Gingrich operations and tax laws again IRS: Its rejection of tax-exempt status for a class for Republican political activists may have led to the ethics case against the House speaker.

THE BALTIMORE SUN

The facts sound familiar: a class designed to train political activists using tax-deductible money, involving House Speaker Newt Gingrich of Georgia, with organizing help from Republican Party officials.

A lengthy investigation of the class concludes that those GOP ties were misrepresented to government officials.

But it isn't "Renewing American Civilization," the class at the center of the ethics case currently tormenting Gingrich. It's the American Campaign Academy, a case with striking parallels made all the more intriguing because the same individuals played key roles in both enterprises.

The Internal Revenue Service, backed in a landmark decision from the Tax Court, rejected the academy's request for tax-exempt status.

The decision in that 1989 case played a major role in the House ethics subcommittee's decision to file charges against Gingrich on Dec. 21, sources close to the investigation told Roll Call.

And the logic used in deciding the case guided the thinking of members on the ethics panel and is heavily reflected in the formal statement of the panel's findings.

Gingrich, in a statement pleading guilty to the charges filed by the ethics investigative subcommittee, said he was "naive" in not seeking legal advice for his 1993 course taught at two Georgia colleges, broadcast nationwide by satellite, and marketed to Republican groups by GOPAC, his former political committee.

But documents obtained by Roll Call show that Gingrich was familiar with the academy and its operations. Among the revelations:

Joseph Gaylord, Gingrich's closest political adviser who later helped to organize the "Renewing American Civilization" class, designed and headed the academy. He has been paid more than $1 million by GOPAC in the past five years, federal spending reports show.

The academy was established in Arlington, Va., in 1986 and grew out of training efforts conducted by the National Republican Congressional Committee (NRCC), which Gaylord also ran as executive director. The academy requested tax-exempt status on April 11, 1986.

Jan Baran, Gingrich's attorney in the ethics case until last month, served as secretary of the academy and filed its incorporation papers on Jan. 15, 1986. Baran, at the time, was the NRCC general counsel.

Carlyle Gregory, Gingrich's former top legislative aide and campaign manager, was president of the academy.

Rich Galen, Gingrich's former press secretary and current political spokesman, also served as president of the academy. Galen now directs much of Gingrich's public defense in the case as a spokesman for the NRCC.

Rob Bickhart, GOPAC's former finance director in 1986, was listed as a key member of the academy's finance school staff.

Ladonna Lee, a paid GOPAC consultant, was on the academy staff. Lee incorporated two other tax-exempt groups that were founded and chaired by Gingrich, the American Opportunity Foundation, a 501(c)3 on July 13, 1984, and American Opportunity Inc., a 501(c)4 group.

The two groups were disbanded in 1990. James Tilton, a longtime Gingrich friend and mentor, served in both groups while serving as GOPAC's finance chairman.

Robert Dahl, now an attorney for GOPAC, served on the adjunct faculty staff.

Gingrich acknowledged working "directly with the American Campaign Academy" in an October 1989 letter to a GOPAC contributor. And much of his efforts at GOPAC were directed at professionalizing the training of GOP activists.

The academy conducted a get-out-the-vote drive in Gingrich's congressional district during the 1986 elections, using live and automatic telephone calls, door hangers and mail. The drive cost $16,500, documents said.

The two enterprises, Gingrich's college course and the academy, mirror each other in other ways, including raising questions about whether ties to Republican Party groups were misrepresented to government officials examining the activities.

Despite a wealth of evidence to the contrary uncovered in the IRS examination -- including a finding that the academy was financed with nearly $1 million from the National Republican Congressional Trust -- academy officials insisted in filings to that agency that the American Campaign Academy "is not in any way associated with, connected with, nor affiliated with a political party."

In court papers, the IRS concluded that the academy "sought to hide the Republican Party connection. The record is complete with the coy avoidance of the applicant to admit the Republican orientation of the academy."

The ethics panel charged that filings with the ethics committee by Gingrich and his attorney were "inaccurate, incomplete, and unreliable" because connections between the college course and GOPAC were denied in 13 separate statements and James Cole, the outside counsel investigating the course, found evidence contradicting those statements.

For example, a Dec. 8, 1994, letter from Gingrich to the ethics committee said: "The fact is, 'Renewing American Civilization' and GOPAC have never had any official relationship."

Gingrich said that the idea to teach the course "arose wholly independent of GOPAC, because the course, unlike the committee, is nonpartisan and apolitical."

But Cole uncovered letters sent by GOPAC and signed by Gingrich that described the partisan, political role of the course and directly contradicted Gingrich's later statements to the ethics committee.

The goal of the course, Gingrich wrote, was to activate 200,000 citizen activists. "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 and make government accountable again."

Gingrich wrote that the course "will provide the structure to build an offense so that Republicans can break through dramatically in 1996."

But the ethics investigation concluded that the course's message "was also the main message of GOPAC and the main message of virtually every political campaign speech made by Mr. Gingrich in 1993 and 1994. The course was, among other things, the primary means for developing and disseminating this message."

Filings to the IRS showed that the academy offered an intensive, ten-week crash course in the nuts and bolts of campaign and political management.

Students did not pay tuition; the academy paid students a $300 weekly stipend for attending the classes.

"The academy is merely a school," it said in filings, and would not lobby or intervene in any campaigns. The group said it planned to raise at least $300,000 in tax-deductible contributions to help finance the academy.

But the school was run by Republicans and for Republican students. Importantly, though, both the IRS and the Tax Court agreed that despite those ties, the academy was not intervening in political campaigns or lobbying for legislation. Indeed, the academy was an educational group, the court ruled.

But the central issue -- the same issue discussed in the ethics committee's findings -- is whether the extensive ties to the Republican Party meant that it served private interests rather than public interests.

The court sided with the IRS in ruling that benefits to the Republican Party, even though they were secondary and a byproduct of the primary educational mission, destroyed the academy's request for tax-exempt status.

The academy's activities improperly "serve the private interest of Republican Party entities rather than public interests exclusively," the court ruled.

The decision, considered by tax attorneys to be a landmark ruling, reaffirmed the tax code and a 1945 Supreme Court ruling that held that tax-exempt status cannot be given to activities that benefit private groups.

Celia Roady, the tax expert hired by the ethics committee, concluded that the academy and the Gingrich matters revolved around the same question.

And she concluded, according to the ethics panel, that the activities associated with the Gingrich course violated the tax code because, "among other things, those activities were intended to confer more than insubstantial benefits on Mr. Gingrich, GOPAC, and other Republican entities and candidates."

A tax attorney hired by Gingrich, James Holden, disagreed with that conclusion and said the activities did not violate tax-exempt status. But Holden agreed with Roady that he would advise against using charitable groups in connection with the course.

Frances Hill, a tax attorney specializing in exempt organizations, said it "is clear that the same reasoning was used. And the point is, the Tax Court was right in its ruling" in the academy case. "The case is a credit to the Tax Court."

Damon Chappie wrote this article for Roll Call, an independent, nonpartisan newspaper that covers Congress.

Pub Date: 1/12/97

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