Monday, December 11, 2006

Newt Gingrich--what a swell guy! (Part 3: the ethics charges)

Overview

Newt Gingrich rose to power by accusing Democrats in general and Jim Wright in particular of corruption and ethical violations, but Newt his ownself was guilty of corruption and ethical lapses, including lying to Congress.

A procedural history of the investigation

On January 17, 1997, the House Ethics Committee issued its report concerning the alleged ethics violations of Gingrich. The report begins with a description of the procedural history of the investigation:
On September 7, 1994, a complaint was filed with the Committee on Standards of Official Conduct ("Committee") against Representative Newt Gingrich by Ben Jones, Mr. Gingrich's opponent in his 1994 campaign for re-election. The complaint centered on a course taught by Mr. Gingrich called "Renewing American Civilization." [NOTE: This is the course which was to provide the material for Gingrich's $4.5 million book deal.] Among other things, the complaint alleged that Mr. Gingrich had used his congressional staff to work on the course in violation of House Rules. The complaint also alleged that Mr. Gingrich had created a college course under the sponsorship of 501(c)(3) organizations in order "to meet certain political, not educational, objectives" and, therefore, caused a violation of section 501(c)(3) of the Internal Revenue Code to occur. In partial support of the allegation that the course was a partisan, political project, the complaint alleged that the course was under the control of GOPAC, a political action committee of which Mr. Gingrich was the General Chairman.

Mr. Gingrich responded to this complaint in letters dated October 4, 1994, and December 8, 1994, but the matter was not resolved before the end of the 103rd Congress. On January 26, 1995, Representative David Bonior filed an amended version of the complaint originally filed by Mr. Jones. It restated the allegations concerning the misuse of tax-exempt organizations and contained additional allegations. Mr. Gingrich responded to that complaint in a letter from his counsel dated March 27, 1995.

On December 6, 1995, the Committee voted to initiate a Preliminary Inquiry into the allegations concerning the misuse of tax-exempt organizations. The Committee appointed an Investigative Subcommittee ("Subcommittee") and instructed it to: determine if there is reason to believe that Representative Gingrich's activities in relation to the college course "Renewing American Civilization" were in violation of section 501(c)(3) or whether any foundation qualified under section 501(c)(3), with respect to the course, violated its status with the knowledge and approval of Representative Gingrich * * *.

The Committee also resolved to appoint a Special Counsel to assist in the Preliminary Inquiry. On December 22, 1995, the Committee appointed James M. Cole, a partner in the law firm of Bryan Cave LLP, as the Special Counsel. Mr. Cole's contract was signed January 3, 1996, and he began his work.

On September 26, 1996, the Subcommittee announced that, in light of certain facts discovered during the Preliminary Inquiry, the investigation was being expanded to include the following additional areas:

(1) Whether Representative Gingrich provided accurate, reliable, and complete information concerning the course entitled `Renewing American Civilization,' GOPAC's relationship to the course entitled `Renewing American Civilization,' or the Progress and Freedom Foundation in the course of communicating with the Committee, directly or through counsel (House Rule 43, Cl. 1);

(2) Whether Representative Gingrich's relationship with the Progress and Freedom Foundation, including but not limited to his involvement with the course entitled `Renewing American Civilization,' violated the foundation's status under 501(c)(3) of the Internal Revenue Code and related regulations (House Rule 43, Cl. 1);

(3) Whether Representative Gingrich's use of the personnel and facilities of the Progress and Freedom Foundation constituted a use of unofficial resources for official purposes (House Rule 45); and

(4) Whether Representative Gingrich's activities on behalf of the Abraham Lincoln Opportunity Foundation violated its status under 501(c)(3) of the Internal Revenue Code and related regulations or whether the Abraham Lincoln Opportunity Foundation violated its status with the knowledge and approval of Representative Gingrich (House Rule 43, Cl. 1).

As discussed below, the Subcommittee issued a Statement of Alleged Violation with respect to the initial allegation pertaining to Renewing American Civilization and also with respect to items 1 and 4 above. The Subcommittee did not find any violations of House Rules in regard to the issues set forth in items 2 and 3 above. The Subcommittee, however, decided to recommend that the full Committee make available to the IRS documents produced during the Preliminary Inquiry for use in its ongoing inquiries of 501(c)(3) organizations. In regard to item 3 above, the Subcommittee decided to issue some advice to Members concerning the proper use of outside consultants for official purposes.

On January 7, 1997, the House conveyed the matter of Representative Newt Gingrich to the Select Committee on Ethics by its adoption of clause 4(e)(3) of rule X, as contained in House Resolution 5.

On January 17, 1997, the Select Committee on Ethics held a sanction hearing in the matter pursuant to committee rule 20. Following the sanction hearing, the Select Committee ordered a report to the House, by a roll call vote of 7-1, recommending that Representative Gingrich be reprimanded and ordered to reimburse the House for some of the costs of the investigation in the amount of $300,000. The following Members voted aye: Mrs. Johnson of Connecticut, Mr. Goss, Mr. Schiff, Mr. Cardin, Ms. Pelosi, Mr. Borski, and Mr. Sawyer. The following Member voted no: Mr. Smith of Texas.

The adoption of this report by the House shall constitute such a reprimand and order of reimbursement. Accordingly, the Select Committee recommends that the House adopt a resolution in the following form.
I would add that the subcommittee's members were two Republicans and two Democrats.

What the foregoing does not show is that Gingrich agreed to accept the reprimand and order of reinbursement in order to avoid further hearings and keep his job as Speaker. Had the hearings continued, more evidence against Gingrich would have come out, and he would have run a real risk of being censured. Censure was (and is) more serious than reprimand, and any House member who is censured was (and still is) prohibited from holding any leadership positions.

What follows is a brief (in relation to what it could be) discussion of the result of the investigation.

The negotiation of the reprimand agreement and its breach by Gingrich

As reported in this January 18, 1997, Washington Post article,
Cole disclosed that in its original statement of alleged violations, the investigative subcommittee had charged Gingrich with three counts of violating House rules, two for having failed to seek proper legal advice on the tax laws and one for providing the committee with inaccurate information.

But Cole said committee members were anxious to bring the ethics case to a swift conclusion without a lengthy disciplinary hearing, which he said could have "put the House in some turmoil for up to six months." So the members encouraged him to enter into negotiations with Gingrich and his lawyers.

As a result of those negotiations, completed on Dec. 20, the three counts were combined into a single count of engaging "in conduct that did not reflect creditably on the House of Representatives." In return, Gingrich agreed to admit to the violations, and face a reprimand and the financial penalty.
In other words, this agreement meant there would be no protracted hearings which would further detail Gingrich's activities, that Gingrich would not be censured, and it would look like Gingrich was really being punished although technically Gingrich and the Republicans could say that he had not been found guilty of really serious ethical violations.

With that in mind, let's take a look at just what Gingrich did.

The Special Counsel's statement

At the actual hearing before the Ethics Committee, Special Counsel James Cole gave a detailed statement. You can find the statement beginning with this link. To read the entire statement you will have to keep scrolling and clicking "next" until you get to page 22. Cole's statement is a good description of the entire investigation, the charges, and the facts. Consequently, I am going to rely on that statement for what follows. Should anyone doubt the accuracy of Cole's statement, consider the following:
At the end, all of the members of the subcommittee agreed on the facts. There were differences as to the law, but eventually we came to one conclusion together. We found common ground for agreement, and that produced the statement of alleged violations to which Mr. Gingrich has admitted.
*******
This is evidenced by the fact that Mr. Gingrich has agreed that, in fact, this is an appropriate characterization of the charges against him, appropriate scope, appropriate seriousness--all of which is evidenced by his admission to the statement of alleged violation, and his agreement that the sanction that the subcommittee is recommending is the appropriate sanctions.
(emphasis added). Unless otherwise noted, the information below (not including my opinions) came from Cole's statement.

Newt's transgressions
  • Overview
Gingrich's ethical violations basically all concerned the college course which was the basis for his $4.5 million book deal and the project which was the precursor to the college course. The full story is very long and complicated, and if you want to know the full story, start by reading all of Cole's statement, and then read the 136-page Ethics Committee Report. At the risk of upsetting the delicate balance of the universe, I am going to try to make a long story short.

Gingrich had three basic problems: 1) the college course (and its predecessor project) was expressly designed for a partisan objective (get more people to vote Republican); 2) Gingrich financed the creation and dissemination of the course through money from non-profit and charitable organizations, which is illegal; and 3) he basically lied to the Ethics Committee about all of this.

Under the law at the time, it was illegal for charitable and non-profit organizations to give money to political candidates or political action committees (PACs) or for political activities. Violation of the law could result in the charitable/non-profit group losing its tax-exept status. Here is how Cole explained it:
Under the Internal Revenue Code, a 501(c)(3) organization [which is a charitable or non-profit organization] must be operated exclusively for exempt purposes. The presence of a single non-exempt purpose, if more than insubstantial in nature, will destroy the exemption of the organization regardless of the number or importance of truly exempt purposes that are present.

Conferring a benefit on private interests is a non-exempt purpose. Under the Internal Revenue Code, a 501(c)(3) organization is also prohibited from intervening in political campaigns or providing any support to political action committees. These prohibitions reflect the congressional concerns that taxpayer funds are not to be used to support political activity.
The college course was called "Renewing American Civilization." It was preceded by a television program, "America's Opportunity Workshop," (AOW) that was created and distributed mainly through GOPAC, a political action committee (PAC) which basically became Gingrich's PAC. "America's Opportunity Workshop" later was called "American Citizen's Television" (ACTV). Gingrich submitted two letters discussing "Renewing American Civilization," GOPAC, and other groups involved in the course. Then, when he was questioned in person, he testimony showed that his representations in the letters were false.
  • AOW/ACTV and the ALOF
AOW was initially a project of GOPAC, but soon it was becoming too costly for GOPAC. The decision was made to transfer the project to a 501(c)(3) organization in order to attract tax-deductible funding. That was a problem because of the goals of AOW. As described by Cole,
Mr. Gingrich had hoped that by using this program he would be able to create a citizen's movement. And in doing this, workshops were set out throughout the country where people could gather and watch the program and where people could be recruited for this citizens' movement.

While the program was educational, the citizens' movement was also considered to be a tool to recruit non-voters and people who were apolitical to the Republican Party.

The message that was used in AOW was considered to be one that would be particularly useful for Republicans and that could not be used for Democrats.
In other words, the objective of AOW/ACTV was to recruit new voters for the Republican party. That is a political, partisan activity for which funds from a 501(c)(3) group would be illegal.

The group which took over ACTV was the Abraham Lincoln Opportunity Foundation (ALOF). Not only was there a question about ALOF engaging in political activities, there was evidence that ALOF was in reality a part of GOPAC (which would be a further legal violation). The details are in the Ethics Committee Report (pp. 28-29 of the .pdf file). That evidence included documentation that AOW/ACTV was an ongoing project of GOPAC.

Also, the finances of ALOF raised serious questions as to the connection to GOPAC. These matters are addressed on pp. 29-31 of the.pdf version of the Ethics Committee Report. Here's a summary. GOPAC loaned ALOF a total of $74,500. GOPAC donors also made $80,000 in contributions to ALOF, of which $70,000 was then paid back to GOPAC. At that time, the executive director of GOPAC sent out letters to potential GOPAC donors seeking contributions of at least $10,000. The letter explained that helping ALOF to pay off its loan from GOPAC would serve the objectives of GOPAC and suggested making a donation to ALOF should be done. The implication plainly was that donating to ALOF would be considered a donation to GOPAC. The financial reacords bear this out, as there are several instances of very large checks going to ALOF, followed almost immediately by checks from ALOF to GOPAC for the identiacl amounts. The problem was that GOPAC was in effect receiving tax-exempt donations, and since GOPAC was an expressly political group, it was not legal for it to receive tax-exempt donations, and it was illegal for ALOF to give money to GOPAC.

Now, I am sure somebody out there is thinking that the money paid to ALOF was not really a payment to GOPAC but was only a repayment of ALOF's loan, so there was nothing wrong with it. Anyone thinking that should be able to define "is" for me. And, as it turns out, other people concluded that all of this was improper, but more on that a little later.

Now let's look at "Renewing American Civilization."
  • Renwing American Civilization
The material for this course was created by Gingrich, GOPAC personnel, and GOPAC members. Gingrich decided that the themes and messages of "Renewing American Civilization" would be the basis for the GOP campaigns of 1993 and 1994. The course, while going to colleges, was intended to be part of workshops set up all over the country in order to get out this partisan message and recruit people for the Republican party. Gingrich and GOPAC determined that such a system would get out GOPAC's message while GOPAC would not bear the cost of dissemination. The course was half lectures by Gingrich and half lectures done by faculty members at the colleges where the course was offered. The major cost was for the distribution of Gingrich's lectures, which was accomplished via via cable, television, satellite broadcasts, video tapes, audio tapes through the Renewing American Civilization Project. This cost--approximately $1.2 million over three years--was paid for by tax-deductible contributions that were made to various 501(c)(3) organizations that sponsored the course. So once again, it appeared that tax-deductible contributions were paying for political activities in violation of the law.
  • Conclusions (and lack thereof) regarding AOW/ACTV and Renewing American Civilization
The tax expert consulted by the subcommittee came to this conclusion, according to Cole:
During a preliminary inquiry, the subcommittee consulted with an expert in the law of tax-exempt organizations, and members of the subcommittee did their own research and read voluminous materials involved in this area.

Mr. Gingrich's activities on behalf of the American Opportunities Workshop, American Citizens Television, and the Renewing American Civilization projects, as well as the activities of others that were done with Mr. Gingrich's knowledge and approval in regard to those organizations, were reviewed by the tax expert.

The expert concluded that those activities violated the status of the organizations under 501(c)(3), in that, among other things, those activities were intended to confer more than insubstantial benefits on GOPAC, on Mr. Gingrich, and on Republican entities and candidates.
(emphasis added). Gingrich naturally hired his own tax expert who came to the opposite conclusion. However, both experts did agree on one thing:
Both the subcommittee's tax expert and Mr. Gingrich's counsel, however, were asked about what kind of advice they would have given Mr. Gingrich had he come to them before embarking on any of these practices.

Each of them had the same conclusion. They would have advised Mr. Gingrich not to use the 501(c)3 organizations he had used for the purposes he had used them. The subcommittee's tax expert based this opinion on the fact that it was a violation of 501(c)3. Mr. Gingrich's tax counsel based his opinion on the fact that the mixture of politics and tax deductible donations is in his words, "an explosive mix." It draws the attention of the IRS, it raises red flags, and he would not advise a client to do so.
Moreover, Gingrich knew that what he was doing was risky and possibly illegal. The evidence made it clear "Gingrich had intended that the American Opportunities Workshop and American Citizens Television Project and the Renewing American Civilization Projects would have substantial partisan political purposes." Also, even before AOW, Gingrich had been part of a group called the American Campaign Academy which had been denied 501(c)(3) tax-exempt status because it was providing an improper benefit to Republican candidates even though the Academy's activities were also educational. Gingrich told the Ethics subcommittee that at that time he had been "fully briefed of the tax controversy involving the Academy and was very well aware of its legal problems as they were progressing." Gingrich had also stated publicly that in regard to "Renewing American Civilization" "he viewed his activities as being very aggressive in regard to 501(c)(3) law. He stated he was going right up to the line and taking risks in that regard." He had been part of an "educational" program that had been deemed as a violation of tax laws, he was aware of those issues, and yet he admittedly and intentionally embarked on subsequent "educational" programs that he knew could be illegal.

At this point I must state that the tax law issues were not resolved against Gingrich. The Ethics committee did not resolve them and instead referred the matters to the IRS. This was part of the plea agreement. Also, after the Ethics Committee issued its report and reprimand, a new Congress--and a new Ethics Committee--convened, which conveniently meant that the matters would not be addressed by the Ethics Committee again. Also, as reported by the AP on February 4, 1999, the Progress and Freedom Foundation--the 501(c)(3) group which primarily funded the Renewing American Civilization course-- was cleared of any wrongdoing by the IRS.

Now I know what some of you are thinking...this proves that Gingrich did nothing wrong and that he was the victim of a vast left-wing conspiracy. Think again. Seriously, think about it. Lawyers have codes of professional conduct and ethics (insert joke here). Although the codes vary from state to state, they all basically say that a lawyer should avoid even the appearance of impropriety. What Gingrich did certainly had the appearance of impropriety. Now recall that the issue before the House Ethics Committee was whether Gingrich had violated the ethical rules of the House--not whether he had broken some other law. Moreover, the one charge which was leveled at Gingrich was whether he had engaged "in conduct that did not reflect creditably on the House of Representatives." When the #1 person in the House, who rose to power by attacking the Democrats' corruption, and who presented himself as virtuous, engaged in the things that Gingrich did (and remember, there was no dispute about the factual account of what he did), in my book that certainly "does not reflect creditably on the House of Representatives. What do you think?

Should you be unsure of your answer, then read on...
  • Not being truthful
This was the issue that really brought Gingrich down.

Before the subcommittee was formed, Gingrich sent a letter dated October 4, 1994, which discussed "Renewing American Civilization." However, that letter did not discuss any of the tax issues, and those issues were the basis for the original ethics complaint filed against Gingrich. The Ethics Committee informed Gingrich that it wanted some explanation on those issues, and in a December 8, 1994, letter, "Mr. Gingrich stated that the course had no partisan political aspects to it, that his motivation for teaching the course was not political and that GOPAC was neither involved in the course nor received any benefit from any aspect of the course." That letter was written by Gingrich's lawyer, but Gingrich read, approved, and signed it. However, when he then testified to the subcomittee, he admitted those statements were inaccurate. In January 1995, the complaint against Gingrich was amended, and on March 27, 1995, once again the subcommittee received a letter from Gingrich's attorney. Here's what Cole said about that letter:
The letter was signed by Mr. Gingrich's attorney, but Mr. Gingrich reviewed it and approved it prior to its being delivered to the committee.

When asked about this letter, Mr. Gingrich stated, in the course of the preliminary inquiry, Mr. Gingrich stated, that if there had been anything inaccurate in that letter he would have told his attorney to change it.
So, Newt reviewed it and then told the subcommittee that it was accurate. And now for the good part...
Similar to the letter of December 8, the letter of March 27 stated that the course had no partisan, political aspects to it, that Mr. Gingrich's motivation for teaching the course was not political, and that GOPAC had no involvement in, and received no benefit from any aspect of the course.

In his testimony before the subcommittee concerning these letters, Mr. Gingrich admitted that these statements were not true.
Unbelievable. After he admitted to the subcommittee that the December 8, 1995, letter was incorrect, he sends them another letter making the same incorrect statements--you know the ones he told them were incorrect! And then he had the gall to tell the subcommittee he did not see anything innacurate in the March 27, 1995, letter.

Now tell me if you think Gingrich's conduct "d[id] not reflect creditably on the House of Representatives.

Cole's statement provided a concise picture of Gingrich's conduct.

Cole gave a nice summary of the charges and the facts.
In looking at the letters and talking to Mr. Gingrich and his attorney, it was clear that the goal of these letters was to have the complaints against Mr. Gingrich dismissed.

What was also clear was that all -- all of the people who were involved in drafting or editing the letters or reviewing them for accuracy, only Mr. Gingrich had personal knowledge of the facts contained in the letters regarding the course.

The facts in the letters that were inaccurate, incomplete and unreliable went to the heart of the issues that were being considered by the committee. In reviewing the evidence concerning both the American Opportunities Workshop and American Citizens Television Project and the Renewing American Civilization Project, certain patters became apparent.

In both instances, GOPAC had initiated the use of the message that was in each of those projects as part of its political program to build a Republican majority in Congress. In both instances, there was an effort to have the material appear to be non-partisan on its face yet serve as a partisan political message for the purpose of building the Republican Party.

Under the Methodology Test, as it's known, of the Internal Revenue Code -- of the Internal Revenue Service both of these projects did qualify as educational.

However, they both had substantial partisan, political aspects to them. They were both initiated as political projects, both motivated, at least in part, by political goals.

The other striking similarity in both situations is that GOPAC was in need of new source of funding for the projects and turned them over to 501(c)(3) organizations for that purpose. Once the projects had been established in a 501(c)(3) organization, however, the same people continued to manage it as had done so at GOPAC. The same message was used as when it was at GOPAC. And the dissemination of the message was directed towards the same goal as the project had intended when it was at GOPAC.

The only significant difference was that the activity was now funded by a 501(c)(3) organization. This is not a situation where one entity develops a message through a course or a television program for purely educational purposes and then an entirely separate entity independently decides to adopt that message for partisan political purposes.

Rather this was a coordinated effort to have the 501(c)(3) organizations help in achieving a partisan political goal. In both instances, the idea to develop the message and disseminate it for partisan political use came first. The use of the 501(c)(3) came second as a source of funding.

This factual analysis was accepted by the members of the subcommittee and myself. However, there was a difference of opinion as to the result under Section 501(c)(3) when applying the law to these facts.
(emphasis added). And that difference of opinion was one of the reasons for the agreement reached with Gingrich that he would agree to this factual analysis and accept a reprimand and a penalty of $300,000. I reiterate that the facts were agreed upon by the two Republicans and two Democrats on the subcommittee. The facts were not and are not in dispute.

Does this kind of behavior make for good leaders? I say "no." Do we need leaders who engage in this kind of behavior? Again, I say "no." More specifically, is this kind of behavior what we need in a President? I say "hell, no." And that is why this series on Newt Gingrich is relevant. He is gearing up to run for President in 2008. People need to be reminded of Gingrich's past--and shown that he has not changed.

And that will be done after the next post, which shows a swell family man Gingrich is.



4 Comments:

Anonymous Ray said...

"The remaining parts of this series will not be as long or detailed as part 1."

I count roughly 55 paragraphs in part 1. There are about 78 paragraphs in part 3 and they are probably longer on average.

You lied. There should be a Senate investigation.

12/12/2006 6:24 AM  
Blogger WCharles said...

In my defense, I think I will call in a writing professor to define just what is a "paragraph." If that doesn't halt the investigation, I will bring in a computer expert to show that somehow the Blogger software or my keyboard malfunctioned to produced paragraphs that should not have been paragraphs.

If all that fails (and it will), I will semi-admit that I did something wrong, but will not admit that I lied. Then I will go back to Part 1 and correct my mistake--with a notation about my error. Of course, I will take such action not because I have been caught and am trying to avoid said investigation.

Seriously, you are correct, and I will make a correction. I did not realize how long this post was until I saw it once it was published. Most of the articles I had were lacking in details and rather confusing as to the overall picture, so I decided to go with Cole's statement and the Committee report. Cole's statement is about 20 pages and the report is 136 pages, so at least I tried to condense all of that without leaving out important facts. :-)

12/12/2006 9:37 AM  
Anonymous Ray said...

Nice comeback. This blog would be so much more boring if I didn't play straight man and set you up for a few zingers.

BTW, word count for pt.1 is 3355 and for pt.3 is 4435.

I look forward to pt.4, should be very interesting.

12/12/2006 10:14 AM  
Blogger WCharles said...

I think this time I set you up to deliver a very good zinger. ;-)

12/12/2006 10:22 AM  

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