For
example, an organization that hires a political candidate to do
commercials for its charity drive and runs the commercials frequently
during the political campaign may have no interest in supporting the
candidate's campaign. Nevertheless, its action would constitute, at
least, indirect intervention or support of the political campaign.
However, the same G.C.M. goes on to say:
We do not mean to imply that every activity that has an effect on a
political campaign is prohibited political activity. We recognize that
organizations may inadvertently support political candidates. In these
instances the organizations have not ``intervened'' or ``participated''
in political campaigns. A hospital that provides emergency health care
for a candidate acts on behalf of the candidate during the election,
but only inadvertently supports his campaign.
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Although the prohibition on political campaign intervention
under section 501(c)(3) is absolute, Congress recognized that
the sanction of loss of tax exemption could, in some cases, be
disproportionate to the violation. In 1987, Congress added
section 4955 to the Code, which imposes excise tax penalties on
section 501(c)(3) organizations that make ``political
expenditures'' in violation of the prohibition, as well as
organization managers who knowingly approve such expenditures.
The legislative history provides that the enactment of section
4955 was not intended to modify the absolute prohibition of
section 501(c)(3), but to provide an alternative remedy that
could be used by the IRS in cases where the penalty of
revocation seems disproportionate to the violation:
i.e., where the expenditure was unintentional and
involved only a small amount and where the organization
subsequently has adopted procedures to assure that
similar expenditures would not be made in the future.
H.R. Rep. No. 100-391, at 1623-24 (1987).
The legislative history also provides that the excise tax
may be imposed in cases involving significant, uncorrected
violations of the prohibition, where revocation alone may be
ineffective because the organization has ceased operations
after diverting its assets to an improper purpose. In these
cases, the excise tax penalty on organization managers may be
the only effective way to penalize the violation. Id. at 1624-
25.
The IRS has shown an inclination to impose the excise tax
under section 4955 in lieu of revocation of exemption in cases
where the violation appears to be minor in relation to the
organization's other exempt purpose activities.\98\ For
example, P.L.R. 9609007 (Dec. 6, 1995) involved a section
501(c)(3) organization that sent out a fundraising letter
linking the organization to issues raised in the particular
campaigns. The IRS concluded that the letters evidenced a bias
for one candidate over the other. The organization sought to
defend itself by saying only a few of the letters were sent to
the states whose elections were mentioned in the letters. The
IRS rejected this defense, stating that:
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\98\ Prior to the enactment of section 4955 in 1987, the IRS was
reluctant to impose revocation in cases where the violation was not
blatant and the organization had a record of otherwise charitable
activities. For example, P.L.R. 8936002 (May 24, 1989) involved a
section 501(c)(3) organization that engaged in voter education and
issue advocacy relating to the 1984 Presidential election. Describing
the case as ``a very close call,'' the IRS ``reluctantly'' concluded
that the organization's voter education activities did not constitute
prohibited political campaign intervention, despite the use of ``code
words'' that could be viewed as evidencing support for a particular
candidate.
The IRS appeared unwilling to seek revocation with respect to the
organization, probably because of its history of legitimate educational
activities. Had section 4955 been in effect when the activity took
place, the IRS would have had another enforcement alternative: it could
have imposed excise tax penalties on the organization's expenditures
for the activities it found so troublesome.
[I]t is common knowledge that in recent times the
primary source of a candidate's support in such
elections is often derived from out-of-state sources.
Although a particular reader may not have been eligible
to actually vote for the described candidate, he or she
could have been charged by [the organization], in our
view, to participate in the candidate's campaign
through direct monetary or in-kind support,
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volunteerism, molding of public opinion, or the like.
Id. The IRS found that the organization violated the political
campaign intervention prohibition and imposed an excise tax on
the organization under section 4955; it did not, however,
propose revocation of the organization's exemption under
section 501(c)(3).
(b) Section 501(c)(3) Organizations May Not Establish or
Support a PAC
Although organizations exempt from tax under some
categories of section 501(c) are permitted to establish or
support PACs,\99\ those exempt under section 501(c)(3) are not.
When section 527 (governing the tax treatment of PACs) was
added to the Code in 1974, the legislative history provided
that ``this provision is not intended to affect in any way the
prohibition against certain exempt organizations (e.g., sec.
501(c)(3)) engaging in `electioneering' * * *'' S. Rep. No. 93-
1357 (1974), reprinted in 1975-1 C.B. 517, 534. The regulations
under section 527 reflect this congressional intent:
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\99\ For example, section 501(c)(4) and (6) organizations are
permitted to establish and/or support PACs. If these exempt
organizations provide support for PACs, they are subject to tax, under
section 527, on the lesser of their net investment income or their
``exempt function'' income.
Section 527(f) and this section do not sanction the
intervention in any political campaign by an
organization described in section 501(c) if such
activity is inconsistent with its exempt status under
section 501(c). For example, an organization described
in section 501(c)(3) is precluded from engaging in any
political campaign activities. The fact that section
527 imposes a tax on the exempt function income (as
defined in section 1.527-2(c)) expenditures of section
501(c) organizations and permits such organizations to
establish separate segregated funds to engage in
campaign activities does not sanction the participation
in these activities by section 501(c)(3) organizations.
Treas. Reg. Sec. 1.527-6(g).
Since the enactment of section 527 in 1974, it has been
clear that a section 501(c)(3) organization will violate the
prohibition on political campaign intervention by providing
financial or nonfinancial support for a PAC. IRS CPE Manual at
438-40. While the use of a section 501(c)(3)'s facilities,
personnel, or other financial resources for the benefit of a
PAC is impermissible, the prohibition does not stop there. In
its CPE Manual, the IRS also noted that ``[a]n IRC 501(c)(3)
organization's resources include intangible assets, such as its
goodwill, that may not be used to support the political
campaign activities of another organization.'' Id. at 440. Some
leading practitioners have interpreted this provision to
prohibit a charity from allowing its name to be used by a PAC,
even if the charity provides no financial support or
assistance; by allowing a PAC to use its name, the charity
implies to its employees and to the public that it endorses the
activity of the PAC. See Gregory L. Colvin et al., Commentary
on Internal Revenue Service 1993 Exempt Organizations
Continuing Professional Education Technical Instruction Program
Article on ``Election Year Issues,'' 11 Exempt Org. Tax Rev.
854, 871 (1995) [hereinafter ``EO Comments''].
(c) ``Express Advocacy'' is Not Required, and Issue
Advocacy is Prohibited if Used to Convey Support
for or Opposition to a Candidate
An organization does not need to violate the ``express
advocacy'' standard applied under federal election law for it
to violate the political campaign prohibition of section
501(c)(3).\100\ T.A.M. 8936002 (May 24, 1989). That is, it is
not necessary to advocate the election or defeat of a clearly
identified candidate to violate the prohibition. IRS CPE Manual
at 412-13.
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\100\ The FEC's ``express advocacy'' standard came into being
because the Supreme Court held a provision of the Federal Elections
Campaign act relating to contributions ``to reach only funds used for
communications that expressly advocate the election or defeat of a
clearly identified candidate.'' See IRS CPE Manual at 412 (quoting
Buckley v. Valeo, 424 U.S. 1, 77 (1976)). Examples of ``express
advocacy'' include ``vote for,'' ``elect,'' and ``Smith for Congress''
or ``vote against,'' ``defeat,'' and ``reject.'' Id. at 413 (referring
to 11 C.F.R. Sec. 109.1(b)(2)).
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Moreover, an organization may violate the prohibition even
if it does not identify a candidate by name. The IRS has stated
that ``issue advocacy'' may serve as ``the opportunity to
intervene in a political campaign in a rather surreptitious
manner'' if a label or other coded language is used as a
substitute for a reference to identifiable candidates. Id. at
411.
The concern is that an IRC 501(c)(3) organization may
support or oppose a particular candidate in a political
campaign without specifically naming the candidate by
using code words to substitute for the candidate's name
in its messages, such as ``conservative,'' ``liberal,''
``pro-life,'' ``pro-choice,'' ``anti-choice,''
``Republican,'' ``Democrat,'' etc., coupled with a
discussion of the candidacy or the election. When this
occurs, it is quite evident what is happening--an
intervention is taking place.
Id. 411-412. Furthermore:
[a] finding of political campaign intervention from the
use of coded words is consistent with the concept of
``candidate''--the words are not tantamount to
advocating support for or opposition to an entire
political party, such as ``Republican,'' or a vague and
unidentifiably large group of candidates, such as
``conservative'' because the sender of the message does
not intend the recipient to interpret them that way.
Code words, in this context, are used with the intent
of conjuring favorable or unfavorable images--they have
pejorative or commendatory connotations.
Id. at 412 n. 6.
(d) Educational Activities May Constitute Participation or
Intervention
As discussed above, the IRS considers activities that
satisfy the ``methodology test'' to be ``educational.'' Just as
educational activities may result in impermissible private
benefit, however, so too may they violate the prohibition on
political campaign intervention. The IRS takes the position
that ``[a]ctivities that meet the methodology test * * * may
nevertheless constitute participation or intervention in a
political campaign.'' IRS CPE Manual at 415.
New York Bar, 858 F.2d 876 (2d Cir. 1988), referred to
above, is the leading case on point. In that case, a bar
association published ratings of judicial candidates. The
ratings were distributed to bar members and law libraries. The
Association also issued press releases regarding its ratings,
but did not conduct publicity campaigns to announce its
ratings. Id. at 877. The Second Circuit held that although the
Association's publications were educational, the distribution
of the publications constituted prohibited campaign
intervention. By disseminating the educational publications
with the hope that they would `` `ensure' that candidates whom
[the Association] consider[ed] to be `legally and
professionally unqualified' '' would not be elected, the court
held that the Association ``indirectly'' participated in a
political campaign on behalf of or in opposition to a candidate
for public office. Id. at 881.
An implication of the holding in New York Bar is that one
must consider not only whether the activity itself, e.g.,
publishing educational materials such as candidate ratings,
violates the political campaign prohibition, but also whether
the intended consequences of the activity violates the
prohibition.\101\ The need to consider the consequences of an
otherwise educational activity is clear from a review of
several IRS rulings finding that an organization violated the
prohibition by disseminating material that was deemed
educational, but nonetheless affected voter preferences in
violation of the prohibition.
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\101\ See also T.A.M. 9635003 (Apr. 19, 1996). T.A.M. 9635003
involved a section 501(c)(3) organization that conducted ``citizens'
juries,'' a form of voter education in which a cross-section of
citizens are selected to determine which issues are most relevant in
the context of a particular campaign, to hear presentations by
candidates on those issues, and to rate the candidates' positions on
the issues. The section 501(c)(3) organization disseminated the citizen
jury's report, including the candidate ratings. In its dissemination,
the organization made it clear that it did not support or oppose any
candidate, and that the views expressed were those of the citizen
jurors and not the organization. The IRS found that the dissemination
of the report constituted impermissible participation in a political
campaign, and that all expenditures in connection with the conduct of
the citizens' jury--and not just the expenditures of the
dissemination--constituted ``political expenditures'' under section
4955: This culmination shows that all the activity of the organization
leading up to the final report is intimately connected with and a part
of the process to put on the [citizens' jury], and thus publication of
the final report makes the entire process with respect to the
[citizens' jury] a proscribed political activity.
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For example, in Rev. Rul. 67-71, 1967-1 C.B. 125, the IRS
ruled that a 501(c)(3) organization created to improve the
public educational system by engaging in campaigns on behalf of
candidates for school board was not exempt. Every four years,
when the school board was to be elected, the organization
considered the qualification of the candidates and selected
those it thought most qualified. The organization then
``engage[d] in a campaign on their behalf by publicly
announcing its slate of candidates and by publishing and
distributing a complete biography of each.'' Id. Although the
selection process ``may have been completely objective and
unbiased and was intended primarily to educate and inform the
public about the candidates,'' the IRS nonetheless ruled it to
be intervention or participation in a political campaign. Id.
In Rev. Rul. 76-456, 1976-2 C.B. 151, the IRS ruled that an
organization formed for the purpose of elevating the morals and
ethics of political campaigning was nevertheless intervening in
a political campaign when it solicited candidates to sign a
code of fair campaign practices and released the names of those
candidates who signed and those candidates who refused to sign.
The IRS stated that this was done to educate citizens about the
election process and so that they could ``participate more
effectively in their selection of government officials.'' Id.
at 152. Nonetheless, such activity, although educational, ``may
result * * * in influencing voter opinion'' and thus
constituted a prohibited participation or intervention in a
political campaign. Id.
(e) Nonpartisan Activities May Constitute Prohibited
Political Campaign Participation
The IRS takes the position that the nonpartisan motivation
for an organization's activities is ``irrelevant when
determining whether the political campaign prohibition'' has
been violated. IRS CPE Manual at 415. As support for this
position, the IRS cites Rev. Rul. 76-456 and New York Bar, both
of which are discussed above. In those cases, the court or the
IRS found that the activities in question were nonpartisan, but
nevertheless held that they constituted participation in a
political campaign. As noted by the IRS in its CPE Manual, the
court in New York Bar ``made the rather wry observation [that]
[a] candidate who receives a `not qualified' rating will derive
little comfort from the fact that the rating may have been made
in a nonpartisan manner.'' IRS CPE Manual at 416. Similarly, in
G.C.M. 35902 (July 15, 1974), the IRS stated:
The provision in the Code prohibiting participation or
intervention in ``any political campaign'' might
conceivably be interpreted to refer only to
participation or intervention with a partisan motive;
but the provision does not say this. It seems more
reasonable to construe it as referring to any
statements made in direct relation to a political
campaign which affect voter acceptance or rejection of
a candidate * * *
(f) The IRS Has Found Violations of the Prohibition on
Political Campaign Participation When an Activity
Could Affect or Was Intended to Affect Voters'
Preferences
As discussed above, the courts and the IRS have found
prohibited political campaign intervention when the activity in
question, although educational, affected or could reasonably be
expected to affect voter preferences, even where the
organization's motives in undertaking the activity were
nonpartisan. G.C.M. 35902 is to similar effect. In that case,
the IRS held that a public broadcasting station's nonpartisan
educational motivation was irrelevant in determining whether
its provision of free air time to candidates for elective
office was permissible under section 501(c)(3). The IRS found
that the station's procedures for providing air time, including
an equal time doctrine for all candidates and an on-air
disclaimer of support for any particular candidate, were
sufficient to ensure that the activity would not constitute an
impermissible political campaign intervention. The fact that
the station's motivation was to educate the public and not to
influence an election, however, was deemed to be irrelevant.
The cases and rulings cited above make it clear that simply
having an educational or nonpartisan motive for engaging in
prohibited political activity is not a defense to a finding of
violation. The relevance and irrelevance of motive is sometimes
misstated, however. While the absence of an improper political
motivation is irrelevant, evidence showing the existence of a
political motivation is relevant and one of the facts and
circumstances that the IRS will consider in determining whether
there is a violation. Indeed, the IRS has found the existence
of evidence showing an intent to participate in a political
campaign to be sufficient to support a finding of violation,
despite the lack of evidence that the activity achieved the
intended results.
For example, in G.C.M. 39811 (Feb. 9, 1990), a religious
organization encouraged its members to seek election to
positions as precinct committee-persons in the Republican or
Democratic Party structures. Although none of the
organization's members actually ran for such positions, the IRS
found that urging its members to become involved in the local
party organizations was part of the organization's larger plans
to ``someday control the political parties.''
The first step in the Foundation's long-term strategy
was to encourage members to be elected as precinct
committeemen. These individuals could then exert
influence within the party apparatus, beginning with
the county central committee. Precinct committeemen
could sway the precinct caucuses, a step in the
selection of delegates to the party's presidential
nominating convention. * * * Intervention at this early
stage in the elective process in order to influence
political parties to nominate such candidates is, we
believe, sufficient to constitute intervention in a
political campaign.
Id. The IRS went on to say:
In its discussion of the Tax Court opinion [in New York
Bar], the [Second Circuit] observed that the ratings of
candidates were ``published with the hope that they
will have an impact on the voter.'' The effort, and not
the effect, constituted intervention in a political
campaign. Therefore, whether anyone heeded the call to
run for precinct committee, whether that individual was
elected, and if so, what he or she subsequently did are
all immaterial.
Id.
In G.C.M. 39811, the IRS did not contend that the
organization's urging of members to run for office alone
constituted the violation. Rather, the organization's ``long-
term strategy'' of seeking to influence the political parties'
nomination of candidates by having its members elected to
office, and its urging of members to run for office so as to
carry out that strategy, were sufficient to support a finding
of impermissible campaign participation, despitethe fact that
the effort was not successful.
Other cases and rulings have also looked to an
organization's intent as an important element of a finding of
prohibited participation or intervention. In 1972, a court held
that an organization violated the participation or intervention
prohibition when it ``used its publications and broadcasts to
attack candidates and incumbents who were considered too
liberal.'' Christian Echoes National Ministry, Inc. v. United
States, 470 F.2d 849, 856 (10th Cir. 1972). The court did not
discuss whether the activities actually influenced voters or
were reasonably likely to do so. Rather, it concluded that the
organization's ``attempts to elect or defeat certain political
leaders reflected [the organization's] objective to change the
composition of the federal government.'' Id.
The IRS also found an organization's intent relevant in
P.L.R. 9117001 (Sept. 5, 1990). As described in that ruling, an
organization mailed out material indicating that it was
intending to help educate conservatives on the importance of
voting in the 1984 general election. According to facts stated
in the ruling letter, the material contained language
``intended'' to induce conservative voters to vote for
President Reagan, even though his name was not included in the
materials. The IRS thus concluded that ``the material was
targeted to influence a segment of voters to vote for President
Reagan.'' Id.
Based on the above, the IRS position is that an
organization can violate the political campaign prohibition by
either: (a) conducting activities that could have the effect of
influencing voter acceptance or rejection of a candidate or
group of candidates (the ``effect'' standard), or (b) engaging
in activities that are intended to influence voter acceptance
or rejection of a candidate or group of candidates, whether
they do so or not (the ``effort'' standard). Most of the
uncertainty over the scope of the prohibition on political
campaign intervention relates to the ``effect'' standard--the
possibility that an organization may, without intending to do
so, engage in an activity that could have the effect of
influencing voter acceptance of a candidate and, as a result,
place its tax exemption in jeopardy and/or risk incurring
excise tax penalties under section 4955. The legislative
history of section 4955 makes it clear that an inadvertent
action may indeed violate section 501(c)(3), and suggests that
the IRS may appropriately apply the excise tax penalty rather
than revocation as a sanction in such situations. Nevertheless,
some practitioners have expressed the view that, in
interpreting whether ambiguous behavior is violative of the
campaign intervention prohibition, primary reliance should be
placed on whether there was a political purpose to the behavior
at issue. See EO Comments at 856-57. In other words, ``to
violate the 501(c)(3) prohibition, the organization's actions
have to include an intentional 'tilt' for or against one or
more people running for public office.'' Id. at 857. In this
regard, it was noted that:
In most cases, the presence of a political purpose will
be clear from the charity's paper trail, because
organizational activities in the political arena are
usually accompanied by assertive behavior, much
internal discussion, and explicit written
communications. * * *
Id.
To date, the IRS has shown no intention to abandon its
position that an organization may violate the prohibition
against political campaign intervention based on the unintended
or inadvertent effect of its actions, as well as by an engaging
in activities with ``an intentional tilt'' in favor of a
candidate or in support of a PAC. Indeed, its recent election
year warning to section 501(c)(3) organizations not to ``become
involved in any other activities that may be beneficial or
detrimental to any candidate'' (discussed above) evidences an
apparent intention to adhere to a broad interpretation of the
prohibition. IRS News Release IR-96-23 (Apr. 24, 1996).
(ii) If a Substantial Part of an Organization's Activities is
Attempting to Influence Legislation, or its Primary Goal can
only be Accomplished through Legislation, it is an ``Action''
Organization
Section 501(c)(3) provides that an organization cannot be
tax-exempt if a ``substantial part'' of its activities is
``carrying on propaganda, or otherwise attempting, to influence
legislation.'' Although there is virtually no legislative
history on the prohibition, courts have declared that the
limitations in section 501(c)(3) ``stem from the policy that
the United States Treasury should be neutral in political
affairs and that substantial activities directed to attempts to
influence legislation should not be subsidized.'' Haswell v.
United States, 500 F.2d 1133, 1140 (Ct. Cl. 1974), cert.
denied, 419 U.S. 1107 (1975). (The court also noted that
``[t]ax exemptions are matters of legislative grace and
taxpayers have the burden of establishing their entitlement to
exemptions.'' Id.)
The Regulations provide that an organization is an
``action'' organization if ``a substantial part of its
activities is attempting to influence legislation by propaganda
or otherwise.'' Treas. Reg. Sec. 1.501(c)(3)-1(c)(3)(ii). The
Regulations also provide that an organization is an ``action''
organization if it has the following two characteristics:
(a) Its main or primary objective or objectives (as
distinguished from its incidental or secondary
objective) may be attained only by legislation or a
defeat of proposed legislation; and
(b) it advocates, or campaigns for, the attainment of
such main or primary objective or objectives as
distinguished from engaging in nonpartisan analysis,
study, or research and making the results thereof
available to the public.
Treas. Reg. Sec. 1.501(c)(3)-1(c)(3)(iv).
To determine whether a substantial part of an
organization's activities is attempting to influence
legislation, two alternative tests exist. Each test contains
its own definition of ``legislation'' and what constitutes an
attempt to influence legislation. The two tests also contain
different ways of determining substantiality. One test is
referred to as the ``substantial-part test.'' The other test,
referred to as the ``expenditure test,'' 102 was added to
tax law in 1976 at sections 501(h) and 4911 as a result of
uncertainty over the meaning of the word ``substantial.''
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\102\ As stated in the legislative history with respect to I.R.C.
Sec. 501(h): ``The language of the lobbying provision was first enacted
in 1934. Since that time neither Treasury regulations nor court
decisions gave enough detailed meaning to the statutory language to
permit most charitable organizations to know approximately where the
limits were between what was permitted by the statute and what was
forbidden by it. This vagueness was, in large part, a function of the
uncertainty in the meaning of the terms `substantial part' and
`activities'. * * * Many believed that the standards as to the
permissible level of activities under prior law was too vague and
thereby tended to encourage subjective and selective enforcement.''
---------------------------------------------------------------------------
The ``expenditure test'' sets forth specific, dollar levels
of permissible lobbying expenditures. Section 501(h) did not
amend section 501(c)(3), but rather provided charitable
organizations an alternative to the vague ``substantial-part''
limitations of section 501(c)(3). A charitable organization may
elect the ``expenditure test'' as a substitute for the
substantial-part test. A public charity that does not elect the
expenditure test remains subject to the substantial part test.
Treas. Reg. Sec. 1.501(h)-1(a)(4). Joint Committee in its
General Explanation of the Tax Reform Act of 1976, 1976-3 C.B.
(Vol. 2) 419.
The substantial-part test is applied without regard to the
provisions of section 501(h). The law, regulations and rulings
regarding the expenditure test may not be used to interpret the
law, regulations and rulings of the substantial-part test.
Section 501(h)(7) (``nothing [in section 501(h)] shall be
construed to affect the interpretation of the phrase `no
substantial part of the activities of which is carrying on
propaganda, or otherwise attempting, to influence legislation,'
under [section 501(c)(3)]'').
Determining whether an organization violated the lobbying
limitation requires an understanding of what constitutes: i.
``legislation;'' ii. an attempt to ``influence'' legislation;
and iii. a ``substantial'' part of an organization's
activities. It is also necessary to understand the
circumstances under which an organization's ``objectives can be
achieved only through the passage of legislation.''
(a) Definition of ``Legislation''
The Regulations define ``legislation'' to include ``action
by the Congress, by any State legislature, by any local council
or similar governing body, or by the public in a referendum,
initiative, constitutional amendment, or similar procedure.''
Treas. Reg. Sec. 501(c)(3)-1(c)(3)(ii). ``Action by the
Congress'' includes the ``introduction, amendment, enactment,
defeat, or repeal of Acts, bills, resolutions, or similar
items.'' G.C.M. 39694 (Jan. 22, 1988). This definition does not
include Executive Branch actions, or actions of independent
agencies. P.L.R. 6205116290A (May 11, 1962). Requesting
executive bodies to support or oppose legislation, however, is
prohibited. The IRS does not recognize a distinction between
``good'' legislation and ``bad'' legislation. For example, in
Rev. Rul. 67-293, 1967-2 C.B. 185, the IRS ruled that an
organization substantially engaged in promoting legislation to
protect animals was not exempt even though the legislation
would have benefited the community.
(b) Definition of ``attempting to influence legislation''
Under the Regulations, an organization will be regarded as
``attempting to influence legislation'' if it:
(a) contacts members of a legislative body for the
purpose of proposing, supporting, or opposing
legislation (Treas. Reg. Sec. 1.501(c)(3)-
1(c)(3)(ii)(a)) (referred to as ``direct lobbying'');
(b) urges the public to contact members of a
legislative body for the purpose of proposing,
supporting, or opposing legislation (id.) (referred to
as ``grassroots lobbying''); or
(c) advocates the adoption or rejection of
legislation (Treas. Reg. Sec. 1.501(c)(3)-
1(c)(3)(ii)(b)).
Section 4945(e) of the Internal Revenue Code provides
additional guidance regarding the meaning of ``attempting to
influence legislation.'' 103 According to that provision,
a taxable expenditure includes any amount paid or incurred for:
---------------------------------------------------------------------------
\103\ I.R.C. Sec. Sec. 4945(d) and (e) contain definitions of
``attempting to influence legislation'' with respect to taxable
expenditures by private foundations, not public charities. However,
``[a]ctivities which constitute an attempt to influence legislation
under Code Sec. 4945 * * * also constitute an attempt to influence
legislation under Code Sec. 501(c)(3).'' G.C.M. 36127 (Jan. 2, 1975).
Congress viewed section 4945(e) as a clarification of the phrase
``attempting to influence legislation'' in tax-exempt law generally,
not just with respect to private foundations. Id.
(a) any attempt to influence any legislation through
an attempt to affect the opinion of the general public
or any segment thereof, and
(b) any attempt to influence legislation through
communication with any member or employee of a
legislative body, or with any other government official
or employee who may participate in the formulation of
the legislation (except technical advice or assistance
provided to a government body or to a committee or
other subdivision thereof in response to a written
request by such body or subdivision . * * *) other than
through making available the results of nonpartisan
analysis, study, or research.
Treas. Reg. Sec. 53.4945-2(d)(4), which is applicable to non-
electing public charities,104 discusses ``nonpartisan
analysis, study, or research'' as follows:
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\104\ See G.C.M. 36127 (Jan. 2, 1975) and Haswell v. United States,
500 F.2d 1133 (Ct. Cl. 1974).
Examinations and discussions of broad social,
economic, and similar problems are [not lobbying
communications] even if the problems are of the type
with which government would be expected to deal
ultimately * * * For example, [an organization may
discuss] problems such as environmental pollution or
population growth that are being considered by Congress
and various State legislatures, but only where the
discussions are not directly addressed to specific
legislation being considered, and only where the
discussions do not directly encourage recipients of the
communication to contact a legislator, an employee of a
legislative body, or a government official or employee
who may participate in the formulation of
legislation.105
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\105\ See also G.C.M. 36127 (Jan. 2, 1975).
Even if specific legislation is not mentioned, however, an
indirect campaign to ``mold public opinion'' may violate the
legislative lobbying prohibition. In Christian Echoes National
Ministry, Inc. v. United States, 470 F.2d 849 (10th Cir. 1972),
the organization in question produced religious radio and
television broadcasts, distributed publications, and engaged
``in evangelistic campaigns and meetings for the promotion of
the social and spiritual welfare of the community, state and
nation.'' Id. at 852. The court found the publications
attempted to influence legislation ``by appeals to the public
to react to certain issues.'' Id. at 855.106
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\106\ For example, the publications urged its readers to: ``write
their Congressmen in order to influence the political decisions in
Washington;'' ``work in politics at the precinct level;'' ``maintain
the McCarran-Walter Immigration law;'' ``reduce the federal payroll by
discharging needless jobholders, stop waste of public funds and balance
the budget;'' ``stop federal aid to education, socialized medicine and
public housing;'' ``abolish the federal income tax;'' and ``withdraw
from the United Nations.'' Christian Echoes National Ministry, 470 F.2d
at 855. In light of these facts, the court upheld the IRS position that
the organization failed to qualify as a 501(c)(3) organization.
---------------------------------------------------------------------------
Under the expenditure test, ``grassroots lobbying'' is
``any attempt to influence legislation through an attempt to
affect the opinions of the general public or any segment
thereof.'' Treas. Reg. Sec. 56.4911-2(b)(2)(i). Such a
communication will be considered grassroots lobbying if it: (a)
refers to specific legislation, (b) reflects a view on such
legislation, (c) [e]ncourages the recipient to take action with
respect to such legislation.
Treas Reg. Sec. 56.4911-2(b)(2)(ii).107
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\107\ The IRS has also concluded that an organization formed to
``facilitate'' the inauguration of a state's governor-elect and the
``orderly transition of power from one political party to another by
legislative and personnel studies'' violated the prohibition on
attempting to influence legislation. G.C.M. 35473 (Sept. 10, 1973). The
IRS ``saw no logical way to avoid concluding that [the organization's]
active advocacy of a proposed legislative program requires it to be
[classified as an action organization. * * *]'' See also Rev. Rul. 74-
117, 1974-1 C.B. 128.
---------------------------------------------------------------------------
(c) Definition of ``Substantial''
A bright-line test for determining when a ``substantial''
part of an organization's activities are devoted to influencing
legislation does not exist. Neither the regulations nor case
law provide useful guidance as to whether the determination
must be based on activity or expenditures or both. In
Seasongood v. Commissioner, 227 F.2d 907 (6th Cir. 1955), the
courtheld that attempts to influence legislation that
constituted less than five percent of total activities were not
substantial. The percentage test of Seasongood was, however, explicitly
rejected in Christian Echoes National Ministry, Inc.
The political [i.e. legislative] activities of an
organization must be balanced in the context of the
objects and circumstances of the organization to
determine whether a substantial part of its activities
was to influence legislation. (citations omitted.) A
percentage test to determine whether the activities
were substantial obscures the complexity of balancing
the organization's activities in relation to its
objects and circumstances.
Id. at 855. Yet in Haswell v. United States, 500 F.2d 1133,
1145 (Ct. Cl. 1974), the court determined that while a
percentage test is not the only measure of substantiality, it
was a strong indication that the organization's purposes were
no longer consistent with charity. In that case, the court
concluded that approximately 20 percent of the organization's
total expenditures were attributable to attempts to influence
legislation, and they were found to be substantial. Id. at
1146.
The IRS has characterized the ambiguity over the meaning of
``substantial'' as a ``problem [that] does not lend itself to
ready numerical boundaries.'' G.C.M. 36148 (January 28, 1975).
In attempting to give some guidance on the subject, however,
the IRS said:
[t]he percentage of the budget dedicated to a given
activity is only one type of evidence of
substantiality. Others are the amount of volunteer time
devoted to the activity, the amount of publicity the
organization assigns to the activity, and the
continuous or intermittent nature of the organization's
attention to it.
(d) Circumstances under which an organization's
``objectives can be achieved only through the
passage of legislation''
The Regulations require that when determining whether an
organization's objectives can be achieved only through the
passage of legislation that ``all the surrounding facts and
circumstances, including the articles and all activities of the
organization, are to be considered.'' Treas. Reg.
Sec. 1.501(c)(3)-1(c)(3)(iv). There is little additional IRS or
court guidance on the subject. In one of the few comments on
this section of the Regulations, the IRS said in G.C.M. 33617
(Sep. 12, 1967) that an organization that was ``an active
advocate of a political doctrine'' was an action organization
because its objectives could only be attained by legislation.
In its publications, the organization stated that its
objectives included:
the mobilization of public opinion; resisting every
attempt by law or the administration of law which
widens the breach in the wall of [redacted by IRS]
working for repeal of any existing state law which
sanctions the granting of public aid to [redacted by
IRS]; and uniting all `patriotic' citizens in a
concerted effort to prevent the passage of any federal
law [redacted by IRS]. * * *''
By advocating its position to others, thereby
attempting to secure general acceptance of its beliefs;
by engaging in general legislative activities to
implement its views; by urging the enactment or defeat
of proposed legislation which was inimical to its
principles: the organization ceased to function
exclusively in the educator's role of informant in that
its advocacy was not merely to increase the knowledge
of the organization's audience, but was to secure
acceptance of, and action on, the organization's views
concerning legislative proposals, thereby encroaching
upon the proscribed legislative area.
In Rev. Rul. 62-71, 1962-1 C.B. 85, an organization was
formed ``for the purpose of supporting an educational program
for the stimulation of interest in the study of the science of
economics or political economy, particularly with reference to
a specified doctrine or theory.'' It conducted research, made
surveys on economic conditions available, moderated discussion
groups and published books and pamphlets. The research
activities were principally concerned with determining the
effect various real estate taxation methods would have on land
values with reference to the ``single tax theory of taxation.''
``It [was] the announced policy of the organization to promote
its philosophy by educational methods as well as by the
encouragement of political action.'' Id. The tax theory
advocated in the publications, although educational within the
meaning of section 501(c)(3), could be put into effect only by
legislative action. Without further elaboration of the facts
involved or how the theory could only be put into effect
through legislative action, the IRS ruled the organization was
an action organization, and thus not operated exclusively for
an exempt purpose.
In G.C.M. 37247 (Sept. 8, 1977), the IRS discussed whether
a organization whose guiding doctrine was to propagate a
``nontheistic, ethical doctrine'' of volunteerism could be
considered a 501(c)(3) organization. The ``ultimate goal'' of
the guiding doctrine was ``freedom from governmental and
societal control.'' According to the IRS:
[t]his objective can obviously only be attained legally
through legislation, including constitutional
amendments, or illegally through revolution. If [the
organization] should advocate illegal activities, then
it is not charitable; if it advocates legal attainment
of its doctrine's goal through legislation, then it is
an action organization.
The IRS did not conclude that organization was an action
organization, only that there was such a possibility and
further investigation was warranted. Research has not uncovered
further information about this case.
d. To Satisfy the Operational Test, an Organization Must Not Violate
the ``Private Inurement'' Prohibition
To qualify for tax-exempt status, section 501(c)(3)
provides that an organization must be organized and operated so
that ``no part of [its] net earnings * * * inures to the
benefit of any private shareholder or individual.'' The
Regulations add little clarification to this provision other
than saying that ``[a]n organization is not operated
exclusively for one or more exempt purposes if its net earnings
inure in whole or in part to the benefit of private
shareholders or individuals.'' Treas. Reg. Sec. 1.501(c)(3)-
1(c)(2).
Although the private benefit and private inurement
prohibitions share common and often overlapping elements, the
two are distinct requirements which must be independently
satisfied. American Campaign Academy, 92 T.C. at 1068. The
private inurement prohibition may be ``subsumed'' within the
private benefit analysis, but the reverse is not true. ``[W]hen
the Court concludes that no prohibited inurement of earnings
exists, it cannot stop there but must inquire further and
determine whether a prohibited private benefit is conferred.''
Id. at 1069. It should be noted that the private inurement
prohibition pertains to net earnings of an organization, while
the private benefit prohibition can apply to benefits other
than those that have monetary value. Furthermore, unlike with
the private benefit prohibition, the prohibition on private
inurement is absolute. ``There is no de minimis exception to
the inurement prohibition.'' G.C.M. 39862 (Nov. 22, 1991).
The IRS has described ``private shareholders or
individuals'' as ``persons who, because of their particular
relationship with an organization, have an opportunity to
control or influence its activities.'' Id. ``[I]t is generally
accepted that persons other than employees or directors may be
in a position to exercise the control over an organization to
make that person an insider for inurement purposes.'' Hill, F.
and Kirschten, B., Federal and State Taxation of Exempt
Organizations 2-85 (1994). ``The inurement prohibition serves
to prevent anyone in a position to do so from siphoning off any
of a charity's income or assets for personal use.'' G.C.M.
39862 (Nov. 22, 1991). Furthermore, the IRS has stated that:
[I]nurement is likely to arise where the financial
benefit represents a transfer of the organization's
financial resources to an individual solely by virtue
of the individual's relationship with the organization,
and without regard to accomplishing exempt purposes.
G.C.M. 38459 (July 31, 1980). Also IRS Exempt Organizations
Handbook (IRM 7751) Sec. 381.1(4) (``The prohibition of
inurement in its simplest terms, means that a private
shareholder or individual cannot pocket the organization's
funds except as reasonable payment for goods or services'');
and Hopkins, supra, at 267 (Proscribed private inurement
``involves a transaction or series of transactions, such as
unreasonable compensation, unreasonable rental charges,
unreasonable borrowing arrangements, or deferred or retained
interests in the organization's assets'').