October 24, 1997

Nonprofits Were Quiet Partners of Both Parties in Last Election

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    WASHINGTON -- Despite the mountain of documents and videotapes that the Clinton White House has surrendered to investigators looking into campaign finance abuses in the 1996 election, a touch of mystery still surrounds a dinner held in the Blue Room of the White House on July 12, 1996.

    That dinner, held by President Clinton and Hillary Rodham Clinton, included 60 guests, a select list that the White House has persistently refused to release but has just now surfaced. Some of the guests were wealthy donors who wanted to give money to the Democratic Party but preferred to do so quietly, either because they had business before the government or simply wanted to avoid having their names appear on public donor lists.

    Nonprofit Groups as Political Players

    The Democratic Party and the Republican Party directed donors to an array of nonprofit groups where the contributions would not be publicly disclosed. Following are some of the groups:

    VOTE NOW '96: This group, based in Florida for the election last year, accepted money from donors for vote-turnout efforts in minority areas that voted heavily Democratic. Fund-raisers for the Democratic National Committee steered donors to Vote No w '96, which raised $3 million last year.

    NATIONAL COALITION ON BLACK VOTER PARTICIPATION: The goal of this group is to increase African-American voter registration and turnout. The Democratic committee directed a $50,000 donation to the group, which also received a $90,000 grant from Vote Now '96.

    AMERICAN DEFENSE INSTITUTE: This group, which promotes Republican and military issues, received $600,000 from the Republican National Committee in 1996, but returned it because of criticism in the news media. Republican fund-raisers steered $1 mill ion in donations, including a $500,000 donation from Philip Morris Cos., to the organization. Donations to this group are tax-deductible.

    NATIONAL RIGHT TO LIFE COMMITTEE: The anti-abortion group received $650,000 directly from the Republican committee in the last two weeks of the 1996 election. In addition, Republican fund-raisers steered donors to this group.

    AMERICANS FOR TAX REFORM: This group received $4.6 million directly from the Republican committee in October 1996 for a direct-mail campaign supporting the Republican Party's plank on Medicare. Donations were also sent to this group by Republican f und-raisers.

    TRIAD MANAGEMENT SERVICES: This consulting company supported conservative Republican congressional candidates. It located wealthy conservative donors and sent their money to candidates, conservative political action committees and two nonprofit gro ups that sponsored television attack advertisements against Democrats. In the two weeks before the 1996 election, Triad directed more than $3 million to the two nonprofit groups, Citizens for Reform and Citizens for the Republic Education Fund, for the ad vertisements.

    Source: Senate Governmental Affairs Committee

    The solution was simple, they were told. They could make their donations to an organization called Vote Now '96, which was ostensibly created to encourage voter turnout and, unlike the Democratic National Committee or the Clinton-Gore campaign organization, would not be required to identify the donors or the amount of their gifts. Vote Now '96 ultimately received $3 million in donations in the 1996 campaign.

    The Democrats were not alone in their ability to accommodate generous stealth donors. Republicans, too, had special pockets for campaign donations that would not go into publicly scrutinized accounts.

    Together, nonprofit groups that received directed donations from both parties took in more than $12.5 million in 1996. And donations to at least two of the groups were tax deductible. While the referral of donors to such groups as Vote Now '96 has received some attention, the full scope of the practice is only now becoming clear as Congress investigates the activities of the groups.

    Documents obtained by Democrats on the Senate Governmental Affairs Committee, which has been holding hearings on campaign finance, show that the Republican National Committee steered more than $1 million to allied groups in the last election, including the National Right to Life Committee and a voter turnout group called the American Defense Institute.

    Republicans also relied on Triad Management Services, a consulting company that used two affiliated nonprofit groups to take in $3 million in donations that have not been publicly disclosed.

    For both parties, friendly nonprofit groups have become the political equivalent of Swiss bank accounts: places where donors can make contributions that are hidden from public view but still help Democratic and Republican candidates and causes. Almost as important, the donors can still receive the gratitude of the Democratic and Republican fund-raisers who steer contributors to these hideaways and keep Washington politicians aware of who their friends are.

    Secret donations were a staple of politics before Watergate, when President Richard M. Nixon kept hundreds of thousands of dollars in cash from wealthy Republican donors stashed in a White House safe. Disclosure was a crucial element of the campaign finance reform law passed in 1974. The resurrection of secret political donations, although from more indirect routes, alarms some election law watchdogs.

    "It's the equivalent of creating a black market in political influence," said Nicole Gordon, the executive director of the New York City Campaign Finance Board, who called such hidden money routes "incredibly destructive and pernicious."

    "Complete and accurate disclosure," Ms. Gordon said, "is the first necessary condition for any effective campaign finance regulation."

    It is legal for the political parties to steer donors to nonprofit groups, but the parties cannot legally tell the groups how and where to spend the money they collect. Yet because the missions of many of the groups dovetail with the election efforts of the two parties -- and in some cases involved participants closely associated with the parties -- the legal distinctions have become blurred.

    Nonprofit groups were not the only receptacles for quiet donations. Both parties suggested that donors give directly to state party organizations in some instances, especially when donors were hoping to obscure a large contribution to one side. Spottier disclosure requirements at the state level meant that contributors' donations would be less noticed than if they gave directly to the national political parties.

    According to the depositions of two Democratic fund-raisers interviewed last month by the Senate Governmental Affairs Committee, the Democratic National Committee steered several big donors to Vote Now '96 and to another nonprofit group, the National Coalition on Black Voter Participation.

    One such donor to Vote Now '96 was Vance Opperman, a Minneapolis businessman whose company, West Publishing, was involved in a high-stakes merger and had sensitive business dealings with the Justice Department. Opperman gave the group $100,000 in late October. The merger eventually went through and the company won a $14 million contract with the Justice Department for on-line legal research.

    Vote Now '96 also received $450,000 from an international businessman, Gilbert Chagoury, who lives in Paris much of the year and has extensive agricultural business holdings in countries including some in Africa. Chagoury, who lists a Los Angeles address on records with the Federal Election Commission, made $7,500 in political contributions in 1996, all to the Republican Party. A lawyer for Vote Now '96 said she was unsure how Chagoury came to contribute to the organization.

    Officials of Democratic National Committee guided Samir Danou, a Detroit businessman who was host for a fund-raiser for President Clinton on Oct. 21, 1996, to give $50,000 to the National Coalition on Black Voter Participation. The coalition worked closely with Vote Now '96 to promote black voter turnout.

    Danou was lobbying both the Clinton administration and Congress on a controversial issue: lifting the economic embargo against Iraq to help sick Iraqi children. He gave $25,000 to the Republican National Committee and $20,000 to the Democratic National Committee in conjunction with the Clinton fund-raiser.

    In a deposition, Mark Thomann, a former committee fund-raising official, discussed how a desire for privacy influenced some donations that he had handled. When questioned about directing Opperman to Vote Now '96, for example, Thomann told Senate investigators: "Vance is a very private person, and when you give large amounts it's obviously public record. I thought it was just basically a privacy matter."

    Opperman and his family took advantage of the state party route to give the Democrats an additional $300,000 in donations to state Democratic parties. When asked about these donations, Thomann responded, "I think Vance's wish on the state committees was the privacy issue."

    Opperman and his family gave generously to both the Democrats and the Republicans, although their state donations tipped the scales heavily toward the Democrats.

    Privacy, too, said Thomann, was a factor in the $265,000 given by the Sault Ste. Marie tribe in Michigan to state Democratic parties, a list of which was kept by Harold Ickes, who as White House deputy chief of staff in the last election also steered donors to Vote Now '96 and other friendly nonprofit groups.

    Thomann noted in his deposition that the tribe participated "on both the Republican and Democratic side, and by giving too much to one side may upset their friends on the other side." The tribe was worried about angering Gov. John Engler of Michigan, a Republican who was opposed to some of its casino and land plans.

    The tribe did not give to Vote Now '96. But according to a list of the Vote Now '96 guests at the July 1996 White House dinner obtained by The New York Times, the tribe's vice chairman, George Nolan, and Ted Gatzaros, a Michigan businessman who was involved in proposed casino projects with the tribe, were among the guests at Clinton's table.

    Various Democratic National Committee officials, including Marvin Rosen, its finance director in the last election, sought contributors for Vote Now '96. The White House dinner was held in part to help generate donations. The mix of guests was eclectic and included major donors to the group, including representatives of the Rockefeller family (Alida Messinger, a family member, gave Vote Now '96 $300,000). Among the guests were a number of Florida lawyers and businessmen who were close to Vote Now 96's chairman, Hugh Westbrook, a Florida health care executive and well-known Democratic Party fund-raiser.

    The dinner list also included big Democratic Party contributors like Mansoor Ijaz, a New York businessman who raised large contributions for the party and lobbied the Clinton administration to normalize its relations with the Sudan, and Ramesh Kapur, a Massachusetts businessman who also raised large sums for the party. But neither man gave any donations to Vote Now '96.

    The Republicans also steered millions of dollars to friendly nonprofit groups and state party organizations. Rupert Murdoch, for example, gave $1 million in donations to the California Republican Party, $750,000 of it in the last days of the election. Howard Rubenstein, a spokesman for Murdoch, said he was not seeking privacy but gave the money because he lives in California.

    The presidential campaign of Bob Dole and the Republican National Committee were also involved in orchestrating big contributions through similar nonprofit groups, according to internal campaign records. One stalwart Republican Party donor, the Philip Morris Cos., agreed to a request by the Republican National Committee to give $500,000 to the American Defense Institute, which promoted turnout among military personnel.

    In all, more than $1 million in contributions from major Republican donors was steered by the Republican National Committee to friendly nonprofit groups. In some cases, the committee even acted as an intermediary and collected the donors' checks and handed them to the nonprofit groups. This was on top of huge contributions the committee made directly to some nonprofit groups.

    The committee gave $4.6 million of its own money to Americans for Tax Reform, a nonprofit group that promoted Republican views on Medicare, and gave $600,000 to the National Right to Life Committee, an anti-abortion group that aided Republican candidates.

    But the Republican Party's most inventive ally was Triad, or Tactical Resources in American Democracy. Founded in 1995, it is a profit-making company that funnels money into congressional races through two tax-exempt organization associated with it: Citizens for Reform and Citizens for the Republic Education Fund.

    Triad raised money from conservative donors and sent it to the nonprofit groups that bought so-called issue advertisements on television attacking Democrats and supporting Republican candidates and causes. None of those donations are publicly disclosed and Triad, under investigation by Democrats on the Senate Governmental Affairs Committee, refuses to disclose its donors.

    "Most of the time, if you want to participate in the election and not appear on a disclosure report, the answer is, 'You can't,"' said Mark Braden, lawyer for Triad and the two nonprofit groups.

    "For a handful of people who contributed to Reform and Republic, the motivating interest was not to have their names disclosed, and this is really pretty much how you do it. You give through a coalition or any number of other groups that are floating around."

    Braden said some Triad donors had been so concerned about secrecy that they insisted on having written agreements with Triad that their names would not be disclosed unless Triad was ordered to do so by the courts. Still, Braden said, the majority of Triad's donors had been primarily attracted by the conservative candidates that Triad supported and less by a promise of anonymity.

    Robert Bauer, a lawyer who represents Vote Now '96, said its donors had been motivated by a desire to promote voter turnout, not secrecy.

    "For years we have relied on the support of donors whose only interest is voter registration," Bauer said.

    While Vote Now '96 poured money into voter turnout efforts in heavily Democratic areas, Triad's donors were the invisible hand behind some of the most celebrated negative advertisements of 1996, attacking Democratic congressional candidates for supporting gay rights and, in one case, calling one losing candidate a wife-beater.

    Neither of the two nonprofit groups associated with Triad was active before the 1996 election. One existed only on paper as of Oct. 11, 1996, when it first opened a bank account. In the next 20 days, from Oct. 11 to Oct. 31, the group, Citizens for Reform, received $1.6 million from Triad donors in the form of 12 bank transactions. By Oct. 31, $1.4 million of this money had been spent on advertisements, documents show. A second Triad-affiliated nonprofit group received $1.7 million in late October for television attack advertisements.

    Triad is now financing a $500,000 television advertising campaign opposing organized labors' use of union dues for campaign contributions. This issue has been a rallying cry of the Republican leadership, which has based its opposition to overhauling the campaign finance system on this financial link between the unions and Democratic candidates.

    The Senate Governmental Affairs Committee had planned to hold public hearings on the use of nonprofit groups by both political parties, including Vote Now '96, Triad and others. But with time running out and the groups' balking over requests to reveal their donors, the hearings have been stalled.

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