[Senate Report 105-167]
[From the U.S. Government Publishing Office]
105th Congress Rept. 105-167
SENATE
2d Session Vol. 3
_______________________________________________________________________
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION
WITH 1996 FEDERAL ELECTION CAMPAIGNS
__________
FINAL REPORT
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
Volume 3 of 6
March 10, 1998.--Ordered to be printed
INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996
FEDERAL ELECTION CAMPAIGNS--VOLUME 3
105th Congress Rept. 105-167
SENATE
2d Session Vol. 3
_______________________________________________________________________
INVESTIGATION OF ILLEGAL OR
IMPROPER ACTIVITIES IN CONNECTION
WITH 1996 FEDERAL ELECTION
CAMPAIGNS
__________
FINAL REPORT
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
Volume 3 of 6
March 10, 1998.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
SUSAN COLLINS, Maine JOHN GLENN, Ohio
SAM BROWNBACK, Kansas CARL LEVIN, Michigan
PETE V. DOMENICI, New Mexico JOSEPH I. LIEBERMAN, Connecticut
THAD COCHRAN, Mississippi DANIEL K. AKAKA, Hawaii
DON NICKLES, Oklahoma RICHARD J. DURBIN, Illinois
ARLEN SPECTER, Pennsylvania ROBERT G. TORRICELLI, New Jersey
BOB SMITH, New Hampshire MAX CLELAND, Georgia
ROBERT F. BENNETT, Utah
Hannah S. Sistare, Staff Director and Chief Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
MAJORITY STAFF
Michael J. Madigan, Chief Counsel
J. Mark Tipps, Deputy Chief Counsel
Donald T. Bucklin, Senior Counsel
Harold Damelin, Senior Counsel
Harry S. Mattice, Jr., Senior Counsel
John H. Cobb, Staff Director/Counsel
K. Lee Blalack, Counsel
Michael Bopp, Counsel
James A. Brown, Counsel
Brian Connelly, Counsel
Christopher Ford, Counsel
Allison Hayward, Counsel
Matthew Herrington, Counsel
Margaret Hickey, Counsel
Dave Kully, Counsel
Jeffrey Kupfer, Counsel
John Loesch, Counsel
William ``Bill'' Outhier, Counsel
Glynna Parde, Counsel
Phil Perry, Counsel
Gus Puryear, Counsel
Mary Kathryn (``Katie'') Quinn, Counsel
Paul Robinson, Counsel
John S. Shaw, Counsel
David Hickey, Investigator
Stephen J. Scott, Investigator
Matthew Tallmer, Investigator
Darla Cassell, Office Manager
Mary D. Robertson, Office Manager
Kenneth Feng, GAO Detailee
Mark Kallal, Legal Assistant
John W. M. Claud, Legal Assistant
Mike Marshall, Legal Assistant
Michael Tavernier, Legal Assistant
Michael Vahle, Legal Assistant
Amy Alderson, Staff Assistant
Kim Bejeck, Executive Assistant
Deborah Collier, Executive Assistant
Daniel Donovan, Staff Assistant
Leanne Durm, Staff Assistant
Michele Espinoza, Executive Assistant
Cheryl Ethridge-Morton, Executive Assistant
Heather Freeman, Staff Assistant
John Gilboy, Staff Assistant
Janat Montag, Executive Assistant
Kathryn O'Connor, Executive Assistant
Wayne Parris, Staff Assistant
Jason Parrott, Staff Assistant
Sahand Sarshar, Staff Assistant
Jerome Sikorski, Archivist
Loesje Troglia, Executive Assistant
Sandra Wiseman, Executive Assistant
GOVERNMENT AFFAIRS COMMITTEE STAFF
Frederick S. Ansell, Chief Counsel
Richard A. Hertling, Senior Counsel
Curtis M. Silvers, Professional Staff Member
Paul S. Clark, Communications Director
Michal S. Prosser, Chief Clerk
Matthew Peterson, Assistant Clerk
Christopher W. Lamond, Systems Administrator
Steve Diamond, Senator Susan Collins
Jim Rowland, Senator Sam Brownback
Brian Benczkowski, Senator Pete V. Domenici
Michael Loesch, Senator Thad Cochran
Barbara Olson, Senator Don Nickles
William J. Morley, Senator Arlen Specter
Rick Valentine, Senator Bob Smith
Bill Triplett, Senator Robert F. Bennett
MINORITY STAFF
Alan Baron, Minority Chief Counsel
Pamela Marple, Deputy Chief Counsel
David McKean, Deputy Chief Counsel
Jeffrey Robbins, Deputy Chief Counsel
Alan Edelman, Counsel
Jonathan Frenkel, Counsel
Jim Lamb, Counsel
Deborah Lehrich, Counsel
Cassandra Lentchner, Counsel
Dianne Pickersgill, Counsel
Lisa Rosenberg, Counsel
Kevin Simpson, Counsel
Howard Sklamberg, Counsel
Beth Stein, Counsel
David Cahn, Assistant Counsel
Sarah Des Pres, Assistant Counsel
Peter Rosenberg, Assistant Counsel
Larry Gurwin, Investigator
Jim Jordan, Press Secretary
Holly Koerber, Clerk
Bill McDaniel, Investigator
Jay Youngclaus, Investigator
Caroline Badinelli, Staff Assistant
Ann Metler, Research Assistant
Jessica Robinson, Staff Assistant
Rachael Sullivan, Staff Assistant
Nichole Veatch, Staff Assistant
Linda Gustitus, Governmental Affairs Committee, Senator Levin
Elise Bean, Governmental Affairs Committee, Senator Levin
Laurie Rubenstein, Governmental Affairs Committee, Senator Lieberman
Nanci Langly, Governmental Affairs Committee, Senator Akaka
Marianne Upton, Governmental Affairs Committee, Senator Durbin
Matthew Tanielian, Governmental Affairs Committee, Senator Torricelli
Bill Johnstone, Governmental Affairs Committee, Senator Cleland
FBI DETAIL
Anne Asbury, Investigator
Jerome Campane, Investigator-FBI Detail Leader
Becky Chan, Investigator
Jeffrey Harris, Investigator
Steven Hendershot, Investigator
James Kunkel, Investigator
Kelli Sligh, Investigator
Vo ``Ben'' Tran, Investigator
C O N T E N T S
----------
Page
Chapter:
1. Preface................................................... 1
2. Procedural Background and Overview........................ 5
3. Summary of Findings....................................... 31
4. The Thirst for Money...................................... 51
5. The White House Controlled the DNC and Improperly
Coordinated the Activities of the DNC and Clinton/Gore '96. 105
6. The DNC Dismantled Its System for Vetting Contributions... 167
7. DNC Fundraising in the White House: Coffees, Overnights,
and Other Events........................................... 191
8. Fundraising Calls from the White House.................... 499
9. White House Vetting of Individuals with Access to the
President.................................................. 751
10. Johnny Chung and the White House ``Subway''.............. 781
11. The Contribution of Yogesh Gandhi........................ 917
12. Ted Sioeng, His Family, and His Business Interests....... 961
13. John Huang's Years at Lippo.............................. 1117
14. John Huang at Commerce................................... 1153
15. John Huang Moves from Commerce to the DNC................ 1653
16. John Huang's Illegal Fundraising at the DNC.............. 1689
17. The Hsi Lai Temple Fundraiser and Maria Hsia............. 1749
18. The China Connection: Summary of Committee's Findings
Relating to the Efforts of the People's Republic of China
to Influence U.S. Policies and Elections................... 2499
19. Charlie Trie's and Ng Lap Seng's Laundered Contributions
to the DNC................................................. 2517
20. Charlie Trie's Contributions to the Presidential Legal
Expense Trust.............................................. 2711
21. The Saga of Roger Tamraz................................. 2905
22. DNC Efforts to Raise Money in the Indian Gaming Community 3071
23. The Hudson, Wisconsin Casino Proposal.................... 3165
24. The Cheyenne and Arapaho Tribes: Their Quest for the Fort
Reno Lands................................................. 3547
25. The Offer of R. Warren Meddoff........................... 3623
26. White House, DNC and Clinton-Gore Campaign Fundraising
Efforts Involving the International Brotherhood of
Teamsters.................................................. 3655
27. Compliance by Nonprofit Groups with Committee Subpoenas.. 3833
28. Role of Nonprofit Groups in the 1996 Elections........... 3993
29. Allegations Relating to the National Policy Forum........ 4195
30. White House Document Production.......................... 4277
31. DNC Document Production.................................. 4425
32. Campaign Finance Reform Issues Brought to the Forefront
by the Special Investigation............................... 4459
33. Recommendations.......................................... 4503
Additional Views
34. Additional Views of Chairman Fred Thompson............... 4511
35. Additional Views of Senator Susan Collins................ 4535
36. Additional Views of Senator Arlen Specter................ 4539
37. Additional Views of Senator Robert Bennett............... 4545
Minority Views
38. Additional Views of Senators Glenn, Levin, Lieberman,
Akaka, Durbin, Torricelli and Cleland...................... 4557
39. Additional Views of Senator Glenn........................ 9507
40. Additional Views of Senator Levin........................ 9511
41. Additional Views of Senator Lieberman.................... 9525
42. Additional Views of Senator Akaka........................ 9559
43. Additional Views of Senator Durbin....................... 9565
44. Additional Views of Senator Torricelli................... 9571
The Cheyenne and Arapaho Tribes: Their Quest for the Fort Reno Lands
Introduction
The Committee investigated the circumstances surrounding
contributions totaling $107,000 that the Cheyenne and Arapaho
Tribes of Oklahoma (``C/A'' or ``tribes'') made to the DNC in
1996. The bulk of the contributions, approximately $87,000
worth, was made shortly after two C/A representatives attended
a June 17, 1996 luncheon at the White House, where they were
afforded an opportunity to speak to President Clinton about a
long-standing tribal land claim (to the Fort Reno lands in
Oklahoma, described below). On March 13, 1997, following media
accounts that discussed the stark poverty of the tribes and
raised questions about the source of the money used for the
contributions, the DNC returned all of the C/A contributions.
The Committee interviewed and deposed witnesses and
reviewed documents and other materials in connection with its
investigation, but public hearings were never held. The
Committee's work was hampered by a lack of access to key
witnesses. First, the four most knowledgeable tribal
representatives were initially cooperative with the Committee's
investigation but later asserted their Fifth Amendment
privilege against self-incrimination and would not testify
under oath without a grant of immunity. The Committee was thus
unable to depose these crucial witnesses, who were: Charles
Surveyor, the tribal chairman, Archie Hoffman, the tribal
secretary, Tyler Todd, the tribal governmental affairs advisor,
and Rick Grellner, a tribal attorney. Although the Committee
respected these witnesses' invocation of the privilege, it is
doubtful they invoked it in good faith. Their immunity proffer
disclosed no discernible basis for a criminal prosecution.
Moreover, their assertion appeared to contain a large measure
of gamesmanship. Through their attorney, they originally
asserted the privilege unconditionally. Then, the assertion was
lifted as to the Committee's hearing subpoenas, provided that
the witnesses could select who among them would testify and
provided they could make a long speech at the start of their
testimony. Then, when it was too late for the Committee to call
them, they dropped their conditions with respect to the hearing
subpoena but not the deposition subpoena.1
---------------------------------------------------------------------------
\1\ Early on, the tribal representatives cooperated with the
investigation, and they were asked to appear voluntarily for a
deposition. They agreed but then at the eleventh hour asserted their
Fifth Amendment privilege and declined to testify. See Conference--
Proposed Depositions, Sept. 15, 1997, pp. 6-7. The Committee then
served deposition and hearing subpoenas on Hoffman, Todd, Grellner, and
Surveyor, and the witnesses all asserted their Fifth Amendment
privilege in response to both the hearing and deposition subpoenas. See
Letter from Barry Coburn to John H. Cobb, Sept. 16, 1997. (Ex.
1)(asserting privilege for purposes of deposition). The witnesses never
withdrew their assertion of the privilege regarding the deposition
subpoenas, and only withdrew their privilege with respect to the
hearing subpoenas on Oct. 30, 1997, the last day of the Committee's
public hearings.
---------------------------------------------------------------------------
Second, despite repeated attempts, the Committee was unable
to secure the voluntary testimony of Michael Turpen, a former
attorney general of Oklahoma who was retained by the C/A to
help lobby on their behalf. Turpen was a crucial fact witness,
a point Committee staff made often to him and his attorney.
According to the tribe, Turpen helped solicit their DNC
contributions and invited them to attend the June 17, 1996
White House luncheon. In one news account, Archie Hoffman, the
tribal secretary, stated, ``Turpen said give $100,000; he said
that's the way you gotta work.'' 2 The Committee
repeatedly sought Turpen's cooperation, but he gave very little
despite many representations that he would. Like the tribal
representatives, Turpen seemed to game the Committee for his
own purposes, giving assurances of cooperation outwardly while
never really intending to do so.3
---------------------------------------------------------------------------
\2\ Sue Schmidt, ``Tribes Disappointed After Gifts to DNC,''
Washington Post, March 10, 1997, p. A1.
\3\ The Committee's fruitless dealings with Turpen are briefly
summarized in Ex. 2. Letter from John H. Cobb to C.S. Lewis, Nov. 7,
1997 (Ex. 2).
---------------------------------------------------------------------------
Much of the tribes' story was presented to the Committee in
a series of staff interviews of tribal representatives
conducted in August and September 1997.4 Except
where otherwise noted, the information contained in the
discussion below was provided by the tribal representatives
during those interviews.
---------------------------------------------------------------------------
\4\ Separately, the tribes's attorney gave the Committee a detailed
oral proffer on September 15-16, 1997, largely duplicating information
that the tribal representatives had provided the Committee during the
earlier interviews and also had provided to the press. The Committee
did not formally consider an offer of immunity for the four tribal
representatives who invoked the Fifth Amendment.
---------------------------------------------------------------------------
Despite the limited cooperation of key witnesses, the
Committee gathered enough facts to reach the following
conclusion. This chapter in the DNC's 1996 fund-raising efforts
is among the most sordid. In brief, Democratic fund-raisers led
the tribes, who were politically naive, to believe that making
a large contribution would secure them the long-sought Fort
Reno lands. The tribes made contributions to the DNC, received
encouragement about their land claim from many quarters,
including the President himself, but ultimately received
nothing. The tribes then fell into the hands of a series of
Democratic operators, who attempted to pick their pockets for
legal fees, land development fees, and additional
contributions. The fleecing stopped only when several
unflattering press accounts ran regarding the tribes' plight.
Background and the Decision to Donate to the DNC
The C/A have aggressively pursued their claim to the Fort
Reno lands for several years.5 In 1994 and 1995, the
tribes contacted the Departments of Interior and Agriculture,
seeking assistance in obtaining the land. The tribes made
little apparent progress with the agencies, however, and grew
frustrated. Their frustration was compounded by the widespread
opposition of the entire Oklahoma congressional delegation to
the Fort Reno claim.6 By late 1995, the tribes were
ready to try another approach and hired Michael Turpen, a
former Oklahoma attorney general, to lobby on their behalf.
Turpen came to the C/A's attention through Tyler Todd, an
advisor to the tribal business committee. Turpen set up
meetings in Washington with relevant administration officials
regarding the Fort Reno lands, accompanying the C/A to
Washington on two different occasions in early 1996. In
addition, Turpen wrote a senior White House official, Mack
McLarty, in March 1996, seeking his help with the Fort Reno
matter.7
---------------------------------------------------------------------------
\5\ The Fort Reno lands are located near the C/A tribal complex in
west Oklahoma. The land is held by the federal government, which
operates an agricultural research center there. The land apparently has
valuable oil and gas reserves.
\6\ Although Democrats and Republicans alike in the Oklahoma
delegation expressed opposition for their claim, the tribes took
special exception to Senator Don Nickles and Congressman Frank Lucas
and ran a series of television ads against them.
\7\ Letter from Michael C. Turpen to Mack McLarty, Mar. 18, 1996
(Ex. 3).
---------------------------------------------------------------------------
Throughout this time, Turpen was also a top Oklahoma fund-
raiser for the Democratic Party and Clinton/Gore
'96.8 In early 1996, he first mentioned that the
tribes should get involved in the ``process'' and make a
contribution to the DNC. He told them at least once that in
order for the tribes to be noticed, such a contribution should
be ``six figures.'' Over the course of several weeks in the
spring of 1996, the tribal leaders decided that they should
contribute to the DNC as a means of ``getting heard'' on their
land claim.
---------------------------------------------------------------------------
\8\ The tribal representatives thought Turpen was the Oklahoma
Chairman of Clinton/Gore '96. However, Jason McIntosh, a former DNC and
Clinton/Gore official who knows Turpen well, was not aware of any
official title Turpen held in 1996 with the campaign. McIntosh
identified Turpen as a leading Democratic fund-raiser in Oklahoma.
Deposition of Jason McIntosh, Oct. 29, 1997, p. 15.
---------------------------------------------------------------------------
In May 1996, several tribal representatives, including
Surveyor, Todd, Grellner, and perhaps others, met with Turpen
in his law office. The tribes informed Turpen that they had
decided to contribute $100,000 to the DNC. Turpen, who was
pleased, promptly called Jason McIntosh, an official at
Clinton/Gore '96 and an old friend of his. Turpen put McIntosh
on the speaker phone with the tribal representatives and
explained that the tribe would be contributing $100,000 to the
DNC.9 Tribal representatives recall Turpen noting
that the contribution would make the tribes the largest DNC
donor in Oklahoma. During that call, the tribes and Turpen also
discussed the Fort Reno land claim with McIntosh.
---------------------------------------------------------------------------
\9\ Id. at p.22.
---------------------------------------------------------------------------
Turpen and McIntosh also discussed whether the tribes could
afford the contribution. McIntosh apparently asked Turpen
whether the C/A had sufficient funds to cover the contribution,
to which Turpen replied, ``Well, my check cleared,'' meaning
his initial $5,000 retainer payment for representing the C/
A.10 Sometime after the call, McIntosh provided
wiring instructions to Turpen so that the tribes could wire
their donation directly to the DNC.11
---------------------------------------------------------------------------
\10\ The tribe paid Mr. Turpen at least $10,000 for his lobbying
services. Tribal Resolution No. 052296S113, May 22, 1996 (Ex. 4). The
tribe produced one bill from Turpen that shows some of this lobbying
work on their behalf. Bill from Riggs, Abney, et al. May 2, 1996 (Ex.
5).
\11\ McIntosh deposition, p.25.
---------------------------------------------------------------------------
Several days later, on June 13, 1996, Turpen called
Grellner, telling him words to the effect, ``You have decided
to give $100,000 to the DNC. As a result, you will be invited
to a lunch with President Clinton at the White House on June
17, 1996.'' The tribe was ecstatic, although they did not know
how exactly their invitation came to pass. Neither Turpen nor
McIntosh had mentioned a luncheon or any other meeting with
President Clinton previously. Turpen made it clear that two
tribal representatives could attend the lunch.
In his deposition, McIntosh indicated that Turpen extended
the luncheon invitation to the C/A at his own initiative.
Turpen had been invited to the luncheon, which was set up
through the DNC and the White House political affairs office.
Turpen asked McIntosh if two tribal representatives could be
substituted in his place, and McIntosh passed along the request
to the DNC and White House, which acceded.12
McIntosh testified that the tribes's pledge to contribute
$100,000 ``possibly . . . helped them a great deal'' in
receiving an invitation to the June 17 luncheon.13
---------------------------------------------------------------------------
\12\ Id. at pp. 28-32.
\13\ Id. at p. 33.
---------------------------------------------------------------------------
The June 17, 1996 Luncheon and Encouragement Regarding The Fort Reno
Land Claim
On June 16, 1996, four tribal representatives, Surveyor,
Todd, Hoffman, and Grellner, traveled to Washington for the
luncheon. They chose Surveyor and Todd to attend the White
House event. The next morning (the day of the luncheon), they
recall meeting with McIntosh at the DNC
headquarters.14 Shortly after they arrived at the
DNC, they remember McIntosh asking them, ``Did you bring the
check?'' They explained that they had not but that they would
wire the money as soon as they returned to Oklahoma. McIntosh
did not seem upset.15 McIntosh recalls simply
inquiring about whether they had encountered any difficulty in
wiring their contribution, since he had provided the wiring
instructions earlier.16
---------------------------------------------------------------------------
\14\ McIntosh recalls the meeting taking place at Clinton/Gore's
headquarters, where McIntosh worked at the time. McIntosh deposition,
p. 38.
\15\ In one Committee interview, Grellner indicated that McIntosh
was in fact upset.
\16\ McIntosh deposition, pp. 41-42.
---------------------------------------------------------------------------
The C/A did not bring a contribution to the DNC because
there had been dissent among the tribal business committee
members, the tribal decision-making body, over whether to make
the contribution. Surveyor and Todd and others favored making
the contribution; but Robert Tabor, the committee treasurer,
was not fully sold on the idea. Thus, the C/A came to the DNC
on June 17 empty-handed.
Before they left for the luncheon, McIntosh showed the four
around the offices and struck up some small talk. Eventually,
McIntosh took them to meet Terry McAuliffe. According to the
tribes, McIntosh said McAuliffe had raised $40 million so far,
and McIntosh told McAuliffe that the C/A was now the largest
donor in Oklahoma.
McAuliffe then took Surveyor and Todd to the White House
for the luncheon.17 The group entered the White
House through the East Gate and were taken to a small room,
where five or six guests were already waiting. They were
eventually joined by other guests, including McAuliffe,
President Clinton, and a photographer. The luncheon consisted
mainly of small talk, but towards the end of the luncheon, the
guests were invited (prompted perhaps by McAuliffe) to speak
briefly to President Clinton about whatever was on their minds.
Surveyor and Todd have an imprecise recollection of what others
said, but remember discussions about retirement benefits,
railroads, and a publishing chain. Todd declined to speak, in
deference to Surveyor, the tribe's top elected official.
Surveyor was seated to President Clinton's immediate left, and
he spoke last and apparently at much greater length than the
other guests. He talked first generally about matters of
concern to Native Americans, discussing health care funding,
education, and the like.
---------------------------------------------------------------------------
\17\ The White House political office prepared a briefing
memorandum for the June 17th luncheon that described the event and the
participants. Memorandum, Democratic National Committee Presidential
Luncheon, June 16, 1996 (Ex. 6). McIntosh helped draft the portion that
discussed Surveyor and Todd. McIntosh deposition, p. 36.
---------------------------------------------------------------------------
Surveyor then spoke about the Fort Reno lands. He described
the situation to President Clinton and noted that since the
land was taken by executive order in the 1880s,18
perhaps President Clinton could arrange the return of the land
by a new executive order. President Clinton turned to an aide
who was taking down notes and asked, ``Do we have anything on
Fort Reno?'' and the aide replied affirmatively.19
Without recalling President Clinton's exact words, Surveyor and
Todd recount that the President said something like, ``We will
look into it and see if anything can be done about it, and
we'll see what we can do.'' They did not take this to be a
binding promise to return the land, but they were quite
heartened by the President's comment.
---------------------------------------------------------------------------
\18\ The tribes received $15 million from the United States in
settlement of their land claims. See Cheyenne-Arapaho Tribes v. United
States, 16 Ind. Cl. Comm. 171 (1965).
\19\ The tribes have a standard Fort Reno information packet that
they had given to McAuliffe earlier and surmise that McAuliffe's copy
ended up with the aide.
---------------------------------------------------------------------------
Surveyor and Todd walked out of the luncheon with McAuliffe
and others. McAuliffe told them, ``If the President says he'll
do something, he'll do it.'' McAuliffe, in his Committee
deposition, could not recall any conversation between President
Clinton and Surveyor, and he did not recall speaking with
Surveyor or Todd after the luncheon about the Fort Reno
lands.20
---------------------------------------------------------------------------
\20\ Deposition of Terrance McAuliffe, Sept. 18, 1997, p. 29.
---------------------------------------------------------------------------
Of interest to the Committee is whether the words of
encouragement spoken by President Clinton or McAuliffe might
have helped induce the tribes to consummate their DNC
contributions. Because the Committee has not received sworn
testimony from the tribal representatives, it is difficult to
parse what exactly they were told, or how they might have
viewed what was said to them. However, the tribes provided the
Committee with tapes of two contemporaneous tribal business
committee sessions--held on June 20 and July 3, 1996--in which
committee members discussed the decision to contribute to the
DNC. As the following excerpts from the tapes reveal, it is
clear the tribes believed that their discussion with President
Clinton was made possible only by contributions and that the
discussion with the President would lead to the return of the
land: 21
---------------------------------------------------------------------------
\21\ The Committee transcribed the tapes and gave transcripts to
counsel for the tribes, with the understanding that the tribes would
identify the voices on the transcripts and provide the Committee
annotated versions of the transcripts. The tribes never provided such
annotated versions, however. Thus, the voice identification made above
was performed by Committee staff, based on staff`s familiarity with the
voices of some of the business council meeting attendees. Unidentified
voices are denoted ``speaker.''
Todd: Mr. [Surveyor] brought up all of our issues, and the
President listened very intently, and the secretary took all of
the notes, and he made certain she had everything.
Surveyor: It was mostly on Fort Reno what I was talking
about. And at the last, I told him how it was taken and if
there was any way they could get it back the same way, then
[inaudible]. When I got through talking, he [President Clinton]
said, ``Well, I think we can help you then.'' He told the
secretary, ``Do you have it?'' and she said, ``Yes.''
Speaker: It can be returned by Executive Order?
Surveyor: Yes.22
---------------------------------------------------------------------------
\22\ Excerpted transcript of Tribal Working Session, June 20, 1996,
pp. 38-39 (Ex. 7).
* * * * *
---------------------------------------------------------------------------
Speaker: Are you saying you feel that this donation----
Todd: Well, put it this way----
Speaker [continuing]: Would enhance the transfer of the
property from the government to the tribe, Fort Reno?
Todd: I definitely think so.
Speaker: What kind of commitment did you get from the
President?
Todd: Well, in the first place, you don't go in and make
deals with the President. We go in and talk to him.
Speaker: That's what [inaudible] were saying, too. It's
illegal for the President to make deals.
Surveyor: Well, there were no deals made to the Cherokees a
few years back. . . . They donated $150-and-some thousand or
$200-and-some thousand, right around there, and you can see the
results. They got everything and are getting everything. That's
what it comes down to. I hate to say it's that way, but . . .
that's just the way it goes.23
---------------------------------------------------------------------------
\23\ Id. at pp. 41-42.
Moreover, it is clear from the tapes that the tribal
representatives thought there was an admission price--$50,000
---------------------------------------------------------------------------
per head--for attendance at the luncheon:
Speaker: Was there a commitment?
Speaker: Tyler [Todd], was there a commitment?
Todd: Was there a commitment on what?
Speaker: From us to the Democratic Party?
Todd: Uh-huh.
Surveyor: I believe there was something of a commitment--
again, to meet with the President.
Speaker: It costs $100,000 to visit the President?
[Pause.]
Speaker: What do you charge, Charles? [Laughter.]
24
---------------------------------------------------------------------------
\24\ Id. at pp. 55-56. Although, as revealed by the tapes, the
tribal representatives very clearly believed that their contributions
would help them obtain Fort Reno, they took a more diplomatic view
publicly. According to the tribal representatives, the contribution
caused an uproar in the tribal community, which led Surveyor and Todd
to issue a press release on June 28, 1996. The press release
characterized the luncheon as an ``historic'' meeting between Surveyor
and President Clinton. The press release recounted that Surveyor told
the President about the Fort Reno land claim but rejected the notion
that Clinton promised to return the land. News Release of Cheyenne-
Arapaho Tribes of Oklahoma, June 28, 1996 (Ex. 8). Despite their public
diplomacy, the private, contemporaneous words of the tribal leaders in
the tape excerpts portray a different belief altogether. Or as poet
Emily Dickinson once observed: ``The thought beneath/so slight a film/
is more distinctly seen/as laces just reveal the surge/or mists the
Appenine.''
The tribes' belief that DNC contributions would ultimately
lead to success regarding the land is corroborated by the
testimony of Terry Lenzner, a private investigator who met with
the tribes in May 1997.25 Mr. Lenzner told the
Committee that the C/A representatives with whom he met
believed they had been promised favorable action on their land
claim in exchange for contributions to the DNC:
---------------------------------------------------------------------------
\25\ Mr. Lenzner's involvement with the C/A is discussed more fully
below.
Lenzner: They [the tribal representatives] say they
had been approached by somebody who had worked in the
campaign, whose name I can't recall. They had been
promised action on the lands. . . . My recollection is
that they were promised favorable action, that they
were going to get their lands returned in exchange for
a donation.26
---------------------------------------------------------------------------
\26\ Testimony of Terry Lenzner, July 31, 1997, pp. 56-57.
In fact, Lenzner, whose firm the DNC had retained to
investigate foreign money contributions, initially thought the
tribal representatives wanted him to investigate the DNC for
the failure to consummate a contributions-for-land quid pro
---------------------------------------------------------------------------
quo:
Senator Specter: [Tribal representatives say they
were told they would] get their lands returned in
exchange for a contribution?
Lenzner: That's my recollection of what they were telling
me, and at the time . . . I started wondering whether they were
asking me to conduct an investigation of this incident. . . . I
thought there might be a problem with them telling me about it
in view of the Democratic National Committee work we are
currently doing.27
---------------------------------------------------------------------------
\27\ Id. at pp. 57-58.
Lenzner's conflict of interest concerns passed, however, when
the tribes made clear that the target of the investigation in
which they might be interested was not the DNC.
the tribes donate approximately $107,000 to the dnc
The first contribution ($87,000)
Immediately after the White House luncheon, the C/A were
called with some frequency by Turpen and McIntosh, an effort
the C/A viewed as dunning the tribes into making good on their
contribution pledge. They remember Turpen making the first call
on June 20 and expressing irritation about the tribes not
contributing $100,000 before the luncheon event. Turpen
insisted that the tribes pay the DNC immediately. According to
tribal representatives, McIntosh then placed several calls
starting on June 24, 1996 (usually to Grellner, the tribal
attorney), which became increasingly aggressive in tone. In his
deposition, McIntosh explained that Turpen had merely asked him
to ``coordinate'' with the C/A and ensure that the contribution
came through.28 McIntosh testified that he had
numerous conversations with Grellner about the
contribution.29 However, McIntosh said that the
calls were frequently occasioned by Grellner's indications that
the money had been transferred, when the money in fact had
not.30
---------------------------------------------------------------------------
\28\ McIntosh deposition, p. 43.
\29\ Id. at p. 45.
\30\ Id. at pp. 139-40.
---------------------------------------------------------------------------
The C/A business committee met to discuss the contribution
on June 20, 1996. Although no formal resolution authorizing the
contribution was passed, Surveyor, Todd, Hoffman, and Grellner,
having determined that the business committee informally
expressed sufficient support, wired a contribution to the DNC
on June 26, 1996 for $87,671.74.31 That amount
represented all of the money in the C/A's bank account. The
money for the contribution was derived from a bingo hall owned
by the tribes.32 Although the hall is not
profitable--it has incurred millions in losses since opening--
the C/A receive a monthly $5,000 payment from the entity that
manages the bingo hall on their behalf. The tribes had intended
to contribute the full $100,000 pledged to the DNC, but there
was a shortfall in the bank balance.
---------------------------------------------------------------------------
\31\ Wire transfer, Boatmen's First National Bank of Oklahoma, June
26, 1996 (Ex. 9).
\32\ Memorandum from Tyler Todd to Charles Surveyor, April 23, 1997
(Ex. 10).
---------------------------------------------------------------------------
The tribes played a bit of a shell game internally in order
to make the June 26th contribution. The business council
treasurer, Robert Tabor, opposed the idea of a contribution and
wanted nothing to do with it. To get around Tabor's reluctance,
the money was transferred from the tribal account controlled by
Tabor and placed into the account of an affiliated entity (a
business development corporation) from where it was wired to
the DNC.
The tribal business committee met again on July 3, 1996 and
passed a resolution formally approving a $100,000 contribution
to the DNC.33
---------------------------------------------------------------------------
\33\ Tribal Resolution No. 070996S167, July 9, 1997 (and related
meeting minutes) (Ex. 11).
---------------------------------------------------------------------------
The second contribution ($20,000)
Sometime in July, Turpen called the tribe, reminded them
that they were ``$13,000 short'' on their DNC commitment, and
suggested that they help host President Clinton's 50th birthday
celebration in August. Turpen said that hosting the party would
cost $20,000, and the tribe agreed to do so. The tribe provided
the funds in a cashier's check 34 to someone at
Turpen's firm, whom the tribe understood was running the
Oklahoma portion of the birthday celebration. As with the
earlier $87,000 contribution, Tabor, the business council
treasurer, wanted nothing to do with the contribution, so again
the money was transferred from a tribal account to that of the
tribal development corporation. The money qualified the C/A as
a sponsor of a birthday dinner in Oklahoma City that coincided
with, and was linked up by remote television connection to, the
main birthday party held at Radio City Music Hall in New York
in August 1996.35
---------------------------------------------------------------------------
\34\ Cashier's check, People's National Bank, August 12, 1996 (Ex.
12).
\35\ Invitation to Oklahoma Democratic Rally for President Bill
Clinton's 50th Birthday (Ex. 13).
---------------------------------------------------------------------------
Where Did the Money Come From?
At times, the media has described the C/A contributions as
coming from a tribal ``welfare fund,'' a description resisted
by tribal representatives who do not like the implication that
they made large political contributions, which accomplished
little, at the expense of more basic tribal needs. The source
of the money also raises the issue of the tribes' poverty.
Based on its questioning, the Minority appears ready to argue
that these obviously impoverished tribes are in fact flush with
money.36
---------------------------------------------------------------------------
\36\ See McIntosh deposition, pp. 110-14.
---------------------------------------------------------------------------
There are several points worth noting in this regard.
First, while the Committee has undertaken no effort to
determine the actual poverty level of the C/A, it is fair to
say that they are very poor. The unemployment rate among tribal
members is 62%, and two-thirds of tribal members receive public
assistance.37The average per capita income is
approximately $6,000 per year.38The tribal
representatives consider their people's financial condition to
be desperate, and indeed, one reason obtaining Fort Reno is
important to them is the economic self-sufficiency that
judicious development of the land promises. In fact, when the
business council was debating the DNC contributions, during a
July 1996 meeting, the tribes' poverty was noted frankly:
\37\ Michael Grunwald, ``Modern Promises, Old Betrayal,'' The
Boston Globe, Jan. 18, 1998, p. A1.
\38\ Id.
Speaker: $100,000, that is not a lot to the people up
there playing big politics, but for us it's a lot of
money, and that, from what I gather, practically almost
bankrupts us. It puts our capital way down there low. .
. Historically, we have a tough time making it, and the
bills start coming in--bills, bills,
bills.39
---------------------------------------------------------------------------
\39\ Transcript of Tribal Working Session, July 3, 1996, p. 43 (Ex.
14).
Second, while the account from which the money is drawn
does not appear to be a specially-earmarked welfare fund, it is
frequently used to pay for such things as funeral costs,
heating bills, and general assistance for needy tribal members.
When the DNC returned the contribution in March 1997, the
tribes took the money and used it for buses to transport the
elderly and infirm, a Head Start program, and emergency
assistance.
The DNC returned the tribes' contributions on March 13,
1997, expressing concern that the contributions might have
``come from their welfare fund.'' 40 The DNC,
moreover, refunded the contribution to dispel the ``link in the
minds of the Tribe's members that they needed to give this
money in order to be heard on an official government matter.''
41 Such a link, of course, is exactly what Turpen
placed in the minds of the C/A when they were considering
whether to contribute. Ironically, the tribes were offended
that the DNC returned the money, thinking that the gesture
meant their money was not good enough for the Democratic party.
---------------------------------------------------------------------------
\40\ DNC Press Release: ``DNC Returns Cheyenne-Arapaho Tribal
Donation,'' Mar. 13, 1997 (Ex. 15). See also Letter from B.J.
Thornberry to Charles Surveyor, Mar. 13, 1997 (enclosing contribution
refund) (Ex. 16).
\41\ Id.
---------------------------------------------------------------------------
Other Political Events Attended by Tribal Representatives
For a brief time in 1996, the C/A's sizeable contributions
secured them invitations to several DNC-related events. Those
included:
In August 1996, Surveyor attended a reception at
the Vice President's residence. His attendance was arranged by
an attorney at Turpen's firm.
In August 1996, Todd attended a dinner with Vice
President Gore at a Washington hotel, an event to thank the
sponsors of the ``remote'' birthday celebrations for President
Clinton. Todd sat at the same table with Vice President Gore,
who at one point told the table that if anyone needed anything,
they should contact Mitchell Berger, a prominent fund-raiser
also seated there.42
---------------------------------------------------------------------------
\42\ Several weeks after the dinner, in October 1996, Tyler Todd
did call Berger, telling him about some planned federal budget cuts to
an Indian AIDS program. Berger was very responsive, reciting a list of
Administration officials he would contact. Many of these officials
subsequently called Todd to discuss the funding issue. Funding for the
program was later restored. For his part, Berger contacted Todd around
December 1996, and asked for a $25,000 contribution to the inaugural,
which the tribes declined. Berger solicited contributions several
times, once saying that, ``you [C/A] owe us money.'' For more on
Berger, see the section of this report on R. Warren Meddoff.
---------------------------------------------------------------------------
In August 1996, Surveyor, Todd, and Grellner
attended the Democratic National Convention.
On October 18, 1996, DNC Chairman Don Fowler
visited the tribal complex in Oklahoma.43
---------------------------------------------------------------------------
\43\ Don Fowler's Briefing Material for Cheyenne-Arapaho Meeting,
Oct. 18, 1996 (Ex. 17).
---------------------------------------------------------------------------
Nathan Landow and Peter Knight
As November and December 1996 wore on, the C/A grew
restless. They had seen no progress regarding Fort Reno and
little benefit from their contributions. In fact, the only
tangible result of their DNC contributions was more
solicitations from various Democratic fund-
raisers.44 A series of contacts would lead them to
Nathan Landow, a wealthy Maryland area real estate developer
who is a longtime supporter of Vice President Gore and the
DNC,45 and to the law firm where Peter Knight,
Landow's friend, practiced. Knight, a former Gore aide, is a
prominent political fund-raiser who chaired Clinton/Gore '96.
---------------------------------------------------------------------------
\44\ The fundraisers they mentioned to the Committee were Nathan
Landow, Mitchell Berger, and Mary Pat Bonner. Tribal representatives
also told Copperthite about solicitations from these individuals.
Deposition of Michael Copperthite, Aug. 27, 1997, pp. 29-33. Although
Landow could not recall soliciting the tribes, he recalled speaking to
Berger and Bonner, both of whom indicated that they had solicited the
tribes for contributions. Deposition of Nathan Landow, Sept. 17, 1997,
pp. 66-67. Landow said it was ``possible'' but unlikely that he
solicited the tribes himself for political contributions. Id. at pp.
57-59.
\45\ In late November 1995, Vice President Gore successfully
solicited Landow by phone for a $25,000 DNC contribution. Landow,
according to the Vice President's notes, replied, ``You'll have it in
hand in one hour.'' DNC Finance Call Sheet, Nov. 27, 1995 (Ex. 18).
---------------------------------------------------------------------------
The path to Landow and Knight went through Michael
Copperthite, a Democratic political consultant. In 1996,
Copperthite managed the successful campaign of Arkansas
Congressman Marion Berry, a former administration official the
tribes had met in earlier rounds of Washington lobbying.
Copperthite originally contacted Grellner, the tribal attorney,
in October 1996 to see if the C/A would consider contributing
to Berry's campaign. Although the C/A did not give money,
Grellner did contribute $5,000 personally to the Arkansas
Democratic Party. Grellner also solicited advice from
Copperthite about the C/A's growing restlessness over Fort
Reno, and Copperthite agreed to help the tribes. After the
Berry campaign, Copperthite took tribal representatives around
Washington, and arranged for them to meet with lobbyists and
Capitol Hill staffers to discuss the Fort Reno
lands.46 One of these meetings was with Landow.
---------------------------------------------------------------------------
\46\ Copperthite would figure prominently in the C/A's saga from
November 1996 until late 1997, and he spent many hours trying to help
them. Early on, Copperthite tried to arrange a fee-splitting agreement
with Landow regarding the tribe's land. Copperthite deposition, Sept.
3, 1997, p. 133. Landow rebuffed the idea and, in any event, would part
company with the tribes in March 1997, as discussed below.
To the Committee's knowledge, Copperthite has made no other effort
to be paid for his work with the tribes, apart from occasionally asking
(but not insisting on) reimbursement of his out-of-pocket expenses.
Copperthite's methods seem unorthodox, his motivation somewhat
inscrutable, but he has worked pro bono for the tribes and appears to
have earned their trust. He was involved in having a bill introduced in
the House of Representatives during the 105th Congress to convey the
Fort Reno lands to the tribes.
---------------------------------------------------------------------------
Copperthite first took Surveyor, Grellner, and Hoffman to
meet Landow on November 24, 1996, at Landow's offices in
Bethesda, Maryland. Copperthite portrayed Landow as someone
close to Vice President Gore who might be able to help them
with the Fort Reno claim. According to Landow, Copperthite was
persistent in asking Landow to meet with C/A representatives,
and his persistence finally piqued Landow's interest in the
matter.47
---------------------------------------------------------------------------
\47\ Landow deposition, pp. 20-21.
---------------------------------------------------------------------------
At the November 24 meeting, the tribal representatives
described for Landow their June 17 luncheon with President
Clinton, and recounted how the President's words encouraged
them to think there would be favorable action on the Fort Reno
land. According to the tribes, Landow disputed their account,
telling them something to the effect, ``That was no meeting. It
was an appreciation lunch.'' Landow denies having any
discussion or any knowledge during this time about the tribes'
White House luncheon.48 The tribes then described
their land claim. Landow expressed interest preliminarily, and
explained his view that the tribes needed to proceed on two
different tracks--one, negotiating with the federal government
to obtain the land, and two, determining how to develop the
land once they had it.49 Landow viewed his role as
that of the developer and thought the tribes needed to find
legal representation to help with their claim to Fort
Reno.50
---------------------------------------------------------------------------
\48\ Id. at p. 32.
\49\ Id. at p. 25.
\50\ Id.
---------------------------------------------------------------------------
Landow said he recommended several Washington lawyers and
law firms to the tribes at the November 24 meeting, including
specifically Peter Knight of the firm Wunder, Diefenderfer,
Cannon & Thelen.51 Landow denied that he marketed
Knight's close relationship with Vice President
Gore.52 He does recall saying that Knight and his
firm would take the case only if they felt ``they could be of
assistance.'' 53
---------------------------------------------------------------------------
\51\ Id. at pp. 25-26.
\52\ Id. at p. 36.
\53\ Id. at pp. 40-41.
---------------------------------------------------------------------------
The tribes recall Landow's characterization of Knight quite
differently. They remember Landow explicitly touting Knight's
close relationship to Vice President Gore and claiming that
Knight's relationship to the Vice President would improve the
tribes's likelihood of prevailing on Fort Reno. They also
recall Landow saying that Knight would only take the case if
``he could deliver.'' Thus, the tribal representatives were
quite pleased when Landow called Rick Grellner the night of the
24th, and told him representatives of Knight's firm wanted to
meet them the next day. They related this news to
Copperthite.54 In fact, shortly after the initial
meeting with Landow ended, Landow called Grellner at Grellner's
hotel, and directed Grellner to describe the Fort Reno claim
over the phone to an associate at Knight's law firm, Jody
Trapasso. They arranged to meet with Trapasso the next day and
discuss the matter further.
---------------------------------------------------------------------------
\54\ Copperthite deposition, Aug. 27, 1997, p. 46.
---------------------------------------------------------------------------
The November 25 meeting was held at the Wunder,
Diefenderfer offices, attended by Grellner, Surveyor, Landow,
and Trapasso. Grellner described for Trapasso and Landow
various ways the federal government could return the land to
the tribes. Without committing, Trapasso indicated that the
firm would ``take a look at it.'' Landow told Surveyor and
Grellner that fees would have to be ``worked out.'' According
to the tribes, Landow also solicited them for a contribution to
a Gore 2000 Committee. Landow described that such a committee
was being set up, and the tribe, without making a firm
commitment, indicated they planned to be supportive. In his
deposition, Landow did not recall ever soliciting the tribes
for a political contribution.55 Following the
initial meetings with Landow and Trapasso, there were a series
of calls between Landow and Grellner, in which Landow talked up
Knight's connections to the Vice President and indicated that
although Knight had not decided whether he would take the case,
it would be a ``great opportunity'' for the tribes if he did.
---------------------------------------------------------------------------
\55\ Landow deposition, p. 59. The tribes never contributed in
response to any solicitations by Landow.
---------------------------------------------------------------------------
The C/A were pleased with this turn of events. They viewed
Landow and Knight as people with sufficient ties to the
Administration to cause favorable action on the land. As
explained by Copperthite, ``[the tribes] were pretty ecstatic
because they now felt . . . their [DNC] contribution, though it
didn't get them what they initially thought it would, they now
were meeting the people who could carry forth and help them get
their land back.'' 56
---------------------------------------------------------------------------
\56\ Copperthite deposition, Aug. 27, 1997, p. 40.
---------------------------------------------------------------------------
Landow also began sketching out fees, both for himself and
Knight or Knight's firm. According to the tribes, Landow told
Grellner that Knight would require a $100,000 payment up front,
plus $10,000 a month in order to represent them. Landow also
described his compensation generally and discussed receiving
commissions based on a percentage of the closing price for any
future sales of the Fort Reno lands. Landow and Grellner had
approximately a half dozen conversations about fees in November
and December 1996. During one of these, Landow unsuccessfully
solicited a political contribution from the tribes for an
entity Landow called the ``Tennessee Victory Fund.''
On January 21, 1997, Surveyor and Grellner met with Landow
and Copperthite over breakfast at the Willard Hotel in
Washington. They again discussed Fort Reno and the nature of
compensation to be paid to Landow and Knight. Landow once
again, according to the tribes, indicated that Knight's fee
would be $100,000 up front and $10,000 per month. According to
Copperthite, Surveyor indicated that because the tribal
business committee would have to vote out payments to Knight,
it might be easier simply to pay one lump sum up front, to
which Landow replied, ``well, then, make it a quarter of a
million dollars so they can get the ball rolling.''
57 They also discussed Landow's fees. At this
meeting (and perhaps in subsequent phone conversations with
Grellner), Landow solicited the tribes one more time for a
political contribution.
---------------------------------------------------------------------------
\57\ Id. at p. 44.
---------------------------------------------------------------------------
Copperthite has testified that at the close of the meeting,
Landow told the tribes they should be ready to sign contracts
with Landow and Knight's firm and have a check in hand to pay
Knight's firm when everyone next met. Landow explained that
Knight was ``filling up with clients,'' and thus it was urgent
to retain Knight soon.58
---------------------------------------------------------------------------
\58\ Id. at p. 45.
---------------------------------------------------------------------------
A meeting was held on February 4, 1997, at Knight's office.
The tribes understood that the purpose of the meeting was to
execute agreements for Knight and Landow, and for the tribes to
make an initial payment to Knight. Landow, Knight, Grellner,
Copperthite, and Trapasso all attended. Surveyor was supposed
to attend but did not, which became a matter of contention.
Copperthite and Grellner arrived at the offices and waited
for approximately 45 minutes while Knight, Landow, and Trapasso
met privately. That group then joined Copperthite and Grellner.
Grellner apologized for Surveyor's absence, and informed the
group that while the tribes remained very willing to retain
Knight, no tribal resolution had yet been passed approving the
representation. Grellner also asked for more specifics about
Landow and Knight's compensation.
The fact that the tribes were not ready to consummate a
deal with Landow and Knight's firm incensed Landow. He asked
Knight and Trapasso to leave the room and then ripped Grellner
and Copperthite for not having Surveyor present, for not having
a check to pay to Knight's firm, and for not being able to sign
a deal that day. Grellner and Copperthite both recollect an
abusive, profanity-strewn tirade from Landow, one Copperthite
described as ``Teamster-esque.'' 59 Grellner and
Copperthite then recount two things happening. First, Landow
``dictated'' the terms of a contract, which Grellner wrote
down, later preparing a draft based on what Landow required.
The contract addressed compensation for both Knight's firm and
Landow.60 The terms dictated by Landow included:
$100,000 up front to Knight's firm, with $10,000 monthly
payments; and for Landow, 10% of any settlement price for
development of the land and 10% of any revenue from gas or oil
extraction.
---------------------------------------------------------------------------
\59\ Id. at p. 57.
\60\ Id. at pp. 54-61.
---------------------------------------------------------------------------
Second, Landow threatened the C/A. He told Grellner and
Copperthite that if they failed to reach an agreement as
specified by Landow, he would make sure the tribes never
obtained the Fort Reno lands. At one point, according to both
Copperthite and Grellner, Landow told them something like, ``If
you don't do this deal, I will fuck you.'' 61
---------------------------------------------------------------------------
\61\ Id. at p. 61.
---------------------------------------------------------------------------
It should be noted that Landow takes issue with at least
some of Copperthite and Grellner's characterization of his
meeting with them on February 4, 1997. Landow concedes that he
expressed anger at Copperthite and Grellner because Landow
thought the purpose of the meeting was to reduce to writing
agreements involving Landow, the tribes, and the Wunder,
Diefenderfer firm regarding Fort Reno.62 Landow also
concedes that he ``suggested'' terms and conditions for an
agreement between him and the tribes,63 but he
denies threatening them.64
---------------------------------------------------------------------------
\62\ Landow deposition, pp. 79-80, 88.
\63\ Id. at pp. 84-85.
\64\ Id. at p. 88.
---------------------------------------------------------------------------
Whatever impression Landow thought he left, Grellner sent
him on February 14, 1997 a proposed ``Consulting Services
Agreement'' to be signed by the tribes, Landow, and
Knight.65 The draft agreement reflected Grellner's
understanding of what Landow dictated during the February 4
meeting. It provided that Knight and Wunder, Diefenderfer would
represent the tribes in pursuing the Fort Reno lands and that
the firm would be paid $100,000 in advance and $10,000 per
month for its services. It also granted Landow a
``contingency'' fee of 10% of the settlement price on any real
estate development on the property, and a 10% ``net working
interest'' in any oil and gas production
developed.66 Several days later, Landow sent
Surveyor a revised agreement that contained essentially
identical compensation terms but modified other terms of the
agreement. Landow indicated the tribes would need to contract
separately with Knight's firm.67
---------------------------------------------------------------------------
\65\ Consulting Services Agreement, undated (Ex. 19).
\66\ Id. The press has reported that Fort Reno sits atop oil and
gas reserves worth millions of dollars. Don Van Natta, ``Where Tribes
Saw Promise, Democrats Saw Pledge,'' The New York Times, Aug. 12, 1997,
p. A1.
\67\ Letter from Nathan Landow to Charles Surveyor, March 4, 1997
(with enclosed ``Cheyenne Arapaho-Landow Consulting Agreement'') (Ex.
20).
---------------------------------------------------------------------------
Landow disclaimed having any role in negotiating the terms
of a representation agreement between Wunder, Diefenderfer and
the tribes.68 However, Landow had several
discussions in early 1997 with two attorneys at Knight's firm,
Ken Levine and Jody Trapasso, about the firm representing the
tribes, and he admits being ``made aware'' of the fee
arrangement under negotiation.69 Landow and Levine
also sent each other copies of the proposed agreements they
sent the tribes in response to the February 14, 1997
draft.70
---------------------------------------------------------------------------
\68\ Landow deposition, pp. 52-53.
\69\ Id. at pp. 54, 78, 96.
\70\ Id. at pp. 111-12.
---------------------------------------------------------------------------
Curiously, Knight told the Committee that by the February
4, 1997 meeting, he had decided not to represent the tribes and
assumed Trapasso had relayed that decision to
Landow.71 Knight, however, noted that other firm
attorneys (Trapasso and Levine) were continuing to discuss the
possibility of representing the tribes. Moreover, as late as
March 4, 1997, Levine was still indicating that Knight would be
involved in the firm's representation.72
---------------------------------------------------------------------------
\71\ Deposition of Peter Knight, Sept. 17, 1997, p. 171.
\72\ Letter from Kenneth Levine to Charles Surveyor, Mar. 4, 1997
(Ex. 21).
---------------------------------------------------------------------------
Landow did not speak with the tribes again after sending
his March 4 proposal. The Washington Post ran an unflattering
story on March 10, 1997 about Landow's dealings with the
tribes,73 a development that ended the proposed
consulting arrangement. The tribal representatives told the
Committee that while they were serious about the terms of the
proposed Wunder, Diefenderfer representation, Surveyor would
never have agreed to the consulting terms proposed by Landow,
which Surveyor considered excessive.74
---------------------------------------------------------------------------
\73\ Not long after negative press stories broke, Landow wrote an
apology to Knight. Letter from Nathan Landow to Peter and Gail Knight,
Mar. 21, 1997 (Ex. 22).
\74\ As a postscript, the C/A business committee secretary, Archie
Hoffman, noted during an early visit to Landow's office that Landow
possessed a Sioux war bonnet containing golden eagle feathers, an
apparent violation of federal laws prohibiting such possession. Hoffman
reported Landow to the U.S. Fish and Wildlife Service, which commenced
an investigation. See Richard Tapscott, ``Maryland Developer to Donate
Indian Headdress to Museum,'' Washington Post, Dec. 3, 1997, p. C3.
---------------------------------------------------------------------------
Cody Shearer
Several weeks after completing their dealings with Landow
and Knight, the C/A encountered another figure whose interest
in them they would come to regret. In the spring of 1997, an
acquaintance of Tyler Todd's, Al Cilella, offered to put the C/
A in touch with someone in Washington named Cody Shearer, whom
Cilella said could help them. Through Cilella, several tribal
representatives--Todd, Hoffman, Surveyor, Grellner, and Bob
Musgrove--first met Shearer on May 8, 1997.
In his Committee deposition, Shearer describes himself as a
freelance journalist. He has also touted himself in a Website
as having been ``involved in a series of backchannel operations
for President Clinton,'' including brokering the peace in
Bosnia and opening negotiations between Syria and
Israel.75 Nevertheless, Shearer says that it was
only his journalistic interest, not an interest in helping the
Clinton administration, that drew him to meet with the tribes.
Cilella, an occasional source of news tips for Shearer, simply
informed him that the C/A had an interesting story, and
according to Shearer, all Shearer did was follow
up.76
---------------------------------------------------------------------------
\75\ Webpage for Institute for International Mediation and Conflict
Resolution, undated (Ex. 23). After posting these claims on the Web for
18 months, Shearer has edited them out in a revised webpage. He
indicated the claims were false in his Committee deposition. Deposition
of Cody Shearer, Sept. 16, 1997, pp. 61-64.
\76\ Shearer deposition, pp. 11-13.
---------------------------------------------------------------------------
The initial May 8, 1997 meeting took place at lunch in a
Capitol Hill restaurant. Although Shearer testified that his
journalistic interest quickly abated when he sized up the
tribal representatives at lunch, he nevertheless invited them
to his house later that day.77 Shearer recounted
politely hearing the tribes out and being anxious to shoo them
from his house. In contrast, the tribes recall Shearer bragging
about his ties to the Clinton administration 78 and
indicating that he could take the tribes's plight ``to the
top,'' meaning President Clinton. According to the tribes,
Shearer played them a videotape greeting to Shearer's parents
from President Clinton and the First Lady. According to the
tribes, Shearer also said that he would mention the Fort Reno
matter directly to President Clinton or the First Lady over the
upcoming Memorial Day weekend. Shearer recalls making no such
offer.79
---------------------------------------------------------------------------
\77\ Id. at pp. 16-17.
\78\ Shearer's brother in law is Strobe Talbott, the Undersecretary
of State; his brother is Derek Shearer, the U.S. Ambassador to Finland;
Shearer's sister, Brooke, is a political appointee at the Interior
Department. Id. at pp. 8-9.
\79\ Id. at pp. 31-32, p. 73.
---------------------------------------------------------------------------
The tribes related their anger about Senator Nickles's
opposition to Fort Reno reverting to the C/A, so Shearer
suggested that the tribe contact an investigator acquaintance
of his, Terry Lenzner of the Investigative Group International
(IGI). Shearer recommended that the tribes retain IGI to try
and locate unfavorable information on Senator Nickles to use as
possible leverage in the future.
Shearer arranged a meeting the next day, May 8, 1997, at
IGI. Lenzner and a colleague attended. The tribes stated their
suspicions that Senator Nickles' opposition to giving Fort Reno
to the C/A might involve oil and gas interests.80
Lenzner offered to investigate Nickles, his wife, and family
businesses, and a proposed investigative work plan was sent to
the tribes.81
---------------------------------------------------------------------------
\80\ The tribes have never offered any proof of this, and the
Committee has seen none whatsoever.
\81\ Letter from Terry Lenzner to Richard Grellner, May 12, 1997
(Ex. 24). In addition to having been hired by the DNC (see above),
Lenzner was also retained by the Presidential Legal Expense Trust
(``PLET'') to investigate the source of Charlie Trie's PLET
contributions. See section of the report regarding PLET.
---------------------------------------------------------------------------
Both Majority and Minority Members observed what an
outrageous proposal this was. When Lenzner attempted to liken
the proposed investigation to campaign-related ``opposition
research'' (itself a troubling manifestation of modern
politics), Members had this to say:
Senator Specter: [Senator Nickles] was not a candidate
here. You were doing this in order to have some effect on his
attitude about the return of the Indian land . . . to find
information on Senator Nickles which, to put it mildly, would
try to pressure him or persuade him to change his
position.82
---------------------------------------------------------------------------
\82\ Hearing Transcript, July 31, 1997, p. 62.
* * * * *
---------------------------------------------------------------------------
Senator Lieberman: [Lenzner's proposal] seems to be . . .
an attempt to investigate the personal lives of Members of
Congress as a way to affect their votes here, and that is
really an outrageous intrusion into the system.83
---------------------------------------------------------------------------
\83\ Id. at p. 76.
Ultimately, the tribes decided not to hire Lenzner. As with
Landow, the tribes' dealings with Lenzner ended when
unflattering media stories appeared 84 regarding the
Shearer/Lenzner involvement.
---------------------------------------------------------------------------
\84\ See Michael Isikoff, ``The Dark Side of the Money Trail,''
Newsweek, Aug. 4, 1997, p. 6.
---------------------------------------------------------------------------
In interviews with Committee staff, tribal representatives
have related their misgivings about Shearer, their suspicion of
his motives, and their belief that he was trying to silence
them while he made vague efforts to ``help.'' Shearer has
denied most of this, but nevertheless there are parts of his
story that the Committee finds suspicious. First, Shearer
testified that he had almost no contact with any tribal
representatives after May 9, 1997. He testified that he had no
personal meetings with them after that time and that he had
only three phone conversations with them, all of which were
brief and related only to media stories.85 Tribal
representatives, however, have told to Committee staff that
Shearer had frequent contact with them after May 1997,
especially with Tyler Todd, and discussed the substance of
their land claims.
---------------------------------------------------------------------------
\85\ Shearer deposition, pp. 53-54.
---------------------------------------------------------------------------
Second, Shearer told the Committee that he never told the
tribes he would, and never in fact did, speak with anyone in
the Clinton administration or the DNC regarding the tribes'
land claims.86 Shearer further recounted that he has
never told the tribes that he would assist them in any way,
including helping them obtain drug and alcohol treatment
facilities.87 However, Shearer's version of events
varies sharply from what the Committee has learned from the
tribes' attorney and another witness. In a discussion with
Committee staff, Grellner indicated that Shearer told Todd, as
recently as late August 1997, that if the tribes would
``cooperate''--meaning protect the Administration during the
Committee's investigation--Shearer would help arrange for the
tribes to receive a drug and alcohol rehabilitation facility at
the tribal complex in Oklahoma.88
---------------------------------------------------------------------------
\86\ Id. at pp. 60-64.
\87\ Id. at pp. 54, 74.
\88\ Interviews of Richard Grellner, Sept. 2 & 10, 1997.
---------------------------------------------------------------------------
Grellner and other tribal representatives have apparently
related similar information to Copperthite. In his Committee
deposition, Copperthite testified: ``Rick Grellner . . . told
me that Mr. Shearer had called last week and said that if the
tribe remained silent through their [Committee] testimony or
depositions because there was an article about them being
deposed in an Oklahoma paper, they would get an alcohol and
drug rehabilitation center.'' 89
---------------------------------------------------------------------------
\89\ Copperthite deposition, Sept. 3, 1997, p. 192.
---------------------------------------------------------------------------
Finally, Shearer testified that he had one brief
conversation with Peter Knight about the tribes in which while
discussing an unrelated topic, he inquired simply whether
Knight had an opinion about the tribes.90 Knight's
version of the conversation differs: ``[Mr. Shearer] came in
and told me basically that the Indians were out to get the Vice
President and me. And he said that he told them, `That would be
a dumb thing if you're interested in getting your land back.'
'' 91
---------------------------------------------------------------------------
\90\ Shearer deposition, pp. 29-31.
\91\ Knight deposition, p. 178.
---------------------------------------------------------------------------
Conclusion
It is difficult to imagine a more cynical political
exploitation than that visited upon the tribes by the
collection of Democratic fund-raisers and operatives they
encountered in 1996 and 1997. In contrast to wealthy tribes
with successful gambling enterprises--whose access to the
highest reaches of the administration is vividly demonstrated
in the Hudson casino story--the C/A were fleeced,
unsuccessfully re-fleeced, and then abandoned. They have
nothing to show for their $107,000 in contributions, except
memories of a Presidential luncheon and the hollow echoes of
``encouragement'' to contribute given them along the way. The
administration and its hangers-on pursued donations from these
poor and vulnerable tribes without shame or, apparently,
remorse.
The Offer of R. Warren Meddoff
Two weeks prior to the November 5, 1996 election, the
President attended a DNC fundraiser in Florida. At that
fundraiser, as the President walked along the rope line meeting
and greeting people, R. Warren Meddoff thrust a business card
in his hand. The President continued walking and read the words
written on the back of the card: I have an associate that is
interested in donating $5 million to your campaign.1
The President then returned to Meddoff, and asked for another
card to give to his staff.
---------------------------------------------------------------------------
\1\ Testimony of R. Warren Meddoff, September 19, 1997, p. 7.
---------------------------------------------------------------------------
The President gave this second card to Harold Ickes, Deputy
Chief of Staff of the White House, and asked him to call
Meddoff about the potential contribution, which Ickes did
within two days. Ickes' calls to Meddoff from the White House
and Air Force One regarding contributions continued from
October 24, 1996 to October 31, 1996. Then, on October 31,
1996, only five days prior to the election, Ickes directed the
White House to fax instructions to Meddoff steering donations
to the DNC and several nonprofit groups favorable to the
President. Later the same day, Ickes called Meddoff and told
him to ``shred'' the fax. All of this was done without the
knowledge of the background of R. Warren Meddoff or the actual
donor.
From October 1996 until July 17, 1997, R. Warren Meddoff
was the Director of Government Affairs for Bukkehave, Inc.
(``Bukkehave'') of Fort Lauderdale, Florida.2
Bukkehave is a wholly owned U.S. subsidiary of a Danish
corporation, Bukkehave, Limited.3 Prior to his
employment with Bukkehave, Meddoff was a self-employed
consultant in the areas of real estate, investment development
and brokerage, and in financial matters with several foreign
governments.4
---------------------------------------------------------------------------
\2\ Deposition of R. Warren Meddoff, August 19, 1997, p. 6; see
also Meddoff testimony, p. 4. According to Meddoff, Bukkehave
``supplies vehicles and spare parts primarily to governments, the
United Nations, and charitable organizations operating in the third
world.'' Id.
\3\ Meddoff deposition, p. 6. Meddoff testified in his deposition
that the owners of Bukkehave, Limited were represented to him as Hans
Christian Bukkehave and Christian Haar, both Danish nationals. Id.
\4\ Meddoff testimony, p. 4.
---------------------------------------------------------------------------
Meddoff also had a business relationship with William
Morgan, a Texas businessman,5 dealing in pre-World
War II German governmental gold-backed bearer
bonds.6 Morgan indicated to Meddoff in early October
1996 that he would soon be closing a business transaction
involving the sale of bearer bonds from which he would receive
approximately $300 million in revenues.7 Morgan told
Meddoff that since they ``previously had made commitments to
both presidential campaigns,'' he would honor that obligation
and donate $5 million to each campaign.8 Morgan
subsequently called Meddoff on October 22, 1996 to inform him
that the transaction was proceeding and asked him to notify the
appropriate individuals that he would be prepared to make the
donations by the end of that month.9 Meddoff
previously had been invited by Mitchell Berger 10 to
attend a fund-raising dinner for the President on October 22,
1996 at the Biltmore Hotel in Coral Gables,
Florida.11 Meddoff attended the fund-raiser to speak
to the President on behalf of a client of Bukkehave, Inc. to
gain support for permitting humanitarian flights to Cuba, which
had been hit by a hurricane.12
---------------------------------------------------------------------------
\5\ Meddoff deposition, p. 11. Although Meddoff had a business
relationship with Morgan, they have never personally met. Id. at p. 13.
\6\ Meddoff testimony, p. 5.
\7\ Meddoff deposition, p. 14.
\8\ Id. See DNC memorandum from Penny (no last name listed) to
Bonnie (no last name listed) regarding $1,000,000 contribution, July
29, 1996 (Ex. 1) (noting that Penny had ``received a call from Meddoff
who relayed that Morgan wanted to contribute in excess of $1 million to
the Democratic campaign.'') This memorandum also notes that ``Leon
Panetta was apprised of the plan [to contribute] over a year ago.
Meddoff convinced Morgan to contribute the money through himself and
Mitchell [Berger] because Mitchell `is a real nice guy.' Meddoff said
Morgan is not looking for any appointments, favors, etc. However, he
would like some kind of tax benefits, if possible.'' See also Letter to
Senator Robert Dole from R. Warren Meddoff, Feb. 22, 1995 (Ex. 2). This
letter states that Meddoff and his client want to make a donation to
the Republican Party. Meddoff followed up on his letter with a phone
call to Senator Dole's office. A member of Senator Dole's staff
informed Meddoff that when the funds were available to please call back
and he would be instructed on how to make a proper donation to the
Republican party. Meddoff deposition, p. 22.
\9\ Id. at pp. 14-15.
\10\ According to Meddoff, Mitchell Berger was ``in charge of fund-
raising for the Democratic Party in the State of Florida.'' Id. at p.
22. Meddoff previously mentioned to Berger's law partner, Manuel
Kushner, that he would be making a large donation once a gold bond
transaction closed and that it could go through Berger so he would get
credit for such a large donation. Id. at p. 24; see also supra note 8.
\11\ Meddoff deposition, p. 22.
\12\ Bukkehave paid $1,500 for Meddoff to attend the dinner.
Meddoff deposition, p. 22. According to Meddoff, the Administration's
policy did not permit direct flights from the U.S. to Cuba. Bukkehave's
client, Catholic Relief Services, had materials warehoused in Miami to
assist the victims of the hurricane but was not allowed to deliver the
materials because of this policy. Id. at p. 23. The morning of the
fund-raiser, Meddoff faxed a letter to the White House expressing his
intention to speak to the President on this policy. Id. at p. 25. See
also Letter from R. Warren Meddoff to President Clinton regarding Cuban
humanitarian relief, October 22, 1997 (Ex. 3).
---------------------------------------------------------------------------
Although Meddoff attended the fund-raiser primarily to
speak to the President about those flights, he had talked
earlier that day to Morgan about informing the ``presidential
campaigns'' of Morgan's intent to make a large contribution to
each.13 Morgan and Meddoff discussed the possibility
that Meddoff would be unable to speak directly to the President
at the fund-raiser that evening. They concluded that Meddoff
should write the offer of a donation on the back of a business
card and hand it to the President.14
---------------------------------------------------------------------------
\13\ Meddoff deposition, p. 14. It is illegal to give contributions
to a Presidential federal election campaign that has agreed to limit
its spending in return for receiving public financing. There is a
$1,000 individual contribution limit to presidential primary
candidates. 2 U.S.C. Sec. 4412(a)(6). There is also a prohibition on
additional funding to presidential candidates in the general election.
26 U.S.C. Sec. 9003(b)(2) and 9012(b).
\14\ Meddoff deposition, p. 28.
---------------------------------------------------------------------------
At the fundraiser that evening, Meddoff approached the
President and said, ``Mr. President, this is for you,'' and
handed the President his business card.15 The back
of the business card read, I have an associate that is
interested in donating $5 million to your
campaign.16 As the President walked away, he glanced
down and read the card, then returned to Meddoff and asked for
another card to give his staff. The President promised that
someone from his staff would be in touch.17
According to Meddoff, the President also briefly discussed the
situation in Cuba and told him that humanitarian flights to
Cuba could resume.18 The entire conversation lasted
less than five minutes.19
---------------------------------------------------------------------------
\15\ Id. at pp. 28-29.
\16\ Meddoff testimony, p. 7.
\17\ Meddoff deposition, p. 29.
\18\ Meddoff testimony, p. 8.
\19\ Meddoff deposition, p. 29.
---------------------------------------------------------------------------
On October 23, 1996, the day after the fund-raiser, Meddoff
contacted Morgan to inform him that he had spoken directly to
the President and relayed his message regarding the
contribution.20 Harold Ickes left a message for
Meddoff on Bukkehave's answering machine on Saturday, October
24, 1996.21 Because Ickes left the message on a
Saturday, Meddoff did not receive the message until that
Monday, October 26, 1996.22 Ickes was not in the
office when Meddoff returned his call on Monday, October 26,
1996. Instead he was informed him that Ickes needed to speak to
Meddoff and would get back to him.23
---------------------------------------------------------------------------
\20\ Id. at p. 30.
\21\ Meddoff testimony, pp. 8-9. Ickes testified that he ordinarily
would have asked someone at the DNC to follow-up on Meddoff's offer.
However, given the shortness of the time and the fact that the
President had approached him directly about it, he pursued the offer
himself. Deposition of Harold Ickes, June 27, 1997, p. 40.
\22\ Telephone message from Harold Ickes produced by R. Warren
Meddoff, October 26, 1996 (Ex. 4).
\23\ Meddoff testimony, p. 9.
---------------------------------------------------------------------------
Later that same day, Ickes called Meddoff and informed him
that the President had given him Meddoff's business card.\24\
They discussed Morgan's proposed contribution. Meddoff
indicated that he did not expect the funds to become available
until at least November 1, 1996.\25\ Meddoff also told Ickes
that Morgan was looking for a ``tax-favorable way'' to make the
donation and was assured by Ickes that this could be worked
out.\26\ Meddoff further testified that Ickes told him ``that
there were methods of making tax-favorable contributions.''
\27\ According to Ickes, he informed Meddoff that because this
was a general election, contributions to the President's
campaign were restricted by the FECA, but that there were other
ways of making contributions to assist the President's re-
election.\28\ Meddoff also recalls discussing with Ickes that
the initial donation would be in the amount of $5 million, but
that Morgan anticipated being able to make a total contribution
in excess of $50 million over a period of time.\29\
---------------------------------------------------------------------------
\24\ Meddoff deposition, p. 38. Ickes testified that President
Clinton related the facts Meddoff testified to and asked him to call
Meddoff. Deposition of Harold Ickes, June 27, 1997, p. 38.
\25\ Meddoff deposition, p. 38. Meddoff did not recall whether
Ickes asked about how Morgan would be able to make such a large
contribution. Id. at p. 39. Ickes testified, however, that he ``tried
to find out a little bit about it. It was very vague, that he--that
Morgan has come into or had substantial funds, wanted to make
contributions, would prefer that some of those contributions go to
organizations that would be basically tax-exempt.'' Deposition of
Harold Ickes, June 27, 1997, p. 40.
\26\ Meddoff deposition, p. 39.
\27\ Meddoff testimony, p.10.
\28\ Deposition of Harold Ickes, June 27, 1997, p. 39.
\29\ Meddoff deposition, p. 44. See Ickes' handwritten notes taken
during his telephone conversation with Meddoff in which he wrote ``$55
million and $5 million,'' these notes confirm Meddoff's testimony
regarding the telephone conversation. October 30, 1996 (Ex. 5).
---------------------------------------------------------------------------
Meddoff testified that during his conversation with Ickes,
he was acting ``strictly in [the] capacity of forwarding on
messages and very much so just being an individual in the
middle that was trying to facilitate Mr. Morgan's wishes to
make a contribution and Mr. Ickes' desire to get a
contribution.'' \30\ According to Meddoff, both Ickes and
Morgan asked him if he would continue in his capacity as
intermediary.\31\ Morgan refused to be interviewed by the
Committee,\32\ but he has been quoted in newspapers to say that
he was strictly non-political and all he was doing was some tax
planning.\33\
---------------------------------------------------------------------------
\30\ Meddoff deposition, p. 43.
\31\ Meddoff deposition, pp. 43-44.
\32\ Morgan was not subpoenaed by the Committee because he did not
have firsthand knowledge of the conversations that occurred between
Meddoff and Ickes.
\33\ Robert Nolin, ``Businessman Regrets Contribution Offer,'' Sun-
Sentinel (Ft. Lauderdale), September 28, 1997, p. 3.
---------------------------------------------------------------------------
Ickes testified that after he hung up with Meddoff, he
called Eric Berman, who was the head of research at the
DNC.\34\ Ickes relayed his conversation with Meddoff to Berman
and asked him to personally run a check on Meddoff and
Morgan.\35\
---------------------------------------------------------------------------
\34\ Deposition of Harold Ickes, June 27, 1997, p. 40. This
immediate call to the DNC contradicts his testimony that he did not
have time to refer the matter to the DNC. See supra note 21.
\35\ Id. Ickes told Berman to ``get his ass in gear himself, not to
pawn this off on anybody.'' Id.
---------------------------------------------------------------------------
Ickes testified that he recalled receiving from Eric Berman
``either directly before or directly after the election, a very
slim packet of material about Morgan and company, and just
misplaced it.'' \36\ He further testified that because of press
inquiries he sent an additional memo on November 19, 1996 to
Berman requesting replacement for the information he lost.\37\
The Committee finds this explanation incredible because the
Meddoff incident did not come into the public eye until
February 1997.\38\
---------------------------------------------------------------------------
\36\ Id. at pp. 54-56.
\37\ While Ickes never spoke to Meddoff after his October 31, 1996
telephone conversation about shredding the fax (see below), apparently
his interest in Meddoff and Morgan continued. See Memorandum from
Harold Ickes to Eric Berman regarding William R. Morgan and R. Warren
Meddoff, November 19, 1996 (Ex. 6). Berman in response provided a fax
with biographies on November 25, 1996. See fax from Eric Berman, Dan
Fee and Rick Hess to Harold Ickes and Jessica Fitzgerald regarding
Meddoff, Morgan, Vaduz and Bukkehave, November 25, 1996 (Ex. 7).
Deposition of Harold Ickes, June 27, 1997, pp. 54-56.
\38\ Michael Isikoff, ``The White House Shell Game,'' Newsweek,
February 10, 1997, p. 34.
---------------------------------------------------------------------------
Ickes contacted Meddoff on October 29, 1996 and asked
whether $1.5 million could be disbursed within the next 24
hours because the campaign had an immediate need for money.\39\
When Meddoff told him that it was not possible to have the
money the next day, and that Morgan and he had not received any
instructions as to how to structure the donations and transfer
the funds. Ickes then asked whether it could be available in
the next 48 hours.\40\ After discussing this request with
Morgan, Meddoff relayed to Ickes that there was a possibility
that the money could be disbursed within that time, but that he
needed the information regarding where the funds should be
sent.\41\ Ickes told him that he would fax the
instructions.\42\ Ickes also told Meddoff that he would receive
information on nonprofit organizations that were friendly to
the President's campaign but inquired into whether Morgan would
also be willing to make a contribution to the DNC that would
not be tax deductible.\43\ Meddoff replied that he would talk
to Morgan about it, but thought that Morgan probably would be
willing to make such a contribution.\44\ Meddoff subsequently
contacted Morgan who was amenable to making a small donation
that would not be tax deductible.\45\
---------------------------------------------------------------------------
\39\ Meddoff deposition, p. 41.
\40\ Meddoff testimony, p. 12.
\41\ Meddoff deposition, p. 41. Morgan told Meddoff that he was
having difficulty in closing the transaction but that he would ``try to
put together the funds.'' Id. at p. 43. He instructed Meddoff to have
Ickes tell him to which groups the money should be sent. Id.
\42\ Id. at p. 41.
\43\ Meddoff deposition, p. 50 and Testimony of Harold Ickes,
October 8, 1997, p. 100.
\44\ Meddoff deposition, p. 50.
\45\ Id. at pp. 52-53.
---------------------------------------------------------------------------
Ickes testified that after speaking to Meddoff, he believes
that he called Minyon Moore, then political director of the
DNC, to ask if she knew any ``legitimate organizations'' that
could use last-minute money.\46\ She suggested the nonprofit
group National Coalition of Black Voter Participation. In
addition to the organization Moore recommended, Ickes himself
selected Vote Now 96, an organization to which the DNC had in
the past directed money.\47\ Ickes was familiar with Hugh
Westbrook and Gary Baron, individuals involved with Vote Now
96, a voter registration organization. He testified that ``they
were always out trolling for money.'' \48\ Ickes further
testified that he may have called Gary Baron directly and told
him there may be some money forthcoming, but made no
promises.\49\ Ickes also selected a group called Defeat 209
because he knew Pat Ewing, the Executive Director, and the
President had spoken out against California's Proposition 209,
a ballot initiative to ban preferential treatment on the basis
of race, gender and other immutable characteristics.\50\
---------------------------------------------------------------------------
\46\ Deposition of Harold Ickes, June 27, 1997, p. 52.
\47\ See the section of the report on the Teamsters.
\48\ Deposition of Harold Ickes, June 27, 1997, p. 53.
\49\ Id.
\50\ Id. at p. 52.
---------------------------------------------------------------------------
Ickes then called Karen Hancox, the Deputy Director of
Political Affairs at the White House, from Air Force One. He
dictated to her a list of these nonprofit organizations, as
well as their bank account and contact information, for her to
send to Meddoff, so that Morgan could immediately wire his
donations to them.51 Hancox typed this information
into a memorandum to Meddoff from Ickes, and directed one of
her staff to fax the memorandum to Meddoff.52 This
memorandum was faxed from the White House to Meddoff on October
31, 1996 at approximately 9:42 a.m.53 Ickes'
instruction to and use of White House staff and equipment to
send a fax providing information to send donations to the DNC
and nonprofit organizations is a potential violation of the
law.54
---------------------------------------------------------------------------
51 Deposition of Karen Hancox, June 9, 1997, p. 149.
See also Memorandum from Harold Ickes to R. Warren Meddoff regarding
donations, October 31, 1996, p.1 (Ex. 8).
52 Hancox deposition, p. 149.
53 Ex. 8 at p.1.
54 If Ickes solicited Meddoff for contributions, it
would appear that he violated criminal provisions of the Hatch Act,
specifically 5 U.S.C. Sec. 7323(b) which prohibits a federal employee
from soliciting political contributions from any location at any time.
---------------------------------------------------------------------------
After having the fax sent, Ickes called Meddoff later the
same day and informed him that DNC Finance Director Richard
Sullivan would contact him.55 Approximately 30
minutes after Meddoff received the faxed memorandum, he
received a telephone message that Sullivan had
called.56 Meddoff and Sullivan spoke several times
on October 31, 1996, during which Sullivan expressed his
concern regarding Ickes' handling of the matter.57
In fact, Sullivan commented to Meddoff that ``that's not the
way that they did things at the DNC.'' 58 Meddoff
testified that he talked to Sullivan at least four or five
times that day.59
---------------------------------------------------------------------------
55 Meddoff deposition, p. 47.
56 Id. at pp. 47-48.
57 Id. at p. 55.
58 Id.
59 Id. at p. 56. Sullivan testified that he called
Meddoff ``probably four'' times. Deposition of Richard Sullivan,
September 5, 1997, p. 48.
---------------------------------------------------------------------------
Upon receiving the memorandum faxed from the White House,
Meddoff immediately faxed a copy to Morgan and contacted him
regarding the information ``within ten minutes of the receipt
of this fax.'' 60 Morgan instructed him to ``proceed
forward to see what they wanted.'' 61 After
reviewing the memorandum, however, Morgan told Meddoff that the
organizations were ``unacceptable.'' 62 By this
time, however, Meddoff was no longer dealing with Ickes but
with Sullivan.
---------------------------------------------------------------------------
60 Meddoff deposition, p. 54.
61 Meddoff deposition, p. 55.
62 Id.
---------------------------------------------------------------------------
During the same day he received Ickes' fax, Meddoff also
called Don Fowler, Chairman of the DNC, at the suggestion of
Sullivan.63 Meddoff testified that he talked to
Fowler three to five times.64 Meddoff testified that
both Sullivan and Fowler were ``concerned about who Morgan was,
where the funds were coming from; that they wanted to slow
down.'' 65 Sullivan testified that when he talked to
Fowler about his conversations with Meddoff, `` Mr. Fowler
said, this situation makes me nervous, let's put this on hold
and see if we can find out something about Mr. Meddoff and/or
Mr. Morgan.'' 66
---------------------------------------------------------------------------
63 Id. at p. 56.
64 Id.
65 Id.
66 Deposition of Richard Sullivan, September 5, 1997,
p. 51.
---------------------------------------------------------------------------
Meddoff informed Sullivan that Morgan wanted a letter
``expressing appreciation for contributions to these efforts.''
67 He received a letter by facsimile the same day
around 12:56 p.m. from Don Fowler.68 Fowler's letter
reads, ``Please accept my deep appreciation for the substantial
financial support you have offered to the Democratic Party.
Your support will help advance President Clinton's agenda for
the American people as we enter the 21st Century. We look
forward to working with you in the future.'' 69
Meddoff marked up this letter to add references to the
President and to note that Morgan was the individual making the
contribution, and sent it back by facsimile to
Fowler.70 Although Fowler told Meddoff that he would
send out the revised letter, he never did. In fact, the DNC
``went silent'' and did not return Meddoff's telephone calls
inquiring into the status of the letter and the
contribution.71 Sullivan was instructed by Fowler
not to pursue the matter any more.72
---------------------------------------------------------------------------
67 Id. at p. 49.
68 Letter from Don Fowler to R. Warren Meddoff, October
31, 1996, p. 1 (Ex. 9).
69 Id. at p. 2.
70 Meddoff deposition, p. 60. See Letter from Donald L.
Fowler to R. Warren Meddoff with handwritten notes, October 31, 1996
(Ex. 10).
71 Meddoff deposition, p. 61.
72 Deposition of Richard Sullivan, September 5, 1997,
p. 71.
---------------------------------------------------------------------------
According to Meddoff, Ickes called him sometime on the
afternoon of October 31, 1996 to explain that the fax was sent
in error and requested that he ``shred'' it.73 Ickes
testified before the Committee that he did not tell Meddoff to
``shred the fax,'' but may have told Meddoff that the fax was
``inoperative.'' 74 Meddoff testified that he
immediately called Morgan because he was ``rather amazed at a
request to shred a document from somebody in the White House.''
75 After the conversation that afternoon, Meddoff
had no further contact with Ickes.76 Also, no one
from the DNC returned Meddoff's calls.
---------------------------------------------------------------------------
73 Meddoff testimony, p. 16.
74 Deposition of Harold Ickes, June 27, 1997, p. 42;
see also Ickes testimony, p. 187 (testifying that Ickes did ``not
recall that I said shred it. I am confident that I did not. I don't use
that kind of language.'').
75 Meddoff deposition, p. 58.
76 Id. at p. 62.
---------------------------------------------------------------------------
The next time Meddoff heard anything about making
contributions to the Democratic Party was the next month,
November 1996, when Mitchell Berger, the fundraiser who had
invited Meddoff to the dinner at which he met the President,
``approached him.'' 77 Berger informed him that the
DNC was not looking for large single donations but smaller
donations. He told Meddoff that all future donations should go
through him after the ``foul-up'' with Ickes.78
Meddoff testified that Berger contacted him on ``numerous
occasions'' after that discussion for
contributions.79 In December 1996, Berger requested
that Meddoff donate $500 to the campaign of Florida Lieutenant
Governor Buddy MacKay. The money was donated by Bukkehave, and
Meddoff subsequently attended a private meeting with the
Lieutenant Governor at Berger's office.80
---------------------------------------------------------------------------
77 Id. at p. 63.
78 Id.
79 Id. at pp. 63-64.
80 Id. at p. 64.
---------------------------------------------------------------------------
Berger and Meddoff also met in December 1996 to ``discuss
donations, support of the administration, and the agenda of the
Vice President.'' 81 At that time Berger suggested
getting together for breakfast with Bukkehave's Chief Executive
Officer, Christian Haar, to discuss how Bukkehave could make
donations to support the Democratic Party. In a December 23,
1996 memorandum sent by facsimile prior to the breakfast
meeting, Meddoff indicated to Berger that he wanted to discuss
arranging a meeting or photo-op with the President and Vice
President when he and Haar were to be in Washington, D.C., from
January 27 through 29, 1997.82 During the meeting
between Berger, Meddoff and Haar, Meddoff and Haar made clear
that Bukkehave wanted to communicate its concerns to the
Administration through the Vice President 83
regarding the United Nations and its procurement policies
concerning U.S.-manufactured goods. Berger requested that they
put their concerns in a letter, which he would forward to the
appropriate individual.84
---------------------------------------------------------------------------
81 Id. at p. 68.
82 Memorandum from R. Warren Meddoff to Mitchell
Berger, December 23, 1996 (Ex. 11).
83 Meddoff deposition, p. 72.
84 Id.
---------------------------------------------------------------------------
Immediately after their meeting, Meddoff forwarded a letter
to Berger listing Bukkehave's concerns.85 Berger
forwarded this letter to Leon Fuerth, Vice President Gore's
National Security Advisor.86 As a result of this
correspondence, and Berger's help, Meddoff was able to arrange
a meeting in Washington with Fuerth on January 14,
1997.87 Because Fuerth could not attend the meeting,
he instead sent John Norris of the Vice President's
staff.88 During this meeting at the Old Executive
Office Building, Norris and Meddoff discussed the UN's
procurement policies.89
---------------------------------------------------------------------------
85 Id. Letter from R. Warren Meddoff to Mitchell Berger
regarding restrictive UN purchase practices, December 26, 1996 (Ex.
12).
86 Letter from Mitchell Berger to Leon Fuerth, December
30, 1996 (Ex. 13).
87 Meddoff deposition, p. 75.
88 John Norris' calendar for January 14, 1997 (Ex. 14).
89 Meddoff deposition, p. 74.
---------------------------------------------------------------------------
Three days after the meeting with Norris, Berger contacted
Meddoff to request that he send a $25,000 contribution to the
Presidential Inaugural Committee by overnight mail to Mary Pat
Bonner, a consultant who was helping coordinate the
event.90 Berger indicated that if the donation was
made, Meddoff and Haar could attend a private dinner with the
President and Vice President during the week following the
inauguration, when they were scheduled to be in
Washington.91
---------------------------------------------------------------------------
90 Id. at pp. 67-76.
91 Meddoff testimony, p. 20.
---------------------------------------------------------------------------
Because Meddoff and Haar felt uncomfortable about being
asked to send such a large amount by overnight mail on the
basis of one telephone call, arrangements were made to meet
Bonner for lunch on January 28, 1997 to present the
contribution in person.92 Berger telephoned Meddoff
the day before the scheduled lunch to tell him that the DNC/
Inaugural Committee could not accept the contribution because
Haar was not a U.S. citizen, and ``they had great concerns over
accepting funds from a non-U.S.-based company.'' 93
Despite this conversation, Meddoff and Haar went to their
scheduled meeting with Bonner.94 When Bonner did not
appear, Meddoff telephoned her office and spoke to Bonner and
Berger. When Meddoff told Berger that it was ``not right to
have people in Washington standing by and then at the last
moment you deciding that you are not going to accept the
contribution,'' Berger told him ``[t]hat's just the way it is.
It's tough luck.'' 95 Meddoff reminded Berger of the
information he had from his dealings with Ickes, to which
Berger replied for him to ``take your best shot and let it
out.'' 96 Shortly thereafter, Meddoff spoke with
Newsweek regarding his contacts with the President and Ickes
and provided its reporters with a copy of the October 31, 1996
memorandum from Harold Ickes.97
---------------------------------------------------------------------------
92 Meddoff deposition, p. 65.
93 Id. at p. 66; Meddoff testimony, p. 23.
94 Meddoff deposition, p. 78.
95 Id. at p. 81.
96 Id.
98 Id. at pp. 82-83.
---------------------------------------------------------------------------
Neither Ickes nor the White House produced the original
memorandum to the Committee. Rather, Ickes and the White House
each produced a copy of the fax that Ickes had received from
Newsweek, which had received it from Meddoff.98
Ickes testified in his deposition that he never saw the
original of the memorandum.99 The Committee also has
never seen the original.100
---------------------------------------------------------------------------
\98\ Ex. 8 (This memorandum, which Ickes produced to the Committee,
contains a tag line at the top of each page indicating that Newsweek
had sent the memorandum by facsimile to Ickes).
\99\ Deposition of Harold Ickes, September 22, 1997, p. 232.
\100\ The destruction of a document to conceal a criminal violation
may constitute obstruction of justice. Similarly, destroying a document
that is responsive to this Committee's subpoena may violate 18 U.S.C.
Sec. 1505 (obstruction of proceedings before departments, agencies, and
committees).
---------------------------------------------------------------------------
This incident illustrates the misuse of nonprofit entities
by presidential campaigns and by donors seeking tax advantages.
Morgan through Meddoff, told Ickes he was interested in aiding
the President's re-election in a tax favorable way. Ickes then
attempted to steer Morgan through Meddoff to nonprofit
organizations that supported the President's re-election
efforts. Ickes' conduct was an attempt to circumvent both the
federal general election contribution prohibition and spending
limits imposed upon campaigns receiving public financing.
If Vote Now '96, The National Coalition of Black Voter
Participation or Defeat 209 had communication with Clinton/Gore
campaign officials about the steering of donors to these
entities, any contributions received under those circumstances
would result in illegal in-kind contributions to the campaign.
11 C.F.R. Sec. 109.1(c).101 The Committee was not
able to determine whether these organizations knew that Ickes
was referring donors to them for the purpose of advancing the
President's re-election. Further investigation is warranted.
The Committee believes Congress would do well to examine
whether it should continue to be legal for campaigns to refer
donors to nonprofit entities that, for all intents and
purposes, will further a candidate's election, and whether such
contributions to nonprofit entities should continue to be tax
deductible.
---------------------------------------------------------------------------
101 Vote Now '96 and The National Coalition of Black
Voter Participation are 501(c)(3) entities, donations made to these
organizations are tax deductible. Defeat 209 is a 501(c)(4) entity.
Donations made to a 501(c)(4) entity are not tax deductible.
---------------------------------------------------------------------------
Additionally, resolution of whether Ickes told Meddoff to
shred the fax requires reconciling contradictory testimony from
two witnesses. Nonetheless, there is no doubt that Ickes sent
Meddoff a fax using official government resources, nor that the
White House did not produce the original fax. If Ickes did
instruct Meddoff to shred the fax, that conduct may constitute
obstruction of justice. 18 U.S.C. Sec. 1505. Finally, the
Meddoff incident is indicative of the extent to which the White
House involved itself in raising money.
White House, DNC and Clinton-Gore Campaign Fundraising Efforts
Involving the International Brotherhood of Teamsters
INTRODUCTION
Labor unions and their political action committees spent
more than $119 million during the 1996 election cycle on
political contributions to federal candidates, on political and
issue advertising, and on other arguably campaign-related
activities.1 As part of its investigation, the
Committee examined several allegations related to efforts by
the White House, the DNC and the Clinton-Gore Campaign to raise
political contributions from labor unions and to encourage
labor expenditures favoring Democratic candidates. Such
allegations included charges that the White House, the DNC,
and/or the Clinton-Gore campaign undertook a range of
potentially improper or illegal efforts to ``cultivate'' labor
union officials and to encourage labor contributions. These
alleged efforts included:
---------------------------------------------------------------------------
\1\ Jennifer Shecter, ``Political Union: The Marriage of Labor &
Spending,'' Center for Responsive Politics Report, 1997
---------------------------------------------------------------------------
misusing federal property and resources;
participating in illegal ``contribution
swap'' schemes involving the International Brotherhood
of Teamsters (``IBT'' or ``Teamsters'');
promising Administration assistance on
specific policy matters as part of an effort to
encourage political contributions; and
granting extraordinary access to
Administration policy makers.
In investigating allegations in these areas, the Committee
issued document subpoenas to the AFL-CIO and the Teamsters'
union, and to several ``tax-exempt'' entities, including the
National Council of Senior Citizens, Citizen Action, and Vote
Now '96. The Committee also sought relevant documents from the
DNC, the Clinton-Gore campaign, the White House, and various
individuals with potentially relevant information. The
Committee conducted fifteen depositions and dozens of
interviews relating to these allegations. On October 9, 1997,
the Committee conducted a hearing to examine one facet of the
Teamsters/DNC contribution swap schemes.
The Committee's investigative efforts were substantially
limited by four factors. First, as described in detail
elsewhere in this report, many of the entities subpoenaed
refused to produce relevant documents to the Committee, citing
a range of purported ``First Amendment'' objections to the
Committee's requests.2 Among the more significant
non-compliant entities were the following:
---------------------------------------------------------------------------
\2\ See the section of this report on discussing subpoena
compliance issues.
---------------------------------------------------------------------------
AFL-CIO--Refused to produce documents
reflecting dealings with the White House, DNC and
Clinton-Gore campaign. Refused to produce relevant
materials from the files of Political Director Steven
Rosenthal, Secretary-Treasurer Richard Trumka,
President John Sweeney, and other individuals involved
in AFL-CIO campaign-related activities.
Teamsters--Refused to produce documents
reflecting dealings with the White House, the DNC, or
the Clinton-Gore campaign.
National Council of Senior Citizens--Refused
to produce documents relevant to the contribution swap
allegations.
Citizen Action--Refused to produce documents
relating to the contribution swap schemes or any other
campaign-related activities.3
---------------------------------------------------------------------------
\3\ As discussed more fully in another section of this report, the
investigation's December 31, 1997 deadline precluded enforcement of the
subpoenas issued to these entities.
---------------------------------------------------------------------------
Second, certain individuals asserted their Fifth Amendment
right against self-incrimination and refused to testify. Among
the persons invoking the Fifth Amendment were certain
individuals associated with the Teamsters contribution swap
schemes, including William Hamilton, formerly the Teamsters'
Government Affairs Director.4
---------------------------------------------------------------------------
\4\ Richard Trumka, Secretary Treasurer of the AFL-CIO, refused to
comply with a deposition subpoena issued by the Committee and later
reportedly asserted his Fifth Amendment rights before the U.S. Attorney
for the Southern District of New York.
---------------------------------------------------------------------------
Third, certain witnesses questioned by the Committee
provided inaccurate or misleading testimony regarding the
matters under investigation. Such testimony is addressed later
in this section.
Fourth, following consultation with the U.S. Attorney's
Office for the Southern District of New York, the Committee
agreed to limit the scope of its investigation in order to
reduce the possibility of interfering with ongoing criminal
prosecutions.5 This limitation most significantly
affected the Committee's investigation of certain aspects of
the ``contribution swap'' schemes.
---------------------------------------------------------------------------
\5\ At the request of the U.S. Attorney's Office, the Committee
agreed that it would not subpoena or otherwise pursue testimony from
several individuals, including Martin Davis, Jere Nash, Michael Ansara,
Nathaniel Charny, Steven Protrulis, and Rochelle Davis.
---------------------------------------------------------------------------
Fundraising efforts by the White House, DNC, and Clinton-Gore campaign
involving the Teamsters
Through the 1980, 1984 and 1988 campaigns, the Teamsters
supported Republican candidates for the Presidency of the
United States.6 In 1991, however, Ronald Carey was
elected President of the IBT and the union's political leanings
changed. Carey shifted IBT support to Democratic Party
candidates and causes, and allocated significant resources to
support Governor Clinton's 1992 campaign for the Presidency. A
document produced to the Committee by the White House described
this Teamsters' support as follows:
---------------------------------------------------------------------------
\6\ White House Document titled ``Teamster Notes'' (Ex. 1).
The Teamsters played an enormous role in the '92
campaign. They spent upwards of $2.4 million in
contributions to [Democratic] state coordinated
campaigns, the DNC, the Clinton campaign, DCCC/DSCC and
congressional candidates. They successfully educated
and mobilized several hundred thousand of their members
for the election and in many cases, local leaders and
staff all across the country worked full time on the
campaign.7
---------------------------------------------------------------------------
\7\ Id.
Following the 1992 campaign, however, the Teamsters'
support for Democratic political campaigns tapered off. The DNC
---------------------------------------------------------------------------
analyzed these circumstances as follows:
The Teamsters did not contribute anything to the DNC
in 1993 or 1994, due largely to internal union
politics. President Ron Carey is up for reelection in
1996 and is being strongly challenged by Jimmy Hoffa,
Jr. It will not be any easier for them to contribute
this cycle, but there is a new political director (Bill
Hamilton), and we ought to find ways for them to
contribute without the money going to the DNC (state
parties, NCEC, etc).8
---------------------------------------------------------------------------
\8\ Memorandum from Jim Thompson to Senator Dodd and Chairman
Fowler, February 13, 1997 (Ex. 2).
In early 1995, the White House determined that it would
attempt to renew the Teamsters' interest in Democratic
campaigns. Documents produced by the White House demonstrate
the nature of this effort. In January or February, 1995, Harold
Ickes considered several specific recommendations for
encouraging interest by unions in President Clinton's and the
DNC's upcoming 1996 campaigns.9 These
recommendations included inviting labor leaders to meet with
the President and other Administration policy makers, and
discussing Administration assistance on certain specific policy
initiatives.
---------------------------------------------------------------------------
\9\ See Deposition of Harold Ickes, September 22, 1997, pp. 197-
218. Ickes' duties as Deputy Chief of Staff included service as the
White House ``point person'' for organized labor, and the White House
``point person'' for the Clinton-Gore Campaign and the DNC. Testimony
of Harold Ickes, October 8, 1997, pp. 8-9, 160.
---------------------------------------------------------------------------
Early in 1995, Ickes reviewed a document titled ``Teamster
Notes'' (produced to the Committee by the White House)
containing the following analysis of the Teamster's political
activities:
In the early days of the Administration, [the
Teamsters] worked to mobilize hundreds of thousands of
Teamster families to contact members of Congress in
support of the President's economic plan (they sent
150,000 post cards to Arlen Specter alone.) When they
are plugged in and energized they can be a huge asset.
Over the past two years their enthusiasm has died down.
They have been almost invisible at the DNC and other
party committees. . . . With our proclamations on
striker replacement . . . and our NLRB appointments
(very important to Carey) we are in a good position to
rekindle the Teamster leadership's enthusiasm for the
Administration, but they have some parochial issues
that we need to work on.10
---------------------------------------------------------------------------
\10\ Ex. 1 (emphasis added by Ickes).
Ickes highlighted language in the document indicating that
Bill Hamilton would be the ``new director of government
relations'' for the IBT, and that ``He [Hamilton] will control
the DRIVE (Teamster pac) purse strings.'' 11
---------------------------------------------------------------------------
\11\ Id. (emphasis added by Ickes). See generally Ickes deposition,
September 22, 1997, pp. 121-132.
---------------------------------------------------------------------------
Later in the document (under the heading
``Recommendations''), Ickes underlined portions of the
following text:
It is in our best interest to develop a better
relationship with Carey. . . . Carey is not a
schmoozer--he wants results on issues he cares about.
The Diamond Walnut strike and the organizing effort at
Pony Express are two of Carey's biggest problems. We
should assist in any way possible.12
---------------------------------------------------------------------------
\12\ Ex. 1 (emphasis added by Ickes).
In the months following his review of that document, Ickes
met on three occasions with Bill Hamilton and other union
representatives to discuss the Diamond Walnut Strike, the Pony
Express matter, and other issues important to the
Teamsters.13 One such meeting was held in late March
1996, and included Hamilton, Ickes, Deputy Transportation
Secretary Mort Downey, Labor Undersecretary Tom Glynn, Steve
Silberman from Cabinet Affairs at the White House, and Steve
Rosenthal, then Assistant Secretary of Labor for
Policy.14
---------------------------------------------------------------------------
\13\ Internal Teamster Memorandum drafted by Bill Hamilton, March
27, 1995 (Ex. 3).
\14\ Id. Rosenthal later became the PAC Director for the AFL-CIO.
---------------------------------------------------------------------------
As set forth in a contemporaneous memorandum prepared by
Hamilton, the ``Outcomes'' of the meeting included commitments
by the Administration to take steps that could benefit the
Teamsters on the Diamond Walnut strike, the Pony Express
matter, and other issues. The memo states, in part:
Diamond Walnut--Ickes said he met face-to-face with
USTR Mickey Kantor last week and that Kantor agreed to
use his discretionary authority to try to convince the
CEO of that company that they should settle the
dispute.15
---------------------------------------------------------------------------
\15\ Id.
Jennifer O'Connor, Ickes' aide at the White House, testified
that Ickes asked her to follow up with Mr. Kantor to see if
Kantor had contacted the Diamond Walnut company. O'Connor
telephoned Kantor's office and determined that Kantor had
indeed made contact with Diamond Walnut.16 O'Connor
confirmed that the purpose of Kantor's contact with Diamond
Walnut was an attempt to assist the Teamsters.17 (By
contrast, Ickes testified in his deposition that he was not
aware of any steps ever taken by the Administration relating to
the Diamond Walnut strike.18)
---------------------------------------------------------------------------
\16\ Deposition of Jennifer O'Connor, October 6, 1997, pp. 179-181.
\17\ Id.
\18\ Ickes deposition, September 22, 1997, p. 141.
---------------------------------------------------------------------------
Other ``Outcomes'' listed in the Hamilton memo included
Administration actions relating to Pony Express, to
``regulatory changes in the administration of Section 13(c) of
the transit act,'' to ``NAFTA Trade Adjustment Assistance,''
and to ``Amtrak labor protections.'' 19 On the Pony
Express matter, the Labor Department agreed ``to move
expeditiously'' on certain investigations, and the White House
agreed ``to try to set up a meeting for [Teamster officials]
with the Fed[eral Reserve Board].'' With respect to the other
matters, Deputy Transportation Secretary Downey agreed to
assist with potential regulatory changes ``as a way to head off
unwanted restrictions on labor protections . . .;'' Labor
Undersecretary Glynn agreed ``to see what could be done through
the regulatory process to see that the trade adjustment
assistance program is extended to drivers and other
transportation workers;'' Ickes agreed to look into a proposal
potentially affecting freight railroad workers, and ``agreed to
ask [White House Chief of Staff Leon] Panetta about bringing in
the railroad CEO's to lean on them.'' 20
---------------------------------------------------------------------------
\19\ Ex. 3.
\20\ Id.
---------------------------------------------------------------------------
The Administration's efforts on these issues appear to have
succeeded in rekindling the Teamsters' enthusiasm for
Democratic campaigns. Beginning in late 1995, the Teamsters
launched a significant effort to assist Democratic Senate
candidate Ron Wyden defeat Republican Gordon Smith in a special
election to fill the seat vacated by Senator Packwood in
Oregon.21
---------------------------------------------------------------------------
\21\ The Teamsters planned to supported the Wyden campaign through
direct mailings, get-out-the-vote (GOTV) and voter registration
efforts, distribution of yard signs and bumper stickers, operation of
phone banks, and DRIVE (PAC) contributions. In addition, the Teamsters
assigned two staff members to work full-time supporting the campaign.
Bill Hamilton wanted ``to make [the Oregon] campaign an unprecedented
coordinated Teamster effort'' to ``[e]lect a Democrat to fill the
vacant Packwood Senate seat.'' Internal Teamsters Memorandum from Bill
Hamilton to Al Panek, re: Oregon, October 19, 1995 (Ex. 4). The IBT
also intended to run several ``issue advertisements'' on the radio
critical of Gordon Smith. According to Bill Hamilton, these ads were
``independent expenditure[s] aimed at influencing the . . . election.''
Internal Teamsters Memorandum from Bill Hamilton to David Frulla, re:
Oregon, January 2, 1996 (Ex. 5).
---------------------------------------------------------------------------
This close relationship between the White House and the
Teamsters continued throughout 1996. As Hamilton noted in a
March 14, 1996 memo regarding a possible Teamster endorsement
of President Clinton's campaign:
It's also a fact that we ask for and get, on almost a
daily basis, help from the Clinton Administration for
one thing or another. In the absence of a better
candidate, it doesn't make sense to complicate our
ability to continue doing so.22
---------------------------------------------------------------------------
\22\ Internal Teamster Memorandum drafted by Bill Hamilton re: Ron
Carey's comments at AFL-CIO meeting, March 14, 1996 (Ex. 6).
Similarly, in the text of what is titled ``Political Action
---------------------------------------------------------------------------
Speech to Local Union Leadership,'' Hamilton wrote:
But let's understand each other. We need Bill Clinton and
Bill Clinton needs us.
Every day we get help in small ways from Bill Clinton--he
makes a phone call, he uses the veto threat, he makes an
appointment. In the last few months:
--Stopped the NAFTA border crossings.
--Told his negotiators to open up Japanese airports
to UPS planes, competitively disadvantaged to FedEx
there. (We asked him to do it.)
--Killed a provision that Dole wrote into the budget
bill to make it easy for newspapers to contract out our
work.
--Guaranteed a veto on Davis-Bacon repeal.
--His NLRB has changed the rules to make it easier to
get hearings and decisions toward single-cit [sic] unit
determination.
--He stood up against cuts in OSHA, job training.
--He promised to veto the TEAM Act and FLSA
changes.23
---------------------------------------------------------------------------
\23\ Internal Teamster Document titled Political Action Speech to
Local Union Leadership (Ex. 7) (emphasis in original).
In an effort to further strengthen the relationship with
the Teamsters, Carey and Hamilton were strongly encouraged by
White House and DNC personnel to attend White House ``coffees''
and other events. At one such event, Hamilton met with the Vice
President and discussed an issue arising under the North
---------------------------------------------------------------------------
American Free Trade Agreement (``NAFTA''):
The White House has called several times to try to
invite you [Ron Carey] to breakfast with the President,
and we've begged off. . . . At a similar breakfast with
the V-P last week I broached the issue of the [American
Trucking Association's] attempt to bring Mexican
truckers into the U.S. as owner-operators on
``business'' visas. As a result, we're following up
with his staff and the State Department to head it
off.24
---------------------------------------------------------------------------
\24\ Internal Teamster Memorandum from Bill Hamilton to Ron Carey,
April 29, 1996 (Ex. 8).
Hamilton and the Teamsters were ultimately successful in
obtaining Administration assistance on the NAFTA cross-border
trucking issue.25 Indeed, the Administration delayed
implementation of a previously planned executive action by more
than one year. A December 19, 1996 internal Teamster memorandum
from Hamilton to Carey indicates that the delay was tied both
to the U.S. Presidential election and to Carey's internal bid
for the Teamster presidency:
---------------------------------------------------------------------------
\25\ On December 4, 1995, Secretary of Transportation Federico Pena
unequivocally stated ``we're ready for December 18th'', the original
date set for Mexican trucks to gain free access to U.S. highways in the
border states. See Transcript, speech given by Secretary Pena at a
joint press conference with his Mexican counterpart on December 4, 1995
(Ex. 9). The anticipated action did not occur in 1995, or in 1996 for
that matter. See Internal Teamster Memorandum from Bill Hamilton to Ron
Carey, December 19, 1996 (Ex. 10). See also ``Truckers, Supplier Press
Clinton to Open Border,'' Journal of Commerce, December 19, 1996
(Reporting that DOT action was motivated by a desire to encourage
Teamsters support for Democratic campaigns).
Yesterday was the one-year anniversary of the delay
in the implementation of the NAFTA border cross
truckings. Originally as of December 18, 1995, Mexican
trucks and drivers were to be allowed to go anywhere
with [sic] the state of their entry. . . . The bottom
line: now that their election and your [Ron Carey's]
election is over, they are near a decision to go
forward and open the border. . . . We might be able to
wangle a further delay of 60 to 90 days on pure
political grounds--that doing it now undercuts your new
election mandate.26
---------------------------------------------------------------------------
\26\ Ex. 10 (emphasis in original).
The Administration's efforts to assist the Teamsters on all
of the matters described above suggest a potentially serious
problem. The documentary record indicates that Ickes and other
Administration officials provided assistance to the Teamsters
on specific policy matters with the intention of enticing the
Teamsters to participate in Democratic campaigns and causes.
Federal law prohibits any government official from ``promising
. . . special consideration'' in connection with a government
policy or program in return for ``. . . support of or
opposition to any candidate or political party. . . .'' 18
U.S.C. Sec. 600. That provision has been interpreted to outlaw
efforts to ``entice'' future political support by promising
government assistance.27 In addition, 5 U.S.C.
Sec. 7323 prohibits a federal employee from ``. . . us[ing] his
official authority or influence for the purpose of interfering
with or affecting the result of an election.'' Further, these
facts demonstrate a number of potential violations of 3 C.F.R.
100.735-4, requiring that executive branch employees ``shall
avoid any action . . . which might result in, or create the
appearance of . . . [g]iving preferential treatment to any
person; [or] . . . [m]aking a Government decision outside
official channels.'' The Committee recommends further
investigation of these matters.
---------------------------------------------------------------------------
\27\ Memorandum Opinion for the Assistant Attorney General,
Criminal Division, February 25, 1980.
---------------------------------------------------------------------------
The Teamsters ``Contribution Swap'' schemes
Despite the efforts of the White House and the DNC to
``court'' the Teamsters during 1995 and early 1996, by Spring
1996 the Teamsters'' leadership was ``somewhat distracted'' by
the internal race for the Teamsters'' Presidency.28
As a result, the Teamsters'' union was not participating in
federal electoral politics at the same extraordinary level as
it had in the 1992 campaign.29 In May or early June
1996, a plan for a ``contribution-swap scheme'' between the
Teamsters and the DNC was conceived. It was relatively simple:
the DNC agreed to find a $100,000 donor for Ron Carey's
campaign for reelection as Teamster president; in exchange, the
Teamsters'' PAC director, Bill Hamilton, would steer
approximately $1 million to state Democratic
parties.30
---------------------------------------------------------------------------
\28\ Deposition of David Dunphy, October 28, 1997, pp. 42-43.
\29\ Id.
\30\ United States of America v. Martin Davis, U.S. District Court,
Southern District of New York, Criminal Information 97 Cr., pp. 12-13.
(Ex. 11).
---------------------------------------------------------------------------
Involved in the initial discussions of the scheme were
Martin Davis, a principal of an organization named ``The
November Group'' (that simultaneously served as a consultant
for both Carey and the DNC), and Terry McAuliffe, a former
Clinton-Gore Campaign Finance Chairman who was engaged in
special projects for the DNC during the summer months of
1996.31 Martin Davis described the initial
conversations regarding the proposed scheme as follows:
---------------------------------------------------------------------------
\31\ Id.; Deposition of Terrence McAuliffe, September 18, 1997, pp.
9-10.
In the spring and summer of 1996, I informed
individuals, including a former official of the
Clinton-Gore '96 Re-election Committee and the
Democratic National Committee, that I wanted to help
the DNC with fundraising from labor groups including
the Teamsters. I told them that I wanted to raise more
money from the Teamsters than they originally
anticipated. I also asked them if they could help Mr.
Carey by having the DNC raised [sic] $100,000 for the
Carey campaign.
The people I was dealing with agreed to try to find a
contributor for the Carey campaign. Mr. [Jere] Nash [a
Carey campaign consultant] and the Teamsters Director
of Government Affairs [Mr. Bill Hamilton] knew of my
efforts to leverage the planned Teamster contributions
to Democratic party organizations in order to obtain
contributions to the Carey campaign.32
---------------------------------------------------------------------------
\32\ Martin Davis Guilty Plea allocution, U.S. District Court,
Southern District of New York, September 18, 1997, pp. 25-26. (Ex. 12).
Soon after the initial discussions, Laura Hartigan, the
Finance Director for the Clinton-Gore campaign, and Richard
Sullivan, the DNC's Finance Director, became involved.
Sullivan's initial involvement occurred in May or June 1996.
Sullivan had one or more conversations with Hartigan and Davis
and discussed the possibility that certain DNC contributors
might qualify to give to Carey's campaign.33
Sullivan has described his understanding of the proposed
arrangement with Martin Davis as follows:
---------------------------------------------------------------------------
\33\ Deposition of Richard Sullivan, September 5, 1997, pp. 80-88,
94.
Q: Was it your understanding that Laura Hartigan was
suggesting that you help Ron Carey?
A: Um, yeah, it could be interpreted that way.
Martin Davis . . . told me that he was working with .
. . Laura [Hartigan] to raise money from many of the
labor unions. . . . He stated that . . . he would be
working with Laura on this through the course of the-
that he wanted to be helpful to the Democratic cause
and that he would be working with Laura through the
course of the next couple of months on various unions,
and that--but that it would--it would be a personal
favor to him if we could help him raise some money for
Ron Carey's election.34
---------------------------------------------------------------------------
\34\ Id. at pp. 85-86.
On or about June 12, 1996, Hartigan wrote a memorandum to
Martin Davis, requesting Teamster PAC donations to specific
state Democratic parties. Less than one week later, on June 17,
Davis attended a small White House luncheon with the President
and eight other guests.35 According to a White House
document discussing the background of the events guests, Davis
was ``extremely active in supporting the campaign.''
36 McAuliffe and Hartigan also attended the
luncheon.37
---------------------------------------------------------------------------
\35\ This is the same luncheon attended by representatives of the
Cheyenne and Arapaho tribes which is discussed in another section of
the report.
\36\ DNC Briefing Memorandum for June 17, 1996 DNC Presidential
Luncheon, June 16, 1996 (Ex. 13).
\37\ The Committee has interviewed several attendees at the
luncheon. According to those attendees, guests were permitted during
and after the luncheon to speak with the President regarding matters
concerning them. None of the guests interviewed was either privy to, or
has a clear recollection of any conversations between Martin Davis and
the President. Because the Committee has not been able to speak with
Davis, it cannot be determined whether Davis ever discussed Teamster
fundraising or Carey's campaign with the President.
---------------------------------------------------------------------------
Shortly following the White House luncheon, the Teamsters
responded to Hartigan's June 12, request for Teamster funds. On
June 21, Bill Hamilton instructed that DRIVE contribution
checks be issued to state Democratic parties in amounts which
corresponded with those requested by Hartigan.38 On
or about June 24 and 25, $236,000 was transferred from Teamster
DRIVE funds to the specified state Democratic
parties.39
---------------------------------------------------------------------------
\38\ Memorandum from Bill Hamilton to Greg Mullenholz, June 21,
1996 (Ex. 14).
\39\ Ex. 11, p. 20.
---------------------------------------------------------------------------
Referring to Hartigan's June 12, memorandum, Davis has
stated:
In June 1996 I forwarded to the Teamsters a fax from
the DNC requesting that the Teamsters make
contributions to certain state Democratic parties
totaling more than $200,000. Within the next few weeks,
I was informed by either the Clinton-Gore Committee or
the DNC that they identified a donor who was willing to
give $100,000 to the Carey campaign through Teamsters
for a Corruption Free Union [a Ron Carey campaign
committee].40
---------------------------------------------------------------------------
\40\ Ex. 12, p. 26.
In late June/early July 1996, the DNC took steps to locate
a donor for Carey's campaign. Sullivan assigned responsibility
for DNC fundraising in the Northern California region to DNC
employee Mark Thomann. In connection with that new assignment,
Sullivan instructed Thomann to follow-up on outstanding
contribution commitments made by attendees of a June 9, 1996
DNC ``Presidential Dinner'' fundraiser at the San Francisco
home of Senator Diane Feinstein and her husband, Richard
Blum.41 Among the outstanding contribution
commitments was one for $100,000 made by Judith
Vazquez.42
---------------------------------------------------------------------------
\41\ Deposition of Mark Thomann, pp. 20-21.
\42\ The DNC's Invitation List describes Vazquez as ``the richest
female entrepreneur in the Phillippines.'' DNC Briefing Memo for DNC
Presidential Dinner, June 8, 1996 (Ex. 15). Vazquez's lawyers
understood the dinner to carry a $100,000/plate price tag. Transcribed
Interview of Twila Foster (Vazquez's attorney), October 20, 1997, p.
10; Transcribed Interview of Noah Novogrodsky (Vazquez's attorney),
October 13, 1997, p. 24. Vazquez made the $100,000 commitment because
she wanted to meet the President, and wanted to support his campaign.
Novogrodsky Interview, p. 12; Deposition of Mark Thomann, September 23,
1997, p. 60.
---------------------------------------------------------------------------
Vazquez's $100,000 commitment was problematic. Vazquez is a
Philippine national--she is not an American citizen and does
not hold a green card.43 Thus, Vazquez could not
legally contribute to the DNC. Nevertheless, Vazquez was
invited to, and attended the June 9 fundraiser.44
---------------------------------------------------------------------------
\43\ Deposition of Mark Thomann, pp. 29-30. The American subsidiary
of Vazquez' company had no U.S. earnings and was also ineligible to
contribute to the DNC. Testimony of Mark Thomann, October 9, 1997, pp.
9-10.
\44\ Richard Blum submitted a Statement to the Committee asserting
that he met with Vazquez prior to the fundraiser, realized she was a
foreign citizen and invited her to attend the fundraising event simply
as a ``guest.'' Statement of Richard C. Blum (Ex. 16). Vazquez informed
Committee staff in a telephone interview that she did not meet with
Blum prior to the fundraiser.
---------------------------------------------------------------------------
Either contemporaneous with, or following the event,
Vazquez or her friend and banker, Shirley Nelson, was informed
that the $100,000 Vazquez contribution should not be directed
to the DNC.45 Instead, they were told to direct the
donation to Vote Now '96, a tax-exempt ``Get Out the Vote''
organization that focused on traditionally Democratic
constituencies.46
---------------------------------------------------------------------------
\45\ Documents obtained by the Committee suggest that Blum directed
that Vazquez's $100,000 commitment should be channeled instead to Vote
Now '96. See Novogrodsky notes from ``7/30 conversation with Shirley
Nelson'' (Shirley ``acknowledged that Vote Now '96 was the brainchild
of ``Diane's [Senator Feinstein's] husband' '') (Ex. 17). By contrast,
Thomann testified that he believed that Marvin Rosen, the DNC's Finance
Chairman, suggested that Vazquez's donation be directed to Vote Now
'96. Thomann deposition, pp. 28-29. Shirley Nelson corroborated
Thomann's version of events in a telephone interview with Committee
staff.
\46\ Id.
---------------------------------------------------------------------------
When Thomann initially received his instruction to follow-
up on the Vazquez contribution, he was given a DNC commitment
sheet that identified Vote Now '96 as the intended recipient of
the $100,000 contribution. Shortly thereafter, Thomann received
a telephone call from Richard Sullivan regarding Vazquez's
contribution. In that telephone call, Sullivan told Thomann
that there was to be ``a change of direction,'' and that the
contribution should be made to Carey's campaign committee,
``Teamsters for a Corruption Free Union.'' 47
\47\ Thomann testimony, pp. 72-73.
---------------------------------------------------------------------------
Richard Sullivan called me and asked whether or not
Judith was going to make a contribution to Vote '96 and
my response in the initial part of the conversation was
``I'm checking it out with counsel,'' the legalities
out with counsel. Then he apprised me of a change in
direction and he brought up the possibility of Judith
making a contribution to the Teamsters for a Corruption
Free Union.
My first reaction was laughter, based on the fact
that I couldn't quite grasp Teamsters for a Corruption
Free Union. I had no idea what it was. He did tell me
that it was the Ron Carey campaign, and I asked what
the legalities were and he gave me the parameters of
the contribution, whether or not she was capable of
making a contribution, what the parameters would be. He
told me that it needed to be an individual and that
individual could not have employees, and therefore
asked whether or not Pacific Duvas, the American
subsidiary [owned by Ms. Vazquez], had employees and if
that was a potential source of a
contribution.48
---------------------------------------------------------------------------
\48\ Thomann deposition, p. 38. Thomann provided consistent
testimony during the October 9, 1997 hearing. Thomann testimony, pp.
14-15.
After speaking with Sullivan, Thomann contacted Vazquez,
and requested that she redirect a portion of her $100,000
contribution to Teamsters for a Corruption Free
Union.49 Vazquez agreed to do so, and wrote to her
banker, Shirley Nelson, with the following instructions:
---------------------------------------------------------------------------
\49\ Thomann testimony, pp. 19-20.
I received a call from Mr. Mark Thomann, Finance Director
of the Democratic National Committee with a request that our
donation from DUVAZ Pacific Corporation be distributed as
follows:
1. Fifty Thousand Dollars ($50,000) to the Teamsters
for a Corruption Free Union; and
2. Fifty Thousand Dollars ($50,000) to Vote 1996.
These amounts are to be transferred immediately to the
accounts of the parties concerned and are to be drawn from
DUVAZ Pacific Corporation, CA# [account number]. . .
.50
---------------------------------------------------------------------------
\50\ Letter from Judith Vasquez to Summit Bank, July 12, 1996 (Ex.
18).
---------------------------------------------------------------------------
At this point in time--July 12, 1996--it appeared that the
DNC had succeeded in directing funds to Carey's campaign. The
DNC, in fact, had control over precisely how and where the
contribution from Judith Vazquez (a Philippine National) would
be utilized, instructing her to whom she should write the
checks.51 Shortly after Vazquez's letter was sent,
however, Vazquez's attorneys learned of her intentions to
donate to the Carey campaign and intervened to stop the
donation.52
---------------------------------------------------------------------------
\51\ Thomann testimony, p. 20.
\52\ Novogrodsky Interview, p. 34. Vazquez had retained attorneys
at the firm of Jackson, Tufts, Cole & Black in San Francisco on a
corporate law issue in June 1996. Part of the attorneys' work for
Vazquez included an analysis, beginning in early June, of the legality
of the donations that had been requested by the DNC. Foster Interview,
pp. 7-9. By late June/early July, the lawyers had concluded that their
client could only give to a charitable organization of some sort:
I made it clear to Mark Thomann that the only way we could
think of to have our client give a donation would be to a
charity . . . I told him very clearly and plainly that it
was our legal conclusion that she couldn't give to things
---------------------------------------------------------------------------
that were not 501(c)(3) organizations.
Novogrodsky Interview, p. 41.
When Vazquez's counsel received a copy of her July 12, 1996
letter, they acted immediately.53 They determined
that Vazquez could not legally donate to Teamsters for a
Corruption Free Union:
---------------------------------------------------------------------------
\53\ Id. at p. 83.
There were two very quick phone calls, and
immediately, I concluded that Teamsters for a
Corruption-Free Union could not receive a gift because
they weren't a charity, and I told Mark Thomann that, .
. . and I tried to put the brakes on this donation
going because the directions in the July 12th letter
seemed to suggest that this was a final outcome, and I
had discovered that would be illegal.54
---------------------------------------------------------------------------
\54\ Id. at p. 34.
Vazquez's lawyers succeeded in stopping the donation to
---------------------------------------------------------------------------
Teamsters for a Corruption Free Union.
Q: Is it your understanding that your law firm's
legal advice was the reason that the $50,000 donation
to Teamsters for a Corruption-Free Union was not made?
A: Yes. We gave advice that she should not make it,
and that advice was followed.55
---------------------------------------------------------------------------
\55\ Id. at p. 70.
After Thomann was informed by Vazquez's attorneys that the
requested donation would be illegal, Thomann became
---------------------------------------------------------------------------
uncomfortable:
And after we had determined that the Teamsters for a
Corruption Free Union was not a possible source of--for
a contribution, I was frankly very distraught and upset
that I was put in this situation. . . .56
---------------------------------------------------------------------------
\56\ Thomann deposition, p. 47. Thomann provided consistent
testimony during the October 9, 1997 hearing. See Thomann testimony,
pp. 21-22.
Thomann contacted Vazquez over the following days and
discussed the situation. Their communications, and
communications among Vazquez and her attorneys, resulted in two
letters. First, on July 22, 1996, Vazquez wrote to her banker,
asking that the $100,000 in requested contributions be held
temporarily ``until everything is straightened out.''
57 Then, on July 25, 1996, Vazquez wrote again to
her bank, instructing that:
---------------------------------------------------------------------------
\57\ Letter from Judith Vasquez to Summit Bank, July 22, 1996 (Ex.
19).
[A]s per the recommendation of the Finance Director
of the Democratic Party, Mark Thomann, Duvaz Pacific
Corporation [Vazquez's company] is donating the amount
of US $100,000.00 to ``VOTE '96.'' 58
---------------------------------------------------------------------------
\58\ Letter from Judith Vasquez to Summit Bank, July 25, 1996 (Ex.
20). Allegations have been made that Vote Now '96 may have been used as
a conduit to channel money to Carey's campaign. Although Vote Now '96
did in fact frequently provide grants to Project Vote and other GOTV
organizations involved in various aspects of the contribution swap
schemes, the Committee's investigation has not documented any link
between Vote Now '96 and the Carey campaign. The Committee has not,
however, examined financial or accounting records for Vote Now '96 and
Project Vote.
At this time, Thomann became so uncomfortable with the
situation that he decided to recuse himself entirely from the
---------------------------------------------------------------------------
matter. Thomann testified:
Well, the most important thing is that I was in
constant contact with Judith Vazquez' local counsel and
Shirley Nelson, as well as Richard [Sullivan] to a
certain degree, in regards to this Teamsters for a
Corruption Free Union contribution. I asked that--after
determining that it was not an appropriate contribution
for her to be making, I had asked that I be left out of
the collection of this contribution. . . .59
---------------------------------------------------------------------------
\59\ Thomann testimony, p. 22. During this time, Thomann was also
receiving significant pressure from Nathaniel Charney, a lawyer who
represented Carey's campaign. Thomann had determined that Vazquez did,
in fact, have employees and thus could not, as an individual,
contribute to Carey's campaign. Thomann testified that he used that
rationale as ``my way out'' with Charney, but that Charney replied by
asking if Vazquez's husband could contribute to Carey's campaign.
Thomann testimony, pp. 24-25.
I had tremendous trepidation in regards to sending a
contribution to a campaign--a labor campaign. I didn't know
anything about it and I just felt that it was not
appropriate.60
---------------------------------------------------------------------------
\60\ Thomann deposition, p. 48. Thomann provided consistent
testimony during the October 9, 1997 hearing. Thomann testimony, pp.
20-21.
---------------------------------------------------------------------------
Thereafter, on July 31, 1996, Vazquez made a $100,000
donation to Vote Now '96,61 despite concerns raised
by Vazquez's counsel about the DNC directing funds to a
purportedly nonpartisan tax exempt organization.62
---------------------------------------------------------------------------
\61\ Summit Bank Cashier's Check made payable to Vote Now '96 from
Duvaz Pacific Corporation, July 31, 1996 (Ex. 21).
\62\ Novogrodsky Interview, p. 79. Vazquez's lawyer testified: ``I
knew that a tight nexus between a DNC official suggesting that our
client give money to a 501(c)(3) would jeopardize the purpose of the
501(c)(3).'' Id.
---------------------------------------------------------------------------
After the Vazquez donation to Carey's campaign failed to
materialize, Martin Davis resumed his discussions with Richard
Sullivan and others regarding the contribution swap scheme:
I continued to communicate with these officials [of
the DNC and/or Clinton-Gore Campaign] in an effort to
find a person willing to contribute $100,000 to the
Carey campaign. In order to insure that the DNC
fulfilled its commitment to raise a hundred thousand
dollars, I asked Mr. Nash to make sure that the
Teamsters Director of Government Affairs would direct
any DNC or Clinton-Gore request for funds through
me.63
---------------------------------------------------------------------------
\63\ Ex. 12 at pp. 26-27.
Richard Sullivan was also discussing this matter internally
---------------------------------------------------------------------------
with DNC officials:
I was sitting down with Marvin Rosen in which we were
talking about fundraising matters and how much money we
could raise over the next couple of months. It had been
represented to us by Don Fowler and B.J. Thornberry
that there were 10 to 12 unions that still had
substantial contributions to make; that there were four
to five other unions, Teamsters possibly being one that
were still considering doing up to a million dollars
for election, some form, some way.
And I at this particular time, I reminded Marvin that
I had this person, Martin Davis, calling me in regards
to unions, and that he was asking us to raise money for
the Carey for president campaign or whatever, Carey
campaign, and that he was representing that it would be
helpful to his raising money from unions if we helped
him raise some money for Carey.64
---------------------------------------------------------------------------
\64\ Sullivan deposition, September 5, 1997, p. 181. Sullivan
testified that Rosen told him it was not a good idea to pursue the
contribution swap scheme, and that neither Sullivan nor anyone else
ever did ``anything specific'' to raise money for Carey. Id. at 95.
On or about August 10, 1996, Laura Hartigan of the Clinton-
Gore campaign, with the assistance of Sullivan, prepared a
memorandum to Davis requesting approximately $1 million in
``State Party Federal and Non-Federal Contributions.''
65 The memorandum was very specific in identifying
particular recipients, and the sums to be contributed. When
Davis received that memorandum, he forwarded it to Hamilton
with the following message:
---------------------------------------------------------------------------
\65\ Memorandum from Richard Sullivan to Martin Davis, August 10,
1996 (Ex. 22).
Bill: I'm forwarding this to you from Richard
Sullivan. I'll let you know when they [the DNC] have
fulfilled their commitment.66
---------------------------------------------------------------------------
\66\ November Group fax memo from Martin Davis to Bill Hamilton,
August 11, 1996 (Ex. 23). See also Ex. 12 at p. 27.
At that time, Davis took steps to ensure that none of the
Teamster contributions requested by Hartigan would be made
until the DNC ``had fulfilled its commitment'' by obtaining a
donor for the Carey campaign.67
---------------------------------------------------------------------------
\67\ Ex. 12 at pp. 26-27; Jere Nash Guilty Plea allocution,
September 18, 1997 p. 24 (Ex. 24).
---------------------------------------------------------------------------
Because Hamilton, Davis and Nash have not been available
for questioning by this Committee, and because several critical
documents were withheld until after depositions on thematters
at issue had occurred, the Committee has not been able to reach a
conclusion as to what, if any, further efforts were made in August,
September, or October 1996 by Sullivan, or others at Sullivan's
direction, to solicit funds for Carey's campaign.68 The
following is a summary of the evidence obtained by the Committee on
this topic:
---------------------------------------------------------------------------
\68\ For instance, unanswered questions include the meaning of the
following phrases in Richard Sullivan's notes: ``Teamsters give money
to other unions,'' ``4-5 other unions . . . $1 Million.'' Sullivan
handwritten notes (Exs. 25 & 26).
---------------------------------------------------------------------------
During the Committee's deposition of
Sullivan on September 5, 1997, he was questioned
regarding several of his handwritten notes made during
the summer of 1996 that refer to ``Teamsters'' or
``Carey'' and list additional names of DNC donors. In
each instance, Sullivan could not recall any contacts
by the DNC with any of the listed individuals or any
other persons to solicit funds for Carey's
campaign.69
---------------------------------------------------------------------------
\69\ The Committee received information that a DNC donor named
Alida Messinger may have been contacted by the DNC or McAuliffe and
asked to contribute, either directly or through an intermediary, to
Carey's campaign. The Committee contacted Messinger's attorney, to
determine whether any such contact had occurred. Although Messinger's
attorney initially promised to provide that information to the
Committee, he refused to cooperate after consulting with his client.
---------------------------------------------------------------------------
Evidence obtained by the Committee indicates
that further contributions were made by the Teamsters
to state Democratic parties following August 10, 1996.
For example, records show that the Teamster's PAC
contributed $68,000 to the New York State Democratic
Party on October 16, 1996. The amount requested for the
New York State Democratic Party in the August 10, 1996
memorandum from Sullivan to Hamilton was $69,900.
Several other state Democratic parties received DRIVE
contributions at or near the amounts requested in that
memorandum.
On November 7, 1997, the DNC produced to the
Committee an October 14, 1996 internal DNC memorandum
regarding ``Special Labor Money.'' The memorandum
details union contributions apparently to various State
Democratic political organizations totaling $990,000,
including $185,000 specifically from the Teamsters
Union.70
---------------------------------------------------------------------------
\70\ DNC Memorandum to File Re: ``Special Labor Money,'' October
14, 1996 (Ex. 27). After receiving this memorandum, the Committee
contacted the DNC and requested an opportunity to interview the DNC
employee from whose files the memorandum originated. The DNC failed to
make that individual available for an interview.
---------------------------------------------------------------------------
Although the Committee has not identified a further
prospective donor solicited by Sullivan for the Carey campaign,
it is clear that further efforts were made after August 1996 by
Terry McAuliffe to explore possible contribution swap schemes.
Specifically, in late September or early October 1996,
McAuliffe discussed with Davis the possibility of a
contribution swap between the Teamsters and ``Unity '96.''
``Unity '96'' was a joint fundraising effort among the DNC, the
Democratic Senatorial Campaign Committee (``DSCC'') and the
Democratic Congressional Campaign Committee (``DCCC''). Davis
testified:
In early October 1996, a Clinton-Gore official [Terry
McAuliffe] asked if I would attempt to raise $500,000
from the Teamsters for an entity that was a joint
fundraising effort of the Democratic National
Committee, the Democratic Senatorial Campaign Committee
and the Democratic Congressional Campaign Committee. It
was understood between us that he and others would try
to identify a person who would contribute a hundred
thousand dollars to the Carey campaign.71
---------------------------------------------------------------------------
\71\ Ex. 12 at p. 27. Ex. 24 at p. 24. ``Davis told me that the
Clinton-Gore representative had asked Davis to obtain a contribution
from the Teamsters to the Democratic Senate Campaign Committee also in
exchange for a donation to the Carey campaign.''
Thereafter, McAuliffe raised this proposal on at least two
occasions with persons involved in Unity '96. First, while
making fundraising telephone calls from DCCC offices, McAuliffe
spoke with Matthew Angle, the DCCC Executive Director. Angle
---------------------------------------------------------------------------
testified:
[H]e [McAuliffe] brought up or asked did we know
anybody that could or would write a check to Ron Carey
and that if we could help Carey, then we would perhaps
get contributions back to the DCCC.72
---------------------------------------------------------------------------
\72\ Deposition of Matthew Angle, October 28, 1997, pp. 44-45.
Second, the proposal was raised during one or more Unity
Fund meetings attended by representatives of the DNC, DSCC, and
---------------------------------------------------------------------------
DCCC. Rita Lewis, a DSCC employee, testified:
Terry [McAuliffe] said that if we were--if we could
find a donor for Ron Carey's election [the Teamsters
would] be more apt to give to Unity '96.73
---------------------------------------------------------------------------
\73\ Deposition of Rita Lewis, October 27, 1997, p. 16.
Following the Unity '96 meeting(s), Lewis reported
McAuliffe's comments to the Chairman of the DSCC, Senator
---------------------------------------------------------------------------
Robert Kerrey:
Q: After you heard those comments, did you inform anybody
outside of the meeting that topic had been raised?
A: I brought it up with Senator Bob Kerrey.
* * * * *
Q: In what context did you talk to Senator Kerrey about
this?
A: At that point he was spending a lot of time at the
Senate Campaign Committee, and we were raising money, and we
were discussing the Teamsters because they were angry at the
Democratic Senators and, thus, were not contributing to our
campaigns. And there seemed to be an effort that they were
trying to get other labor unions to not give to our
campaigns.74
---------------------------------------------------------------------------
\74\ Id. at pp. 18-19.
Senator Kerrey, in turn, telephoned a long-time Democratic
donor, Bernard Rapoport, and discussed the contribution swap
proposal. Rapoport testified that Senator Kerrey asked him for
---------------------------------------------------------------------------
his opinion of the swap scheme:
Q: . . . In approximately September or October of 1996, did
you receive a call from Senator Bob Kerrey of Nebraska,
informing you of a potential contribution swap whereby he, or
somebody else, would try to find someone to contribute to Ron
Carey's campaign and, in exchange, the teamsters would
contribute a larger sum to the DNC, or some entity like that?
* * * * *
A: I received a call from Senator Kerrey, and he says, ``I
want your opinion on something,'' and he explained to me about
this--contributing to Teamsters, and the Democratic Committee
would benefit, and he said, ``What do you think?''. I said, ``I
don't like it.'' He says, ``I don't either.'' That ended the
conversation.75
---------------------------------------------------------------------------
\75\ Deposition of Bernard Rapoport, October 20, 1997, pp. 34-35.
After talking with Senator Kerry, Rapoport called Hamilton
---------------------------------------------------------------------------
to express his concerns:
Q: . . . Did you understand the contribution swap that
Senator Kerrey told you about to be illegal?
A: I don't--I'm--I'm not a lawyer so I would not--I--I
didn't think it would smell good, but I don't know anything
about the legality. . . .
Q: . . . After your phone call with Senator Kerrey, did you
then call Bill Hamilton?
A: I think I could have talked to him afterwards. I think I
did.
Q: And what do you recall about the substance of that
conversation?
A: I think I--I said, ``Bill, I got a call from--from
Kerrey,'' and I guess I--I told him what transpired in that
conversation, and then I told him what I thought, and Bill
said, ``Okay.'' That was it.76
---------------------------------------------------------------------------
\76\ Id. at pp. 43-44, 50.
In a recent newspaper account, Michael Tucker, spokesman
for Senator Kerrey and the DSCC, was quoted as stating that the
Teamster contribution swap scheme ``would have been illegal,
and that was part of the reason for not acting--for dismissing
it.'' 77 The Committee has found no evidence that
Senator Kerrey contacted any other DNC donors regarding any
contribution swap proposal.78
---------------------------------------------------------------------------
\77\ Washington Times, October 22, 1997, p. A3.
\78\ In an October 23, 1996 memo to Carey, Hamilton wrote: ``As you
know, I have stopped all contributions to the Democratic Senate
Campaign Committee because of the disappointing performance of Senate
Democratic leaders, especially Democratic Leader Tom Daschle, on the
FedEx vote two weeks ago just before they adjourned. I was asked as
recently as yesterday by Sen. Kerrey, chairman of the DSCC, to
reconsider. He asked for $500,000; I said no.'' Internal Teamsters
Memorandum from Bill Hamilton to Ron Carey, October 23, 1996 (Ex. 28).
---------------------------------------------------------------------------
In sum, the Committee concludes that Terry McAuliffe and/or
other officials of the DNC participated in efforts to engage in
a contribution swap scheme with Martin Davis and Carey's
campaign. Such efforts included soliciting an illegal
contribution for Carey's Campaign from Judith Vasquez, a
Philippine National. Thereafter, McAuliffe and perhaps others
took further steps to attempt to bring illegal contributions to
Ron Carey's campaign. The Committee recommends further
investigation of these matters.
In the September 18, 1997 Criminal Informations, the U.S.
Attorney for Southern District of New York alleged that, after
the Unity '96 contribution swap scheme did not proceed, the
Teamsters turned to various other political organizations,
namely the National Council of Senior Citizens (``NCSC''),
Citizen Action, Project Vote, and the AFL-CIO in its search for
contributions to Carey's campaign. At the request of the U.S.
Attorney's Office, the Committee agreed not to probe further
certain elements of the NCSC, Citizen Action, and Project Vote/
AFL-CIO contribution swap schemes in order to avoid possible
prejudice to the ongoing Criminal investigations.
Misleading and Inaccurate Testimony
In investigating fundraising efforts involving the
Teamsters, the Committee was hindered by witnesses who provided
less than candid testimony. Some examples follow:
Richard Sullivan
Sullivan was questioned about the proposed contribution
swap between the DNC and the Teamsters during his September 5,
1997 deposition, which occurred more than two weeks before the
Committee deposed Mark Thomann, and also before the U.S.
Attorney's Office for the Southern District of New York filed
Criminal Informations publicly describing the contribution swap
schemes. Sullivan told the Committee that neither he nor any
other DNC employee ever solicited money for Carey's campaign.
Q: Did anyone at the DNC, to your knowledge, solicit
money for Ron Carey?
A: Um, no one, to my knowledge, solicited money for
Ron Carey at the--no one, to my knowledge solicited
contributions for Ron Carey.\79\
---------------------------------------------------------------------------
\79\ Sullivan deposition, September 5, 1997, p. 89.
Sullivan also denied ever doing anything ``specific'' to help
---------------------------------------------------------------------------
raise money for Ron Carey:
Q: . . . [D]id you do anything specific to try to
raise money for Ron Carey?
A: Um, did I do anything--I did--I did not, um, um--I
don't believe that I did anything specific to try to
raise money for Ron Carey.\80\
---------------------------------------------------------------------------
\80\ Id. at p. 95.
---------------------------------------------------------------------------
Q: Did you ask anyone else at the DNC to try to raise
money for Ron Carey?
A: I did not ask anybody to try to raise money for
Ron Carey.\81\
---------------------------------------------------------------------------
\81\ Sullivan deposition, September 5, 1997, p. 95.
Following Sullivan's deposition, the Committee obtained
testimony and documents indicating that Sullivan had not been
truthful. As Thomann testified, and as the contemporaneous
documentation confirms, Sullivan instructed Thomann in early
July 1996 to ask Judith Vazquez to contribute to Carey's
campaign.\82\ Thomann did so; Vazquez agreed to make the
donation and, on July 12, 1996, Vazquez instructed her bank to
wire $50,000 to Carey's campaign committee, Teamsters for a
Corruption-Free Union.\83\ Had Vazquez's lawyers not then
intervened, $50,000 would have ended up in Ron Carey's campaign
coffers.
---------------------------------------------------------------------------
\82\ Thomann deposition, p. 38, Ex. 18. Although Sullivan did admit
that he told Thomann that ``there may come the opportunity for us to
want to raise some money for Ron Carey,'' he failed to disclose that
the Vazquez solicitation had in fact been made. Sullivan deposition,
September 5, 1997, pp. 119-20. Notably, Thomann felt so ill at ease
about solicitating Vazquez that he informed Sullivan in late July 1996
that he was recusing himself from the matter. Thomann testimony, pp.
22, 24-25. Sullivan did not mention anything about Thomann's recusal
during his deposition.
\83\ Thomann testified that Sullivan called him in August 1997
(prior to Sullivan's deposition) and asked Thomann ``not to talk to the
press'' about the Teamster matter. Thomann deposition, p. 52.
---------------------------------------------------------------------------
Harold Ickes
As discussed previously, documents produced by the White
House and other evidence suggest that Harold Ickes assisted the
Teamsters Union with the Diamond Walnut strike and other
matters in order to encourage Carey and the Teamsters Union to
provide more financial assistance to Democratic candidates and
the DNC. When asked at his September 20, 1997 deposition what
the Administration did regarding the Diamond Walnut strike,
Ickes responded: ``Nothing that I know of.'' \84\
---------------------------------------------------------------------------
\84\ Ickes deposition September 22, 1997, p. 141.
---------------------------------------------------------------------------
In fact, after consultations with the Teamsters Union,
Ickes asked Mickey Kantor, then the United States Trade
Representative, to contact the management of the Diamond Walnut
Company to attempt to persuade them to change their position
vis-a-vis the Teamsters. According to an internal Teamsters
memorandum:
Ickes said he met face-to-face with USTR Mickey
Kantor last week and that Kantor agreed to use his
discretionary authority to try to convince the CEO of
that company that they should settle the dispute.\85\
---------------------------------------------------------------------------
\85\ Ex. 3.
In addition, the Committee determined that Ickes asked his
aide, Jennifer O'Connor, to confirm that Kantor had indeed
spoken with Diamond Walnut management. O'Connor confirmed that
---------------------------------------------------------------------------
Kantor had done so.
Q: . . . Did Mr. Ickes ever ask you to assist the
Teamsters in any way with the Diamond Walnut strike?
A: Yes.
Q: Tell me what this request was? . . .
A: He asked me to make some inquiries of the U.S.
Trade Representative's Office. . . .
Q: What inquiries were you to make at the U.S. Trade
Representative's Office?
A: I was supposed to find out if the U.S. Trade
Representative had spoken to the Diamond Walnut Company
head.
Q: Was the U.S. Trade Representative at the time Mr.
Kantor?
A: Yes.
Q: Was it your understanding that Mr. Kantor was to
have spoken with the Diamond Walnut head?
A: Yes. . . .
Q: Did you have any understanding at the time as to
why Mr. Kantor was to speak to the head of Diamond
Walnut?
A: I guess my assumption was that somebody somewhere
felt that Mr. Kantor could be persuasive with Diamond
Walnut. . . .
Q: What did you learn from the U.S. Trade
Representative's Office?
A: That Mr. Kantor had spoken with the person in
question at Diamond Walnut.\86\
---------------------------------------------------------------------------
\86\ Jennifer O'Connor deposition, pp. 179-181.
---------------------------------------------------------------------------
Terry McAuliffe
Terry McAuliffe, former DNC and Clinton-Gore '96 National
Finance Chairman, was deposed twice by the Committee. On the
first occasion, June 6, 1997, McAuliffe testified that ``he
didn't do anything with the Teamsters.'' \87\ On the second
occasion, September 18, 1997, when presented with specific
evidence of certain of his dealings with Martin Davis,
McAuliffe remembered a meeting he had in which Davis said that
he wanted to help raise money for the DNC from the Teamsters
union. McAuliffe testified, however, that after this meeting,
he passed Davis off to Hartigan and didn't deal with him again
on this issue. McAuliffe further stated: ``I would tell you, to
my knowledge, no one ever did anything. I know I never talked
to anybody, I never talked to any donors. . .'' \88\ ``All I
know is when the first story or when the first stories on the
Teamsters came out, I didn't have a clue about any of this.''
\89\
---------------------------------------------------------------------------
\87\ McAuliffe deposition, June 6, 1997, p. 168.
\88\ McAuliffe deposition, September 18, 1997, at pp. 90-91.
\89\ Id. at p. 78.
---------------------------------------------------------------------------
After McAuliffe's September 18, 1997 deposition, the guilty
pleas of Martin Davis and Jere Nash became public. In his plea
allocution, Martin Davis testified as follows:
In early October 1996, a Clinton-Gore official [Terry
McAuliffe] asked if I would attempt to raise $500,000
from the Teamsters for an entity that was a joint
fundraising effort of the Democratic National
Committee, the Democratic Senatorial Campaign Committee
and the Democratic Congressional Campaign Committee. It
was understood between us that he and others would try
to identify a person who would contribute a hundred
thousand dollars to the Carey campaign.\90\
---------------------------------------------------------------------------
\90\ Ex. 12 at p. 27.
Jere Nash, in his guilty plea allocution, also refers to
McAuliffe's efforts on behalf of the Carey campaign: ``Davis
told me that the Clinton-Gore representative [McAuliffe] had
asked Davis to obtain a contribution from the Teamsters to the
Democratic Senate Campaign Committee also in exchange for a
donation to the Carey campaign.'' \91\
---------------------------------------------------------------------------
\91\ Ex. 24 at p. 24.
---------------------------------------------------------------------------
Also after McAuliffe's September 18 deposition, the
Committee deposed Rita Lewis from the DSCC and Matthew Angle
from the DCCC. Lewis testified that McAuliffe addressed
fundraising for the Carey campaign at a Unity '96
organizational meeting. She said thatMcAuliffe ``described if
we were to find money for Ron Carey's election, that the Teamsters
would be more likely to give to Unity '96.'' \92\
---------------------------------------------------------------------------
\92\ Lewis deposition, p. 15.
---------------------------------------------------------------------------
Angle testified that McAuliffe had a conversation with him
sometime in the fall of 1996 in which ``[McAuliffe] brought up
or asked did [the DCCC] know of anybody that could or would
write a check to Ron Carey.'' He mentioned that assistance to
Carey might facilitate ``contributions back to the DCCC.'' \93\
---------------------------------------------------------------------------
\93\ Angle deposition, pp. 44-45.
---------------------------------------------------------------------------
After reviewing the testimony of Davis, Nash, Lewis and
Angle, the Committee requested that McAuliffe appear for a
further deposition. McAuliffe, through his counsel, declined to
appear, explaining that he could ``. . . add little if anything
to the record the Committee has already developed on this
issue. . . .''
CONCLUSION
Significant hurdles impeded the Committee's ability to
investigate thoroughly many of matters addressed herein.
Notwithstanding these hurdles, the Committee has obtained
evidence sufficient to demonstrate a problematic course of
conduct, and to cite certain specific illegal or improper
campaign practices involving the White House, the Clinton/Gore
campaign, the DNC and the Teamsters.
The Supreme Court, in United States Civil Service
Commission et al. v. National Association of Letter Carriers,
AFL-CIO, et al., 413 U.S. 548, 564-65 (1973), opined:
It seems fundamental in the first place that
employees in the Executive Branch of the Government, or
those working for any of its agencies, should
administer the law in accordance with the will of
Congress, rather than in accordance with their own will
or the will of a political party. They are expected to
enforce the law and execute the programs of the
Government without bias or favoritism for or against
any political party or group or the members thereof.
It is not only important that the Government and its
employees in fact avoid practicing political justice
but it is also critical that they appear to the public
to be avoiding it if confidence in the system of
representative Government is not to be eroded to a
disastrous extent.
Here, the activities of the White House and DNC not only
appear to contravene the fundamental notion that our Nation's
citizens are entitled to equal treatment under the laws, but
also raise questions as to the applicability of certain Federal
criminal statutes. Specifically, did Ickes and other
Administration officials provide special treatment or policy
assistance to Teamster officials in order to entice the
Teamsters Union to support Democratic campaigns? Further, did
McAuliffe and/or DNC officials seek donors other than Vazquez
as part of a contribution swap scheme with the Ron Carey
campaign?
In sum, substantial further inquiry into each of these
matters is warranted. The Committee concludes that
investigation by the Department of Justice is required to
determine the following:
Whether Harold Ickes or other Administration
personnel violated 18 U.S.C. Sec. 607, 5 U.S.C.
Sec. 7323 or any other provision of law in connection
with the Diamond Walnut matter, the Pony Express
matter, the cross-border trucking issue and other
measures taken by the White House on behalf of the
Teamsters;
Whether Administration officials violated
federal election laws by using the prerogatives of the
White House to entice labor union officials to make
political contributions and to participate in
Democratic campaigns;
Whether McAuliffe or DNC officials violated
federal law by attempting to engage in contribution
swap schemes with officials of Ron Carey's Campaign.
Compliance by Nonprofit Groups With Committee Subpoenas
I. Introduction
During the course of the Special Investigation, the
Committee on Governmental Affairs (``Committee'') issued 427
subpoenas requiring the production of documents and/or the
personal appearance of an individual for deposition or hearing
testimony. The Committee directed a substantial number of these
subpoenas to nonprofit organizations that were active
participants in the 1996 elections.1
---------------------------------------------------------------------------
\1\ The Committee uses the phrase ``nonprofit group'' as a short-
hand method of describing those entities organized for a noncommercial
purpose that directly participate in the electoral process through
contributions to candidates, the expenditure of funds on the behalf of
candidates, or the expenditure of funds to educate the public on issues
of public policy. These nonprofit groups are entities that are
organized under either Sec. Sec. 501(c) or 527 of the federal tax code.
26 U.S.C. Sec. Sec. 501(c), 527 (1997).
Entities organized under these sections of the tax code receive
preferential tax status so that their income is either totally or
partially exempt from federal taxation. In order to qualify for this
preferential tax status, these organizations must abide by specified
limitations on their political activity. The degree of restriction on
political activity varies widely.
---------------------------------------------------------------------------
At the outset of the investigation, press reports
described the increased use of so-called issue advocacy
campaigns by nonprofit organizations. These press accounts
raised questions about whether those groups were truly
nonpartisan and independent from political parties and
candidates, as required by federal law.2 Because of
allegations surrounding the activity of nonprofit groups in the
1996 election--particularly relating to the use of issue
advocacy campaigns--the Committee decided to investigate the
role of nonprofit organizations in the elections.
---------------------------------------------------------------------------
\2\ E.g., Glenn F. Bunting et al., ``Nonprofits Behind Attack Ads
Prompt Senate Probe,'' L.A. Times, May 5, 1997, p. A1; Fred Wertheimer,
``Investigate the G.O.P., Too,'' N.Y. Times, Feb. 18, 1997, p. A19.
Elizabeth Drew's book, Whatever It Takes, examined in great detail the
increased activity of nonprofit groups in the electoral process. Drew
explored issue advocacy campaigns and the possibility that those
campaigns were coordinated with the national parties and presidential
candidates. See Elizabeth Drew, Whatever It Takes (1997).
---------------------------------------------------------------------------
In order to further that investigation, the Committee
subpoenaed thirty-two entities as well as the Republican
National Committee (``RNC''), the Democratic National Committee
(``DNC''), and the Dole for President (``DFP'') and Clinton/
Gore '96 campaigns. The Committee also subpoenaed for
deposition testimony numerous individuals associated with these
nonprofit organizations. In addition, the Committee issued
subpoenas to banking institutions, seeking the financial
records of several of the nonprofit groups.
Because the bulk of the allegations of illegal and improper
conduct during the 1996 elections involved the national
political parties and presidential candidates, the Committee
served the DNC and the RNC with subpoenas duces tecum on April
10, 1997. On the same day, the Committee also served DFP and
Clinton/Gore '96 with subpoenas demanding the production of
documents.3
---------------------------------------------------------------------------
\3\ The compliance of the DNC and Clinton/Gore '96 campaign is not
discussed in this section of the Committee's report but receives full
consideration in other portions of the report. See below for discussion
of compliance with Committee subpoenas by the DNC and Clinton-Gore '96
campaign.
---------------------------------------------------------------------------
In addition to the candidate and party committees, the
Committee investigated several nonprofit organizations that
were supportive of the Republican agenda during the 1996
elections. By either developing policy or sponsoring issue
advocacy campaigns, these groups advocated policy positions
generally associated with the Republican Party. Accordingly, on
April 9, 1997, the Committee issued subpoenas demanding the
production of certain documents to the National Policy Forum
(``NPF''), Americans for Tax Reform (``ATR''), Triad Management
Services, Inc. (``Triad''), the Coalition for Our Children's
Future, Inc. (``CCF''), Citizens for the Republic Education
Fund, Inc. (``CREF''), and Citizens for Reform, Inc.
(``CR'').4
---------------------------------------------------------------------------
\4\ Triad is a for-profit organization. However, Triad managed
issue advocacy campaigns sponsored by CR and CREF and, thus, enjoyed a
unique relationship to the nonprofit organizations. Because many of the
compliance questions that arose during the investigation of CR and CREF
relate to the Minority staff's efforts to obtain information about CR
and CREF from Triad, the Committee is treating Triad as a nonprofit
organization for the purposes of this discussion.
---------------------------------------------------------------------------
The AFL-CIO (hereinafter referred to as ``the AFL-CIO'' or
``the Federation'') was another group that was very active
during the 1996 election cycle. Press accounts linked the
leadership of the AFL-CIO with an illegal conspiracy to funnel
general treasury funds from the International Brotherhood of
Teamsters (``IBT'') to the reelection campaign of IBT President
Ron Carey. In addition, the Federation sponsored a massive, $35
million dollar issue advocacy campaign overtly designed to
return control of Congress to the Democratic Party.5
Because of allegations of illegality and impropriety
surrounding these activities, the Committee unanimously issued
a subpoena duces tecum to the AFL-CIO on May 23, 1997.
---------------------------------------------------------------------------
\5\ The Annenberg Public Policy Center, in its report on issue
advocacy campaigns in the 1996 elections, dubbed the AFL-CIO ``the-800
pound gorilla of issue advocacy advertisers during the 1996 campaign.''
Paul Taylor, Introduction to Deborah Beck, et al., Issue Advocacy
Advertising During the 1996 Campaign 3 (Annenberg Public Policy Center
1997).
---------------------------------------------------------------------------
The Committee issued additional document subpoenas to a
host of nonprofit groups on July 30, 1997. These nonprofit
organizations, which spanned the ideological spectrum, were
allegedly involved in a variety of questionable campaign
practices during the 1996 elections. Press reports suggested
that some of these groups might have violated their tax status
and committed election law infractions. The subpoenaed groups
included Citizen Action, Citizen Vote, Inc. (``Vote Now '96''),
the National Education Association (``NEA''), the International
Brotherhood of Teamsters (``IBT''), the National Council of
Senior Citizens (``NCSC''), the Sierra Club, the Campaign to
Defeat 209, the Democratic Leadership Council, Inc. (``DLC''),
EMILY's List, the National Committee for an Effective Congress
(``NCEC''), the Association of Trial Lawyers of America
(``ATLA''), Americans United for Separation of Church and State
(``Americans United''), the American Defense Institute
(``ADI''), the American Defense Foundation (``ADF''), the
National Right to Life Committee, Inc. (``NRLC''), Citizens for
a Sound Economy (``CSE''), the Christian Coalition, Inc., the
Better American Foundation, Inc. (``BAF''), the American Cause,
the Republican Exchange Satellite Network (``RESN''), The
Coalition: Americans Working for Real Change (``Coalition''),
Women for Tax Reform (``WTR''), the Heritage Foundation, and
Citizens Against Government Waste.
The Committee encountered substantial resistance to these
subpoenas. Entirely apart from the ten individuals who fled the
country or the thirty-five witnesses who invoked their Fifth
Amendment right against self-incrimination, a large number of
individuals who had been subpoenaed for depositions simply
refused to appear or declined to answer substantive questions.
A still larger number of nonprofit organizations, led in
particular by the AFL-CIO, refused in whole or in part to
produce documents pursuant to lawfully issued subpoenas duces
tecum.
Compliance comprises several elements: 1) the timeliness of
production, 2) the thoroughness of production, and 3) good
faith--evidencing a genuine desire to cooperate with the
Committee. Clearly, compliance is a relative term. With some
notable exceptions, most of the entities failed to comply with
the Committee's subpoenas. 6 Some of these nonprofit
groups refused to produce any docunly provided documents
specifically requested by Committee staff, while a few produced
only publicly available material.7
---------------------------------------------------------------------------
\6\ The Committee notes that the NPF initially resisted the
Committee's efforts to learn the identities of donors to the group. See
Order of Chairman Fred Thompson, July 3, 1997 (Ex. 1). The NPF also
objected to efforts by the Committee to investigate activities
occurring prior to the 1996 federal election cycle. Id. One NPF
witness, Michael Baroody, refused to answer questions during a
deposition on the grounds that the questions sought information beyond
the scope of the Committee's legitimate authority. Id. After Chairman
Thompson issued an order overruling these objections, NPF fully
complied by producing witnesses for depositions and answering each and
every question put to them. See below for discussion of the NPF's
compliance with Committee subpoenas.
\7\ For almost three months, the AFL-CIO repeatedly refused to
produce any documents to the Committee as required by the subpoena.
Eventually, the Federation produced only 4,145 pages of material, all
of which had been made publicly available. Letter from Robert M.
Weinberg and Robert F. Muse, Counsel for AFL-CIO, to Michael J.
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug.
20, 1997 (Ex. 3).
---------------------------------------------------------------------------
Many of the nonprofit groups claimed that the Committee's
subpoenas sought information beyond the scope of its legitimate
investigative authority. Several nonprofit groups alleged that
the Committee's subpoenas violated constitutional guarantees,
including the First Amendment right to freedom of expression
and association.8 Some of the organizations baldly
asserted that they could not be investigated since they did not
engage in illegal or improper behavior during the 1996 federal
elections.9
---------------------------------------------------------------------------
\8\ ATLA, the Christian Coalition, Citizen Action, Citizens Against
Government Waste, the IBT, NCSC and the NRLC submitted joint objections
to the Committee's subpoenas, arguing that those subpoenas exceeded the
Committee's authority and infringed on the First Amendment rights of
the members of the various organizations. See Letter from ATLA,
Christian Coalition, Citizen Action, Citizens Against Government Waste,
the IBT, NCSC and the NRLC to Michael J. Madigan, Chief Counsel, and
Alan I. Baron, Minority Chief Counsel, Sept. 3, 1997 (Ex. 4).
\9\ For example, Counsel for ATR objected to the Committee's
subpoena on the grounds that ATR had no documents relating to ``illegal
or improper activities'' in connection with the 1996 elections. See,
e.g., Letter from Thomas E. Wilson, ATR Counsel, to Madigan J. Madigan,
Chief Counsel, June 11, 1997 (Ex. 5).
---------------------------------------------------------------------------
In addition, some of the nonprofit groups--most notably
the AFL-CIO, the IBT, and the Christian Coalition--refused to
produce witnesses pursuant to deposition subpoenas, or to allow
the Committee to interview persons affiliated with those
groups.10 Several of the organizations produced
witnesses for depositions but, on advice of counsel, those
witnesses declined to answer substantive
questions.11
---------------------------------------------------------------------------
\10\ Following the lead of the AFL-CIO, many of these nonprofit
groups jointly refused to comply with the Committee's subpoenas. Neil
A. Lewis, ``Nonprofit Groups to Defy Subpoenas in Senate Inquiry,''
N.Y. Times, Sept. 4, 1997, p. A16.
\11\ For example, on advice of counsel, witnesses affiliated with
Triad, CR and CREF refused to answer substantive questions during their
depositions. E.g., Deposition of Carolyn Malenick, Sept. 16, 1997, pp.
5-29; Deposition of Lyn Nofziger, Sept. 16, 1997, pp. 6-22; Deposition
of Carlos A. Rodriguez, Sept. 17, 1997, pp. 5-23.
---------------------------------------------------------------------------
In Senate Resolution 39, which authorized the Special
Investigation, the full Senate imposed a deadline of December
31, 1997 on the investigation. As a result of this deadline,
the Committee found it virtually impossible to enforce its
subpoenas. Enforcing a contempt of Congress citation is a time
consuming and lengthy process.12 As a result, the
December 31, 1997 deadline severely hampered the Committee's
ability to threaten and conduct enforcement proceedings.
---------------------------------------------------------------------------
\12\ See below for detailed analysis of contempt procedures.
---------------------------------------------------------------------------
In the pages that follow, the Committee discusses the
organized resistance to its subpoenas by some of the nonprofit
groups and the impact that this resistance had on other
nonprofit organizations that had previously been cooperating
with the Special Investigation.13 The Committee then
outlines the prevailing legal and constitutional standards
governing congressional subpoena power.14 The
Committee closes with an analysis of the contempt procedures
and discusses the manner in which the December 31, 1997
deadline rendered those compliance procedures useless to the
Committee.15
---------------------------------------------------------------------------
\13\ See below for discussion of resistance to Committee subpoenas.
\14\ See below for discussion of legal standards governing
congressional subpoena power.
\15\ See below for discussion of December 31, 1997 deadline and its
impact on Committee's investigation.
---------------------------------------------------------------------------
As the following discussion makes clear, this record of
noncompliance presents a troubling precedent. The Committee
shares the grave concerns expressed by Senator Joseph
Lieberman, ``[t]he message is: if you ignore a congressional
subpoena, you're immune. That's an awful precedent.''
16
---------------------------------------------------------------------------
\16\ Guy Gugliotta, ``Congressional Investigations: More Partisan
and Less Powerful,'' Wash. Post, Nov. 20, 1997, p. A23.
---------------------------------------------------------------------------
II. DISCUSSION
A. Subpoena Compliance by Nonprofit Groups
(1) Contagious noncompliance
The Special Investigation encountered more than sporadic
resistance in its effort to learn about illegal and improper
activities by nonprofit groups in the 1996 election. In fact,
noncompliance was contagious. By the close of the Committee's
investigation, most of the nonprofit groups had publicly
declared their intent to defy subpoenas.17 Quite a
few groups that had theretofore complied with subpoenas ceased
cooperating with the Committee after several prominent
organizations publicly defied the Committee with impunity.
---------------------------------------------------------------------------
\17\ Neil A. Lewis, ``Nonprofit Groups to Defy Subpoenas in Senate
Inquiry,'' N.Y. Times, Sept. 4, 1997, p. A16 (stating that 26 nonprofit
groups subpoenaed by the Committee would not comply with requests for
documents and witnesses).
---------------------------------------------------------------------------
This pattern of noncompliance had its genesis in the
obstructionist tactics of the AFL-CIO. Indeed, until the AFL-
CIO publicly announced its intention--on August 20, 1997--to
withhold virtually all of the documents and witnesses requested
by the Committee, most of the nonprofit groups were
cooperative. After the AFL-CIO took the lead in defying the
Committees subpoenas, compliance by nonprofit groups declined
precipitously.
For instance, before the AFL-CIO openly refused to comply
with document and deposition subpoenas on August 20, 1997,
Triad, CR and CREF produced virtually all documents requested
by the Committee. Triad, CR and CREF also produced four
witnesses for depositions and scheduled several additional
witnesses requested by the Minority staff. Following the AFL-
CIO's letter informing the Committee that it would not
cooperate, Counsel for Triad, CR and CREF instructed their
clients to appear for depositions but not to answer substantive
questions.18
---------------------------------------------------------------------------
\18\ E.g., Malenick deposition, pp. 5-29; Nofziger deposition, pp.
6-22; Rodriguez deposition, pp. 5-23.
---------------------------------------------------------------------------
(2) The AFL-CIO's strategy of obstruction
Therefore, in order to understand why the Committee
encountered enormous opposition to its subpoenas, it is first
necessary to understand the circumstances of the AFL-CIO's
noncompliance. On May 23, 1997, the Committee subpoenaed the
AFL-CIO, demanding the production of all responsive documents
by June 15, 1997. The subpoena listed forty-eight
specifications, of which Nos. 14 through 48 sought information
directly related to the Federation's electoral and political
action efforts during the 1996 election cycle.
Counsel for the AFL-CIO responded to the subpoena on June
5, 1997, and immediately objected to the production of
documents, arguing that the subpoena exceeded the Committee's
mandate and abridged the Federation's First Amendment rights of
free speech and association.19 The Committee staff
met with the Federation's Counsel on June 19, 1997, and
attempted to accommodate their concerns by asking the attorneys
to identify the specific specifications to which they objected.
Consistent with the Committee's policy of working with
subpoenaed entities to encourage maximum compliance, the
Committee offered to narrow the scope of the subpoena in return
for the Federation commencing a rolling production schedule.
---------------------------------------------------------------------------
\19\ Letter from Robert M. Weinberg and Robert F. Muse, AFL-CIO
Counsel, to Michael J. Madigan, Chief Counsel, and Alan I. Baron,
Minority Chief Counsel, June 5, 1997 (Ex. 6).
---------------------------------------------------------------------------
On July 11, 1997, a full month after the initial return
date, the AFL-CIO informed the Committee that it would not
articulate specific objections to the scope of the subpoena and
declined to begin a rolling production of
documents.20 In response, the Committee again
offered to limit the documents initially requested in order to
facilitate compliance. The Committee asked that the Federation
produce the requested documents by July 30, 1997, and warned
that the failure to agree on a proposed production schedule
would require the Committee to institute contempt
proceedings.21
---------------------------------------------------------------------------
\20\ Letter from Robert M. Weinberg and Robert F. Muse, AFL-CIO
Counsel, to Philip Perry and James A. Brown, Majority Counsel, July 11,
1997 (Ex. 7).
\21\ Letter from Philip Perry and James A. Brown, Majority Counsel,
to Robert M. Weinberg, AFL-CIO Counsel, July 17, 1997 (Ex. 8).
---------------------------------------------------------------------------
Throughout most of August, the AFL-CIO refused to cooperate
and declined repeated efforts by the Committee to establish
even a modest production schedule. On August 15, 1997, the
Committee summarized the stalemate as follows:
This is not a complex situation. Nearly three months
have passed since the subpoena was issued and yet you
have not produced a single page of material to the
Committee. We have made every effort to facilitate
compliance by you, including by repeatedly offering to
negotiate a reduction in the breadth of the AFL-CIO
subpoena, and by indicating a narrow range of high
priority documentation for an initial segment of a
rolling production process. At no point have you
cooperated in this process.22
---------------------------------------------------------------------------
\22\ Letter from Michael J. Madigan, Chief Counsel, and Philip
Perry, Majority Counsel, to Robert M. Weinberg and Robert F. Muse,
Counsel for AFL-CIO, Aug. 15, 1997 (Ex. 9).
On August 20, 1997, the AFL-CIO produced three boxes of
documents totaling 4,145 pages, which its counsel acknowledged
were ``materials already in the public domain--e.g., public
disclosure forms filed with the Federal Election Commission,
publicly filed tax documents, Department of Labor disclosure
forms, press releases, television advertisements, and leaflets
and handbills.'' 23 This production obviously
included none of the highly relevant documents sought by the
Committee.
---------------------------------------------------------------------------
\23\ Ex. 3.
---------------------------------------------------------------------------
At the same time, the AFL-CIO submitted its first brief to
the Committee, which set forth constitutional and legal
objections to the subpoena. In the brief, the Federation cited
First Amendment free speech and associational rights and argued
that the Committee's subpoena exceeded the scope of its
enabling resolution.24
---------------------------------------------------------------------------
\24\ In the Matter of: A Subpoena to the AFL-CIO, Memorandum of
Points and Authorities in Support of AFL-CIO's Objections to Subpoena
Duces Tecum, Aug. 20, 1997 (Ex. 10).
---------------------------------------------------------------------------
The Committee responded to those objections on August 25,
1997, stating that
. . . our review to date has demonstrated that such
objections lack significant legal support. It is also
clear from the character of such objections that the
AFL-CIO has chosen, without consulting the Committee,
to construe the subpoena in as overbroad a manner as
possible in order to attempt to justify its continuing
delays in compliance.25
---------------------------------------------------------------------------
\25\ Letter from Michael J. Madigan, Chief Counsel, to Robert M.
Weinberg and Robert F. Muse, Counsel for AFL-CIO, Aug. 25, 1997 (Ex.
11).
In the same letter, the Committee significantly narrowed the
scope of the subpoena to encourage voluntary compliance so the
Committee could proceed expeditiously with its investigation.
It did so by amending eleven specifications and unilaterally
agreeing not to enforce seventeen others.26
---------------------------------------------------------------------------
\26\ Id.
---------------------------------------------------------------------------
After reviewing the AFL-CIO's objections, Chairman Thompson
issued an order on September 3, 1997, that instructed the AFL-
CIO to produce the requested documents.27 The order
limited the production of documents as set forth in the
Committee's August 25, 1997 letter, and indicated that the
Committee would not enforce any other specifications in the
subpoena.28
---------------------------------------------------------------------------
\27\ AFL-CIO Production Order, Sept. 3, 1997 (Ex. 12).
\28\ Id.
---------------------------------------------------------------------------
The AFL-CIO refused to comply with the Chairman's order.
Instead, the AFL-CIO's Counsel submitted a second letter brief
reasserting the constitutional and other arguments set forth in
their August 20, 1997 letter.29 The Committee never
sought to compel compliance by the AFL-CIO. Because of the
likelihood that a contempt citation against the Federation
would meet a prolonged filibuster on the floor of the Senate,
the Committee concluded that it was simply not viable to pursue
contempt with only a few months until the expiration of the
December 31, 1997 deadline.
---------------------------------------------------------------------------
\29\ Letter from Robert M. Weinberg and Robert F. Muse, Counsel for
AFL-CIO, to Chairman Fred Thompson and Senator John Glenn, Sept. 8,
1997 (Ex. 13). In addition to the document subpoena noted above, the
Committee also issued five subpoenas requiring deposition testimony
from individuals affiliated with the AFL-CIO. With the exception of
Geoffrey Garin, a pollster that worked with the AFL-CIO, those
witnesses refused to appear. All five of those individuals, including
two consultants retained by the AFL-CIO, were represented by Counsel
for the AFL-CIO.
---------------------------------------------------------------------------
The Committee concludes that the AFL-CIO not only failed to
comply with subpoenas, but that it deliberately adopted an
obstructionist strategy designed to thwart production of
responsive and relevant documents. The Committee believes that
the Federation intentionally adopted this strategy in the
cynical hope of escaping scrutiny, knowing that the Committee
was operating under a December 31, 1997 deadline that rendered
calls for contempt an empty threat.
(3) The AFL-CIO encouraged noncompliance by other nonprofit
groups
The AFL-CIO's obstructionist tactics hampered the
Committee's ability to draw any kind of reasonable conclusions
about the Federation's activities in the 1996 election cycle.
Even more damaging to the Committee's efforts, however, was the
encouragement of unwarranted defiance that the AFL-CIO provided
other subpoenaed entities.
The Federation openly encouraged other nonprofit groups to
resist the Committee's subpoenas. For example, on August 20,
1997, the NEA's Counsel contacted the Committee and stated that
he had received a copy of the AFL-CIO memorandum in opposition
to the Committee's subpoena.30 He added that ``[t]he
arguments that the AFL-CIO makes with regard to the invasion of
constitutional rights, exceeding the Committee's mandate, and
overbreadth largely are applicable to the NEA
subpoena.''31 The Committee notes that the NEA's
letter, which was received via facsimile, arrived at the
Committee's offices before the AFL-CIO's memorandum in
opposition. Following the lead of the AFL-CIO, the NEA did not
produce a single document to the Committee.
---------------------------------------------------------------------------
\30\ Ex. 2, p.2.
\31\ Id.
---------------------------------------------------------------------------
The NEA is not the only nonprofit group that took guidance
from the AFL-CIO. On September 3, 1997, the same day that the
Federation was ordered to comply with the Committee's subpoena
or face a contempt citation, a diverse coalition of nonprofit
groups filed joint objections to the Committee's
subpoenas.32 The groups, which represented the
entire political spectrum, complained that the Committee's
subpoenas (1) exceeded the Committee's delegated authority, (2)
demanded documents the confidentiality of which were protected
by federal law, (3) were overbroad, burdensome and oppressive,
and (4) violated the First Amendment rights of the subjected
organizations and their members.33
---------------------------------------------------------------------------
\32\ Ex. 4.
\33\ Id.
---------------------------------------------------------------------------
The merits of these objections will be addressed in greater
detail below but, after a careful review of the authorities and
arguments offered by the groups, the Committee finds the
objections to without merit.34
---------------------------------------------------------------------------
\34\ See below for discussion of congressional subpoena power and
its constitutional and legal limitations.
---------------------------------------------------------------------------
Like the NEA, several of the groups that submitted joint
objections to the Committee on September 3, 1997 conceded in
late August that the AFL-CIO had shared its legal brief with
the organizations. For example, on August 21, 1997--the day
after the AFL-CIO submitted its formal objections to the
Committee--the IBT's Counsel advised the Committee that she had
received a copy of the Memorandum of Points and Authorities in
Support of AFL-CIO's Objections to Document Subpoena, and that
``we agree with the AFL-CIO's legal analysis.'' 35
On the same day, Citizen Action's Counsel wrote to the
Committee that her client ``agree[d] with many of the
objections raised by the AFL-CIO in its opposition . . .''
36
---------------------------------------------------------------------------
\35\ Letter from Leslie Berger Kiernan, Counsel for IBT, to Michael
J. Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel,
Aug. 21, 1997, p. 2 (Ex. 14).
\36\ Letter from Lyn Utrecht, Counsel for Citizen Action, to
Michael J. Madigan, Chief Counsel, and Alan I. Baron, Minority Chief
Counsel, Aug. 21, 1997, p.1 (Ex. 15).
---------------------------------------------------------------------------
The impact of the AFL-CIO's obstructionist tactics cannot
be overstated. The NCSC, which has a long-standing affiliation
with the AFL-CIO, initially agreed to comply with the
Committee's subpoena. In fact, on August 13, 1997, the NCSC's
Counsel contacted Committee staff and asked that the return
date be extended until mid-September because key organization
officials were on vacation and unable to respond to the
subpoena.37 Committee staff met with NCSC's Counsel
on August 14, 1997, at which time the NCSC agreed to comply
with eleven specifications by September 7, 1997. However, on
August 20, 1997--the same day that the AFL-CIO filed its legal
brief in opposition to the Committee's subpoena--the NCSC's
Counsel stated that ``on closer examination of the subpoena, we
see further First and Fourth Amendment problems, together with
what appears to be a demand for records far in excess of the
Committee's jurisdiction.'' 38
---------------------------------------------------------------------------
\37\ Letter from Robert Mozer, Counsel for NCSC, to Michael J.
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug.
13, 1997 (Ex. 16).
\38\ Letter from Robert J. Mozer, Counsel for NCSC, to Michael J.
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug.
20, 1997 (Ex. 17).
---------------------------------------------------------------------------
As this correspondence indicates, the AFL-CIO actively
encouraged other nonprofit organizations--even groups that had
already agreed to cooperate with the Committee--to defy
subpoenas. A cursory comparison of the letter from these groups
and the brief submitted by the Federation on August 20, 1997
indicates that the organizations supported their joint
objections with the same arguments raised by the AFL-
CIO.39 Furthermore, the AFL-CIO's defiance of the
Committee's deposition subpoenas encouraged other groups, who
did not want their employees or officers testifying before the
Committee, to follow suit.
---------------------------------------------------------------------------
\39\ Ex. 4.
---------------------------------------------------------------------------
B. Congressional subpoena power and its limitations
(1) The nonprofits' objections to the Committee's subpoenas
As explained above, many of the nonprofit groups justified
their noncompliance by arguing that the Committee's subpoenas
sought documents beyond the scope of its mandate and/or that
the subpoenas impinged on various constitutional rights. In
particular, the AFL-CIO--and the groups that followed its
lead--claimed that the Committee's subpoenas violated First
Amendment rights to freedom of speech and
association.40 ATLA also suggested that the
subpoenas violated the Fourth Amendment's protection against
unreasonable searches and seizures.41 After a
careful review of the materials submitted by the various
nonprofit groups, the Committee concludes that--with a rare
exception--these objections were baseless.
---------------------------------------------------------------------------
\40\ Ex. 10; see also Ex. 4.
\41\ Letter from Roger S. Ballentine, ATLA Counsel, to Michael J.
Madigan, Chief Counsel, and Alan I. Baron, Minority Chief Counsel, Aug.
14, 1997 (Ex. 18).
---------------------------------------------------------------------------
The Committee will first address the objections that were
raised as to the Committee's legislative authority. A
congressional committee's authority to issue and enforce a
subpoena is derived from its enabling resolution. In this case,
the Committee derived its authority from Senate Resolution 39
and Senate Report 105-7.
It is well established that such a resolution and the
accompanying report shall be interpreted first by reference to
the language of the resolution, and then, by resorting to the
legislative history.42 Both Senate Resolution 39 and
Senate Report 105-7 clearly demonstrate that the Committee
possessed the authority to conduct a broad-scale inquiry into
the 1996 election campaign, and that the full Senate approved
the scope of the Special Investigation.
---------------------------------------------------------------------------
\42\ See, e.g., Wilkinson v. United States, 365 U.S. 399, 408-409
(1961); Barenblatt v. United States, 360 U.S. 109, 117 (1959); Watkins
v. United States, 354 U.S. 178, 209-15 (1957). See also United States
v. Rumely, 345 U.S. 41, 43 (1953) (holding that ``the problem [of
interpreting a congressional resolution] is much the same as that which
confronts the Court when called upon to construe a statute'').
---------------------------------------------------------------------------
The Majority Leader originally proposed a version of Senate
Resolution 39 which would have allocated $3 million for
``conducting an investigation of illegal activities in
connection with [the] 1996 Federal election campaigns.'' As
envisioned by the original resolution, the Committee on Rules
and Administration would have conducted the
investigation.43
---------------------------------------------------------------------------
\43\ Congressional Record, Mar. 11, 1997, p. S2096.
---------------------------------------------------------------------------
The Committee on Governmental Affairs subsequently approved
an amendment that greatly increased the investigation's budget,
granted jurisdiction to the Committee on Governmental Affairs,
and expanded the investigation's scope to include ``illegal or
improper activities in connection with 1996 Federal election
campaigns.'' 44 Majority Leader Lott subsequently
agreed to the Committee's amendment and offered the amendment
on the Senate floor.45
---------------------------------------------------------------------------
\44\ Senate Report 105-7, p. 3 (emphasis added).
\45\ See above for introduction discussing Committee's mandate.
---------------------------------------------------------------------------
As set forth in Senate Report 105-7, the Committee's
authority extended to an investigation relating, but not
limited to, the following activities:
The independence of presidential campaigns from the
political activities pursued for their behalf by
outside individuals or groups;
the misuse of charitable and tax-exempt organizations
in connection with political or fundraising activities;
unregulated (soft) money and its effect on the
American political system;
promises and/or the granting of special access in
return for political contributions or favors;
the effect of independent expenditures (whether by
corporations, labor unions, or otherwise) upon our
current campaign finance system, and the question as to
whether such expenditures are truly independent; and
contributions to and expenditures by entities for the
benefit or in the interest of public
officials.46
---------------------------------------------------------------------------
\46\ Senate Report 105-7, p. 3.
---------------------------------------------------------------------------
The scope of the Committee's proposed inquiry was ``a
testament to the patent need for a through and wide-ranging
investigation into the role of big money in federal elections,
both presidential and congressional.'' 47 In fact,
the Minority members of the Committee stated that ``[w]e agree
wholeheartedly with the description of the scope of the
investigation as set forth by the majority report.''
48 The Senate ultimately enacted the Committee's
amendment to Resolution 39, as offered by the Majority Leader.
---------------------------------------------------------------------------
\47\ Id. at pp. 2-3.
\48\ Id. at pp. 5-6.
---------------------------------------------------------------------------
Thus, while much of the nonprofit activity under
investigation by the Committee would clearly be illegal, the
language of Senate Resolution 39 included more than simply
illegal conduct. It allowed the Committee to examine practices
that might be legal yet improper or unethical. In addition to
the text of Senate Resolution 39, a thorough reading of the
legislative history--including the ensuing floor debate--
clearly shows that the subpoenas issued to the various
nonprofit groups did not exceed the scope of the Committee's
mandate.
For example, Subpoena No. 72, which was issued to Triad,
required the production of the following types of documents:
(1) Documents referring or relating to the founding
of the organization, its structure, management, and tax
status;
(2) Bank records for all Triad accounts;
(3) Documents used for fundraising, marketing,
polling as well as information concerning advertising
and other voter education activity, including phone
banks and direct mail;
(4) Documents relating to any communications by Triad
and an agent of any political committee as well as any
donations or contributions to or from a national party
committee; and
(5) Documents relating to any donations to nonprofit
organizations related to Triad.49
---------------------------------------------------------------------------
\49\ With the exception of requiring the production of documents
involving persons specifically associated with each group, the language
of this subpoena is identical to the language used in the other
subpoenas that were issued on April 9, 1997. These subpoenas included
those served on the NPF, CR, CREF, ATR and CCF.
---------------------------------------------------------------------------
This subpoena only requires the production of documents that
relate or refer to the group's voter education and election
activities.
Similarly, Subpoena No. 95, which the Committee issued to
the AFL-CIO, sought only the production of documents directly
related to the Federation's voter education, electoral and
political activities. Subpoena No. 95 required the AFL-CIO to
produce the following types of documents:
(1) All documents relating to the organizational
structure, management, annual reports, annual financial
statements, board minutes involving federal elections,
campaigns or candidates, as well as employee manuals or
handbooks relating to political activity;
(2) All documents relating to contributions to any
federal political committee or candidate;
(3) All documents related to the AFL-CIO's political
action committee as well as voter education efforts,
including precinct targeting efforts;
(4) All documents relating to political or voter
education advertising, including polling and other
support materials;
(5) All documents that relate or refer to any federal
election, candidate or campaign;
(6) All documents relating to other political action
committees working with the AFL-CIO; and
(7) All documents relating to grass roots political
organizing by the AFL-CIO.50
---------------------------------------------------------------------------
\50\ The AFL-CIO subpoena is the only subpoena containing this
exact language.
---------------------------------------------------------------------------
Finally, the language of the last group of subpoenas, which
the Committee issued to nonprofit organizations on July 30,
1997, is also well within the broad legislative mandate of
Senate Resolution 39. For example, Subpoena 296, which was
issued to the National Right to Life Committee, requires the
production of the following types of documents:
(1) Documents referring or relating to the founding of
the organization, its structure, management, and tax
status;
(2) All financial statements and annual reports;
(3) Documents used for fundraising, marketing, polling
as well as information concerning advertising and other
voter education activity, including phone banks and
direct mail;
(4) Documents relating to any communications by the
National Right to Life Committee and an agent of any
political committee as well as any donations or
contributions to or from a national party committee;
and
(5) Documents relating to any donations from the
National Right to Life to any federal candidate,
political committee or campaign.51
---------------------------------------------------------------------------
\51\ With the exception of requiring the production of documents
involving persons specifically associated with each group, the language
of this subpoena is identical to the language used in the other
subpoenas that were issued on July 30, 1997. These subpoenas include
the bulk of the nonprofit groups under investigation. See above for
listing of entities subpoenaed on July 30, 1997.
---------------------------------------------------------------------------
As these three examples illustrate, the Committee's subpoenas
sought only information related to the voter education,
political and electoral activities of the various nonprofit
groups.
It was argued that the Committee's subpoenas were invalid
because the term ``improper'' in Senate Resolution 39 was
impermissibly vague. It is specious to argue that the term
``improper'' is vague and undefined by Senate Resolution 39 and
the accompanying Report. ``Improper'' as a functional matter
can be defined from several sources, including the Committee's
authorizing resolution and statements of Chairman Thompson and
other members of the Committee. Consequently, the Committee
rejects all of the objections as to scope that were raised by
the nonprofit groups during the investigation.
Most of the nonprofit groups also objected to Committee
subpoenas on constitutional grounds. For the most part, the
Committee finds those objections unpersuasive. While the power
of Congress to investigate is broad, ``its range and scope'' is
not unlimited.52 The ``scope of the [Committee's]
power of inquiry . . . is as penetrating and far-reaching as
the potential power to enact and appropriate under the
Constitution.'' 53 This power is extremely broad so
long as the Committee pursues a legitimate legislative
interest.
---------------------------------------------------------------------------
\52\ Barenblatt, 360 U.S. at 112 (quotation omitted).
\53\ Id. at 111.
---------------------------------------------------------------------------
The cases relied upon by the nonprofit groups to justify
their noncompliance are inapposite, since they involved
attempts by state legislatures to obtain the membership lists
of private, volunteer organizations.54 None of those
cases are applicable to Congress. Moreover, it is clear from
reading the specifications contained in the various subpoenas
that the Committee never sought donor information or membership
lists. In fact, Chairman Thompson specifically refused to order
nonprofit groups to produce membership or donor information
except with respect to foreign members and donors.55
---------------------------------------------------------------------------
\54\ E.g., Gibson v. Florida Legis. Investig. Comm., 372 U.S. 539
(1963); NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958).
\55\ Ex. 1.
---------------------------------------------------------------------------
The other cases cited by the nonprofit groups to support
noncompliance are equally distinguishable because they concern
the investigative authority of regulatory bodies.56
Because the Senate's investigative authority is vested in the
Constitution itself, these cases are inapposite.
---------------------------------------------------------------------------
\56\ E.g., FTC v. American Tobacco Co., 264 U.S. 298 (1924)
(addressing whether an adjudicatory agency has the legal authority to
subpoena documents related to a price-fixing investigation); Hearst v.
Black, 87 F.2d 68 (1936) (involving a Federal Communication Commission
subpoena of all telegraphs made over a certain time period).
---------------------------------------------------------------------------
Notwithstanding the limitations in the Bill of Rights, the
Supreme Court has generally acknowledged the broad subpoena
authority of Congress. For example, in Packwood v. Senate
Select Committee on Ethics,57 the Supreme Court
ruled that a subpoena seeking a senator's personal diaries was
not overly broad and did not violate either his First or Fourth
Amendment rights. The Supreme Court also rejected a First
Amendment objection to a Senate subpoena in Eastland v. United
States Servicemen's Fund.58
---------------------------------------------------------------------------
\57\ 510 U.S. 1319 (1994).
\58\ 421 U.S. 491 (1975).
---------------------------------------------------------------------------
As a result, the Committee concludes that only three valid
objections could be raised by the nonprofit groups. First, the
Committee recognized the assertion of an individual's Fifth
Amendment right against self-incrimination. Second, the
Committee did not challenge assertions of the attorney-client
and work-product privileges.59 Third, the Committee
recognized the First Amendment rights of the nonprofit groups
to maintain the secrecy of their domestic members and donors.
Therefore, the Committee believes that the remaining objections
as to scope and constitutionality were baseless and frivolous.
---------------------------------------------------------------------------
\59\ The Senate has never officially recognized these common law
privileges, see Jurney v. MacCracken, 294 U.S. 125, 146 (1935), but the
Committee did not elect to challenge their assertion during the Special
Investigation.
---------------------------------------------------------------------------
C. Enforcement of Committee subpoenas
(1) Contempt procedures and the December 31, 1997 deadline
A contempt citation is the only mechanism available to the
United States Senate for enforcing a subpoena against a party
in noncompliance. As outlined in the preceding pages, many of
the nonprofit groups were, at best, in ``partial compliance''
with the Committee's document and deposition
subpoenas.60 Partial compliance and outright
noncompliance obstructed the Committee's efforts to investigate
allegations of improper or illegal campaign finance abuses
during the 1996 federal election cycle.
---------------------------------------------------------------------------
\60\ See above for discussion of noncompliance with Committee
subpoenas by nonprofit groups.
---------------------------------------------------------------------------
Although the Committee attempted to secure full compliance
with its subpoenas, these efforts were severely hampered by the
full Senate's imposition of a December 31, 1997 deadline for
the Special Investigation. As is explained in the succeeding
pages, the contempt process is very time consuming. Thus, the
deadline substantially reduced the Committee's leverage and
weakened its ability to threaten contempt proceedings as a
means of forcing compliance.
(2) Classifications of contempt
The ability to issue contempt citations is an inherent
power of both chambers of Congress.61 There are
three types of contempt proceedings--inherent, statutory
criminal and statutory civil contempt.62 Civil
contempt is available to the Senate only.63 Criminal
contempt citations are ``after the fact'' punishments for
failure to comply, whereas the civil citation compels
cooperation with the subpoena in order to obtain the
information requested. The Senate has used the civil citation
six times since its inception in 1978, and the criminal
citation has not been used by the Senate since the creation of
the civil contempt procedures.
---------------------------------------------------------------------------
\61\ See Anderson v. Dunn, 19 U.S. (6 Wheat) 204 (1821). See also
Jay R. Shampansky, Congress' Contempt Power, CRS Report No. 86-83A,
Feb. 28, 1986.
\62\ See Groppi v. Leslie, 404 U.S. 496 (1972); 2 U.S.C.
Sec. Sec. 192 & 194; 2 U.S.C. Sec. 288d; 28 U.S.C. Sec. 1365.
\63\ See 2 U.S.C. Sec. 288d; 28 U.S.C. Sec. 1365.
---------------------------------------------------------------------------
The ``inherent contempt'' power has not been used by the
House or Senate in over sixty years. It is a cumbersome
procedure that requires the Senate's Sergeant-at-Arms to
physically bring the recalcitrant party before the Senate.
There, the party is tried. Conviction by the Senate can result
in confinement in the Capitol Jail until compliance or the
expiration of a specified time period.64
---------------------------------------------------------------------------
\64\ The time period can be either the end of the current session
of Congress or the life of the Committee. See Morton Rosenberg,
Investigative Oversight: An Introduction to the Law, Practice and
Procedures of Congressional Inquiry, Apr. 7, 1995, p. 14.
---------------------------------------------------------------------------
The ``statutory criminal contempt'' procedure is set forth
in 2 U.S.C. Sec. Sec. 192 and 194, which state that a party
under subpoena who refuses to testify or produce documents, or
who appears before the Committee and refuses to respond to
questions, is subject to a criminal contempt citation from the
Senate. The citation must be approved by the Senate to issue.
Once passed by the Senate, the President Pro Tempore must
certify the criminal contempt citation and then submit it for
prosecution to the United States Attorney for the District of
Columbia.65 Upon submission to the United States
Attorney, it becomes the ``duty'' of the United States Attorney
to ``bring the matter to a grand jury for action.''
66
---------------------------------------------------------------------------
\65\ 2 U.S.C. Sec. 194. If Congress is not in session, the citation
can be approved by the ``presiding officer.'' Id.
\66\ Id.; see also Todd D. Peterson, Prosecuting Executive Branch
Officials for Contempt of Congress, 66 N.Y.U.L. Rev. 563 (1991);
``Prosecution of Contempt of Congress,'' Subcommittee on Administrative
Law and Governmental Relations, House Comm. on the Judiciary, 98th
Cong., 1st Sess. 21-35 (1983) (citing testimony of Stanley Brand). It
is unclear whether the United States Attorney retains discretion under
the statute to decline prosecution of the recalcitrant party.
---------------------------------------------------------------------------
Criminal contempt requires a ``willful'' violation of the
Senate subpoena.67 This form of contempt is punitive
and not compulsory. Therefore, if the Senate--and ultimately
the court--holds a recalcitrant party in criminal contempt,
that party cannot purge the contempt penalty by producing the
subpoenaed information.68
---------------------------------------------------------------------------
\67\ 2 U.S.C. Sec. 192.
\68\ 2 U.S.C. Sec. 192. The recalcitrant party can be found guilty
of a misdemeanor, which is punishable by a fine up to $1,000 and
imprisonment for one year. Id.
---------------------------------------------------------------------------
The ``statutory civil contempt'' procedure is available
only to the Senate pursuant to 2 U.S.C. Sec. 288d(a). The
committee issuing the subpoena, when faced with noncompliance,
must file a report to the full Senate.69 This report
must outline the procedure followed to issue the subpoena; the
extent to which the party has complied with the subpoena; any
objections raised by the subpoenaed party; and supply the
reasons the committee is pursuing civil enforcement, rather
than certifying a criminal action for contempt of Congress or
initiating a contempt proceeding directly before the
Senate.70
---------------------------------------------------------------------------
\69\ Id. Sec. 288d. In order to be reported out of Committee, the
report must be approved by a majority of members voting and present.
Id. Sec. 288d(c)(1).
\70\ Id. Sec. 288d(c)(2).
---------------------------------------------------------------------------
The civil contempt citation and its accompanying report
constitute a Senate Resolution, which is a privileged motion. A
privileged motion means that the resolution goes to the Senate
floor immediately and is not subject to
amendments.71 Once the resolution reaches the Senate
floor, however, it is subject to the rules of the chamber,
including filibuster. The Senate, after considering the report,
may adopt a resolution directing the Senate Legal Counsel to
initiate civil contempt proceedings against the recalcitrant
party.72
---------------------------------------------------------------------------
\71\ Id. Sec. 288j(a)(1).
\72\ Id. Sec. 288d(a).
---------------------------------------------------------------------------
After adoption of the resolution, Senate Legal Counsel
submits an application to the United States District Court for
the District of Columbia. The civil action, filed in the
committee's name, will request either declaratory relief or an
order compelling compliance with the subpoena. In the district
court, the recalcitrant party can make motions and interpose
objections. If the district court rejects those objections, the
court issues an order requiring compliance with the Senate
subpoena.
If the party still refuses to comply, the court may try the
person in summary proceedings for contempt of court by applying
for an order to show cause why the party should not be held in
contempt for failure to comply with the court's order. If the
court overrules the party's objections to the contempt order,
it will impose sanctions in order to compel the recalcitrant
party to comply with the subpoena.73 The contempt
order can be purged by the recalcitrant party. Even if the
Senate prevails in the district court, the recalcitrant party
may still exercise its right to appeal.74
---------------------------------------------------------------------------
\73\ The judicial contempt power supplements, but does not
supplant, the Senate's contempt power. See id. Sec. 288d(g).
\74\ 28 U.S.C. Sec. 1291.
---------------------------------------------------------------------------
The entire process can take as long as three
months.75 If the recalcitrant party appeals from the
district court, the process can extend for years.
---------------------------------------------------------------------------
\75\ For example, during the controversy over the Senate Ethics
Committee's attempts to secure former Oregon Senator Bob Packwood's
diaries, the Committee's civil contempt order and report issued on
October 20th; the full Senate considered the civil contempt citation on
November 1st and 2nd; the Senate's filed its application to the
district court on December 16th; and, the district court issued its
order requiring production of the diaries on January 7th of the
following year.
---------------------------------------------------------------------------
(3) Summary
The contempt procedures are the only vehicles by which a
Senate committee can ensure compliance with duly issued
subpoenas. In order for a Senate committee to conduct a
thorough and complete investigation against parties who are
willing to withstand public pressure to cooperate, a committee
must be able to force the recalcitrant parties to comply with
lawful Senate process. Due to the lengthy and arduous
procedures for civil and criminal contempt, it is essential
that future Senate investigations be free of arbitrary time
deadlines. Such deadlines encourage stalling, gamesmanship and
outright resistance to committee authority. In fact, the
conduct of the nonprofit and other groups illustrates how the
Senate imposed deadline of December 31, 1997 impeded the
Special Investigation.
III. CONCLUSION
Senate Resolution 39 granted the Committee explicit
authority to examine the numerous press accounts of illegal and
improper conduct by nonprofit groups in connection with the
1996 federal election cycle. In order to fulfill its
responsibilities, the Committee issued subpoenas to those
nonprofit groups that were most active during the 1996
elections. Those subpoenas did not exceed the Committee's
mandate or its constitutional authority to investigate matters
relevant to the Senate's consideration of reforms to the
federal campaign finance system. Despite the exercise of lawful
process, most of the nonprofit groups did not comply with
Committee requests for documents and deposition testimony.
Most troubling to the Committee, however, is the manner in
which its investigation was obstructed. Prior to the AFL-CIO's
open defiance of the Committee, most of the nonprofit groups
displayed a general willingness to cooperate with the
investigation. Most of the organizations readily produced
documents and scheduled witnesses for depositions. Once the
AFL-CIO refused to comply with the Committee's subpoenas by
raising specious and unsupported legal objections, the other
nonprofit groups had no reason--other than public
spiritedness--to cooperate. In other words, after the AFL-CIO
thwarted the Committee's investigation with impunity, the
remaining nonprofit groups did not fear the Committee's threats
of contempt.
Had the Committee been able to pursue contempt proceedings
against the AFL-CIO, or even credibly threaten contempt
proceedings, the Committee might have avoided the
obstructionist tactics of the AFL-CIO and others. Those threats
lacked credibility, however, because the nonprofit groups
understood that the Committee could not obtain a contempt of
Congress citation from a federal district court before the
expiration of the December 31, 1997 deadline. Moreover, even if
the Committee could have obtained such a citation, the right of
the organizations to appeal a finding of contempt guaranteed
that the Committee could not effectively utilize the contempt
procedures.
Therefore, the Committee concludes that the Senate's
imposition of an arbitrary deadline dramatically impeded the
course of the Special Investigation. As is discussed in more
detail in other sections of the report, absent the necessary
evidence, the Committee was unable to draw any meaningful
conclusions about the activities of nonprofit groups during the
1996 elections.
Role of Nonprofit Groups in the 1996 Elections
The 1996 election witnessed an unprecedented level of
political activity by nonprofit groups.1 The
Annenberg Public Policy Center at the University of
Pennsylvania estimates that, during the 1996 election cycle,
nonprofit groups spent between 55 and 70 million dollars on
political advocacy campaigns.2 These figures include
so-called ``independent expenditure'' 3 and ``issue
advocacy'' campaigns, 4 and constitute roughly one-
seventh of the 400 million dollars expended on political
advertising during the 1996 elections by parties, candidates
and others.5 This amount does not measure all of the
political advocacy and work of nonprofits, however. Get-out-
the-vote (``GOTV'') efforts and other types of in-kind
contributions by nonprofits supplemented paid media campaigns.
---------------------------------------------------------------------------
\1\ Paul Taylor, Introduction to Deborah Beck, et al., Issue
Advocacy Advertising During the 1996 Campaign 3 (Annenberg Public
Policy Center 1997). The Committee uses the phrase ``nonprofit group''
as a short-hand method of describing those entities organized for a
noncommercial purpose that directly participate in the electoral
process through contributions to candidates, the expenditure of funds
on behalf of candidates, or the expenditure of funds to educate the
public on issues of public policy. These nonprofit groups are entities
that are organized under either Sec. 501(c) or Sec. 527 of the federal
tax code. 26 U.S.C. Sec. Sec. 501(c), 527 (1997).
\2\ Taylor, supra note 1, p. 3. The Annenberg Report calculated
that the national political parties spent roughly $80 million on issue
advocacy and independent expenditure campaigns. This figure represents
a substantial portion of the $135 to $150 million spent by nonprofit
groups. Id.
\3\ ``Independent expenditure'' campaigns are communications that
expressly advocate the election or defeat of a clearly identified
federal candidate. These expenditures must be disclosed by the
sponsoring group but are not subject to contribution or expenditure
limits. In order to qualify as an independent expenditure, the
communication cannot be made in coordination with the candidate. 2
U.S.C. Sec. 441a(a)(7)(B).
\4\ ``Issue advocacy'' campaigns are communications designed to
promote a set of ideas or public policies. Issue advocacy is
distinguished from ``express advocacy'' in that the communications do
not advocate the election or defeat of a clearly identified federal
candidate. Buckley v. Valeo, 424 U.S. 1, 43-44 (1976) (narrowly
construing Federal Election Campaign Act of 1974 as applying only to
``expenditures for communications that in express terms advocate the
election or defeat of a clearly identified candidate for federal
office'').
\5\ Taylor, supra note 1, p. 3.
---------------------------------------------------------------------------
During and after the 1996 election, there were numerous
press reports about the activities of nonprofit groups. These
press accounts raised questions about whether the organizations
were truly nonpartisan and independent from political parties
and candidates as required by federal law.6 Because
of allegations surrounding the political activities of
nonprofit groups--particularly relating to the use of issue
advocacy campaigns--one of the priorities of the Committee was
to investigate the role of nonprofit organizations in the
elections.
---------------------------------------------------------------------------
\6\ See, e.g., Glenn F. Bunting et al., ``Nonprofits Behind Attack
Ads Prompt Senate Probe,'' Los Angeles Times, May 5, 1997, p. A1; Fred
Wertheimer, ``Investigate the G.O.P., Too,'' New York Times, Feb. 18,
1997, p. A19; Elizabeth Drew, Whatever It Takes (1997).
---------------------------------------------------------------------------
Senate Resolution 39, which authorized the Special
Investigation, specifically expanded the scope of the inquiry
to include not only illegal activities but improper conduct as
well.7 As a result, the Committee intended to
examine the following activities involving nonprofit
organizations:
\7\ Senate Report 105-7, p. 3.
---------------------------------------------------------------------------
The independence of presidential campaigns from the
political activities pursued for their behalf by
outside individuals or groups;
the misuse of charitable and tax-exempt organizations
in connection with political or fundraising activities;
unregulated (soft) money and its effect on the
American political system;
promises and/or the granting of special access in
return for political contributions or favors;
the effect of independent expenditures (whether by
corporations, labor unions, or otherwise) upon our
current campaign finance system, and the question as to
whether such expenditures are truly independent; and
contributions to and expenditures by entities for the
benefit or in the interest of public
officials.8
---------------------------------------------------------------------------
\8\ Id.
---------------------------------------------------------------------------
In order to further this goal, the Committee subpoenaed
thirty-two nonprofit organizations in addition to the
Republican National Committee (``RNC''), the Democratic
National Committee (``DNC''), and the presidential campaigns of
Senator Robert Dole and President Bill Clinton. The Committee
also subpoenaed numerous persons associated with these entities
for deposition testimony. Lastly, the Committee subpoenaed
several banking institutions, seeking the financial records of
some of the nonprofit groups.9
---------------------------------------------------------------------------
\9\ See below for listing of nonprofit groups that were subpoenaed
by the Committee.
---------------------------------------------------------------------------
The Committee issued these subpoenas to investigate several
specific allegations involving illegal or improper conduct by
nonprofit groups during the 1996 federal elections. First, the
Committee sought evidence that some political action committees
(``PACs'') participated in schemes to evade the contribution
limits set by federal election law.10 Second, the
Committee wanted to determine whether expenditures by nonprofit
groups for issue advocacy campaigns were coordinated with
federal candidates and/or party committees in such a manner
that those expenditures became illegal in-kind contributions to
the candidates or parties. Third, the Committee intended to
explore the increased use of issue advocacy campaigns by
nonprofit groups during the 1996 elections. Specifically, the
Committee hoped to examine the distinction between issue and
express advocacy--a distinction which in practical terms
appeared to be meaningless in the 1996 elections. Fourth, the
Committee sought evidence about the illegal use of nonpartisan,
tax-exempt groups by political parties and candidates for
partisan purposes.11
---------------------------------------------------------------------------
\10\ PACs, which are classified under Sec. 527 of the tax code, may
receive income that is exempt from federal taxation if that income is
spent ``influencing or attempting to influence'' the election of
candidates to federal, state, or local office. 26 U.S.C.
Sec. 527(c)(3), (e)(2). Unlike nonprofit groups organized under
Sec. 501(c) of the tax code, there are no partisan limitations on the
political activities of PACs. Indeed, PACs may contribute directly to
political candidates. However, because PACs may engage in partisan
political advocacy--as distinct from the nonpartisan advocacy of groups
organized under Sec. 501(c)--their activities are subject to regulation
under the Federal Election Campaign Act of 1971 (``FECA'').
\11\ Entities organized under Sec. 501(c) of the tax code receive
preferential tax status so that their income is either totally or
partially exempt from federal taxation. In order to qualify for this
preferential tax status, these organizations must abide by specified
limitations on their political activity. The degree of restriction on
political activity varies widely.
Groups organized under Sec. 501(c) may not contribute to political
candidates or parties but they may participate in the political
process. Groups organized for charitable, religious or educational
purposes are generally classified under Sec. 501(c)(3). Contributions
to groups organized under Sec. 501(c)(3) are not only exempt from
federal tax, but the donor may deduct the contribution as well. 26
U.S.C. Sec. 170(a), (c)(2). In return for this extremely favorable tax
treatment, these nonprofits may ``not participate in, or intervene in .
. . any political campaigns on behalf of (or in opposition to) any
candidate for public office.'' Id. Sec. 501(c)(3). Moreover, a
Sec. 501(c)(3) may not sponsor issue advocacy campaigns. In short,
these groups may not engage in political advocacy of any kind and must
limit their activities to purely educational functions.
Groups classified under Sec. 501(c)(4) are generally considered
social welfare organizations. Id. Sec. 501(c)(4). While the income of
groups organized under Sec. Sec. 501(c)(3) and (c)(4) is exempt from
federal taxation, donations to a Sec. 501(c)(4) are not deductible to
the contributor. A group organized under Sec. 501(c)(4), however, may
engage in political advocacy so long as the advocacy is of a
nonpartisan nature. Id. As a result, a Sec. 501(c)(4) may sponsor issue
advocacy campaigns.
Labor unions are nonprofit groups organized under Sec. 501(c)(5)
and mutual not-profit business organizations, such as the Chamber of
Commerce, are classified under Sec. 501(c)(6). These groups may engage
in nonpartisan political advocacy only. Id. Sec. 501(c)(5),(6). Both
types of groups can sponsor issue advocacy campaigns.
---------------------------------------------------------------------------
As described in great detail in the portion of the report
dealing with compliance, the Committee encountered substantial
resistance to its subpoenas.12 A substantial
majority of the nonprofit organizations, led by the AFL-CIO,
refused in whole or in part to produce documents or witnesses
pursuant to lawfully issued subpoenas. Relying on dubious
arguments about the constitutionality and scope of the
Committee's subpoenas, many of these groups pursued a tactical
strategy designed to impede the Special Investigation. Knowing
that the Senate had imposed a December 31, 1997 deadline on the
Special Investigation--a deadline that rendered useless the
lengthy contempt procedures available to the Committee--the
nonprofit groups stalled, delayed and ultimately refused to
cooperate with the Committee.
---------------------------------------------------------------------------
\12\ See below for discussion of noncompliance with Committee
subpoenas by nonprofit groups.
---------------------------------------------------------------------------
Because of the deadline, the Committee had no ability to
force the nonprofit groups to provide the documents and
testimony necessary to a full understanding of their conduct.
As a result of these tactics--particularly those of the AFL-
CIO--the Committee obtained only a smattering of relevant
documents and a handful of useful depositions.
With only a portion of the material evidence before the
Committee, it was unable to draw any reasonable conclusions
about the conduct of most of the nonprofit groups. In fact, the
Committee believes that it would be irresponsible to draw
inferences about serious allegations of illegality and
impropriety on such a limited amount of evidence. Consequently,
the Committee cannot confirm or deny most of the allegations of
illegal or improper conduct relating to the political
activities of nonprofit groups in the 1996 elections.
In their zeal to find a moral equivalent to the proven
misconduct of the DNC and the Clinton/Gore '96 campaign, the
Minority has repeatedly disclosed to the press--in violation of
the Committee's Confidentiality Protocol--documents and
deposition testimony that they contend prove violations of
election and tax laws by the RNC, Republican candidates and
sympathetic nonprofit groups. The Committee finds such
conclusions irresponsible given the limited available evidence
and the lack of public hearings.
Instead of sitting in judgment on an incomplete record, the
Committee will lay out some of the evidence that has been
uncovered during the course of the Special Investigation.
As noted above, the Committee sought to thoroughly examine
allegations that some nonprofit groups illegally coordinated
issue advocacy expenditures with federal candidates andparty
committees, thereby providing unreported and unlimited in-kind
contributions to those candidates and committees. FECA Sec. 431(9)(A)
defines the term ``expenditure'' as anything of value ``made by any
person for the purpose of influencing any election for Federal
office[.]'' 13 Section 441a(a)(7)(B)(1) states that
``expenditures'' that are made ``by any person in cooperation,
consultation, or concert, with, or at the request or suggestion of, a
candidate, his authorized political committees, or their agents, shall
be considered to be a contribution to such candidate[.]'' 14
As contributions, coordinated expenditures are subject to FECA's
limitations as to amount and source. Consequently, when a nonprofit
expends funds for communications designed to influence a federal
election, and the expenditure is made at the request of the candidate
or the candidate's agent or is based upon information obtained from the
candidate or the candidate's agent, the expenditure must be treated as
an in-kind contribution to the candidate for the purposes of disclosure
requirements and contribution limits.
---------------------------------------------------------------------------
\13\ 2 U.S.C. Sec. 431(9)(A)(1).
\14\ Id. Sec. 441a(a)(7)(B)(1).
---------------------------------------------------------------------------
In addition to FECA and FEC regulations applying to
nonprofit groups generally, there are several regulations that
specifically apply to political communications by labor
organizations. For example, FEC regulations allow registration
and voting communications ``provided that . . . [t]he
preparation and distribution or registration and get-out-the-
vote communications shall not be coordinated with any
candidate(s) or political party.'' 15 Labor
organizations may also prepare and distribute the voting
records of Members of Congress ``provided that . . . [t]he
decision on content and the distribution of voting records
shall not be coordinated with any candidate, group of
candidates or political party.'' 16 FEC regulations
also allow labor organizations to prepare and distribute voter
guides so long as the unions do not contact ``or in any way act
in cooperation, coordination, or consultation with or at the
request or suggestion of the candidates, the candidates'
committees or agents.'' 17
---------------------------------------------------------------------------
\15\ 11 C.F.R. Sec. 114.4.
\16\ Id. In addition to these regulations, the FEC has issued at
least one advisory opinion holding that coordination is a consideration
in determining whether general public communications critical of
Members of Congress' voting records are subject to the contribution
limitations and prohibitions of the FECA. FEC Advisory Opinion 1985-14.
\17\ 11 C.F.R. Sec. 114.4.
---------------------------------------------------------------------------
FEC regulations define coordination as:
any arrangement, coordination, or direction by the
candidate or his or her agent prior to the publication,
distribution, display, or broadcast of the
communication. An expenditure will be presumed to be so
made when it is--
Based on information about the candidates plans,
projects, or needs provided to the expending person by
the candidate, or by the candidates agents, with a view
toward having an expenditure made; or
Made by or through any person who is, or has been,
authorized to raise or expend funds, who is, or has
been, an officer of authorized committee, or who is, or
has been, receiving any form of compensation or
reimbursement from the candidate, the candidate's
committee or agent.18
---------------------------------------------------------------------------
\18\ Id. Sec. 109.1(b)(4)(I)(A),(B).
---------------------------------------------------------------------------
Using these regulations as a guidepost, the Committee found
some evidence that the AFL-CIO coordinated issue advocacy
campaigns with the DNC and the Clinton/Gore '96 campaign.
The Annenberg Report dubbed the AFL-CIO ``the-800 pound
gorilla of issue advocacy advertisers during the 1996
campaign.'' 19 Following the 1994 election in which
Republicans wrested control of both houses of Congress for the
first time in forty years, the AFL-CIO and its affiliated
unions set about reinvigorating the political operation of
organized labor. One of the principal manifestations of this
reorganization was a series of paid media campaigns, or issue
ad campaigns, designed to boost the political influence of
organized labor. The AFL-CIO and its affiliated unions
developed and funded three separate and distinct programs:
``Stand Up for America's Working Families,'' ``Project '95,''
and ``Labor '96.'' All three programs were ostensibly efforts
to convince Congress to support the AFL-CIO's political and
legislative agenda and to educate voters about the voting
records of their federal elected officials.
---------------------------------------------------------------------------
\19\ Taylor, supra note 1, p. 3.
---------------------------------------------------------------------------
Evidence obtained by the Committee indicates, however, that
all three programs were conceived, designed and implemented to
defeat Republican Members of Congress during the 1996 federal
elections. Specifically, the AFL-CIO sponsored a paid media
campaign that repeatedly targeted incumbent Republicans. The
Federation's issue advertisements constituted an unrelenting
barrage of television and radio ads, beginning in April 1995,
that did not cease until the close of the 1996 elections.
The AFL-CIO and its affiliate unions provided the campaigns
of the challengers in those districts direct contributions
through COPE. The AFL-CIO also committed 102 political staff
workers to organize union members in those races, and sponsored
both direct mail campaigns and get-out-the-vote drives in those
targeted districts.20 In fact, the day after the
1996 election, AFL-CIO President John Sweeney claimed credit
for reducing the Republican majority in the House of
Representatives.21
---------------------------------------------------------------------------
\20\ ``Hotline Turnout Study,'' Hotline, Nov. 1, 1996, p. *21
(quoting AFL-CIO Spokesperson Deborah Dion).
\21\ ``Statement of John Sweeney, President, AFL-CIO, on Election
'96'' AFL-CIO Press Release, Nov. 6, 1996 (Ex. 1).
---------------------------------------------------------------------------
The first of these issue ad campaigns was called ``Stand Up
for America's Working Families,'' which began airing
commercials attacking Republican legislative proposals on April
7, 1995.22 There can be little doubt about the
partisan tone of the issue ads sponsored by the AFL-
CIO.23 For example, on June 26, 1995, the AFL-CIO
released an issue ad entitled ``Sparkler'', which attacked
Republican budget proposals. The text and video of the ad were
as follows:
---------------------------------------------------------------------------
\22\ ``AFL-CIO Campaign for America's Working Families,'' AFL-CIO
Press Release, Apr. 7, 1995 (Ex. 2).
\23\ Thomas Donahue, who served as President of the Federation
during most of 1995, described the program as ``the AFL-CIO's national
effort to expose . . . Republican votes against workers and their
families, and in favor of their rich friends. It's our campaign to let
the American people know the truth about what the Republicans are doing
in Washington, and what else they have planned.'' ``AFL-CIO President
Tom Donohue, Stand Up News Conference,'' AFL-CIO Press Release, Aug.
21, 1995, p.1 (Ex. 3).
------------------------------------------------------------------------
Video Audio
------------------------------------------------------------------------
Kids at a Fourth of July parade........... America. Where children can
go as far as their dreams
will take them . . .
If we keep their
opportunities bright and
alive . . .
Kids on front steps, holding sparklers. But every time the
Light fades until all we see is the Republican Congress cuts
sparklers and the light of the sparklers jobs, cuts education, cuts
on their faces.. college loans, Medicare or
health and safety to pay
for tax cuts for the rich,
they undercut the promise
of America . . . And a
dream dies.
Sparklers start to go out until they are Ask Congress to make America
all extinguished.. the land of opportunity
again . . . To keep the
American dream alive . . .
To stand up for America's
working families.24
24 ``AFL-CIO TV:30, `Sparkler,''' AFL-CIO
Press Release, June 26, 1995, p. 1 (Ex.
4).
One sparkler lights. Kids laughing and
waving sparklers.
------------------------------------------------------------------------
Subsequent issue ads singled out Republican Members of
Congress by name for criticism and urged the audience to
contact their representatives directly. For example, the AFL-
CIO released an issue ad for the Labor Day congressional recess
in 1995, which criticized Republican proposals reforming the
Occupational Health and Safety Act (``OSHA''). The commercials
were titled by the name of the Member of Congress that was
targeted. In one such ad, entitled ``Grain-Dickey,'' the text
was as follows:
------------------------------------------------------------------------
Video Audio
------------------------------------------------------------------------
(Slow, Moving Track)
Stills of Patrick Hayes................... (Ron Hayes voice:)
Our son Patrick was a good
kid. A real hard worker
Slow push in on silo...................... Two years ago, Patrick was
crushed to death in the
feed mill where he worked.
Rescue shots.............................. The company thought they
could get away with
breaking the law.
Patrick was just 19 years
old when he died.
Ron and Dot Hayes, sitting together. Soft Now, the Republicans in
lighting. Congress are cutting health
and safety . . .
Close up on Ron Hayes..................... Protections I know can save
lives. If they succeed,
more people will die.
Worker and family shots................... (Voice over)
Call Rep. Dickey 1-800-765-4440........... Tell Republican Congressman
Jay Dickey to stop cutting
health and safety . . .
Disclaimer................................ So other families don't lose
their loved ones. 25
------------------------------------------------------------------------
During a press conference discussing the OSHA issue ad, a
reporter asked Tom Donohue how the AFL-CIO selected the thirty-
six congressional districts in which it ran these ads. He
responded that the districts were selected because ``the bulk
of them are [represented by] first-term, freshmen Republicans
who . . . may be defeatable.'' 26 Donohue's remarks
suggest that these Republican Members of Congress were targeted
because the AFL-CIO thought they were vulnerable in the 1996
federal election. 27
---------------------------------------------------------------------------
\25\ AFL-CIO Press Release, Aug. 1995 (Ex. 5).
\26\ Ex. 3, p. 3.
\27\ Donahue later told reporters that the AFL-CIO would be
targeting congressional ``districts that are designated marginal or
critical to us.'' Press Conference of Thomas Donohue, President of AFL-
CIO, Sept. 21, 1995, p. 3 (Ex. 6).
---------------------------------------------------------------------------
The Stand Up for America's Working Families campaign was
later joined by ``Project '95,'' which was an issue ad campaign
sponsored by the American Federation of State, County &
Municipal Employees (``AFSCME''). Project '95 grew out of the
internal struggle over control of the AFL-CIO. For only the
second time in Federation history, an incumbent leader, Tom
Donahue, was being challenged by an insurgent, John Sweeney.
As part of the campaign to unseat Donahue, AFSCME President
McEntee--an ally of Sweeney--created Project '95. Press
accounts described Project '95 as ``grassroots organizing
against 14 targeted GOP Members [of Congress] that, union
leaders hope, will materialize into electoral victory next
year.'' 28 The Committee found evidence that AFSCME
designed Project '95--purportedly an issue advocacy campaign--
in order to defeat Republican Members of Congress, including
many of the same representatives whose districts had been
bombarded with AFL-CIO advertisements as part of the Stand Up
for America's Working Families campaign. Press accounts
explained that Project '95 was
---------------------------------------------------------------------------
\28\ Tim Curran, ``Labor's Political Rebirth?,'' Roll Call, Nov.
6, 1995, p. 1.
[f]unded by independent unions and other citizen
groups and headed by 1990 [Democratic] Rhode Island
House candidate Scott Wolf, the project has provided
``issues education efforts'' and full-time local
coordinators in selected Republican-held
[congressional] districts . . .
Already, Wolf said, the '95 Project is in place in 14
House districts ``and we will be expanding our coverage
in the near future.'' He identified a quartet of
potentially vulnerable GOP Members elected last year--
``Reps. Phil English (Pa), John Ensign (Nev), Frank
Riggs (Calif), and Jim Longley (Maine)--as early
targets.'' 29
---------------------------------------------------------------------------
\29\ Id.
The aggressive use of partisan attack ads disguised as
issue advocacy--similar to Project '95--became a centerpiece of
John Sweeney's successful challenge to Donohue. The partisan
motives for the issue ad campaigns were widely known. Deputy
White House Chief of Staff Harold Ickes testified that Project
'95 was ``a very, very substantial campaign . . . that McEntee
was basically heading up for Sweeney to take back the Congress
[for the Democratic Party].'' 30
---------------------------------------------------------------------------
\30\ Deposition of Harold Ickes, June 27, 1997, p. 92.
---------------------------------------------------------------------------
Sweeney's proposals, however, went further than those put
forth by McEntee and AFSCME. Sweeney proposed a new political
training institute designed not only to train workers, campaign
managers and prospective political candidates, but also to
organize other union members to participate in key
congressional races in 1996. Therefore, Project '95 can be
understood as a dress rehearsal for Labor '96, the massive
issue ad campaign sponsored by the AFL-CIO during the 1996
election cycle.
Labor '96 cost the AFL-CIO $35 million. Of that figure, the
paid media campaign cost $25 million, with the balance funding
direct mail advertising and organizational activities. The AFL-
CIO financed the issue ad campaign with a $.15 per member, per
month assessment.31
---------------------------------------------------------------------------
\31\ Beck et al., supra note 1, pp. 10-12.
---------------------------------------------------------------------------
Labor '96 sponsored issue ads that were clearly designed to
influence the outcome of the election. For example, Labor '96
aired a number of issue ads that attacked by name Republican
Members of Congress, while simultaneously depicting an ominous
looking image of House Speaker Newt Gingrich and Senate
Majority Leader Bob Dole. One of those ads, which aired in the
Washington state congressional districts of Republican
Congressmen Rick White and Randy Tate, stated as follows:
---------------------------------------------------------------------------
\32\ AFL-CIO Video Tape, ``Randy Tate/Rick White''.
------------------------------------------------------------------------
Video Audio
------------------------------------------------------------------------
Congressmen Rick White.................... On November 20th, our
Congressmen voted with Newt
Gingrich and against
working families.
(Picture of Newt Gingrich)
Federal budget vote....................... They voted to cut Medicare,
education, and college
loans, all to give huge tax
breaks to the big
corporations and the rich.
(Picture of elderly man) Cut Medicare
(Picture of graduate) Cut Education
Congressmen Rick White and Randy Tate
voted tax breaks for the rich (picture of
Wall Street, limousine doors opening).
Picture of Clinton vetoing bill in Oval . . . But President Clinton
Office . . .. said no. He stood up for
working families and sent
the Gingrich budget back to
Congress.
Dole and Gingrich pictured behind podium
together..
Congressmen Rick White and Randy Tate..... Now it's up to us. We need
to get involved and speak
out. Let's tell Congressmen
White and Tate, this time,
don't vote for the wealthy
special interests.
(American Flag)
(Man at the mail box, woman on the phone)
(Picture of Capitol)
(Picture of family) 1-800-765-4440 This time vote for America's
working families.
Paid for by the Men and Women of the AFL-
CIO.32.
------------------------------------------------------------------------
As this ad illustrates, Project '96 was a partisan campaign
designed to influence federal elections and return political
control of Congress back to the Democratic Party.
Since these expenditures were apparently ``made for the
purpose of influencing a[] federal election''--as that phrase
is used in FECA Sec. 431(9)(A)(1)--the question of coordination
becomes central to any determination of impropriety against the
AFL-CIO, the DNC, the Clinton/Gore '96 campaign and Democratic
Members of Congress. Within weeks of John Sweeney assuming the
AFL-CIO presidency in October 1995, the Federation stepped up
the coordination of its political efforts with the DNC, the
White House and Democratic Members of Congress.
For example, on November 15, 1995, the senior leadership of
the AFL-CIO, including Sweeney, Richard Trumka and Linda
Chavez, met in the Oval Office with Vice President Gore, Harold
Ickes, Chief of Staff Leon Panetta, Deputy Chief of Staff
Erskine Bowles, Jennifer O'Connor, Ickes' assistant for labor
matters, and David Strauss, the Vice President's Chief of
Staff. Ickes' handwritten notes indicate that the possible
purpose of the meeting was to discuss the AFL-CIO's political
contributions and strategy during the 1996 federal election
campaign.33
---------------------------------------------------------------------------
\33\ Handwritten Notes of Harold Ickes, Nov. 15, 1995 (Ex. 7).
---------------------------------------------------------------------------
Beginning on December 1, 1995, the AFL-CIO launched
television and radio issue advertisements opposing budget
proposals put forth by Republican congressional leaders. The
issue ads targeted twenty Republican congressional districts.
As part of this effort, the AFL-CIO also funded a direct mail
campaign in fifty-five districts represented by Republican
Members of Congress.34
---------------------------------------------------------------------------
\34\ Mike Hall, ``Workers Building Support for Budget Veto,'' AFL-
CIO News, Dec. 1, 1995 (Ex. 8).
---------------------------------------------------------------------------
Ickes met for a second time with senior leaders of the AFL-
CIO on December 5, 1995. That afternoon, Sweeney and McEntee
met with Ickes at the White House. Documents obtained by the
Committee show that the AFL-CIO's leadership provided the White
House and Clinton-Gore '96 campaigns a sneak preview of the
Federation's political plans for 1996. Ickes' handwritten notes
of the meeting state that the Federation was targeting fifty-
five congressional districts, that AFSCME ``freed up'' $10.5
million for the upcoming political campaign to ``move 75 people
into [the] field for '96,'' and that Sweeney ``will propose . .
. that all unions do this.'' 35
---------------------------------------------------------------------------
\35\ Handwritten Notes of Harold Ickes, Dec. 5, 1995 (Ex. 9).
---------------------------------------------------------------------------
According to Ickes' sworn deposition testimony, his notes
``refer[] to the fact that organized labor was going to make a
very strong effort to try to take back the House . . . to make
it Democratic.'' 36 He stated that his notes
``referred to the internal campaign of the AFL-CIO mounted in
1996, which was reportedly about $35 million to focus on taking
back the House of Representatives.'' 37 Ickes
testified that the campaign ``focused on swing districts to try
to ensure that Democrats could take back the House in '96.''
38 Ickes added that AFL-CIO Political Director Steve
Rosenthal wanted ``to let the White House know the key points
[of the AFL-CIO's political action efforts in 1996] and the
amount of resources that labor was devoting to trying to take
back the House.'' 39
---------------------------------------------------------------------------
\36\ Deposition of Harold Ickes, Sept. 22, 1997, p. 168.
\37\ Id. at pp. 176-77.
\38\ Id. at p. 177.
\39\ Id. at p. 185.
---------------------------------------------------------------------------
Two days later, on or about December 7, 1995, Ickes
presided over a critical third meeting at the White House with
officials of the AFL-CIO and representatives of various
affiliated unions. Media consultants for both the AFL-CIO, the
DNC and the Clinton-Gore '96 campaign, including the
President's chief media consultant Dick Morris, also attended
this meeting with Ickes. According to the deposition testimony
of Morris, the meeting was held in the Roosevelt Room of the
White House. 40 Morris testified about that meeting
as follows:
---------------------------------------------------------------------------
\40\ Deposition of Richard Samuel Morris, Aug. 20, 1997, p. 216.
The second meeting was one that was set up by Mr.
Ickes in the Roosevelt Room of the White House, which
was a meeting he arranged, conceptualized, and chaired.
And at that meeting, there were six or seven
representatives of labor there, and on the campaign--on
the Clinton-Gore side, present were Ickes, Sosnik,
Stephanopolous, myself, and I believe--and some of the
consultants. I can't be quite clear on who I think
probably--some--either Penn or Schoen or Knapp. I don't
believe Squier was there. And at the meeting--and from
labor, they had somebody from the teachers, somebody
from the municipal--from the AFSCME, somebody from the
AFL. And they may have had Vic Fingerhut there, who was
their media creator. I'm not sure about that.
And they showed us the ads that they either had run
or were--either had run or were thinking of running. I
was never quite clear what it was. And we showed them
ads that we had already run, and they suggested to us
that there be coordination of the advertising--this was
issue oriented ads about the budget . . . And their
suggestion was that in States where we were advertising
they not, and in States where they weren't, we
do.41
---------------------------------------------------------------------------
\41\ Id. at p. 216-17 (emphasis added).
---------------------------------------------------------------------------
When asked who from organized labor spoke at the meeting,
Morris testified that
[t]here were five or six [people] who spoke. The
teachers union person--each of the union people--the
teachers union, the AFSCME, the AFL, and there may have
been one or two other unions--spoke in turn about what
their media plans were that they were planning to
advertise in states of Republican senators, they were
going to spend $1 million over the course of the next
year on doing it, here are the ads they had already
run, here were the ads that they were about to run. It
was a full briefing of us by them on their media
plans.42
---------------------------------------------------------------------------
\42\ Id. at p. 222.
Morris also testified that Ickes was favorably disposed to
the idea of coordination with the AFL-CIO. Morris said that,
during the course of that meeting, Ickes ``was basically urging
us, me, to coordinate with a [labor-run media] campaign that I
thought was counterproductive to our campaign and would have
rather not been on the air.'' 43
---------------------------------------------------------------------------
\43\ Id. at p. 220.
---------------------------------------------------------------------------
Ickes' version of the meeting conflicts somewhat with the
recollection of Morris:
Q: Do you recall if . . . they actually showed their
media ads?
A: It was during the budget fight. I think AFL-CIO was
running--in fact, I'm pretty sure they were running
some ads during the budget fight and they may well have
shown us some of those ads.
* * * * *
Q: Do you recall why the labor representatives were
showing you their ads?
A: Yeah. They would come over from time to time, just
the way Steve Rosenthal would tell me what labor was
doing.
Q: Were there other occasions where they came over and
showed you [their] ads?
A: Very, very seldom. I vaguely remember this. I don't
recall--there may have been another meeting like this,
but I don't recall it specifically. But I have some
vague recollection of them coming over because I think
they put--they ran ads in certain areas.
* * * * *
Q: During these meetings, did anyone from labor ever
suggest that they divide up the media area such as
states or congressional districts with the DNC or the
Clinton-Gore campaign?
A: With respect to the budget fight?
Q: Yes, specifically.
A: They may--a lot of things were suggested in
meetings like that and it could well have been that
there was some suggestions. But my--I think that these
ads were up and running and that the AFL-CIO just
wanted to show us what they were running.44
---------------------------------------------------------------------------
\44\ Deposition of Harold Ickes, Sept. 22, 1997, pp. 191-93.
White House Political Director, Doug Sosnik, also attended
the meeting in the Roosevelt Room on December 7, 1995. In his
deposition, Sosnik recalled being present but could not
remember any details.45 Sosnik testified, however,
that he discussed AFL-CIO advertisements with Harold Ickes on
---------------------------------------------------------------------------
at least one other occasion. Sosnik testified that he told
Harold [Ickes]--when the AFL-CIO said that they were
going to run ads, I said to Harold--and this was prior
to them running the ads, and this was prior to the DNC
running ads--I said how are we supposed to--what are
the rules of the road here, in terms of what is
appropriate or not appropriate in working with labor?
---------------------------------------------------------------------------
\45\ Deposition of Douglas Brian Sosnik, Sept. 12, 1997, pp. 141-
46.
* * * * *
---------------------------------------------------------------------------
The decision that I made following these discussions
[with White House and/or DNC counsel] was not to
discuss with labor either the content or the placement
of their ads prior to them doing it, and the same in
our world, which was not to discuss with them any ads
that the campaign was to--were going to put out, either
in substance or where they were going to
go.46
---------------------------------------------------------------------------
\46\ Id. at pp. 148-49.
Despite Sosnik's testimony, both Ickes and Morris testified
that organized labor and the DNC previewed each other's ads. In
addition, Morris' testimony that Ickes and the labor
representatives openly discussed coordinating their respective
campaigns is the most direct evidence that Labor '96 was
nothing more than a coordinated expenditure--and therefore an
in-kind contribution--to the DNC and Clinton-Gore reelection
campaigns.
Shortly after the coordination meeting in the Roosevelt
Room, the AFL-CIO launched Labor '96, its issue advocacy
campaign that aired through the presidential and congressional
elections. On January 16, 1996, the AFL-CIO announced ``a
scornful $1 million radio and television campaign'' protesting
the federal government shutdown, and targeting twenty-seven
unspecified congressional districts.47
---------------------------------------------------------------------------
\47\ ``27 Members of Congress Who Voted to Cut Medicare, Medicaid,
Education, College Loans to Fund Tax Cut for Rich Now Face Public
Outrage, Media Blitz,'' AFL-CIO Press Release, Jan. 16, 1996 (Ex. 10).
---------------------------------------------------------------------------
Documents obtained from the White House further illustrate
how the Clinton-Gore '96 campaign coordinated with organized
labor, particularly the AFL-CIO, to obtain the maximum
electoral benefit from their issue advocacy efforts. On
February 14, 1996, Jennifer O'Connor--Ickes' principal aide for
labor issues--wrote him a draft memorandum about organized
labor's anticipated role in the 1996 election campaign.
O'Connor proposed ``[c]ommunications/message sessions,'' which
involved ``[b]ring[ing] in unions to discuss message with
[White House Communications Director] Don Baer, [Clinton-Gore
'96 Communications Director] Ann Lewis and others.''
48 Her memorandum to Ickes also called for
``mailings/union talking points,'' and ``GOTV''
activities.49
---------------------------------------------------------------------------
\48\ Draft Memorandum from Jennifer O'Connor to Harold Ickes, Feb.
14, 1996 (Ex. 11).
\49\ Id.
---------------------------------------------------------------------------
One week later, the AFL-CIO's ruling executive council
formally approved Labor '96 (a.k.a. ``Project '96''). At a
special convention, one month later, the affiliated unions of
the AFL-CIO voted to endorse President Clinton for re-election,
and to fund Labor '96 with $35,000,000. A Federation press
release announced that Labor '96 intended to inform voters
``how Republican leaders of Congress are trying to destroy
Medicare, Medicaid, education and college loans . . . and how
they tried to destroy workplace health and safety protections,
wage standards and environmental protections[.]'' 50
---------------------------------------------------------------------------
\50\ ``AFL-CIO Special Convention Endorses Clinton for Re-election,
Votes Funds for Massive National Education and Action Program,'' AFL-
CIO Press Release, Mar. 25, 1996 (Ex. 12).
---------------------------------------------------------------------------
On March 30, 1996, Steve Rosenthal met with DNC Chairman
Don Fowler at Federation headquarters to discuss ``funding
issues outside of the Coordinated Campaign structure,''
including ``the amount of financial support that w[ould] be
directed from the various [unnamed] organizations[.]''
51 Rosenthal and Fowler also discussed ``which
states should receive support from these organizations in order
to maximize our effort.'' 52
---------------------------------------------------------------------------
\51\ Memorandum from Alejandra Y. Castillo to Don Fowler, Mar. 29,
1996 (Ex. 13). The Committee did not have the opportunity to question
Chairman Fowler about this meeting with Rosenthal because the DNC did
not produce this document until one week after Chairman Thompson
announced the suspension of hearings.
\52\ Id.
---------------------------------------------------------------------------
Labor '96 was not simply a paid media issue advocacy
campaign. During the second week of July, the AFL-CIO conducted
a candidate seminar for fifty Democratic congressional
candidates at which Geoffrey Garin and other labor pollsters
presented their research and consulting services.53
In addition, the Committee has documentary evidence and
deposition testimony indicating that the AFL-CIO also may have
shared the results of internal polling data and other
information with officials of the White House, the DNC and/or
Clinton-Gore '96. Garin testified that ``after the disaster [of
the 1994 elections] occurred and they decided to change
pollsters at the White House,'' he provided several briefings
to President Clinton's key political aides, including Harold
Ickes.54 Garin also indicated that the AFL-CIO
shared with White House, DNC and Clinton-Gore '96 officials the
results of the 1995 polling data that prompted the Federation
to overhaul its political operation. Garin said that the AFL-
CIO shared the polling data in order ``to strengthen the
quality of political education and political action within the
labor movement.'' 55
---------------------------------------------------------------------------
\53\ Mary Jacoby, ``Labor Works Around Edges of Election Law,''
Chicago Tribune, July 27, 1996, p. 1.
\54\ Deposition of Geoffrey Garin, Sept. 5, 1997, p. 37.
\55\ Id. at p. 29.
---------------------------------------------------------------------------
David Strauss, a key aide to Vice President Gore, also
testified in his deposition that Garin briefed the Vice
President and other White House officials during the fall of
1995 on ``a whole range of issues . . . concerning the mood of
the country and how people were responding to the President.''
56 At about the same time that the AFL-CIO created
``Stand-Up for America's Working Families,'' Garin and a
Democratic pollster conducted a major research project entitled
``The Situation Facing America's Working Families.'' Garin
testified that he presented the results of that paper to White
House economic advisors in early 1995.57 It is
unknown whether that research was shared with the President's
political aides as well.
---------------------------------------------------------------------------
\56\ Deposition of David M. Strauss, Aug. 14, 1997, p. 71.
\57\ Garin deposition, pp. 40-41.
---------------------------------------------------------------------------
On July 13, 1996, Steve Rosenthal met again with Ickes in
the White House. Ickes' handwritten notes of the meeting
indicate that they discussed Labor '96 in great detail. For
example, Ickes' notes show that Rosenthal said that the AFL-CIO
was going to commit ``102 staff'' in ``76 CDS [congressional
districts],'' ``500 guys in 30 districts,'' spend ``$20.5
[million] for radio [advertisements],'' and ``devote 2000-2500
[staff and union activists] full-time during [the] last 6 weeks
[of the campaign].'' 58
---------------------------------------------------------------------------
\58\ Handwritten Notes of Harold Ickes, July 13, 1996 (Ex. 14).
---------------------------------------------------------------------------
The Committee also obtained documents that suggest that
Steve Rosenthal and other senior leaders of the AFL-CIO knew,
or should have known, of the statutes and regulations
prohibiting coordination of campaign expenditures between the
Federation, the DNC, White House, and Clinton-Gore '96
campaign. For example, an AFL-CIO press release announcing the
hiring of Rosenthal noted that he previously served as the
deputy political director of the DNC, where he supervised the
party's nationwide 1992 coordinated campaign.59
Prior to that, Rosenthal served as political director of the
Communications Workers of America (``CWA'') and on several
state and local political campaigns.60
---------------------------------------------------------------------------
\59\ ``AFL-CIO President Announces More Key Staff Changes,'' AFL-
CIO Press Release, Nov. 16. 1995 (Ex. 15).
\60\ Id.
---------------------------------------------------------------------------
There is additional evidence that the leadership of the
AFL-CIO knew about restrictions on coordinated political
activity. Documents produced by the DNC show that Rosenthal and
possibly Garin attended and participated in a conference,
entitled ``Win In '96: A Coordinated Campaign Meeting.'' The
DNC sponsored the conference in June of 1996 in Washington and
presented the legal framework for coordinated campaigns. DNC
General Counsel Joseph Sandler and Deputy General Counsel Neil
Reiff devoted an entire section of the briefing materials to
``working with . . . labor unions.'' 61
---------------------------------------------------------------------------
\61\ ``Win in '96: A Coordinated Campaign Meeting,'' DNC Handbook,
June 6-9, 1996, pp. 15-18 (Ex. 16).
---------------------------------------------------------------------------
A handbook distributed by Sandler and Reiff states that
``unions can distribute voter registration information, as long
as `[such] activity is not coordinated with any particular
party or candidate, [and] no activity can be targeted toward
[a] particular party or candidate.' '' 62 The DNC
lawyers advised the AFL-CIO that voter guides could ``say
anything short of express advocacy if there is no contact
whatsoever with any campaign or party . . . [and] no
coordination as to [the] distribution or content with any
campaign or party committee.'' 63 Finally, the
handbook states that union-sponsored GOTV drives ``must not
include express advocacy, cannot be targeted to supporters of a
candidate or to members of a particular party, [and] cannot be
coordinated with [a] candidate or party.'' 64
---------------------------------------------------------------------------
\62\ Id. at p. 16.
\63\ Id. at p. 16 (emphasis in original).
\64\ Id. at p. 17.
---------------------------------------------------------------------------
Therefore, there is a substantial body of evidence
suggesting that the AFL-CIO violated FEC regulations regarding
coordination of public communications by labor organizations
and candidates for federal office. There is also evidence that
the AFL-CIO coordinated expenditures for its Labor '96 issue
advocacy campaign with officials from the White House, DNC and
Clinton-Gore '96 campaign. If so, the AFL-CIO may have provided
illegal in-kind contributions to Democratic candidates for
federal office, including President Clinton and Vice President
Gore.
As explained in the compliance section of this report, the
Committee subpoenaed several nonprofit groups that are
generally supportive of the Republican agenda. Despite limited
evidence, the Committee found that some of these organizations
sponsored issue ads that were clearly designed to influence the
outcome of federal elections.
One of the organizations that the Committee subpoenaed was
Triad Management Services, Inc (``Triad''). Triad, which was
the subject of several press reports, is a for-profit political
consulting firm that advises conservative donors as to which
PACs, candidates and special projects (i.e., tax-exempt
organizations) are most likely to advance the conservative
principles of the donors.65 Triad does not work for
individual candidates or PACs. Carolyn Malenick, the President
and founder of Triad, started the company in 1995 after serving
as the Finance Director of the Oliver North for Senate
campaign.66
---------------------------------------------------------------------------
\65\ Deposition of Meredith O'Rourke, pp. 107-108.
\66\ Deposition of Anna Lee Malenick Evans, August 19, 1997, at pp.
8, 23-24.
---------------------------------------------------------------------------
In return for a set fee, Triad provides its conservative
clients due diligence and research on political candidates,
PACs, and tax-exempt organizations. Triad then recommends to
its clients where to make donations. Triad earns management
fees from two nonprofit organizations, Citizens for Reform
(``CR'') and Citizens for the Republic Education Fund
(``CREF''), that were also subpoenaed by the
Committee.67 In return for the management fees,
Triad solicited donations to CR and CREF from its conservative
clients in order to fund an issue advocacy campaign that was
critical of Democratic congressional candidates.68
In the Fall of 1996, Triad raised several million dollars and
also managed the issue advocacy campaigns.69
---------------------------------------------------------------------------
\67\ Id. at p. 26; O'Rourke deposition at p. 40.
\68\ Evans deposition at p. 28; O'Rourke deposition at p. 140.
\69\ Evans deposition at p. 63; O'Rourke deposition at pp. 140-150.
---------------------------------------------------------------------------
Under the guidance of Triad, CR and the CREF funded several
million dollars of issue ads in the weeks preceding the 1996
elections.70 Like the issue ad campaign sponsored by
the AFL-CIO, these commercials mentioned the name and depicted
the image of federal candidates. Many of the advertisements
sponsored by CR and CREF, under Triad's direction, can be
fairly labeled as ``attack ads'' that focused on the voting
records and even personal backgrounds of Democratic candidates.
---------------------------------------------------------------------------
\70\ Evans deposition at pp. 138, 146.
---------------------------------------------------------------------------
For example, during the hearings, the Committee viewed an
issue ad sponsored by CR that informed voters that Bill
Yellowtail, the Democratic candidate for a Montana
congressional seat, had been arrested for spousal
abuse.71 Also like the Labor '96 campaign, many of
the CREF's issue ads focused attention on the candidate rather
than exclusively on issues. For example, the CREF aired an
issue ad attacking Winston Bryant, the Democratic candidate for
Senate in Arkansas. In the ad, the announcer stated as follows:
---------------------------------------------------------------------------
\71\ Testimony of Lawrence Noble, Sept. 25, 1997, p. 71.
Senate candidate Winston Bryant's budget as Attorney
General increased 71%. Bryant has taken taxpayer funded
junkets to the Virgin Islands, Alaska and Arizona. And
spent about $100,000 on new furniture. Unfortunately,
as the state's top law enforcement official, he's never
opposed the parole of any convicted criminal, even
rapists and murderers. And almost 4,000 Arkansas
prisoners have been sent back to prison for crimes
committed while they were out on parole. Winston
Bryant: government waste, political junkets, soft on
crime. Call Winston Bryant and tell him to give the
money back.72
---------------------------------------------------------------------------
\72\ Beck et al., supra note 1, p. 23.
Since the issue ads were intended ``to influence the
outcome of a[] federal election''--within the meaning of FECA
Sec. 431(9)(A)--the question of illegality turns on whether
those issue ads were coordinated with federal candidates or the
candidate's agents.73 The Committee has no evidence
of coordination between Triad and any of the national party
committees. In fact, there is some suggestion that Carolyn
Malenick created Triad because of dissatisfaction with the
Republican Congressional Campaign Committee (``RCCC'') and that
the RCCC viewed Triad as a competitor for conservative
Republican donors.
---------------------------------------------------------------------------
\73\ 11 U.S.C. Sec. 441a(a)(7)(B)(1).
---------------------------------------------------------------------------
Triad gathered crucial information about individual
Republican candidates before selecting the topics and media
markets for issue ads. Triad's political consultant, Carlos
Rodriguez, performed what Triad called ``political audits'' on
over 250 Republican congressional campaigns. These audits
allowed Rodriguez to evaluate the strengths and weaknesses of
each campaign and to make recommendations of assistance to
Malenick.74
---------------------------------------------------------------------------
\74\ See, e.g., Randy Tate Audit Memorandum, Oct. 3, 1996 (Ex. 17).
---------------------------------------------------------------------------
For example, a typical audit memorandum indicated the
campaign's proposed budget, cash on hand, and current debt. The
memoranda also provided the latest polling data and highlighted
the key issues in the campaign. The memoranda also set forth an
extensive narrative discussion of each campaign's good and bad
points. Rodriguez would then close with a discussion of the
candidate's crucial needs and issue a recommendation to
Malenick.75
---------------------------------------------------------------------------
\75\ E.g., Rick White Political Audit Memorandum, Oct. 3, 1996 (Ex.
18).
---------------------------------------------------------------------------
Rodriguez audited the campaign of John Thune, a Republican
congressional candidate on September 25, 1996. Though Rodriguez
did not meet with Thune personally, he did visit with the
campaign manager, Dan Nelson. Rodriguez noted in his audit
memorandum that the Thune campaign possessed ``[g]ood
consulting. Good polling. Good media. In a state where strategy
and media dictates the outcome of an election, this campaign is
well staffed and poised to win in November.'' 76
Under the ``Action'' item, Rodriguez indicated that he and
Malenick should ``[c]ontinue communication with Dan Nelson and
John Thune.'' 77 In the way of assistance, Rodriguez
suggested to Malenick that, ``[i]f there is anything we can do
to help [the campaign] it would probably be in the area of
501(c)4 education with regards to the liberal tendencies of his
opponent.'' 78 There is no evidence, however, to
support a finding that Triad coordinated issue advocacy
expenditures with the Thune campaign, or that the Thune
campaign had any knowledge of or participation with Triad in
its activities.
---------------------------------------------------------------------------
\76\ John Thune Political Audit Memorandum, Sept. 25, 1997, p. 2
(Ex. 19).
\77\ Id.
\78\ Id.
---------------------------------------------------------------------------
Under FECA and FEC regulations, the expenditure must be
shown to have been made at the request of the candidate or the
candidate's agent, or based on information obtained from the
candidate.79 Communication in the abstract is not
equivalent to coordination. The Committee found no evidence
that Congressman Thune or anyone from his campaign staff
directed the substance or location of issue advocacy
expenditures made by CR and CREF. In fact, the Committee has
found no evidence that Congressman Thune or his campaign even
knew about these issue ads before they were aired. Therefore,
there is no basis to conclude that Triad illegally or
improperly coordinated issue advocacy expenditures with the
Thune campaign.
---------------------------------------------------------------------------
\79\ 2 U.S.C. Sec. 441a(a)(7)(B)(1); see also 11 C.F.R.
Sec. 109.1(b)(4)(I)(A),(B).
---------------------------------------------------------------------------
Another example illustrates the point more clearly. During
a visit with the campaign of Rick Hill, a Republican
congressional candidate in Montana, Rodriguez learned that the
Democrat candidate, Bill Yellowtail, had been involved in a
spousal abuse incident. During the audit, Rodriguez also
learned that Hill did not intend to raise the issue in the
campaign. In his audit memorandum following the visit,
Rodriguez described one of the Hill campaign's needs as ``3rd
Party to `expose' Yellowtail'' for wife-beating.80
Triad followed Rodriguez's advice and, in the last weeks of the
1996 campaign, CR funded several hundred thousand dollars worth
of issue ads that focused on Yellowtail's arrest for spousal
abuse.
---------------------------------------------------------------------------
\80\ Rick Hill Political Audit Memorandum, Sept. 24, 1996, p. 2
(Ex. 20).
---------------------------------------------------------------------------
At first blush, this evidence suggests that CR, acting
through Triad, selected the substance and location of issue ads
at the request of a congressional candidate. The
Committee,however, found evidence that indicates that the Hill campaign
did not ask Triad to air these ads. Shortly after the CR issue ads
began running in Montana, the Rick Hill campaign contacted Triad to
protest the negative advertising and demanded that the ads cease
immediately. On October 25, 1996, the Hill campaign's lawyer, Tom
Hopwood, wrote to Mark Braden, the attorney for CR, decrying CR's
``unwanted intrusion into this congressional campaign.'' \81\ Hopwood
noted that Rick Hill ``was not consulted about these ads, had no
knowledge of their existence and most assuredly disapproves of their
content.'' \82\ He added that ``this type of overtly negative
campaigning simply does not work in Montana. . . . Simply put,
Montanans do not need or want the type of campaigning embodied in your
client's ads.'' \83\
---------------------------------------------------------------------------
\81\ Letter from Tom K. Hopwood, Counsel for the Rick Hill for
Congress Committee, to E. Mark Braden, Counsel for CR, Oct. 25, 1997
(Ex. 21).
\82\ Id.
\83\ Id.
---------------------------------------------------------------------------
In light of the contemporaneous letter from the Hill
campaign and the inability to depose Carolyn Malenick or Carlos
Rodriguez, the Committee cannot conclude that CR funded the
Yellowtail issue ad at the request of Congressman Hill or his
campaign. As a result, there is no basis to conclude that Triad
illegally or improperly coordinated issue ad expenditures with
the Hill campaign.
In the case of Congressman Vince Snowbarger, a Republican
from Kansas, there is evidence of contact between his campaign
staff and Rodriguez. However, the Committee has not found any
documents or testimony to support a finding of coordination.
Rodriguez met with Snowbarger's campaign staff in June of 1996
and provided the staff a detailed fundraising strategy. In the
action item of his audit memorandum, Rodriguez stated that he
would ``continue to monitor the campaign, working closely with
[the campaign] to find out what progress they are making both
in fundraising and voter contact.'' \84\ In September of 1996,
Snowbarger's campaign staff visited with Triad in Washington to
discuss the progress of the campaign. In the last weeks before
the election, CR spent roughly $300,000 on issue ads and phone
banks in Snowbarger's district.
---------------------------------------------------------------------------
\84\ Vince Snowbarger Political Audit Memorandum, June 15, 1996
(Ex. 22).
---------------------------------------------------------------------------
Even though there was regular communication between Triad
and the campaign, the Committee has found no evidence
suggesting that CR selected media markets or the substance of
the issue ads at the request of Representative Snowbarger's
campaign or based on information obtained from the campaign.
The Committee cannot determine what information CFR used to
create the issue ads that aired in Representative Snowbarger's
district. Absent some evidence of direction and control, the
Committee is left only with evidence of communication between
Snowbarger's campaign and Triad. Communication alone is clearly
not sufficient to infer illegal or improper coordination of
expenditures. There is no evidence that the Snowbarger campaign
had any role in CFR's advertisements.
In the case of Senator Sam Brownback of Kansas, the
Committee obtained testimony that Senator Brownback met with
Carolyn Malenick and her clients during the 1996 Republican
National Convention.\85\ As described by Meredith O'Rourke in
her deposition to the Committee, the meeting was arranged so
that Senator Brownback could thank Triad clients who had
contributed to his campaign.\86\ O'Rourke also testified that,
on two occasions, she helped Senator Brownback call potential
contributors from the RCCC.\87\
---------------------------------------------------------------------------
\85\ Deposition of Meredith O'Rourke, Sept. 3, 1997, p. 119.
\86\ Id. at pp. 119-20.
\87\ Id. at pp. 94-96.
---------------------------------------------------------------------------
The Committee found no evidence to suggest that the
Brownback campaign acted in any way illegally or improperly in
its dealings with Triad. It is entirely appropriate for Senator
Brownback to meet with campaign contributors to thank them for
a donation. The Committee has no evidence suggesting that any
of those contributions was given illegally or improperly. In
addition, the Committee finds no impropriety in Meredith
O'Rourke helping Senator Brownback telephone potential donors.
While it would be an illegal in-kind donation from a
corporation for O'Rourke to assist Senator Brownback as part of
her job responsibilities at Triad, the preliminary evidence
indicates that O'Rourke performed this service in a voluntary
capacity and on her own time. Mark Braden, Triad's Counsel, has
indicated that Triad's employment records show that O'Rourke
was not compensated by Triad for the service she rendered
Senator Brownback.\88\ Like any other citizen, O'Rourke is free
to volunteer time to political candidates of her choosing.
---------------------------------------------------------------------------
\88\ Ruth Marcus, ``The Secret of a Senator's Success?'' Washington
Post, Dec. 12, 1997, p. A1.
---------------------------------------------------------------------------
The Committee also discovered evidence that Triad was
particularly sensitive at the time to coordination problems.
Shortly before the election, Triad discovered that several sub-
vendors had not observed the proper distance between the
nonprofit groups and individual campaigns. On October 24, 1996,
Carlos Rodriguez circulated a confidential memorandum to all
vendors and subvendors hired by CR and CREF, reminding them of
the strict requirements of issue advocacy campaigns.\89\
---------------------------------------------------------------------------
\89\ Memorandum from Carlos Rodriguez to All CR and CREF Vendors/
Subcontractors, Oct. 24, 1996, p. 1 (Ex. 23).
---------------------------------------------------------------------------
Rodriguez advised the vendors that Triad had recently
learned that ``at least one mail piece submitted for legal
clearance is a version of a voter contact piece that has been
used in at least one Republican campaign for a House seat. Even
worse, the piece used by that campaign was paid for by the
Republican party.'' \90\ Rodriguez reminded Triad vendors that,
``[u]nder no circumstances is Citizens for Reform or Citizens
for the Republic Education Fund to act or even create the
appearance of acting as an agent of, or in cooperation with any
political party, candidate or campaign.'' \91\ He then warned
the vendors not to use materials generated by candidate or
party committees, stating as follows:
---------------------------------------------------------------------------
\90\ Id.
\91\ Id.
If you have received clearance on any educational
material (direct mail, TV, radio) that is not your
original work product created solely for the
educational effort on behalf of our two committees, you
must do the following immediately:
1. STOP production/distribution of that work product.
2. Contact me.
* * * * *
Violation of this rule may result in serious legal
action against [CR, CREF] and you. These are issue
advertisements, not party or candidate ads.
I know that this is new to most of you, so please
bear with us and be extra careful as we try to meet the
letter and spirit of the rules that apply to these
types of educational efforts.\92\
---------------------------------------------------------------------------
\92\ Id. at pp. 1-2 (emphasis added & omitted).
The Committee considers this memorandum to be a highly
probative contemporaneous statement of Triad's intent with
respect to coordination of issue advocacy campaigns. It clearly
demonstrates that Triad was sensitive to coordination concerns
and that it took every effort to ensure that its vendors
observed the requirements for issue advocacy.
Carolyn Malenick reiterated her concern about coordination
in a November 6, 1996 memorandum to Dick Dresner and Joanne
Banks, who were media consultants hired by Triad to create
issue ads for CR and CREF.\93\ In the memorandum, Malenick
chastised Dresner, Wicker & Associates for not observing
instructions regarding coordination with individual campaigns.
She stated as follows:
---------------------------------------------------------------------------
\93\ Memorandum from Carolyn Malenick to Dick Dresner and Joanne
Banks, Nov. 6, 1997 (Ex. 24).
It has come to my attention that from Wednesday of
last week, the sub-contractors chosen by Dresner,
Wicker and Associates, Inc. chose additional
subcontractors to perform the duties for the 501(c)4
projects managed by TRIAD Management Services, Inc.
When planning meetings took place between the
principals of both parties, vendors were discussed at
great length. It was made clear, in the final
discussion on Tuesday, October 15th, that the vendors
could have no contact with campaigns and that all
vendors were to be known. The vendors of Dresner,
Wickers & Assoc, Inc. having sub-contracted additional
vendors without TRIAD's knowledge, has created both
legal and political problems that could have been
avoided, had this requirement been met.
. . . Both Citizens for Reform and Citizens for the
Republic Education Fund, managed by TRIAD, plan to hold
Dresner, Wickers and Associates responsible for any
fall-out incurred over the coming months, with vendors
chosen by Dresner, Wickers and Associates.\94\
---------------------------------------------------------------------------
\94\ Id. (emphasis added).
---------------------------------------------------------------------------
As this memorandum makes clear, Malenick and Triad
attempted to ensure that vendors hired to create issue ads did
not coordinate--or even have contact--with individual
campaigns.
Consequently, there is substantial evidence militating
against a finding of coordination between Triad and federal
candidates. Without a complete factual record, the Committee
simply cannot conclude that there is evidence sufficient to
infer that CR and CREF--acting through Triad--illegally
coordinated issue advocacy expenditures with individual
candidates or their campaigns.
The same can be said of the RNC and the nonprofit groups
that have been linked to it in numerous press reports. The
Committee's investigation found evidence that the RNC routinely
supported nonprofit groups that it considered sympathetic to
its cause. This support principally took the form of financial
contributions directly from the RNC or from funds raised by RNC
officials. Standing alone, there is nothing illegal or improper
about the RNC donating money to like-minded nonprofit groups.
Despite evidence of substantial contributions to nonprofit
groups by or through the RNC, the Committee has found no
evidence that the RNC directed or controlled the expenditure of
those funds. Absent such direction and control or other
evidence that the RNC coordinated the expenditure of those
funds, the Committee cannot conclude that the RNC misused the
various nonprofit groups that it supported.
Documents obtained by the Committee indicate that the RNC
considered nonprofit groups an integral part of the
conservative coalition. For example, an April 23, 1996
memorandum to RNC Chairman Haley Barbour from RNC Political
Director Curt Anderson, explained that the RNC ``no longer
treat[s] coalition planning as if it is an ancillary activity,
or a quaint way of getting well meaning but ignorant people
involved. . . . We teach that campaigns must include both a
thematic and tactical approach to including the combined
efforts of every coalition group that they can conceivably
appeal to.'' \95\ Anderson explained that ``[a]t virtually all
of our field meetings we have put together day long meetings
[sic] in which we bring the decision makers from the biggest
coalition groups. We generally spend an hour with each of them
comparing notes on races. . . .\96\ Anderson further advised
Barbour that, ``[w]hile it has always been true that our
coalition groups need direction on how they can best effect
[sic] the outcome of elections, many of the larger groups are
becoming increasingly sophisticated in their approach and they
employ competent professionals who know how to make things
happen.'' \97\
---------------------------------------------------------------------------
\95\ Memorandum from Curt Anderson, RNC Political Director, to
Haley Barbour, RNC Chairman, Apr. 23, 1996, pp. 1-2 (Ex. 25).
\96\ Id. at p. 2.
\97\ Id. at p. 3.
---------------------------------------------------------------------------
In an earlier memorandum to Chairman Barbour on the same
subject, Anderson indicated that--in response to a request from
Barbour--he had collected a list of nonprofit groups that would
be most supportive of the Republican agenda.\98\ Anderson
included the NRLC, the Christian Coalition, ATR and Citizens
for a Sound Economy as possible members of this coalition
group.\99\ The senior leadership of the RNC considered
approximately thirty nonprofit groups for membership in this
coalition,\100\ but Anderson envisioned that the coalition
would be limited to groups ``that actually have troops in the
field that they can motivate, activate, and deliver, or groups
that have a track record of expending significant resources to
do the same.'' \101\
---------------------------------------------------------------------------
\98\ Memorandum from Curt Anderson, RNC Political Director, to
Haley Barbour, RNC Chairman, Mar. 4, 1996 (Ex. 26).
\99\ Id.
\100\ RNC Chart of Nonprofit Groups (Ex. 27).
\101\ Ex. 26 at p. 1.
---------------------------------------------------------------------------
RNC documents indicate, however, that the RNC clearly
appreciated the difference between the permissible and
impermissible activities of PACs and nonprofit groups. In a
manual on nonprofit groups and coalition building prepared by
the National Republican Senatorial Committee (``NRSC''), each
of the organizations is listed and described. The NRSC manual
divides the groups into two categories, ``those who endorse
candidates and those who do not.'' \102\ The manual states
that, as a PAC, the NRLC can endorse candidates and directly
advocate the election or defeat of a candidate, while correctly
noting that Citizens for a Sound Economy, the Christian
Coalition and ATR cannot endorse candidates as groups organized
under Sec. 501(c)(4) of the tax code.\103\
---------------------------------------------------------------------------
\102\ NRSC Coalition Building Manual, Chapter XII, p. 21 (Ex. 28).
\103\ Id.
---------------------------------------------------------------------------
The Committee obtained documents showing that the RNC, NRSC
and RCCC followed the coalition building strategy outlined in
the Anderson memoranda by contributing large sums of money to
coalition members, including ATR, the NRLC, and the CCF. The
documents indicate that, on October 4, 1996, the RNC donated $2
million to ATR from its Republican National State Elections
Committee Corporate Operating account.\104\ The RNC donated an
additional $1 million to ATR on October 17, 1996.\105\ ATR
received another $1 million contribution from the RNC on
October 25, 1996,\106\ and received $600,000 more from the same
account on October 31, 1996.\107\ In addition to the $4.6
million donated to ATR, the RNC contributed $650,000 to the
NRLC in the last weeks before the 1996 election.
---------------------------------------------------------------------------
\104\ Republican Nat'l St. Elections Comm. Corp. Operating Check
No. 8501 (Ex. 29).
\105\ Republican Nat'l St. Elections Comm. Corp. Operating Check
No. 8576 (Ex. 30).
\106\ Republican Nat'l St. Elections Comm. Corp. Operating Check
No. 8633 (Ex. 31).
\107\ Republican Nat'l St. Elections Comm. Corp. Operating Check
No, 8673 (Ex. 32).
---------------------------------------------------------------------------
In addition to direct contributions from the RNC to
nonprofit groups, the senior leadership of the RNC helped to
raise funds for many of the coalition's nonprofit
organizations. An October 17, 1996 memorandum from Joanne Coe
to Haley Barbour, Curt Anderson and Sanford McCallister
indicates that the RNC solicited contributions to several
nonprofit groups and routed those donations from the donor to
the organizations.\108\ In the memorandum, Coe stated that she
sent two $100,000 checks to ATR and NRLC from Carl Lindner, a
wealthy businessman and a major donor to the RNC. She also
indicated that senior RNC officials had raised $950,000 for the
American Defense Institute (``ADI''), a pro-defense group
organized under Sec. 501(c)(3) of the tax code.
---------------------------------------------------------------------------
\108\ Memorandum from Joanne Coe, to Haley Barbour, RNC Chairman,
et al., Oct. 17, 1996 (Ex. 33).
---------------------------------------------------------------------------
Although there is evidence that the RNC donated large sums
of money to several sympathetic nonprofit groups and even
solicited additional funds for those groups from the RNC's
largest donors, there is no evidence that anyone at the RNC
ever directed or controlled the expenditure of these funds.
Based upon the evidence obtained by the Committee, the
Committee finds nothing illegal about the RNC financially
supporting like-minded nonprofit groups. In addition, the
Committee possesses no evidence of illegalities by the
organizations that received these contributions, such as ATR
and ADI. Indeed, the Committee obtained the entiretyof its
information on this subject because prior to the AFL-CIO's intentional
noncompliance with valid Committee subpoenas, these organizations
complied with the Committee's subpoenas.
In a related area, there can be little doubt that the RNC's
issue ads were intended to influence the outcome of a federal
election within the meaning of FECA Sec. 431(9)(A)(1). One of
those issue ads, entitled ``The Story,'' was nothing more than
a biography of Bob Dole. The Story states as follows:
Audio of Bob Dole: We have a moral obligation to give
our children an America with the opportunity and values
of the nation we grew up in.
Voice Over: Bob Dole grew up in Russell, Kansas. From
his parents he learned the value of hard work, honesty
and responsibility. So when his country called . . . he
answered. He was seriously wounded in combat.
Paralyzed, he underwent nine operations.
Audio of Bob Dole: I went around looking for a
miracle that would make me whole again.
Voice Over: The doctors said he'd never walk again.
But after 39 months, he proved them wrong.
Audio of Elizabeth Dole: He persevered, he never gave
up. He fought his way back from total paralysis.
Voice Over: Like many Americans, his life experience
and values serve as a strong moral compass. The
principle of work to replace welfare. The principle of
accountability to strengthen our criminal justice
system. The principle of discipline to end wasteful
Washington spending.
Voice of Bob Dole: It all comes down to values. What
you believe in. What you sacrifice for. And what you
stand for.\109\
---------------------------------------------------------------------------
\109\ Script of RNC's ``The Story'' Commercial, May 29, 1996 (Ex.
34).
Like The Story, another RNC issue ad entitled ``Stripes''
focused on personality traits rather than public issues. The
---------------------------------------------------------------------------
text of the RNC ad is as follows:
Voice Over: Bill Clinton, he's really something. He's
now trying to avoid a sexual harassment lawsuit
claiming he is on active military duty. Active duty?
Newspapers report that Mr. Clinton claims as commander
in chief he is covered under the Soldiers and Sailors
Relief Act of 1940, which grants automatic delays in
lawsuits against military personnel until their active
duty is over. Active duty? Bill Clinton, he's really
something.
Accompanying Visual: Clinton golfing, duck hunting,
and, clad in a safety helmet, enjoying a bike ride with
Hillary. In the background, someone whistles a vaguely
martial tune. The ad closes with a ``Blues Brothers''
photo of Clinton in dark glasses and a dark suit, and
smiling. \110\
---------------------------------------------------------------------------
\110\ ``GOP Ad on Clinton's Claim in Sexual Harassment Suit,'' AP
File, PM Cycle, May 25, 1996 (Ex. 35).
A detailed analysis is unnecessary. A document produced by the
RNC indicates that even the RNC's Political Director did not
think The Story qualified as issue advocacy. In a May 22, 1996
memorandum to Haley Barbour, Curt Anderson stated that ``[w]e
could run into a real snag with the Dole Story spot. Certainly,
all the quantitative and qualitative research strongly suggests
that this spot needs to be run. Making this spot pass the issue
advocacy test may take some doing.'' \111\
---------------------------------------------------------------------------
\111\ Memorandum from Curt Anderson, RNC Political Director, to
Haley Barbour, RNC Chairman, May 22, 1996, p. 2 (emphasis added) (Ex.
36).
---------------------------------------------------------------------------
Under the language of FECA, however, the RNC's issue ad
campaign would only be illegal if it was produced at the
request of Senator Dole or coordinated with the Dole
campaign.\112\ Based on the available evidence, the Committee
finds no basis for concluding that any illegal coordination
between the RNC and Dole campaign took place.
---------------------------------------------------------------------------
\112\ 2 U.S.C. Sec. Sec. 431(9)(A)(1), 441a(a)(7)(B)(1).
---------------------------------------------------------------------------
The RNC's issue ad campaign commenced well after--almost
eight months--the beginning of the DNC's issue ad campaign. In
addition, the RNC spent almost $20 million less than the DNC on
this effort. Finally, there is no evidence that Senator Dole
micro-managed the RNC's issue ads in the same fashion that
President Clinton controlled the DNC's campaign. Whereas the
evidence indicates that the President ``directed and
controlled'' the DNC's issue ads--including drafting and
editing scripts--there is no evidence that Bob Dole personally
had any role in the RNC's ad campaign.\113\
---------------------------------------------------------------------------
\113\ Senator Dole did know contemporaneously that the RNC intended
to sponsor the issue ad campaign on his behalf. ``Remarks of GOP
Presidential Candidate Senator Bob Dole,'' Federal News Service, June
6, 1996 (Ex. 37).
---------------------------------------------------------------------------
There is some indication, however, that the RNC may have
had some communication with the Dole campaign to some extent on
the campaign. Documents produced by the RNC suggest that Scott
Reed may have provided input regarding the amount of
expenditures for issue ads for party-building purposes. Haley
Barbour, the RNC Chairman, wrote a memorandum to Curt Anderson,
the RNC's Political Director, on June 5, 1996 concerning
Barbour's rejection of a request by the RNC staff for $800,000
to underwrite costs of RNC Unity Events.\114\ In the
memorandum, Barbour advises Anderson that he
---------------------------------------------------------------------------
\114\ Memorandum from Haley Barbour, RNC Chairman to Curt Anderson,
RNC Political Director, June 5, 1996 (Ex. 38). The FEC allows political
parties to spend a mix of soft and hard money on television issue
advocacy. FEC Advisory Op. 1995-25, Fed. Election Camp. Fin. Guide
(CCH) para. 6162 at 12,109 (August 24, 1995).
will reach out to Scott Reed to ask him whether the
Dole campaign would want us to 1) reduce other
spending, such as the issue advocacy television
advertising, by $800,000; 2) significantly increase the
number and lead time for Victory '96 events in order to
offset these costs (although I am not convinced at this
time that the Victory '96 events will produce the
revenue currently anticipated and budgeted for
expenditure [sic]; 3) not spend the sum requested for
Unity Events; or 4) consider some other
alternative.\115\
---------------------------------------------------------------------------
\115\ Id.
As explained in the compliance section of the report, the
Committee was never able to secure the deposition testimony of
Curt Anderson, Joanne Coe, or Don Sipple.\116\ In addition, the
Committee attempted unsuccessfully to obtain the testimony of
Scott Reed on these topics after he was deposed originally in
connection with he National Policy Forum (``NPF''). As a
result, the Committee obtained no evidence that the RNC's issue
ads were aired at the request or suggestion of the Dole
campaign staff. Similarly, the Committee cannot determine on
this limited factual record whether the substance of the ads or
the markets in which they aired were selected based on
information obtained from the Dole campaign staff. As a result,
the Committee cannot draw any meaningful conclusions about the
allegations that the RNC coordinated its issue advocacy
expenditures with the Dole campaign.
---------------------------------------------------------------------------
\116\ Barbour was deposed, and testified before the Committee at
public hearings, but was not questioned about this memorandum.
---------------------------------------------------------------------------
At the outset of the investigation, there were also several
press accounts that cited documents obtained from the Minority
staff and alleged that Triad participated in illegal schemes to
funnel contributions to candidates from donors that had already
contributed the maximum allowed by law to those candidates. For
instance, several stories focused on the in-laws of Senator Sam
Brownback.\117\ The press reports noted that FEC records
indicate that, after John and Ruth Stauffer had donated the
maximum allowed by law to Senator Brownback, they donated
$37,500 to eight PACs. Within days of those contributions, the
eight PACs contributed $36,000 to Senator Brownback's
campaign.\118\
---------------------------------------------------------------------------
\117\ James Kuhnhenn, ``Inquiry Sought into Donations by Brownback
In-laws,'' Kansas City Star, May 2, 1997, p. A6.
\118\ Id.
---------------------------------------------------------------------------
Carolyn Malenick and most of the principal witnesses with
knowledge of Triad's activities refused to answer substantive
questions under oath during scheduled
depositions.119 The Committee did not interview or
depose the Stauffers or any of the persons associated with the
eight PACs. There is no evidence that Senator Brownback had any
knowledge of or involvement with these activities.
---------------------------------------------------------------------------
\119\ E.g., Deposition of Carolyn Malenick, Sept. 16, 1997, pp. 5-
29; Deposition of Lyn Nofziger, Sept. 16, 1997, pp. 6-22; Deposition of
Carlos A. Rodriguez, Sept. 17, 1997, pp. 5-23.
---------------------------------------------------------------------------
In another example, the press reported that Robert Riley,
Jr., donated $1,000 to the 1996 primary campaign of his father,
Robert Riley, Sr., a successful Republican congressional
candidate in the third district of Alabama. After consulting
and hiring Triad, Robert Riley, Jr., donated $1,000 each to
five conservative leaning PACs in May of 1996. Several days
after the donations, four of the five PACs donated a total of
$3,500 to Representative Riley's campaign.120
---------------------------------------------------------------------------
\120\ Kuhnhenn, ``Inquiry Sought into Donations by Brownback In-
laws,'' Kansas City Star, at p. A6. The four PACs were the Free
Congress PAC, the American Free Enterprise PAC, the Citizens Allied for
Free Enterprise PAC, and the Faith, Family and Freedom PAC. Id.
---------------------------------------------------------------------------
The Committee obtained an interview with Robert Riley, Jr.
He stated that his contributions to the Triad-recommended PACs
were not given with the guarantee or understanding that the
PACs would return the contributions to his father's
campaign.121 Riley stated that Malenick was very
emphatic that she could not promise that Triad or its PAC
coalition would help his father. Malenick convinced Riley that
contributing to conservative PACs would be the best way to
assist the Republican cause generally and thereby ensure a
Republican majority in Congress.122
---------------------------------------------------------------------------
\121\ Memorandum of Interview of Robert R. Riley, Jr., Sept. 16,
1997, p. 2.
\122\ Id.
---------------------------------------------------------------------------
Riley vigorously denied that his contributions to the PACs
were an effort to illegally funnel money to his father's
campaign in order evade the individual contribution limits of
federal law. Riley asserted that his purpose in supporting the
conservative PACs was to advance, in general, the conservative
agenda through the overall support of sympathetic candidates.
His purpose in consulting with Carolyn Malenick was to identify
which PACs would best achieve these goals, relying on the
research and advice of Triad.123 The Committee found
no testimony or documents to contradict Riley's account of his
contributions.124
---------------------------------------------------------------------------
\123\ Id.
\124\ In fact, Riley provided the Committee with copies of
affidavits from Billie Joe Johnson, Jr., his father's campaign manager,
and Donna Rose Suggs, his father's campaign treasurer, which
corroborated his account of the contributions. Affidavit of Billie Joe
Johnson, Jr. (Ex. 39); see also Affidavit of Donna Rose Suggs (Ex. 40).
The affidavits were prepared in connection with an FEC complaint, MUR
4633, filed against Robert Riley, Jr. by James Anderson of Montgomery,
Alabama.
In the affidavits, Johnson and Suggs state that they received PAC
checks from Triad but that they had no discussions with Triad
indicating that donations from Robert Riley, Jr., would be funneled
through the PACs back to his father's campaign. Id.
---------------------------------------------------------------------------
Even though the timing and amount of the contributions in
these examples suggest that the PACs served as conduits that
allowed the donors to evade the $1,000 contribution limit,
there is no evidence that the PACs or donors understood that
their donations would be passed back to a particular candidate.
In fact, in the case of Robert Riley, Jr., Riley emphatically
denied that there was ever such an agreement between himself
and the four PACs who later donated to his father's campaign.
The circumstantial evidence cited in the press reports about
Representative Riley and Senator Brownback is simply
insufficient to draw an inference of illegality, and there is
no evidence to suggest the campaigns had any knowledge of these
activities.
Relying solely on a suspicious pattern of donations is
unpersuasive by itself, because the pattern is far too common
to support a finding of wrongdoing. For example, on June 29,
1996, Marilyn Williams of West Bloomfield, Michigan contributed
$1,000--the maximum allowed by law--to the primary campaign of
Sandy Freedman. Freedman was seeking the Democratic nomination
for Florida's eleventh congressional district. On August 2,
1996, Williamson donated $3,000 to Emily's List, a PAC that
exclusively supports female Democratic candidates. Eleven days
later, on August 13, 1996, Emily's List donated $3,000 to Sandy
Freedman's campaign.125
---------------------------------------------------------------------------
\125\ Federal Election Commission Records for Emily's List and
Marilyn Williamson (Ex. 41).
---------------------------------------------------------------------------
Similarly, on June 3, 1996, Barry Shier of Las Vegas,
Nevada contributed $1,000 each to the primary and general
election campaigns of Robert G. Torricelli, the Democratic
candidate for Senate in New Jersey. Shier is an executive with
Mirage Resorts, Inc., in Atlantic City, New Jersey. On June 4,
1996, the day after Shier's donations, the Torricelli primary
and general election campaigns each received $1,000 donations
from the Mirage Resorts, Inc., Political Action Committee,
a.k.a., Golden Nugget PAC. Perhaps coincidentally, Shier
donated $2,000 to the Golden Nugget PAC two days later on June
6, 1996.126
---------------------------------------------------------------------------
\126\ Federal Election Commission Records for Barry Shier and the
Golden Nugget PAC (Ex. 42).
---------------------------------------------------------------------------
On June 30, 1995, Don Tyson of Springdale, Arkansas donated
$1,000 to the primary campaign of Tom Harkin, the Democratic
candidate for Senate in Iowa. Tyson is the Chairman of Tyson,
Inc., a food processing company that is one of the largest
wholesale distributors of chicken in the country. On July 18,
1995, several weeks after Tyson contributed to the Harkin
campaign, he donated an additional $1,000 to the National
Broiler Council Political Action Committee. Nine days later, on
July 27, 1997, the PAC contributed $1,000 to the Harkin
campaign.127
---------------------------------------------------------------------------
\127\ Federal Election Commission Records for Don Tyson and the
National Broiler Council PAC (Ex. 43).
---------------------------------------------------------------------------
On September 28, 1995, Charlotte Lowder of Montgomery,
Alabama contributed $1,000--the maximum allowed by law--to the
primary campaign of Roger Hugh Bedford, the Democratic
candidate for Senate in Alabama. Several months later, on
December 15, 1995, she donated another $1,000 to the Colonial
Bancgroup Inc. Federal Political Action Committee (``Colonial
Fed PAC''). Only four days later, on December 19, 1995, the
Colonial Fed PAC contributed $1,000 to the Roger Hugh Bedford
for U.S. Senate primary campaign.128
---------------------------------------------------------------------------
\128\ Federal Election Commission Records for Charlotte Lowder and
the Colonial Fed PAC (Ex. 44).
---------------------------------------------------------------------------
As with Triad, the Committee cannot conclude that Emily's
List, the Golden Nugget PAC, the National Broilers PAC, and the
Colonial Fed PAC participated in schemes designed to evade the
individual contribution limits established by federal law.
Likewise, the Committee does not believe that there is evidence
sufficient to conclude that the federal candidates who received
donations from these PACs were party to a conspiracy designed
to evade the individual contribution limits.
The Committee gathered documents that--at least initially--
suggest that some national labor unions participated in
conspiracies to evade contribution limits. Under federal
election law, multi-candidate PACs can donate a maximum of
$5,000 per election, per candidate committee.129 One
way of circumventing this limit is to create several different
PACs that are controlled by a common entity or source. In order
to prevent such a scheme, FECA contains ``affiliation'' rules
that impose a single limit on ``all contributions made by
political committees established or financed or maintained or
controlled by any corporation, labor organization, or any other
person.'' 130
---------------------------------------------------------------------------
\129\ 2 U.S.C. Sec. 441a(a)(2)(A).
\130\ Id. Sec. 441a(a)(5) (emphasis added).
---------------------------------------------------------------------------
FEC regulations identify a number of circumstantial factors
probative of affiliation between PACs, including (1) common or
overlapping membership, (2) common or overlapping officers or
employees, (3) the direct provision of funds or goods on an on-
going basis from one PAC to another, (4) an active or
significant role by one PAC in the formation of the other and,
perhaps most importantly, (5) similar patterns of
contributions.131 Using these factors as a
guidepost, the Committee found circumstantial evidence that the
National Council of Senior Citizens (``NCSC''), a
Sec. 501(c)(4) organized ostensibly to lobby on behalf of
America's elderly,132 was affiliated with the AFL-
CIO during the 1996 elections in a manner that allowed the
latter to circumvent the $5,000 contribution limit for PACs.
---------------------------------------------------------------------------
\131\ 11 C.F.R. Sec. 110.3.
\132\ The NCSC receives the bulk of its annual revenue from the
federal government. In fiscal year 1996, the NCSC received $34 million
in grants from the Department of Labor as part of its Senior Community
Service Employment Program. In contrast, the NCSC's lobbying budget for
1996 totaled only $4.4 million. The Lobbying Disclosure Act of 1995
prohibits lobbying activities by groups, organized under
Sec. 501(c)(4), that receive federal funding. Therefore, the NCSC
divided its functions between a Sec. 501(c)(4) and a PAC in order to
spend only nonfederal funds on political activity.
---------------------------------------------------------------------------
This scenario is illustrated by the campaign of Thomas
Fricano, the Democratic congressional candidate for the twenty-
seventh district of New York. Fricano is a former executive of
the United Auto Workers (``UAW''). The Committee on Political
Education (``COPE''), the AFL-CIO's PAC, contributed $5,000 to
Fricano's primary campaign on June 19,1996, the maximum allowed
by law. The NCSC's PAC followed COPE's lead with an additional $5,000
donation to Fricano's primary campaign on September 5,
1996.133
---------------------------------------------------------------------------
\133\ Federal Election Comm'n Records for COPE and the NCSC PAC
(Ex. 45).
---------------------------------------------------------------------------
On its face, there is nothing suspicious about two PACs
donating the maximum contribution to the same political
candidate. In this case, however, the evidence suggests that
the NCSC is affiliated with the AFL-CIO so that both PACs'
contributions are limited in the aggregate to $5,000 per
candidate, per election.134 There is evidence that
national labor unions helped create the NCSC. Virtually the
entire NCSC Board of Directors and local directors are
officials of AFL-CIO affiliated unions.135
---------------------------------------------------------------------------
\134\ 2 U.S.C. Sec. 441a(a)(2)(A),(5).
\135\ For example, Eugene Glover, the NCSC's President, is the
former Secretary-Treasurer of the International Association of
Machinists. Steve Protulis, the NCSC's Executive Director, is the
former National Coordinator of Support Groups for COPE.
---------------------------------------------------------------------------
The most significant evidence of affiliation, however, lies
in the donation and contribution patterns. The NCSC's PAC
received only seven donations from individuals in 1996, and
these were all from employees or officers of the NCSC. The
remainder of the funds donated to the NCSC's PAC derived from
COPE and the PACs of AFL-CIO affiliated unions, almost all of
which had already donated to COPE itself. As a result, 96% of
the funds flowing into the NCSC's PAC in 1996 derived from
union sources. In addition, all of the candidates that received
contributions from the NCSC's PAC were similarly supported by
COPE.136
---------------------------------------------------------------------------
\136\ Ex. 45.
---------------------------------------------------------------------------
This pattern of donations to the NCSC PAC and of
contributions by the PAC to AFL-CIO supported candidates
suggests--at least circumstantially--that the NCSC acted in
concert with the AFL-CIO during the 1996 election cycle. If the
NCSC was affiliated with COPE, as the evidence suggests, then
the AFL-CIO could use the NCSC as a conduit to evade the $5,000
contribution limit set by federal law. Indeed, the Fricano
campaign discussed above illustrates how affiliated PACs can
potentially funnel additional donations to candidates after one
PAC has donated the maximum of $5,000.
While evidence of this affiliation scheme is compelling,
the Committee believes that it would be inappropriate to
conclude that the AFL-CIO and the NCSC acted illegally, even
though both the AFL-CIO and the NCSC refused to comply with
Committee subpoenas requesting documents. The AFL-CIO defied
deposition subpoenas and thereby prevented the Committee from
gaining sworn testimony from persons involved in these
contributions. As a result, the Committee does not possess the
full documentary record about these contributions.
In summary, because many of the nonprofit groups refused to
cooperate with the Committee and the Committee had no effective
means to compel compliance, it does not possess a sufficient
factual record to make findings about allegations of illegal
and improper conduct by nonprofit groups during the 1996
elections. As a result, the Committee does not believe that it
can draw sustainable conclusions on the many serious
allegations regarding nonprofit activity that arose out of the
1996 elections.
Allegations Relating to the National Policy Forum
The National Policy Forum (``NPF'') was founded in 1993 as
a ``grassroots'' think tank to develop a policy agenda through
a series of ``town meetings,'' i.e. policy forums, throughout
the nation. The NPF was formed by Haley Barbour, then the
recently elected Chairman of the Republican National Committee
(``RNC''), and others, and started with $100,000 in RNC ``seed
money.'' The NPF was structured as a nonprofit corporation
under Section 501(c)(4) of the Internal Revenue
Code.1
---------------------------------------------------------------------------
\1\ See 26 U.S.C. Sec. 501(c)(4)(1997).
---------------------------------------------------------------------------
The Committee's investigation of the NPF covered a wide
range of allegations. The lion's share of these allegations
related to a ``loan guarantee'' transaction involving the NPF
and a Florida Corporation named Young Brothers Development
(USA), Inc. (``YBD (USA)''), the subsidiary of a Hong Kong
entity, Young Brothers Development, Ltd. (``YBD (Hong Kong)'').
Such allegations included claims that:
(1) the NPF was utilized to launder or illegally
``funnel'' money from the Hong Kong entity into the RNC
to assist the RNC in the 1994 federal election cycle;
(2) the NPF received money from the Hong Kong entity
in exchange for government favors or business
considerations and;
(3) the NPF misused its non-profit tax status in some
fashion.
In pursuing the allegations, the Committee subpoenaed
documents from many sources, deposed fourteen individuals and
conducted several interviews. In the course of these efforts,
several of the subpoenaed parties objected to certain of the
Committee's inquiries, citing the Committee's limited
jurisdiction to the 1996 election cycle. On July 3, 1997,
Chairman Thompson issued an Order clarifying these parties'
obligations. The Order provided that information predating
November 1994 (the beginning of the 1996 election cycle) must
be provided if it sheds light on efforts by the NPF to raise
foreign funds during the 1996 election cycle, but that ``it is
not appropriate for the Committee to inquire into matters that
relate only to the 1994 federal election campaigns.''
2 Following issuance of the Order, although
preserving their objections, the NPF and NPF witnesses fully
complied.3
---------------------------------------------------------------------------
\2\ See Order of Chairman Fred Thompson, July 3, 1997 (Ex. 1).
\3\ See Catalog of NPF Document Production (Ex. 2).
---------------------------------------------------------------------------
None of the witnesses associated with the NPF or the Young
Brothers companies invoked their Fifth Amendment rights or fled
the country to avoid testifying before the Committee. In
contrast to numerous Democratic donors, fundraisers and
administration officials, persons associated with the NPF and
the Young Brothers appeared voluntarily for Committee
depositions. Indeed, Ambrous Young, the Director of YBD (Hong
Kong), voluntarily traveled from Hong Kong to London to be
deposed by the Committee. Former RNC Chairman Haley Barbour
voluntarily testified at length before the Committee.
formation and financing of the national policy forum
The NPF was created in the spring of 1993 as a
``participatory policy institute . . . in which average
citizens, community leaders, people away from Washington,
legislators, local officials, state officials, as well as
Federal officials had an opportunity to participate in the
issues that face our government.'' 4 The NPF was
initially envisioned as a wing or subsidiary of the RNC. That
initial plan was rejected, however, in favor of the creation of
a separate, distinct and independent policy institute under
Section 501(c)(4) of the Internal Revenue Code.5
According to the NPF's first president, Mr. Michael Baroody,
``[t]he National Policy Forum was to be a Republican Center for
the exchange of ideas. As I used to say routinely at the start
of our forums, that was decidedly and intentionally not the
same as a center for the Republican exchange of ideas--meaning
NPF was to be open to all and set out to hear from all,
regardless of party.'' 6
---------------------------------------------------------------------------
\4\ See Deposition of Haley Barbour, July 19, 1997, p. 19-20.
\5\ The NPF had a separate board of directors, separate management,
separate employees, separate operations and separate offices from the
RNC. The RNC and NPF had separate accounting systems, and did not
commingle funds. In short, the two organizations were two separate
legal entities. See Barbour testimony, p. 117:
Senator Glenn has said the NPF was an arm or subsidiary of
the RNC. That is not correct. Indeed, I had originally
considered establishing the policy institute as a part of
the RNC. Over time and before it was founded, however, I
came to the conclusion that the policy institute should be
---------------------------------------------------------------------------
separate from the RNC for a variety of reasons.
\6\ See Testimony of Michael Baroody, July 23, 1997, p. 190. The
nature of the relationship between the NPF and the RNC was not material
in assessing the legality of the matters at issue. Because the NPF
undertook no campaign-related activities, its actions were not subject
to federal campaign restrictions, no matter what link it had to the
RNC.
---------------------------------------------------------------------------
At its formation, the NPF received a $100,000 loan from the
RNC. As NPF fundraising efforts failed to satisfy NPF expenses,
the NPF received additional loans from the RNC. The NPF
leadership discussed a range of fundraising options, including
the possibility of soliciting money from foreign sources (which
would be legal for a non-profit corporation.) 7 By
the end of 1993, the NPF had a debt to the RNC in the amount of
$260,000. By mid-1994, that amount had grown to approximately
$2 million.8
---------------------------------------------------------------------------
\7\ See generally Baroody testimony, pp. 202-05.
\8\ See Baroody testimony, p. 206.
---------------------------------------------------------------------------
The NPF debt threatened to grow larger through 1994 as the
pace of NPF forums increased. 9 During the summer
and fall of 1994, the NPF was competing with Congressional
campaigns for contributions from prospective donors. Expecting
a fundraising shortfall during that period, NPF attorneys
negotiated and obtained a $2.1 million loan from Signet Bank to
refinance part of its preexisting debt to the RNC and to
provide the NPF with operating funds.
---------------------------------------------------------------------------
\9\ Between 1993 and 1996, the NPF held over 80 public conferences
and issues fora involving thousands of people throughout the nation and
published two books reflecting its findings. The NPF had 14 ``policy
councils'' involved in these efforts with over 1500 members. See
generally Deposition of Kenneth Hill, July 11, 1997, pp. 46-48. The
NPF's document production to the Committee demonstrated an enormous
breadth of activity undertaken in its public fora and conferences.
---------------------------------------------------------------------------
By 1996, the NPF's continuing fundraising shortfalls led to
a crisis. In early 1996, the NPF negotiated to defer one of its
payments on the Signet Bank loan. By June 1996, the NPF
indicated to Signet that it would default on the $1.5 million
remaining due on the loan. Signet Bank exercised its right to
take collateral posted by YBD (USA) to cover the default.
Following its default on the Signet Bank loan, the NPF also
defaulted on approximately $2.5 million in outstanding debt to
the RNC.
In January 1997, the NPF's operations ceased. On February
21, 1997, the IRS issued a letter ruling disapproving the NPF's
1993 application for 501(c)(4) status. Although the dispute
regarding NPF's tax status had no actual tax implications--the
NPF never earned any profit or conferred any tax deductions on
its donors--the IRS's decision has been appealed.10
The appeal is pending.
---------------------------------------------------------------------------
\10\ There has been significant controversy regarding the IRS's
February 21, 1997 ruling. During the Committee's hearings, the IRS's
disapproval of the NPF's application was sharply contrasted with the
IRS's approval of tax-exempt status for the Democratic Leadership
Council. Although this comparison raised certain issues regarding
partisanship at the IRS, the discussion of the NPF's tax status was not
material to the legality of the NPF loan guarantee transaction. In
short, because the NPF never engaged in any election-related activities
of any kind, it was never subject to federal election law, regardless
of whether it did or did not qualify for tax-exempt status.
---------------------------------------------------------------------------
The RNC's Relationship with the Young Brothers Companies
The relationship among the RNC and Young Brothers
Development (USA) began in 1991. At that time, Young was a U.S.
citizen and served as Director of a Hong Kong corporation, YBD
(Hong Kong).11
---------------------------------------------------------------------------
\11\ Ambrous Young was born in the People's Republic of China,
emigrated to Taipei, Taiwan when he was 14 years old, and was granted
U.S. citizenship in 1970. Young's wife, four sons and daughter are all
U.S. citizens. Young, a Hong Kong resident, gave up his U.S.
citizenship at the end of 1993. Benton Becker, counsel to YBD (USA),
was asked why Young gave up his U.S. citizenship:
Senator Durbin. Do you know why he renounced his U.S.
citizenship?
Mr. Becker. Well, I've asked him that question, and every
time I ask him that question he always says, ``That's not
the right word, Benton. I didn't renounce anything. I still
feel strongly about the United States.'' He said that he
simply decided that he wanted to create a single
citizenship in the Republic of China and in Hong Kong, and
he just doesn't come to the U.S., doesn't have any real
reason to come to the U.S., and his children have all
graduated from colleges in the U.S. He used to spend a lot
of time here visiting his children when they were studying.
That's the only explanation that's ever been given to me.
See Becker testimony, July 23, 1997, pp. 135-36. Although the Committee
obtained certain tangential evidence suggesting that Young's decision
may have been influenced by prospective tax implications, the Committee
has received nothing conclusive on that issue.
In 1991, Alex Courtelis was a commercial real estate
developer doing business in Florida. Courtelis also served as
an official of the RNC's ``Team 100'' program.12 In
1991, Courtelis and Young began to discuss a potential shopping
center deal in Southern Florida. In structuring the potential
deal, YBD (USA), a Florida corporation and a subsidiary of YBD
(Hong Kong), was formed. By October of 1991, negotiations for
the real estate purchase were progressing. Courtelis asked
Young to consider contributing $100,000 to the RNC to become an
RNC ``Team 100'' member.13
---------------------------------------------------------------------------
\12\ Becker testimony, p. 40.
\13\ Id. at 42.
---------------------------------------------------------------------------
Team 100 members were provided with several benefits,
including invitations to certain Team 100 events each year.
Although then a U.S. citizen, Young spent a considerable amount
of time abroad. Young's sons, all U.S. citizens, spent
substantially more time in the U.S. Young and Courtelis
determined that the Team 100 membership would be in the name of
YBD (USA) so that Young's sons could attend the Team 100
events.14 The funds for YBD (USA)'s Team 100
donations were provided, in the form of a loan, from YBD (Hong
Kong) to YBD (USA).15
---------------------------------------------------------------------------
\14\ Id.
\15\ See Becker testimony, p. 174; Becker testimony, p. 43.
---------------------------------------------------------------------------
In Spring 1992, after the YBD (USA)'s $100,000 in Team 100
contributions had been made, the shopping center deal involving
YBD (USA) and Courtelis fell through.16 Thereafter,
YBD (USA) continued to pursue several U.S. real estate
opportunities but apparently did not generate sufficient funds
to repay immediately YBD (Hong Kong) for its $100,000
loan.17
---------------------------------------------------------------------------
\16\ Becker believed when the Team 100 contributions were made that
YBD (USA) would generate U.S. earnings sufficient to cover the
contributions. See Becker testimony, p. 172: ``The actual Team 100
commitment and payment occurs [in late 1991] while the [YBD
(USA)]shopping center deal is still viable.''
\17\ Richards, Becker and Young have all testified that it was
their intention that YBD (USA) would engage in substantial business in
the United States. Although several potential ventures were explored--
including various commercial real estate opportunities and an
investment in a software company--none came to fruition. Although the
Committee understands that YBD (USA) did have income from property
management activities and certain interest income during its lifetime,
the Committee has insufficient information to determine whether this
income was sufficient to account for any substantial portion of the
Team 100 donations.
---------------------------------------------------------------------------
If the RNC had reason to know that the funds for the YBD
(USA) Team 100 contributions were derived from a foreign source
rather than the U.S. earnings of a domestic corporation,
acceptance of this donation would have been illegal. According
to Richard Richards, then the President of YBD (USA):
To the best of my knowledge no officer or employee of
the RNC or anyone associated with the RNC other than
Mr. Courtelis knew at the time that the Young Brothers
USA contributions to the RNC arose out of Young
Brothers Hong Kong money.18
---------------------------------------------------------------------------
\18\ See Affidavit of Richard Richards, Esq. (Ex. 3) The affidavit
was created under the following circumstances:
Mr. Richards: . . . [I]t was probably a couple of weeks
ago. The attorneys that represent The Republican National
Committee asked if they could see me, and they flew out to
Ogden, Utah, where I live and presented me with an
affidavit that they had previously prepared consistent with
some telephone conversations I had with them. We went over
the affidavit. There were some things that I felt were not
accurate. We made the changes. I signed the affidavit and
it appears here today. . . .
Mr. Madigan (Majority Counsel): . . . [D]oes it [the
affidavit] accurately reflect the facts as you know them?
Mr. Richards: I think so. I don't know of anything that
is not true.
Testimony of Richard Richards, July 25, 1997, pp. 91-92.
The RNC did not obtain financial or other information
indicating that YBD (USA) had insufficient income in the U.S.
to make a legal donation. Rather, it appears that Courtelis and
the RNC relied upon the representations of the YBD (USA)
counsel, Benton Becker, that the donations were
proper.19
---------------------------------------------------------------------------
\19\ Courtelis (now deceased) dealt with Becker on behalf of the
RNC. Courtelis was not an attorney, but apparently knew that Mr. Young
and his family were U.S. citizens. Becker performed a legal analysis of
the transaction, and prepared a memorandum advising that the
transaction be legally structured such that a loan would be made from
YBD (Hong Kong) to YBD (USA) which YBD (USA) would repay with its U.S.
earnings. See Memorandum from Benton Becker to File, October 11, 1991
(Ex. 4).
---------------------------------------------------------------------------
The RNC has informed the Committee that it returned
contributions to YBD (USA) in May 1997 when it obtained
information indicating their possible foreign origin.
Solicitation of the YBD (USA) Loan Guarantee to the NPF
In the spring of 1994, an NPF fundraiser named Fred
Volcansek met with Dan Denning, the NPF's Chief Financial
Officer, and Donald Fierce, an RNC official.20 The
three discussed the faltering fundraising efforts of the NPF,
and the NPF's outstanding debt to the RNC.21 It was
agreed that Volcansek would work to find an entity willing to
provide a loan or a loan guarantee to the NPF.22
---------------------------------------------------------------------------
\20\ Volcansek testimony, July 24, 1997, pp. 10-11, 27.
\21\ Volcansek testimony, p. 28.
\22\ Volcansek testimony, p. 30. Note: Mr. Volcansek's testimony
regarding this meeting differs somewhat from that of Mr. Denning. Mr.
Volcansek, an ``international businessman,'' believed that he had been
asked to assist with seeking a loan guarantee due to his foreign
expertise. See Volcansek testimony, p. 57. Mr. Denning recalls no
conversation relating to foreign sources of funds. See Deposition of
Daniel B. Denning, June 30, 1997, p. 74-75.
---------------------------------------------------------------------------
In the summer of 1994, Fred Volcansek contacted his friend
Richard Richards, a former RNC chairman with a law practice in
Washington, D.C. The NPF recognized that, as a result of the
impending congressional elections, the RNC and congressional
campaigns would present stiff competition for available
fundraising sources through November, 1994. The NPF also
recognized that the competition for funds could present the NPF
with a significant cash flow problem in the coming months.
Richards had introduced Volcansek to Ambrose Young and knew of
Richards' relationship with Young. Volcansek asked Richards if
Young or the Young companies might agree to provide a loan
guarantee the NPF.23
---------------------------------------------------------------------------
\23\ Volcansek testimony, p. 12.
---------------------------------------------------------------------------
In early August 1994, Ambrous Young, along with his son,
Steven Young, and Richards, met over dinner in Washington with
Barbour, Volcansek and Denning. Barbour knew that YBD (USA) was
already a Team 100 member.24
---------------------------------------------------------------------------
\24\ It is not clear when Barbour learned that Ambrous Young was no
longer a citizen. See Barbour testimony, p. 231-32. Ambrous Young's
son, Steve Young, was a U.S. citizen. See Deposition of Richard
Richards, June 10, 1997, p. 86. Barbour believed that the name ``Young
Brothers'' in YBD (USA) referred to Steve Young and his brothers, all
of whom are U.S. citizens. Barbour testimony, pp. 208-09.
---------------------------------------------------------------------------
At the dinner, Barbour requested that Young consider
whether YBD (USA) would provide a loan guarantee to the NPF.
Young agreed to consider it, and asked for information on the
NPF and the proposed loan guarantee.25 Mr. Barbour
responded in writing on August 30, 1994, and explained that, by
obtaining a bank loan guaranteed by YBD (USA), the NPF:
---------------------------------------------------------------------------
\25\ Young deposition, p. 35.
. . . would not need to raise funds during the fall's
political season when competition for contributions is
especially keen, and most potential donors are focused
on elections and not public policy.26
---------------------------------------------------------------------------
\26\ See Letter from Haley Barbour to Ambrous Young, with
attachment, August 30, 1994 (Ex. 5). Ambrous Young prepared a letter in
reply dated September 9, 1994 expressing reservations regarding the
loan guarantee proposal. Letter to Haley Barbour from Ambrous Young,
Sept. 9, 1994. (Ex. 6). Although the letter was to be delivered to
Barbour by Young's son, Barbour does not recall receiving the letter,
and no such letter appears in the RNC or NPF files. The Minority has
theorized that one sentence in Young's September 9, 1994 letter
suggests that Mr. Barbour was actually soliciting funds from Young for
use in the 1994 elections:
. . . [W]e are willing to consider the support of the
$2.1 million which is the amount you have expressed to me
is urgently needed and directly related to the November
---------------------------------------------------------------------------
election.
Haley Barbour stated that the above-quoted sentence from Young's letter
refers to Barbour's earlier statement that the NPF would have
significant trouble raising funds in the months preceding the November
elections, not that the NPF loan guarantee would somehow be used in the
elections.
---------------------------------------------------------------------------
Whether or not Barbour received Young's September 9, 1994 letter is
not material to the Committee's assessment of the transaction.
Young asked Becker to act as counsel to negotiate the terms
of the potential loan guarantee from YBD (USA) to the NPF.
Young asked Becker to make all efforts to obtain security in
the event of an NPF default.27
---------------------------------------------------------------------------
\27\ Young deposition, p. 37.
---------------------------------------------------------------------------
Young and Becker both testified that they understood that
the loan guarantee sought by Barbour was for the NPF, and
understood the NPF to be a separate entity from the RNC:
Ambrous Young Deposition Testimony
Q: What did you understand, as a general matter, was
the use for which this money was sought?
A: All I understood the Forum, the National Policy
Forum needs money. . . .28
---------------------------------------------------------------------------
\28\ Id. Young also testified:
---------------------------------------------------------------------------
[N]obody explained to me how the money should be utilized
and this and that, nor mentioned to me about election of
the congressional system. . . .
Young deposition at 29.
Benton Becker Deposition Testimony
He [Ambrous Young] also informed me that he was told
by Mr. Barbour that the National Policy Forum was not
part of the Republican National Committee, that it, the
National Policy Forum, was not within the auspices of
the Federal election laws, since it, as an
organization, was not involved with Federal elections,
that it was a think tank. . . .29
---------------------------------------------------------------------------
\29\ Becker deposition, pp. 31-32.
Volcansek also explained to Young that, as an individual without
U.S. citizenship, Young could not have any role in the federal
elections:
Many times I had the opportunity to explain to Mr. Young
that he could not participate in our political process. I
explained to Mr. Young that it was impossible for him to
participate in the process of elections and to directly
contribute in any way to the Republican National Committee
or to any individual campaign. (Volcansek testimony, p.
---------------------------------------------------------------------------
81).
It was also clear that the Florida corporation, YBD (USA),
would be the loan guarantor:
No one ever considered the Hong Kong entity as being
the loan guarantor. From day one, the consideration, it
is my understanding, had always been the U.S.
corporation. . . .30
---------------------------------------------------------------------------
\30\ See Becker testimony, p. 124.
In negotiating the terms of the loan guarantee, Becker
asked the RNC General Counsel, David Norcross, whether the RNC
would formally agree to repay any loss by YBD (USA) if the NPF
defaulted.31 Norcross told Becker that the RNC could
not do so.32 Becker nevertheless continued to
request some form of commitment from the RNC. Ultimately,
Barbour responded with a letter committing to raise the issue
with the RNC Budget Committee and seek its approval in the
event that the NPF defaulted on an outstanding debt to ``a
domestic corporation.'' 33
---------------------------------------------------------------------------
\31\ Becker deposition, pp. 38-39.
\32\ Becker deposition, pp. 39.
\33\ See Letter from Haley Barbour to Benton Becker, August 30,
1994, p. 1 (Ex. 7); See also Becker deposition, pp. 39-40; Barbour
deposition, pp. 72-74.
---------------------------------------------------------------------------
To evaluate Barbour's ``commitment,'' Young and Becker
consulted with Young's long-time friend, Richard Richards.
Richards informed Young and Becker that he believed that the
RNC Chairman would have power to compel the RNC Budget
Committee to cover any NPF default.34 Richards,
Becker and Young recognized that Barbour's ``commitment'' was
not a judicially enforceable obligation.35
---------------------------------------------------------------------------
\34\ See Richards testimony, p. 78-79.
\35\ See Becker deposition, p. 39.
---------------------------------------------------------------------------
Following such consultations, Becker, along with attorneys
for the NPF and Signet Bank, the lender, analyzed the proposed
loan guarantee transaction. Mr. Volcansek described such
efforts as follows:
[N]umerous nationally prominent campaign finance
lawyers reviewed this transaction and deemed it
perfectly legal, ethical, and proper in all respects.
This was a transaction that was conducted in the full
light of day with the most extensive legal review that
I have ever seen for a transaction of comparable
value.36
---------------------------------------------------------------------------
\36\ See Volcansek testimony, pp 14-15. See also Memorandum from
Benton Becker to Ambrous Young, dated September 23, 1994 (Ex. 8):
These procedures outlined in this memo are calculated to
accomplish the following goals:
1. To insure that no arguable violation of U.S. law could
result to YBD or its principals. . . . [p. 1]
With this in mind, as you have instructed, all considerations have been
made to assure that no claim and no violation of law could result from
YBD (USA) serving as a loan guarantor. [p. 3]
On September 19, 1994, Barbour wrote to Ambrous Young,
thanking Young for YBD (USA)'s agreement to make the loan and
describing Barbour's dealings with Young's son, Steve:
. . . I was heartened by Steve's telling me that at
the end of the year consideration would be given to
doing even more. The Young family and your company are
exceptionally generous, and I am genuinely grateful for
the confidence you are showing in me.37
\37\ See Letter from Haley Barbour to AmbrousYoung, September 19,
1994 (Ex. 9).
On October 13, 1994, the loan guarantee documents were
signed. The transaction was structured as follows: Signet Bank
loaned $2.1 million to the NPF. The loan was collateralized by
$2.1 million in CD's posted by YBD (USA). As NPF made its
quarterly loan payments to Signet Bank, Signet Bank would
release the CD's to YBD (USA). In the meantime, YBD (USA)
earned market-rate interest on the CD's.38 YBD (USA)
received the funds to purchase the $2.1 million in CD's to be
posted as collateral for NPF's loan in the form of a loan from
its parent, YBD (Hong Kong).
---------------------------------------------------------------------------
\38\ Testimony of Benton Becker, July 23, 1997, p. 47.
---------------------------------------------------------------------------
When the NPF received the $2.1 million in loan proceeds on
October 13, 1994, it wrote to Signet Bank indicating that $1.6
million of the proceeds would be used to retire a portion of
the NPF's debt to the RNC's non-federal Republican National
State Election Committee (``RNSEC'') account.39 On
October 20, 1994, $1.6 million of the outstanding debt of $2.4
million was repaid to the RNSEC account.40 The
remaining $500,000 was applied to NPF expenses. NPF's $1.6
million repayment reduced its debt to the RNSEC account to
approximately $800,000.41
---------------------------------------------------------------------------
\39\ See Letter from NPF Comptroller Steven Walker to Kevin
Killoren of Signet Bank, October 13, 1994, (Ex. 10).
\40\ See Deposition of Haley Barbour, pp. 85-86.
\41\ See Deposition of John Bolton, July 15, 1997, p. 46.
---------------------------------------------------------------------------
allegations regarding the 1994 elections
Although matters relating to the 1994 elections are not
within this Committee's investigative mandate, certain charges
relating to such elections were raised during Committee
hearings. The Minority has alleged that the $1.6 million debt
repayment by the NPF to the RNC was used by the RNC to fund
critical campaign activities in Congressional districts across
the country. Specifically, the Minority contends that the flow
of funds evidences a plan to funnel foreign money into the 1994
elections, i.e. from YBD (Hong Kong) to YBD (USA) to Signet
Bank to collateralize a loan to the NPF, a portion of which was
utilized to repay a legitimate pre-existing debt to the RNC.
Barbour offered two reasons why that allegation was ``wrong in
fact, and . . . wrong in effect.'' 42 First, all the
funds were loaned from and repaid to the RNSEC ``non-federal''
account. Such funds cannot be used on behalf of any candidate
in a federal election.43 There is no evidence that
these funds found their way to any federal ``hard money''
accounts, or that the RNSEC funds were used in coordination
with any congressional candidate.
---------------------------------------------------------------------------
\42\ See Barbour testimony, pp. 254-55.
\43\ See Barbour testimony, p. 254.
---------------------------------------------------------------------------
Second, there was no shortage of funds in the RNSEC
account: The RNC's RNSEC account had more than $3 million
available for use as of October 19, 1996--before it received
the $1.6 million NPF repayment.44 Shortly following
the NPF repayment, the RNC transferred $500,000 from the RNSEC
account to its building fund, which was utilized for the
physical operations of the RNC, and transferred $1.6 million in
repayment of an outstanding RNC loan from Signet
Bank.45 In addition, the funds available for use
from the RNSEC account, including funds available via a line of
credit, never dipped below $5 million between October 20, 1994
and the election.46 In sum, there is no evidence
that the $1.6 million repaid by the NPF to the RNSEC account
was used for any electoral or campaign activity and thus had
any impact in any 1994 Republican congressional
victories.47 Moreover, there is no evidence that the
YBD loan guarantee transaction, which was legal and authorized
under federal election laws, was related to or affected the
1996 election campaigns.
---------------------------------------------------------------------------
\44\ See Chart, Republican National Committee, Non-Federal Funds
Available October, 1994--November, 1994 (Ex. 11).
\45\ See Barbour testimony, pp. 127, 252.
\46\ See Ex. 11.
\47\ See Barbour Testimony, pp. 127, 235-37.
Allegations have also been made that a seven day delay in debt
repayment by the NPF to the RNSEC account (from October 13 until
October 20, 1994) evidences a conspiratorial intent to delay public
disclosure of such repayment. The Committee has not received an
explanation of this delay from any person responsible for it, but
Barbour suggested a possible rationale:
I never talked to Steve Walker [the NPF Controller] about
it, but if he had asked me, if he would have asked me, I
would have told them wait and make the payment, the
repayment, actually, on October 20th or thereafter, because
when you are raising money like we do, almost not
exclusively, but very heavily from small donors, you don't
want the newspaper saying the RNC got a $1.5 million
contribution or a $2.5 million contribution because then
your small donors say, well, they don't need more money.
You know, that chills-the small donors drive our party. Our
---------------------------------------------------------------------------
average contribution at the RNC was $45.
Barbour testimony, p. 190.
dealings between barbour and young: january 1995--june 1996
Following the 1994 elections, Young and Barbour
communicated on several occasions. In early 1995, Young made a
trip to the United States for medical treatment. During that
trip, Barbour arranged for Young to meet briefly with Speaker
Gingrich and Senator Dole in their Congressional offices.
Although discussions at such meetings included the possible
fate of Hong Kong following the British departure and the
Taiwanese-Chinese relationship, there was no discussion
relating to any legislation, government program or government
contract of any kind.48
---------------------------------------------------------------------------
\48\ Neither Young nor any of his companies ever did business or
sought any business with the United States Government. See Young
deposition, p. 83; Volcansek testimony, p. 77; Barbour testimony, pp.
196, 198.
---------------------------------------------------------------------------
In August 1995, Barbour paid a visit to Young in Hong Kong
and asked if YBD (USA) would relinquish the CD's held by Signet
Bank, effectively ``forgiving'' NPF's obligation to repay YBD
(USA). Young agreed to consider the matter.49
---------------------------------------------------------------------------
\49\ The Minority has argued that one portion of Young's testimony
regarding his August 1995 conversations with Barbour should be read to
indicate that Young explained to Barbour that forgiveness was
impossible because YBD (Hong Kong), the actual source of funds for the
loan guarantee, was undergoing a government audit. Barbour, however,
recalls no such explanation, and recalls that Young agreed to consider
his request for forgiveness. Barbour's recollection on this point is
supported by that of Young's lawyer, Richard Richards. Richards wrote:
Shortly after the loan was made, you [Barbour] journeyed to
Hong Kong, and approached Mr. Young for the first time
about the question of forgiveness of the loan. Mr. Young
called me and told me of the discussion and informed me
that he wanted to be as helpful to you as he could and he
---------------------------------------------------------------------------
would take the request for forgiveness under advisement.
See Letter from Richard Richards to Haley Barbour, September 17, 1996
(Ex. 12). In any event, Barbour's knowledge or lack thereof regarding
YBD (Hong Kong)'s role in the transaction was immaterial--as discussed
elsewhere herein, the loan guarantee transaction was legal whether or
not the funds originated in Hong Kong.
In late 1995, Barbour planned a trip to Beijing, including
a meeting with the Chinese Foreign Minister. Barbour invited
Young to accompany him. Young agreed.50 In early
1996, Barbour met with the foreign minister while Young and
others attended this ceremonial meeting.51 Mr. Young
described the encounter as follows:
---------------------------------------------------------------------------
\50\ Young testified that he agreed to go on the trip as a gesture
of ``friendship'' to Barbour. Mr. and Mrs. Young, Mr. and Mrs. Barbour,
and Mr. and Mrs. Richard Richards all participated in the trip, which
apparently included sightseeing in and outside Beijing. See Ex. 3. Mr.
Young and Mr. Barbour both testified that they neither discussed nor
did any business of any kind while on the trip to China, or at any
other time. See Young deposition, pp. 83, 85-86; see Barbour
deposition, p. 106.
\51\ See Ex. 3; Becker testimony, p. 49; see Young deposition, pp.
84-85.
Q: Can you describe the type of reception given by
the Chinese Government to Haley Barbour on that trip?
A: The reception, I would say--I will give a rate: I
would say third class or lower.
Q: Do you know why that type of reception was given
to Haley Barbour?
A: Much later I was puzzled why they do that,
because, as a party Chairman for China they always want
to win friendship from the United States, and later I
raised the question through my personal friends who did
ask the questions and they come back to me and said
that during that particular moment the Chinese
government are in favor of the winning of President
Clinton, i.e. the Democrats, so they tried not to
offend the Democrats, so therefore they lowered down
Mr. Barbour. That's the answer I got.52
---------------------------------------------------------------------------
\52\ Young deposition, p. 84.
Although there was apparently no discussion relating to
forgiveness of the loan guarantee during the trip to China, the
topic arose again in 1996.
By 1996, it was clear that the NPF's disappointing
fundraising efforts would not support its operating expenses.
The NPF had taken a series of loans from the RNC, but the RNC
was becoming increasingly reluctant to extend
credit.53 The NPF missed its January 1996 loan
repayment to Signet Bank, and asked Signet (the lending bank)
and YBD (USA) (the loan guarantor) for permission to defer the
payment.54 Both agreed.
---------------------------------------------------------------------------
\53\ Becker testimony, p. 46.
\54\ Becker deposition, pp. 55-57.
---------------------------------------------------------------------------
In or about May 1996, Barbour had a conversation with
Richard Richards regarding the loan guarantee. During that
conversation, Barbour understood Richards to agree that YBD
would not object if NPF defaulted on the $1.5 million in funds
remaining due on the loan and Signet Bank took the YBD (USA)
CD's.55 By contrast, Richards has described that
conversation as follows:
---------------------------------------------------------------------------
\55\ See generally Barbour testimony, pp. 147, 149-151.
I did not say, because I did not have the authority
to say, ``Go ahead and default and we will do
nothing.'' In essence that would that would be our way
of forgiving the loan. I think I did say I doubted Mr.
Young would sue you in the event of default, but Mr.
Young did not say that, and did not give me
authorization to say we wouldn't sue and therefore, go
ahead and default and we'll simply walk
away.56
---------------------------------------------------------------------------
\56\ See Ex. 12.
By June 1996, NPF had informed Signet Bank that it intended
to make no further payments and would default on the loan.
Later that summer, Signet accelerated the loan and took $1.5
million in YBD (USA) CD's.57
---------------------------------------------------------------------------
\57\ See generally Becker testimony, p. 50 .
---------------------------------------------------------------------------
dispute and settlement
In July 1996, after learning of the default, Richards and
Becker wrote to Barbour and asked him to obtain authorization
from the RNC Budget Committee for the RNC to repay the NPF's
debt to YBD (USA). In August, 1996, at the Republican
Convention, Barbour sent the President of the NPF, John Bolton,
to present the issue to the Budget Committee. Bolton made a
presentation, but the Committee tabled the matter.58
---------------------------------------------------------------------------
\58\ See Bolton deposition, July 15, 1997, p. 82.
---------------------------------------------------------------------------
When Richards and Becker learned that the RNC Budget
Committee would not cover the NPF default, they became very
angry. Although Richards and Becker recognized that the RNC did
not have a legally cognizable obligation to cover the NPF
default, they decided, in service to their client, YBD (USA),
to attempt to pressure to the RNC to cover the
loss.59
---------------------------------------------------------------------------
\59\ See e.g. Memorandum from Becker to Young and Richards,
September 16, 1996 (Ex. 13).
---------------------------------------------------------------------------
On September 17, 1996, Richards wrote to Barbour
threatening to sue him and laying out a purported factual
record of the transaction.60 Included in the letter
were claims that Barbour had offered to arrange ``business
opportunities'' in China in return for loan forgiveness, and
that the loan guarantee was originally made in order to funnel
money to sixty targeted House seats. Richards has since
recanted several of those statements:
---------------------------------------------------------------------------
\60\ See Ex. 12.
---------------------------------------------------------------------------
Mr. Richards' Testimony:
Q: Is there anything in this letter that you feel
requires some level of clarification to be properly understood?
A: Yes. The tone--the reference in the letter to business
is grossly misleading, because we didn't go there to get
business. We didn't discuss business. But Ambrous's ability to
pay the loan depended upon him getting business. And so I know
the tone of the letter kind of says we all went there for a
business purpose, and that isn't quite accurate. And I
attribute that to writing the letter when I was grossly
irritated.61
---------------------------------------------------------------------------
\61\ Richards deposition, June 19, 1997, p. 112.
---------------------------------------------------------------------------
Mr. Richards' Affidavit:
At the time I wrote this letter, the repayment of
collateral was very much at issue and I was concerned that my
client, Mr. Young, would suffer as a result of an NPF default.
Accordingly, in the letter, I made several serious statements
which, upon reflection, were made as negotiating tools and were
not accurate. In particular, I stated that if Mr. Young could
get some business opportunities it may justify the contribution
of a portion of the loan collateral. I know of no business
activities Mr. Barbour was ever asked to undertake or did
undertake on behalf of Mr. Young, his sons, or any of the Young
Brothers entities either in the United States or abroad. In
addition, in my September 17, 1996 letter, I stated that the
repayment of the loan made certain funds available to the RNC
during the 1994 federal election cycle, the funds merely repaid
the RNC for its earlier loans to NPF, and I now understand that
these funds could not and were not used to directly benefit
congressional candidates.62
---------------------------------------------------------------------------
\62\ See Ex. 3 (emphasis supplied); see supra n. 20 (discussing
origin of Mr. Richards' affidavit.)
The statements in Mr. Richards' September 17, 1996 letter
have also been contradicted by the testimony of Young and
Barbour:
Testimony of Ambrous Young:
Q: Did you or any Young Brothers business benefit
financially as a result of your trip with Haley Barbour to
China?
A: No.
* * * * *
Q: So Haley Barbour never suggested any business?
A: Never at all, nor we approached him or him approached
us. . . . I have never had any business in mind.63
---------------------------------------------------------------------------
\63\ Young deposition, pp. 83-86.
---------------------------------------------------------------------------
Testimony of Haley Barbour:
Q: Did Mr. Young articulate any point of view that you
can recall that specifically would have helped Young Brothers
Development either in this country or in China or Hong Kong,
anywhere--or Taiwan?
A: He never said anything to me or in front of me about
his company's business or businesses or his companies'
businesses or business, ever.64
---------------------------------------------------------------------------
\64\ Barbour testimony, pp. 197-198.
After receiving Richards' September 17, 1996 letter,
Barbour decided that the best course of action was no
response.65 Richards followed with an October 16,
1996 letter containing the following statement:
---------------------------------------------------------------------------
\65\ See id. p. 146. Barbour testified ``Now, that's what I took
the letter to be, a negotiating tool to try to put pressure on me.
That's why I didn't respond. And it's also why I didn't give it
credibility.''
I believe it is significant that Bob Dole and the
Republican Party are now challenging contributions made
to the Clinton campaign by Indonesian citizens through
an American contact. Obviously there are some
differences between that situation and ours; however, I
think we stand the same risk of some very adverse
publicity if the loan were forgiven. . . .66
---------------------------------------------------------------------------
\66\ See Letter from Richards to Barbour, October 16, 1996 (Ex.
14).
Richards has since testified as follows regarding the
meaning of his reference to ``differences'' between the Clinton
---------------------------------------------------------------------------
campaign and the YBD loan guarantee:
Ambrous Young's money did not go to a political
campaign, where I believe that the money, the
Indonesian money went to the Presidential campaign and
to the Democratic party for campaign purposes. Ours
went to a think tank. Ours went to the
Forum.67
---------------------------------------------------------------------------
\67\ Richards deposition, June 19, 1997, p. 114.
Following the 1996 elections, Becker and the NPF negotiated
a settlement.68 The NPF repaid (with RNC funds)
approximately half of the $1.5 million lost by YBD
(USA).69
---------------------------------------------------------------------------
\68\ The NPF agreed to pay $800,000 in settlement of the dispute
but then reduced that amount by $50,000--the interest accrued to date
by the YBD (USA) certificates of deposit. Becker testimony, pp. 52-53.
\69\ Becker testimony, pp. 52-53. The Committee also investigated
allegations of two other allegedly foreign donations to the NPF. First,
the Committee reviewed a $25,000 donation on August 2, 1996 from the
Pacific Cultural Foundation, a non-profit think-tank located in Taiwan.
The NPF was one of several U.S. organizations that received funds from
the Pacific Cultural Foundation. Second, the Committee reviewed a
$50,000 donation from Panda Industries on or about July 18, 1995. Panda
Industries and related entities are the subject of further examination
in the section on Ted Sioeng of the Committee's Report. Under present
law, such donations are legal.
---------------------------------------------------------------------------
Mr. Becker has informed that Committee that, although YBD
(USA) admittedly has no legal right to return of the $800,000,
it continues to request that the RNC reimburse it for its
losses.
Allegations Relating to the Testimony of Haley Barbour
As the Committee's investigation progressed, the Minority's
focus shifted from the mechanics of the loan guarantee
transaction to allegations that Haley Barbour had given false
testimony. The Minority's allegations regarding Barbour's
testimony relate principally to one set of statements: During
the hearing and his deposition, Barbour testified that he did
not have credible information until the Spring of 1997 that the
funds for the CD's collateralizing the NPF loan from Signet
Bank were obtained by YBD (USA) via a loan from it parent, YBD
(Hong Kong).70
---------------------------------------------------------------------------
\70\ Barbour deposition, pp. 130-131.
---------------------------------------------------------------------------
To be clear, neither Barbour nor any other person
questioned during this investigation denied that the funds for
the NPF loan guarantee originated in Hong Kong--that fact was
never in dispute. Rather, Barbour stated that he did not have
credible information on that topic until he reviewed NPF files
retrieved from storage in Spring 1997. Moreover, whether or not
Barbour personally knew prior to 1997 that the funds for the
guarantee originated in Hong Kong is notmaterial to the
Committee's assessment of the loan guarantee transaction. As noted
above, the NPF was a non-profit corporation and it was free to accept
donations from foreign sources.
The Minority has theorized that there were certain
occasions prior to Spring 1997 when, contrary to his testimony,
Barbour was informed that the funds for the NPF guarantee
originated in Hong Kong.
First, the Minority cites a conversation sometime prior to
October 1994 among Barbour, Fred Volcansek (then engaged in NPF
fundraising), Dan Denning (the NPF Chief Financial Officer) and
Dan Fierce (an RNC official). Volcansek testified that, during
that conversation, he told the group that the loan guarantee
money would originate in Hong Kong.71 When
questioned regarding this conversation Barbour responded:
---------------------------------------------------------------------------
\71\ Volcansek deposition, p. 108-109.
Fred may be right and I may not have heard it because
it was not relevant. That issue is a totally irrelevant
issue. It was then and it is now, but I do not recall
his saying that in that meeting or any other meeting. .
.72
---------------------------------------------------------------------------
\72\ Barbour testimony, p. 141.
Denning, who also attended the meeting, testified that he
recalled no such conversation with Volcansek or anyone
else.73 Indeed, Volcansek himself testified that:
---------------------------------------------------------------------------
\73\ See Denning deposition, p. 222.
[A]s I tried to point out to Mr. Baron a moment ago,
that wasn't an issue. I mean, the significance of it
being a foreign transaction, because of our viewpoint
on the whole matter, the fact that I mentioned it and
brought it up in the overall context of a long and
lengthy meeting about a lot of things, I'm not
surprised that Mr. Denning didn't focus on what I
said.74
---------------------------------------------------------------------------
\74\ Volcansek testimony, pp. 48-49.
The second instance in which, according to the Minority,
Barbour learned that YBD (Hong Kong) was lending the funds to
YBD (USA) for the loan guarantee was an alleged conversation at
an August 1994 dinner in Washington. The dinner was attended by
Ambrous Young, Steve Young, Barbour and Denning.75
The Minority argues that Young told Barbour during that dinner
that the funds for the loan guarantee would come from YBD (Hong
Kong). In support of that proposition, however, the Minority
has only cited a single question and answer from Ambrous
Young's deposition:
---------------------------------------------------------------------------
\75\ See generally Denning deposition, p. 153.
Q: Can you describe in general what you recall was
the discussion at the dinner?
A: The discussion basically was Mr. Haley Barbour
requested me to consider for the loan of $3.5 million
and assured me of the safe return of the loan, but as a
result of that, I could not commit, nor have the power
to commit, but requested him to give us more
information so that we can present it to YBD (Hong
Kong) Board of Directors for further
consideration.76
---------------------------------------------------------------------------
\76\ Young deposition, p. 35.
However, in his answer, Young said nothing to indicate that
funds from the YBD (USA) CD's came from Hong Kong. Even if
Young had stated that he needed to take the issue to the Board
of YBD (Hong Kong), such a statement does not necessarily
indicate that the actual funds for the loan guarantee were
originating in Hong Kong rather than from the U.S. subsidiary.
This interpretation of Young's testimony parallels other
evidence obtained by the Committee, including the following
---------------------------------------------------------------------------
statement by Barbour:
I remember Mr. Young saying that he having a
favorable but non-committal response, not that he would
have to go back to his board . . .77
---------------------------------------------------------------------------
\77\ Barbour testimony, p. 142.
This interpretation is also supported by Barbour's August 30,
1994 letter to Young's attorney, Benton Becker (written shortly
---------------------------------------------------------------------------
after the dinner):
It is my understanding one of your clients--a
domestic corporation--is considering guaranteeing a . .
. bank loan to the National Policy Forum
(NPF).78
---------------------------------------------------------------------------
\78\ See Letter from Haley Barbour to Ambrous Young dated October
10, 1994 faxed to Benton Becker on October 11, 1994 (Ex. 15).
In addition, Denning, an NPF official also attending the dinner
that night, did not recall any discussion that the funds for
the loan guarantee come from a Hong Kong
corporation.79
---------------------------------------------------------------------------
\79\ See generally Denning deposition, pp. 153-159.
---------------------------------------------------------------------------
Next, the Minority cited a 1995 conversation between Young
and Barbour, during Barbour's visit to Young's yacht in Hong
Kong. During that visit, Barbour and Young had a discussion
regarding the possibility that the NPF might default on the
Signet Bank loan. Barbour asked Young whether YBD (USA) would
``forgive'' any such default. Young testified regarding that
exchange as follows:
Q: What was your response to Mr. Barbour's
proposition that the loan be forgiven, as we have
discussed?
A: I said no in the manner of an apology. I explained
to him that we have difficulties to do that, because
the YBD (USA) money, which was guaranteed under the
form of a certificate, deposit certificate, for the
Forum loan, was a loan from YBD Hong Kong, and YBD Hong
Kong we are facing a government audit every year.
Without justification to the directors, or to the
board, who approved such loan could face government
punishment, so therefore I explain this cannot be
done.80
---------------------------------------------------------------------------
\80\ Young deposition, pp. 57-58.
It is clear from Young's testimony that he recalls discussing
the issue of forgiveness with Barbour. It is also clear why
Young ultimately did not regard forgiveness as a viable option.
It is not clear, however, that Young explained his reasons for
rejecting forgiveness during the 1995 conversation with
Barbour.81 Indeed, when Young's attorney, Richard
Richards, memorialized the 1995 conversation in his September
1996 letter to Barbour, Richards made no mention of the YBD
(Hong Kong) government audit and, contrary to Young's
testimony, indicated that Young was actually considering
forgiving the NPF obligation:
---------------------------------------------------------------------------
\81\ When read the portion of Young's testimony relating to a
government audit of YBD (Hong Kong), Barbour replied:
I do not recall him saying, and I did not understand him
---------------------------------------------------------------------------
to say, anything like that.
Barbour deposition, p. 120.
Shortly after the loan was made, you [Barbour]
journeyed to Hong Kong and approached Mr. Young for the
first time about the question of forgiveness of the
loan. Mr. Young called me and told me of the discussion
and informed me that he wanted to be as helpful to you
as he could and he would take the request of
forgiveness under advisement.82
---------------------------------------------------------------------------
\82\ See Ex. 12. Although there are significant questions regarding
the accuracy of many portions of Richards' letter (including Richards'
own admissions that the letter was written as a bargaining tool), Young
testified generally that this portion of the letter was accurate. See
Young deposition, p. 86-87.
Further, other portions of Young's own testimony also raise
questions regarding the content of his communications to
Barbour in August 1995. For example, Young testified that he
and Barbour were ``concentrating on the subject of forgiving
the loan [to NPF]'' and did not make ``any special point'' of
the fact that the funds for the loan guarantee had originated
in Hong Kong.83 In addition, Young testified that,
as the conversation with Barbour progressed on the issue of
forgiveness, ``I think he [Barbour] misunderstood me . . .''
and that Barbour mistakenly believed that Young had agreed to
provide NPF with yet further funds in order to pay off the
Signet Bank loan.84 In sum, there is significant
reason for uncertainty regarding the content of Young's and
Barbour's 1995 conversation.
---------------------------------------------------------------------------
\83\ See Young deposition, p. 58.
\84\ See Young deposition, p. 59.
---------------------------------------------------------------------------
Finally, the Minority cites certain alleged communications
between Richard Richards and Barbour as possibly providing
Barbour with knowledge prior to 1997 that YBD (USA) was lent
the funds for the CD's by its Hong Kong parent. Specifically,
the Minority has focused upon an alleged 1994 telephone call
between Richards and Barbour (which Richards mentioned for the
first time during his hearing testimony), and statements in
Richards' September 17, 1996 letter.85 In both,
Richards states that the funds for the NPF guarantee would be
transferred (via a loan) to YBD (USA) from YBD (Hong Kong). The
following, however, was Richards' sworn deposition testimony on
June 19, 1997:
---------------------------------------------------------------------------
\85\ Barbour testified that he did not regard the September 17,
1996 letter as credible when he received it. See Barbour deposition
145-46; see also Bolton deposition, July 15, 1997, pp. 138-40.
Q: On the third page, first paragraph begins, ``With
this in mind, as you have instructed, all
considerations have been made to assure that no claim
and no violation of law could result from YBD (USA)
serving as a loan guarantor.''
Now, that paragraph goes on to discuss a loan from
YBD (Hong Kong) to YBD (USA). Mr. Richards, do you know
if that loan transaction was, in fact, performed? . . .
A: Yes it was. It was the source of the funds in the
American bank.
Q: Were the details of that loan transaction ever
communicated to Mr. Barbour?
* * * * *
A: No. It was all done between
attorneys.86
---------------------------------------------------------------------------
\86\ Richards deposition, June 19, 1997, p. 106.
Indeed, several other aspects of Richards' testimony before
this Committee have been inconsistent or self-contradictory.
(In fact, Richards contradicted himself on several issues
during his public testimony.87) Also, Richards has
admitted that he wrote correspondence to Barbour containing
purposely inaccurate statements regarding his dealings with
Barbour on this transaction:
---------------------------------------------------------------------------
\87\ For instance, when questioned during the hearings by the
Minority, Richards stated that language in his September 17, 1996
letter to Barbour was accurate. When questioned by the Majority,
Richards confirmed that his affidavit contradicting that letter was
actually accurate. See generally Richards testimony, p. 91-92.
At the time I wrote this letter, the repayment of
collateral was very much at issue and I was concerned
that my client, Mr. Young, would suffer as a result of
an NPF default. Accordingly, in the letter, I made
several statements which, upon reflection, were made as
negotiating tools and were not accurate.88
---------------------------------------------------------------------------
\88\ Ex. 3.
As noted above, the only contemporaneous writings by
Barbour that might be probative of his knowledge on this issue
are his letters of August 30, 1994 and October 10, 1994. In
both, Barbour states that YBD (USA)--a ``domestic
corporation''--is guaranteeing the loan. This, of course,
suggests that Barbour understood YBD (USA), not YBD (Hong
Kong), to be the source of funds for the NPF loan guarantee.
Barbour summarized his response to questions regarding the
accuracy of his testimony in the following exchange with
Senator Lieberman:
Senator Lieberman: . . . So I am puzzled, with all
respect and affection, which I have for you, that you
never--that you did not know that this money was going
to come. My God, you went to Hong Kong to see Mr.
Young, and I am just surprised that you did not know at
any point in this, and again, it is legal, that the
money was going to come from Hong Kong to YBD (USA).
Mr. Barbour: Senator, I appreciate the statement of
affection, which you know is mutual . . . and the fact
of the matter is . . . it would be easier to say, hey,
I knew all along, it was legal, it didn't make any
difference. The problem with that is I didn't. . . . It
was irrelevant, the whole time. Maybe that is why it
just never caught my attention if different people in
fact really did bring it up, but the fact of the matter
is, it was legal either way, version A, version B. It
happens that version A is what I truly remember and
what I got to tell you is the truth, and I knew that
Mr. Young was the head of the family, and I knew that
the family lived in Hong Kong, and the boys, the sons,
the Young Brothers, I assumed, were all Americans, that
their mama was an American, and it didn't--you know--
this is somebody that had been giving to the RNC.
So I just had to tell you like I remember it, and
like I said, it would be easier to tell it another way,
but it is the truth.89
---------------------------------------------------------------------------
\89\ Barbour testimony, pp. 208-09.
---------------------------------------------------------------------------
DISCUSSION
The NPF loan guarantee transaction did not violate existing law
Four sets of attorneys reviewed the NPF loan guarantee
transaction before it was consummated: Mark Braden, a
nationally recognized election law expert represented the NPF;
Shea and Gardner, a prominent Washington firm, represented
Signet Bank; Benton Becker, a former U.S. Attorney and counsel
to President Ford, represented YBD (USA); and David Norcross,
the General Counsel of the RNC, represented the RNC in its role
as NPF's creditor. Documents and testimony obtained by the
Committee indicate that all of these counsel concluded that the
transaction was legal in all respects.90 Indeed, the
testimony is undisputed that the transaction was carefully
structured to clear all legal hurdles:
---------------------------------------------------------------------------
\90\ As noted above, there is no dispute that the NPF was legally
able to receive foreign contributions or assistance.
To the point of the matter, Senator, is nobody was
hiding anything or concealing anything. It was a
commercial transaction, and it didn't matter that the
money was coming from a foreign corporation to its
subsidiary in the U.S.91
---------------------------------------------------------------------------
\91\ See Becker testimony, p. 164.
---------------------------------------------------------------------------
[W]hat would be the motive for Mr. Young to enter
into such a nefarious plot? There would be no motive. .
. . nothing to gain by that.92
---------------------------------------------------------------------------
\92\ See Becker testimony, p. 165-166. Recognizing that the
transaction was subject to such exacting legal review, some have
attempted to adopt an alternative legal theory unsupported by the facts
of the transaction. Proponents of this theory argue that the Committee
should ignore all the efforts undertaken to ensure that the
arrangements were legal and instead focus on certain alleged
communications among Barbour and Young preceding the transaction. They
argue that Barbour may have violated federal election law (in
particular 2 U.S.C. Sec. 441e) when he solicited a loan guarantee for
the NPF from Young. Specifically, they argue that Barbour illegally
solicited a foreign contribution from Young ``for the purpose of
influencing a federal election'' by suggesting that the contribution to
the NPF would help the Republican Party's prospects for the upcoming
1994 elections. This theory is infirm in several important respects,
including that it mischaracterizes the evidence obtained by the
Committee. Contrary to the theoretical assertions, Young testified that
neither Barbour nor others associated with the NPF or RNC ever informed
him that the NPF loan guarantee would assist Republican candidates in
the 1994 election. Young deposition, p. 29-30. Likewise, Volcansek (the
NPF fundraiser) explained to Mr. Young that, as an individual without
U.S. citizenship, Young could not have any role in the federal
elections. Volcansek testimony, p. 81.
In sum, the Committee has found no evidence of any plan
involving the NPF to inject foreign funds into the 1994 or any
other federal election.93 Rather, the Committee
finds that the NPF loan guarantee was a legitimate commercial
transaction intended to facilitate funding for the NPF's
continuing operations. The transaction was thus in all respects
legal and proper.
---------------------------------------------------------------------------
\93\ The opposite is true--the NPF was a significant drain on RNC
resources, ultimately defaulting on $2.5 million in RNC loans.
---------------------------------------------------------------------------
There is no evidence that the loan guarantee transaction involved an
illegal or improper ``quid pro quo'' arrangement
The loan guarantee transaction did not involve an illegal
or improper ``quid pro quo'' arrangement. Neither YBD (USA) nor
YBD (Hong Kong) ever had any dealings with the U.S. Government.
YBD (USA) counsel Benton Becker testified as followed:
Senator Collins: Have Mr. Young, Mr. Ambrous Young,
or YBD (USA) or YBD (Hong Kong) to your knowledge ever
asked Haley Barbour for assistance in obtaining
contracts or business or assistance of some sort from
the United States Government?
Mr. Becker: I have asked that question several times
several ways of my clients, and they have answered
those questions--that question under oath, and I'll
repeat their answer. The answer is unequivocally no.
* * * * *
There was no special favor, no quid pro quo, no
under-the-table understanding or deal.94
---------------------------------------------------------------------------
\94\ Testimony of Benton Becker, July 23, 1997, pp. 117-118, 120.
---------------------------------------------------------------------------
The NPF was not subject to federal election law restrictions on foreign
contributions
Evidence obtained by the Committee demonstrated that the
NPF did not engage in any campaign related activities in either
1994 or 1996. Thus, it was not subject to restrictions on
foreign funding.
The NPF did not misuse its tax status
Although the NPF's application for 501(c)(4) tax exempt
status was not approved, the NPF's tax status was never
relevant. The NPF was a non-profit corporation that never had
any income. Thus, the NPF could never have incurred any tax
liability. Moreover, because the NPF was organized as a
501(c)(4) rather than a 501(c)(3) entity, no donor ever
received any tax deduction for a contribution to the NPF.
The evidence does not support a conclusion that barbour misled this
committee
There is insufficient credible evidence to conclude that
Barbour misled this Committee:
Mr. Volcansek's testimony was contradicted.
Mr. Richard's testimony is inconsistent and
self-contradictory.
Mr. Young's testimony was far from clear.
Moreover, contemporaneous documents support
Mr. Barbour's recollection.95
---------------------------------------------------------------------------
\95\ See supra.
---------------------------------------------------------------------------
The Committee concludes that twisting Barbour's remarks to
make a charge of illegal activity is wrong and unfair. Although
the elaborate chain of evidence is subject to being confused or
deliberately misrepresented, the Committee's conclusion is that
the facts cannot be twisted to support a charge that Barbour's
testimony was anything less than truthful.
White House Document Production
Introduction
Beginning with the earliest meeting between Committee
investigators and White House Counsel on February 11, 1997, the
White House promised its cooperation with the Committee's
investigation and committed to produce documents requested by
the Committee on a timely basis. At that meeting, Counsel to
the President Charles F.C. Ruff conveyed the President's wishes
that Ruff's office cooperate with the Committee to the fullest
extent possible.1
---------------------------------------------------------------------------
\1\ See Memorandum from Paul L. Robinson to Michael J. Madigan, et
al., Feb. 17, 1997 (Ex. 1); See also Letter from Charles F.C. Ruff to
Donald T. Bucklin noting continuing applicability of earlier pledge to
``voluntarily provide all of the information that the Committee needed
for its investigation,'' July 29, 1997 (Ex. 2).
---------------------------------------------------------------------------
The Committee was, of course, well aware of the dilatory
tactics confronted by prior Congressional investigations into
Clinton Administration activities.2 Ruff and the
staff of lawyers he put together to handle the numerous
investigations into White House wrongdoing, however, joined the
White House Counsel's office only in early 1997.3
The Committee therefore remained cautiously optimistic that
Ruff's promises to cooperate were real, and that Ruff and his
staff did not intend to adopt the blatantly obstructionist
methods of his predecessors.4 The Committee hoped
that, in this instance, the Clinton White House would choose to
emulate the responsiveness of the Reagan and Carter
Administrations--each of which voluntarily waived executive
privileges applicable to documents requested by Congressional
investigative bodies.5 Instead, Ruff and the White
House Counsel's office selected the Nixon White House as their
model.
---------------------------------------------------------------------------
\2\ See 143 Cong. Rec. S716 (daily ed. Jan. 28, 1997) (statement of
Sen. Thompson) (``If one looks solely to the past, there is little
reason to be optimistic. We have seen what appears to be a grudging
release of information . . . . We have seen all manner of delaying
tactics which congressional oversight committees claimed were intended
to avoid scrutiny by Congress . . . .''); Memorandum from Michael
Madigan to Charles F.C. Ruff attaching ``excerpts from the Whitewater
investigation final report that illustrate the type of document
production problems/miscommunications'' faced by the Whitewater
investigators, February 17, 1997 (Ex. 3). See also S.Rep. 104-280,
Report of the Special Committee to Investigate Whitewater Development
Corp. and Related Matters, pp. 151, 225-27, 237-39; H.Rep. 104-849,
Report of the Committee on Government Reform and Oversight on the
Investigation of the White House Travel Office Firings and Related
Matters, pp.154-59.
\3\ See Deposition of Charles F.C. Ruff, Oct. 27, 1997, pp. 4-5
(``Q: What is your current position? A: Counsel to the President. Q:
How long have you held that position? A: Since February 10, 1997.');
Deposition of Lanny A. Breuer, Oct. 17, 1997, p. 6 (``I joined the
White House on--I believe it is February 16, 1997.'); Deposition of
Michael X. Imbroscio, Oct. 17, 1997, p. 7 (``I began work in the White
House on March 3, 1997.').
\4\ See 143 Cong. Rec. S716 (daily ed. Jan. 28, 1997) (statement of
Sen. Thompson) (``There is a new team in the White House, individuals
who command respect. I am hoping that the new White House counsel will
understand that his position is one of counsel to the office of the
President. He is not the President's personal attorney.').
\5\ See id. (``As instructive examples of the cooperation of . . .
Presidents [Reagan and Carter], they both allowed congressional
examination of all documents . . . .'').
---------------------------------------------------------------------------
Eleven months' experience with White House document
production practices unfortunately established that the
Committee's initial optimism was undeserved, and that the White
House never had any intention of cooperating beyond what its
staff believed was absolutely necessary, when under extreme
pressure. The Committee presented the White House with an
immediate opportunity to prove its good intentions by initially
agreeing to proceed with the production of documents from the
White House without first issuing a subpoena. The White House,
however, responded to the Committee's expression of goodwill by
improperly delaying and manipulating its document production to
take advantage of the Committee's December 31, 1997 expiration.
The Committee's later attempt to jump start the White House's
production through issuance of a formal--although ultimately
unenforceable 6--Committee subpoena was met with
continued White House obstruction.
---------------------------------------------------------------------------
\6\ Senate committees are powerless to enforce subpoenas against
executive branch employees acting in their official capacities. See 28
U.S.C. Sec. 1365(a). That provision vests in the United States District
Court for the District of Columbia original jurisdiction over actions
brought by the Senate or its committees to enforce compliance with its
subpoenas. Section 1365(a), however, also explicitly withholds district
court jurisdiction over actions to enforce subpoenas issued ``to an
officer or employee of the executive branch of the Federal Government
acting within his or her official capacity . . . .''
---------------------------------------------------------------------------
The following is a discussion of the most egregious
examples of the White House's consistently uncooperative
approach to its production of documents to the Committee. This
discussion begins with a description of the White House's utter
disregard for any reasonable document production schedule set
by this Committee or promised by the White House itself. It
then describes broken promises relating to particular documents
withheld by the White House on spurious assertions of executive
privilege. Finally, this section summarizes the manipulative
manner in which the White House handled its production to the
Committee of White House entrance records, White House
videotapes and several other specific categories of documents
and other materials.
In spite of the significant problems posed by the White
House's efforts to obstruct and manipulate the Committee's
investigation, the Committee remains satisfied that it met one
of its primary goals of uncovering for the American people
important information about their government. Whether
disseminated through the Committee's hearings or through the
simultaneous production of documents by the White House to the
Committee and to the press,7 the American people now
possess far more knowledge about the inner workings of the
Clinton White House than they did prior to the commencement of
the Committee's investigation.
---------------------------------------------------------------------------
\7\ The White House, on a number of occasions, attempted to
manipulate the Committee's investigation by providing copies of
significant documents to the press at the same time that it produced
the documents to the Committee. For instance, the White House produced
copies of the purportedly belatedly discovered White House videotapes
to the Committee late in the evening of October 14, 1997, and made the
video footage available to the press on the following day. See Susan
Schmidt & Lena H. Sun, ``On Tape, Clinton Links Lead in Polls, Issue
Ads,'' Washington Post, Oct. 16, 1997, p. A1. Similarly, on December 8,
1997, the White House simultaneously produced to the Committee and to
the press copies of a daily chronicle of Presidential activities. See
Marc Lacey & Glenn F. Bunting, ``White House Forwards More Donor
Records,'' Los Angeles Times, Dec. 9, 1997, p. A1. The Committee notes,
however, that the White House chose not to provide to the press copies
of the thousands and thousands of pages of useless and irrelevant
material it produced to the Committee, such as 40,000 printed pages of
unintelligible information from the White House database. See Letter
from Donald Bucklin to Charles F.C. Ruff, July 28, 1997 (Ex. 4).
---------------------------------------------------------------------------
Slow-walking in the production of documents
In response to the White House Counsel's pledges of
cooperation and the Committee's optimism that the document
production problems that burdened prior Congressional
investigations into the Clinton Administration could be
avoided, the Committee, at the request of the White House,
elected to proceed with the production of White House documents
without first issuing a subpoena to the White House. Instead,
on April 9, 1997,8 the Committee delivered a request
for production of documents in the form of a letter to the
White House Counsel's office.9 This document request
constituted a ``narrowly defined'' subset of a larger document
request that the Committee intended to make in the
future.10 The Committee understood that most of the
documents had already been gathered by the White House
Counsel's office in response to written directives sent by
previous White House Counsel Jack Quinn to all White House
personnel in December 1996 and January 1997.11 By
limiting the request to these documents, the Committee--facing
a December 31, 1997 deadline--hoped to expedite the time frame
within which it could expect a production from the White House.
In fact, the Committee expressly requested ``as many of these
documents as possible within . . . ten days.''12
---------------------------------------------------------------------------
\8\ After the initial meeting on February 11, 1997, the Committee
and White House spent ``several weeks'' negotiating the terms of a
document protocol addressing the White House's confidentiality and
privilege concerns. See Letter from Michael Madigan to Charles Ruff,
April 23, 1997 (Ex. 5). The White House's document production could not
proceed until the protocol was finalized in April. The protocol, when
completed, outlined the procedures for Committee review, storage and
use of documents designated ``Confidential'' or ``Highly Confidential''
by the White House. It also created a mechanism for Committee review of
documents withheld from production by the White House. See ``Security
Procedures and Other Protocols,'' April 1, 1997 (Ex. 6). Unresolved
issues relating to the funding for and scope of the Committee's
investigation also played a role in the early suspension of the
progress of the investigation. These issues were settled by the
Senate's adoption of the Committee's funding resolution on March 11,
1997. See Helen Dewar, ``Senate GOP Widens Election Fund Probe; Legal
but `Improper' Practices Included,'' Washington Post, March 12, 1997,
p. A1.
\9\ Letter from J. Mark Tipps to Lanny Breuer, April 9, 1997 (Ex.
7).
\10\ Id.
\11\ See Ex. 5.
\12\ Ex. 7.
---------------------------------------------------------------------------
On April 11, 1997, Committee counsel met with Lanny Breuer
of the White House Counsel's office and discussed the April 9
letter request ``line by line.'' 13 Breuer assured
the Committee that the White House would produce the majority
of the records responsive to the April 9, 1997 request on April
21.14
---------------------------------------------------------------------------
\13\ See Ex. 5.
\14\ See id.
---------------------------------------------------------------------------
Late in the afternoon of April 21, however, the Committee
received a single box of documents accompanied by a letter
indicating that additional documents would be forthcoming the
following week.15 Chief Counsel Michael Madigan
expressed the Committee's ``shock[ ] that [only] a single box
of documents was produced'' and that the Committee would ``not
receive the balance of the requested documents until next
week.'' 16
---------------------------------------------------------------------------
\15\ Letter from Charles F.C. Ruff to The Honorable Fred Thompson,
April 21, 1997 (Ex. 8).
\16\ See Ex. 5.
---------------------------------------------------------------------------
Even the subsequent week's production, however, did not
represent the balance of the documents responsive to the April
9 letter request. On May 13, 1997, Chairman Thompson called
Erskine Bowles, White House Chief of Staff, to complain about
the pace of the White House's production of
documents.17 Bowles then ordered Breuer and Michael
Imbroscio of the White House Counsel's office to meet with
Committee Senior Counsel Donald Bucklin to discuss the
delinquent production.18 After the meeting, Bucklin
provided to the White House a detailed list of the ``several
categories'' of documents requested by the Committee that the
White House had not yet produced.19
---------------------------------------------------------------------------
\17\ See Bob Woodward, ``Senator Criticizes White House Action in
Fund-Raising Probe,'' Washington Post, May 16, 1997, p. A14.
\18\ See id.; Memorandum from Donald T. Bucklin to Lanny A Breuer,
May 15, 1997 (Ex. 9).
\19\ Id.
---------------------------------------------------------------------------
On May 21, 1997, the Committee, as promised, issued a
second, more comprehensive document request to the White House
by letter from Bucklin to Breuer.20 Although Senior
Counsel Donald Bucklin indicated that the Committee
``consider[ed] the items contained in the . . . request to be a
priority,''21 the White House responded with the
same lack of urgency and timeliness as it did with the April 9
request. The White House delivered its documents to the
Committee in small batches and on a schedule that bore no
discernible relation to the Committee's deadlines or
expressions of urgency. In fact, almost four months after the
Committee's first document request, Ruff acknowledged in a July
25, 1997 letter to Madigan that not only was the White House's
production in response to several of the Committee's April 9
requests still incomplete,22 twenty-four of the
forty-two ``priority'' items contained in the May 21 request
had also not received a White House response.23 In
retrospect, it is apparent that the only Committee deadline of
any interest to the White House was the Committee's December
31, 1997 termination date.
---------------------------------------------------------------------------
\20\ Document Requests attached to Letter from Donald T. Bucklin to
Lanny A. Breuer, May 21, 1997 (Ex. 10).
\21\ Id.
\22\ Letter from Charles F.C. Ruff to Michael J. Madigan, July 25,
1997 (Ex. 11). Although Ruff stated in the text of his letter that
``all of the [April 9] requests have been completed,'' he nevertheless
identified in an attachment to his letter four specific document
requests for which production remained incomplete.
\23\ See id. The Committee issued a specifically targeted
``supplemental'' document request on June 9, 1997. Letter from Donald
T. Bucklin to Lanny A. Breuer, June 9, 1997 (Ex. 12). By July 28, 1997,
the White House had completed its production in response to none of the
four requests contained in the supplemental request. See Letter from
Donald T. Bucklin to Charles F.C. Ruff, July 28, 1997 (Ex. 13).
---------------------------------------------------------------------------
In response to the White House's consistent failure to
abide by any reasonable production schedule--as well as its
frequent production of documents either immediately before or
even after deposition or hearing testimony relating to the
author or subject of the documents (discussed in detail
below)--the Committee voted unanimously on July 31, 1997 to
issue a subpoena to the White House bearing a return date of
August 12, 1997.24 Although Chairman Thompson
himself communicated to Ruff the Committee's insistence on
``strict and prompt compliance'' with the
subpoena,25 the subpoena did not succeed in altering
the lack of the responsiveness of the White House in any
meaningful way. For instance, as discussed below, it was not
until well after the August 12 return date on the subpoena that
the White House produced videotapes of White House coffees. The
White House also produced highly relevant documents even after
the December 31, 1997 termination of the Committee's
investigation. On January 16, 1998, the White House hand
delivered to the Committee (and simultaneously produced to the
press 26) a package containing documents found in
the files of a White House employee charged with evaluating
facsimile technology services offered to the White House by
Johnny Chung, a central figure in the Committee's
investigation.27 The White House did not attempt to
explain why this employee's files had not previously been
searched for these unquestionably responsive documents.
---------------------------------------------------------------------------
\24\ See Guy Gugliotta, ``Panel Unanimously Issues Subpoena to
White House; Committee Allows Sen. Thompson to ``Order'' Compliance if
Deadline is Not Met,'' Washington Post, Aug. 1, 1997, p. A16.
\25\ Letter from Chairman Fred Thompson to Charles F.C. Ruff, Aug.
6, 1997 (Ex. 14).
\26\ See ``Party Donor Pitched Fax Business to White House,''
Washington Post, January 17, 1998, p. A12.
\27\ See Letter from Lanny A. Breuer to Michael Madigan, January
16, 1998 (Ex. 15). Among the significant documents produced by the
White House on January 16 was a July 17, 1995 memorandum from Harold
Ickes to a DNC employee ``strongly urging'' that the DNC obtain
``broadcast fax capability'' and suggesting Johnny Chung's company as a
suitable outside contractor for such service. See Ex. 33 to the section
of this report on Johnny Chung. The White House also belatedly produced
in January 1998 a list identifying the dates on which certain large
contributors to the DNC spent the night in the Lincoln Bedroom. ``U.S.
Senate Committee on Government Affairs Request--Certain Overnight
Guests Dates,'' Dec. 23, 1997 (Ex. 16). The Committee specifically
requested this information from the White House in August and continued
to actively pursue this request in the succeeding months. See Letter
from Glynna Parde to Dimitri Nionakis, Oct. 31, 1997 (Ex. 17).
---------------------------------------------------------------------------
Broken promise to assert the executive privilege in only the narrowest
circumstances
The scope of executive privilege applicable to the
documents sought by the Committee was the central focus of the
February 11, 1997 meeting between the Committee and
representatives of the White House Counsel's office, the first
substantive discussion of document production
issues.28 At that meeting, Ruff stated that he
anticipated that executive privilege would be inapplicable to
most White House documents relating to campaign
contributions.29 While he added that the privilege
would apply to documents relating to allegations that campaign
contributions influenced a White House policy decision, Ruff
also stated that the White House would accommodate the
Committee by permitting review of the purportedly privileged
documents.30 Ruff's suggestion that the Committee
have an opportunity to review documents withheld on executive
privilege grounds was subsequently incorporated by the
Committee on April 1, 1997 into its formal protocol governing
White House document production issues.31
---------------------------------------------------------------------------
\28\ See Ex. 1. In a floor speech on January 28, 1997, Chairman
Thompson also expressed his opinions on the proper breadth of the
executive privilege. See 143 Cong. Rec. S716 (daily ed. Jan. 28, 1997)
(statement of Sen. Thompson).
\29\ See Ex. 1.
\30\ See id.
\31\ See Ex. 6, p. 4.
---------------------------------------------------------------------------
The actual breadth of executive privilege ultimately
asserted by the White House--as opposed to the theoretically
narrow privilege suggested by Ruff on February 11, 1997--was
revealed by documents withheld from the first White House
production to the Committee on April 21, 1997. This production
demonstrated vividly that the White House did not validate the
Committee's initial optimism that the WH would adopt the narrow
approach to executive privilege asserted by the Reagan and
Carter Administrations. For example, request number 19 in the
Committee's April 9 letter asked for the production of ``[a]ll
documents referring or relating to Charlie Trie's appointment
to the Commission on US-Pacific Trade and Investment Policy,
and all documents regarding Executive Order #12987 signed on
January 31, 1996.''32 On April 21, 1997, the White
House produced only a few documents in response to request
number 19, but notified the Committee that a substantial number
of additional responsive documents had been withheld on
executive privilege grounds.33
---------------------------------------------------------------------------
\32\ Ex. 7.
\33\ Ex. 5.
---------------------------------------------------------------------------
In accordance with the document production protocol,
Committee counsel reviewed the two and one-half boxes of
withheld documents at the White House.34 After a
four-hour review, Committee counsel concluded that most of
``the documents withheld did not remotely resemble the type of
sensitive information'' that Ruff had suggested the White House
would withhold.35 The documents instead included a
number of public speeches, manuals, background news articles,
resumes and other similar public documents, and few documents
that legitimately implicated deliberative process
concerns.36 Committee counsel segregated the most
relevant documents from the two and one-half boxes, and Madigan
thereupon insisted in his April 23, 1997 letter to Ruff that
the segregated portion be produced to the
Committee.37 Although the White House produced these
documents on May 7, 1997,38 it both redacted the
documents and also insisted that they be accorded ``highly
confidential'' treatment under the protocol, and thereby made
available only to specifically-designated Committee
staff.39 The White House's spurious assertion of
executive privilege succeeded in forcing the needless review by
the Committee of wrongfully withheld documents and delaying by
several weeks the progress of central aspects of the
Committee's investigation.
---------------------------------------------------------------------------
\34\ See Ex. 6.
\35\ See Ex. 5.
\36\ See id.
\37\ Id.
\38\ Letter from Lanny Breuer to Don Bucklin, May 7, 1997 (Ex. 18).
\39\ Id.; see also Ex. 6. The White House produced additional
documents relating to Trie's appointment to the Commission on U.S.-
Pacific Trade and Investment Policy on July 24, 1997 and September 10,
1997. See Letter from Lanny A. Breuer to Donald T. Bucklin, July 24,
1997 (Ex. 19) and Letter from Dimitri J. Nionakis to Donald T. Bucklin,
Sept. 10, 1997 (Ex. 20). The Committee's public hearings on Trie's
illegal activities concluded on July 31, 1997.
---------------------------------------------------------------------------
Production of incomplete WAVES records
Another category of documents requested from the White
House in the Committee's April 9 letter request were ``Workers
and Visitors Entrance System'' (``WAVES'') records identifying
the dates and times of White House admission by John Huang and
other central figures involved in the Committee's
investigation.40 Although the White House produced
records in response to this request on April 21,
1997,41 the Committee discovered during a meeting
with representatives of the United States Secret Service on
April 30, 1997 that the records produced by the White House
left out critical categories of unquestionably relevant
information.42 The Secret Service explained to the
Committee that complete WAVES records contain a comments
section in which problems that surfaced during a particular
individual's background check are noted, and an ``XX'' notation
identifying those whose admission is questioned by the Secret
Service.43 Neither section was included in the WAVES
records produced by the White House on April 21, 1997.
---------------------------------------------------------------------------
\40\ See, e.g., Document Request No. 1, attached to Ex. 7.
\41\ See Ex. 2.
\42\ See Memorandum from Margaret A. Hickey to Donald T. Bucklin,
May 9, 1997 (Ex. 21). The Secret Service generates the WAVES records of
all individuals entering the White House and turns over a computer tape
of the records to the White House at the end of each month. Id.
\43\ See id.
---------------------------------------------------------------------------
The White House, when confronted with these omissions,
explained that it believed that this information had not been
requested by the Committee.44 As the Committee's
April 9 letter request expressly asked for the production of ``
`WAVE[S]' records''--and not exclusively the entrance and
departure information contained in those records--the Committee
immediately demanded production of copies of these records in
the form described by the Secret Service.45
Incredibly, Karen Popp of the White House Counsel's office then
informed the Committee during a telephone call that, in spite
of the Secret Service's description of the records, the
categories of information missing from the records already
produced to the Committee by the White House simply did not
exist. The White House withdrew this specious assertion and
eventually produced complete copies of the WAVES records, but
only after its position was specifically refuted during a
meeting among representatives of the Committee, the Secret
Service, and the White House.
---------------------------------------------------------------------------
\44\ See Letter from Donald T. Bucklin to Lanny A. Breuer, May 12,
1997 (Ex. 22).
\45\ See id.
---------------------------------------------------------------------------
Production of relevant documents either immediately before, or in some
cases, even after a witness' deposition or hearing testimony
In spite of Ruff's assertion that ``the timing of [the
White House's document] production . . . had absolutely nothing
to do with politics or tactics,'' and that the White House
``produced . . . documents as soon as we found them,''
46 the pattern of White House production of
documents either immediately before or even after the
deposition or hearing appearance of the author or subject of
those documents leads the Committee to the opposite conclusion.
The repeated instances of the production of significant
documents relating to a particular witness whose testimony was
immediately upcoming or just completed belies Ruff's suggestion
that the timing of the production was merely coincidental.
---------------------------------------------------------------------------
\46\ ``Statement of Charles F. C. Ruff,'' July 30, 1997 (Ex. 23).
---------------------------------------------------------------------------
The most egregious example of the White House's timing of
the production of particular documents to coincide with the
Committee's deposition or hearing schedule was its production
of the WAVES records of Ng Lap Seng, the Macau-based
businessman and financial supporter of Charlie Trie. On July
29, 1997, Jerry Campane, an FBI agent on detail to the
Committee, testified before the Committee concerning the
results of the Committee's investigation into the source of the
funds used by Trie for his substantial contributions to the
DNC. The Committee had found that Trie relied on over $1
million wired by Ng Lap Seng from accounts he maintained at
banks in Hong Kong and Macau to support his laundered political
contributions.47 Late in the afternoon of July 29,
1997, after the completion of Campane's testimony, the White
House hand-delivered to the Committee a package of documents
containing WAVES records revealing that Ng Lap Seng had visited
the White House ten times between June 22, 1994 and October 21,
1996.48
---------------------------------------------------------------------------
\47\ See the section of this report on Charlie Trie's DNC
contributions and fundraising.
\48\ See Memorandum from Glynna Parde to Donald T. Bucklin
attaching copies of Ng Lap Seng's WAVES records, July 30, 1997 (Ex.
24).
---------------------------------------------------------------------------
Significantly, the July 29 delivery also included
handwritten notes and other documents created by Lisa Berg, a
White House employee who was deposed by the Committee on the
same day that Campane testified.49 Berg's deposition
concluded approximately three hours before the production of
these documents.50
---------------------------------------------------------------------------
\49\ See id.
\50\ See id.
---------------------------------------------------------------------------
Chairman Thompson publicly excoriated the White House on
July 30, 1997 for its blatant efforts to manipulate the work of
the Committee.51 The Chairman added that the
Committee would no longer tolerate such improprieties, and that
a subpoena had been prepared for the overdue White House
document production.52 As discussed above, the
Committee unanimously voted to issue the subpoena on July 31,
1997.
---------------------------------------------------------------------------
\51\ Hearing Transcript, statement of Chairman Fred Thompson, July
30, 1997, pp. 121-22.
\52\ Id., pp. 122-23.
---------------------------------------------------------------------------
Late production of White House audio and videotapes
On October 1, 1997, Michael Imbroscio of the White House
Counsel's office revealed to Committee Counsel Donald Bucklin
that he had discovered the existence of videotapes of several
coffees and other events attended by the
President.53 In the following weeks, the White House
produced to the Committee one videotape containing footage of
President Clinton's attendance at forty-four White House
coffees and sixty-six additional videotapes of hundreds of
other fundraising events attended by President
Clinton.54
---------------------------------------------------------------------------
\53\See Memorandum from Donald T. Bucklin to Senator Fred Thompson,
Oct. 6, 1997 (Ex. 25). Imbroscio testified that he informed Bucklin of
the existence of the videotapes on the following day, on October 2,
1997. Testimony of Michael Imbroscio, Oct. 29, 1997, pp. 126-27. As
discussed below, Imbroscio's recollection of the events leading to the
discovery of the videotapes differs in several significant ways from
the recollection of other individuals involved in the discovery and
production of the videotapes.
\54\ The White House, however, produced the videotape footage of
the White House coffees to Time magazine prior to its Saturday, October
4, 1997 production to this Committee. Time's article discussing the
contents of the videotapes appeared on the newsstands on Monday,
October 6. See Michael Duffy & Michael Weisskopf, ``Let's Go to the
Videotape,'' Time, Oct. 13, 1997, p. 30. This production to Time in
advance of the Committee's receipt of the videotapes is one more
example of the White House's cynical effort to manipulate the
investigation.
---------------------------------------------------------------------------
These videotapes were responsive to the Committee's first
document request to the White House--the April 9 letter
request--which expressly requested the production of
videotapes.55 The Committee's May 21, 1997 document
request and its July 31, 1997 subpoena also expressly included
videotapes within their explanations of the types of materials
sought by the Committee.56 These specific requests
for videotapes (as well as subsequent direct inquiries by
Committee counsel), however, produced only assurances from the
White House Counsel's office that no responsive videotapes
existed.57
---------------------------------------------------------------------------
\55\ See Ex. 7 (defining ``document'' as ``any written, recorded,
or graphic matter of any nature whatsoever, regardless of how recorded,
. . . including, but not limited to, the following: . . . graphic or
oral records or representations of any kind (including, without
limitation, . . . videotape . . . )'').
\56\ See Ex. 10.
\57\ See Ex. 25.
---------------------------------------------------------------------------
In spite of the Committee's repeated requests for the
production of videotapes, the tapes were produced to the
Committee only after the Committee was able to rebut the White
House Counsel's initial insistence that none existed and direct
the White House's own inquiry to locate them. In an August 7,
1997 meeting with representatives of the White House Counsel's
office, Bucklin--acting on the basis of information provided by
a third-party source--requested that the White House ``double-
check'' with an entity called the White House Communications
Agency (``WHCA'') for the existence of responsive
videotapes.58 After receiving no response, Bucklin
subsequently reiterated this request in an August 19, 1997
letter to Breuer.59 On August 29, 1997 (after the
unexplained passage of an additional ten days), Imbroscio
followed up on Bucklin's lead and met with Steven Smith, WHCA's
Chief of Operations.
---------------------------------------------------------------------------
\58\ See id.
\59\ Letter from Donald T. Bucklin to Lanny A. Breuer, Aug. 19,
1997 (Ex. 26).
---------------------------------------------------------------------------
During his August 29, 1997 meeting with Smith, Imbroscio
learned that WHCA videotaped fundraisers, political dinners and
other events attended by the President.60 Imbroscio
testified that Smith also informed him that WHCA typically did
not record ``closed events''--closed to the press as well as
the public--and that a WHCA cameraman would thus not have
attended the White House coffees.61 While Imbroscio
reported this information to the Committee in a meeting on
September 9, 1997,62 it turned out to be both
incorrect and inconsistent with the information that Smith
recalled communicating to Imbroscio during their August 29,
1997 discussion. Smith testified that he told Imbroscio that
WHCA videotaped closed events ``all the time,'' 63
but that Imbroscio never asked him specifically about the
videotaping of coffees.64 In fact, Smith testified
that ``[t]he word ``coffee'' . . . was never used'' during his
meeting with Imbroscio.65
---------------------------------------------------------------------------
\60\ Deposition of Michael Imbroscio, Oct. 17, 1997, pp. 89-90.
\61\ Id., p. 91.
\62\ Id., p. 116.
\63\ Deposition of Steven Smith, Oct. 10, 1997, pp. 138-139; see
also Testimony of Steven Smith, Oct. 23, 1997, pp. 52-53.
\64\ Smith testimony, p. 53.
\65\ Id.
---------------------------------------------------------------------------
Imbroscio further misinformed the Committee during the
September 9, 1997 meeting by stating that WHCA possessed a log
of its videotapes that he would make available to the
Committee.66 Imbroscio, at the same time, failed to
notify Committee counsel that Smith had informed him that WHCA
instead possessed a searchable computer database of its
videotapes through which WHCA could confirm the existence of
videotapes of desired White House events.67 The
confusion created by Imbroscio's misstatements led Bucklin to
repeatedly urge Imbroscio to produce the log to the Committee
instead of pushing for the ultimately more fruitful exercise of
searching the database.68 Imbroscio testified that
he did not search WHCA's database and uncover the existence of
the responsive videotapes until October 1, 1997.69
---------------------------------------------------------------------------
\66\ Imbroscio deposition, pp. 116-19.
\67\ Smith deposition, pp. 146-47; see also Smith testimony, p. 52.
\68\ Imbroscio deposition, pp. 120-22 (acknowledging Bucklin's
frequent requests to review a log of WHCA's videotapes).
\69\ Id., pp. 152-53.
---------------------------------------------------------------------------
Imbroscio immediately shared his discovery with Ruff, who
directed Imbroscio to pass his findings on to
Bucklin.70 When Ruff later met with Attorney General
Janet Reno on October 2, 1997, however, he did not inform her
of the discovery of the videotapes, even though he knew that
Reno was preparing a letter to House Judiciary Committee
Chairman Henry Hyde addressing Hyde's recommendation that
several allegations of White House fundraising improprieties
(to which the videotapes proved to be relevant) necessitated
the appointment of an independent counsel.71 Without
the benefit of several illuminating portions of the White House
videotapes, Reno concluded in her October 3, 1997 letter to
Chairman Hyde that she found that the evidence against
President Clinton did not call for any action under the
Independent Counsel statute.72 The Committee,
however, believes that the evidence provided in the White House
videotapes compels the opposite conclusion.
---------------------------------------------------------------------------
\70\ Id., pp. 172-74.
\71\ See Roberto Suro, ``Reno Explores Probe of Gore Phone Calls;
Statement Cites `Complexity' of Issues,'' Washington Post, Oct. 4,
1997, p. A1.
\72\ See id.
---------------------------------------------------------------------------
The failure of the White House Counsel's office to
explicitly direct White House employees to turn over responsive
``videotapes'' was a primary factor in the failure of the White
House to produce the videotapes in a timely fashion. On April
28, 1997, Ruff circulated to ``[e]very employee'' of the
Executive Office of the President a memorandum (the ``Ruff
Directive'') directing its recipients to ``conduct a thorough
and complete search of ALL of your records (whether in hard
copy, computer, or other form)'' for ``[a]ny documents or
materials'' relating to the subjects of the various ongoing
campaign fundraising investigations (including this Committee's
investigation).73 Unlike the Committee's April 9,
1997 document request, which specifically defined the term
``document'' to include ``videotape[s],'' 74 the
Ruff Directive neither defined the terms ``document'' or
``material'' nor otherwise expressly indicated the Committee's
intention that responsive videotapes be produced.
---------------------------------------------------------------------------
\73\ Memorandum from Charles F.C. Ruff to Executive Office of the
President, April 28, 1997 (Ex. 27). White House Special Counsel Lanny
Breuer explained that the Ruff Directive was not specifically tailored
to collect documents responsive to the Committee's April 9 letter
request. In addition to responding to this Committee's request, the
Ruff Directive was designed to ``collect the materials that were
responsive to . . . the House request, the Justice Department request,
and other subcommittees and other investigatory bodies that were
interested in campaign finance investigations.'' Deposition of Lanny
Breuer, Oct. 17, 1997, pp. 29-30. It did so, however, only by replacing
the Committee's narrowly tailored requests with more generic
alternatives. For example, the Committee's April 9 letter request
sought ``[a]ll documents referring or relating to the May 13, 1996
coffee.'' The Ruff Directive replaced this request with one for ``[a]ny
documents or materials . . . [r]eferring or relating to White House
political coffees.''
\74\ Ex. 7; see footnote 55, supra.
---------------------------------------------------------------------------
Representatives of the White House Counsel's office
defended the decision to replace the Committee's detailed
definition of ``document'' (which included an express reference
to ``videotape'') with the instruction to White House employees
to search ``ALL of your records.'' Breuer testified that he
believed that the deletion of the Committee's detailed
definition actually made it more likely that the video tapes
would have been produced in the first instance.75
Breuer claimed that busy White House employees, most of whom
are not lawyers, would be less likely to carefully read and
properly respond to a detail-laden document request than they
would to the White House's simplified replacement.76
---------------------------------------------------------------------------
\75\ Testimony of Lanny Breuer, Oct. 29, 1997, p. 202.
\76\ Breuer deposition, pp. 37-38.
---------------------------------------------------------------------------
For two reasons, the Committee finds the White House
Counsel's explanation to be untenable. First, Smith, WHCA's
Chief of Operations, specifically rejected Breuer's suggestion.
Smith stated that ``if somebody wanted the White House
Communications Agency to look for tapes, audiotapes,
videotapes, . . . that's what they should ask for, you know,
video or audiotapes.'' 77 The Committee also finds
that the elimination from the Ruff Directive of the Committee's
specific reference to videotapes substantially decreased the
likelihood that individuals outside of WHCA who were familiar
with WHCA's practice of videotaping events involving the
President would have identified the need to produce the
videotapes. Deputy Counsel to the President Cheryl Mills, who
testified to the Committee that she ``certainly'' knew that one
of WHCA's functions was to videotape the
President,78 and who frequently attended meetings of
the White House lawyers working on the campaign finance
investigation,79 would have been a likely source of
this information. However, as Mills also testified that
``everybody . . . in the White House'' knew that WHCA
videotaped events,80 others should have identified
to the White House Counsel its oversight at an earlier time.
---------------------------------------------------------------------------
\77\ Smith deposition, p. 166; see also id., pp. 167-68.
\78\ Deposition of Cheryl D. Mills, Oct. 18, 1997, p. 83. Mills, in
fact, appears on the videotape of the President's March 11, 1995 radio
address. See id., pp. 59-60. Johnny Chung purchased admission for
himself and a delegation of Chinese businessmen to the radio address
attended by Mills with a $50,000 check he hand delivered to the First
Lady's Chief of Staff at the White House. See the section of this
report on Johnny Chung.
\79\ See Breuer deposition, p. 24.
\80\ Deposition of Cheryl D. Mills, Oct. 18, 1997, p. 87; see also
Deposition of Alan P. Sullivan, Oct. 16, 1997, pp. 80-81 (``[T]hese
tapes were made by two guys lugging a commercial Beta camera around
with a boom mike with a fuzzy grey ball, wandering around in front of
large groups of people. Hardly what one would categorize as covert
activities.'').
---------------------------------------------------------------------------
A contributing factor leading to the failure of WHCA
personnel to turn over the videotapes immediately in response
to the Ruff Directive was the mysterious failure of the White
House Military Office--WHCA's parent entity--to transmit a
complete copy of the Ruff Directive to WHCA. Alan Sullivan,
head of the White House Military Office, testified that he
remembered receiving the Ruff Directive from the White House
Counsel's office, and directing that it be faxed to the
Military Office's ``operating units.'' 81 Although
Col. Charles Campbell, Deputy Commander of WHCA, remembered
receiving the fax from the White House Military Office, he
testified that WHCA received an incomplete copy of the Ruff
Directive.82 Campbell testified that WHCA did not
receive the page of the Ruff Directive that specifically
directed its recipients to search their ``files and records for
. . . [a]ny documents or materials . . . [r]eferring or
relating to White House political coffees.'' 83 WHCA
personnel testified to the Committee that they believed that if
they had received a complete copy of the Ruff Directive, they
would have searched WHCA's database and produced the videos of
the White House coffees at that time.84
---------------------------------------------------------------------------
\81\ Alan Sullivan deposition, pp. 52-56.
\82\ Deposition of Charles Campbell, Oct. 21, 1997, p. 48.
\83\ Id., p. 53. The White House Military Office produced to the
Committee copies of the faxes that it sent to four other units under
its supervision, each of which contained a complete copy of the Ruff
Directive. All four of the faxes are dated April 29, 1997 and all bear
fax confirmation information indicating that they were sent within
minutes of each other. See Ex. 28--31. Neither WHCA nor the White House
Military Office was able to find the purportedly incomplete copy of the
Ruff Directive that the Military Office faxed to WHCA. Campbell
deposition, pp. 53-54.
\84\ See, e.g., Testimony of Charles McGrath, Oct. 23, 1997, p. 92.
---------------------------------------------------------------------------
WHCA's purely speculative assessment of the impact of this
mysterious and inadvertent transmission error, however, is a
considerably less significant and blameworthy factor in the
delinquent production of the videotapes than the absence from
the Ruff Directive of a specific reference to videotapes. WHCA
certainly cannot be held accountable for its failure to receive
a complete copy of the Ruff Directive from the White House
Military Office. The White House, on the other hand, made the
intentional decision to infect the document production process
with uncertainty and imprecision by eliminating the Committee's
express reference to videotapes.
Delinquent production of Presidential diaries and daily chronicles
A further category of information specifically requested by
the Committee in its document requests and subpoena to the
White House was ``diaries.'' 85 Although Imbroscio
acknowledged his awareness of the existence of a Presidential
diarist ``in the opening months that [he] was working at the
White House,'' 86 the White House concealed the
existence of the detailed daily diaries of the activities of
the President from the Committee until the deposition of the
diarist, Ellen McCathran, on October 27, 1997.87
McCathran testified in her deposition that she prepares and
maintains a detailed chronological log of the President's
movements and activities that is based on a broad range of
documentary material, including annotated presidential
schedules, movement logs, and various phone logs.88
---------------------------------------------------------------------------
\85\ See Document Request No. 9 attached to Ex. 10 (``All personal
or business calendars, date books, personal notes, logs, phone logs,
call sheets, journals or diaries maintained or used by President
Clinton or Vice President Gore from 1993 to the present that refer or
relate to any of the individuals or entities listed [above].''); see
also, e.g., Document Requests attached to Ex. 7 (Defining ``document''
as ``any written, recorded, or graphic matter of any nature whatsoever,
regardless of how recorded, . . . including, but not limited to, the
following: . . . diaries . . . .'').
\86\ Imbroscio deposition, p. 191. Imbroscio joined the White House
Counsel's office on March 7, 1997. Id., p. 7.
\87\ The discovery of the existence of the diaries was a
serendipitous event and not the primary purpose for the deposition of
the diarist. The Committee deposed the diarist after discovering that
she was the custodian of presidential telephone logs originally created
by WHCA. The Committee's discovery of the continued existence of the
telephone logs was itself contrary to earlier representations of
Imbroscio, who reported to Committee counsel during a September 9, 1997
meeting that WHCA's phone logs were destroyed after 60 days. Imbroscio
deposition, pp. 238-40.
\88\ Deposition of Ellen McCathran, Oct. 27, 1997, pp. 15, 19, 41-
42.
---------------------------------------------------------------------------
Instead of producing the complete diary, the White House
turned over to the Committee approximately one thousand pages
of the documentary material used by McCathran to prepare her
diary.89 These records, however, are merely the
pieces of the jigsaw puzzle that the diarist had already
completed. As McCathran herself indicated, the diary she
prepares from the voluminous documentary material represents
the only complete source of information on the President's
activities.90 Despite the Committee's repeated
requests, and Ruff's assurances that he ``underst[oo]d the
Chairman's concerns'' about the White House's failure to
produce the diaries,91 the White House never
produced them to the Committee.
---------------------------------------------------------------------------
\89\ Testimony of Charles F.C. Ruff, Oct. 29, 1997, pp. 198-99.
Imbroscio, in fact, sought to contradict in public hearings Chairman
Thompson's assertion that the White House concealed the existence of
the diaries by simply referring to the quantity of documents produced
from the files of the diarist. Imbroscio testimony, pp. 114-15. While
the mass of background information gathered from the diarist's files
may indeed reveal to the Committee the existence of a diarist, it was
patently disingenuous for Imbroscio to suggest that these background
materials somehow revealed the existence of the diarist's final work
product.
\90\ See ``Talking Points for Senate Deposition,'' prepared by
Ellen McCathran, Oct. 27, 1997 (Ex. 32).
\91\ Ruff testimony, p. 218.
---------------------------------------------------------------------------
The White House also failed until December 8, 1997 to
disclose to the Committee the existence of a second diary-type
document. On December 8, the White House simultaneously
produced to the Committee and to the press hundreds of pages of
a ``chronicle'' of the daily activities of the President
prepared by Special Assistant to the President and Records
Manager Janis Kearney.92 Kearney reports to Nancy
Hernreich, Deputy Assistant to the President and Director of
Oval Office Operations.93 Kearney testified that
when she began work in the White House in December 1995,
Hernreich directed her to ``keep a daily chronicle of the
Presidency'' derived from her review of White House
correspondence and attendance at various White House
meetings.94
---------------------------------------------------------------------------
\92\ Marc Lacey and Glenn Bunting, ``White House Forwards More
Donor Records,'' Los Angeles Times, Dec. 9, 1997, at A1.
\93\ Deposition of Janis Kearney, Dec. 23, 1997, p. 12.
\94\ Id., pp. 17-18, 21-22.
---------------------------------------------------------------------------
Hernreich certified in a memorandum to the White House
Counsel's office on April 29, 1997 that she ``directed all
individuals in [her] office to search their files'' in response
to the April 29, 1997 Ruff Directive, and that ``all responsive
documents ha[d] been provided.'' 95 However,
although Kearney's ``chronicles'' were unquestionably
responsive to the Committee's document requests,96
Kearney testified that Hernreich instructed her that ``there
was no need'' for Kearney to respond to the White House
Counsel's requests.97
---------------------------------------------------------------------------
\95\ Memorandum from Nancy Hernreich to Dimitri Nionakis, April 29,
1997 (Ex. 33).
\96\ For instance, the June 19, 1996 entry states that ``[the
President] hosted a coffee, that Nancy H[ernreich] described as a
``political'' coffee that would probably last all morning. She
explained the difference between ``money'' coffees and the ``political/
issues'' coffees as how much [the President] interjected.'' Diary entry
of Janis Kearney, June 19, 1996 (Ex. 34). This entry falls squarely
within May 21, 1997 Document Request No. 11 which sought ``[a]ll
documents referring or relating to any White House coffee . . . .'' Ex.
10. The late production of this entry is also particularly significant,
as it appears to contradict Nancy Hernreich's affirmative response in
her deposition to the suggestion that she could not ``tell [the
Committee] much about what happened at the coffees or after the coffees
with regard to fund-raising.'' Deposition of Nancy Hernreich, June 20,
1997, pp. 104-05.
\97\ Kearney deposition, p. 60.
---------------------------------------------------------------------------
Conclusion
Although the White House repeatedly pledged its cooperation
with the Committee's investigation, its actions spoke far more
loudly than its words. The White House produced documents to
the Committee pursuant to its own schedule and without regard
to any deadlines other than the December 31, 1997 expiration of
the Committee's investigation. The White House, in fact,
ignored even deadlines imposed by the scheduling of deposition
or hearing testimony of the author or subject of particular
documents, and instead often produced documents after the
appearance of the witnesses to whom the documents related. It
withheld documents under specious assertions of executive
privilege. It concealed the existence of highly relevant
materials and unreasonably and improperly redacted significant
information from many of the documents it chose to disclose.
Finally, the White House's intentional omission from the
document search directive disseminated among White House
employees of any indication of the breadth of the materials
sought by the Committee caused a six-month delay in the
production of the critically important White House videotapes.
This is not the behavior of a White House seeking to
cooperate with a Senate Committee's exercise of its important
oversight authority. Rather, these actions vividly demonstrate
the lengths to which this White House went in order to obstruct
the work of a Committee seeking to reveal information that the
White House hoped to keep secret. In spite of the White House's
efforts, however, the Committee's efforts led to the exposure
by the White House--either through the Committee's hearings or
through the White House's production of information directly to
the press--of much that would otherwise have remained
undisclosed.
In light of the above, the Committee urges other lawful
authorities who are investigating criminal conduct and who are
subpoenaing White House records, to exercise extreme caution in
assuming that any White House document production is either
complete or accurate.
DNC Document Production
The DNC's failure to comply fully and in a timely manner
with the Committee's subpoena significantly hampered the
Committee's investigation. The DNC delayed the production of
documents, produced documents in a manner calculated to impede
the effective examination of DNC officers and employees, and
generally obstructed the Committee's investigation. More
specifically, the DNC responded slowly to the Committee's long-
anticipated subpoena, produced previously-gathered documents
only on the eve of depositions at which they were to be used,
and never fully complied with the Committee's subpoena. In so
doing, the DNC's constant refrain was that the financial burden
of complying with the Committee's lawful subpoena was too
great. Alternatively, the DNC would urge that its resources
were being diverted by grand jury subpoenas. All the while, the
DNC could take comfort from the Committee's investigatory
deadline, knowing that judicial enforcement of the Committee's
subpoena was impossible.
The deadline imposed on this Committee lurked at all times
behind the DNC's noncompliance. As discussed elsewhere in this
report,\1\ many organizations simply chose to ignore this
Committee's subpoenas, with the hope that the time limit
imposed on the Committee's investigation would render court
enforcement of its subpoenas impossible--and perhaps legally
moot. The DNC could not pursue the same strategy and ignore
this Committee's subpoena; the political costs of doing so
would have been too great. The DNC still found its own ways to
hinder the Committee's investigation by exploiting the
Committee's investigatory deadline.
---------------------------------------------------------------------------
\1\ See e.g., the section of this report on the noncompliance by
nonprofit organizations with the Committee's subpoenas.
---------------------------------------------------------------------------
The Committee and the DNC engaged in many battles over
document production. The purpose of this section of the report
is not to describe every shortcoming in the DNC's production of
documents in response to the Committee's subpoena. Nor is the
purpose of this section to document tediously every meeting and
phone call between Committee staff and the DNC's lawyers on
issues that arose concerning document production. Rather, the
Committee merely wishes to focus attention on a few serious
issues that arose in the course of the DNC's alleged compliance
with the Committee's subpoena, and which the Committee believes
fairly illustrate a pattern of obstruction on the part of the
DNC.
One case in particular--the belated production of Richard
Sullivan's files--may even raise criminal issues. The Committee
cannot exclude the possibility that these files were
intentionally withheld, which would constitute the crime of
obstruction of Congress. Indeed, the inconsistent, incredible
explanations for the belated production of those files give
weight to the possibility that they were deliberately withheld
from the Committee.
The committee's subpoena
The Committee issued a subpoena to the DNC on April 9,
1997. The subpoena was served on April 10. The subpoena's
return date--the date by which the DNC was to comply with the
subpoena--was April 30, 1997.
This subpoena hardly came as a surprise to the DNC. As
early as November 6, 1996, the day after the 1996 election, DNC
General Counsel Joseph Sandler sent a memorandum to all DNC
division directors, headed ``Immediate Attention,'' which
directed them to preserve DNC documents and required DNC
employees to prepare an inventory of their files.\2\ The
memorandum was drafted in apparent anticipation of
congressional and law enforcement subpoenas.\3\
---------------------------------------------------------------------------
\2\ Memorandum from Joe Sandler, November 6, 1996 (Ex. 1).
\3\ Memorandum from Joseph E. Sandler, January 13, 1997 (Ex. 2). By
January 13, 1997, the DNC had received at least two federal grand jury
subpoenas.
---------------------------------------------------------------------------
Moreover, the Committee gave a draft of the subpoena to the
DNC's outside lawyers on March 18, 1997. By March 18, the DNC
was thus aware that the Committee would request, at a minimum,
documents already requested by grand jury subpoenas. The DNC
was also permitted to comment on the draft subpoena, with an
eye toward streamlining and expediting its document production.
In some cases, the Committee even incorporated into the final
subpoena suggestions made by the DNC's lawyers. In short, the
DNC should have been well-prepared for the Committee's
subpoena.
The DNC's sluggish response to the subpoena
Despite having ample time to prepare to respond to the
subpoena, the DNC responded sluggishly. Sandler testified that
the DNC circulated a memorandum directing employees to search
their files on or about April 24, 1997--less than a week before
the subpoena's return date, and nearly two weeks after the
Committee issued its long-anticipated subpoena.\4\
---------------------------------------------------------------------------
\4\ Deposition of Joseph E. Sandler, August 22, 1997, pp. 113-14.
---------------------------------------------------------------------------
In fact, the DNC chose to ignore the subpoena's return
date. Sandler testified that the DNC did not require its
employees to finish searching their files pursuant to the April
24, 1997, search memorandum until nearly four months after the
Committee's subpoena was issued--and nearly one month after the
Committee commenced public hearings. Sandler's testimony on
this point contained an implicit suggestion that this
Committee's subpoena was either ignored or given a ``low
priority'':
Q: All right. Mr. Sandler, you had indicated in one
of your previous answers that DNC employees began
reviewing their files for documents specifically
responsive to this committee's subpoena on or about
April 24th of this year?
A: Something--yeah. I'd have to look at the search
memo. That's right.
Q: Now, how long did that process take for employees
to complete their search of their files?
A: It took a long time. It didn't--it wasn't
completed until a couple weeks ago. We set a deadline
of July 31st. It was a Friday, around there was the--we
set an absolute deadline. A lot of people had turned
stuff in already, but we made a point of having it
wrapped up by then.
Q: So it was only within the past two weeks that
the--I mean, that the--am I correct that the process of
having employees of the DNC review their files in terms
of responsiveness to our subpoenas lasted from
approximately April 24th until approximately two weeks
ago?
A: Two or three weeks ago. But I want to say that it
was an ongoing process. There were continually
materials being received. You asked us to focus again
on certain things as a matter of the committee's
priorities. And you have to keep in mind, Mr. Mattice,
that the DNC has been simultaneously responding to 12
other subpoenas, most of which were issued by federal
grand juries that can hardly be ignored or made a lower
priority.\5\
---------------------------------------------------------------------------
\5\ Id. at pp. 114-15 (emphasis added).
The Committee concludes that the DNC was slow-walking its
response to the subpoena, knowing that the DNC could use the
allegedly more urgent subpoenas issued by federal grand juries
as an excuse for delaying the Committee, even though the DNC
knew the Committee's investigation would have to be concluded
by the end of the year. The DNC's bad faith is patent.\6\
---------------------------------------------------------------------------
\6\ Moreover, as will be discussed in some detail later, the DNC's
July 31, 1997 deadline for searching documents may have contributed to
the late discovery of 4,000 documents from the files of Richard
Sullivan. If Paul DiNino's testimony is to be credited, he looked into
one drawer of the only file cabinet in his office only when, in late
July, the DNC sought to ensure that all files had been searched for
responsive documents by the end of July. See infra, notes 35-38 and
accompanying text.
---------------------------------------------------------------------------
A pattern of gamesmanship
While the DNC waited for months for its employees to finish
searching their files to respond to the Committee's subpoena,
it began to produce some documents soon after the receipt of
the subpoena. From the very beginning of this production, the
Committee discerned a pattern of gamesmanship. Between April 25
and April 30, 1997, the DNC produced approximately 25 boxes of
documents to the Committee. The Committee understood that these
boxes contained documents previously produced to other
governmental entities (such as grand juries) in response to
their subpoenas. Although a smattering of these documents were
relevant, most were of no value. The production included
repetitive donor lists, thousands of pages of ``The Hotline''
(a political newsletter circulated by electronic mail), and
non-consecutive spreadsheets containing donor information,
which were virtually impossible to piece together in the form
produced.
Because of the Committee's investigative deadline,
depositions for DNC witnesses had to begin quickly. The
shortage of relevant documents would impair the Committee's
examination of DNC witnesses, many of which were scheduled for
May. The Committee was concerned that the DNC's manner of
production would result in having to constantly re-call
witnesses as documents relevant to them trickled out of the
DNC. Responding to the Committee's concern, the DNC agreed to
produce documents relating to particular witnesses in advance
of their depositions.
Unfortunately, even more gamesmanship ensued. The DNC's
supposed compliance with its agreement smacked of bad faith; it
routinely produced documents relevant to particular witnesses
the afternoon before their deposition, even though the
documents had been gathered by the deponents long before.
One representative example of this sort of egregious
behavior concerns documents relevant to the testimony of DNC
Deputy National Finance Director David Mercer. The Committee
began to depose Mercer on Wednesday, May 14, 1997. On the
afternoon of Tuesday, May 13, the DNC delivered two boxes of
documents previously gathered by Mercer from his files. When
the Committee could not conclude Mercer's deposition on May 14,
his deposition was scheduled to resume on Tuesday, May 27,
1997, the day following Memorial Day. On the evening of Friday,
May 23, 1997, the DNC produced four boxes of additional
documents that the DNC represented had been previously gathered
by Mercer from his files. During the continuation of his
deposition on May 27, Mercer was shown one of the documents
produced on the previous Friday, and he testified that the
document had been produced by him to Sandler around
``Christmastime'' of 1996.\7\
---------------------------------------------------------------------------
\7\ Deposition of David Mercer, May 27, 1997, p. 59.
---------------------------------------------------------------------------
The Committee concludes that the DNC's production of
documents on the eve of a witness' second day of deposition
testimony, when the witness had gathered the documents and
given them to the DNC's counsel roughly six months earlier, was
an obstructionist tactic. Unfortunately, the DNC frequently
employed this tactic in the course of the Committee's
investigation.
In the midst of this gamesmanship, the DNC informed the
Committee in a meeting in the middle of June 1997 that 55 boxes
of documents had been produced to other governmental entities
in response to their subpoenas, but had not been produced to
the Committee--even though they had been specifically requested
by the Committee's subpoena, and the Committee had been led to
believe that the productions between April 25 and April 30 were
comprised primarily of documents previously produced to other
governmental entities. Even more surprising was that the DNC
would not just copy the contents of these boxes and forward
them to the Committee; rather, the DNC insisted on re-reviewing
these documents and producing them incrementally--allegedly to
protect privileges, even though any alleged privilege would
have been waived by the previous production to other
governmental entities. The DNC produced the documents over the
days leading up to the July 4 holiday; production of the 55
boxes was not complete until July 2, 1997--less than a week
before the commencement of the Committee's public hearings,
which were to open with the testimony of former DNC National
Finance Director Richard Sullivan.
This dismal pattern of production continued throughout the
Committee's investigation.
Richard Sullivan's file cabinet: Possible Obstruction of Congress
On Monday, July 28, 1997, several DNC lawyers met with
Committee counsel to discuss many of the document production
problems. In the course of that meeting, they described
documents then in the immediate ``pipeline'' to the Committee.
In so doing, they specifically represented to the Committee
that it would soon be receiving several boxes of ``generic''
Finance Division documents.
On Friday, August 1, 1997--one day after the Committee had
concluded its July hearings and adjourned for the August
recess--a DNC lawyer called the Committee and informed it that
the representation that the boxes were generic Finance Division
documents may have been ``mistaken.'' According to the DNC, it
had just learned that a number of the boxes were actually from
Richard Sullivan's files. Sullivan had been deposed in May and
June, and had been the Committee's first witness in public
hearings on July 9-10.\8\ The DNC promised that the documents
would be produced by Monday, August 4, as it clearly recognized
the significance of failing to produce documents relating to
the Committee's first public witness. Indeed, on that same day,
August 1, DNC Chairman Roy Romer personally called Chairman
Thompson to inform him of the same discovery and to apologize
for the delay.
---------------------------------------------------------------------------
\8\ During the first day of Sullivan's deposition, he expressed
concerns about his access to the documents that he left behind at the
DNC. See Deposition of Richard Sullivan, June 4, 1997, pp. 13-27. At
the same time, Sullivan's lawyer, Robert Bauer, expressed vague
concerns to the Committee that the DNC had not produced all of
Sullivan's documents to the Committee. In fact, Bauer later informed
the Committee that, immediately following the second day of Sullivan's
deposition, on June 5, 1997, he had spoken with Judah Best, a lawyer
for the DNC, and advised Best that it appeared that the Committee had
not received all of Sullivan's documents.
---------------------------------------------------------------------------
On Monday, August 4, 1997, the DNC's delivered two boxes of
documents from Richard Sullivan's files. The Committee
estimates the total number of pages produced at 4,000.
Committee staff quickly reviewed the documents, and discovered
that the documents were among the most significant yet produced
to the Committee. The documents included:
Approximately 1,500 pages of Sullivan's
handwritten notes, apparently taken during meetings or
telephone conversations.\9\
---------------------------------------------------------------------------
\9\ Sullivan acknowledged during the first day of his deposition
testimony that he ``worked off a legal pad'' during his day; however,
he also testified that he ``did not take copious notes of meetings.''
Deposition of Richard Sullivan, June 4, 1997, p. 10. Sullivan also
testified that he ``would keep the legal pads for a period of two to
three weeks as they were relevant to what I was working on, and then
generally would throw them away.'' Id. In the light of the subsequent
production of 1,500 pages of Sullivan's handwritten notes, which
represent only those notes responsive to the Committee's subpoena,
Sullivan's candor is called into serious doubt.
---------------------------------------------------------------------------
Sullivan's ``Roger Tamraz'' file.
Sullivan's ``Johnny Chung'' file.
Sullivan's ``Mark Middleton'' file.
Sullivan's ``Harold Ickes'' file, which,
among other things, included documents relating to
possible fund-raising phone calls placed by the
President and Vice President.
Numerous call sheets prepared by the DNC for
the First Lady.
The press was quick to pick up on the DNC's belated
production of such highly relevant files concerning a major
witness. In a front-page article in The Washington Post on
August 8, 1997, entitled ``Senate Panel Probes DNC Files
Delay,'' reporter Bob Woodward quoted DNC Chairman Roy Romer as
saying that the new Sullivan material was discovered on July 30
by Paul DiNino, the new DNC finance director who had replaced
Sullivan.\10\ Woodward reported that he had interviewed DiNino,
and that DiNino said that the new Sullivan documents were in a
drawer in the only file cabinet in his office. Woodward's
article continued:
---------------------------------------------------------------------------
\10\ Bob Woodward, ``Senate Probes DNC Files Delay'', The
Washington Post, Aug. 8, 1997, p. A14.
Asked why he waited more than five months to look in
the drawer, DiNino said there was a new push at the end
of July to make sure all DNC files had been reviewed.
``I hadn't looked in before . . . I don't like paper
anyway, and I didn't need space for files. Richard
[Sullivan] and I have different styles. Richard saved a
lot of things. When he discovered the material July 30,
DiNino said, he called DNC lawyers at once.\11\
---------------------------------------------------------------------------
\11\ Id.
The Committee investigated the delay in producing the
Sullivan files. The testimony on this subject was
contradictory,\12\ which raises disturbing inferences,
especially given the proximity of the depositions to the events
in question.
---------------------------------------------------------------------------
\12\ One day after the Woodward article, Marc Lacey and Alan Miller
of The Los Angeles Times reported on their own interview with Paul
DiNino. Marc Lacy & Alan Miller, ``Delayed DNC Papers Irk Thompson,''
The Los Angeles Times, Aug. 8, 1997, p. A16. According to their report,
DiNino said that he had ``opened the drawers of the filing cabinet at
some point after he first arrived at his DNC office on Feb. 20, and, in
a cursory review, spotted brochure and other seemingly innocuous
material.'' Id. The article continued:
``I opened the top drawer and it appeared to me to be very common
items such as brochures,'' he said. ``I opened another drawer that had
legal pads with doodles on them.''
DiNino said that when DNC officials recently urged staffers
to search the premises again for papers sought under a
Senate subpoena, he inspected the filing cabinet again on
July 30 and discovered four boxes of relevant records.
---------------------------------------------------------------------------
Id. There are subtle inconsistencies between this account and that
reported by Woodward.
Joe Birkenstock's testimony
The first witness to testify on this topic was Joseph
Birkenstock, who was deposed on August 28, 1997. Birkenstock is
a lawyer working for the DNC's Office of General Counsel, and
he primarily handles document production issues relating to the
various campaign finance investigations. He reports directly to
Sandler.\13\
---------------------------------------------------------------------------
\13\ Deposition of Joseph M. Birkenstock, August 28, 1997, p. 8.
Birkenstock testified that he first became aware of the
existence of the Sullivan files on Wednesday, July 30,
1997.\14\ On that day, he overheard DiNino and Scott Freda,
formerly Sullivan's administrative assistant and now the
Finance Division's chief of staff, talking about ``a certain
group of documents that they seemed unfamiliar with and seemed
not to know whose responsibility they would be to search . .
.''\15\ So, Birkenstock called Freda and offered to resolve the
issue by having ``somebody from the document group come over
with a bunch of boxes. We would just box the documents up and
take them with us and put them into the production process.''
\16\ Obviously, Birkenstock thought the documents were relevant
from the snippets of conversation he allegedly overheard.
Indeed, if DiNino's testimony, discussed later, is to be
credited, DiNino was certainly aware of the relevance of the
documents prior to discussing them with Freda.
---------------------------------------------------------------------------
\14\ Id. at p. 109.
\15\ Id.
\16\ Id. at pp. 113-14.
---------------------------------------------------------------------------
When the documents were retrieved by personnel from the
General Counsel's office, they filled four boxes--roughly
12,000 pages.\17\ Two days later, Birkenstock realized the
documents were Richard Sullivan's, and ``alarms went off'' in
his head.\18\
---------------------------------------------------------------------------
\17\ See Id.
\18\ Id. at pp. 114-15.
---------------------------------------------------------------------------
Birkenstock was asked how these documents were overlooked
earlier. He explained that, on the day that Sullivan was
leaving the DNC, Birkenstock met with Sullivan in an office
located about two doors down from Sullivan's office.\19\
Sullivan was leaving about eight boxes of documents in the
room.\20\ Birkenstock testified that he thought the eight boxes
comprised the entire universe of Sullivan's files:
---------------------------------------------------------------------------
\19\ Id. at p. 111.
\20\ Id. at p. 112.
I asked him if all of these documents--if this was
all of the files he had at the DNC. As I recall his
response--I guess you are aware of his characteristic
way of speaking in which he would kind of being three--
or a handful of phrases and then finish one of them.
So, again, I don't recall the specific words that he
used, but, in general, I recall his response being,
``To the best of my--as far as I know--as far as I
can--yes, these are all my files.'' \21\
---------------------------------------------------------------------------
\21\ Id. at p. 112-13.
Birkenstock re-affirmed that, ``in general, what I am asking
him was whether those were all of his files, and in general, I
recall him responding that they were.'' \22\
---------------------------------------------------------------------------
\22\ Id. at p. 113. Sandler testified that, when Sullivan departed
the DNC, Sullivan ``assembled a number of boxes which he represented to
. . . Mr. Birkenstock constituted all of his files at the DNC.''
Deposition of Joseph E. Sandler, August 22, 1997, p. 100. Sandler said
that the reason the file cabinet documents were not produced earlier
was ``that Mr. Sullivan didn't turn them over to Mr. Birkenstock when
he left the DNC.'' Id. at p. 105.
---------------------------------------------------------------------------
Richard Sullivan's testimony
Sullivan's recollection differs significantly from
Birkenstock's. Concerning the meeting they had on the day of
Sullivan's departure, Sullivan testified as follows:
A: . . . I pointed out to him the boxes in which I
assembled the documents from my office with the
exception of the file cabinet and I pointed out the
file cabinet to him.
* * * * *
Q: Why did you point the file cabinet out to him?
A: Because I had moved everything else but the file
cabinet, all the--a new finance director was coming in.
So, I had moved everything out of my desk and on my
desk and on a table that was in my office into another
office. I did not move the file cabinet nor did I box--
nor did I place in any boxes the contents of the file
cabinet. So, I pointed to the boxes in one room and
then pointed to the file cabinet in the other room.\23\
---------------------------------------------------------------------------
\23\ Deposition of Richard Sullivan, September 5, 1997, p. 215.
Sullivan repeated his claim that he pointed out the file
cabinet to Birkenstock.\24\
---------------------------------------------------------------------------
\24\ Id. at 216. Sullivan also testified that, in response to one
of the DNC's search memoranda for documents to respond to various
subpoenas, he believed he may have referenced his file cabinet as a
location for potentially responsive documents on a schedule that he,
like other DNC employees, was to return to Joe Birkenstock. Id. at p.
218; see also id. at p. 216. (provided schedule to Birkenstock). The
DNC has resisted production of that schedule, asserting that the
schedule was protected from disclosure by the work product doctrine. On
the strength of Sullivan's testimony about the contents of the
schedule, the Committee asserted that any work product protection was
waived, and sought the schedule again from the DNC. The DNC produced
the schedule on September 11, 1997. One could reasonably read the
schedule as corroborating, in some respects, Sullivan's testimony.
Among other things, the ``Johnny Chung'' file which was in the file
cabinet of documents belatedly produced to the Committee, appears to be
referenced in that schedule (the schedule describes a responsive
document as ``Johnny Chung Luncheon List''). Its location is described
as ``File.'' Although the reference is not as clear as the phrase
``File Cabinet,'' it is similar. Memorandum from Richard Sullivan to
Joe Birkenstock, December 19, 1996, p. 2 (Ex. 3).
Further buttressing the probability that Sullivan's account is
truthful is that Sullivan told the Committee about his file cabinet on
the first day of his deposition. See Deposition of Richard Sullivan,
June 4, 1997, p. 12. If Sullivan were attempting to conceal the
existence of these files, this would be odd. Moreover, given Sullivan's
reference to his file cabinet in the deposition on June 4 (in which a
lawyer representing the DNC was present), and given that Sullivan's
lawyer informed a DNC lawyer on June 5 that he believed that the
Committee may not have received all of Sullivan's responsive documents,
see supra note 8, it is difficult to comprehend that DNC's continued
``oversight'' of Sullivan's file cabinet.
---------------------------------------------------------------------------
Paul DiNino's testimony
Paul DiNino was deposed on September 16, 1997. He admitted
to inspecting the file cabinet at least twice prior to July 30,
1997. He stated that he first opened the file cabinet sometime
within a month or so of his arriving at the DNC on February 20,
1997.\25\ He testified that he opened the file cabinet ``[j]ust
to see what was in there.'' \26\ According to DiNino, he opened
two drawers of the four-drawer filing cabinet: the top drawer
and the third drawer down.\27\ In the top drawer, he saw
``brochures,'' and in the third drawer, he found ``doodled
legal pads.'' \28\ His concluding thought was, ``It's junk.''
\29\
---------------------------------------------------------------------------
\25\ Deposition of Paul DiNino, September 16, 1997, pp. 22-23.
\26\ Id. at p. 23.
\27\ Id. The file cabinet had four drawers, and DiNino testified
that it stood about four or four and a half feet tall. Id. at p. 11.
\28\ Id. at p. 23.
\29\ Id.
---------------------------------------------------------------------------
A few months later, DiNino testified that he ``opened the
same drawers and I saw the same thing and I closed it. Again,
that time it was probably more out of boredom than of
curiosity.'' \30\ DiNino was pressed concerning his explanation
for why he opened the same two drawers of the filing cabinet
that he had previously opened and found to be junk. His answers
are hard to accept:
---------------------------------------------------------------------------
\30\ Id. at p. 26.
Q: Do you know why it would be that you, on at least
two occasions, opened drawers one and three but never
looked in drawers two and four?
A: I wish I had an answer for you. No, I don't
Q: You said that through boredom or curiosity you
looked in drawers one and three.
A: Mm-hmm.
Q: Curiosity never led you to two and four?
A: My curiosity was pretty much killed in one and
three. There was nothing in there.\31\
---------------------------------------------------------------------------
\31\ Id. at pp. 29-30.
When even more questions were asked on this topic, it turns
that DiNino did have an answer for the Committee about why he
---------------------------------------------------------------------------
opened only drawers one and three:
Q: I guess my question would be I'm curious and maybe
you can clarify why on a repeated number of occasions
you'd looked through drawers one and three and not
looked in drawers two and four.
A: Again, that's a good question. The first drawer is
at eye level. The third drawer is at the level my hand
is. I ask myself the same question.
Q: Okay, Now, the second time you looked at the
drawers you said you were also bored or curious?
A: I'm a pacer. I opened the same drawers. They were
at eye level and they were at the same level as my
hand.
Q: I guess the point I don't understand is if you've
looked at drawers one and three and you're curious,
wouldn't you be looking in two and four?
A: If my curiosity was organized, I would have done
that. I didn't. Had I, this would have been taken care
of a long time ago.\32\
---------------------------------------------------------------------------
\32\ Id. at pp. 33-35 (emphasis added).
The Committee finds this explanation--that drawer one was at
eye level and drawer three was at hand level--preposterious.
The file cabinet stood four and a half feet tall. DiNino was a
man of normal height. Four feet tall is not eye level, and,
more important, drawer three (which is the second drawer up
from the floor) would have been far from hand level. Anyone
reading DiNino's testimony in the presence of a four-drawer
filing cabinet would find his explanation incredible.
Be that as it may, DiNino testified under oath that he did
not open drawer two until July 30.\33\ He testified that he
never opened the bottom drawer, drawer four.\34\ The reason he
re-investigated the file cabinet was that, at a senior staff
meeting on Tuesday, July 29, ``it was announced that a woman on
staff would be going around to every filing cabinet, assigning
each filing cabinet a number, and whoever's area that filing
cabinet or box or whatever was in, they were responsible to
have that filing cabinet searched.'' \35\ This was part of ``a
final push at the DNC to get all the documents that complied
with the subpoena'' by Friday, August 1, 1997.\36\ DiNino
further testified that, when ``the filing cabinets were
numbered, I asked my assistant . . . if she would search the
filing cabinet. And before I asked her to do that I wanted to
make absolutely sure that there was nothing in there that she
would stumble upon, so I investigated first.'' \37\ When he
opened drawer two, he discovered three documents that
``complied with the document search that we were finishing
up.'' \38\
---------------------------------------------------------------------------
\33\ Id. at pp. 9-12; 35-36.
\34\ Id. at pp. 12, 29.
\35\ Id. at p. 27.
\36\ Id. Recall that the DNC did not require its employees to
complete their search of their files to respond to the Committee's
subpoena until July 31, 1997. See supra, note 5 and accompanying text.
\37\ DiNino Deposition at pp. 35-36. This testimony is internally
inconsistent: on the one hand, DiNino asserts that he asked his
assistant if she would search the file cabinet; on the other hand, he
asserts that before asking her to do so, he first investigated the file
cabinets and discovered the Sullivan documents. Obviously, this
discovery--and DiNino's alleged instruction to Freda to handle the
documents--eliminated the need for asking his assistant to search the
file. See infra, note 39 and accompanying text. Nevertheless, DiNino
testified that he asked his assistant to search the file cabinet.
\38\ Id. at p. 9; see also id. at pp. 11-12, 35-36.
---------------------------------------------------------------------------
DiNino then called Freda into his office, and asked Freda
to take care of the documents.\39\ Originally, DiNino did not
remember any further discussion on that day with Freda
concerning the documents.\40\ Later, DiNino testified that,
after he called Freda into his office to take care of the
documents, Freda came back and said he had spoken with Joe
Sandler, and that the documents would be taken care of.\41\
---------------------------------------------------------------------------
\39\ Id. at p. 9.
\40\ Id. at pp. 15-16.
\41\ Id. at pp. 31.
---------------------------------------------------------------------------
DiNino's recollection of events in this regard could be at
odds with Birkenstock's. If DiNino called Freda into his
office, it seems less likely that Birkenstock would have
overheard Freda and DiNino conversing regarding the file
cabinet. Moreover, DiNino does not seem to recall the
conversation with Freda as one concerning who would be
responsible for searching the newly discovered files, which
seemed to be Birkenstock's recollection of the nature of the
conversation between Freda and DiNino.\42\
---------------------------------------------------------------------------
\42\ The Committee sought to re-depose Freda and DiNino to try to
sort out some of these contradictions. Counsel for Freda and counsel
for DiNino each informed the Committee that their clients would not
appear for a deposition without a formal subpoena. Just before the
Committee requested that Freda and DiNino appear and testify
voluntarily, the Committee had reached an understanding that no
additional subpoenas for depositions would be issued. Apparently, the
minority advised the lawyers for DiNino and Freda of the understanding,
resulting in DiNino's and Freda's unavailability (both had appeared
voluntarily for depositions earlier--Freda before the discovery of the
file cabinet--when the Committee was routinely issuing subpoenas).
---------------------------------------------------------------------------
Paul DiNino resigned from the DNC within days of his
deposition.\43\
---------------------------------------------------------------------------
\43\ See Brian McGrory, ``Democrats Name Finance Director,'' Boston
Globe, Sept. 23, 1997, p. A4.
---------------------------------------------------------------------------
Conclusion
The testimony concerning the belated production of
documents from Richard Sullivan's file cabinet is largely
incredible. The many unanswered questions and contradictions
require further exploration, because they raise the possibility
that some individual or group within the DNC or acting on its
behalf may have acted intentionally to withhold these documents
from the Committee. If that is the case, a crime may have been
committed; the intentional withholding of documents from a
Congressional committee constitutes obstruction of
Congress.\44\ The Committee thus urges the Justice Department
to investigate.
---------------------------------------------------------------------------
\44\ See 18 U.S.C. Sec. Sec. 1501, 1505.
---------------------------------------------------------------------------
the august 29, 1997 order
Given the DNC's pattern of noncooperation, obstruction, and
delay, Chairman Thompson issued an order on August 29, 1997.
Among other things, the order required that the DNC produce all
documents responsive to the Committee's April 9, 1997 subpoena
by September 3, 1997. After recounting examples of the DNC's
tactics in responding to the Committee's subpoena, the Chairman
specifically determined that the ``DNC . . . willfully refused
to comply with the lawful subpoena the Committee issued on
April 9, 1997. . . .''\45\
---------------------------------------------------------------------------
\45\ August 29, 1997 Order (Ex. 4).
---------------------------------------------------------------------------
The DNC simply ignored the order, and sought yet another
meeting with the Committee to discuss document production
issues. The meeting was held on September 4, and was attended
by Chairman Thompson, Committee staff, DNC Chairman Roy Romer,
and DNC in-house and outside counsel.\46\
---------------------------------------------------------------------------
\46\ In the meantime, the DNC's pattern of obstructionism and
gamesmanship continued. On Friday, September 5, 1997, the DNC produced
approximately 20,000 documents gathered from the personnel within the
``Office of the Chairman.'' Former DNC National Chairman Don Fowler was
then scheduled to testify only four days later, on Tuesday, September
9, 1997, when he did, in fact, testify. Documents from the Friday
afternoon production were used at the public hearings the following
Tuesday, but would have been more useful had they been produced in a
timely manner, such as before Fowler's May 21, 1997 deposition.
Additional evidence of DNC obstructionism concerns DNC General
Chairman Christopher Dodd. The DNC did not produce files relating to
him until October 31, 1997, after Chairman Thompson had announced
earlier that day that the hearings were being recessed subject to the
call of the chair.
---------------------------------------------------------------------------
In the course of this September 4 meeting, which largely
consisted of the DNC's assertions that it was doing everything
that it could to respond to the Committee subpoena and could
not comply with the August 29, 1997 order, a repeated topic of
conversation between the Committee staff and the DNC's lawyers
was revisited: Why had the Committee received virtually no
electronic mail (``e-mail'') from the DNC? \47\
---------------------------------------------------------------------------
\47\ The Committee believed that DNC e-mail might be a fruitful
area for discovery, because users are often extremely candid in their
e-mail messages.
---------------------------------------------------------------------------
The DNC explained--for the first time--that a computer
system crash in March 1996 made all e-mail prior to that date
unrecoverable. Moreover, the DNC further represented--for the
first time--that no e-mail from March 1996 to November 1996
could be recovered unless the receiver failed to open a
message. In sum, virtually no DNC e-mail could be recovered
prior to the 1996 election. The loss of almost all e-mails from
March 1996-November 1996 occurred, according to the DNC,
because the DNC e-mail system, in the course of ``backing-up,''
was overwriting on back-ups of previous e-mails, thereby
erasing them.
According to Jack Young, of the staff of the DNC's Office
of General Counsel, who attended the September 4, 1996 meeting,
the DNC determined only during the first week of September that
most e-mail for the period March 1996-November 1996 was not
available. This late discovery suggests that the DNC was not
looking for e-mail requested by the Committee until then--
underscoring that the DNC never intended to comply with the
Committee's subpoena's return date, or even the DNC's self-
imposed July 31 deadline.\48\
---------------------------------------------------------------------------
\48\ The date of the DNC's discovery that e-mail from March 1996 to
November 1996 was not generally recoverable was provided to the
Committee only after repeated letters and phone calls to Young in the
wake of the September 4 meeting. Young was asked three times during the
September 4 meeting to explain precisely when the DNC learned that much
of the e-mail could not be produced; indeed, both Chairman Thompson and
Governor Romer asked the question directly. No answer was given in that
meeting.
---------------------------------------------------------------------------
The DNC produces 15 boxes as the committee closes the investigation
On December 23, 1997, two days before Christmas and roughly
a week before the Committee's deadline for concluding its
investigation, the DNC produced 15 boxes of documents.\49\
Because the investigation was ending on December 31, most of
the staff had left or were in the process of leaving. Because
the few remaining staff were drafting the Committee's final
report (which was due by the end of January 1998), the
Committee could not and has not reviewed the documents in the
15 boxes. Thus, the Committee cannot ascertain whether the
December 23, 1997 production, like the belated production of
Richard Sullivan's files, contains documents that would have
been significant to the investigation. The Committee can state,
however, that the December 23 production is emblematic of the
DNC's dilatory and obstructionist tactics.
---------------------------------------------------------------------------
\49\ A box holds approximately 3,000 pages of documents. Most of
the boxes were at least two-thirds full, which means that the December
23 production contained approximately 30,000 to 45,000
documents.conclusion
---------------------------------------------------------------------------
The DNC's response to the Committee's subpoena was rife
with gamesmanship, hindrance, and obstruction. Engaging in such
practices no doubt consumed much of the DNC's treasury, a fact
that, ironically, the DNC has used to impugn investigations of
its fund-raising practices.\50\ The DNC also trumpets the raw
numbers of documents produced--but the manner of their
production undercuts any claim they might make of full
cooperation and good faith.\51\ In short, one of this country's
major political parties deliberately hindered the Committee in
fulfilling the Senate's constitutional role for oversight and
investigation, a sad event for the American public.
---------------------------------------------------------------------------
\50\ Peter Kadzik, one of the DNC's attorneys, complained on the
Cable News Network that, ``I think that there is a strategy here to use
the investigations to cripple the [DNC] and to benefit the Republican
Party for the upcoming 1998 elections, and we're certainly not going to
participate in that kind of a scheme.'' Inside Politics, CNN, December
12, 1997. Even the President has voiced this accusation, urging that
the investigations are ``obviously part of a strategy'' to hobble
Democrats, and complaining, ``I've worked very hard this year to try to
keep it [the strategy] from bankrupting the party.'' Jeanne Cummings,
``From one Angle or Another, Half the Committees in House Plan to Probe
Democrats' Fund Raising,'' The Wall Street Journal, December 24, 1997,
p. A12.
Much of the President's ``hard'' fund-raising work could have been
avoided if the DNC had been more forthcoming in responding to the
Committee's subpoena. The DNC could have easily gathered and copied
responsive documents and forwarded them to the Committee at modest
expense. Instead, the DNC and its principal outside law firm, Debevoise
& Plimpton, opted to pursue the expensive strategy of managing the
document production to obstruct and run out the clock on this
investigation. The Committee cannot estimate the legal fees consumed by
Debevoise & Plimpton lawyers, who were constantly negotiating (in
person, over the phone, and in letters) with the Committee over
document production issues, re-reviewing documents already produced to
the other governmental entities, see supra (discussing late June
through early July production of 55 boxes previously produced to other
governmental entities), and fighting losing battles over asserted
``common interest'' privileges. See the section of this report on fund-
raising phone calls. Had the DNC and Debevoise & Plimpton been
forthcoming and responsive to the Committee's subpoena, the DNC would
have saved substantial resources.
\51\ In fact, the raw number of documents produced does not
correlate in any way to a party's good faith. Lawyers refer to document
productions in which boxes upon boxes of trivial, arguably non-
responsive documents are produced (interspersed with significant,
responsive documents) as a ``boxcar'' production--as in handing over a
``boxcar'' of documents and letting the other party sift through the
documents in search of the important, relevant documents. The DNC's
approach has been consistent with this technique, and it has excused
every oversight and delay by boasting about the number of documents it
has produced--and complaining about the expense of photocopying so many
documents. The December 31, 1997 investigative deadline encouraged the
use of this production tactic, because the DNC could easily calculate
that it is difficult to find a needle in a haystack in a limited period
of time.
---------------------------------------------------------------------------
Sadder still is that the DNC was aided and abetted by an
unreasonable deadline imposed on the Committee's investigation.
The Committee concludes that no successful investigation
involving unwilling parties may be undertaken with an
unreasonable short-term cutoff date. No future investigatory
committee should labor with such a burden. The realistic treat
of seeking judicial enforcement of Senate subpoenas must be
present to coerce compliance from those--such as the DNC in
this investigation--who will not voluntarily cooperate.
Campaign Finance Reform Issues Brought to the Forefront by the Special
Investigation
i. introduction
On March 11, 1997, the Senate passed Senate Resolution 39
empowering the Senate Governmental Affairs Committee to
investigate ``illegal and improper'' activities that arose
during the 1996 federal elections. While the Senate
Governmental Affairs Committee does not have jurisdiction over
campaign finance reform legislation, one of its oversight
responsibilities encompasses operation of the current federal
campaign finance system. Therefore, it is the Governmental
Affairs Committee's obligation, to report our findings to the
Senate committee with legislative authority in this area, the
Senate Rules Committee. Included in this section of the report
are examples of violations of the campaign finance laws that
were revealed by our investigation, as well as findings of
improper federal campaign activity. These findings should be
taken into consideration in any Senate evaluation of federal
campaign finance system reform.
As a result of the Governmental Affairs Committee
investigation into illegal and improper federal campaign
activity during the 1996 federal election two things are
abundantly clear. First, there is no doubt that a wide range of
activity undertaken by the Clinton/Gore '96 Re-election
Campaign Committee, the Democratic National Committee, the AFL-
CIO, various non-profit organizations, and a variety of other
individuals either explicitly violated the Federal Election
Campaign Act (the ``FECA''), or violated the spirit of the
FECA. Second, the never ending quest by those involved in the
campaign process to use any vagaries of the law to their own
advantage, and the resulting legal uncertainties based upon
twenty years of the courts' and the FEC's stressing and
straining to provide coherent interpretations of the FECA, have
made it timely and appropriate for Congress to consider
revisions to the existing law.
In the 1996 election President Clinton decided to accept
federal campaign funding in return for an agreement to cap
spending, but he nevertheless coordinated with the DNC on
expenditures of soft money above that cap to broadcast thinly
disguised issue advertisements meant to advocate his election.
Due to such activity the federal campaign finance system
virtually collapsed. When the FECA was passed in the early
1970s, no member of Congress could have foreseen some of the
developments that will be discussed in this section of the
report: the distinction between ``hard'' and ``soft'' money;
the use of ``issue advocacy'' to advance the election of
specific candidates; the total direction and control that a
presidential candidate would come to assert over national and
state party committee expenditures; the explosive growth in the
cost of running for office and placing television campaign
advertisements; and how the creation of an untested independent
regulatory agency structure to oversee the FECA would impact
the law. As a result of the Committee's investigation and
examination of various illegalities and improprieties during
the 1996 federal elections, it appears that it may be time to
re-evaluate the effectiveness of the campaign finance system as
it exists today.
It must first be recognized that the regulation of federal
campaigns today is not carried out under the comprehensive
scheme anticipated by Congress when it enacted the FECA. As
Thomas Mann, Director of Government Studies at the Brookings
Institute testified, ``the 1974 law worked pretty well at the
Presidential level, but because the Court intervened [to] cut
of[f] pieces of the law on free speech grounds, the
Congressional system was really never in play.'' \1\ During
testimony before the Committee, Professor Burt Neuborne, Legal
Director of the Brennan Center for Justice at New York
University School of Law, asserted that the current system ``is
the worst of all possible worlds'' because it has ``emerged as
a judicial mutant.'' \2\ Although Congress originally devised
and enacted a comprehensive statute, the provisions of which
were intended to interact through checks and balances, over
time various legal interpretations issued by the courts and the
Federal Election Commission (``FEC'') produced a system quite
different from the one Congress enacted.
---------------------------------------------------------------------------
\1\ Testimony of Thomas E. Mann, September 23, 1997, p. 64.
\2\ Neuborne Prepared Testimony submitted to the Governmental
Affairs Committee.
---------------------------------------------------------------------------
The law now in place had its genesis in the Federal
Election Campaign Act of 1971, together with the 1971 Revenue
Act. The FECA, effective April 7, 1972, not only required full
reporting of campaign contributions and expenditures, but also
limited spending on media advertisements. These limits on media
advertisements were later repealed. The FECA incorporated an
explicit ban on foreign contributions that had been enacted in
1966. The FECA continued the long standing ban on direct
contributions by corporations (first enacted in the 1907
Tillman Act) and a similar ban imposed on unions (part of the
Taft-Hartley Act of 1947), but at the same time established the
basic legislative framework for separate segregated funds,
popularly referred to as PACs (political action committees).
Thus, the FECA provided corporations and unions a previously
unavailable opportunity to participate in federal elections
through PACs, but limited that opportunity only to PAC
involvement. The sole use of corporate and union general
treasury funds allowed under the FECA was for the PAC's
establishment, operation and solicitation of voluntary
contributions. It is these voluntary donations that in turn are
contributed to Federal races. Under the 1971 Revenue Act--the
first of a series of laws implementing Federal financing of
Presidential elections--citizens could check a box on their tax
forms authorizing the Federal government to use one of their
tax dollars to finance Presidential campaigns in the general
election.
It was not until passage of the 1974 amendments to the
FECA, however, that Congress created a comprehensive structure
regulating the financing of federal political campaigns. This
system incorporated a number of features from the regulatory
past--the ban on union, corporate and foreign contributions,
for example--and it strengthened the reporting requirements
while creating the Federal Election Commission to enforce and
administer the legislation. The FEC was given jurisdiction in
civil enforcement matters, authority to write regulations and
responsibility for monitoring compliance with the FECA.
The new post-1974 FECA was primarily a structure of
limitations on the movement of money and a venture into public
funding of presidential politics. The 1974 legislation imposed
a variety of limitations on contributions. Individuals were
limited to contributions of $1,000 per candidate per election,
and to a total calendar-year contribution cap of $25,000, of
which $20,000 could go to national party committees. PACs and
party committees could contribute no more than $5,000 per
election to a candidate, except for the major party senatorial
committees that were allowed to contribute $17,500 to each
party senatorial candidate. Expenditure limits were also put in
place, but all of them except those limiting expenditures by
party committees were eventually struck down by the courts.\3\
---------------------------------------------------------------------------
\3\ Buckley v. Valeo, 424 U.S. 1, 39-59. The Court emphasized that
the interest in ``equalizing the relative financial resources of
candidates'' was not sufficient to justify the First Amendment
infringement imposed by expenditure ceilings.
---------------------------------------------------------------------------
Based on the law as modified by the courts, the
Governmental Affairs Committee made an initial examination of
illegal and improper activities carried out during the 1996
federal elections. In late September, 1997 the Committee
reflected on its investigatory findings to that point by
holding four days of hearings on the statutory flaws and
omissions that campaign finance experts maintained allowed or
encouraged the very activities under Committee review. During
these four days of hearings the Committee made a deliberate
attempt to gain insight from a broad range of experts
representing truly diverse viewpoints toward federal campaign
finance regulation. As part of the discussion of campaign
finance statutory shortcomings, the Committee examined proposed
legislative action advocated to prevent future illegalities and
improprieties. The various experts who testified advocated
everything from replacement of the current federal campaign
finance system's reliance on contribution limits and
prohibitions with an open market system relying solely on
disclosure 4 to a highly regulated system involving
a full public financing option.5
---------------------------------------------------------------------------
\4\ Testimony of Leo Troy, Sept. 24, 1997, p. 171.
\5\ Testimony of Ellen Miller, Sept. 24, 1997, p. 188.
---------------------------------------------------------------------------
As a result of these four days of testimony, in addition to
knowledge gained through the overall investigation, the
Committee identified several issues as particularly problematic
in the current statutory scheme regulating federal campaigns in
the United States. Issues that seem particularly salient and
partly responsible for the widespread abuses in the 1996
federal elections include the following: failure to properly
vet large contributions; the use of soft money to circumvent
restrictions in the law; the conflict between First Amendment
guarantees of free speech and campaign spending limitations;
campaign spending by non-profits; the potential to undermine
the current campaign system through coordination between
entities; the use of union members' dues in political
campaigns; as well as a variety of structural problems related
to administration of the current system. The problem areas
examined by the Committee for possible reform are highlighted
below. This review is not intended to advocate or criticize any
particular reform, but rather it is designed to ensure that the
results of this investigation are considered whenever Congress
undertakes reform of the FECA.
ii. soft money
Much of the testimony the Committee heard involved ``soft
money,'' as opposed to ``hard'' money which is raised within
the prohibitions and limitations of the FECA. ``Soft'' money is
raised and spent in the political process outside of the FECA
prohibitions and limitations. As a result of the evolutionary
process discussed in this section, national party committees
now raise and spend ``soft'' money received from corporations,
unions and individuals in unlimited amounts. This money is in
turn spent by national and state political party committees. In
certain instances outlined below, national party committees
allocate specific expenditures between soft and hard money
according to predetermined ratios established by the FEC to
reflect the percentage of impact such expenditures are
estimated to have on federal versus other elections. According
to testimony before the Committee, $265 million in such soft
money funds entered national party committee coffers for uses
related to the 1996 federal elections.6 In addition
to the corporate and union sources, much of this money was made
up of unlimited individual contributions from those who had
otherwise given the maximum amount permitted to given political
committees under the FECA limits.
---------------------------------------------------------------------------
\6\ Testimony of Burt Neuborne, Sept. 25, 1997, p.129 and A.
Corrado, T. Mann, D. Ortiz, T. Potter and F. Souraf [HEREINAFTER
Corrado], Campaign Finance Reform A Sourcebook, 167 (1997).
---------------------------------------------------------------------------
Soft money has also grown to mean money spent directly by
corporations, unions, non-profits or individuals to impact
specific elections through the discussion of issues, but which
avoids the Buckley Court's ``magic words'' of express advocacy
7 on behalf or in opposition to an identifiable
federal candidate. Such funds, according to current regulation,
whether expended by party committees, unions, corporations, or
other entities, are supposed to be expended only on ``get-out-
the-vote'' campaigns and other non-candidate specific
activities.
---------------------------------------------------------------------------
\7\ See discussion of Advocacy Standards below.
---------------------------------------------------------------------------
This is an area of the law where vagueness, court
interpretations, and FEC guidance have encouraged those active
in campaigns to avoid the restrictions of the system in a
manner that the authors of the FECA could not have possibly
foreseen. As a result of the demand for campaign funds, some
believe that the limits established by federal law have been
rendered meaningless. Some like Professor Burt Neuborne argue
``soft money is nothing more than a campaign contribution. It
is a contribution by a person to a political party with the
funds to be used in some sense in connection with a campaign.''
8
---------------------------------------------------------------------------
\8\ Neuborne testimony, p. 130.
---------------------------------------------------------------------------
A. Background of soft money
The alleged abuses of the soft money stem from two
provisions of the current FECA, and court interpretations of
those provisions over the past twenty years. First, party
committees are limited in the amount of money they are allowed
to spend on behalf of their individual candidates.9
These coordinated ``hard'' money accounts must consist of
contributions from non-prohibited sources (no union, corporate
or foreign money),10 and be within the $20,000 limit
placed on individual contributions to party
committees.11 Disbursements from these accounts are
called ``coordinated expenditures'' because they can be made in
direct coordination with a candidate's campaign. (They are also
known as 441a(d) monies, since this is the section of Title 2
of the United States Code that authorizes such spending.) Given
that the FECA indexes these coordinated amounts for inflation,
by 1996 they were roughly three times their original level:
National party committees could spend $12 million on behalf of
a presidential candidate, or $30,910 for a House candidate
($61,820 in a single-district state), and from $61,820 in the
smallest states, to $1.4 million in California on behalf of a
Senate candidate.12
---------------------------------------------------------------------------
\9\ 2 U.S.C. Sec. 441a(d).
\10\ 2 U.S.C. Sec. Sec. 441b(a) & 441e.
\11\ 2 U.S.C. Sec. 441a(a)(1)(C).
\12\ 2 U.S.C. Sec. 441a(d) and 1996 Coordinated Party Expenditure
Limits, 22 Federal Election Commission Record 14 (April, 1996).
---------------------------------------------------------------------------
Prior to the 1996 election, it was presumed that the full
amount of party expenditures on any broadcast advertisements
placed to assist a party's candidate would necessarily be paid
for with hard dollars from such coordinated hard dollar
accounts.13 As a result of the Supreme Court's
decision in Colorado Republican Federal Campaign Committee v.
FEC, (Colorado Republican), 116 S. Ct. 2309 (1996), the last
federal election also saw the advent of party committee
independent expenditures made on behalf of non-presidential
federal candidates. Thus, for the first time since the passage
of the FECA, party committees were allowed to expend unlimited
hard money to expressly advocate the election or defeat of
clearly identified federal candidates and not count those
expenditures against their 441a(d) limits, so long as those
expenditures were not made in express coordination with a
candidate in the particular race.
---------------------------------------------------------------------------
\13\ See the discussion below of changes wrought by FEC Advisory
Opinion 1995-25, Fed. Election Camp. Fin. Guide (CCH) para. 6162 at
12,109 (August 24, 1995).
---------------------------------------------------------------------------
The various uses of soft money in 1996 are a culmination of
a long evolutionary process. In amendments to the FECA passed
by Congress in 1979 to encourage grass-roots participation,
greater leeway was given to party organizations to spend
federal funds (hard money) with respect to election-related
activity. As a result of these amendments party organizations
could spend unlimited amounts of hard money on voter
registration and identification, certain types of campaign
material, and voter turnout programs. Although these 1979
Amendments authorized a circumscribed realm of unlimited party
expenditures, they did not sanction unlimited spending by party
committees of unregulated (soft money) on activities designed
to assist a particular candidate for federal office. The latter
activity came into vogue as a result of FEC interpretations of
the FECA. In Advisory Opinion 1978-10 the FEC declared that the
Kansas Republican State Committee could use corporate and union
money to finance a share of their voter drives, so long as it
allocated its costs to reflect the federal and nonfederal
shares of any costs incurred.14 They did this
because in Kansas, as in many states, the use of corporate and
union money in state elections is permissible. By direct
analogy, national party committees have since been allowed to
split the costs of such grassroots ``state based'' activity
between soft and hard money elements. The practice grew because
federal and state committees are largely allowed to transfer
funds without restriction.15 The practice also grew
despite the eventual acknowledgment by the courts that such
grassroots activity directly impacted federal
elections.16
---------------------------------------------------------------------------
\14\ FEC Advisory Op. 1978-10, Fed. Election Camp. Fin. Guide (CCH)
para. 5340 at 10,335 (August 29, 1978).
\15\ 2 U.S.C. Sec. 441a(a)(4).
\16\ See Common Cause v. Federal Election Commission, 692 F. Supp.
1391 (D.D.C. 1987) and Common Cause v. Federal Election Commission, 692
F. Supp.. 1397 (D.D.C. 1988).
---------------------------------------------------------------------------
Thus, just as Congress was allowing party organizations to
spend unlimited amounts of money raised under federal rules on
voter programs and other activities, the FEC allowed them to
pay a share of such costs with funds not subject to federal
limits.17 As a result of this evolution, national
party committees could now spend ever greater amounts of soft
money, and the quest was on to find a way to spend this money
outside of the system to directly benefit federal candidates.
---------------------------------------------------------------------------
\17\ FEC Advisory Op. 1978-10, Fed. Election Camp. Fin. Guide (CCH)
para. 5340 at 10,335 (August 29, 1978).
---------------------------------------------------------------------------
As an outgrowth of Common Cause court action against the
it,18 the Federal Election Commission finally issued
new soft money regulations that took effect on January 1, 1991.
Under these rules, all party committees raising and spending
soft money in conjunction with federal elections must file
regular disclosure reports of their contributions and
disbursements with the FEC. These reports must identify any
contributors to national party committees who give more than
$200 to soft money accounts or party building-fund accounts.
---------------------------------------------------------------------------
\18\ See Common Cause v. Federal Election Commission, 692 F. Supp.
1391 (D.D.C. 1987) and Common Cause v. Federal Election Commission, 692
F. Supp. 1397 (D.D.C. 1988).
---------------------------------------------------------------------------
Most importantly the new regulations established specific
allocation formulas for the use of soft and hard money. These
rules require national party committees to pay for 65% of all
their overall ``generic voter drive'' costs made in a
presidential election year out of ``hard dollar'' accounts (60%
must come from hard dollars in non-presidential election
years). Thus, 35% of the money spent on generic activity during
a presidential election year (40% in non-presidential election
years) may come from money raised outside the limits and
prohibitions of the Federal Election Campaign Act.19
As a result of these new regulations, the public learned in
1992 that the major party committees raised more than $83
million in soft money, or about four times the amount of soft
money estimated to have been spent by party committees in 1984.
In the 1996 cycle the explosion in soft money continued. Soft
money receipts at the Republican national party committees
increased by 178% over 1992 to $138.2 million, while Democratic
party committee receipt of soft money increased 242% over 1992
levels to $123.9 million.20 Due to such disclosure
we now know the extent and potential impact of party committee
soft money in the federal political process. No such disclosure
exists for direct corporate, or large individual soft money
expenditures on ``issue advertisements.''
---------------------------------------------------------------------------
\19\ 11 C.F.R. Sec. 106.5(b).
\20\ Corrado, Campaign Finance Reform A Sourcebook, 175 (1997).
---------------------------------------------------------------------------
The latest, and perhaps the most significant event,
contributing to the current questionable use of soft money for
issue advocacy advertisements was the FEC's issuance of
Advisory Opinion 1995-25. 21 In Advisory Opinion
1995-25 the FEC ruled that party issue advertisements relating
solely to congressional legislative proposals would have to be
paid for by a mixture of hard and soft money, even if they did
not expressly advocate the election or defeat of any
identifiable federal candidate. The FEC ruled that such party
issue advertisements must be paid for by using 60% (1995 was a
non-presidential election year) hard money. The FEC reasoned
that because of the very nature of a national party committee,
it would not make any generic expenditures that did not in some
way benefit federal election candidates.
---------------------------------------------------------------------------
\21\ FEC Advisory Op. 1995-25, Fed. Election Camp. Fin. Guide (CCH)
para. 6162 at 12,109 (August 24, 1995).
---------------------------------------------------------------------------
B. Problems arising from soft money
As outlined above, soft money can be spent directly by a
national party committee for a portion of its state based
generic party building and issue advocacy, or transferred to
the various affiliated state party committees for similar
activity. Under no circumstances can soft money be utilized to
advocate the election or defeat of a clearly identifiable
federal candidate (i.e. express advocacy). The statute, FEC
application of the law, and court opinions make clear that
party committees in particular are further prohibited from
spending soft money on any kind of electioneering message. As
defined by the FEC, ``electioneering messages'' are statements
``designed to urge the public to elect a certain candidate or
party.'' 22 The electioneering message standard is
discussed in greater detail in the advocacy section of this
report.
---------------------------------------------------------------------------
\22\ FEC Advisory Op. 1985-14, 2 Fed. Elec. Camp. Fin. Guide (CCH)
para. 5819, at 11,185--11, 186 (May 30, 1985).
---------------------------------------------------------------------------
As described in further detail in the coordination section
below, the Clinton/Gore '96 campaign devised a way to
circumvent the DNC's 441a(d) coordinated expenditure limit and,
in violation of the FECA, illegally utilize approximately $44
million in national committee soft money to their candidate's
advantage through electioneering messages that they claim to be
pure issue advertisements. These advertisements carefully
avoided expressly advocating the electionof President Clinton,
but these party committee expenditures were clearly made for the
purpose of influencing the Presidential election. This election
influencing purpose has been acknowledged by those who worked directly
with President Clinton on them, including Dick Morris 23 and
Leon Panetta.24
---------------------------------------------------------------------------
\23\ Deposition of Dick Morris, August 20, 1997, pp. 274 & 345. See
also the section of this report on The Thirst for Money.
\24\ Meet the Press (NBC television broadcast, March 9, 1997).
---------------------------------------------------------------------------
It is established practice that national party committees
and state party committees work in tandem when spending for
federal, state and local elections. Given that state party
committees may spend the same coordinated amounts as the
national party organizations in House and Senate races,
``agency agreements'' have gained popularity. In those states
or districts where a state party lacks adequate funding to meet
the coordinated spending limit, and a national party committee,
usually a congressional or senatorial campaign committee,
considers a race strategically important, the state and
national party committees form an ``agency agreement'' that
transfers the state party's spending quota to the national
committee. With national party committees now able to spend
soft money on an expanding array of things that they formerly
paid for with hard money,25 ``agency agreements''
have become increasingly common because national party
committees have larger reserves of hard money to maximize
potential coordinated expenditures on express advocacy in tight
contests.
---------------------------------------------------------------------------
\25\ Witness the broadcast issue advertisements that appeared as a
result of FEC Advisory Op. 1995-25, Fed. Election Camp. Fin. Guide
(CCH) para. 6162 at 12,109 (August 24, 1995).
---------------------------------------------------------------------------
In addition to agency agreements, the DNC deftly utilized
state party committees in 1996 as a conduit to further increase
their illegal expenditure of soft money on electioneering
messages favoring the re-election of President Clinton, all the
time claiming such advertisements consisted of pure issue
advocacy outside of the realm of the FECA. Such manipulation of
the current FECA for party committee advantage results from the
regulatory distinction establishing different hard to soft
expenditure ratios for state party committees and national
party committees. 26 The FEC lacks jurisdiction to
regulate any state party committee spending outside that made
on behalf of federal candidates. Therefore, FEC guidelines
leniently allow general state party expenditures that have an
incidental federal election impact to be allocated over a two
year election cycle using the ratio of federal to nonfederal
candidates on that State's November ballot. For example, in a
state where the ballot includes candidates for two types of
federal races--say, presidential and congressional--and
candidates for eight nonfederal offices, the state party could
pay for 80% of the generic activities with soft dollars. Given
that hard dollars (raised in $1,000 increments from FECA non-
prohibited sources) are significantly more difficult to raise,
the distinction described above creates an incentive to have
the state party pay for as many activities as possible using
soft money. To take advantage of the current system, national
party committees have begun transferring soft money to state
party committees to utilize the various states' higher soft
money allowance. Substantial amounts of such transfers are made
to state and local political parties for ``generic voter
activities'' that in fact ultimately benefit federal candidates
because the funds for all practical purposes remain under the
control of the national committees. The use of such soft money
thus allows more corporate, union treasury, and large
contributions from wealthy individuals into the system.
---------------------------------------------------------------------------
\26\ Testimony of Anthony Corrado, September 25, 1997, p. 7.
---------------------------------------------------------------------------
Despite disclosure regulations for the national party soft
money accounts, monies raised and spent by state and local
committees that claim to be unrelated to federal election
express advocacy do not have to be reported to the FEC (but
they are often reported at the state level). Of course,
transfers to the state party committees from the national party
committees are reported as expenditures on the national party
committee FEC filings. Disclosure reports required to be filed
at the state level by state party committees are often
inadequate to fully disclose the ultimate use of such
transferred funds.27
---------------------------------------------------------------------------
\27\ Testimony of Anthony Corrado, September 25, 1997, p. 8, ll. 7-
12 .
---------------------------------------------------------------------------
In the crucial 1995 pre-election year, according to FEC
reports, the DNC transferred almost $11.4 million in soft money
to state parties, followed by another $6.4 million in the first
quarter of 1996. In sharp contrast, the RNC shifted a little
over $2.4 million to the states from January 1, 1995 to
February 29, 1996. Ultimately the DNC quietly transferred at
least $32 million,28 and perhaps as much as $64
million,29 to state Democratic party committees in
the 1996 cycle. This transfer of funds allowed state party
committees to utilize a higher proportion of the national party
committee's soft money in areas impacting federal elections
than if the national party committee had made the expenditures
directly. The DNC on its own would have had to purchase the
very same air time under the much tighter federal allocation
guidelines requiring a higher percentage of hard dollars.
---------------------------------------------------------------------------
\28\ Democrats Used the State Parties to Bypass Limits, New York
Times, October 1, 1997, at A1.
\29\ Anthony Corrado testimony, p. 7.
---------------------------------------------------------------------------
Recent history is replete with evidence that these
different state and national allocation formulas are being
utilized to circumvent the FECA. In October 1990, the DNC
accepted a $230,000 contribution in soft money from Louisville,
Kentucky newspaper publishing heiress Mary C. Bingham. Shortly
thereafter, the DNC transferred $215,000 to the Kentucky
Democratic Party, which in turn paid for an advertising blitz
that closely paralleled the themes that Bingham's favored
candidate used in campaigning for the U.S. Senate.30
In the Spring of 1995 the Pennsylvania Democratic Party was
$200,000 in debt, but after receiving $2.8 million from the DNC
it used approximately $2.7 of the funds to pay for television
spots created by DNC media consultant Squier, Knapp & Ochs. The
Squier firm was also paid by the Clinton/Gore ``96 campaign
committee, and ads that it produced for the Clinton/Gore ``96
committee were either identical to, or closely mimicked by
state party and DNC re-election campaign ads.31 The
flow of funds in and out of the Michigan Democratic Party
during the first quarter of 1996 vividly displays this scheme.
On five separate occasions, the DNC shifted cash from both its
federal and nonfederal accounts to the Michigan Democratic
Party. Within days of each transfer, the Michigan Democratic
Party wrote a check in the same amount to the Squier firm to
pay for pro-Clinton ads.32 Moreover, the proportion
of hard and soft dollars that the Michigan Democrats used to
pay Squier was exactly the same as the hard and soft-dollar
transfers from the DNC. All told, the DNC conveyed $172,731
from its federal (hard-dollar) account and $281,824 from its
nonfederal (soft-dollar) account to the Michigan Democrats.
That is exactly the same ratio as the FEC allocation formula
that applies to the cost of generic activities paid for by the
Michigan Democrats in 1996: 38% hard and 62% soft. If the DNC
had directly paid for those ads in Michigan, its 65/35 FEC
allocation formula would have required the committee to spend
$295,461 in hard dollars and $159,094 in soft
dollars.33 Thus, the DNC saved $122,810 in hard
dollars by using the Michigan Democratic Party as a conduit to
pay for these particular advertisements. If this is not a
violation of the current FECA, it is definitely a manipulation
of an undesirable ``loophole'' in violation of the spirit of
the law.
---------------------------------------------------------------------------
\30\ Federal Election Commission Enforcement Matter Under Review
3182 (DNC, Kentucky Democratic Party, Harvey Sloane for U.S. Senate, et
al.).
\31\ J. Barnes, Party Favors, National Journal, May 11, 1996, p.
1038.
\32\ For example, the investigation uncovered an advertisement
containing the same visuals incorporating President Clinton giving a
speech and the exact language which, according to the disclaimers on
the advertisement, was alternatively paid for by the DNC, or the
Michigan Democratic Party. The narration of that advertisement stated
the following: ``Every year in America, one million women are the
victims of domestic abuse. It is a violation of our Nation's values.
It's painful to see. It's time to confront it. The President's plan:
Increased child support enforcement. Work, not welfare, to encourage
stronger families. Improve and enforce domestic violence laws. One
million women. A test of our national character. A challenge we will
meet.'' Given the acknowledged ``gender-gap'' of the 1996 election
there is little doubt that this mention of President Clinton during an
election year was intended to influence the Presidential election.
\33\ J. Barnes, Party Favors, National Journal, May 11, 1996, p.
1038.
---------------------------------------------------------------------------
FEC reports of the receipts and expenditures of a dozen
state Democratic parties from July 1, 1995, through March 31,
1996, indicate that the state entities operated as little more
than a pass-through for the DNC to pay for the production and
broadcasting of ads by the Squier firm. Clearly, the Democratic
National Committee produced commercials that various state
Democratic party committees in turn placed in their local media
market with a disclaimer stating that the advertisements had
been paid for by that specific state Democratic party
committee. In news accounts the Pennsylvania Democratic Party
spokeswoman Kelly McBride said, when asked about DNC transfers
and the subsequent ads, ``The state party cooperated with the
national party to produce those commercials.'' This scheme to
avoid FEC mandated allocation is especially odious in that it
allows national party committees to continue to control the
content and placement of advertisements, and at that same time
avoid adherence of the FEC's specific regulations. The truth
was probably most accurately reflected by Florida Democratic
Party communications director Jo Miglino who said, when asked
about such Florida Democratic Party advertising in her state,
``Those aren't ours; those are the DNC's.'' 34
---------------------------------------------------------------------------
\34\ Id.
---------------------------------------------------------------------------
C. Potential reforms directed at soft money
Under the FECA's current system of contribution
limitations, the investigation has found, soft money spending
by political party committees eviscerates the ability of the
FECA to limit the funds contributed by individuals,
corporations, or unions for the defeat or benefit of specific
candidates. The development of soft money has severely
undermined the party coordinated expenditure limits of the
FECA, since party committees that reach this coordinated limit
can now continue to spend money to influence federal elections
beyond the coordinated limit through a variety of means. One
option available to national party committees is to simply
shift their spending to issue advocacy ads (those having a
bearing on issues of the specific election contest, but
avoiding explicit advocacy of any candidate). Another course
national parties can now pursue as a result of the Colorado
Republican decision (discussed infra) is to make independent
expenditures 35 that can benefit a candidate without
counting against any party spending ceilings. Finally,
unlimited national party committee soft money can be
transferred to state parties to pay for issue advertisements
carefully designed to influence a federal election, but at the
same time avoid reporting by not expressly advocating the
election or defeat of an identifiable federal candidate.
---------------------------------------------------------------------------
\35\ See discussion elsewhere in this section of Colorado
Republican Federal Campaign Committee v. FEC, 116 S. Ct. 2309 (1996).
---------------------------------------------------------------------------
Reforms in the area of soft money must recognize that state
parties are governed by state laws; that traditional party-
building activities from voter registration and get-out-the-
vote drives to sample ballots impact both the campaigns for
state and local office and campaigns for federal office; and
that most students of the system believe it is desirable to
enhance the role of parties. One solution for the ``soft
money'' morass that the Committee heard advocated was a
suggestion to simplify the current complicated distinctions
between hard money, soft money, coordinated money, and
independent expenditures. Anthony Corrado suggested a clear
statutory definition of national party committee money,
subjecting it all to federal limitations and
prohibitions.36 Eliminating the legal distinction
between non-federal (soft) and federal (hard) funds at the
national party committee level is a tempting proposal, if a
decision is made to rid the system of soft money. Many people
maintain that the Buckley decision allows political parties to
be subjected to the same source and amount restrictions that
apply to candidate contributions.37 Don Simon of
Common Cause brought to the Committee's attention a letter co-
signed by 124 constitutional scholars from across the country.
That letter concludes that Congress clearly possesses the power
to limit the soft money system through such a limitation on
national party committee funds.38
---------------------------------------------------------------------------
\36\ Testimony of Anthony Corrado, Sept. 25, 1997, pp. 96 & 97.
\37\ Neuborne testimony, September 25, 1997, pp. 130-134.
\38\ Letter from Ronald Dworkin and Burt Neuborne to Senator John
McCain and Senator Russell Feingold, September 22, 1997.
---------------------------------------------------------------------------
The wisdom of extending the hard money limitations now
being imposed on candidates to party committees, hinges on the
assumption that national political party expenditures
inevitably affect the outcome of federal elections, that
national party committees do not expend funds unless they
benefit their candidates, and that the courts will accept the
argument that such contributions to party committees have the
potential to influence a legislator's votes and thus can have a
corrupting influence. Court decisions support the proposition
that Congress has broad power to regulate the flow of funds
into the electoral process. Courts have upheld limitations
ranging from the overall $25,000 individual annual contribution
limit to the $5,000 PAC contribution ceiling.39
---------------------------------------------------------------------------
\39\ See California Medical Ass'n v. FEC, 453 U.S. 182 (1981); FEC
v. National Right to Work Committee, 459 U.S. 197 (1982), and Austin v.
Michigan Chamber of Commerce, 494 U.S. 652 (1990).
---------------------------------------------------------------------------
In return for prohibiting national party committee receipt
of soft money, some advocate raising the existing limits on
individual contributions to parties, such as creating a
separate $25,000 annual limit to party committees above and
beyond any other annual limit imposed on individual
contributors. At the same time, party committees could be
allowed to allocate these ``hard money'' resources among their
candidates as they choose without restriction.40
Under this reform scenario, the party committees would retain
control of their spending priorities, the public would have
full disclosure of the source of funds, and the party system
would be freed of excessively large contributions from
individuals, unions or corporations that might lead to the
appearance of corruption or actual quid pro quo.
---------------------------------------------------------------------------
\40\ Testimony of Norman Ornstein, Sept. 24, 1997, p. 82 and
Testimony of Douglas C. Berman, Sept. 24, 1997, p. 200.
---------------------------------------------------------------------------
Curtis Gans, Executive Director of the Committee for the
Study of the American Electorate, proposed Congress merely
prohibit the use of party committee soft money for broadcast
advertising. Rather than completely eliminating soft money,
this approach would allow its continued use for non-federal
grassroots activity and institutional building.41 On
the other hand, Anne McBride of Common Cause testified that any
compromise under which soft money was allowed to exist at the
state level, but not at the federal level, would result in more
manipulation and ``gaming'' of the system.42
---------------------------------------------------------------------------
\41\ Testimony of Curtis Gans, September 24, 1997, p. 157.
\42\ McBride testimony, p. 5.
---------------------------------------------------------------------------
One witness testified that soft money limitations on
national party committees would be unconstitutional because
money to party committees raises no compelling state interest
in preventing quid-pro-quo corruption.43 Brent
Thompson, former director of the Fair Government Foundation,
credits soft money for allowing party organizations to increase
their role in elections and thus strengthen the ``federalism''
of the American party structure.44 He also argues
that party committee receipt of such soft money separates the
source of the funds from the candidates, and thus prevents the
appearance of corruption or actual quid pro quos for campaign
dollars.
---------------------------------------------------------------------------
\43\ Testimony of Roger Pilon, Senior Fellow, CATO Institute, Sept.
25, 1997, pp. 144, and 153-155.
\44\ Brent Thompson, Despite Reform Frenzy, Don't Blame Soft Money
for Campaign Scandal, Roll Call, March 27, 1997, p. 12.
---------------------------------------------------------------------------
Yet others note that candidates, such as President Clinton,
essentially are the party committee,45 and as such
control party solicitations and reap the rewards of these
excessive contributions. Such a posture makes the candidate
just as susceptible to corruption or actual quid pro quos as if
the contributions were given directly to the candidate's
campaign committee. Failure of the FECA to effectively address
the symbiosis between a sitting President and his party
committee is another example of the need for an overall
coherent set of checks and balances to counteract the revisions
read into the FECA since its passage.
---------------------------------------------------------------------------
\45\ Deposition of Richard (Dick) Samuel Morris, August 20, 1997,
pg. 30.
---------------------------------------------------------------------------
During the Committee's hearings, witnesses such as Edward
Crane, President of the CATO Institute and Roger Pilon, Senior
Fellow at the CATO Institute, argued that there should be no
restrictions at all on the source or amount of party committee
expenditures. Under such a system, prompt and complete
disclosure is seen as sufficient regulation to control the
potential evils of union, corporate and large contributions.
There is no explanation of how such disclosure prevents state
reporting gaps, potential delays in federal reporting, or the
FEC's previous inability to sufficiently sanction violators of
similar provisions in order to avoid reoccurrence. Despite all
of these options discussed, it may be impossible to completely
control the flow of soft money as our system of Federalism
makes it unlikely that federal legislation could
constitutionally deprive the various state party committees of
the right, where it is now legal under state law, to continue
to raise corporate, union and large individual contributions.
III. Foreign Contributions
A central focus of the Committee's investigation was the
manner in which illegal foreign money made its way into the
federal election process. Title 2 U.S.C. Sec. 441e explicitly
makes it illegal for any foreign national to contribute to any
federal or non-federal election in the United States, either
directly or indirectly.46 This prohibition dates
from 1966 legislation responding to congressional hearing
revelations that Philippine sugar producers and agents of
Nicaraguan president Luis Somoza contributed to federal
candidates. The foreign contribution prohibition also prevents
domestic subsidiaries of foreign corporations from establishing
PACs if the foreign parent finances the PAC's establishment,
administration, or solicitation costs, or if individual foreign
nationals within the corporation have an impact on the
decisions of the PAC, participate in its operation, or serve as
officers.47 Since federal law prohibits a foreign
national from making contributions through another person or
entity, the FEC has made it clear that domestic subsidiaries of
foreign parent corporations may only make contributions out of
domestic profits.48
---------------------------------------------------------------------------
\46\ Sec. 441e Contributions by Foreign Nationals
(a) It shall be unlawful for a foreign national directly or through
any other person to make any contribution of money or other thing of
value, or to promise expressly or impliedly to make any such
contribution, in connection with an election to any political office or
in connection with any primary election, convention, or caucus held to
select candidates for any political office; or for any person to
solicit, accept, or receive any such contribution from a foreign
national.
(b) As used in this section, the term ``foreign national'' means --
(1) a foreign principal, as such term is defined by section 611(b)
of title 22, except that the term ``foreign national'' shall not
include any individual who is a citizen of the United States; or
(2) an individual who is not a citizen of the United States and who
is not lawfully admitted for permanent residence, as defined by section
1101(a)(20) of title 8.
\47\ 11 C.F.R. Sec. 110.4(a)(3).
\48\ FEC Advisory Op. 1992-16, Fed. Election Camp. Fin. Guide (CCH)
para. 6059 at 11,813 (June 26, 1992).
---------------------------------------------------------------------------
The Committee's investigation heard testimony that three
problems led to increased illegal foreign contributions in the
1996 federal elections. First, organizations like the
Democratic National Committee (DNC) failed to establish and
abide by sufficiently stringent vetting procedures to review
even the largest contributions. Second, the solicitation of
massive amounts of soft money increased the perception that
large contributions could result in some quid pro quo, and thus
foreign contributors decided their money might influence
policy. Finally, the foreign contribution prohibition is very
difficult to enforce for the average contribution because
recipient committees lack a reliable method to ensure that
donors who are not known to campaign solicitors are in fact
American citizens.
Foreign contributions were encouraged by many contributors'
belief that the DNC's obviously desperate and aggressive search
for large contributions meant contributing in 1996 was more
likely than ever to lead to personal gain. One prime example of
the DNC's encouragement of this state of mind is found in a
$250,000 contribution from South Korean businessman, John K. H.
Lee.49 Michael Mitoma, the mayor of Carson,
California, testified during the Committee's public hearings on
September 5, 1997 that he believed arrangement of a meeting
between President Clinton and Lee would encourage Lee's
decision to locate a factory in Carson.50 Once
Mitoma related information to John Huang about a Korean
businessman who was considering starting a business in America,
Mr. Huang and his colleagues at the DNC anxiously arranged a
photo-op for Lee with the President in exchange for a $250,000
contribution. Any casual observer, let alone someone vetting a
$250,000 contribution to the President of the United States,
should have quickly come to the conclusion that the source of
this particular corporate soft money contribution, Lee's newly
incorporated U.S. company Cheong Am America, Inc., was merely a
front for processing an illegal foreign contribution from Lee.
Despite the fact that Lee spoke no English, and needed to fly
to Washington from Korea, he and four individuals of his choice
were able to meet on April 8, 1996 with Don Fowler, Richard
Sullivan, Peter Knight, and ultimately the President. A simple
check of the California incorporation records would have shown
that Cheong Am was incorporated at the end of February
1996.51 Thus, even without the bank records showing
that the Cheong Am America bank account was funded by a
transfer of $1.3 million from Korea on March 26,
1996,52 one could have surmised that it was unlikely
Cheong Am America had operated long enough to generate the U.S.
revenue needed to make a U.S. political contribution. This
$250,000 contribution was covered with red flags--all of which
were ignored.
---------------------------------------------------------------------------
\49\ See detailed discussion of the John K.H. Lee contribution in
the section of this report on John Huang's illegal fundraising at the
DNC.
\50\ Testimony of Michael Mitoma, September 5, 1997, p. 126.
\51\ See section of this report entitled ``John Huang's Illegal
Fund-raising at the DNC,'' Ex. 11, State of California Certificate of
Incorporation.
\52\ Id., Ex. 12, Assorted bank records of Cheong Am America.
---------------------------------------------------------------------------
In their zeal to raise money, DNC officials at best
neglected to ask the obvious questions, and at worst
deliberately looked the other way. The drive for large
contributions led the DNC to accept the Lee contribution.
Considering that the legal hard dollar limit for individuals is
$1,000 per election, the person solicited for a $250,000 soft
money contribution would logically anticipate something in
return, or at least expect a higher level of access. As Common
Causes' Ann McBride pointed out in her testimony,
[i]f you look at what this Committee exposed about
foreign contributions, . . . [they] simply would not
have found a way into the system if this huge
unlimited, unregulated system did not exist, and so we
believe the best reform to end the problem revealed in
this Committee about foreign contributions is to end
the soft money system.53
---------------------------------------------------------------------------
\53\ McBride testimony, p. 5.
During the 1996 election, the issue of whether this foreign
national prohibition applies to the gift of ``soft'' or
nonfederal money to a national party committee came to the
forefront. The FECA definition of ``contribution'' is limited
to ``any gift, subscription, loan, advance, or deposit of money
or anything of value made by any person for the purpose of
influencing any election for Federal office.'' 54 As
seen in the footnote above quoting the FECA foreign
prohibition, it only bans foreign contributions. Technically,
soft money as described above, by definition may not therefore
constitute a ``contribution'' because it is supposedly not made
``for the purpose of influencing any election for Federal
office.'' In response to a question from Senator Thompson
challenging her stance that ``soft money'' never constitutes a
``contribution,'' 55 Attorney General Janet Reno's
testimony before the Senate Judiciary Committee on April 30,
1997, indicates that the Department of Justice interprets
Section 441e to prohibit soft money contributions to party
committees from foreign nationals.56 Certainly that
was the common understanding prior to the 1996 elections, and
clearly the DNC believed such a prohibition to exist as it
refunded all such foreign soft money contributions that it was
found to have received. Regardless of this questionable new
interpretation limiting the reach of the FECA's foreign
contribution prohibition, the President's unprecedented use of
soft money to advance his re-election prospects renders the
acceptability of foreign soft money contributions moot in the
present context.
---------------------------------------------------------------------------
\54\ 2 U.S.C. Sec. 431(8)(A)(i) (emphasis added).
\55\ Attorney General Reno letter to Senator Orrin Hatch, April 14,
1997.
\56\ See Department of Justice Oversight, Hearing of the Senate
Judiciary Committee, Federal News Service, April 30, 1997.
---------------------------------------------------------------------------
The dismantling of the DNC vetting procedures 57
only exacerbated the problem of foreign contributions finding
their way into the 1996 federal elections. For the 1992
election cycle the DNC implemented a system for vetting
contributions over $10,000. Any check for $10,000 or more was
to go through a vetting desk.58 This desk was
supervised by Barbara Stafford, an attorney in the DNC's Office
of General Counsel. Stafford had full-time responsibility for
vetting contributions, as did her assistant, David
Blank.59 In fact, the 1992 vetting system involved
an entire group of individuals, usually numbering between six
and ten, who did nothing but vet major
contributions.60 Current DNC Deputy General Counsel
Neil Reiff confirmed to the Committee that there was once a
separate ``unit'' of about seven or eight people, supervised by
Barbara Stafford, that vetted checks.61 Indeed,
current DNC General Counsel Joseph Sandler has testified that
``for the 1992 election a procedure known as Major Donor
Screening Committee'' was in place.62 Sometime after
the 1994 election this vetting procedure was
dismantled.63 According to FEC records, the DNC
received 178 contributions of $100,000 or more in 1995 and 1996
without an appropriately established vetting procedure, and
without in fact checking to determine if they were legal. The
DNC's failure to properly vet donations facilitated the
funneling of foreign contributions to the DNC by fundraisers
like John Huang.
---------------------------------------------------------------------------
\57\ See the section of this report on The DNC Dismantled Vetting
System.
\58\ Deposition of Robert J. Stein, June 17, 1997, p. 58.
\59\ Stein deposition, p. 81.
\60\ Deposition of Melissa A. Moss, June 11, 1997, pp. 12 and 17.
\61\ Deposition of Neil Paul Reiff Esq., June 20, 1997, p. 30.
\62\ Deposition of Joseph E. Sandler, May 15, 1997, p. 47.
\63\ For a fuller account, see the section of this report on The
DNC Dismantled Vetting System.
---------------------------------------------------------------------------
In addition to strengthening sanctions imposed upon those
who do not take appropriate precautions to avoid violating
existing FECA provisions, witnesses at the Committee's hearings
raised the possibility of establishing through law stringent
vetting procedures. There are currently no established
statutory or regulatory requirements detailing appropriate
vetting procedures to be utilized by political committees to
ensure acceptance of contributions within the limitations and
prohibitions of the FECA. Such vetting procedures could be
modeled after the FEC's regulatory requirements detailing the
best efforts required of political committees to obtain
required contributor information.
As a result of the discussion above, application of the
foreign contribution prohibition to soft money also might be
reformulated. Banning contributions from permanent non-citizen
residents did not meet with much approval when it was discussed
during the Committee's hearings.64 One alternative
raised would prohibit those who cannot legally vote from
contributing to political campaigns (i.e., non-U.S. citizens,
as well as those who are not 18 years old or who are convicted
felons).65 A bright line test such as a voting
eligibility requirement is easily understandable and could be
communicated through a required disclaimer on all campaign
solicitations.
---------------------------------------------------------------------------
\64\ Discussion between Senator Akaka and Thomas E. Mann, September
24, 1997 pp. 55-56.
\65\ Discussion between Senator Akaka and Thomas E. Mann, September
24, 1997, p. 56.
---------------------------------------------------------------------------
IV. Advocacy Standards
A. Issue advocacy, express advocacy and electioneering message
The FECA, as interpreted by the FEC and various court
opinions, allows the government regulation of the political
speech of corporations, unions, non-profits and individuals on
First Amendment grounds in only those instances containing
express advocacy of the election or defeat of a clearly
identifiable candidate.66 The Supreme Court in
Buckley v. Valeo indicates the following explicit advocacy
terms satisfy the strict ``express advocacy'' test applied when
limiting First Amendment rights: ```vote for,' `elect,'
`support,' `cast your ballot for,' `Smith for Congress,' `vote
against,' `defeat,' `reject.''' 67 Still, at no
point did the Court state that this list was exhaustive. The
Court stated such a strict line was required because,
---------------------------------------------------------------------------
\66\ Buckley v. Valeo, 424 U.S. 1 (1976); see caveat in
Coordination section below.
\67\ Buckley, 424 U.S. at 44 n.52.
the distinction between discussion of issues and
candidates and advocacy of election or defeat of
candidates may often dissolve in practical application.
Candidates, especially incumbents, are intimately tied
to public issues involving legislative proposals and
governmental actions. Not only do candidates campaign
on the basis of their positions on various public
issues, but campaigns themselves generate issues of
public interest.68
---------------------------------------------------------------------------
\68\ Id. at 42.
According to the Court, a standard that depends on the
speaker's intent or purpose has a chilling effect on political
speech.
Applying the Supreme Court's reasoning in Buckley, the
Ninth Circuit in Federal Election Commission v. Furgatch, 807
F. 2d 857 (1987), cert denied, 484 U.S. 850 (1987) reviewed the
following advertisement text:
DON'T LET HIM DO IT.
The President of the United States continues
degrading the electoral process and lessening the
prestige of the office.
It was evident months ago when his running mate
outrageously suggested Ted Kennedy was unpatriotic.
The President remained silent.
And we let him.
It continued when the President himself accused
Ronald Reagan of being unpatriotic.
And we let him do it again.
In recent weeks [Jimmy] Carter has tried to buy
entire cities, the steel industry, the auto industry,
and others with public funds.
We are letting him do it.
He continues to cultivate the fears, not the hopes,
of the voting public by suggesting the choice is
between ``peace and war,'' ``black or white,'' ``north
or south,'' and ``Jew vs. Christian.'' His meanness of
spirit is divisive and reckless McCarthyism at its
worst. And from a man who once asked, ``Why not the
best?''
It is an attempt to hide his own record, or lack of
it. If he succeeds the country will be burdened with
four more years of incoherences, ineptness and
illusion, as he leaves a legacy of low-level
campaigning.
DON'T LET HIM DO IT.69
---------------------------------------------------------------------------
\69\ Furgatch, 807 F.2d at 858.
Despite the lack of any of the magic words from Buckley,
the Ninth Circuit found this to constitute express advocacy.
The opinion specifically stated, ``[a] test requiring the magic
words `elect,' `support,' etc., or their nearly perfect
synonyms for a finding of express advocacy would preserve the
First Amendment right of unfettered expression only at the
expense of eviscerating the Federal Election Campaign Act.
`Independent' campaign spenders working on behalf of candidates
could remain just beyond the reach of the Act by avoiding
certain key words while conveying a message that is
unmistakably directed to the election or defeat of a named
candidate.'' 70 Instead of the magic words test, the
Furgatch court outlined the following three prong test to
determine whether advocacy comes within the purview of the
FECA: (1) speech constitutes express advocacy if it is
``unmistakable and unambiguous, suggestive of only one
plausible meaning;'' (2) such express advocacy speech must
present a ``clear plea for action''; and (3) it must be clear
what action is being advocated.
---------------------------------------------------------------------------
\70\ Id. at 863.
---------------------------------------------------------------------------
When applying Buckley to determine whether advocacy falls
within the regulatory framework of the FEC, other federal
appeals courts have held that the express advocacy test set out
in Buckley can only be met by communications that contain
explicit and unambiguous words that urge readers (or viewers)
to elect or defeat a clearly identified candidate. This
includes the First [Faucher v. Federal Election Commission, 928
F. 2d 468 (1991), cert. denied sub nom., 502 U.S. 820 (1991)],
the Second [Federal Election Commission v. Central Long Island
Tax Reform Immediately Committee, 616 F. 2d 45 ( 2d Cir.
1980)], and the Fourth circuit [Federal Election Commission v.
Christian Action Network, 894 F. Supp. 946 (W.D. Va. 1995),
aff'd, No. 95-2600, slip op. (3d Cir. Aug. 2, 1996)].
When the FEC tried to incorporate the Furgatch express
advocacy standard into its regulations it was successfully
challenged in the First Circuit, where a district court ruled
the new regulations are unconstitutional on their face. Maine
Right to Life Committee, Inc. v. Federal Election Commission,
914 F. Supp. 8 (D. Me. 1996). In striking down the Commission's
``express advocacy'' regulations, the court distinguished
between mere ``contact,'' which the court ruled cannot be
regulated, and issue advocacy that is ``coordinated'' with or
authorized by a candidate, which the court suggested could be.
The court pointed out that ``Buckley talked only about
prohibiting expenditures `authorized or requested by the
candidate,' interpreted at its broadest as `all expenditures
placed in cooperation with or with the consent of a candidate.'
The FEC has gone far beyond `cooperation' or `consent' in these
prohibitions of all contact and consultation in the preparation
of voter guides . . .'' 71
---------------------------------------------------------------------------
\71\ Clifton v. Federal Election Commission, 927 F.Supp. 493, 499
(D. Me. 1996).
---------------------------------------------------------------------------
Thus, currently the laws have been interpreted to allow
pure uncoordinated ``issue advocacy'' to be paid for directly
by corporations, unions, non-profits or individuals with soft
money (i.e. from sources and in amounts beyond the prohibitions
and limitations of the FECA). In the 1996 cycle this
distinction led to abuses as unions and non-profits ran ``issue
advertisements.'' Evidence shows that these advertisements were
coordinated with candidate committees, and in some instances
seem to cross the line from issue based advertising into
candidate targeted express advocacy.
As opposed to the clearly independent entities discussed
above, the courts have indicated, and the FEC has clearly
implemented, an ``electioneering message'' threshold for
regulation of party committee expenditures coordinated with
federal candidates and made in connection with a candidate's
federal election.'' 72 In her April 14, 1997 letter
to Senator Hatch and the Senate Judiciary Committee, Attorney
General Reno reaffirms the ``electioneering message'' standard
as appropriate when applied to ``party media advertisements
that focus on `national legislative activity.''' 73
The FEC advisory opinions cited by the Attorney General define
``electioneering message'' to mean statements ``designed to
urge the public to elect a certain candidate or party.''
74 This distinction from the standard applied to
independent groups flows from the following Supreme Court
discussion found in Buckley:
---------------------------------------------------------------------------
\72\ See FEC Advisory Op. 1995-25, 2 Fed. Elec. Camp. Fin. Guide
(CCH) para. 6162, at 12,109-12,110 (August 24, 1995); and FEC Advisory
Op. 1985-14, 2 Fed. Elec. Camp. Fin. Guide (CCH) para. 5819, at 11,185-
11, 186 (May 30, 1985).
\73\ Reno Letter to Hatch, April 14, 1997 at 7 (citing FEC Advisory
Opinions above).
\74\ FEC Advisory Op. 1985-14, 2 Fed. Elec. Camp. Fin. Guide (CCH)
para. 5819, at 11,185-11, 186 (May 30, 1985).
[I]ndependent advocacy . . . does not presently
appear to pose dangers of real or apparent corruption
comparable to those identified with large campaign
contributions. The parties defending [the FECA] contend
that it is necessary to prevent would-be contributors
from avoiding the contribution limitations by the
simple expedient of paying directly for media
advertisements or for other portions of the candidate's
campaign activities. They argue that expenditures
controlled by or coordinated with the candidate and his
campaign might well have virtually the same value to
the candidate as a contribution and would pose similar
dangers of abuse. Yet such controlled or coordinated
expenditures are treated as contributions, rather than
expenditures under the Act (emphasis added). [The
FECA's] contribution ceilings . . . prevent attempts to
circumvent the Act through prearranged or coordinated
expenditures amounting to disguised contributions . . .
The absence of prearrangement and coordination of an
expenditure with the candidate or his agent not only
undermines the value of the expenditure to the
candidate, but also alleviates the danger that
expenditures will be given a quid pro quo for improper
commitments from the candidate.75
---------------------------------------------------------------------------
\75\ Buckley v. Valeo, 424 U.S. 1, 46-47.
The Court later limited the express advocacy standard to the
banks, corporations, and labor organizations discussed in
---------------------------------------------------------------------------
section 441b of the FECA:
[W]hen the maker of the expenditure is not within
these categories--when it is an individual other than a
candidate or a group other than a `political
committee'--the relation of the information sought to
the purposes of the Act may be too remote. To insure
that the reach of Sec. 434(e) [detailing FECA reporting
requirements] is not impermissibly broad, we construe
`expenditure' for purposes of that section . . . to
reach only funds used for communications that expressly
advocate the election or defeat of a clearly identified
candidate.76
---------------------------------------------------------------------------
\76\ Buckley, 424 U.S. at 80 (emphasis added). See also FEC v.
Massachusetts Citizens for Life (``MCFL''), 479 U.S. 238, 249 (1986).
The Court in Buckley made clear that the term ``political
committees'' can ``only encompass organizations that are under
the control of a candidate or the major purpose of which is the
nomination or election of a candidate. Expenditures of
candidates and of `political committees' so construed can be
assumed to fall within the core area sought to be addressed by
Congress.'' 77 As provided throughout the FECA,
``political committees'' are more highly regulated than other
entities. Thus, coordinated electioneering messages by
political committees (such as the DNC) must be paid for with so
called hard-money (money acquired within the limits established
by the FECA and from non-prohibited sources).
---------------------------------------------------------------------------
\77\ Buckley, 424 U.S. at 79.
---------------------------------------------------------------------------
B. Examples of questionable issue advocacy
1. The DNC
In the 1996 election the Governmental Affairs Committee
investigation found blatant electioneering messages illegally
paid for with soft money funds by the Democratic National
Committee and its affiliated state party committees, all of
which were made at the behest of the Clinton/Gore '96 campaign.
In clear contradiction to the FECA, court pronouncements and
FEC guidance, these party committees maintained that their
advertisements were immune from federal regulation because they
constituted issue advertisements, which did not expressly
advocate the election or defeat of the Clinton/Gore ticket.
Such attempts at clever obfuscation of the appropriately
applicable legal standard, through positive or negative
portrayal of certain candidates in the context of issues, does
not ultimately exempt a party committee from the electioneering
message standard.
The following are sample DNC and Democratic state party
committee advertisements which the investigation reviewed from
videotapes, and which appear to constitute ``electioneering
messages'' within the FECA's jurisdiction (despite DNC
insistence that they are appropriate issue advertisements)
outside the jurisdiction of the FECA:
``American values. Do our duty to our
parents. President Clinton protects Medicare. The Dole/
Gingrich budget tried to cut Medicare $270 billion.
Protect families. President Clinton cut taxes for
millions of working families. The Dole/Gingrich budget
tried to raise taxes on eight million of them.
Opportunity. President Clinton proposes tax breaks for
tuition. The Dole/Gingrich budget tried to slash
college scholarships. Only President Clinton's plan
meets our challenges, protects our values.''
``America's values. Head Start. Student
loans. Toxic cleanup. Extra police. Protected in the
budget agreement; the President stood firm. Dole,
Gingrich's latest plan includes tax hikes on working
families. Up to 18 million children face healthcare
cuts. Medicare slashed $67 billion. Then Dole resigns,
leaving behind the gridlock he and Gingrich created.
The President's plan: Politics must wait. Balance the
budget, reform welfare, protect our values.''
``Head Start. Student loans. Toxic cleanup.
Extra police. Anti-drug programs. Dole, Gingrich wanted
them cut. Now they're safe. Protected in the '96
budget--because the President stood firm. Dole,
Gingrich? Deadlock. Gridlock. Shutdowns. The
President's plan? Finish the job, balance the budget.
Reform welfare. Cut taxes. Protect Medicare. President
Clinton says get it done. Meet our challenges. Protect
our values.''
``The President says give every child a
chance for college with a tax cut that gives $1,500 a
year for two years, making most community colleges
free, all colleges more affordable . . . And for
adults, a chance to learn, find a better job. The
President's tuition tax cut plan.''
``Protecting families. For millions of
working families, President Clinton cut taxes. The
Dole-Gingrich budget tried to raise taxes on eight
million. The Dole-Gingrich budget would have slashed
Medicare $270 billion. Cut college scholarships. The
President defended our values. Protected Medicare. And
now, a tax cut of $1,500 a year for the first two years
of college. Most community colleges free. Help adults
go back to school. The President's plan protects our
values.''
The Republican National Committee's issue advocacy campaign
seems to have complied with the law. It is true that the RNC
broadcast a series of commercials highlighting key legislative
and other issues confronting the country during the spring and
summer of 1996. It also ran a commercial discussing traditional
American values shared by Senator Dole in helping to formulate
the Republican legislative agenda. The commercial called on
Americans to urge their elected officials to support the agenda
of welfare reform, criminal justice reform, and ending wasteful
government spending. In educating Americans on these key
issues, the RNC's spots did not expressly advocate the election
or defeat of any candidate, and do not otherwise seem to
reflect an electioneering message.
The Committee found no evidence of coordination between
Senator Dole and the RNC sufficient to make these RNC issue
advertisements in-kind contributions to the Dole for President
Committee. The Committee gathered no evidence contradicting
Senator Dole's assertion that the RNC retained editorial
control over its advertising at all times.78 There
is no evidence that anyone at the Dole for President
Committee--including Senator Dole--dictated what the content of
RNC advertisements would be, or decided where or how often the
advertisements would be broadcast.
---------------------------------------------------------------------------
\78\ Dole: Illegal Ads Cost Him Election, AP Wire Story, January 9,
1998.
---------------------------------------------------------------------------
2. Unions and non-profits 79
---------------------------------------------------------------------------
\79\ For a detailed discussion of 1996 nonprofit activity reviewed
by the Committee's investigation see the section of this report on
``Misuse of Nonprofit Groups in the 1996 Elections.''
---------------------------------------------------------------------------
While the Democratic National Committee opened the soft
money advocacy wars in 1995 with advertisements designed to
deter primary challengers to President Clinton and bolster his
support by portraying him as standing up to the new Republican
congressional majority,80 the AFL-CIO followed suit
by announcing a $35 million soft money issue advertising
campaign aimed at the legislative records of potentially
vulnerable Republican House incumbents.81 As
discussed in the Misuse of Nonprofits section of this report,
these advertisements often crossed over into express advocacy
due to the level of alleged coordination between candidates and
the AFL-CIO. After the conventions, a variety of issue groups
and organizations, usually tax-exempt 501(c)(4) organizations,
began running ``issue ads'' to counter the AFL-CIO efforts in
targeted districts and states.82
---------------------------------------------------------------------------
\80\ See the section of this report on The Thirst for Money.
\81\ Id.
\82\ Id.
---------------------------------------------------------------------------
Currently, tax-exempt organizations that utilize issue
advocacy attempt not to cross the line into judicially defined
express advocacy to avoid election law limits on the amount and
sources of campaign contributions and contributor restrictions.
However, such non-profits often secretly, and illegally,
coordinate their efforts with the candidates they favor in
particular elections. Such mixing of politics and non-profits
carries little risk to any politician who might benefit because
financial penalties imposed by the Internal Revenue Code for
prohibited political activity can only be levied against the
charity and its managers. Besides, by the time the IRS pursues
such activity the money can be spent and the organization
disbanded.
C. Proposed reform
The Committee heard testimony from Professor Daniel R.
Ortiz, that ``[t]o anyone interested in campaign finance
reform, issue advocacy is the 800-pound gorilla. Without taming
it, campaign finance reform--no matter how thoroughly it
addresses public funding, soft money, PACs, and other perceived
problems--will come to naught.'' 83 Nothing in the
Buckley decision, or the First Amendment, prevents Congress
from substituting a better definition for election related
activity that is more encompassing than the magic words express
advocacy standard. While the Buckley decision criticized any
express advocacy standard based on a subjective interpretation
of the speaker's intent, one option is to establish a
``totality of the circumstances test'' for FECA application to
speech that would objectively gauge the speaker's intent. Such
a standard would incorporate such considerations as proximity
to the election, the use of the candidates' name or likeness,
and whether the ad is geographically targeted.84
Under this approach, much of what was labeled ``issue
advertising'' during the 1996 elections would fall within FECA
regulation, and thus the money used to pay for such ads would
have to be raised and reported in accordance with the federal
election laws. Thus unions, corporations, non-profits and
others wishing to run candidate targeted electioneering
advertisements would need to raise funds for such ads in
accordance with the FECA.
---------------------------------------------------------------------------
\83\ Testimony of Daniel R. Ortiz, September 25, 1997, p. 19.
\84\ Neuborne testimony, p. 136.
---------------------------------------------------------------------------
Another proposal would require any advocacy that uses a
federal candidate's name or likeness in a given period of time
before a primary or general election date to be paid for with
funds within the prohibitions and limitations of the FECA, and
appropriately disclosed through reporting.85 A 90
day time frame often has been suggested for such reporting
because it reflects the same time frame used by Congress to
limit lawmakers'' postal patron mass-mailing communications.
This proposal maintains the magic words express advocacy test
of Buckley prior to the 90 day period, and might pass the
Supreme Court's compelling interest test by imposing reporting
obligations on issue advocacy for only a very limited time
period. Unions, corporations and non-profits could run issue
ads as they did in the 1996 race up until this 90 day
threshold, after which they could continue their activity if
they utilized hard money from affiliated political action
committees, which register and report. The undergirding
rationale behind this proposal is that the mention or
appearance of any candidate in mass media advertising is bound
to have some impact on that candidate's election, and that the
Court might interpret Buckley to find the totality of the
circumstances (e.g. timing close to an election) compelling
enough in such a situation to allow ``issue advertisements'' to
be treated as a campaign contribution. Furthermore, the courts
have been more receptive to restrictions placed upon
corporations and unions than any other groups. Pure issue
advocacy groups (e.g. The Sierra Club, the NRA, NARAL, the
National Right to Life Committee, etc.) that wish to engage in
candidate directed issue advocacy during this limited 90 day
time period could establish registered and reporting separate
segregated funds for such activity during that time
period.86
---------------------------------------------------------------------------
\85\ See McCain/Feingold proposed legislation.
\86\ Neuborne Opening Statement, Sept. 25, 1997, Hearing
Transcript, pp. 130-140.
---------------------------------------------------------------------------
In response to proposed expansions in the definition of
express advocacy, the obvious First Amendment sensitivity to
regulating issue advocacy leads many to believe any limits
violate the right to free speech. In his testimony before the
Committee Professor Roger Pilon,Senior Fellow at the Cato
Institute, cited Buckley when he argued that limitations on
contributions and expenditures ``are subject to strict judicial
scrutiny: they must serve a `compelling state interest' employing the
`least restrictive means.' '' 87 Although it is not
explicitly clear whether a more encompassing definition of express
advocacy is desirable, or even constitutional, if the course of non-
action is followed, it must be recognized that Congress would be
encouraging further growth of union, corporate non-profit and
individual independent expenditures. As was witnessed in the 1996
election, such independent expenditures often drown out the
advertisements of the very candidates competing in certain
congressional elections. Senator Bennett indicated during testimony
that he and other candidates want more, not less, control of their own
campaigns.88
---------------------------------------------------------------------------
\87\ Pilon testimony, pp. 143-144.
\88\ Hearing Testimony of Senator Bennett, Sept. 24, 1997, pp. 63 &
64.
---------------------------------------------------------------------------
As a result of the Supreme Court's application of the
compelling state interest test to the regulation of issue
advocacy, some argue in favor of a constitutional amendment
allowing limited regulation of political speech, as opposed to
other First Amendment protections. It has been argued that the
constriction of the free speech rights of private groups and
political candidates increased the influence and power of the
press, and is therefore bad public policy.89 As
Edward H. Crane, President of the CATO Institute, noted during
the Committee's hearings, ``[t]he media functions as a
gatekeeper of information to the public and its gatekeeping
role is reduced when candidates [or third parties] can
communicate directly with the voters.'' 90
---------------------------------------------------------------------------
\89\ Brent Thompson, Will campaign reform hurt?, Washington Times,
1/14/97.
\90\ Testimony of Edward H. Crane, Sept. 24, 1997, p. 139, ll. 17-
20.
---------------------------------------------------------------------------
V. Coordination
The Supreme Court in Buckley distinguished between
``independent'' advocacy and advocacy coordinated with a
candidate when it declared restrictions on independent spending
by individuals unconstitutional.91 If an entity's
express advocacy expenditures are ``coordinated'' with
candidates, the expenditures are treated as in-kind
contributions that are applicable to the entity's contribution
limits. The courts have only recently begun to address whether
individuals and organizations who fund issue advocacy must also
act independently of candidates, or otherwise risk exposure to
the financial limitations, prohibitions, registration and
reporting requirements of the FECA. On the other hand, as will
be discussed below, FEC enforcement matters have clearly
determined that coordination of any advocacy results in in-kind
contributions subject to FECA regulation.
---------------------------------------------------------------------------
\91\ Buckley, 424 U.S. at 46-47.
---------------------------------------------------------------------------
In Colorado Republican 92 the Supreme Court
overruled the previously accepted presumption that a party
committee could not make independent expenditures, but in doing
so made the degree of coordination between candidates and their
party committees the crucial determining factor in deciding
whether the expenditure was truly ``independent.'' Indeed, in
the Court's view, the ``constitutionally significant fact''
requiring the absence of limits on independent expenditures
``is the lack of coordination between the candidate and the
source of the expenditures.'' 93 The Court
recognized that the FECA's structure would make no sense if the
FECA's limits could be easily circumvented through the actions
of third parties who coordinated with candidates. Importantly,
Justice Breyer's plurality opinion was not the only one that
stressed coordination in determining the legality of the
regulation of the relationship between a party and its
candidates. Two additional justices, who along with the three
justices joining in Justice Breyer's opinion constitute a
majority of the Court, believe that all party spending on
behalf of a candidate is a ``contribution,'' and hence subject
to the FECA limits.94
---------------------------------------------------------------------------
\92\ Colorado Republican Federal Campaign Committee v. FEC, 116 S.
Ct. 2309 (1996).
\93\ Id. at 2317.
\94\ Id. at 2332.
---------------------------------------------------------------------------
The Committee's investigation discovered that the Clinton/
Gore '96 Re-election campaign not only subverted the Federal
Election Campaign Act by coordinating spending and other
activities with the Democratic National Committee, but in fact
the DNC served as little more than a conduit through which
funds raised by the reelection campaign were funneled into
advertisements commissioned, designed, revised and placed by
the reelection campaign in order to advance the President's
reelection chances. Here again, those involved in the political
process have stretched to the breaking point an illogical
interpretation of a provision of the FECA, in clear
contradiction to FEC guidance, all in order to gain advantage.
During 1995 and 1996 the DNC paid for a variety of advocacy
pieces supporting the re-election of Bill Clinton and Al Gore
under the thin guise of issue advertisements. These
advertisements were paid for using soft money.95 An
Annenberg Public Policy Center Report indicates that about $44
million in soft money was used for such DNC
advertising.96 None of these ads were counted
against the 1996 DNC presidential campaign coordinated
expenditure limit of $11,994,007.97 There is also
evidence that the Clinton/Gore '96 campaign coordinated its
activities through the DNC with the AFL-CIO, EMILY's List, and
others.98 The degree of coordination between the
DNC, and these other entities, and agents of the Clinton/Gore
'96 campaign committee raises the specter of a wide variety of
Federal Election Campaign Act violations.
---------------------------------------------------------------------------
\95\ See the section of this report on The Thirst for Money.
\96\ The Annenberg Pub. Policy Ctr., No. 16, Issue Advertising
During the 1996 Campaign: A Catalog (1997).
\97\ 1996 Coordinated Party Expenditure Limits, 22 Federal Election
Commission Record 14 (April, 1996).
\98\ See specific discussions of these organizations in the section
of the report on Misuse of Nonprofit Groups.
---------------------------------------------------------------------------
A. The law
The FECA defines ``contribution'' to include ``any gift,
subscription, loan, advance, or deposit of money or anything of
value made by any person for the purpose of influencing any
election for Federal office.'' 99 Under the FECA,
payment for a communication made ``for the purpose of
influencing any election for Federal office'' is automatically
considered a contribution if it is made by any person ``in
cooperation, consultation, or concert, with, or at the request
or suggestion of, a candidate, his authorized political
committees, or their agents.'' 100
---------------------------------------------------------------------------
\99\ 2 U.S.C. Sec. 431(8).
\100\ 2 U.S.C. Sec. Sec. 431(9)(A)(i), 441a(a)(7)(B)(i).
---------------------------------------------------------------------------
Pursuant to these statutory directives, the FEC has issued
regulations that clearly and directly state that coordination
of an expenditure with a candidate places such expenditure
within the purview of the FECA. The FEC regulations elaborate
on the statute by asserting a presumption of coordination when
an expenditure is made ``[b]ased on information about the
candidate plans, projects, or needs provided to the expending
person by the candidate, or by the candidate's agents, with a
view toward having an expenditure made. . . .'' 101
Under the FEC's regulations, the financing of the dissemination
of any broadcast or other form of campaign materials prepared
by the candidate, his campaign committees, or their authorized
agents in cooperation or consultation with a third party shall
be considered a contribution to that candidate from the third
party for the purpose of contribution limitations and shall be
the reporting responsibility of the person making the
expenditure.102 Such contributions are illegal if
they violate the prohibitions and limitations of the FECA.
---------------------------------------------------------------------------
\101\ 11 C.F.R. 109.1(b)(4)(i)(A).
\102\ 11 C.F.R. Sec. 109.1(d)(1).
---------------------------------------------------------------------------
The FEC has pursued the issue of coordination in a variety
of enforcement cases. In one such case, the FEC found illegal
coordination when the agent of a presidential candidate
committee recommended a vendor to assist an outside individual
in towing a banner behind an airplane that read ``No Draft
Dodger for President.'' 103 Based on this illegal
coordination, the FEC found the campaign had received an in-
kind contribution. While the campaign committee certainly never
maintained any control over the individual's expenditure, and
the message did not contain express advocacy of a distinctly
identifiable candidate, the FEC nonetheless found a violation.
In the end, the presidential political committee admitted to
the violation by its agent and paid a civil penalty.
---------------------------------------------------------------------------
\103\ FEC Enforcement Matter Under Review 3608.
---------------------------------------------------------------------------
In the FEC enforcement case most analogous to the
coordination undertaken between President Clinton's reelection
campaign committee and the DNC, the FEC found similar
circumstances to constitute illegal coordination resulting in
an excessive in-kind contribution. The FEC emphasized
coordination in the Hyatt Legal Services enforcement
case,104 in which the candidate's principal media
consultant also prepared issue advertisements on the public
policy issues of health care and crime for an outside
organization bearing the candidate's name. The Hyatt for Senate
Committee's ``campaign director'' acted as liaison between the
media consultants and the outside organization, and, in
addition, the candidate exercised final editorial approval over
each of the scripts for the third party organization's radio
advertisements. As the FEC conceded, these advertisements
definitely did not constitute express advocacy advertisements
under Buckley, and they were paid for with soft money.
Nonetheless, the FEC found the coordination between the
campaign and the third party organization sufficient to make
the expenditures for these advertisements illegal under the
FECA.
---------------------------------------------------------------------------
\104\ FEC Enforcement Matter Under Review 3918.
---------------------------------------------------------------------------
To reach this conclusion the FEC used the following logic.
Payments for any communication made for the purpose of
influencing a federal election are contributions if the
communication is coordinated with a candidate, a candidate's
committee, or agents of the candidate or
committee.105 The FEC determined that certain
communications or activities involving the participation or
control of a federal candidate resulted in a contribution or
expenditure on behalf of the candidate if: ``(1) direct or
indirect reference is made to the candidacy, campaign or
qualifications for public office of you or your opponent;'' or
(2) reference was made to ``your views on public policy issues,
or those of your opponent, or [to any] issues raised in the
campaign;'' or ``(3) distribution of the newsletter is expanded
significantly beyond its present audience, or in any manner
that otherwise indicates utilization of the newsletter as a
campaign communication.'' 106
---------------------------------------------------------------------------
\105\ 2 U.S.C. Sec. 441a(a)(7)(B)(i).
\106\ See FEC Enforcement MUR 3918 [citing FEC Advisory Op. 1990-5,
2 Fed. Election Camp. Fin. Guide (CCH) para. 5982 at 11,612 (March 27,
1990)].
---------------------------------------------------------------------------
Under FEC regulations and decisions, any issue
advertisement containing an ``electioneering message'' and
coordinated by a union, corporate, or non-profit sponsor with a
candidate falls under the FECA's definition of ``contribution''
and its applicable limits.107 Although to date the
courts have not definitively dealt with coordination in the
issue advocacy context, Attorney General Reno's April 14, 1997
letter to the Senate Judiciary Committee acknowledged the
central importance of coordination when advocacy materials
contain an ``electioneering message.'' 108 In citing
FEC Advisory Opinion 1985-14, Attorney General Reno brought to
the forefront the FEC's emphasis on coordination. As noted
above, in AO 1985-14 the FEC held that ``[e]lectioneering
messages include statements ``designed to urge the public to
elect a certain candidate or party.'' 109 Although
the FEC concluded that the ``issue advertisements''
specifically outlined in the request were not subject to the
FECA limitations, it explicitly based its decision on the
complete lack of coordination. The FEC stated it viewed the
request ``as limited to the situation where expenditures for
these communications are made without any consultation or
cooperation, or any request or suggestion of, candidates
seeking election to the House of Representatives in the
selected districts.'' 110
---------------------------------------------------------------------------
\107\ Noble testimony, September 25, 1997, p. 73.
\108\ Letter from Attorney General Reno to Senator Orrin Hatch,
April 14, 1997, at 7.
\109\ Fec Advisory Op. 1985-14, 2 Fed. Election Camp. Fin. Guide
(CCH) para. 5819 at 11,185 (April 12, 1985).
\110\ Id.
---------------------------------------------------------------------------
Lyn Utrecht, General Counsel for Clinton/Gore '96, argues
that a political party is legally allowed to coordinate
activities with the party's Presidential candidate because that
candidate may even designate the national committee of his
party as his own principal campaign committee. Ms. Utrecht
fails to note that the same sections of the FECA and FEC
regulations that allow a presidential candidate to declare a
national party committee as his authorized campaign committee,
also require that national party committee to maintain separate
books of account for that purpose.111 Furthermore,
at no time did the Clinton/Gore '96 campaign designate the DNC
as its principal campaign committee, nor did it maintain
separate books of account as such a designation would require.
She argues that the Commission has always presumed coordination
between a party committee and its presidential
candidate.112 Ms. Utrecht fails to note that the
Supreme Court in the Colorado Republican
decision,113 discussed above, definitively stands
for the proposition that party committee's cannot be presumed
to coordinate with candidates. Furthermore, the existence of
FECA coordinated party expenditure limits for presidential
candidates is illusory if Ms. Utrecht's interpretation is
adopted.114
---------------------------------------------------------------------------
\111\ See 2 U.S.C. Sec. 432(e)(3)(A)(i) & C.F.R. Sec. 102.12(c)(1).
\112\ Lyn Utrecht, Issue Ads: They're Legal, The Washington Post,
December 4, 1997, at A23 [hereinafter: Issue Ads].
\113\ Colorado Republican Federal Campaign Committee v. FEC, 116 S.
Ct. 2309 (1996).
\114\ 2 U.S.C. Sec. 441a(d)(2).
---------------------------------------------------------------------------
B. Reform related to coordination
The degree of coordination undertaken between the DNC and
the Clinton/Gore '96 campaign cannot be justified in light of
prior court opinions, despite the lack of an explicit Supreme
Court decision directly on point about coordination between a
party committee and a party candidate.115 As a
result of a clear reading of the FECA and prior FEC guidance,
the current General Counsel of the Federal Election Commission
unequivocally stated the following in the Committee's
investigatory hearings:
---------------------------------------------------------------------------
\115\ Discussion between Thompson and Thomas E. Mann, Sept. 24,
1997, pp. 25-26.
The Commission views coordination as relevant. It
does matter. A candidate coordinating an ad may turn
that ad into a contribution to the candidate and, thus,
soft money would be prohibited being used for that ad.
116
---------------------------------------------------------------------------
\116\ Noble testimony, p. 34, ll 17-20.
Committee hearing discussion on coordination reform
centered mainly on the need for legislation clarifying the
legal status of issue advertising paid for by third parties and
coordinated with candidate committees.117 Trevor
Potter, a former Chairman of the FEC, maintained before the
Committee that the Buckley decision clearly stands for the
proposition that ``if spending by some third party is
controlled by a candidate, is done at the direction of the
candidate, then it can be attributed to the candidate.''
118 Professor Daniel Ortiz concurred by stating,
``if there is direct coordination between a candidate and an
individual or any of these other entities . . . there is a very
strong argument that should count as an in-kind contribution .
. .'' 119 It was thus proposed that coordination
regarding issue advocacy be more explicitly prohibited between
candidates and third parties.120 Norman Ornstein
pointed out the following:
---------------------------------------------------------------------------
\117\ Discussion between Senator Cochran and Don Simon, Sept. 24,
1997, pp. 92-94.
\118\ Potter testimony, September 25, 1997, p. 36.
\119\ Ortiz testimony, September 25, 1997, p. 37.
\120\ Mann testimony, September 24, 1997, p. 26.
What the Supreme Court set up in the law as an
independent expenditure, which meant that there could
be no coordination with parties or candidates, referred
to express advocacy and hard money. What we are now
finding is people have begun to use that definition to
get around it so that they can, in fact, collude
together in ways that I think go against the grain of
what we hope to have in a free and robust political
debate in our process where you know who is making the
charges and where you have some sense of where things
are coming from.121
---------------------------------------------------------------------------
\121\ Ornstein testimony, p. 57, ll. 4-13.
In the view of various witnesses, reformers should be
careful not to shut down the availability of disclosed soft
money, only to encourage candidates to hide their donations
through unreported coordinated issue advocacy with third
parties.122 As Thomas Mann testified,
---------------------------------------------------------------------------
\122\ Mann testimony, September 23, 1997, p. 65.
if you ban soft money but do nothing about issue
advocacy, the parties, the candidates, and most
importantly, the consultants, will rush to this
opportunity to engage in undisclosed coordination of
private dollars going to sham issue advocacy campaigns,
which will do more than anything else to undermine the
whole notion of accountability of candidates and
parties in our elections.123
---------------------------------------------------------------------------
\123\ Mann testimony, September 24, 1997, p. 24.
---------------------------------------------------------------------------
VI. Corporate and Union Spending in U.S. Federal Elections
124
---------------------------------------------------------------------------
\124\ Some of the following discussion is attributable to: U.S.
Library of Congress. Congressional Research Service. The Use of Union
Dues for Political Purposes and Agency Fee Objectors. CRS Report 97-555
E, by Gail McCallion, October 14, 1997; and Political Spending by
Organized Labor: Background and Current Issues. CRS Report 96-484 GOV,
by Joseph E. Cantor.
---------------------------------------------------------------------------
During the Committee's investigation, there was much
discussion on the proper role of unions and corporations in
federal elections, and specifically the appropriate use of
membership dues paid to the unions or general treasury funds
expended by corporations. Due to the disproportionate influence
that unions and corporations are able to exert as a result of
their ability to accumulate large amounts of funds, they have
long been restricted in their involvement in the federal
electoral process. The combined wealth of the corporate
community is an undeniable fact, and testimony before the
Committee confirmed that unions today continue to hold huge
financial sway, as they ``possess $10 billion in assets
collectively.'' 125
---------------------------------------------------------------------------
\125\ Testimony of Leo Troy, Sept. 24, 1997, p. 169.
---------------------------------------------------------------------------
A. Background
Corporations have been prohibited from directly
contributing to federal candidates since the 1907 Tillman Act.
The Smith-Connally Act, or War Labor Disputes Act of 1943,
first prohibited labor unions from using their treasury funds
to make political contributions to candidates for federal
office. As a war measure, Smith-Connally expired six months
after the end of the World War II, but the ban was made
permanent by including it as one of the provisions of the Taft-
Hartley Act, or the Labor Management Relations Act of 1947.
This prohibition against the use of labor union treasury funds
as a source of candidate contributions has been part of federal
law ever since, and was incorporated along with the analogous
corporate prohibition into the Federal Election Campaign Act at
Section 316.126
---------------------------------------------------------------------------
\126\ ``It is unlawful for any national bank, or any corporation
organized by authority of any law of Congress, to make a contribution
or expenditure in connection with any election to any political office,
or in connection with any primary election or political convention or
caucus held to select candidates for any political office, or for any
corporation whatever, or any labor organization, to make a contribution
or expenditure in connection with any election at which presidential
and vice presidential electors or a Senator or Representative in, or a
Delegate or Resident Commissioner to, Congress are to be voted for, or
in connection with any primary election or political convention or
caucus held to select candidates for any of the foregoing offices, or
for any candidate, political committee, or other person knowingly to
accept or receive any contribution prohibited by this section, or any
officer or any director of any corporation or any national bank or any
officer of any labor organization to consent to any contribution or
expenditure by the corporation, national bank, or labor organization,
as the case may be, prohibited by this section.'' 2 U.S.C.
Sec. 441b(a).
---------------------------------------------------------------------------
Presently, corporations and unions spend money to influence
the political process through four principal
mechanisms.127 First, these entities use separate
segregated funds (called political action committees or PACs)
to influence federal elections. These funds are regulated by
law, and must consist of totally voluntary union member
contributions,128 in the case of union PACs. In the
case of corporate PACs, the money must be garnered voluntarily
from corporate stockholders, executive or administrative
personnel or their families. These PAC funds can be directly
contributed by corporate or union PACs to federal campaigns, or
utilized for independent expenditures, which by definition
expressly advocate the election or defeat of an identifiable
candidate. Despite the voluntary nature of the contributions to
these accounts, the costs of administering such separate
segregated funds (PAC) may be paid out of general treasury
funds. Second, unions are explicitly allowed under the FECA to
conduct unlimited communications with union members and their
families on any subject, including advocacy of the election or
defeat of clearly identifiable federal
candidates.129 Similarly, corporations are allowed
such unlimited communications with stockholders, executive or
administrative personnel. Unions and corporations are further
allowed to conduct nonpartisan registration and get-out-the-
vote campaigns aimed at these same people.130 For
these activities unions and corporations may use non-regulated
general treasury funds (so-called ``soft money''). Third, such
non-regulated union or corporate soft money may be used for
contributions to state and local elections (including
contributions to national parties for use in state and local
elections or other purposes), in those states and local
jurisdictions which do not have their own prohibition against
union or corporate contributions. It has been asserted that
such expenditures have a tangential impact on simultaneously
conducted federal elections. The fourth, and most
controversial, mechanism is the use of so-called issue
advertisements (public education that promote union public
policy perspectives) financed directly out of union revenue,
and consequently, largely paid for by union member and
nonmember dues and fees. Keeping in mind their fiduciary duties
to stockholders, corporations have a similar mechanism
available to them. As our investigation revealed, sometimes
union and corporate revenue is given directly to third party
entities, such as non-profit organizations, so that these
groups may pay for their own issue advertisements outside of
FECA regulation.
---------------------------------------------------------------------------
\127\ U.S. Library of Congress. Congressional Research Service.
Business and Labor Spending in U.S. Elections. CRS Report 97-973 GOV,
by Joseph E. Cantor. October 28, 1997.
\128\ ``It shall be unlawful for such a fund to make a contribution
or expenditure by utilizing money or anything of value secured by
physical force, job discrimination, financial reprisals, or the threat
of force, job discrimination, or financial reprisal; or by dues, fees,
or other moneys required as a condition of membership in a labor
organization or as a condition of employment, or by moneys obtained in
any commercial transaction.'' 2 U.S.C. Sec. 441b(b)(3)(A); See also 11
C.F.R. Sec. 114.5(a).
\129\ 2 U.S.C. Sec. Sec. 431(9)(B)(iii) and 441(b)(b)(2)(A).
\130\ 2 U.S.C. Sec. 441(b)(b)(2)(B).
---------------------------------------------------------------------------
In the 1996 federal elections, the AFL-CIO utilized to its
advantage some of the questionable interpretations imposed on
the vagaries of the FECA to advance its federal candidate
specific political agenda. The AFL-CIO then allegedly expanded
on those questionable interpretations by illegally coordinating
its pursuit of a $35 million ``issue advocacy'' campaign in
1996 with the Clinton/Gore '96 Re-election campaign, as well as
other entities and candidates. The AFL-CIO allegedly carried
out such an advocacy program in part through a special
assessment included in their member's union dues and non-
member's compulsory agency fees, 131 rather than
through their political action committee. The current
controversy over the use of such funds centers on two issues.
First, there is the question of whether such advertisements
were actually issue based, or rather, cleverly designed
advertisements avoiding the use of express words of advocacy,
but nonetheless aimed at specific federal
candidates.132 The specific activities undertaken by
unions such as the AFL-CIO and problems associated with issue
advocacy, as well as proposals for legislative action in that
area, are found elsewhere in this report. This section of the
report centers on the second issue, which involves agency fees
required to be paid by all individuals covered by union
bargaining agreements as part of union security agreements
permitted in 29 states and the District of Columbia.
---------------------------------------------------------------------------
\131\ Full union members pay union dues voluntarily, as opposed to
those who resign from the union. In non-right to work states these non-
members are compelled to pay ``agency fees'' for that portion of union
expenses determined to be germane to collective bargaining.
\132\ Discussion between Senator Bennett and Norman J. Ornstein,
September 23, 1997, pp. 90-91.
---------------------------------------------------------------------------
In non-right to work states union security agreements are
agreements between employers and unions that require employees
to give financial support to unions as a condition of
employment. Section 8(a)(3) of the National Labor Relations Act
(NLRA) and Section 2, Eleventh of the Railway Labor Act
133 explicitly authorize an employer and a union to
enter into an agreement requiring all employees in the
bargaining unit to pay union dues as a condition of continued
employment, whether or not the employees become union members.
The premise was that under the principle of exclusive
representation, a certified union must represent all the
workers in a bargaining unit, so it is only fair that all such
workers pay their fair share of the union's costs in doing so.
Nonetheless, out of deference to ``states'' rights,'' under the
language of Section 14(b) of the NLRA, individual states are
free to prohibit agency shops and union security clauses in
collective bargaining agreements. The Supreme Court has ruled
that a union security agreement may not require an employee to
actually join a union but only to pay union initiation fees and
dues.134 An employee who chooses not to join is
called a ``financial core member'' or ``dues-paying non-
member'' because he or she continues to provide financial
support to the union but does not participate in other union
activities.
---------------------------------------------------------------------------
\133\ 29 U.S.C. Sec. 158(a)(3), and 45 U.S.C. Sec. Sec. 151-158.
\134\ NLRB v. General Motors Corp., 373 U.S. 734 (1963).
---------------------------------------------------------------------------
The political use of such agency fees paid by financial
core members first reached the U.S. Supreme Court when Harry
Beck and twenty of his coworkers sued the Communications
Workers of America (CWA) over support of Democrat Hubert H.
Humphrey in his bid for the presidency in 1968. Beck and his
colleagues were strong opponents of gun control, and therefore
they filed suit against the CWA over the use of agency fees to
benefit Humphrey, who strongly advocated gun control. It took
until 1988 for the Supreme Court to rule in Communications
Workers of America v. Harry E. Beck, 487 U.S. 735 (``Beck''),
that dues-paying non-member employees covered by union security
agreements may only be charged a pro rata share of union dues
and fees that are attributable to collective bargaining,
contract administration, or grievance adjustment; they may not
be charged a pro rata share of union dues and fees that are
attributable to union expenses for political or ideological
purposes.135 In determining that the CWA should
reimburse all excess fees Beck and his colleagues paid since
January 1976, the Supreme Court majority placed heavy emphasis
on the lower court finding that the union was unable to
establish that any more than 21 percent of its funds were used
in support of collective-bargaining efforts.
---------------------------------------------------------------------------
\135\ See U.S. Library of Congress. Congressional Research Service.
The Use of Compulsory Union Dues for Political Purposes. CRS Report 97-
618 A, by John Contrubis. July 12, 1994.
---------------------------------------------------------------------------
Individuals like Beck, who are members of a bargaining unit
covered by a union security agreement, but who object to the
use of their dues for political purposes, are now called agency
fee objectors.136 In order to pay a reduced agency
fee, an employee must be aware of his right to object to
payment of union political expenses, and then must express his
objection to the union. In addition, in order to qualify as an
agency fee objector, a union member must first resign his union
membership. According to the U.S. Bureau of Labor Statistics,
in 1996 16.3 million individuals age 16 and over were members
of unions (14.5% of all those employed); and, 18.2 million
individuals were represented by unions (16.2% of all those
employed). Thus, in 1996, 1.9 million individuals (including
government workers many of whom cannot be covered by union
security agreements, and agricultural workers) were represented
by unions, but were not union members. There is no way of
knowing the number of union members that, if given the option,
would request a portion of their funds not be utilized for
political purposes.
---------------------------------------------------------------------------
\136\ Id.
---------------------------------------------------------------------------
On April 13, 1992, President George Bush signed Executive
Order 12800. This order directed the Secretary of Labor to
require all companies performing federal contract work to post
notices in their plants and offices during the term of their
contract informing workers of their Beck rights. In do so
President Bush quoted Jefferson's declaration that ``to compel
a man to furnish contributions of money for the propagation of
opinions which he disbelieves and abhors is sinful and
tyrannical.'' Ultimately this all came to naught, as in one of
his first official acts in office, President Clinton issued
Executive Order 12836, rescinding President Bush's Executive
Order 12800.
After President Clinton assumed office all agency
initiatives attempting to support President Bush's Executive
Order 12800 were also stymied. The Department of Labor
(``DOL'') had previously published 28 pages of proposed rules
revising the manner in which labor unions report their
financial condition to the DOL, the NLRB, and their members.
One noteworthy proposed revision pertained to forms LM-2 and
LM-3 and the inclusion of a new schedule entitled ``Statement
C--Expenses,'' which would be used by unions to allocate all
expenses among eight new functional categories: contract
negotiation and administration; organizing; safety and health;
strike activities; political activities; lobbying; promotional
activities; and ``other.'' Internationals and labor
organizations in general were united in the opinion that such
unit-by-unit accounting would be extremely costly and
burdensome, just to account for Beck related costs. On February
10, 1993, the DOL, under Clinton and then Labor Secretary
Robert Reich, proposed a one-year extension in the effective
date of these final rules. In Final Rules issued December 21,
1993 the Clinton administration DOL ultimately rejected most of
the proposed Bush Administration changes.
The NLRB has issued three important decisions, among many
others, interpreting and applying Beck. In two cases issued on
December 20, 1995, California Saw and Knife (320 NLRB 224) and
United Paperworkers International Union (320 NLRB 349), the
Labor Board ruled that unions must inform all workers of their
Beck rights when they are hired; that organizing costs are not
core expenses,137 but lobbying or litigation
expenses are; that unions can limit the time during which
workers may object; that a notice published once a year in a
union newspaper is acceptable notice; that unions may set their
own methods for handling differences with objectors and they do
not have to let outside auditors see their books. In Service
Employees International Union, 323 NLRB 39, March 21, 1997, the
NLRB ordered an SEIU local to take affirmative steps to notify
individuals covered by the collective bargaining agreement of
their rights to remain nonmembers of the union, and to abstain
from paying that part of agency fees attributable to political
expenditures.
---------------------------------------------------------------------------
\137\ Apparently one cannot be forced to pay for union efforts to
proselytize others.
---------------------------------------------------------------------------
B. Problems reviewed by the investigation
The Committee heard testimony that union use of general
treasury soft money funds for political issue advocacy violates
both the spirit of the FECA and the Beck decision. Senator
Kassebaum Baker testified to the following:
I tend to believe that the unions have been coercive
in their activities, have been particularly focused in
those efforts, and actually the corporate contributions
and individual contributions found ways to match that
by utilizing this ability to use the so-called soft
money, where you do not have to identify that you are
for or against a candidate. You can speak to an issue
and clearly influence how the viewer would regard that
candidate.138
---------------------------------------------------------------------------
\138\ Testimony of Senator Nancy Kassebaum Baker, September 30,
1997, p. 76.
Professor Leo Troy, of the Rutgers University Department of
Economics, testified that in reality, the Beck decision
provides union members no protection from the use of their dues
for political advocacy they oppose. He noted that members are
not sufficiently informed about their Beck rights, nor
sufficiently empowered, to take an affirmative stand against
their union leadership and demand a refund.139
Senator Nickles maintained during the hearings that Beck's
solution of requiring post-hoc affirmative action by union
members seeking a refund serves only to ostracize such union
members from their organization. Furthermore, it was
acknowledged during the hearings that Beck actually requires
union members to first forfeit their union membership and any
corresponding involvement in the union's policy decisions
before seeking such a refund. As Senator Nickles points out,
that is hardly the equivalent of a voluntary
contribution.140 Even if you accept that the
advertisements run by the unions are issue oriented, and not
candidate specific, Professor Troy notes that ``dues-paying
member[s] . . . are often being compelled to pay for something,
political preferences and ideas that they do not support.''
141 One need only remember that the Beck challenge
initially revolved around opposition to gun control, not merely
the candidate that espoused gun control.
---------------------------------------------------------------------------
\139\ Testimony of Leo Troy, September 24, 1997, p. 192.
\140\ Discussion between Senator Don Nickles and panelists, Mann,
Ornstein, Simon, and McBride, September 24, 1997, pp. 109-110.
\141\ Troy testimony, p. 170.
---------------------------------------------------------------------------
C. Reform proposals
There are a range of ideas aimed at reforming this hotly
disputed area of campaign finance. One idea is to codify some
form of the Beck decision. As discussed elsewhere in the
report, other witnesses testified before the Committee that
legislation designed to deal with the interaction of soft money
and issue advocacy is necessary to effectively tackle union and
corporate manipulation of the current system.
Don Simon of Common Cause stated that ``if you do ban soft
money, then the only contribution that a union could make to a
political party would be out of its affiliated political action
committee, which by definition has voluntarily contributed
money.'' 142 Senator Kassebaum Baker testified that
she and former Vice President Mondale agreed with Presidents
Bush, Carter, and Ford that one of the most needed reforms is
``a ban on soft money contributions to the national parties and
their campaign organizations, equally applied to corporations
and unions.'' 143 Nonetheless, Thomas Mann, Director
of Government Studies at the Brookings Institute, clarified
that merely abolishing soft money would not deal with the
problem because of the possibility that ``shutting off soft
money will lead to an incredible growth in coordinated issue
advocacy with groups and their favorite candidates basically
running shadow campaigns outside the regulated system.''
144 Such issue advocacy was exactly the crux of the
problem in the 1996 election use of $35 million in union
general treasury funds composed of membership dues.
---------------------------------------------------------------------------
\142\ Testimony of Donald J. Simon, September 24, 1997, p. 111.
\143\ Senator Nancy Kassebaum Baker, p. 5.
\144\ Thomas E. Mann testimony, p. 87.
---------------------------------------------------------------------------
A ban on the raising of soft money by national party
committees effectively deals with the use of union and
corporate general treasury funds in the federal political
process only if it is combined with some restriction on issue
advocacy. One such proposal discussed in the issue advocacy
section of this report expands the definition of express
advocacy during a set period prior to an election to include
any use of a candidate's name or image. As former Vice
President Mondale testified before the Committee,
[t]he McCain-Feingold amendment would repeal the
availability of soft money from union treasuries or
corporate treasuries for what is called express
advocacy and, under the expanded definition, that would
include ads that use candidates' names under the terms.
I think that is a good amendment. It restores the
voluntary nature of contributions from union members so
that they have to be voluntary. And it seems to me that
is a good resolution of the dispute.145
---------------------------------------------------------------------------
\145\ Testimony of Vice President Walter Mondale, September 30,
1997, p. 74, ll. 9-17.
Another proposal of particular note in this area is a
California state initiative that will be placed on the next
California ballot. That initiative seeks to require public and
private employers and labor organizations to obtain permission
from employees and members before withholding pay or using
union dues or fees for political contributions. Permission must
be obtained annually using a prescribed form. That annual
permission would be sought through a form, the sole purpose of
which is for the documentation of such a request. The form
would contain the name of the employee, the name of the
employer, the total annual amount which is being withheld for a
contribution or expenditures and the employee's signature.
Labor organizations would in turn be required to maintain
records of all such authorizations for review upon request of
the California Fair Political Practices Commission (the
California equivalent of the FEC).
Proposed federal legislation would codify the Beck decision
by requiring unions to notify non-union members of their right
to request a refund of the portion of their agency fees used
for political activities.146 Other legislation calls
for notification of Beck rights in writing for each new
employee, as well as annual written notification for all
employees.147 Under legislation proposed in the fall
of 1997, unions would be required to notify such non-members of
their reimbursement rights, and they would be required to
obtain written, voluntary authorization before a union could
use member or nonmember dues or fees for political
activities.148 Nonetheless, such initiatives might
not successfully deal with one of the problems that existed in
the 1996 elections for the reason that the AFL-CIO is not a
union, per se. Technically, Beck cannot be directly applied to
the AFL-CIO because it is a federation of various unions, and
it could quite possibly argue that the 1996 special assessment
was really the burden of the constituent unions, and not
necessarily paid out of union member dues. However, non-members
could challenge the possible use of their agency fees by the
AFL-CIO affiliated union, and thus seek a refund after the
fact.
---------------------------------------------------------------------------
\146\ See S. 25 (McCain/Feingold), the Bipartisan Campaign Reform
Act of 1997, Introduced January 21, 1997; referred to the Committee on
Rules and Administration. Considered September 29, 1997, by the Senate,
modified by unanimous consent, amendments SP 1258 through 1265
proposed.
\147\ See S. 179 (Hutchinson), the Campaign Finance Reform and
Disclosure Act of 1997, Introduced January 22, 1997; referred to the
Committee on Rules and Administration.
\148\ See S. 9 (Nickles), the Paycheck Protection Act, Introduced
January 21, 1997; referred to Committee on Rules and Administration.
Hearings held on June 25, 1997, by the Committee on Rules.
---------------------------------------------------------------------------
The bills currently being considered include a variety of
proposals that would, if enacted into law, have an impact on
unions. They include new posting requirements, requiring unions
to receive written permission to use an individual's dues for
political purposes, revamping union financial reporting
requirements, and eliminating union security provisions
altogether. Labor unions object to all of these proposals on
the grounds that they are too onerous and expensive to
implement.
Employer posting of Beck rights, however, would not create
any overt burden on a union. Posting would be the
responsibility of the employer. The AFL-CIO publicly stated its
willingness to accept codification of Beck rights during Senate
consideration of S. 25. However, unions have also argued that
it is unfair to single out Beck rights for special posting
requirements. They argue that if new employer posting
requirements are enacted, they should not be limited to Beck
rights, but should include requirements to post employee rights
to organize and join unions as well.
Unions oppose a new requirement that they receive written
permission to use dues for political purposes because of the
administrative burdens it would entail and because it might
result in more individuals choosing to become agency fee
objectors. Nonetheless, it is the constitutional right of those
that might choose to become agency fee objectors to do so, and
the administrative burden can hardly outweigh an otherwise
unjustifiable requirement for union members to pay for support
of beliefs they oppose. Supporters of this proposal argue that
union members can only make educated decisions if they are
fully informed of their Beck rights.
Finally, vigorously opposed by unions are proposals to
abolish union security agreements, or to require unions to
allow agency fee objectors to remain union members rather than,
as now, to withdraw from the union when they choose to become
an agency fee objector. Regarding membership requirements, one
union witness before the Subcommittee on Employer-Employee
Relations testified that:
Unions, like every other voluntary association,
operate on the principle that it is the right of the
majority to decide the duties of membership, and that
those who desire to enjoy the privileges of membership
are required to become members of the organization and
accept whatever responsibilities come with membership .
. . to force a union to allow dissidents who withdraw
from membership to retain the right to participate in
membership decisions would turn Beck--and the First
Amendment--on their heads.149
---------------------------------------------------------------------------
\149\ Testimony of James Coppess, Communication Workers of America,
before the U.S. Congress. House. Committee on Education and the
Workforce. Subcommittee on Employer-Employee Relations. Hearing on
Union Dues. 105th Congress, 1st Sess., March 18, 1997, pp. 7-8.
---------------------------------------------------------------------------
vii. dealing with the demand for campaign funds
Testimony by Professor Burt Neuborne described the current
campaign finance regulatory system as strictly ``supply side''
because it only limits contributions. Prior to the Buckley
court's finding that expenditure limits were largely
unconstitutional unless voluntarily agreed to in exchange for
some benefit, the FECA had attempted to lessen the demand for
funds by placing caps on campaign expenditures. Professor
Neuborne noted that as a result of the Buckley decision
``expenditures, whether made by candidates from their personal
wealth; or by candidates using money raised from supporters; or
by independent entities wishing to support a candidate, are
virtually immune from regulation.'' 150 Ornstein
pointed out in his testimony that the inability to limit
expenditures was probably for the best because ``we need a
significant and large sum of money or resources in our
political arena because what you want in a campaign process, as
what you want in the legislative arena, is a robust dialogue, a
communication process that people can see.'' 151
---------------------------------------------------------------------------
\150\ Neuborne testimony, September 25, 1997, pp. 130-140.
\151\ Testimony of Norman J. Ornstein, September 23, 1997 p. 66,
ll. 20-25.
---------------------------------------------------------------------------
Nonetheless, the desire to win political contests, and the
demand for the money participants believe necessary to do so,
helps drive the never-ending cycle of fund-
raising.152 Under such circumstances, the Court's
interpretation that there is no legally enforceable upper
expenditure limit for federal candidates only increases the
drive not to fall behind in fund-raising. Spiraling campaign
costs are further exaggerated by the media costs associated
with a candidate's important task of getting his message to the
public. The Committee heard testimony that 60 percent of every
competitive Senatorial campaign dollar goes to media and 30
percent goes to fund-raising, with the remaining 10 percent for
travel and staff.153 Ornstein, and others the
Committee heard from, argue that in order to get a grasp on
current campaign improprieties, legislation must somehow
appropriately deal with the desperate pursuit for campaign
funds that creates an environment wherein propriety and the law
are stretched to the breaking point.154 Ornstein
expressed the feelings of most witnesses on this issue in the
following statement:
---------------------------------------------------------------------------
\152\ See the section of this report on The Thirst for Money.
\153\ Gans testimony, September 24, 1997, p. 155.
\154\ Ornstein testimony, September 23, 1997, p. 56.
I am not for spending limits. I am uneasy about
spending limits, and I am afraid, especially now as I
see what is happening with the issue ads, that if we
put spending limits on candidates that it is going to
enhance the role of some of the outside groups.
I would prefer to go in a different direction which
is to increase the incentives and provide [other] ways
of ameliorating the demand. . . .155
---------------------------------------------------------------------------
\155\ Ornstein testimony, September 24, 1997, p. 107.
Below is a discussion of ideas advocated to dampen demand for
campaign spending, increase public participation and allow
candidates more time to concentrate on the issues of the
election instead of spending excessive time fund-raising.
A. Free or subsidized postage and television time
Most proposals for dampening the demand for campaign funds
center around the provision of some free or subsidized postage
and/or television time to candidates and parties. Testimony
before the Committee indicated that television costs are
increasingly a larger percentage of every candidate's costs,
and such costs are clearly driving up the overall costs of
campaigns.156 Proposals range from block grants of
television time given to the party committees to allocate as
they see fit, to fund-raising qualification thresholds for
individual candidates to receive television time in their
markets of choice. The argument is that party committees and
candidates will spend less time raising funds and more on the
issues if they are assured the opportunity to espouse their
beliefs.
---------------------------------------------------------------------------
\156\ McBride testimony, September 24, 1997, p. 58.
---------------------------------------------------------------------------
While there is no requirement that the provision of such
free services necessarily be in return for anything, testimony
before the committee noted that if free television or reduced
postal rates are enacted in return for overall expenditure
limitations, the net impact may be an undesirable reduction in
the overall political discourse. Professor Pilon quoted the
Eighth Circuit when it assessed similar state provisions: ``one
is `hard-pressed to discern how the interests of good
government could possibly be served by campaign expenditure
laws that necessarily have the effect of limiting the quantity
of political speech in which candidates for public office are
allowed to engage.' '' 157 While free television
time might be made contingent on certain candidate behavior, it
could instead be provided with no strings as a floor enabling
all qualified candidates the ability to spread their views to
the voting public.
---------------------------------------------------------------------------
\157\ Pilon Opening Statement, September 25, 1997 Hearing
Transcript, quoting Shrink Missouri Government PAC v. Maupin, 71 F.3d
1422, 1426 (8th Cir. 1995).
---------------------------------------------------------------------------
B. Public financing
The Committee heard testimony that some sort of extension
of the Presidential public funding system to Congressional
elections would eliminate the demand-driven pressure to obtain
campaign contributions. The public financing currently
available at the state or local level in Maine, Arkansas, and
Nebraska was noted. Twelve states are currently considering
public funding legislation.158
---------------------------------------------------------------------------
\158\ Senator John Glenn Hearing Transcript, September 24, 1997 p.
126.
---------------------------------------------------------------------------
A compromise suggestion to encourage small contributors is
creation of a 100% tax credit for contributions of $100 or less
to federal candidates. To truly encourage broad-based small
contributions, as opposed to subsidizing current large
contributors, this tax credit could be limited to individuals
who contribute less than $500 during the tax
year.159 As one witness testified, ``[r]ight now,
let us face it, a candidate is going to do a cost-benefit
analysis before spending time to raise money, and raising money
from small donors takes a lot of time, and the return is not
there.' 160 In addition to lessening the candidates'
scramble for funds, this reform suggestion stems from the
belief that encouragement of small contributors will lead
citizens to become more involved in the political process. It
is hoped that such small contributors will feel they have more
at stake in the process, and it will reduce the public's
perception that contributions buy legislative action.
---------------------------------------------------------------------------
\159\ Ornstein testimony, September 23, 1997, p. 84.
\160\ Ornstein testimony, September 24, 1997, p. 123.
---------------------------------------------------------------------------
C. Revising contribution limits
There was much discussion before the Committee about the
possibility of revising the current contribution limits imposed
on individuals, candidates and party committees. Many agreed
with Senator Bennett's assessment that ``one of the problems we
have now is campaign contribution limits. . . . Certainly the
greatest demand on your time is fund-raising.'' 161
When discussing Eugene McCarthy's primary challenge of Lyndon
Johnson, both Senator Bennett and Curtis Gans made the point
that today's $1,000 per contributor limit would have prevented
the relatively unknown McCarthy from mounting any
campaign.162 In fact, the individual contribution
limit of $1,000 (set in 1972) is worth approximately $259
today. In order to have the same amount of purchasing power
today as in 1972, individual contribution limits would need to
be increased to approximately $3,800.
---------------------------------------------------------------------------
\161\ Hearing transcript iscussion between the Senator Robert F.
Bennett and panelist Ann McBride, September 24, 1997, p. 65-66.
\162\ Remarks of Senator Robert F. Bennett, September 23, 1997, p.
37 and Gans testimony, September 23, 1997, p. 154.
---------------------------------------------------------------------------
Edward H. Crane, President of the CATO Institute, advocated
abolition of campaign contribution limits all together. He
noted ``[t]he First Amendment applies to all Americans, not
just those in the media, which is why we should eliminate
contribution limits on individual contributors.''
163 Toward the other extreme, Norman Ornstein
testified contribution limits are necessary, otherwise
``contributor[s] cannot say, `Jeez, I'm sorry I've maxed out at
some point,' the relentless pressure can be very, very great,
which is not good.'' 164
---------------------------------------------------------------------------
\163\ Testimony of Edward H. Crane, September 24, 1997, p. 140.
\164\ Ornstein testimony, September 23, 1997, p. 67.
---------------------------------------------------------------------------
Most discussions in this area centered around adjusting the
current $1,000 figure for inflation since the FECA was enacted,
and providing some sort of automatic future inflation
adjustment devise.165 Particular emphasis was placed
on raising the individual contribution limit to political
campaign committees. Currently individuals have a $25,000
annual limit, and of that, a sub-limit of $20,000 can be given
to party committees. Testimony before the Committee advocated
creating two separate $25,000 annual individual limits: one for
party committees and the other for all other federal
contributions.166 It was pointed out that a ban on
soft money would make such a revision all the more important.
Without such a revision party committees would be in direct
competition for scarce resources with their very own
candidates.167
---------------------------------------------------------------------------
\165\ Ornstein testimony, September 24, 1997, p. 73.
\166\ Ornstein testimony, September 24, 1997, p. 82 and Testimony
of Douglas Berman, September 24, 1997, p. 200.
\167\ Ornstein testimony, September 24, 1997, p. 85.
---------------------------------------------------------------------------
viii. political action committees (pacs)
Other than the ability of PACs to coordinate their
activities with affiliated soft money independent expenditure
issue advocacy programs, the Committee heard little testimony
regarding problems with PACs. The Committee heard of no
improprieties that arose from the FECA's treatment of PACs. The
Committee did hear testimony indicating that a ban on political
action committees would be found to be unconstitutional because
there is no empirical evidencethat such a ban would meet the
compelling governmental interest of preventing corruption as defined by
the courts--``a financial quid pro quo, dollars for political favor.''
168
---------------------------------------------------------------------------
\168\ Pilon Written Testimony, p. 5.
---------------------------------------------------------------------------
ix. the federal election commission and enforcement
As Professor Neuborne pointed out in his testimony before
the Investigation Committee, ``[i]f you have good rules, but
you do not have an enforcement mechanism, people will laugh at
the rules. . . .'' 169
---------------------------------------------------------------------------
\169\ Neuborne testimony, September 25, 1997, p. 137.
---------------------------------------------------------------------------
A. A brief history of the Federal Election Commission
In 1975, Congress created the Federal Election Commission
(FEC) to administer and enforce the Federal Election Campaign
Act (FECA)--the statute that governs the financing of federal
elections. The regulation of federal campaigns emanated from a
congressional judgment that our representative form of
government needed protection from the corrosive influence of
unlimited and undisclosed political contributions. The laws
were designed to ensure that candidates in federal elections
were not--or did not appear to be--beholden to a narrow group
of people. Taken together, it was hoped, the laws would sustain
and promote citizen confidence and participation in the
democratic process.
Guided by this desire to protect the fundamental tenets of
democracy, Congress created an independent regulatory agency--
the FEC--to disclose campaign finance information, to enforce
the limits, prohibitions and other provisions of the election
law, and to administer the public funding of Presidential
elections. The FEC is made up of six members, appointed by the
President and confirmed by the Senate. Each member serves a
renewable six-year term; and two seats are subject to
appointment every two years. By law, no more than three
Commissioners can be members of the same political party, and
at least four votes are required for any official Commission
action. This structure was created to encourage nonpartisan
decisions. The Chairmanship of the FEC rotates among the
members each year, with no member serving as Chairman more than
once during his or her term.
B. Structural problems
Critics of the Federal Election Commission claim it is
designed to fail. Further, these critics cite political
patronage and the exclusion of third party commissioners as
detrimental to the FEC's professional even-handed
interpretation of the law.170
---------------------------------------------------------------------------
\170\ Id. at 138-140.
---------------------------------------------------------------------------
One problem that arises is due to the fact that there are
an even number of Commissioners, which often leads to
stalemates over their decisions. The six voting members are
traditionally equally divided between Democrats and
Republicans, making it difficult if not impossible for the FEC
to move against a campaign that is seen as injurious to only
one of the parties. Such a structure is not conducive to
coherent rulings, but there are a limited number of proposals
that are designed to restructure the Federal Election
Commission. The major proposal is with regards to the terms of
the FEC Commissioners. If the repetitive six-year terms that
Commissioners now serve were replaced with a single eight year-
term having no holding over after expiration, some of the
problems inherent with shorter patronage appointments might be
relieved. Specifically, it is hoped that this will preserve the
independence of Commissioners from political pressure related
to their re-appointment.
Another proposal has to do with strengthening the office of
the FEC chairman and creating a new presiding officer as the
Commission's ``Chief Administrator.''
C. Disclosure
One of the primary missions of the FEC is to disclose to
the public the source of federal candidate campaign
contributions, as well as the ultimate use of those funds by
candidates. Faster and more complete disclosure will aid in
alleviating many of the problems found in the current system.
To facilitate speedy and universal access to campaign reports
this Committee heard testimony from Thomas Mann and Norman
Ornstein recommending that electronic filing become mandatory
for all federal candidates and reporting committees after a de
minimus threshold is crossed. Such electronic filing was almost
universally endorsed by those appearing to
testify.171 Such mandatory electronic filing is
already the rule in state elections held in California.
---------------------------------------------------------------------------
\171\ Testimony of Becky Cain, September 24, 1997, p. 151; Ornstein
testimony, September 23, 1997, p. 77; Mann testimony, September 23,
1997, p. 79.
---------------------------------------------------------------------------
Yet another idea to enhance disclosure is to require a
campaign to provide all requisite contributor information to
the FEC before allowing deposit of any contribution. Should any
disclosure information be missing, a contribution could be put
in an escrow account where the money cannot be spent. In turn,
the current ten-day maximum holding period on checks would have
to be waived. This would solve past reporting
discrepancies where some committees achieved over 95%
contributor identification disclosure, while others supplied
the required identification for less than half of their
contributors.
D. Other suggested changes
To speed the process of justice and avoid inaction
resulting from partisan splits on the FEC, many people advocate
the creation of a private cause of legal action directly
against the alleged wrongdoer where the FEC is (a) unable to
act by virtue of a deadlock, or (b) where injunctive relief
would be necessary and appropriate (a high standard requiring a
showing of immediate, irreparable harm). To deter frivolous
actions, a ``loser pays'' standard should apply to requests for
injunctive relief. Another suggestion involves streamlining the
process for allegations of criminal violations, by creating
more shared procedures between the FEC and the Justice
Department, and fast-tracking the investigation from the FEC to
Justice if any significant evidence of fraud exists.
x. conclusion
As reflected throughout this report, the committee's
investigation uncovered blatant abuses and violations of the
FECA. The current state of our campaign finance system is in
serious need of an overhaul. Unanticipated loopholes discovered
in the federal campaign finance laws since they were developed
in the 1970s, as well as the active manipulation of vague
aspects of the FECA by parties trying to gain advantage through
the system, lead to dissatisfaction with the currently enforced
system by all parties. After this investigation, the Committee
can reaffirm the following statement made by Senator Thompson,
which accompanied the investigation's original charter: ``[t]he
Founders of this Republic did not believe that the errors of
government were self-correcting. They knew that only constant
examination of our shortcomings, and learning from them, would
enable representative government to survive.'' 172
The Committee's investigatory hearings have certainly provided
a learning experience for both participants and the general
public. Now is the time to apply the knowledge gained from this
experience to effective legislation, or the American public
must be prepared to endure more blatant campaign finance law
manipulation and corruption.
---------------------------------------------------------------------------
\172\ Senator Fred Thompson, March 10, 1997, Senate Report 105-7 at
2.
Recommendations
Based on its findings, the Committee makes the following
recommendations to the Senate and the Executive Branch. Some of
the recommendations are for legislative action; others could be
implemented by government agencies without Congressional
action.
1. In this report, the Committee sets forth new grounds
which call for the appointment of an independent counsel with
regard to the campaign finance scandal and urges the Attorney
General to seek the appointment of an independent counsel.
Consistent with this recommendation, the Committee urges the
Department of Justice to aggressively pursue the many instances
of apparently illegal activity as set forth in this report.
2. Throughout this report, the Committee highlights the
testimony of different witnesses, given under oath, whose
truthfulness or candor are called into question, as their
testimony appears to have been contradicted by other witnesses
and/or documentary evidence. The Committee recommends and
expects that the Attorney General will review this report with
care and make determinations as to whether or not such
instances constitute perjury within the meaning of 18 U.S.C.
Sec. 1621 or obstruction of the Committee's investigation
prohibited by 18 U.S.C. Sec. 1505.
3. The Committee recommends that executive branch
procedures for granting top secret security clearances be
changed. Persons seeking security clearances who have lived in
foreign countries should receive background checks on their
activities while in those foreign countries. Access to
classified materials should be strictly limited to what the
official needs to know as part of his or her job
responsibilities. Persons performing classified briefings must
know the job responsibility of the persons to whom they show
classified materials. No one should be given access to
classified material as a routine matter before a background
check is conducted. Agencies should ensure that security
clearances are terminated when employees leave the positions
necessitating clearances.
These recommendations flow directly from acts to the
contrary that took place with respect to John Huang during the
1990's. Huang was given top secret security clearance while
working at the Commerce Department. Although Huang had lived
for many years abroad, no background check was undertaken with
respect to his work in those foreign countries. No follow up
was done on the ``hit'' on the computer database that tracks
convictions with regard to Huang's being detaining by the INS
in the 1970's. Huang was not only shown top secret documents
that he had no reason to see, but also, documents related to
areas of responsibility he was specifically excluded from
handling. Those materials were very relevant to the interests
of his former employer. Insufficient steps were taken to make
sure that only persons with a need to know were knowledgeable
of the top secret material. This occurred because the briefers,
including CIA personnel, did not know what Huang's job
responsibilities were. The problem was compounded because of
the indiscriminate manner in which security clearances were
given to political appointees as soon as they began employment.
Even worse, Huang held on to his security clearance after
he left the Commerce Department and worked for the DNC. There
is no justification for this breach of security to occur, and
it was inappropriate for any Commerce Department officials to
suggest arrangements by which Huang could keep his security
clearance after he left the government.
The Commerce Department has already changed some of its
policies regarding security clearances, but there is a
potential problem with any government department or agency.
Whether legislation is enacted or not, the Committee's
investigation has demonstrated the inappropriate manner in
which classified information was made available to Huang and,
through him, possibly to others whose knowledge of such
information was not in the interests of the United States.
4. The Committee recommends that Congress legislate
guidelines for the operation of legal defense funds. Congress
should also legislate guidelines for contacts between the funds
and the beneficiary of the funds and the beneficiary's staff.
In recent years, members of Congress, and now the
President, have established legal defense trusts to assist in
paying of the principal's legal fees incurred in defending
against civil cases, ethics complaints, and criminal charges.
Although the Office of Government Ethics regulates certain
executive branch legal defense trusts, legislation is needed to
standardize the rules governing all such trusts. Persons
interested in the operation of the government, limited in the
amount of hard campaign contributions they could provide, might
believe that they could obtain influence with powerful figures
if they were to make large contributions to the legal defense
fund established to benefit that individual. The more than
$700,000 that Charlie Trie raised for the President's legal
expense trust obviously was calculated to achieve that result.
In the absence of legislation, contributions to legal
defense funds may achieve that effect. To discourage that
result, Congress should pass uniform guidelines for the
creation and operation of legal defense funds by executive
branch and legislative branch officials. Such legislation
should mandate accounting procedures, require that
contributions be disclosed and limited, and that the sources of
funds be according to federal election law, among other
guidelines.
It is important also to establish the independence of these
defense funds. In the case of the President's legal expense
trust, meetings were held between the director of the trust and
large numbers of White House staff. Given the nature of the
discussions held, these meetings raise serious questions about
the independence of the trust from the person for whose benefit
the trust was created. Congress should strictly limit contact
between the trust and the beneficiary.
5. The Committee intends to revisit the Independent Counsel
Act. In addition to all the specific concerns that have been
raised about the statute's operation, the Committee believes it
important that the Attorney General did not invoke the statute
to investigate the subject of the Committee's investigation,
when its operation was clearly called for, and whether
legislation can remedy that situation in light of the
discretion in seeking an appointment that the Attorney General
must constitutionally possess. The Committee expects to revisit
the statute in 1998 to determine whether it should be
reauthorized and, if so, with what amendments.
The independent counsel statute was enacted to prevent the
inherent conflict of interest that occurs when the Justice
Department investigates the possibly criminal conduct of high-
ranking government officials. The facts at issue in the
Committee's investigation clearly warranted the appointment of
an independent counsel. Yet, as of now, none has been
appointed, except as to a matter arising from the course of the
Committee's hearings themselves. The Attorney General enjoys
absolute discretion under the statute to decide whether the
standard of appointment has been triggered. This discretion is
necessary to the statute's constitutionality.
Nonetheless, serious questions were raised, based on
credible allegations, that the President and other covered
officials may have violated federal law. These allegations
should have triggered the seeking of the appointment of an
independent counsel. It makes no difference that the facts were
essentially established, but the issues of law were disputed.
In determining whether a crime ``may have been committed'' by a
covered person, the conflict of interest is thesame whether the
Attorney General is called upon to determine the facts or the law. The
statute was passed to avoid this conflict.
Apart from the theoretical reasons for the need to appoint
an independent counsel, confidence of the American people in
the conduct of the investigation mandates the appointment in
these circumstances. The Department's investigation has not
engendered public confidence. Documents have been left
unexamined, including public record documents and classified
materials of great relevance. Stones have been left unturned.
Moreover, the legal positions taken by the Attorney General
have been inconsistent in many cases with the sources she
claims support her, as well as Supreme Court decisions in some
instances.
In addition, the Attorney General seems to have set the bar
higher to begin the investigation of a covered person than to
investigate an ordinary citizen. Any information against an
ordinary citizen can lead a prosecutor to begin an
investigation. Under the Attorney General's interpretation of
the current independent counsel statue, however, unless the
evidence rises to a level sufficient to trigger the appointment
of an independent counsel, no investigation of a covered person
can occur. This turns the intent and language of the statute on
its head. Under this interpretation, a covered person has more
protection from investigation that he would enjoy in the
absence of the statute.
This Committee is the committee of jurisdiction in the
Senate for this statute. The Committee plans to hold hearings
in 1998 on the operation of the statute and to propose
legislation on how the statute should be altered, assuming it
should be reauthorized beyond 1999.
6. The Committee recommends that time deadlines not be
imposed on investigations authorized by the Senate. Such
deadlines weaken the ability of the Senate to ensure compliance
with its subpoenas, to ensure cooperation, and to gather the
facts necessary to fulfill the charge to the Senate to conduct
a complete investigation.
The Committee opposed imposing a deadline on its
investigation. Deadlines have been deplored by Senators of both
parties over the years because they impinge on the ability of
an investigating committee to perform the tasks assigned to it.
In the case of the Committee's investigation, such concerns
were more than theoretical. They greatly affected the ability
of the Committee to ensure compliance with its subpoenas, to
receive timely information, and to gain cooperation and develop
the necessary facts.
Because of the deadline, many potential witnesses and
possessors of documents relevant to the investigation were
unwilling to cooperate. Such noncooperation was likely to be
successful because the deadline rendered enforcement of
subpoenas problematic and contempt proceedings academic.
The Committee encountered stalling from the White House,
from the DNC, and from a number of nonprofit entities, most
notably the AFL-CIO. The deadline placed on the Committee
emboldened noncooperation in light of the Committee's available
procedures for enforcement of subpoenas. Under these
procedures, months would be necessary to gain court
enforcement. By the time the case would ever go to court, the
Committee's deadline would have expired, and with that, the
Committee's power to enforce.
* * * * * * *
The remaining recommendations deal with the issue of
campaign finance reform. Since the Committee does not have
legislative jurisdiction over the subject, the options for
reform presented to the Committee during its hearings are
referred to the Committee on Rules and Administration for its
consideration. Among the suggestions for reform made to the
Committee were the following.
7. The Committee recommends that those ineligible to vote
be precluded from making contributions to candidates for
federal office.
Given the extensive evidence and testimony reviewed by the
Committee's investigation related to federal candidate
contributions originating from foreign sources, the current
prohibition on foreign contributions needs to be strengthened.
At the present time, some individuals who are not legally
eligible to vote are allowed to contribute to political
campaigns. There is also substantial evidence that minors are
being used by their parents, or others, to circumvent the
limits imposed on contributors. Candidate committees could
confirm through a simple question in all solicitations, and
disclose as part of the currently required contributor
identification material filed with the FEC, that each
contributor is an American citizen of voting age.
8. The Committee recommends that Congress enact protections
for union workers so that their dues are not used for political
purposes with which they disagree. No person should be
compelled to contribute to a federal campaign without his or
her consent.
9. The Committee recommends that publicly funded
presidential candidates, on behalf of their authorized campaign
committee, be required to certify to the Federal Election
Commission, within a certain time frame, that they have not
inappropriately coordinated their activity with outside
entities to overcome contribution and expenditure limits placed
upon those activities by the Federal Election Campaign Act.
Such certification would not be required for incidental
contacts between candidates and outside entities, nor for
attendance at widely attended fundraisers conducted by outside
entities.
The Committee's investigation established that the Clinton/
Gore '96 Campaign Committee not only coordinated its activities
with the Democratic National Committee in order to circumvent
the contribution and expenditure limits imposed upon
presidential candidates accepting public funding, but that the
Clinton/Gore Campaign actually directed and controlled the soft
money fundraising, television advertisement development, and
placement undertaken by the DNC. Furthermore, there is evidence
to indicate that Presidential candidates have shared their
plans, projects and strategies with outside third-party
entities in order for those entities to make what constitute
in-kind contributions on behalf of the candidates. Such third
party expenditures make a mockery of the current campaign
finance system.
10. The Committee recommends that legislation increase the
penalties for knowingly and wilfully accepting illegal campaign
contributions.
The Committee's investigation revealed that between 1994
and 1996 the DNC completely dismantled a previously established
vetting procedure for large and questionable contributions. As
a result, a variety of contributions were accepted in direct
violation of the FECA. Penalties for accepting illegal
contributions, which are criminal if the campaign entity
knowingly accepted such contributions, should be increased.
Since the Committee believes the goal should be to prevent
acceptance of such contributions in the first place, evidence
that a campaign entity established stringent vetting procedures
should be admissible to establish a lack of the knowledge of
illegality that could lead to the imposition of criminal
sanctions.
11. The Committee recommends enactment of legislation
mandating electronic filing with the Federal Election
Commission for all federal candidates and political committees,
and providing for appropriate verification procedures for
electronic filing to avoid fraud.
Easier and more rapid access to campaign finance
information requires that the campaign finance laws be
modernized to account for advancements in computer technology.
Currently, the FEC is not even allowed to accept facsimiles, or
any form of electronic filings as official because these
documents cannot reflect an original signature of the filer, as
called for in the current law. Available computer technology
now allows almost instantaneous disclosure of political
contributions and expenditures. In computer format, such data
is much easier to review, compare and contrast. A recent FEC
survey revealed that 85 percent of all committees or campaign
operations have access to computers, that three-fourths of the
computerized committees have access to the modems, and two-
thirds can reach the Internet. While the FEC currently provides
for voluntary electronic filing, with hard copy backup, there
is no incentive for reporting entities to participate.
Exercising the option for electronic filing now imposes extra
work on committees beyond the required hard copy filing. No
entity wants to expose itself to speedier and more easily
accessible computer disclosure if its opponents are not
subjected to the same level of review. While smaller start-up
participants in the federal election process may not have the
resources to acquire computer technology, they could be
exempted from the mandatory electronic filing legislation by
providing for a relatively high financial activity threshold
before such reporting would be necessary. To ensure accurate
and secure reporting, legislation should also require the FEC
to develop report filing verification procedures. To speed
dissemination of campaign filings it would be much easier to
require the FEC to place electronically filed reports on the
Internet. Such universal access could be provided at the
current FEC website within 24 hours of receipt. To complement
these advancements, legislation should mandate that the FEC
compile, publish, regularly update and post on the Internet a
complete and detailed index of enforcement actions and advisory
opinions. Currently there is no one repository for such
information that is easily and quickly available to the public.
12. The Committee recommends legislation to require
expedited reporting of all contribution activity during the 90
days immediately before an election.
With the advancement of electronic filing and broadcast
technology, the Committee discovered that campaign activity has
become accelerated at the end of the election cycle. The
current paper filing system allows for manipulation of the
disclosure process because facilitating paper filings makes
necessary a cut-off date prior to the election. That would no
longer be the case under an electronic filing system. Last
minute surprise infusions of cash or expenditures would be
disclosed in advance of the election. This would allow
interested parties to evaluate the nature of a candidate's or
entity's support in making an informed decision when going to
the polls.
13. The Committee recommends simultaneous filing with the
FEC of any required state-level state and local committee
filings.
At this time, no centralized electoral finance filing
system exists, even for federal candidates. Because national
party committee transfers to state party committees remain
unlimited, there is no way to ensure such transfers are not in
turn made to facilitate expenditures by the state party
committees for the benefit of federal candidates. The same is
true for expenditures that might be coordinated as a result of
transfers from national unions and non-profit organizations to
local affiliated organizations. Federal election campaign
expenditures are often intertwined with state and local
election activity. The courts and the FEC have acknowledged
this fact through promulgation of their allocation regulations.
To understand the impact of these expenditures, and the
allocations required by the FEC, a central repository of all
available election materials is necessary.
14. The Committee recommends establishment of a ``traffic
ticket approach'' of scheduled fines for minor FEC reporting
violations.
The current structure of the FCA requires an elaborate due
process mechanism for all alleged violations of the Act,
regardless of severity. Thus, late, miscalculated and non-filed
report violations are subjected to several votes of the
Commission, and full briefing of the surrounding facts before
the Commission can seek a civil penalty. This process takes
time and resources away from more involved and egregious
violations, a category including corporate reimbursement
schemes and illegal coordinated soft money issue advertisement
campaigns. The Committee recommends a bifurcated process under
which clear filing violations are enforced via a pre-
established system of non-negotiable civil penalties, while
serious allegations of wrong-doing are processed with careful
consideration of due process rights (S. 1516).
15. The Committee recommends legislation be enacted
reforming the structure and enforcement procedures of the
Federal Election Commission. Currently there are no limits on
the number of times an FEC Commissioner may be reappointed,
Commissioners whose terms expire hold over indefinitely,
enforcement matters are not handled in a timely manner, and
there is no mechanism for resolving 3-3 split Commission votes.
The Committee Report documents the facts surrounding what
may be considered, at least from a campaign money standpoint,
the most corrupt political campaign in modern history. Little
needs to be added to the ugly picture that has already been
painted. It is important for us now to reflect upon the other
implications of the investigation.
It is well established that Congress has the authority
under the Constitution to conduct investigations for the
purpose of laying facts out before the American people as to
the workings of their government and for the additional purpose
of helping Congress to legislate. Therefore, our duties were
twofold: to look into any wrongdoing and, secondly, to consider
the implications of what we learn in terms of existing laws.
The Committee had some success with regard to both of these
responsibilities. The American people have a much better
understanding of how their system operated in 1996. Also
several individuals were identified as having been involved in
improper or illegal conduct. Almost as soon as our Committee
went out of business, federal indictments started being
returned and there has been at least one call for an
independent counsel by the Attorney General. These activities
in large part have to do with our Committee's activities.
Although campaign finance reform legislation was not
passed, it was not because of lack of information. The gigantic
loopholes that were created by the Clinton-Gore campaign and
the Attorney General's acquiescence in those activities are now
well known because of the work of the Committee. This
information should have been sufficient reason for Congress to
act, but it did not. However, a permanent record has been
created and will forevermore be a part of the ongoing debate
which I am confident will eventually result in an overhaul of
the laws pertaining to how we elect public officials in this
country. Those who are critical of the Committee's efforts
because we did not produce a ``smoking gun'' or pass a
particular piece of legislation, overlook these solid
contributions.
Nevertheless, we didn't do as well as we could have. Our
work was affected tremendously by the fact that Congress is a
much more partisan institution than it used to be. I was
personally involved in the Watergate investigation. We had our
share of battles on the staff level, but when push came to
shove, the Members of the Watergate Committee stood together in
order to ferret out wrongdoing on the part of the Nixon
Administration. As a young lawyer, I signed the pleading suing
President Nixon in order for the Committee to gain access to
the White House tapes. Senator Howard Baker, the Ranking
Republican Member, made the motion to file that suit. I asked
the question in public session that revealed for the first time
publicly the existence of that taping system. The Republicans
on that Committee felt an obligation to thoroughly investigate
the alleged wrongdoing of their own President. And, in large
part because the investigation was conducted with bipartisan
cooperation, campaign finance reform was one of the benefits.
Congress made sweeping changes in 1974.
We all watched the Iran Contra investigation of President
Reagan and saw that, although the Committee had many rough days
when witnesses seemed to put the Committee on the defensive,
the Republican leader of the Committee, Senator Warren Rudman,
joined with the Chairman, Senator Daniel Inouye and presented a
united front in order to get at the truth.
Historically there are other examples wherein Committee
minorities have cooperated in an aggressive investigation of a
President of their own party.
We should realize that not only is Minority cooperation in
investigations and hearings desirable and appropriate, it is
actually an absolute necessity if the Committee is going to
carry out its obligations to the American people. As we look to
the future and possible future investigations, we should do so
with the understanding that if a handful of Senators, along
with counsel, see their role as defense lawyers for the
President and use the Committee's valuable time to minimize and
denigrate the Committee's work and to provide justification and
encouragement for those being investigated, then we can be
assured that the investigation will not achieve its goals.
In the past I believe that members have been deterred from
extreme partisanship because of concern over public opinion and
how they would be treated in the press. For whatever reason I
believe that concern is not nearly as prevalent today.
Partisanship begets partisanship and confrontation and the
press is much more likely to report on ``partisan bickering''
than to pass judgment on who is responsible for it. That hurts
the reputation of the Committee and plays into the hands of
those who want the Committee to fail.
The minority, of course, claims that the partisanship was
on the Republican side; they simply wanted the investigation to
be balanced. Yet I repeatedly assured the Minority, publicly
and privately, that if they would assist and participate in the
investigation of illegal and improper campaign activities, I
would join them not only in making sure that Republicans didn't
escape scrutiny, but in assuring that we looked at the broader
picture of the role of independent groups. I also promised to
address other issues that might merit legislative attention in
our report to the Senate and other committees of jurisdiction.
I went against the wishes of many in my party and supported an
inquiry broad enough to include more than just the Clinton-Gore
Campaign. The Minority answered that gesture with a demand that
we have the broadest possible investigation with the least
amount of money with which to conduct it. From the outset, the
Minority went about trying to sell the notion that the primary
mission of our investigation was campaign finance reform--even
though the Governmental Affairs Committee has no jurisdiction
in this area. If that had been the primary reason for the
hearings, the Rules Committee would have conducted it. Instead
of being concernedabout the massive array of criminal and
improper activity that affected the basic integrity of our electorial
process, the Minority attempted from the outset to divert valuable time
and resources toward subpoenas to Republican-related groups which
apparently were engaged in no illegal activity at all. So even though
we were faced with investigating a massive scandal, and even though
scores of people were leaving the country and taking the fifth
amendment and the Committee was faced with a severe time limitation,
the Minority insisted that the Committee, at the very beginning, devote
substantial valuable time and resources to ``even things up.'' No
Committee can effectively operate under these circumstances.
The Minority report reveals the depth of their partisan
commitment. It consists of three parts: First, an attack on the
Majority of this Committee; secondly, attacks on as many other
Republicans as possible; and third, a defense brief for the
Administration. The Minority now comprises the only group in
America that does not believe that there was serious wrong
doing in the Clinton-Gore campaign and the DNC during the last
election. The Minority's concerns are not with the improper
activities of the highest elected and appointed officials in
this country. Their concerns are with Republicans who are
private citizens, people such as Grover Norquist, whom they
ruthlessly castigate without justification.
While espousing campaign finance reform, the Minority
proved to be reforms greatest enemy. By opposing a fair
investigation into the wrongdoing of the administration, they
sacrificed all credibility on the reform issue and provided a
safe haven for all opponents of reform.
I would recommend, that in the future, it be acknowledged
that a Committee investigation cannot reach its potential if
there is not agreement on the front end as to what the
Committee's goals are to be. In future similar circumstances,
leaders of both parties, along with the Chairman and Ranking
Member of the Committee, should meet and agree upon the goals
and priorities of the Committee. The agreement should be
reflected in the resolution authorizing the investigation. If
such an agreement cannot be reached, then the investigation
should not proceed. While this seems to give the Minority a
veto, in a very real sense the Minority already has a veto
power as set forth above. The court of public opinion will
remain the only real restraint, as is the case now.
Furthermore, future investigations should be done by a
select Committee, not a standing Committee. The model should be
the Watergate Committee. The leadership should select four
members of the Majority and three member of the minority,
based, in part, upon their agreement to work together to
achieve the agreed upon purposes and priorities of the
Committee.
The Committee should not have a cutoff date. As set forth
in the Committee report, the imposition of a cutoff date
severely hamstrings the Committee's work by giving those being
investigated a target date by which to delay and stonewall.
After the Iran-Contra hearings, Senators Mitchell and Cohen
advised us of how unwise it was to impose such a cutoff date
and that message needs to be delivered again.
I believe that, with adherence to the above guidelines,
that Congress can continue its historic investigative
responsibilities. Otherwise, unless the atmosphere in Congress
changes markedly, investigations will become increasingly
partisan and less productive. Under present circumstances, a
President under investigation knows that, regardless of his
transgressions, he will have substantial support in Congress,
with some Members defending his every action. It is important
to recognize that a Committee must have a certain measure of
cooperation from the President, whether it be voluntary or
induced.
During this investigation, the White House did everything
possible to delay, mislead and undermine the Committee. It was
very mindful of the cutoff date. Time and again promises to
produce documents would be broken. Records would be produced
after the relevant witness already had testified. Documents
would be withheld and privileges would be asserted solely for
the purpose of buying time. During the Iran-Contra
investigation, President Reagan waived all privileges and
opened up all records, even including his own personal diaries.
During Watergate, President Nixon faced a united committee and
a special prosecutor willing to take him to court to force the
release of the White House Tapes. President Clinton faced a
much different situation. His White House felt no compulsion to
cooperate, knowing that we had a divided committee and knowing
he had an Attorney General who would not appoint a special
counsel to investigate the campaign finance scandal.
In addition, most Committees conducting investigations as
important as this one are accompanied by a very active grand
jury. Again, this was true of Watergate and Iran Contra, as
well as many other investigations. Aggressive criminal
investigations make it much more likely for a Committee to
obtain a cooperation of key witnesses because of the pressure
such witnesses feel. Clearly, key witnesses felt no such
pressure during our investigation. But very shortly after our
Committee went out of business on December 31, 1997,
indictments started to be returned against associates of the
President and Vice President, even though information of their
activities had been known for over a year. Although many are
questioning the future viability of the independent counsel
statute, the Attorney General's handling of this matter will
present a strong argument against abolition of that statute.
It is also clear that major committee investigations have
to come to terms with the realities of the modern media. Most
of the activities of Congress and individual members of
Congress are judged by their ability to get their message
across on television, usually in short sound bites. With the
proliferation of cable channels, there is extreme competition
for the attention of the public, which has an increasingly
short attention span.The public demands, or at least the news
media thinks the public demands, high drama and quick resolutions.
Witnesses with ``star quality'' are required. Complex Committee
investigations do not fit neatly within this environment. In the first
place, 16 Senators, each usually with only 10 minutes in which to
question, is not a system designed to effectively cross examine
witnesses. With rare exceptions, these investigations are laborious,
often boring, piecemeal processes which require an audience which
follows closely enough to understand the significance of the testimony
they are hearing.
Watergate, of course, was an exception. Although that
investigation started off in the traditional way, things soon
changed. The Watergate Committee started off with a young
employee of the Committee to Re-elect the President, who was
questioned about an organizational chart which set forth the
members of the Committee staff. The Committee was pursuing a
``bottom up'' approach, starting with minor witnesses.
Predictably, the hearings were pronounced boring and useless.
Fortunately, shortly thereafter, James McCord was being
sentenced down the street before Judge Sirica and important
information was elicited. Shortly after that, Mr. McCord was
before the Committee and things began to take a different
course. Then, John Dean, the White House Counsel, came forth to
testify against the President and then the taping system was
discovered. Of course, these were extremely unusual events
which had never occurred before that time and have not since
then. Historically, investigations have much less dramatic
results. Investigations usually resolve some matters and leave
many matters unresolved, as is the case with both criminal and
civil trials.
It may be that Committees could serve their purpose in the
future by simply laying out the results of investigations
already completed. Under such an approach, the decision as to
whether or not to even have public hearings would await the
completion of the investigation when results had been analyzed
and conclusions reached. Regardless of the quantity or
importance of the information produced, the investigative
committee of the future that cannot produce a ``smoking gun''
or dramatic witnesses on a regular basis will not be judged as
having ``captured the public attention,'' which now is becoming
the ultimate test of success.
The China Issue
As with all other non-Republican areas of our
investigation, the Minority in their report seeks to minimize
the Committee's efforts with regard to the issue of foreign
influence--even to the point of using misleading closed-session
comments out of context. Therefore, the public is left with a
partisan split as to the interpretation of classified
materials.
I would suggest to anyone who wants to objectively consider
this matter to do the following: Read my July 8, 1997 opening
statement, wherein I set forth some of the facts pertaining to
the Chinese plan to influence our elections. First of all, you
will note the difference between what I said and what some have
reported that I said. I did not say, for example, that I would
prove, nor did I allege, that the PRC funnelled money into our
elections, although, as it turns out, there is strong
circumstantial evidence that they were so involved. Some in the
media have difficulty in making the distinction between the
plan on the one hand, and the implementation of the plan on the
other. Secondly, read the Majority report which sets forth the
individuals with close ties to the Chinese government who were
funneling illegal money into the Democratic National Committee.
It concludes that there is ``strong circumstantial evidence''
that China was involved. And while reading these documents,
keep in mind the fact that both of these documents were
carefully worded and they were thoroughly vetted by the CIA and
FBI and National Security Agency, which, are headed by
appointees of the Clinton Administration. When Members of the
Minority began to attack my statement, I asked FBI Director
Freeh, ``Would you have let me go forward with my statement
knowing that it contained incorrect information?'' He
responded, ``Of course not.''
In view of some of the comments in the Minority report and
certain Minority individual views, I believe a few further
comments are appropriate.
Why did I make the comments I made on the opening day of
the hearings? First of all, I knew the statement was accurate
and, secondly, I did not believe that the matter was being
seriously investigated. Our committee had a short life span and
it was my belief that, if we could not bring the matters to the
public's attention, serious questions with regard to the 1996
campaigns might never be thoroughly pursued. Therefore, after
consulting with the Majority on the Committee and after having
asked Senator Glenn to join me (which he declined to do), I
made the statement and have continued to press our federal
agencies to inform Congress on the information they have on
this matter and to conduct a proper and thorough investigation.
As a result, our intelligence and investigative agencies began
to supply to Congress--albeit grudingly--the information to
which it was entitled. The public now knows about the plan and
the serious questions that have been raised concerning the
implementation of the plan. Also, after several missteps, the
Justice Department seems to be pursuing this matter.
Indictments are now being returned. All of this has been done
without revealing classified information which might jeopardize
our country's means and methods or sources.
To go back in more detail, early on in our investigation,
our staff became aware of the fact that our Federal
intelligence and investigative agencies had information which
conclusively demonstrated that in mid-1995 the Chinese
government devised a plan comprised of several parts, including
illegal activities with regard to our elections. Several
targeted Members of Congress were briefed concerning this plan
as was the National Security Council. As we looked into this
matter, we came away with the distinct impression that the
Justice Department was doing very little, if anything, to
pursue this matter and thatthis information was not being
coordinated with those in the Justice Department who were investigating
the campaign finance scandal. These concerns later proved to be well
founded.
The information, of course, was classified. We requested
that the FBI, CIA and NSA work with us to develop a
declassified document whereby the public could be informed of
this information at least in general terms. Over a period of
many days our staff worked with these agencies. The agencies
made suggestions, deletions and corrections and finally agreed
upon a document. They requested that the heads of these
agencies not be called into public session because the mere
revelations of which agency had which information might prove
to be damaging to sources and methods. We agreed. So while the
underlying documentation could not be revealed and witnesses
could not be called in public session, we would at least be
allowed to provide some hard conclusions to the American people
concerning an issue of importance to them. We thought it might
also have the effect of energizing the Justice Department. I
assumed that, because of the sign-off by these agencies, my
July 8 statement would provoke little controversy within the
Committee. That, of course, proved to be an incorrect
assumption.
We persisted in prodding these agencies for additional
information. They became very reluctant to give us additional
information, and in response to question after question, the
Justice Department in particular would refuse to provide
answers because of ``an ongoing criminal investigation.''
However, even with these barriers, troubling signs appeared. On
two different occasions, we were told that the FBI had
discovered extremely relevant information, with regard to
individuals with close ties to the Chinese government, that
they had just discovered in their files. In other words they
had the information, but they didn't know that they had it.
This last occasion was after the Committee had ended its public
hearings. Furthermore, the Attorney General acknowledged that
this information involving China had not been given to the
Campaign Finance Task Force. This prompted the Attorney General
to request an inspector general investigation as to why this
had happened.
So not only did the Justice Department have information
concerning China's plan to involve itself in our elections.
Justice also had information involving illegal money laundering
by individuals with close ties to the Chinese government.
Apparently no one was looking at the information in its total
context to determine if there was a relationship. This, of
course, was and is extremely troubling. We are now told that
that problem has been rectified at this late date.
As part of the Committee report, we again worked with the
above mentioned agencies to carefully draft a rendition of the
facts in this area. Again, the underlying information is
classified, but we were able to produce a report which
demonstrates that (1) there definitely was such a plan and (2)
there is strong circumstantial evidence that the Chinese were
involved in causing money to be funneled into our 1996
political campaigns.
Since the Minority persists in trying to undermine this
report, certain additional facts should be added. The
characterizations of Maria Hsia and Ted Sieong were
characterizations given to this Committee by an investigative
agency of this Administration. They provided underlying
information which has never been and may not be disclosed,
which more than amply supports these characterizations. While
it is certainly not usually desirable to make such a statement
about individuals without being able to supply all of the
reasons for making it, on balance its obvious importance and
relevance to this investigation makes it important that this
information be given to the public. There is little point in
undertaking a sentence-by-sentence rebuttal of the deficiencies
in the Minority discussion. However, a few representations made
in the Minority chapter are worth mentioning here.
First, the Minority's narrative regarding Mochtar and James
Riady, which states ``there was no non-public relevant
information not already uncovered in the Committee's public
investigation,' 1 is wrong. There is additional
information available from two separate federal agencies. It
discloses a long-term relationship between the Riadys and a
Chinese intelligence agency that is distinct from the business
relations between the Riadys and China Resources cited by the
Minority.
---------------------------------------------------------------------------
\1\ Minority Report, Chapter Two, section ``The Riadys.''
---------------------------------------------------------------------------
Second, the Minority chapter discusses the notion of what
constitutes an ``agent'' at some length, stating that its use
in the Committee report resulted in ``misleading allegations.'
2 The Committee report employs the word in one
instance--to describe Maria Hsia. The word choice was agreed to
by the relevant intelligence and law enforcement agencies. In
fact, it was suggested by them. As the Minority well knows, or
ought to know, the use of the word ``agent'' is amply supported
by information made available to the Committee, which cannot be
disclosed publicly.
---------------------------------------------------------------------------
\2\ Minority Report, Chapter Two, section ``Intermediaries:
Relation to the Committee's Public Investigation.'
---------------------------------------------------------------------------
Quite apart from these and other problematic
representations by the Minority, I am bothered by their
selective and misleading quotations drawn from the Committee's
July 28, 1997 closed session hearing. The apparent point of
that exercise is to revisit the issue of whether the opening
statement I made on July 8, 1997 regarding the ``China Plan''
was accurate or not. To this end, the Minority suggests that
``senior Executive Branch officials'' disagreed with my July 8
statement.
As the Minority Members must know, since most of them were
there, the same officials confirmed the accuracy of the July 8
statement during the July 28 hearing, particularly regarding
whether the information then available suggested that the 1996
Presidential race might have been affected by Chinese efforts
toinfluence our electoral process. It is safe to say that the
July 28 hearing was confusing, for reasons that became clear at a
September 11, 1997 briefing attended (and called) by those same senior
Executive Branch officials.3 At the September 11 briefing,
one senior Executive Branch official reconfirmed the accuracy of my
July 8 statement, and explained that the earlier confusion was largely
a matter of semantics. Questions posed at the July 28 session generally
asked whether there was any ``evidence'' regarding certain matters, and
such questions elicited answers in the negative.4 The
official explained that he had construed ``evidence'' narrowly to
include only proof which would be admissible during a court
proceeding.5 When asked questions more broadly about ``all
the information and circumstances,'' the official gave quite different
answers, and observed that the July 8 statement was reasonable and
accurate.6
---------------------------------------------------------------------------
\3\ The Minority mistakenly calls the September 11 gathering a
hearing. It was not. The senior Executive Branch officials called the
meeting at their own behest in order to share with the Committee some
significant information about a leading figure in the campaign finance
investigation. The briefing was not transcribed, and in hindsight, I am
sorry it was not.
\4\ See, e.g., Minority Report, Chapter Two, section ``Political
Contributions to Federal Elections.''
\5\ Closed Committee Briefing, September 11, 1997.
\6\ Id.
---------------------------------------------------------------------------
As early as July 1997, Minority Members ``acknowledge[d],
and never denied, that the information shown to us strongly
suggested the existence of a plan by the Chinese Government--
containing components both legal and illegal--designed to
influence U.S. congressional elections.' 7 At the
same time, significant contributions to the DNC and, to a
lesser extent, other campaigns, including Republican causes,
were being made or solicited by individuals who have ties to
the PRC government. One would think that this sequence of
events would have engaged the curiosity of the Minority more
fully.
---------------------------------------------------------------------------
\7\ Joint Statement by Senators John Glenn and Joseph Lieberman,
July 15, 1997.
---------------------------------------------------------------------------
campaign finance reform
Having refused to participate in the investigation of the
most egregious offenses of the 1996 campaign, the Minority now
pronounces the Committee's work a failure because we did not
``produce'' campaign finance reform. This line has been readily
adopted by many beltway pundits. This must be the first time in
history that the investigating committee has been charged with
the responsibility of creating a public groundswell to cause
sufficient pressure on Congress to produce a particular piece
of legislation. The theory seems to be while on the one hand
the Committee's revelations were not significant and not
interesting enough to merit television coverage, the Committee,
nevertheless, should have produced such a groundswell and
probably would have if we only had been more ``bipartisan.''
Interestingly, in the few days of testimony we had concerning
our campaign finance system, lessons to be drawn from our
hearings to date and possible remedial legislation, there was
no television coverage and few reporters in the hearing room.
Despite the hypocrisy of many carrying the ``reform
banner'' it must be noted that our investigation did
demonstrate the fact that there are no longer any effective
limits on campaign contributions in this country and apparently
very few limits on what people are willing to do to get them.
Primarily because of the Clinton-Gore campaign and the Attorney
General's view of those activities, big money now dominates the
American political scene as never before. And it will only get
worse.
Even though the President and Vice President certified that
they would abide by federal fundraising and spending limits in
order to receive public funds, they devised a scheme whereby
they could raise an additional $44 million on behalf of their
campaign. Others will now follow that example.
Decades ago, we decided in this country that we did not
want corporations and labor unions to dominate the political
scene. We outlawed contributions by them, imposed limits on
individual and political action committee contribution and
allowed a certain amount of soft money for local party building
activities. Now because of FEC rulings, court rulings and
Attorney General opinions, that system has been totally
eviscerated.
The 1996 campaign provides us with a glimpse of the future.
Money laundering, solicitation of foreign contributions,
shakedowns of Indian tribes and Buddhist Monks and, apparently,
policy being purchased with regard to a casino were all due at
least in part to the new perception of what could be gotten
away with. Campaigns can control huge wads of soft money spent
on TV ads and feel perfectly safe from a legal standpoint. The
problem is of course, that the much harder-to-prove transaction
that produced the soft money is often illegal. Without Congress
lifting a finger we have rapidly moved from an era of the
$1,000 individual contributor or $10,000 ``party builder''
contributor to one where in order to be a real player you are
going to have to come up with hundreds of thousands of dollars.
Unless we change the situation, this will lead to future
scandals and further cynicism among the American people. A
recent public opinion survey on trust in government conducted
by the PEW research center revealed that only 44% of the
American people believe that their leaders are trustworthy.
Among people between the ages of 18 through 29, the number is
39%. And this survey was conducted during a time of economic
prosperity at home and peace abroad. These results are
consistent with other surveys and should cause the Congress to
seriously reconsider the role of money in politics and what
effect it is having on the public's perception of us.
Congress has not revised the campaign finance laws since
1979. In many other areas we see that after a period of time
laws have been passed that resulted in unintended consequences,
and elsewhere court decisions and administrative rulings point
out weaknesses in the legislation which go contrary to
congressional intent. In those instances we have concluded that
we need to address the law again. As a result of
thisinvestigation, I believe that this is what we are going to have to
do so with regard to campaign finance legislation.
In passing the Federal Election Campaign Act Congress
eliminated private contributions to general election
Presidential campaigns altogether for those who opted into the
Presidential public financing program that was established. For
the last 25 years Presidential nominees who were willing to
certify that they would not raise and spend additional funds
were given millions of dollars of taxpayers money to fund their
campaigns. As with the idea of limiting corporate, union, and
individual contributions, the idea was to cut down on the
corrupting influence or appearance of corruption of large sums
of private money being given to elected official and those who
aspired to political office. Congress also believed this
legislation would have the added benefit of pulling candidates
out of the fundraising chase, and instead allow them time to
focus on the issues and not so much on the money provided by
factions supporting those issues.
Things began to happen in the '70s, which along with later
more significant developments in the early '90s, totally
transformed the system that Congress had established. For
example, the national, state, and local party committees were
limited as to what they could spend for individual candidates.
These expenditures were called coordinated expenditures. In the
late 70's Congress amended the campaign laws, and the FEC
interpreted those amendments, to allow national parties to
spend unlimited amounts for voter registration, voter turnout,
etc., without these monies counting against the limitations. On
the grounds that these expenditures also benefited state and
local candidates not subject to ``hard money'' limits, Congress
and the FEC also allowed part of these expenditures to be
funded with money that might be referred to as ``outside the
system''--what came to be known as ``soft money.'' Under these
new rules, parties could raise additional unlimited monies from
individuals, corporations and unions and use those monies for
grassroots efforts.
In 1991, the FEC decided that national parties could fund
35 per cent of their generic voter drive costs from soft money
(40 per cent in a non-election year). The rest would come from
hard money. These new regulations also provided for the first
disclosure of party soft money activity, and thus the public
learned in 1992 that the major party committee raised more than
$83 million in soft money, or about four times the amount of
soft money estimated to have been spent by party committees in
1984.
In the 1996 cycle, the explosion in soft money continued.
Soft money receipts at the Republican National Party committees
increased by 178 per cent over 1992, to $138.2 million, while
Democratic Party committee receipts of soft money increased 242
per cent over 1992 levels, to $123.9 million. Naturally, with
all this new money on hand, there was a tremendous urge to
marry that money up with the largest campaign costs by far--
television advertisements.
That marriage was destined to happen once the FEC issued
Advisory Opinion 1995-25 on August 24, 1995. Despite an attempt
to use careful language, the clear import of Advisory Opinion
1995-25 was to place the FEC stamp of approval for the first
time on the use of soft money by national party committees to
pay for broadcast media advertisements that directly referenced
federal candidates. From that point on candidate-specific, but
issue based, TV advertisements could be lumped with grassroots
activity encouraged by the 1979 Amendments. The DNC and the
Clinton-Gore campaign felt sanctioned under the FEC's hard/soft
allocation regulations to run such helpful TV advertisements
utilizing 40% soft money in 1995 (and 35% in the 1996 election
year). The first such soft-money DNC and Democratic state party
committee ads (also controlled and directed by the Clinton-Gore
Re-election Committee) began running in October of 1995. At
about the same time the AFL-CIO built on the idea by running
similar soft money candidate-specific, but issue based, ads in
favor of Clinton-Gore. However, the rules still prohibited soft
money electioneering messages and coordination.
The stage was set for those who were willing to take the
soft money game to its next level, even if it meant violating
the letter and the spirit of the rules. The Clinton-Gore
campaign in 1995 and 1996 filled that role. Briefly stated, the
Clinton-Gore campaign circumvented the DNC's coordinated
expenditure limit and used approximately $44 million in
national committee soft money to their candidates' advantage
through electioneering messages that they claimed to be ``issue
advertisements.''
The President and Vice President personally raised a good
deal of the soft money--putting them back into the campaign
fundraising chase that Congress specifically intended the
campaign laws to put them above. The President personally
reviewed and edited the television commercial scripts that the
soft money went for and helped make the decisions on where the
ads would be run. As I pointed out earlier, soft money is not
permitted to go to support individual candidates and is not
supposed to be coordinated or directed by those candidates.
Nevertheless, the Attorney General, through her opinion on this
matter, has permitted this abuse.
The second large area that was exploited in the 1996
election cycle had to do with the transfer of large amounts of
soft money from the national party to the state parties which
in turn would be directed by the national parties as to how to
use the funds for national party purposes. Under FEC rules the
amount of permissible soft money expenditures by state parties
depends upon the ratio of federal to non-federal candidates on
that state's November ballot. For example, if there are two
federal races, say Presidential and Congressional, and
candidates for eight non-federal offices, the state party can
pay for 80 per cent of its generic activities with soft
dollars. Given that hard dollars raised in $1,000 increments
are significantly more difficult to raise, this gives an
incentive to the state party topay for as many activities as
possible using soft money. To take advantage of the system, national
party committees begin transferring soft money to state party
committees to utilize the various state's higher soft money allowance.
Substantial amounts of such transfers are made with state and local
parties for ``generic voter activities,'' but in fact ultimately
benefit federal candidates, since the funds remain under the control of
the national committees. So, again, the use of such soft money allows
more corporate, union and large contributions by wealthy individuals
into the system.
In the crucial 1995 pre-election year, according to FEC
reports, the DNC transferred almost $11.4 million of soft money
to state parties, followed by another $6.4 million in the first
quarter of 1996. The RNC shifted a little over $2.4 million to
the states in about that same period of time. Ultimately the
DNC quietly transferred at least $32 million and perhaps as
much as $64 million to state democratic party committees in the
'96 election cycle. Much of this money was used for television
commercials. This transfer of funds allowed state party
committees to use the national party soft money in areas to
help their federal election goals more than if the national
party committee had made expenditures directly. The DNC on its
own would have had to have purchased the same air time under
guidelines requiring a higher percentage of hard dollars.
Our hearings demonstrated that on some occasions the very
same ad would be run by both the national party and the state
party, all created by the DNC Clinton-Gore media consultant,
Squire, Knapp and Ochs. FEC reports of the receipts and
expenditures of a dozen state Democratic parties from July 1,
1995 to March 31, 1996 indicate that the state entities
operated as little more than a pass-through for the DNC to pay
for the production and broadcasting ads by the Squier firm.
Thus, the DNC and the Clinton-Gore campaign found a way to
use all of the big corporate, union, and individual soft money
they could raise for the direct benefit of the Clinton-Gore
campaign. The Clinton-Gore campaign would actually raise the
soft money for the DNC, which in turn would spend it as they
were directed by the Clinton-Gore campaign on ads to benefit
the Clinton-Gore campaign. In addition, the DNC would send soft
money to the states, which could use higher percentage of soft
money than could the DNC, then direct the states as to how to
use the money, once again for televison ads to benefit the
Clinton-Gore campaign.
It was all an obvious ruse, but it could work in a world
where the FEC might take four or five years to impose a modest
fine, and with an Attorney General who was willing to adopt a
tortured Clinton-Gore legal defense theory in order to justify
such actions.
Of course, labor unions and the 501(c)(4) tax exempt
independent groups supporting both parties have kept apace of
these new developments. They, too, now systematically run ads
supporting or targeting specific candidates, all the while
coordinating their activities with the candidate they support
and often with each other. As with issue ads the national
parties, they claim that the ads they run are ``issue ad'' and,
therefore, can't be regulated even though sometimes they
contain clear electioneering messages. However, the fact that
they are coordinated with the candidate makes the expenditure,
in effect, contributions to the candidate's campaign under
Buckley, 424 U.S. (1976), and various FEC enforcement cases.
There is nothing in the court cases that would indicate that
such coordination is legal. In fact, quite the contrary.
Moreover, the FEC takes the position that even ``issue ads''
which are coordinated are illegal. National parties and
independent groups seem to be taking the position that ``we
didn't coordinate,'' but if we did it's legal anyway. The DNC
and the Clinton-Gore campaign stand alone in this regard
because their coordination and actual control by the candidate
himself of the soft money expenditure was so open and so
blatant that they had to make an all out legal defense based
upon the proposition that coordination is permissible.
Buckley addressed the problems of would-be contributors
avoiding the contribution limitations by the simple expedient
of paying directly for media advertisement for a candidate when
the expenditures were controlled by or coordinated with the
candidate or his campaign. Buckley stated ``. . . such
controlled or coordinated expenditures are treated as
contributions rather an expenditures under the Act's (the
FECA's) contributions ceilings (And this) . . . prevents
attempts to circumvent the Act through prearranged or
coordinated expenditures amounting to disguised contributions .
. . .''
And it certainly makes no difference if the person who
wants to purchase the television ad runs his contribution
through the DNC instead of buying it directly. The potential
corrupting influence is present either way. Nevertheless, the
Attorney General seems to have adopted the Clinton-Gore's
campaign argument.
The Attorney General's position will have many
ramifications. Her position is based upon the idea that soft
money contributions are not ``contributions'' under the FECA.
But if that blanket position is true, then soft money foreign
contributions are not illegal either. It is only foreign
``contributions'' that are illegal under the statute. Under her
interpretation, unlimited amounts of foreign money could be
brought in by a political campaign and placed in a soft money
account and used for so-called ``issue ads'' and it would be
perfectly legal.
So in summary, we see that the '96 elections produced some
clear violations of the criminal law and Congress' job in this
area is to exercise oversight over the Justice Department to
make sure that the laws are enforced. However, we also see the
way in which soft money, issue advocacy and coordination are
being used--used in ways that have been long considered to be
violations of the law. So with the combination of court
rulings, FECopinions, and lax law enforcement, as a practical
matter we are left with no campaign finance system at all.
There are some simple legislative solutions to many of the
problems witnessed during the Committee's investigation, and
touched on in the discussion above. First, the national party
committees and federal candidates must address the soft money
situation. The practice of allowing publicly funded primary and
general Presidential candidates to raise soft money for
themselves, or others, is not consistent with the Federal
election Campaign Act's major goal of preventing actual, or the
appearance of, corruption resulting from a quid pro quo for
large campaign contributions. Legislation needs to be passed
prohibiting federal party committees from soliciting, accepting
or directing any money outside that regulated under the Federal
Election Campaign Act. Furthermore, federal candidates should
be prohibited from soliciting or directing soft money in any
manner related to federal elections. The courts, and numerous
constitutional scholars, agree that unions and corporations can
be constitutionally prohibited from participating in the
federal political process. Such a limitation could certainly
extend to the party committees whose main purpose is to elect
federal candidates.
Implicit in doing away with the soft money system is the
corresponding need to raise the hard money contribution limits
to a reasonable level in order to dampen the demand for money
outside the regulated system. The Committee's investigation
revealed that the constant pressure to raise more and more
contributions in $1,000 increments has lessened the time
federal election candidates have to spend on the actual issues
of the campaign, and increases the risk that illegal
contributions will be accepted without proper vetting.
Inflation has taken its toll over the years. An individual
contribution of $1,000 (set in 1972) is worth $259 today. In
order to have the same amount of purchasing power today as in
1972, individual contributions would need to be increased to
approximately $3,800. All of the contribution limits
established in the FECA are subject to the same devaluation.
Therefore, it seems advisable to raise all contribution
limitations established by the FECA, and index them for future
inflation.
As noted in the Final Report's recommendations, the foreign
money prohibition can be strengthened by allowing contributions
to federal candidates and party committees only from those
eligible to vote. This is a brighter line that is more easily
enforced than the current law.
Finally, certain revisions in the law related to the FEC
itself will speed and facilitate fuller disclosure, as well as
more effectively allow the FEC to do its job. The most
important component of such legislation would be the mandatory
requirement that all political committees file electronically
with the FEC. This allows for quicker and more widely
distributed searchable data to be placed on the internet at
very little cost. In order to ``unclog'' the FEC enforcement
system, it is also necessary to establish a traffic ticket type
schedule of fines for minor reporting violations. Currently the
FEC wastes incredible resources processing the most minor
violation under the complicated due process procedures
established by the FECA with more serious violations in mind.
THE COORDINATION ISSUE
The Minority contends that it is legal for a presidential
candidate to direct and control the content of the issue
advocacy conducted by that candidate's political party. The
Minority also contends that the Majority's conclusion to the
contrary is unsupported by any authority. In fact, under
current law, it is illegal for a presidential candidate to
control his party's issue advocacy expenditures in excess of
the permissible coordinated expenditure limits. The purported
authorities cited by the Minority are inapposite.
For presidential campaigns, the Federal Election Campaign
Act creates an optional public finance system whereby
candidates who make the required certifications to the Federal
Election Commission can receive federal matching funds. 26
U.S.C. Sec. Sec. 9003, 9004, et seq. Candidates who voluntarily
agree to participate in this system of partial public financing
are limited in the amount of money they can spend. 2 U.S.C.
Sec. 441a(c). Political parties can make expenditures in
connection with the election campaigns of their presidential
candidates, but such ``coordinated expenditures'' are limited
to amounts set in the FECA (in 1996, $11,994,007). 2 U.S.C.
Sec. 441a(d).
In enacting the presidential campaign funding mechanisms of
the FECA, ``Congress properly regarded public financing as an
appropriate means of relieving major-party candidates from the
rigors of soliciting private contributions.'' Buckley v. Valeo,
424 U.S. 1, 96 (1976) (per curiam). The FECA's contribution
limits to congressional and presidential candidates in general,
and the institution of the public financing of presidential
campaigns in particular, were enacted ``to limit the actuality
and appearance of corruption resulting from large individual
financial contributions.'' 424 U.S. at 26 (contribution
limits), 96 (public financing of presidential campaigns). In
the Buckley case, the Supreme Court upheld the scheme of limits
on contributions and expenditures when they were conditioned by
the receipt of public funds. The rationale for these limits was
to restrict the influence of prospective donors. Clearly, this
would apply equally when candidates solicit directly for
contributions to their campaigns or to a party committee the
candidate controls.
Under the FECA, two important variables that determine
whether a particular contribution or expenditure is legal are
the content of the message and whether coordination exists
between the candidate and the entity that funds the
expenditure. In her April 14, 1997 letter to Senator Hatch,
Attorney General Reno purported to rely upon FEC rulings that
``advertisements that donot contain an `electioneering message'
may be financed, in part, using `soft money,' '' to support the
contention that the President's ads were legal. Letter from Attorney
General Janet Reno to Senator Orrin Hatch, April 14, 1997, p. 7. Then
the Attorney General assumed, without discussion, that the Clinton-Gore
ads did not contain an electioneering message. She did so because,
consistent with the Minority Report, she equated ``electioneering
message'' with ``express advocacy.'' In other words, she and the
Minority apparently take the position that if the ads are not express
advocacy, they, by definition, do not contain an electioneering
message. However, the FEC draws a distinction between the two concepts.
And under their definition, these ads contain an electioneering
message.
The FEC defines ``electioneering message'' to cover a broad
range of expression, broader than the express advocacy standard
set forth in Buckley v. Valeo. Under FEC Advisory Opinion 1985-
14, ``[e]lectioneering messages include statements `designed to
urge the public to elect a certain candidate or party.' '' FEC
Advisory Op. 1985-14, 2 Fed. Election Camp. Fin. Guide (CCH)
para. 5819 at 11,185 (April 12, 1985) (citing United States v.
United Auto Workers, 352 U.S. 567, 587 (1957); see also FEC
Advisory Op. 1984-15; FEC Advisory Op. 1984-23; and FEC
Advisory Op. 1984-62). For instance, in Advisory Op. 1985-14,
the FEC found the following language that is clearly not
express advocacy to constitute an electioneering message: ``Let
your Republican Congressman know that their irresponsible
management of the nation's economy must end--before it's too
late.'' If an advertisement contains an ``electioneering
message,'' then the FECA's restrictions on sources and amounts
of funding, and its disclosure and disclaimer requirements
apply. See 2 U.S.C. Sec. Sec. 441d (disclaimer provisions); 431
et seq. (contribution limitations); 441b(a) (prohibition on
corporate and union funds); 441e (prohibition on foreign
funds); 441f (prohibition on contributions made in the name of
another); 434 (reporting requirements); 441a(d)(2) (limitations
on the amount of ``coordinated expenditures'' a party can make
on behalf of its presidential candidate).
Clearly, under the FEC's test, which defines
``electioneering message'' to encompass far more than ``express
advocacy,'' the Clinton-Gore controlled DNC ads were
``electioneering message'' ads and could not be legally funded
with soft money. President Clinton drafted ads that referred to
both the President and to Republican Presidential candidate Bob
Dole. These ads all criticized candidate Bob Dole and praised
candidate Clinton, and compared the two. This content is what
the FEC means by advertising ``designed to urge the public to
elect a certain candidate or party.'' Accordingly, these
advertisements clearly could not legally be funded with ``soft
money,'' but rather only with hard money subject to the
coordinated expenditure limits set further in the FECA.
Similarly, the Attorney General's April 14, 1997 letter to
Senator Hatch, which the Minority Report again adopts, stated:
``The FECA does not prohibit the coordination of fundraising or
expenditures between a party and its candidate for office.
Indeed, the Federal Election Commission . . . has historically
assumed coordination between a candidate and his or her
political party.'' Letter from Reno to Hatch 4/17/97, at 6-7
(emphasis in original). The conclusion that the legality of
coordinated media advertisements between candidates and parties
turns solely on the content of the advertisement, and not on
the degree of coordination that the Minority finds to be
``assumed,'' runs counter to Supreme Court case law as well as
FEC rulings.
Under the FECA, payment for a communication made ``for the
purpose of influencing any election for Federal office'' is
automatically considered a contribution if it is made by any
person ``in cooperation, consultation, or concert, with, or at
the request or suggestion of, a candidate, his authorized
political committees, or their agents.'' 2 U.S.C.
Sec. Sec. 431(9)(A)(I), 441a(a)(7)(B)(I). FEC regulations
provide that coordination is presumed when candidates provide
information about their plans, projects, or needs to third
persons with a view towards having an expenditure made, 11
C.F.R. Sec. 109.1(b)(4)(I)(A). In addition, those regulations
state that financing of a candidate's broadcast materials in
cooperation or consultation with a third party is a
contribution for the purpose of contribution limitations. 11
C.F.R. Sec. 109.1(d)(1).
In its enforcement actions, the FEC found that an in-kind
contribution resulted from coordination when the agent of
apresidential candidate recommended a vendor to assist an outside
individual who towed a banner behind an airplane that read ``No Draft
Dodger for President.'' (MUR 3608). The FEC found a violation even
though the message contained no express advocacy. And in the Hyatt
Legal Services MUR (MUR 3918), the FEC found that electioneering
advertisements not containing express advocacy and paid for with soft
money were illegal under the FECA when coordinated between a candidate
and an outside organization. The advertisements held to constitute an
electioneering message stated only, ``Hyatt Legal Services. Serving the
people of Ohio.'' The FEC found that this constituted an electioneering
message given that the ad's discussion of bankruptcy due to health care
costs in promoting legal services echoed a theme of Hyatt's campaign,
and that no ads for Hyatt Legal Services outside Ohio mentioned a
similar theme. Additionally, in that case, the campaign's media
consultant prepared issue advertisements for the outside organization,
and the candidate exercised final editorial approval over each of the
scripts for the third party organization's radio advertisements. The
FEC determined that certain communications involving the participation
of a federal candidate results in a contribution on behalf of the
candidate if, inter alia, ``(1) direct or indirect reference is made to
the candidacy, campaign or qualifications for public office of you or
your opponent;'' or (2) reference is made to the candidate's ``views on
public policy issues, or those of [the] opponent . . . .'' (MUR 3918)
(citing FEC Advisory Op. 1990-5, 2 Fed. Election Camp. Fin. Guide (CCH)
para. 5982 at 11,612 (March 27, 1990)).
More importantly, the most recent Supreme Court decision in
this area contradicts the Minority's position on coordination.
Colorado Republican Fed. Campaign Comm. v. FEC, 116 S. Ct. 2309
(1996). In the Court's lead opinion, Justice Breyer explained
that the Court has held limitations on expenditures generally
unconstitutional, but limitations on contributions
constitutional. Nonetheless, the Court has treated
``coordinated expenditures . . . as contributions rather than
expenditures'' in order to ``prevent attempts to circumvent the
Act through prearrangement or coordinated expenditures
amounting to disguised contributions.'' Buckley v. Valeo, 424
U.S. 1, 46-47 (1976) (per curiam). Accordingly, Congress can
regulate coordinated expenditures consistent with the First
Amendment, since ``[t]he FECA contribution limit governs not
only direct contributions but also indirect contributions that
take the form of coordinated expenditures . . . .'' Colorado
Republican, 116 S. Ct. at 2313 (emphasis added). Where,
however, as in Colorado Republican, a party makes expenditures
actually independent of its candidates, those independent
expenditures cannot be regulated.
According to the Court, the FECA may require coordinated
expenditures to be treated as contributions subject to
limitations, notwithstanding the First Amendment, because large
coordinated expenditures (and contributions) create an
appearance of corruption that Congress has a compelling
interest to prevent. Indeed, in the Court's view, the
``constitutionally significant fact'' requiring the absence of
limits on independent expenditures ``is the lack of
coordination between the candidate and the source of the
expenditures.'' Colorado Republican, 116 S. Ct. at 2317. The
Court recognized that the FECA's structure would make no sense
if the FECA's limits could be easily circumvented through the
actions of third parties who coordinated with candidates.
Importantly, Justice Breyer's plurality opinion was not the
only one that stressed coordination in determining the legality
of the regulation of the relationship between a party and its
candidates. Two additional justices, who along with the three
justices joining Justice Breyer's opinion constitute a majority
of the Court, believe that all party spending on behalf of a
candidate is a ``contribution,'' and hence subject to the FECA
limits. 116 S. Ct. at 2332. (Stevens, J., dissenting).
To be sure, the Court did not address whether the First
Amendment prohibits Congressional efforts to limit overall
party coordinated expenditures, although the parties asked it
to reach that question. But the Court noted that the Colorado
Republican Party's suggested affirmative answer to that
question presented ``the first case in the 20-year history of
the Party Expenditure Provision to suggest that in-fact
coordinated expenditures by political parties are protected
from Congressional regulation by the First Amendment.''
Colorado Republican, 116 S. Ct. at 2319.
I, therefore, cannot agree with the Attorney General's
position that ``[w]ith respect to coordinated media
advertisements by political parties . . . , the proper
characterization of aparticular expenditure depends not on the
degree of coordination, but rather on the content of the message.''
Reno Letter to Hatch 4/14/97, at 7. If that were an accurate
understanding of the law, the Colorado Republican case would have been
decided differently: the Court would have simply considered the fact
that the advertisement could not have constituted a contribution under
the FECA because ``the content of the message'' was not express
advocacy. It would not have stressed that the ``constitutionally
significant fact'' of these party advertisements was ``the lack of
coordination between the candidate and the source of the
expenditures.'' Colorado Republican, 116 S. Ct. at 2317. The position
that content alone controls would not only render the Court's entire
discussion of coordination irrelevant, but would make nonsensical the
Court's decision to reserve the question whether party-coordinated
expenditures with candidates could be constitutionally limited.
Moreover, Colorado Republican contradicts the position in
the Attorney General's letter that ``the law specifically
applies only to contributions as technically defined by the
Federal Election Campaign Act (FECA)--funds commonly referred
to as `hard money.' '' Letter from Reno to Hatch 4/17/97, at 4
(emphasis in original). Soft money is outside the scope of the
FECA only to the extent it is used for the narrow purposes the
statute permits, purposes that do not include issue
advertisements designed to influence federal elections. As
Justice Breyer wrote, ``We also recognize that FECA permits
unregulated `soft money' contributions to a party for certain
activities, such as electing candidates for state office, see
Section 431(8)(A)(I), or for voter registration and `get out
the vote' drives, see Section 431(8)(B)(xii). But the
opportunity for corruption posed by these greater opportunities
for contributions is at best attenuated. Unregulated `soft
money' contributions may not be used to influence a federal
campaign, except when used in the limited, party-building
activities specifically designated in the statute.'' 116 S. Ct.
at 2316 (emphasis added).
Since Colorado Republican and the cited FEC regulations and
decisions make clear that coordination is the key circumstance
that determines whether expenditures on behalf of candidates
are legal, a fortiori, when a candidate directs and controls
the expenditures of an outside organization as the President
did with respect to the DNC's issue advocacy advertisements,
coordinated expenditure limitations necessarily apply to that
more egregious use of a third party to disseminate the
candidate's message.
The evidence produced by the Committee on Governmental
Affairs' Special Investigation in depositions and at its
hearings show conclusively that Dick Morris and the President
devised a scheme in which the Clinton-Gore reelection committee
used the DNC as a separate and additional campaign checking
account. The President's control of the DNC was so extensive
that to characterize the situation at issue as ``coordination''
would be to credit the DNC with much more active participation
than, in fact, it provided. It is hard, if not impossible, to
imagine how a candidate could do more, and a party less, to
raise and spend money for that candidate's reelection. These
ads, created, financed, and run at the personal request and
authorization of the candidate, clearly must be treated as
expenditures by the Clinton-Gore reelection campaign.
As pointed out above, the intent of the FECA in providing
limited federal funding is to remove the candidate from the
fundraising process and to prevent the raising of large private
campaign contributions. The deal the taxpayers make with the
candidate is that in exchange for their funding, the candidate
will forswear outside money, thereby making it less likely that
the election will be influenced or appear to be influenced by
big money. Obviously, in the matter before us, the clear
purpose of the law was circumvented. If a candidate can easily
circumvent those limitations through coordination with a third
party, such as by raising unlimited sums for a party committee
the candidate controls, that objective of the statute is
completely undermined.
Governmental Affairs Committee Special Investigation Into Campaign
Finance Illegalities and Improprieties During the 1995-96 Election
Cycle
final report
Additional views of Senator Collins (R-ME)
I agree with the findings and recommendations set forth in
the Report of the Governmental Affairs Committee Special
Investigation into Campaign Finance Illegalities and
Improprieties during the 1995-96 Election Cycle. While I am
filing additional views to emphasize my belief that the
Committee's hearings also demonstrate the need for fundamental
changes in our campaign finance laws, it is imperative that
calls for reform, whether made by me or others, not be used to
justify the failure to enforce existing laws. Thus, my
endorsement of new legislation in no way diminishes my support
for the Committee's recommendation advocating the appointment
of an independent counsel and urging ``the Department of
Justice to aggressively pursue the many instances of apparently
illegal activity as set forth in this report.'' Indeed, without
aggressive enforcement that is impartial both in fact and in
appearance, enacting new laws is a meaningless gesture.
Regarding the need for new legislation, the hearings
provided overwhelming evidence that the twin loopholes of soft
money and bogus issue advertising have virtually destroyed our
campaign finance laws, leaving us with little more than a pile
of legal rubble. In an area otherwise beset with constitutional
disagreements, the Supreme Court has clearly said that Congress
may restrict campaign contributions to avoid the potentially
corrupting effect of big money flowing to candidates. Yet, the
efforts of Congress to establish such limits, made in the
aftermath of the Watergate scandal, have been undermined by the
loophole-seekers, who after years of probing, discovered that
by making creative uses of soft money and running negative
campaign ads with nominal references to issues, they could get
around the barriers erected to prevent large donations from
eroding the confidence of the American people in our electoral
process.
Without reviewing the mass of evidence presented at the
hearings, the episodes involving Roger Tamraz and Yogesh Gandhi
suffice to show the use of soft money contributions to purchase
access to high-ranking officials, including the President of
the United States. In the first instance, an individual facing
an Interpol arrest warrant for allegedly embezzling more than
$150 million, made or solicited more than $300,000 in
donations, with much of that amount going to the Democratic
National Committee (``DNC'') in the form of soft money, to buy
entry to the White House to promote a pipeline project. Feeling
no uneasiness at trading money for access, Mr. Tamraz proudly
volunteered to the Committee that next time he would double his
largesse. Similarly, Mr. Gandhi, having been denied a meeting
at the White House, made a donation to the DNC of $325,000,
allegedly in laundered foreign money, to obtain a picture with
the President for two foreign business associates eager to
impress potential customers with their connections to the
leader of the most powerful country on earth. Conduct of this
sort makes a mockery of the $1000 campaign contribution limit
imposed on individuals.
Even more damaging to our democracy is the perception that
soft money contributions may buy not only access but results as
well. The Hudson Band of Chippewa Indians, an impoverished
tribe in the State of Wisconsin, has every reason to suspect
that the denial by the Secretary of the Interior of its casino
license was driven by the expectation of large soft-money
donations by the wealthy tribes opposing its application. The
fact that Native Americans now apparently feel they must play
the soft money game to participate in our democracy may be the
saddest commentary of all on our campaign finance system.
The hearings also reinforced what every American television
viewer learned in the 1996 elections, namely, that bogus issue
advertising makes a sham of our campaign contribution limits.
These ads usually take the form of savage political attacks
thinly disguised as statements advocating a position on an
issue. If organizations, some of which are barred from
contributing to federal campaigns, and individuals, all of whom
are restricted in the amounts they may contribute, are allowed
to spend unlimited funds to attack a candidate's opponent, and
thereby influence the outcome of the election, the reforms of
the 1970's are rendered a dead letter. Indeed, it has been
persuasively argued that the situation will have been made
worse, as candidates will not even be accountable for this
potentially massive and frequently deceptive form of campaign
advertising.
At a minimum, the hearings demonstrate a need to close
these loopholes to restore the original purpose of the post-
Watergate reforms, and I have cosponsored legislation to that
effect. But the hearings also suggest a more fundamental
problem which, if left unaddressed, will certainly give rise to
new loopholes. That problem is the mania for money that has
infected our political system.
It would be naive to suggest that the mania for money is
new in the political life of our country, but as the hearings
revealed, it has reached epic proportions. Indeed, the
television ad race has become the political counterpart of the
nuclear arms race, characterized by the same insecure feeling
that one can never have enough. Unless we address the spending
side, we will be condemned to the endless task of plugging
leaks in whatever dams we build to limit the flow of
contributions.
Before these proceedings began, I announced my support for
legislation that would place voluntary limits on campaign
spending in return for reduced-priced television time for
political ads and free mailing privileges for campaign
materials. The insatiable appetite for television money,
revealed in the hearings, has strengthened my belief in the
need for such legislation.
The hearings had another effect, however, which was to
strip away the illusion that voluntary spending limits or any
other solution will be perfect for all times. The pressure for
money is so great that we may have no choice but to recognize
that there will be a recurring need to amend our campaign
finance laws to deal with the latest abuses. In the final
analysis, the loudest message of these hearings is that if we
fail to aggressively enforce our current laws, and amend them
when necessary to close loopholes, we risk a democracy driven
not by the quality of one's ideas or the level of one's
integrity but rather by the thickness of one's wallet.
Susan M. Collins,
March 10, 1998.
Additional Views of Senator Arlen Specter
The Senate Governmental Affairs Committee had the potential
to make a significant, if not decisive, impact on campaign
finance reform when we voted 99 to 0 on March 11, 1997, to
include improper as well as illegal activities in our
investigation of the 1996 federal elections.
That potential was immediately undermined by the December
31, 1997, deadline. On March 11, I initiated a colloquy with
the Committee Chairman and Ranking Member pointing to the
obvious incentive of opponents of our investigation to engage
in delaying tactics beyond the cutoff date. That December 31st
cutoff date was a constant cloud over Committee initiatives
deterring the Committee from activities which might not or
could not have been concluded before that date. In the end, the
cutoff date and severe partisan differences led the Committee
to conclude its hearings on October 31st, even two months
before the mandated termination date.
The partisan disagreements were the main reason the
Committee could not and did not do more to expose the facts
which could have created the public demand necessary to compel
the Congress to enact campaign finance reform. I have long been
convinced that such reform would not occur until there was the
kind of a tidal wave of public pressure which led to such
legislation after Watergate.
It is obviously an uphill battle to change the current
system which protects incumbents. It did not take too much
provocation on any issue for one side or the other to throw up
roadblocks when the Committee would come to an intersection
where bipartisan agreement was necessary. To try to assess
blame would be hopeless and pointless. It was a bipartisan,
joint failure.
A key difference arose over who would be subpoenaed and how
broad those subpoenas would be. In June, Senator Levin and I
were deputized to work out a dispute on the subpoena
controversy. We succeeded, perhaps too well, because we were
never deputized again.
Some subpoenas were particularly sensitive because they
might have implicated Members. Those not in the Senate have not
seen and probably cannot understand the constant, frequent
interchanges among Members on numerous issues which require
collegiality for the institution to function. Every effort is
made by Senators to modulate disagreements over specific issues
with the prevailing attitude being that the next vote is more
important than the last vote. I would not say that the Congress
cannot investigate itself; but in this matter, we did not.
Several subpoena recipients correctly complained that their
subpoenas were too broad. Instead of limiting and then
enforcing the subpoenas, the partisan controversy festered and
ultimately nothing was done. In my opinion, our failures to
enforce those subpoenas constitutes a serious precedent
weakening the Senate's institutional authority.
The Committee's work was substantially hindered by
difficulties in obtaining important information from the CIA
and FBI. On September 11, 1997, Attorney General Reno, FBI
Director Freeh and CIA Director Tenet testified before the
Committee on a sequence of events which was and is
extraordinarily difficult to understand and impossible to
justify. Director Tenet testified that a Committee briefing by
the CIA and FBI in July 1997 was incomplete because the
Committee was not told at that time about an FBI report that an
individual, who had been identified in many news accounts as a
major foreign contributor to political campaigns and political
committees, had made significant contributions as part of a
plan of the government of China.
The FBI Director advised that the information about that
individual had been in the FBI files since September or October
of 1995 on one report and since January 1997 on a second
report. The FBI Director advised that the Committee was not
told about that information at the July 1997 briefing because
the FBI did not know it had the information in its files.
The Governmental Affairs Committee was further advised at
the September 11, 1997, briefing that if in the future the
Department of Justice found similar information, they would
``very seriously consider and talk about bringing that
information to the committee.'' That was palpably insufficient.
After that event, I had no confidence in the completeness
of information furnished to the Committee by the FBI or CIA.
During my service on the Intelligence Committee, I found
similar instances where critical information was withheld by
the CIA. My experience with former CIA Director John Deutch,
FBI Director Freeh and CIA Director Tenet leads me to believe
they did not know about such withheld information.
In reporting on the Aldrich Ames case, then CIA Inspector
General Fred Hitz stated that former Directors William H.
Webster, Robert M. Gates and R. James Woolsey should be held
accountable on the following rationale:
We have no reason to believe that the DCIs who served
during the relevant period were aware of the
deficiencies described in this report. But DCIs are
obligated to ensure that they are knowledgeable of
significant developments related to crucial Agency
missions. Sensitive human source reporting on the
Soviet Union and Russia during and after the Cold War
clearly was such a mission, and certain DCIs must
therefore be held accountable for serious shortcomings
in that reporting.
That controversial approach has not been adopted, but it is
worth considering in the light of repeated failures by heads of
those departments to find out and know what is in their
agencies files.
After the strong criticism by Committee Members at the
Senate September 11, 1997, hearing, it was reported that the
FBI then looked further to determine whether other information
had not been disclosed. Shortly thereafter, on September 27,
1997, FBI Agent Ray Wickman resigned. Agent Wickman had served
as a unit chief on Chinese intelligence matters.
The House Government Reform and Oversight Committee has
inquired into the circumstances surrounding Wickman's
termination. One explanation is that he chose to resign because
he was over the 57 retirement age. Another explanation was that
he chose to resign rather than accept a new assignment after
being replaced as the unit chief.
House Chairman Burton questioned FBI Director Freeh in
House hearings on December 10 and Director Freeh stated:
``. . . he (Wickman) has said that he is retired
because he wanted to retire and did not retire because
he felt forced. The other thing--excuse me. The idea
that he was told to turn in his sources is a
nonsensical notion.''
Chairman Burton later asked Director Freeh:
``. . . have any agents or anybody at the Bureau
indicated that he was dissatisfied with the Justice
Department regarding their inquiry into his sources?''
Mr. FREEH: ``No sir.''
At a later point in the hearing Director Freeh asked to
``put one thing on the record'' and then testified:
Mr. FREEH: I got this note from my general counsel,
who asked to ask a question with respect to Mr.
Wickman. I'm told by my counsel that Mr. Wickman was
concerned with the question of DOJ attorneys accessing
what we call asset files. An asset file is not the
substantive information, but lists the names and
address of the informant, which is the most sensitive
files that we have.
I'm told that once the DOJ attorneys understood that
the asset files were not substantive, that was the end
of that issue. But let me get some more information and
report back to you.
As of this date, March 4, 1998, Director Freeh has not yet
reported back.
In the total context, there may be more to this issue than
just the identity of assets and this inquiry should be pursued
to determine whether Agent Wickman or anybody else at the FBI
or the Department of Justice had any other information on the
Chinese issue which was not turned over to our Committee.
In late February 1998, as the Committee was preparing its
final report, Chairman Thompson was advised by Attorney General
Reno that there was new important information on the China
issue which could not be disclosed. I urged that the
information at least be made available to the Committee
Chairman and Ranking Member so that there could be their
evaluation as to whether that information or perhaps a redacted
version could be available for our report. No information has
been made available by the Department of Justice.
Obviously, additional investigation is necessary to develop
further the facts on the issue of the government of China
influencing the 1996 federal elections.
I believe campaign finance reform is urgently required. My
specific recommendations are set forth in Senate Bill 1191
captioned ``The Campaign Finance Reform Act of 1997.''
Following my statements on the subject including arguments on
the Senate Floor, I believe that Independent Counsel should be
appointed to investigate the financing of the 1996 federal
elections.
ADDITIONAL VIEWS OF SENATOR ROBERT BENNETT
It is my intention to address the question of Mr. John
Huang in more detail and in another forum.
Attached are unclassified answers from the Directors of the
Central Intelligence Agency and the Federal Bureau of
Investigation to questions I submitted to them on July 28,
1997.
Central Intelligence Agency,
Washington, DC, November 3, 1997.
Hon. Robert F. Bennett
United States Senate
Washington, DC.
Dear Senator Bennett: Enclosed are the unclassified
responses to the questions you submitted to the Director of
Central Intelligence on 28 July 1997. (We have previously
provided classified responses to the Office of Senate
Security.) As you will note, we were not able to provide
unclassified responses to all the questions you raised. For
those questions to which it was possible to offer unclassified
answers, the information was drawn from a variety of domestic
and foreign open sources. While we have included references to
specific publications in a number of these answers, these
references should not be regarded as a CIA endorsement of
either the publication or the specific information that is
cited.
In your comments during the hearing on 7 October 1997, you
expressed dismay because our original response to you did not
include unclassified answers. Since the initial receipt of your
questions in July, our goal has been to provide you and the
committee with responsive answers. For most of your questions,
unclassified answers are incomplete and therefore inherently
inadequate (a judgment that is obvious from a comparison of our
classified response of 3 October with the information we are
able to provide in the attachment to this letter).
It is important to understand why so little unclassified
information is available on the issues about which you asked
questions. The focus of the mission of the Central Intelligence
Agency is to collect and analyze foreign intelligence
information that is generally sensitive and therefore
classified. On the specific issues now before the committee,
much of CIA's information is obtained from sources and methods
that are particularly sensitive. I understand your desire to
address publicly important questions raised in the course of
the committee's investigation, but the nature of this Agency's
work necessarily limits the information available for public
release.
Please feel free to call me if you have any questions or
concerns on this matter.
Sincerely,
David P. Holmes,
(for John H. Moseman, Director of Congressional Affairs.)
Question 1. Has the Intelligence Community been officially
tasked to report on Chinese government attempts to influence
the American political system?
Answer. The CIA as a matter of regular practice reports to
senior US policymakers on Chinese activities, including
attempts to influence US policy. The Agency brings this
information to the policymaker in several ways.
Sometimes, the disseminated reporting is sent
directly to our customers.
Finished intelligence also plays a large role--
through the National Intelligence Daily, the Economic
Executives Intelligence Brief, and numerous briefings,
intelligence reports, and memoranda tailored to meet specific
requests and audiences.
Question 2. As a deputy director of the PLA's Liaison
Department, does Deng Maomao have any responsibility for media
placement or other attempts to influence the American political
system?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 3. Did the Chinese Communist Party's United Front
Work Department play a role in Chinese efforts to influence the
American political system?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 3a. Did the Second Department of the PLA's General
Staff Department play a role in Chinese attempts to influence
the American political system?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 4. How much money does the Intelligence Community
devote to China? To Russia?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 5. How many Chinese language officers do you have
at Level 2 or better? How many Russian linguists?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 6. What is the relationship between Stanley Ho and
Beijing authorities, especially the Chinese Communist Party?
Answer. According to various Hong Kong press reports,
gambling magnate Stanley Ho was awarded Macau's casino monopoly
in 1962. He is the Managing Director of the Sociedade de
Turismo e Diversoes de Macau (STDM), which operates nine
casinos, the Macau Jockey Club, and several hotels and banks in
the territory.
According to Dow Jones, Ho also holds a 14 percent
share of Air Macau. The airline's majority shareholder is a
wholly-owned subsidiary of the Civil Aviation Administration of
China.
Press reporting indicates that Ho's relationship which
Beijing is characterized by mutual suspicion.
Accounts in the Hong Kong press claim that Beijing
is uncomfortable with Ho's gambling monopoly and has long
sought to ensure greater influence--including efforts to secure
seats on STDM's board of directors--over the billions of
dollars in tax revenues the concession generates for the Macau
government.
The Far Eastern Economic Review reported on 6
September 1996 that Ho is increasing his investments in China.
Question 6a. What is the relationship between Ted Sioeng
and Beijing authorities, especially the Chinese Communist
Party?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 6b. What is the relationship between Beijing
authorities and Charlie Trie [pronounced Tree]?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 7. What is the business relationship between Ng
Lap Seng [pronounced Ung Lop Song] and Charlie Trie? Are they
partners in Ng Lap Seng's Hong Kong Food City operations?
Answer. We are aware from open source materials, including
the Wall Street Journal, that they are close associates and
that Mr. Trie appeared to have helped Mr. Ng establish a
subsidiary of his Macau-based property development corporation
here in the United States. The same reporting also shows that
Mr. Ng subsidized a number of Mr. Trie's business activities
here in the United States.
Question 8. While a member of a White House U.S.-Asia
advisory group, Charlie Trie received a CIA briefing on Asian
economic issues. How many classified briefings did Charlie Trie
receive? How many classified documents did Charlie Trie receive
or review? Please furnish the contents of all classified
briefings and documents that Charlie Trie received.
Answer. On 23 April 1996, analysts briefed the 18-member
Presidential Commisson on U.S.-Pacific Trade and Investment at
the unclassified level on the general economic outlook for East
Asia. Mr. Trie, as a member of this Commission, was present at
the briefing.
The briefers provided a general overview of China's
economy, it's importance to the global economy, and its major
trade and investment partners, especially those in East Asia.
It also covered China's, Hong Kong's, and Taiwan's economic
futures. No classified information was disclosed or furnished.
Question 9. What is the relationship between Ted Sioeng and
James Riady?
Answer. Indonesian press reporting shows an indirect link
between Ted Sioeng and James Riady through the Tanuwidjaja
family of Indonesia. The Riady family and the Tanuwidjaja
family are reported in the press as long-time friends. Sioeng
is related by marriage to the Tanuwidjajas--one of his
daughters is married to Subandi Tanuwidjaja. There are also
business connections--the Tanuwidjaja family bought into the
Worldwide Golden Leaf company, which distributes the same
Chinese cigarettes as Sioeng's companies.
Question 10. What ties does Mr. James Riady have to Beijing
officials?
Answer. A variety of press reporting shows that James
Riady--the eldest son of Mochtar Riady--is in charge of Lippo's
Indonesian operations and plays a substantial role in managing
Lippo's international businesses, particularly in Hong Kong,
where he is Deputy Chairman of Lippo Limited, which controls
most of Lippo's investments in China. According to Moody's
International, Lippo has 17 of its 138 subsidiaries and 13 of
its 30 affiliates incorporated in China. Almost all of these
are joint ventures with local, regional, and central
governments in China. Lippo has provided financial backing for
large-scale public works projects; for example, Lippo has
provided concessionary-rate loans to finance many of these
projects in key party members' home areas.
Question 11. What ties does Stephen Riady have to Beijing
officials?
Answer. Stephen Riady lives in Hong Kong and is the
Chairman of Lippo Limited, which manages Lippo's investments in
China. U.S. business press reporting states that Lippo has
substantial interests in China--about $2 billion in the Riady's
ancestral province of Fujian alone. These include real estate,
banking, electronics, currency exchange, retail, electricity,
and tourism. According to Moody's International, Lippo has 17
of its 138 subsidiaries and 13 of its 30 affiliates
incorporated in China. Almost all of these are joint ventures
with local, regional, and central governments in China. Lippo
has provided financial backing for large-scale public works
projects; for example, Lippo has provided concessionary-rate
loans to finance many of these projects in key party members'
home areas.
Question 12. What relationship did John Huang develop with
Chinese authorities while he was a banker in Hong Kong?
Answer. U.S. press reports claim that John Huang worked for
the Lippo Group, which is a co-owner of the Hong Kong Chinese
Bank with China Resources--owned by China's Ministry of Foreign
Trade and Economic Cooperation.
In January 1994, Lippo Group and the State of
Arkansas sponsored five Chinese government officials--four from
the Ministry of Foreign Trade and Economic Cooperation and one
from the China Friendship Service--to visit the United States.
The group named Huang as the contact person for their group.
Question 13. What advice did the CIA give to the Federal
Reserve on the China Construction Bank (CCB) licensing
application? What role did Ted Sioeng have in the license
application?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 14. Concerning Ted Sioeng's ``Red Pagoda'' brand
cigarettes concession, how did he obtain the concession? What
area does it cover? The U.S.? Southeast Asia? What is its
value?
Answer. According to U.S. press reports, including Business
Week, Mr. Sioeng made money in the late 1970s by selling
refurbished tobacco equipment to China's Yunan Province. He was
later granted government rights to manufacture and export
Hongtashan (``Red Pagoda Mountain'') cigarettes throughout the
world.
The producers of Hongtashan cigarettes made pre-tax profits
of $975 million in 1996, according to press reports. A company
official told the press in May that the Yuxi Cigarette Plant in
Yunan Province earned $115 million in foreign exchange last
year through export.
Question 15. What relationship does Ted Sioeng have to the
Iowa Wesleyan College?
Answer. According to U.S. press reports, including Business
Week and Time, Mr. Sioeng has donated money to Asian-American
groups and his donations to Iowa Wesleyan College were
recognized with an honorary doctorate.
Question 16. What relationship does Ted Sioeng have with
Mr. Chio Hocheong of Macao?
Answer. Our review of Hong Kong and Western press reporting
shows that Chio Hocheong is a Macao legislator and nightclub
owner. He won a seat in Macao's September 1996 legislative
elections. Chio ran under the banner of the Macao Economic
Promotion Association, which was backed by the territory's
gambling, entertainment, and property development interests.
Press reporting is unclear about the nature of the relationship
between Ted Sioeng and Chio Hocheong, if there is any.
Question 17. Johnny Chung started seven California
companies with Chinese nationals as officers, directors, or
shareholders. Who are the Chinese nationals involved in these
businesses?: What relationship does Johnny Chung have to the
China International Trust and Investment Corporation aka CITIC?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 18. What relationship do the Riadys have with
CITIC?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 19. What relationship does the CP Group of
Thailand have with Beijing authorities?
Answer. The Charoen Pokphand (CP) Group is the single
largest foreign investor in China with, according to a Harvard
study on major corporations in ASEAN, 130 joint ventures and
subsidiaries in 27 provinces worth about $3 billion. More than
60 percent of CP's revenues come from China. CP's investments
are diversified in numerous industries including agro-business,
auto parts manufacturing, real estate, telecom, and energy.
CP first entered the Chinese market in 1979 in the
agro-business sector--this has since become the dominant source
of earnings for CP, contributing about 50 percent of the
company's overall total. CP is the world's second largest
producer of chicken boilers and operates more than 100 feed
mills in more than 12 countries, according to Western Press
reports, including Reuters. China alone holds about 70 feed
mills which produce most of more than 6 million tons of chicken
feed per year and process more than 2 million birds a week,
holding substantial market share.
CP is China's second largest motorcycle dealer and
holds more than a 15 percent market share in one of China's
fastest growing industries. CP also is heavily invested in real
estate development in Shanghai.
CP founded its subsidiary Chia Tai, a Chinese
translation of its Thai name. The Chia Tai Group name is almost
always used for business ventures, meeting with Chinese
officials, and making charitable contributions.
CP was unique from other foreign investors, who
concentrated mainly on industry. In addition, CP continued to
invest in China after the Tiananmen incident when other
investors either stopped or slowed their investment.
CP also makes generous contributions to charitable and
infrastructure projects. In 1991, Dhanin delivered $1.9 million
to Chen Hong, Chinese Vice-Minister of Civil Affairs and
Secretary General of the China Committee of the ``International
Decade for Natural Disaster Reduction,'' for relief assistance
to China's flood-stricken areas, according to official Chinese
press.
Question 19a. What relationship does the CP Group have with
the PLA?
Answer. Both the PLA and CP have ventures in the retail
petroleum business, according to several press reports.
Question 19b. What relationship does the CP Group have with
CITIC?
Answer. Western press reporting shows that the CP Group is
the single largest investor in China--concentrating in agro-
business and auto parts--and CITIC is the primary vehicle for
foreign direct investment into China, making commercial
interaction between the two organizations likely.
Question 20. Does the CP Group do business with or in Iran,
Iraq, Syria, or Libya?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 21. What are the business relationships between
Gregory Luchanskiy of Nordex and Vadim Rabinovich of OSTEX?
What business relations do either of them have with Roger
Tamraz?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 22. Does the China Ocean Shipping Company (COSCO)
have a business relationship with Johnny Chung, Charlie Trie,
John Huang or Ted Sioeng?
Answer. According to U.S. press reports, Johnny Chung
brought a COSCO executive into the White House. COSCO's
shipping fleet handles about 85% of Chinese exports to the
United States.
Question 23. Is it true that the last National Intelligence
Estimate on the Chinese military was issued in 1992? Is it also
true that a draft NIE on the PLA was prepared by the CIA last
summer but was suppressed by an outside panel of experts?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.
Question 24. In 1976 CIA Director George Bush established a
Team B to have a second look at Community reporting on the
Soviet Union. Team B was composed of outside experts who were
critics of the reporting at the time and who later became the
leading policymakers of the Reagan Administration. Would you
consider a Team B for China headed by, for example, former
Ambassador to Beijing James Lilley?
Answer. We cannot provide an unclassified response that
answers this question. A classified response has been provided
to the Office of Senate Security.