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Dec. 7 (Bloomberg) -- Newt Gingrich’s network of businesses and policy groups that laid the groundwork for his presidential bid harken back to those that got him into ethics trouble and led to the biggest monetary penalty imposed on a U.S. House speaker.
The charges raised more than a decade ago revolved around allegations that the former speaker improperly used tax-exempt charitable and education organizations to advance partisan political purposes. Today, government ethics advocates say the former speaker used a tax-exempt public policy group to promote his candidacy.
“He skates close to the edge,” said Susan Molinari, a former New York Republican congresswoman and Gingrich ally who voted for the 1997 House reprimand and now supports Republican presidential competitor Mitt Romney. Molinari said the former speaker’s pre-campaign operations suggest he didn’t change behavior after the House ethics scandal. If anything, she said, “it flies in the face of chastened.”
John Feehery, a Republican strategist and former aide to Republican House Speaker Dennis Hastert, who succeeded Gingrich, said he doesn’t believe “Republicans are that disturbed by it. It’s kind of entrepreneurship and ideas.”
R.C. Hammond, a Gingrich spokesman, declined to comment for this story.
The Gingrich ethics probe came to a head on Jan. 21, 1997, when the House voted 395-28 to approve a settlement that concluded Gingrich twice misled the House Committee on Standards of Official Conduct’s investigative subcommittee and required a $300,000 payment to recover some of the probe’s costs.
In its final report, the bipartisan subcommittee wrote that Gingrich’s use of the tax-exempt groups and communication with the committee was either “intentional or it was reckless. Neither choice reflects creditably on the House.”
“The violation does not represent only a single instance of reckless conduct,” the report continued. “Over a number of years and in a number of situations, Mr. Gingrich showed a disregard and lack of respect for the standards of conduct that applied to his activities.”
Republicans Back Reprimand
In the final tally, 196 Republicans supported the rebuke of their own speaker, while 198 Democrats backed it. Twenty-six Republicans and two Democrats opposed it.
Gingrich’s ethics case was revived by House Minority Leader Nancy Pelosi, a California Democrat and former speaker who served on the 1997 investigative panel. “I know a lot about him,” she told the website Talking Points memo
In response, Gingrich said at a Dec. 5 news conference that the House should retaliate if she violates confidentiality rules, something Pelosi’s staff said she won’t do. “We turned over 1 million pages of material,” Gingrich said. “We had a huge report.”
The ethics investigation focused on a college course, called “Renewing American Civilization,” that Gingrich launched in 1993 to spread his political messages to a wider audience. He financed it with tax-deductible charitable donations, which are supposed to be used for activities that broadly benefit the public.
The Case History
In 1990, he’d conducted a similar program, a television program called the “American Opportunities Workshop” that espoused Republican ideas in an effort to recruit converts, the ethics subcommittee report said.
Gingrich financed the television program with charitable contributions through the Abraham Lincoln Opportunity Foundation. That organization was founded by Howard “Bo” Callaway, a Gingrich supporter, to help inner-city children. The foundation was inactive and Callaway allowed Gingrich to revive it for the purpose of financing the television program.
For the college course, Gingrich solicited funds from backers of his political action committee, GOPAC, which was also a vehicle for organizing the Republican campaign to retake control of the House in 1994. The idea to teach a course arose during a January 1993 meeting of GOPAC’s major donors.
According to the ethics report, the college course’s theme became the “main message of virtually every political and campaign speech” Gingrich made.
A draft vision statement dated March 19, 1993 and written by Gingrich said that renewing American civilization will require a “new party system so we can defeat the Democratic machine and transform American society into a more productive, responsible, safe country.”
‘The Only Way’
When asked about the course’s role in this movement, Gingrich said it was “the only way to develop and send” the message, according to the ethics report.
In another memo, written on March 29, 1993, Gingrich said he wanted “Republican activists” committed to setting up workshops built around the course and to open the party up to “every citizen who wants to renew American civilization.”
The course was made available via television satellite feeds and Republican groups, known as site hosts, were responsible for recruiting participants. In May 1993, a letter was sent with Gingrich’s signature to 1,000 college Republicans promoting the course.
In September 1994, Ben Jones, a former Democratic Representative who was challenging Gingrich’s re-election, filed the House ethics complaint against a man who had once lodged ethics charges that led Democratic House Speaker Jim Wright to resign in 1989.
The 1997 negotiated settlement consolidated three counts into one that included two core allegations: that Gingrich didn’t seek legal advice in advance about his use of non-profit organizations and two statements he made to the committee that were inaccurate.
Those statements came in a Dec. 8, 1994 letter, signed by Gingrich, that said the course had no partisan, political elements and that GOPAC wasn’t involved in the course and didn’t receive any benefit from it. A separate letter, dated March 27, 1995, signed by his attorney after Gingrich’s approval, also stated inaccurately that the course had no political, partisan aspects to it.
In his settlement with the ethics investigative subcommittee, Gingrich said the statements in both letters were incorrect. “The facts in the letters that were inaccurate, incomplete and unreliable were material to the committee’s determination on how to proceed with the tax questions contained in the complaints,” the report said.
`Partisan, Political Message’
In its conclusion, the committee said there was an effort by Gingrich 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.”
In exchange for Gingrich’s admissions, the committee dropped the other counts against him. The Internal Revenue Service later ruled the two nonprofit organizations hadn’t acted improperly under tax laws, a decision Gingrich today cites as evidence that he was exonerated.
The ethics committee and IRS investigations were “completely different things,” said Jeffrey Yablon, an attorney at Pillsbury Winthrop Shaw Pittman LLP in Washington D.C., who represented one of the parties.
“The IRS investigation was not of Gingrich, it was of the foundation,” Yablon said. “The Gingrich investigation was really quite different. It was an investigation of Gingrich personally and addressed different questions.”
The IRS “just blinked,” said Frances Hill, a University of Miami law school professor. “It was a signal that the IRS didn’t intend to enforce, certainly if it involved people with political power.”
Gingrich’s use of independent groups for political purposes continued to draw criticism after he left the House.
In 2006, the former speaker founded American Solutions Winning The Future, a tax-exempt political organization that advocated offshore drilling and tax cuts and helped Gingrich connect with local activists around the country as he paved the way for his presidential run.
“This is kind of his M.O., this is the way he has run his political career, to create a web of organizations through all different IRS manifestations,” said Meredith McGehee, policy director for the Campaign Legal Center, a nonpartisan group in Washington that tracks campaign finance.
American Solutions said its mission was to create “the next generation of solutions that will ensure that the United States remains the safest, freest, and most prosperous country in the world.”
Through the group, Gingrich was able to raise unlimited amounts of money from corporations and individuals. Since 2005, Sheldon Adelson, chairman and CEO of the Las Vegas Sands Corp., contributed $7 million. Peabody Energy Corp. gave $800,000. Devon Energy gave $500,0000. Adelson also gave $2,500 to Gingrich’s presidential run.
American Solutions spent $51 million between Jan. 1, 2007 and Dec. 31, 2010. Almost $1 of every $2 spent, $24.5 million, or 48 percent, went for fundraising. Another $7.8 million was spent on travel, including $6.6 million to Moby Dick Airways, a charter service that transported Gingrich to events.
American Solutions sought new supporters, promoted policies and ideas helpful to Gingrich and kept his face and name before the public as he was “making noise” about running in 2008, said Bill Allison, editorial director of the Sunlight Foundation in Washington, a nonpartisan group that promotes government ethics rules.
“He was able to show up in Iowa, created this organization as part of that process, and was able to raise an awful lot of money through it,” Allison said.
Gingrich cut ties with American Solutions in May to run for president. It went out of business in July.
--With assistance from Jonathan Salant and Julie Hirschfeld Davis in Washington. Editors: Jeanne Cummings, Justin Blum
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