Trading in favors

Introduction

Legislative favors, increased access to federal lawmakers and instructions on how to use loopholes to evade federal contribution limits—these are just some of the arrangements discussed in recently released documents relating to judicial challenges of a new soft money law, a Center for Public Integrity study has found.

Such situations appear in many of the more than 40,000 documents the U.S. District Court for the District of Columbia subpoenaed during the discovery process, which the Center obtained in electronic form for a two-week study.

A document that shows coordination between federal races and state parties is a July 2000 letter from Jack David to Dulce Zahniser, then-director of Team 100 for the Republican National Committee. Team 100 is an exclusive group of people who are responsible for raising at least $100,000 each for the Republican Party. David, who has contributed more than $200,000 to the RNC since 2000, wrote to the RNC regarding his donations to the Republican National State Elections Committee.

This letter is to request that $25,000 of the money I contributed to the RNSEC be allocated to help the New York Republican Party and Rick Lazzio [sic] defeat Hillary Clinton this fall, the letter states. I would be pleased if the RNSEC would give the $25,000 to the NY State Republican Committee for that purpose.

If the RNC had agreed to David’s request in advance of the donation, such an act would seem to violate federal election laws, which make it illegal for a donor to earmark a contribution for transfer to a particular state party.

FEC records reveal that David donated $61,000 to the Republican National State Election Committee on July 6, 2000—the day before the letter is dated. Just 19 days after the letter, RNSEC shows a $25,000 transfer to the New York Republican Party, a sequence that seems to mirror the situation described in the letter.

Documents similar to Jack David’s letter—many never previously seen by the public—reveal the extent to which donors and politicians from both sides of the political spectrum ask for and receive favors in exchange for contributions.

The documents were released after being subpoenaed as evidence in the continuing court confrontations questioning the constitutionality of the Bipartisan Campaign Reform Act, commonly referred to as McCain-Feingold.

The Bipartisan Campaign Reform Act, aimed at reducing special interest financing in federal elections, was passed by Congress and signed into law on March 27, 2002. Prior to its passage, contributions of soft money to state and federal political parties were largely unregulated. While the law has mandated increased limits on soft money donations and restricted some party involvement in elections, the regulation is being challenged in court and was partially struck down. But the United States District Court issued a stay on its decision on May 19th. The McCain-Feingold law will remain in effect at least until September, when the Supreme Court hears the case to decide whether the most sweeping campaign finance laws passed in nearly 30 years will stand.

Legislative favors

One intriguing document was an April 2000 letter from the former Republican National Committee Finance Chairman Mel Sembler (now the U.S. Ambassador to Italy) to Lodwrick M. Cook, the co-chairman of Global Crossing, tying a large donation to a recently approved merger.

I was delighted to hear the good news about the merger, the letter states. As you recall in our conversation some weeks ago you agreed to upgrade your Team 100 membership to the Regent program ($250,000) when the merger was approved. Thankfully, this has now been approved, so I am taking the liberty of enclosing an invoice for the additional upgrade.

The Federal Communications Commission approved the merger with Frontier Corporation, the nation’s fifth-largest long-distance telephone company, six months before the letter. The acquisition cost Global $11.2 billion in stock. With 1998 revenue of $2.6 billion Frontier was a serious player in the telecommunications market.

The connections between the Republicans and Global Crossing don’t end there. Lodwrick Cook is one of the trustees of George H. W. Bush’s presidential library; he received the former president’s very first Points of Light award; and since 1999 has donated $315,000 to the Republican Party, almost half of which ($150,000) came after the letter and before the 2000 election.

The company also approved a deal where former President Bush spoke on Global Crossings behalf and was paid in shares of stock instead of his usual $80,000 speaking fee. On April 21, 1998, Bush acquired 100,000 shares of the company—four months before it went public. After the IPO, share prices inflated handsomely and Bush sold his shares for $4.5 million. He had good luck: within a month of his last sale, the company’s stock plummeted.

Gary Winnick, the founder and CEO of Global Crossing, also made out well, selling as much as $700 million in stock before the high-tech bubble burst. Soon after Bush’s and Winnick’s sales of the stock, the company’s finances turned sour and questionable accounting practices similar to those of Enron and WorldCom were revealed. In the aftermath of unpaid debts, layoffs and shriveled 401(k) investments, the Bush Administration stepped in to investigate through the SEC and the Justice Department. But even though there were strong allegations of fiscal misconduct, the Justice Department decided not to file any criminal charges.

Other documents show the intimate link between contributions and governmental lobbying. One is an August 2001 letter from then-RNC Chairman and then-Governor James Gilmore, R-Va., to Max C. Chapman, Jr. the chairman of Gardner Capital Management Corp., a private New York-based investment firm.

“I have forwarded your concerns about the military, stem-cell research, the tax cut and the dredging of the Hudson River over to the White House,” the letter states. Just three sentences later Gilmore asks the Park Avenue business leader to “seriously consider contributing $20,000 in federal dollars this year to the Republican National Committee.”

While many of the letters demonstrate correspondence initiated by lawmakers and party leaders to key contributors, there were also examples of the opposite. In May 1996, before controversial legislation regarding energy deregulation, Entergy CEO Edwin Lupberger wrote a letter asking for Representative Tom DeLay’s (R-Texas) assistance in the repeal of existing regulations.

The letter begins by mentioning the interaction the two had at a Team 100 meeting. Implicit in this statement is that Lupberger is a large campaign contributor because Team 100 members are expected to donate a minimum of $100,000 to join the club.

As we briefly discussed, there is an issue before Congress of significant importance to our company and industry—repeal of the Public Utility Holding Company Act of 1935, the letter states. Your help would be appreciated in urging House Commerce Committee Chairman Tom Bliley and Energy & Power Subcommittee Chairman Dan Schaefer, to act on PUHCA Repeal legislation this year.

DeLay has also been marred in a recent scandal in which Democrats questioned $56,000 in campaign contributions to groups associated to him and three other GOP lawmakers by Kansas-based energy company, Westar Energy Inc. In an email exchange, company executives Doug Lawrence and Doug Lake discussed their plan to get a seat at the table with Republican legislators putting the final touches on the Bush administrations energy bill.

Recent media reports connecting a quid pro quo between Westar, DeLay, Republican Representatives Joe Barton (Texas) and Billy Tauzin (La.) and Senator Richard Shelby (Ala.), stem from executive e-mails suggesting that Tauzin and Barton had solicited the contributions and that Shelby had requested a donation for another candidate. The email does not specifically mention a request from DeLay.

According to recently released documents, Westar Vice President Douglas Lake had already spun the wheels into motion. On May 17, 2002, he sent around a memo outlining specific contributions on the basis of the budget to specific campaigns.

Another letter went out in April 1999 from RNC Chairman Jim Nicholson asking Bristol-Myers Squibb Chairman and CEO Charles A. Heimbold Jr. for $250,000 for a two-year Season Pass membership. While the letter discusses forming a pharmaceutical coalition in Washington, D.C., it also implies that the RNC had previously passed bills for drug makers (even though the RNC has no such authority).

We must keep the lines of communication open if we want to continue passing legislation that will benefit your industry, the letter states. I think that your leadership on this project will provide the perfect bridge between the RNC and the health care industry.

While many documents like these allude to the motivations behind such contributions and communications, a recently released internal RNC memo entitled “Why People Give” spells out the connections. “People expect something in return,” states the document used to solicit donations. “When they make a contribution to a candidate, in some cases, they expect that person to do something in return once they get into office.”

But the memo also cautions party development staff against creating the appearance of a quid pro quo. “This is one thing to watch out for,” continues the RNC internal document. “Never promise anything in return for a contribution. It may come back to haunt you.”

Statements like this may explain why many of the documents related to the BCRA case allude to legislative favors but never explicitly state any direct tie between contributions and governmental action.

While Republicans appear in many questionable letters and depositions in recent years, there are an equal number of suspect situations implicating Democrats dating back to the mid-90s during the Clinton Administration.

One such confidential memo is from Martha Phipps, Democratic National Committee deputy chief of staff, who proposed new opportunities for co-ordination in order for the party to raise an aggressive goal of $40 million during 1994. Among the 10 initiatives set forth are making available Two reserved seats on Air Force I and II trips, six to eight spots at all white House events and Better coordination on appointments to Boards and Commissions.

Other call sheets and internal memoranda show the Democratic Party’s propensity to solicit donations based on its legislative agenda and rarely seen connection to oil corporations. One such call sheet dated November 13, 1995, instructs a caller to ask British Petroleum for a contribution of $85,000, with an attached note providing the reason for the solicitation.

The [Clinton] Administration helped them out on two major issues this year, the DNC call sheet states. The first dealing with deep water drilling in the Gulf of Mexico; and the other, ANS (Alaska North Slope trade), dealing with oil imports from foreign-owned companies.

Other similar 1995 call sheets show comparable connections to companies like Texaco, where DNC callers are instructed to tell how the President helped out the Oil Industry by supporting them on drilling issues, before they ask for a donation of $35,000. Another asks Panhandle Eastern for $10,000, and states that the vice-chairman of the company had attended a meeting with President Clinton.

A question of access

While some donors have made numerous donations with the expectations of increased access to federal lawmakers or greater legislative considerations, others have shown contempt for such solicitations. During recent depositions, Peter Buttenwieser, who has contributed more than $7 million to Democratic candidates and party committees, said he was put off by recent fundraising overtures from DNC Chairman Terry McAuliffe.

“Terry basically told me that if I gave $50,000 by the end of the year, he could get me into that lunch with President Clinton,” said Buttenwieser, president of Buttenwieser & Associates, an education consulting company that evaluates inner-city schools and suggests improvements. “I was offended. I declined, and not long afterwards I wrote him a letter saying I thought this was a quid pro quo thing, and that I really hated that kind of thing.” In media interviews, McAuliffe has denied the existence of any quid pro quo.

But a link between money from Buttenwieser and access to federal lawmakers would be by no means unusual, according to the documents used in the BCRA case. In fact, an internal RNC memo states that a reason people give to the party is for Access. People give to political candidates because they want the ability to have their phone call returned by this person.

Other donors such as Alan G. Hassenfeld, CEO of Hasbro, detailed the games played in Washington when it comes to initiating contact between contributors and federal lawmakers. “Donors know that if they give $100,000 in soft money to the Republicans or $100,000 to the Democrats, that will entitle them to some type of access,” said Hassenfeld, who has made close to $70,000 in donations to federal elections and party committees. “They are not concerned with how that money is used. Instead, many are concerned with access, which they feel allows them to make their cases to federal decision makers and even to influence legislation.”

Other documents connect large corporations with access to federal lawmakers through recent fundraising events. During the RNC’s 2001 Gala, company executives who gave $20,000 or more could request which Republican lawmakers and cabinet secretaries they wanted to dine with.

For instance, MBNA, the largest independent credit card lender in the world, which has donated $1.1 million to party and candidate committees since 1999 and $333,000 to George W. Bush, making the company Bush’s second-largest career contributor, requested that its industry heads be seated with Senators Robert Bennett, R-Utah; Rick Santorum, R-Pa.; John Ensign, R-Nev.; John Kyl, R-Ariz.; and Jeff Sessions, R-Ala.

Another document relating to the same event lists Reliant Energy’s wishes to have federal lawmakers who regulate energy issues at its table. The VIP requests for the $38 billion energy company included House Committee on Energy and Commerce chairman Representative Billy Tauzin, R-La.; Senator Frank Murkowski, R-Alaska; Senator Don Nickles, R-Okla.; Senator Larry Craig, R- Idaho; as well as Energy Secretary Spencer Abraham and Interior Secretary Gale Norton.

Access was also the theme of an October 1998 letter from RNC chairman Jim Nicholson to Phil Anschutz, the founder and largest share holder of Qwest Communications, which is under investigation by the Security and Exchange Commission for questionable accounting practices.

In the letter Nicholson thanks Anschutz for an additional $100,000 donation and hand-writes on the bottom of the letter: “I hope your meeting with [Senator] Trent Lott [R-Miss.] was productive. Thanks Phil!”

Also sought after is access to members of the Cabinet. In one letter to Labor Secretary Elaine Chao, Ohio Republican Party Chairman Robert Bennett asks the Secretary to make a special appearance for a fundraising event.

Dr. Michael Walsh of the Toledo Hospital has committed to raise $100,000 in the Toledo area both this year and next year, states the August 2001 letter. He has personal[ly] requested your aid in helping him reach this tremendous goal. Labor is a top issue for Toledo and the Lucas County area.

Jumping through campaign finance loopholes

Though some letters deal with situations of legislative favors and increased access to lawmakers, other documents released through discovery detail strategies to coordinate fundraising efforts and sometimes discuss ways of transferring and diverting contributions in ways that could violate federal laws.

One letter from then-Congressman Wayne Allard, R- Colo., now a U.S. Senator, tells a contributor how to help his campaign by making donations to his state party committee. The August 1996 correspondence to donor Collis P. Chandler Jr. states that Colorado GOP Chairman Don Bain had assured Allard that the party is “100 percent behind [his] campaign.”

“Under federal election laws, however, you are at the limit of what you can directly contribute to my campaign,” the letter goes on to say. “At the breakfast, Don and I will also discuss how you can further help my campaign by assisting the Colorado Republican Party. As I mentioned, the Colorado GOP will play an enormous role for me and other candidates in the general election race.”

While the correspondence appears to be generated from stationery belonging to Congressman Allard, the letter says that it was “Paid for by the Colorado Republican Party.”