Experts: Charity Laundered Gifts
Newly available documents reveal how a political committee run by House Speaker Newt Gingrich channeled tax-deductible donations through a charity in the early 1990s to raise money to elect a Republican Congress.
The practice, which experts call a form of “charitable money laundering,” consists of using tax-exempt entities as conduits from donors to political organizations. Federal law prohibits IRS-approved public charities from engaging in any form of partisan conduct.
Internal memos and financial documents show that GOPAC, a political committee headed by Gingrich between 1985 and 1995 to support Republican candidates nationwide, encouraged wealthy donors to pay a minimum $10,000 in annual charter dues - and gain a tax write-off - by giving the money to the Abraham Lincoln Opportunity Foundation. The non-profit group, formed in 1984 to help inner-city youths, forwarded the contributions to GOPAC.
In one case, a top GOPAC official urged a New York businessman to send his initial GOPAC dues to the Lincoln Foundation “and thus be of enormous help in our efforts to change the Congress in 1992.” The businessman gave $25,000 and, nine days later, the foundation sent $25,000 to GOPAC, records show.
“This is very blatant,” said Frances R. Hill, a University of Miami law professor and tax expert. “What the entire pattern says to me is these people knew exactly what they were doing and they were trying to be very clever.”
In all, more than $1.6 million - primarily in tax-deductible donations - was spent to produce nationwide broadcasts of Gingrich’s workshops and his college course. Of the funds, $260,000 went to GOPAC via the Lincoln Foundation to finance Gingrich’s American Citizens Television workshop, tax records show.
The Los Angeles Times reported in June that the Lincoln Foundation was among six non-profit groups that Gingrich and his cadre of key advisers used for a decade to extend GOPAC’s reach. The Lincoln Foundation and GOPAC shared the same headquarters, officers, staff, resources, telephones and supporters.
Documents released by the Ethics Committee last weekend Gingrich showed a new pattern: the channeling of GOPAC contributions through the Lincoln Foundation in such a way that the donors received tax deductions and GOPAC received operating funds, according to experts.
“This is a case of charitable money laundering,” said Gregory L. Colvin, a San Francisco attorney who represents non-profit organizations. “It looks like the funds of GOPAC and the funds of (the Lincoln Foundation) were considered to be completely interchangeable by the parties involved.”
The Lincoln Foundation was founded in 1984 by the Colorado Republican Party to benefit disadvantaged inner-city teenagers. After struggling for a few years, the foundation went dormant and was revived in 1990 by GOPAC. The founder and president of the Lincoln Foundation was former Rep. Howard H. “Bo” Callaway, who also served as GOPAC chairman and was a trusted Gingrich adviser.
In 1990, Gingrich and GOPAC launched a series of televised town hall meetings that was touted as a non-partisan campaign to build a nationwide movement among nonvoters. In his report to the Ethics Committee, special counsel James M. Cole concluded there was clear evidence Gingrich designed the workshop for the “substantial partisan, political purposes” of electing a Republican majority to Congress.
But producing the workshops proved expensive - it cost more than $500,000 and consumed about two-thirds of GOPAC’s budget during the first six months of 1990. “Because of this, Mr. Gingrich and others at GOPAC decided to transfer (the television workshop to the Lincoln Foundation) in order to attract tax-deductible funding,” Cole told the Ethics Committee on Friday.
The documents released last weekend include copies of fund-raising letters, internal correspondence and canceled checks. They reveal that in 1991 and 1992, six contributions for a total of $117,000 were given to the Lincoln Foundation just days before the foundation wrote checks of the same size to GOPAC.
Cole noted in his report there was no evidence that Gingrich “had any significant involvement” in the details of these financial transactions.
But notes and fund-raising letters by Gingrich, Callaway and others show that the tax-deductible benefits of contributing to GOPAC were discussed before the checks were made out to the Lincoln Foundation.