Originally created 12/25/96

Panel avoided Gingrich tax question, focused on actions



WASHINGTON - For a year, House ethics investigators grappled with the legality of Speaker Newt Gingrich's use of tax-exempt organizations to further his political agenda.

When they formally charged him with ethical wrongdoing, they avoided judgment on whether he violated tax law and concentrated instead on what he did. The answer was: plenty.

The "Statement of Alleged Violation" signed by Mr. Gingrich demonstrated that the mission of the speaker's political organization - and the goal of his tax-exempt activities - were the same.

Citing numerous documents, the statement showed that the political and tax-exempt activities were so intertwined that they at times used identical wording.

Federal tax law prohibits use of tax-exempt organizations for partisan political purposes. Since donors to these groups can deduct their contributions on federal income taxes, the organizations are subsidized by U.S. taxpayers.

By signing the statement of violation, Mr. Gingrich admitted he did not seek legal advice that would have warned him not to carry out his projects through tax-exempt organizations. And he agreed that incorrect information was submitted to the ethics investigators.

Approved unanimously by a four-member subcommittee, the statement of violation avoided coming to a conclusion on whether Mr. Gingrich committed tax fraud. Instead, it concentrated on Mr. Gingrich's activities. Later, it will issue a report explaining why the charges were handled this way.

Nonetheless, the subcommittee went into detail to show where Mr. Gingrich went wrong:

  • Projects of GOPAC, the political organization Mr. Gingrich led from 1986-95, were shifted to tax-exempt organizations after GOPAC ran short of money to disseminate its partisan message.
  • GOPAC documents showed that its employees were involved in developing the speaker's college course, managing its operations, fund-raising and promotion. Three top GOPAC staffers resigned from the organization but maintained a consulting contract under which GOPAC paid half their salaries. Major donors, known as Charter Members, helped develop the course.
  • Yet, the speaker's responses to the ethics panel in 1994 and 1995 flatly denied any connection.

  • A Gingrich-written document suggested that GOPAC's Republican message of replacing the welfare state should be portrayed in non-partisan terms. This same message was used to describe the goals of the tax-exempt activities.
  • By expressing the program in terms of free enterprise, it would be "very difficult for the Democrats to co-opt because of their ideology and their interest groups," Mr. Gingrich wrote.

  • The ethics subcommittee relied on "an expert in the law of tax-exempt organizations" while the speaker's representative was simply referred to as "Mr. Gingrich's tax counsel."
  • To show how the partisan and tax-exempt activities were connected, the subcommittee cited Mr. Gingrich's GOPAC document on "Key Factors in a House GOP Majority."

    Mr. Gingrich wrote that the organization should "articulate a vision" based on "a governing conservatism (basic American values, entrepreneurial free enterprise and technological progress."

    In early 1990, the report said, GOPAC developed the American Opportunities Workshop - which produced a television program on government reform. The project had three tenants: "basic American values; entrepreneurial free enterprise and technological progress."

    After one program, the project was transferred, "with Mr. Gingrich's knowledge and approval, to the Abraham Lincoln Opportunity Foundation" - a tax-exempt organization. It's basic tenants: "basic American values, entrepreneurial free enterprise and technological progress."

    The subcommittee found that the television workshop was transferred to the tax-exempt group after the project "consumed a large portion of GOPAC's financial resources during 1990."

    "In late 1992 and through 1993, GOPAC's limited financial resources were not sufficient to enable it to carry out all of the political programs at its usual level," the subcommittee found.

    During this financially difficult period, Mr. Gingrich worked out GOPAC's political program of ending the welfare state - and called it "Renewing American Civilization."

    Then, Mr. Gingrich decided to teach his college course, also calling it "Renewing American Civilization."

    The course was funded through two tax-exempt organizations, one closely allied with Mr. Gingrich.

    GOPAC letters to contributors, sent under Mr. Gingrich's name, described "a partisan, political role" for the college course, the statement of violations said.

    One letter said the course had a goal of "activating at least 200,000 citizen activists" to replace the welfare state. The letter concluded: "In essence, if we can reach Americans through my course, independent expenditures, GOPAC and other strategies, we just might unseat the Democratic majority in the House in 1994 ...."

    Mr. Gingrich's prediction turned out to be deadly accurate as the GOP gained control of the House for the first time in 40 years.

    On Sept. 7, 1994, the initial complaint was filed against Mr. Gingrich's course, charging he used his congressional staff to work on the course and misused tax-exempt organizations for political purposes.

    Mr. Gingrich responded on Oct. 4, 1994, that he did not use congressional staff for the course. He failed to address the misuse of tax-exempt organizations, but did say the course staff was paid by the tax-exempts. He never mentioned that GOPAC in 1993 was paying half the salary of three top staffers working on the course.

    When the ethics committee sent Mr. Gingrich a letter asking for additional information on alleged misuse of the tax-exempt organizations, Mr. Gingrich hired an attorney: Jan Baran.

    Ms. Baran then submitted responses, approved by Mr. Gingrich, which contained numerous misstatements about GOPAC's role.

  • The committee quoted liberally from letters submitted under Mr. Gingrich's name.
  • A Dec. 8, 1994, letter cited by the subcommittee stated: "Renewing American Civilization" and GOPAC have never had any official relationship." Also: "As a political action committee, GOPAC never participated in the administration of Renewing American Civilization."

    On March 27, 1995, Ms. Baran signed a 52-page letter with 31 exhibits. It said "GOPAC did not become involved in the speaker's academic affairs because it is a political organization whose interests are not advanced by this non-partisan educational endeavor."

    It continued, "The Renewing American Civilization course and GOPAC have never had any relationship, official or otherwise."



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