IN CONNECTION WITH 1996 FEDERAL ELECTION CAMPAIGNS
FINAL REPORT of the COMMITTEE ON GOVERNMENTAL AFFAIRS
SENATE Rept. 105-167 - 105th Congress 2d Session - March 10, 1998
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| INVESTIGATION OF ILLEGAL OR IMPROPER ACTIVITIES IN CONNECTION WITH 1996 FEDERAL ELECTION CAMPAIGNS FINAL REPORT of the COMMITTEE ON GOVERNMENTAL AFFAIRS SENATE Rept. 105-167 - 105th Congress 2d Session - March 10, 1998 |
MINORITY VIEWS OF SENATORS GLENN, LEVIN, LIEBERMAN, AKAKA, DURBIN, TORRICELLI AND CLELAND Foreword......................................................... 4559 Executive Summary................................................ 4561 Foreword to the Minority Report The faith of the American people in our political system is being jeopardized by the increasing perception, expressed in public opinion polls, that campaign contributions buy access to officeholders that in turn affects policy decisions. The confluence of increased use of expensive television ads and increasingly lengthy campaigns has driven both major parties to excesses in raising and spending political money, particularly soft money. The campaigns of 1996 exhibited a dangerous rise in such excess, including the use of so called independent non- profit and tax-exempt groups whose unregulated expenditures on issue ads that are really thinly disguised campaign ads have made them a major force in our political life. An investigation of what has happened to the campaign finance system and what is needed to fix it was warranted and had the potential to be a catalyst for a public uproar to bring about the needed legislative changes to the system. While the investigation produced some important information, its high potential was not realized by the Governmental Affairs Committee investigation as a result of the Committee Majority's highly partisan approach to the investigation. And this partisanship continues to be on spectacular display in the Majority's report. Bringing balance to the investigation was therefore left to the Minority, and we fulfilled what we saw as our obligation as best we could. This Minority Report is the culmination of our effort and contains a comprehensive description of the Committee's investigation, a set of findings that logically and compellingly follow from the evidence presented, and the implications of our findings for reform of the campaign finance system. It is the hope of the Minority and all the other Democrats in this Senate that the Senate will pass a strong campaign finance reform bill this year. Failing to do that would mean failure to take even a first step to dispel the growing cynicism and lack of trust in our political system and the growing notion of many Americans that our government is for sale. In that notion lies the seed for the future destruction of American democracy. We ignore it at our peril. John H. Glenn, Ranking Member. THE MINORITY REPORT Executive Summary INTRODUCTION The founders of this country envisioned that American political discourse would be based on the power of ideas, not money, and that our elected representatives would be chosen by the principles for which they stand, not the amount of money they raise. Unfortunately, elected officials in the United States have become so dependent on political contributions from wealthy donors that the democratic principles underlying our government are at risk. As Senator Glenn has warned, we face the danger of becoming a government of the rich, by the rich, and for the rich. Candidates for Congress and the presidency spent over $1 billion on their 1996 election activities, according to an estimate by the Annenberg Public Policy Center. In order to raise that enormous quantity of money, some candidates and party officials pushed the campaign finance laws to the breaking point--and some pushed it beyond. The abuses that occurred during the 1996 election exposed the dark side of our political system and underscored the critical need for campaign finance reform, as well as the need to enhance the ability of the Federal Election Commission to enforce campaign finance laws. On March 11, 1997, the Senate voted unanimously to authorize the Governmental Affairs Committee to conduct an investigation of illegal and improper activities in connection with 1996 Federal election campaigns. The Senate asked the Committee to conduct a bipartisan investigation, one that would explore allegations of improper campaign finance activities ``by all, Republicans, Democrats, or other political partisans.'' This was a noble goal, and there were widespread hopes that the Committee would conduct a serious, bipartisan investigation, one that would investigate allegations of abuses by candidates and others aligned with both major political parties. In the end, however, the Committee's investigation provided insights into the failings of the campaign finance system, but it did not live up to its potential. The Minority regrets the failure of the Committee to expose the ways in which both political parties have pushed and exceeded the limits of our campaign finance system. Both parties have openly offered access in exchange for contributions. Both parties have been lax in screening out illegal and improper contributions. Both parties have become slaves to the raising of soft money. Violating the spirit and the letter of the Senate resolution that established its investigation, the Committee aggressively pursued allegations of wrongdoing involving Democrats, but largely ignored allegations of wrongdoing involving Republicans. As a result, the investigation became a partisan exercise, losing credibility and significance.Every one of the 320 subpoenas proposed by the Majority was issued; fewer than half of the subpoenas proposed by the Minority--89 out of 200--were issued. Sixty-six deposition subpoenas requested by the Minority were denied because they were directed to individuals affiliated with the Republican National Committee and conservative political groups, all of whom refused to cooperate voluntarily with the Committee. Thirteen deposition subpoenas issued to, but then ignored by, individuals affiliated with the Republican Party, were not enforced by the Committee. These subpoenas were directed to top officers of the Republican National Committee, the Dole for President campaign, Triad Management, and Americans for Tax Reform. Twenty-five of the 28 hearing days devoted to fundraising practices examined the Democrats. Only three days were allotted to look at possible Republican wrongdoing. Four additional days were spent discussing the need for campaign finance reform. The partisan nature of the investigation was also demonstrated by the Majority's repeated violations of the Committee's longstanding rules of procedure, abrogation of bipartisan agreements on Committee process, and the failure to issue or enforce Minority-requested subpoenas. More significantly, the failure by the Committee to enforce its subpoena authority may have damaged the ability of the U.S. Senate to compel information in future oversight and investigative efforts. The Minority Report brings some balance to the Committee's investigation. Our Report does not shrink from or condone illegal or improper conduct by Democrats. On the contrary, when the evidence indicates misconduct on the Democratic side, that misconduct is noted and condemned. The Minority Report also lays out the evidence we were able to compile about fundraising illegalities and improprieties on the Republican side. The fact that both parties engaged in campaign abuses provides the foundation of our most important conclusion, that the underlying cause of the 1996 campaign scandal is our deeply flawed system of campaign financing. The Committee investigation has built an undeniable case for campaign finance reform. A SYSTEMIC PROBLEM The Committee examined a host of 1996 election-related activities alleged to have been improper or illegal. We heard from fundraisers, donors, party officials, lobbyists, candidates and government officials. Roger Tamraz, a contributor to both parties, admitted making 1996 campaign contributions for one reason, to obtain access to events held in the White House. Buddhist Temple officials admitted reimbursing monastics for making campaign contributions at the temple's direction. A wealthy Hong Kong businessman hosted the chairman of the Republican National Committee on a yacht in Hong Kong Harbor and provided $2 million in collateral for a loan used to help elect Republican candidates to office. The Committee's investigation exposed these and other incidents that ranged from the exemplary, to the troubling, to the possibly illegal. But investigations undertaken by the U.S. Senate are not law enforcement efforts designed to arrive at judgments about whether particular persons should be charged with civil or criminal wrongdoing, but, by Constitutional design, are inquiries whose primary purpose must be ``in aid of the legislative function.'' Accordingly, the most important outcome of the Committee's investigation is the compilation of evidence demonstrating that the most serious problems uncovered in connection with the 1996 election involve conduct which should be, but is not now, prohibited by law. Or as Senator Levin has put it, the evidence shows that the bulk of the campaign finance problem is not what is illegal, but what is legal. The systemic legal problems and the need for dramatic campaign finance reform are highlighted in our Report and in the following summary, which covers subjects addressed during the hearings as well as subjects the Minority would have addressed at the hearings if it had been allocated additional hearing days. The summary is organized like the Minority Report itself--both thematically and by chapter--and, like the Report, it discusses a wide range of questionable conduct by persons and organizations associated with the Republican and Democratic Parties. But the Report also seeks to draw larger lessons about what is needed to repair a campaign financing system in crisis. In our democracy, power is ultimately to be derived from the people--the voters. In theory, every voter is equal; the reality is that some voters, to borrow George Orwell's phrase, are ``more equal than others.'' No one can deny that individuals who contribute substantial sums of money to candidates are likely to have more access to elected officials. And most of us think greater access brings greater influence. It was this concern over linkages between money, access and influence--amid allegations that Richard Nixon's 1968 and 1972 presidential campaigns accepted individual contributions of hundreds of thousands, even millions, of dollars--that spurred Congress to enact the original campaign finance laws. While those laws have evolved over the 20 years since that time, the goals have remained the same: To prevent wealthy private interests from exercising disproportionate influence over the government, to deter corruption, and to inform voters. To achieve those goals, the law imposes both contribution limits and disclosure requirements: Certain categories of donors--including corporations, labor unions, and foreign nationals--are prohibited from making contributions to federal campaigns. Individual donors are limited in the amount of money they may contribute to federal campaigns. All campaign contributions must be disclosed. Violations of the law's contribution limits and disclosure requirements have occurred since they were first enacted. For example, corporations and foreign nationals prohibited from making direct campaign contributions have laundered money through persons eligible to contribute. Donors who have reached their legal contribution limit have channeled additional campaign contributions through relatives, friends, or employees. Indeed, the investigation of the 1996 elections was triggered by suspected foreign contributions to the Democratic Party allegedly solicited by Democratic National Committee (``DNC'') fundraiser John Huang. Indictments and convictions have emerged involving contributors to both parties, including Charlie Trie and the Lum family on the Democratic side, and Simon Fireman, vice chair of finance of Senator Dole's presidential campaign, and corporate contributors to the campaigns of Representative Jay Kim of California on the Republican side. The most elaborate scheme investigated by the Committee involved a $2 million loan that was backed by a Hong Kong businessman, routed through a U.S. subsidiary, and resulted in a large transfer of foreign funds to the Republican Party. While the Committee's investigation uncovered disturbing information about the role of foreign money in the 1996 elections, the evidence also shows that illegal foreign contributions played a much less important role in the 1996 election than once suspected. Whether judged by the number of contributions or the total dollar amount, only a small fraction of the funds raised by either Democrats or Republicans came from foreign sources. More importantly, the Committee obtained no evidence that funds from a foreign government influenced the outcome of any 1996 election, altered U.S. domestic or foreign policy, or damaged our national security. The Committee's examination of foreign money also brought to light an array of fundraising practices used by both parties that, while not technical violations of the campaign finance laws, expose fundamental flaws in the existing legal and regulatory system. The two principal problems involve soft money and issue advocacy. The federal election laws, as noted above, place strict limits on campaigncontributions to federal candidates. Campaign funds which meet all of the federal strictures are often called ``federal'' or ``hard'' money. But FEC regulations also permit political parties to raise and accept contributions that do not meet the law's strict requirements, if the funds are not intended to be used to help specific federal candidates. That means, for example, under the FEC regulations, parties may accept otherwise prohibited contributions from corporations and unions and unlimited contributions from individuals. Parties can then--legally--use this so-called ``non- federal'' or ``soft'' money to help state and local candidates and for generic, party-building purposes such as get-out-the-vote drives. The Committee's investigation revealed that the legal distinction created by the FEC between hard and soft money, while clear on the fundraising side, has become all but meaningless on the spending side. Both the Democratic and Republican Parties raised vast amounts of soft money from corporate, union and individual donors, and then used loopholes in the law to spend that money helping specific candidates. The biggest of these loopholes involves so-called issue advocacy, in which communications, paid for in whole or part with soft money, attack a candidate by name while claiming to be an issue discussion outside the reach of federal election laws. This loophole widened in 1996 due to rulings by a few courts giving wide latitude to the definition of issue advocacy. These courts held, in essence, that political communications are outside the scope of federal election laws unless they contain so-called ``magic words'' (such as ``vote for,'' ``elect,'' or ``defeat'') advocating the election or defeat of a clearly identified candidate. These court rulings led to over $135 million in televised ads by parties and other groups, almost 90 percent of which named specific candidates. This unlimited and undisclosed spending, which the Annenberg Public Policy Center has called ``unprecedented'' and ``an important change in the culture of campaigns,'' may have changed the outcome of at least some 1996 federal elections. It is beyond question that raising soft money and broadcasting issue ads are not, in themselves, unlawful. The evidence suggests that much of what the parties and candidates did during the 1996 elections was within the letter of the law. But no one can seriously argue that it is consistent with the spirit of the campaign finance laws for parties to accept contributions of hundreds of thousands--even millions--of dollars, or for corporations, unions and others to air candidate attack ads without meeting any of the federal election law requirements for contribution limits and public disclosure. The evidence indicates that the soft-money loophole is fueling many of the campaign abuses investigated by the Committee. It is precisely because parties are allowed to collect large, individual soft-money donations that fundraisers are tempted to cultivate big donors by, for example, providing them and their guests with unusual access to public officials. In 1996, the soft-money loophole provided the funds both parties used to pay for televised ads. Soft money also supplied the funds parties used to make contributions to tax-exempt groups, which in turn used the funds to pay for election- related activities. The Minority Report details, in several instances, how the Republican National Committee deliberately channeled funds from party coffers and Republican donors to ostensibly ``independent'' groups which then used the money to conduct ``issue advocacy'' efforts on behalf of Republican candidates. Together, the soft-money and issue-advocacy loopholes have eviscerated the contribution limits and disclosure requirements in federal election laws and caused a loss of public confidence in the integrity of our campaign finance system. By inviting corruption of the electoral process, they threaten our democracy. If these and other systemic problems are not solved, the abuses witnessed by the American people in 1996 will be repeated in future election cycles. All that will change will be the names, dates, and details. FOREIGN MONEY A substantial portion of the Committee's efforts was directed at uncovering whether there was an illegal infusion of foreign funds into the American political process during the 1996 election cycle. The China Plan In his opening statement on the first day of the Committee's public hearings, Chairman Thompson stated that the Committee had discovered a plan ``hatched by the Chinese Government'' that was designed ``to pour illegal contributions'' into American campaigns. Chairman Thompson suggested that the Committee had evidence that this ``China Plan'' had ``affected the 1996 presidential race.'' The Committee did, in fact, receive information that Chinese government officials had proposed a plan during the last election cycle designed to promote its interests in the United States. The Committee also discovered that the China Plan focused not on the presidential race, but on lobbying and promoting Chinese Government interests with Congress, state legislatures and the American public. Although the evidence presented to the Committee supports the conclusion that the plan was implemented in a number of ways, there was ultimately insufficient evidence presented to the Committee to show that the plan involved the Chinese government making contributions to the presidential campaign, let alone that any Chinese government money had actually made its way into any federal campaign, presidential or congressional. Based on the information available to the Committee to date, the China Plan was found to be of minimal significance to the issues investigated by the Committee. Haley Barbour and the National Policy Forum The clearest example of foreign money being solicited and directed into U.S. elections involves the Republican Party and a Hong Kong businessman. It occurred when Haley Barbour, chairman of the Republican National Committee (``RNC'),persuaded Hong Kong businessman Ambrous Young to post collateral of $2 million in support of a loan to the National Policy Forum (``NPF''). NPF, a think tank also presided over by Barbour, was a de facto subsidiary of the RNC. The collateral was posted by a shell corporation that had no assets other than money transferred from Hong Kong. Because of Young's help, NPF was able to obtain a $2 million bank loan, and it quickly transferred the bulk of the loan proceeds to the RNC which, in turn, channeled the money into congressional races around the country. This was a clear case of foreign money being brought into our domestic political process. This money transfer was conceived and executed at the highest levels of the Republican Party. Barbour's testimony that he did not know that the source of the funds was foreign or that the money was intended for infusion into the 1994 congressional elections was contradicted by both documentary and testimonial evidence. Evidence before the Committee demonstrated that Barbour was made aware on several occasions, both before and after the loan was made, that the collateral, $2 million in certificates of deposit, was purchased with foreign money. Barbour himself was quoted on several occasions stating that the money was needed for the November 1994 congressional elections. His denials to this Committee were not credible. Both the Minority and Chairman Thompson agreed that the RNC should repay its Hong Kong benefactor the $800,000 that was forfeited as a result of NPF's default on the loan. Barbour authorized the default after having given assurances that the RNC would stand behind the NPF loan. John Huang John Huang, a U.S. citizen who emigrated from Taiwan in 1969, worked for several years for the Lippo Group, an Indonesian-owned conglomerate. During the late 1980s, he became active in Democratic Party politics. He raised money for President Clinton's campaign in 1992 and later joined the Department of Commerce. It appears that Huang may have raised money for the Democratic National Committee while he was a Commerce Department employee. If true, he may have violated the Hatch Act, which proscribes the solicitation of campaign contributions by federal employees. After leaving Commerce, Huang joined the DNC staff as a full-time fundraiser, concentrating on the Asian-American community. On several occasions, he collected contributions that he knew--or should have known--were improper and possibly illegal. Some Members of the Committee viewed Huang as a potential espionage agent, and spent considerable time attempting to establish that he relayed classified information to his former employer, the Lippo Group, or to the Chinese government when he was employed by the Department of Commerce. Huang offered to testify without immunity from prosecution for any acts of espionage or improper transfer of classified information. The Majority did not pursue this offer. The evidence before the Committee does not support the allegation that Huang served as a spy or a conduit for contributions from any foreign government, including China. Yah Lin (``Charlie'') Trie Yah Lin (``Charlie'') Trie, a U.S. citizen who emigrated from Taiwan in 1974, was not a DNC employee, but he raised substantial sums of money for the DNC and the Presidential Legal Expense Trust, an entity established to raise money to defray the legal bills of President and Mrs. Clinton. Some of the money Trie raised appears to have come from foreign sources, notably Ng Lap Seng (also known as ``Wu''), a business associate of Trie's based in Macao. Trie appears to have made some of his own political contributions from a bank account that was funded with transfers from Wu. The evidence before the Committee does not support the allegations that Trie was acting on behalf of a foreign government or that he was improperly attempting to influence American foreign policy. However, there can be little doubt that Trie hoped to promote his business interests by capitalizing on his earlier friendship with President Clinton. In February, 1997 Trie was indicted by the Department of Justice for conspiracy to defraud the DNC and the FEC by making and arranging illegal contributions utilizing foreign funds. He has returned to the United States and has pleaded not guilty to these charges. Ted Sioeng Individuals and companies associated with Ted Sioeng, an Indonesian-born businessman who is not a U.S. citizen or a legal resident, contributed large sums of money to both Democrats and Republicans. These contributions enabled Sioeng to gain access to high-ranking officials of both parties. The Minority urged the Committee to hold hearings on Sioeng, but none took place. This failure is striking since the Committee focused enormous attention on John Huang and Charlie Trie and other individuals linked to questionable Asian contributions. As noted above, unlike Huang and Trie, individuals associated with Sioeng contributed to both political parties. Jay Kim One of the best-documented examples of foreign contributions to a federal candidate concerned U.S. Representative Jay Kim, a California Republican, who pled guilty last year to campaign finance violations stemming from his 1992 and 1994campaigns. Kim's wife also pled guilty, while a former campaign treasurer was convicted of criminal charges after a jury trial. While examining the Kim case, the Minority found evidence suggesting that there were ongoing improprieties during the 1996 election cycle. Moreover, a recent lucrative book deal between Mrs. Kim and a South Korean publisher raises a serious question as to whether it is an attempt to channel foreign funds to the Kims for improper purposes. These transactions warrant further scrutiny. While the above examples clearly show that foreign money is a problem in the political process, the dimensions of the problem must be kept in perspective. It should be noted that the amount of foreign money that made its way into the election campaigns was a small fraction of the total amount of money contributed and the number of contributions received. INDEPENDENT GROUPS The Minority hoped for a broad bipartisan investigation into the issue of how tax-exempt entities may have been used to circumvent the campaign finance laws. The Minority joined the Majority to issue a subpoena to the AFL-CIO, the Christian Coalition, and nearly 30 other independent groups holding a wide range of political ideologies and affiliations that appeared to have played some role in the 1996 elections. After the subpoenas were issued, however, the Majority failed to enforce them, even in the face of open non- cooperation by entities and individuals subpoenaed by the Committee. The Minority indicated that it would support action against any entity, whether associated with either the Democratic or Republican Party, that failed to comply with a valid Committee subpoena. However, by late summer 1997, compliance by almost all of the independent groups had stopped. Despite these obstacles, the Minority was able to establish that several tax-exempt organizations spent millions of dollars on behalf of Republican candidates through purported ``issue ads'' and other campaign support. Even more disturbing, the RNC funneled money through several theoretically ``independent'' groups and thereby effectively evaded the federal legal limits on the spending of soft money contributions. The RNC and Americans for tax reform One of the most egregious examples of the misuse of tax- exempt entities concerned the Republican National Committee's transfer of money to Americans for Tax Reform (``ATR''). Shortly before the November 1996 election, ATR received a $4.6 million ``donation'' from the RNC and spent that money on direct mail and phone bank operations to counter anti- Republican advertising on the Medicare issue. The evidence collected by the Committee shows clearly that ATR acted as a surrogate for the RNC, enabling the Republican Party to evade campaign finance laws. The coordinated effort between the RNC and ATR permitted the RNC to conserve hard dollars which the RNC could then expend elsewhere. The alliance between the RNC and ATR is a classic example of the soft money loophole being exploited in a manner that pushed the limits of our campaign finance laws. These activities should have been exposed at public hearings, but the Majority refused to permit such hearings. The relationship between the RNC and ATR should be the subject of continued investigation by the Department of Justice, the Internal Revenue Service and the Federal Election Commission. Triad and related organizations The issue advocacy loophole was also exploited by Triad Management Services, a for-profit company that claims to be in the business of providing advice to conservative donors in exchange for fees. In fact, Triad was funded by a handful of wealthy Republican donors who used it as a mechanism to support the election of conservative Republican candidates to the House of Representatives and the Senate. Triad channeled millions of dollars from its backers to two tax-exempt groups it had established for the sole purpose of running attack ads against Democratic candidates under the guise of ``issue advocacy.'' By operating this way, Triad and its financial backers avoided the disclosure and campaign contribution limits of the federal election laws. Triad itself made possibly illegal contributions by providing free consulting advice and other assistance to candidates. Moreover, the evidence suggests that Triad conspired with contributors who had reached their maximum contribution limit to evade the law by laundering additional contributions through designated political action committees (``PACs'') and then earmarking these contributions for certain campaigns. The Department of Justice and the Federal Election Commission should continue the investigation into the operations of Triad to determine the nature and the extent of any illegal activities by that organization. One of the most unfortunate aspects of this entire investigation was the decision by the Majority to unilaterally reverse its pledge to the Minority that the Minority would be afforded three hearing days in October or November, 1997. The Minority was prepared to use the promised hearing days to educate the American people about Triad. The Christian Coalition Among all the ``independent'' groups in the pro-Republican camp, few have been as active as the Christian Coalition (``the Coalition''). In local, state, and federal elections, the Coalition spends substantial sums of money to distribute millions of copies of itsvoter guides. It has acknowledged spending between $22 million and $24 million on 1996 races, and working to distribute about 45 million voter guides. At the Minority's request, the Committee issued a subpoena to the Christian Coalition, but the organization produced only a handful of documents. It refused to provide copies of voter guides, even though copies had been distributed publicly across the country. Despite the lack of cooperation from the Coalition, and the failure of the Majority to seek enforcement, the Minority was able to piece together information about this organization from other sources, including court papers in the FEC's ongoing suit against the Coalition. The Minority found that the Christian Coalition has routinely circumvented federal election law by exploiting the ``issue advocacy'' loophole. Its voter guides, for example, purport to be honest portrayals of candidates, examining how their positions on controversial issues are in accord with the Coalition. In fact, the guides are highly slanted publications, characterized by distortions and omissions in order to help Coalition-backed candidates. Although it purports to be a nonpartisan, social welfare organization, the Christian Coalition is one of the biggest proponents of the Republican Party and Republican candidates. Warren Meddoff and tax exempt groups The evidence before the Committee on coordination between Democratic officials and independent groups is not comparable to the disturbing evidence of Republican coordination with independent groups. The Committee examined activities surrounding a written suggestion by White House Deputy Chief of Staff Harold Ickes to Florida businessman Warren Meddoff that, in response to Meddoff's request, identified organizations to which tax-deductible contributions could be made. However, there was no evidence presented that the groups identified by Ickes, which do not run issue ads and focus mostly on voter- registration activities, coordinated their activities with the White House or the DNC. The Meddoff story sheds so little light on the issue of improper coordination that it is questionable that he would have been called to testify before the Committee were it not for his allegation that Ickes had asked him to shred the memorandum identifying the tax-exempt groups. This allegation, as discussed in this Minority Report, is not credible. The Teamsters election and the DNC The Committee investigated allegations of a possible ``contribution-swapping'' scheme proposed by Martin Davis, a direct-mail consultant to the reelection campaign of Ron Carey, former president of the Teamsters union. The essence of Davis's proposal was that the Teamsters would make contributions to the DNC in return for which Democratic Party officials would find a donor to contribute to Carey's re-election campaign. The evidence established that there were discussions between Davis and various fundraising officials at the DNC about this proposal. While the evidence does not support the conclusion that a contribution-swap ultimately took place, it is disturbing that the matter progressed to the point where a possible contributor for the Carey campaign was identified. This donor did not ultimately contribute to the Teamsters because her status as an employer made her ineligible to contribute to a union election. Nevertheless, Martin Davis's comments to DNC officials should have led them to suspect that Davis was improperly seeking to influence the use of Teamsters funds to benefit the Carey campaign. DNC officials should have immediately refused to take any action in response to Davis's request. THE HSI LAI TEMPLE EVENT The Committee examined whether Vice President Gore knew or should have known that a community outreach rally held at the Hsi Lai Temple in California on April 29, 1996, was an event used by Huang to encourage contributions to the DNC and, therefore, should not have been held on the premises of a tax- exempt religious organization. The evidence before the Committee indicates that the Vice President neither knew nor had reason to know that this was anything other than a community outreach event. The evidence presented to the Committee indicates that there had been plans for the Vice President to appear at a fundraising luncheon at a restaurant and then go to the Hsi Lai Temple for the community outreach event. When the luncheon was canceled, the Hsi Lai Temple event proceeded without any of the indicia normally associated with a fundraiser. There was no admission price for attending, no tickets were sold, no campaign materials were displayed, and the Vice President's speech made no reference to the solicitation of funds. The evidence established that the day after the Vice President appeared at the temple, DNC fundraiser John Huang advised Maria Hsia, a prominent member of the Asian-American community, that he needed to raise money and he asked her to help. She, in turn, asked members of the temple to find contributors. There is not a shred of evidence, however, that the Vice President had any knowledge of this. Moreover, although the donors were reimbursed for their contributions, the source of the funds appears to have been domestic, not foreign. The evidence before the Committee shows that no aspect of Vice President Gore's appearance at the temple was improper. CONTRIBUTION LAUNDERING The Committee learned that some improper reimbursement of campaign contributions occurred in connection with the 1996 federal election cycle. A number of persons associated with Trie and Wu appear to have been reimbursed for their contributions using funds from accounts controlled by Trie. Similarly, YogeshGandhi, a Los Angeles businessman, appears to have made a $325,000 contribution in his name using funds supplied by a Japanese businessman. Businesswoman Pauline Kanchanalak, while reportedly wealthy in her own right, appears to have made substantial contributions with funds supplied by her mother-in-law. All of these contributions were improper and were returned by the DNC. There was, however, no evidence presented to the Committee to suggest that any DNC officials were aware that contributions were being reimbursed from third parties. In addition, the evidence before the Committee does not support allegations of impropriety related to $425,000 in contributions by the Wiriadinatas. The Committee also investigated several instances of contributions to the RNC that were apparently laundered or unlawfully reimbursed. For example, Michael Kojima contributed $500,000 to the Republican Senate-House Dinner Committee in 1992, and the evidence strongly suggests that those funds had actually come from several Japanese businessmen. Despite this evidence, the RNC has kept $215,000 from that contribution. Simon Fireman, a national vice chair of the Dole campaign, and his company, Aqua Leisure Industries, Inc., were convicted for using employees as conduits to make illegal corporate contributions. Aqua Leisure employees contributed more than $100,000 and were reimbursed with corporate funds laundered through a Hong Kong trust. These contributions went to several campaigns, including the Dole for President campaign. There was a similar scheme involving contributions to the Dole for President campaign by employees of Empire Sanitary Landfill, Inc., and, apparently, DeLuca Liquor and Wine, Ltd. Just as the DNC was unaware of having received laundered or illegally reimbursed contributions, there was no evidence to suggest that anyone at the RNC knowingly accepted such contributions. SOFT MONEY AND ISSUE ADVOCACY The federal campaign finance laws provide that candidates should finance their campaigns with so-called ``hard dollars''--contributions received in relatively small dollar amounts from individual donors and political action committees. Soft money--which can be donated by individuals, corporations and unions and in unlimited amounts--is not supposed to be spent on behalf of individual candidates. And yet it is: Tens of millions of soft dollars are raised by the parties and spent, through such devices as ``issue advocacy'' ads, for the benefit of candidates. The soft money loophole undermines the campaign finance laws by enabling wealthy private interests to channel enormous amounts of money into political campaigns. Most of the dubious or illegal contributions that were examined by the Committee involved soft money. The Committee's investigation also showed that the legal distinction between ``issue ads'' and ``candidate ads'' has proved to be largely meaningless. The result has been that millions of dollars, which otherwise would have been kept out of the election process, were infused into campaigns obliquely, surreptitiously, and possibly at times illegally. The issue of soft money abuses is inevitably tied to the question of how access to political figures is obtained through large contributions of soft money. It is also tied to the question of how tax-exempt organizations have been used to hide the identities of soft money donors. A system that permits large contributions to be made for partisan purposes, without public disclosure, invites subversion of the intent of our election law limitations. THE NATIONAL PARTIES It is beyond dispute that the present campaign finance system is riddled with loopholes that invite abuse by both parties. The flaws inherent in the system, however, do not excuse poor judgment. The evidence supports the conclusion that both parties failed to scrutinize their fundraising practices and political contributions with sufficient vigilance. The Committee received evidence that the DNC did not vigilantly supervise the fundraising of its employee John Huang, who was not an experienced professional fundraiser and who was tapping a source of funds--the Asian-American community--that had not previously been heavily targeted for substantial contributions. When the party received large contributions from previously unknown contributors such as Charlie Trie, Yogesh Gandhi, and others, it should have taken special steps to ensure that these were legal and proper donations and that all DNC fundraisers were familiar with--and in compliance with--the rules. Such heightened vigilance is important for any new source of contributions. Instead of heightened vigilance, however, there appear to have been instances where DNC officials ignored warning signals and permitted improper contributions to be accepted. The Committee also learned, however, that a very small proportion of the money raised by the DNC during the 1996 cycle was improper or illegal. The DNC raised $122 million and voluntarily returned less than 200 out of 2.7 million contributions, or .01% of the contributions it received. The DNC also deserves criticism for the manner in which it used access to political figures as a fundraising tool. Also of concern were instances when DNC Chairman Donald Fowler intervened on behalf of contributors in the face of admonitions to refrain from doing so. While there is no basis for ascribing improper intent to Fowler, he exhibited an insensitivity to both the appearance and theimplications of his conduct. Notwithstanding these failings, there was insufficient evidence to support a claim that the DNC was engaged in a systematic effort to disregard or evade the federal election laws. None of the evidence suggests that the DNC condoned any intentional misconduct. DNC fundraising personnel, with few exceptions, performed their functions in a legal and ethical manner. Many of the RNC's activities were subject to similar problems as the DNC. The RNC, for example, received foreign contributions, gave access to top Republican congressional leaders for large contributions, and held fundraising-related events on federal property. However, because the RNC did not comply with the Committee's document subpoena and did not make RNC officials available for deposition, the Committee did not subject allegations involving the RNC to the same level of scrutiny as it did allegations involving the DNC. CONTRIBUTOR ACCESS One of the most troubling aspects of the campaign finance system is that major contributors often enjoy added access to decision-makers in the legislative and executive branches of government. It is neither a mystery nor a surprise that the drive of political campaigns to raise money enables those who can provide funds to gain access to those who control the government. Neither political party can claim the high road of virtue on this issue, and abuses are pervasive in both presidential and congressional fundraising. For years, Republicans have openly offered contributors access to congressional and political figures in their party. One 1997 Republican invitation states that for a $250,000 contribution, a smorgasbord of benefits is available, including sharing a table with the Senate or House committee chairman ``of your choice.'' Another 1992 invitation states in a burst of candor: ``Benefits based on receipts.'' This practice of promising access to political figures in exchange for contributions is the offensive product of a campaign finance system that remains badly in need of reform. One of the most egregious examples of access being provided in exchange for political contributions concerns businessman Roger Tamraz. Evidence presented to the Committee indicates that Tamraz used every tactic imaginable to gain administration support for his oil pipeline scheme. Eventually, Tamraz resorted to making campaign contributions to the Democratic Party, just as he had given to the Republican Party when President Reagan was in the White House. The sobering fact is that the tactic was effective. Despite warnings from DNC staff and opposition from National Security Council staff and Vice President Gore's staff, Tamraz gained access to DNC events in the White House. It was equally troubling for the Republican Party to provide access to Michael Kojima when President Bush was in office--a subject not explored in any of the Committee's hearings. Kojima, a notorious ``deadbeat dad'' who was pursued by creditors, was seated with President Bush because he had donated $500,000 to the Republicans. He also received special assistance from U.S. Embassy officials for his private business interests. After Kojima's attendance at the dinner was publicized, the Republicans were forced to relinquish some of the money he had contributed to Kojima's creditors. But the party has--to this day--ignored strong evidence that Kojima made his donation not with his own money, but with funds transferred to him from Japanese businessmen. The Kojima event may have contributed to subsequent campaign finance abuses. The failure to prosecute Kojima during the Bush administration may have sent a message to other donors that the campaign finance laws were not taken seriously in Washington, a message that could only have encouraged the excesses of 1996. WHITE HOUSE FUNDRAISING TELEPHONE CALLS Fundraising calls from the White House are not a new practice. President Reagan made such calls as did President Clinton. After conducting an extensive investigation into telephone calls made by President Clinton and Vice President Gore, the evidence showed that the calls were not illegal. President Clinton made fundraising calls for the DNC from the private residence while Vice President Gore made DNC telephone calls from his office, in all instances to persons who were outside any federal building. None of these calls violated the Pendleton Act, a 19th century law which forbids the solicitation of campaign contributions from persons who are located on federal property, and Chairman Thompson was correct when he stated that no one would be prosecuted based on such telephone calls. SECRETARY BABBITT AND THE HUDSON CASINO On the final day of the hearings, the Committee heard testimony by Interior Secretary Bruce Babbitt and Paul Eckstein, a lobbyist and former colleague of the Secretary. Eckstein had unsuccessfully lobbied Secretary Babbitt to approve an Indian trust application for the purpose of building a casino near Hudson, Wisconsin. Secretary Babbitt and Eckstein were questioned about allegations that Interior's denial of the Hudson casino proposal was undertaken in response to political pressure brought to bear by opposing tribes who were also Democratic Party supporters. Much of the hearing was devoted to the particulars of a conversation between Secretary Babbitt and Eckstein about Harold Ickes, then-Deputy Chief of Staff in the White House. Several members of the Committee questioned whether Secretary Babbitt had accurately described this conversation in responding to an earlier inquiryfrom Senator John McCain. More attention should have been paid, however, to the extensive evidentiary record which demonstrated that Secretary Babbitt had played no role in the decision and that the Interior officials who did make the decision had no knowledge of either campaign contributions by the opposing tribes or alleged ``pressure'' from the White House or the DNC to deny the casino proposal. WHITE HOUSE PRODUCTION The Majority devoted two full hearing days to an effort to establish that the White House Counsel's Office conspired to withhold videotapes that showed the first few minutes of 44 coffees held at the White House. The evidence before the Committee indicates that the tapes were not produced until October 1997--about six months after they had been requested by the Committee. But the evidence is also clear that shortly after the request was received at the White House, an appropriately worded directive was issued, asking for all materials, including any videotapes, from persons within the White House complex. Evidence presented at the hearing strongly suggested that the delay in producing the tapes was caused by the unintentional mishandling of a fax by personnel at the White House Communications Agency (``WHCA'). The WHCA is staffed by career military personnel who, among their many responsibilities, are charged with creating a videotape record of presidential events in the White House. Had the White House Counsel's Office fax been forwarded to them in its entirety, WHCA personnel would have retrieved the tapes and the tapes would have been produced on a timely basis. Allegations were also made that the tapes may have been tampered with. The Committee hired an expert to examine the tapes: after extensive analysis he concluded there was no evidence of tampering. Overall, the White House cooperated with the Committee's investigative efforts. Hundreds of thousands of pages of documents were voluntarily produced by the White House, many of which shed important light on the fundraising practices being examined by the Committee. In addition, over 50 witnesses were provided by the White House for interview or deposition by Committee staff without the need of subpoenas. During the course of the investigation, however, criticisms arose about delays in the production of certain categories of requested materials. The Committee found no evidence that these delays, although disappointing to the Committee, were the result of an intention to obstruct the Committee's work. In addition to the White House cooperation with the Committee, the DNC also cooperated by producing over 450,000 pages of unredacted documents and providing over 30 witnesses for interview or deposition without the need of subpoenas. In contrast, the RNC responded to its document subpoena, which was virtually identical to the DNC's subpoena, by producing only 70,000 pages of heavily redacted documents and providing no witnesses voluntarily, and only two witnesses for depositions after subpoenas were issued. CONCLUSION Despite a highly partisan investigation, the Committee has built a record of campaign fundraising abuses by both Democrats and Republicans. This record will hopefully be useful to the Federal Election Commission, the Internal Revenue Service and to the Department of Justice as they investigate the 1996 campaign. Most importantly, the Committee's investigation should spur much-needed reform of the campaign finance laws and strengthening of the Federal Election Commission. Congress should provide the Federal Election Commission with the necessary resources to significantly enhance its investigative and enforcement staff. Ultimately, the most important lesson the Committee learned is that the abuses uncovered are part of a systemic problem, and that the system that encourages and permits these abuses must be reformed. PART 1 FOREIGN INFLUENCE
Chapter 1: Overview and Legal Analysis FINDINGS (1) Large contributors to both the Republican and Democratic parties used funds from foreign sources to gain access to top U.S. Government officials. (2) Foreign money comprised only a small fraction of the total contributions made during the 1996 election cycle, and the evidence before the Committee suggests that, with the exception of Republican National Committee Chairman Haley Barbour and Representative Jay Kim, neither party's leaders or candidates intentionally solicited or accepted foreign donations. Nor did the evidence before the Committee suggest that foreign donations altered U.S. policy or damaged American national security. (3) Although detection of foreign-sourced donations is difficult, closer supervision of party fundraisers and a more careful and complete review of large contributions may have prevented some of these contributions from being accepted. OVERVIEW OF FOLLOWING CHAPTERS A primary objective of the Committee's campaign finance hearings was to determine what role foreign money played in the 1996 elections and what impact, if any, it had on American foreign policy. Media reports were rife with allegations that foreign money had infiltrated American political campaigns to win special consideration of private commercial ventures or policy concerns. Such allegations, if true, threaten the integrity of our electoral system, foreign policy, and national security. The Committee vigorously pursued these allegations. As the following chapters demonstrate, the investigation substantiated a host of disturbing facts involving both parties, including a $2 million loan transaction involving a foreign national and foreign funds resulting in the Republican Party benefiting from $800,000 in foreign funds; large contributions to the Democratic Party solicited by John Huang and Charlie Trie in which foreign dollars were used and/or the identity of the true contributor was hidden; large contributions to both parties from apparently insolvent individuals such as Yogesh Gandhi and Michael Kojima; repeated appearances at White House events and Democratic National Committee (``DNC'') fundraisers by foreign nationals attending as guests of DNC contributors; even an organized effort to solicit contributions from foreign nationals in South Korea, resulting in the criminal convictions associated with the election campaigns of Representative Jay Kim of California. In most cases, the Committee uncovered no evidence that a recipient candidate or political party intentionally solicited a contribution funded with foreign money. However, in the cases involving the $800,000 and convictions related to the Kim campaigns, the Committee did obtain evidence that foreign money had been deliberately targeted as a funding source. Some of the transactions described in this and other parts of the Minority Report, such as the conduit contributions obtained by Trie, the Cheong Am contribution, and the solicitation of foreign nationals in the Kim matter, involve foreign money in apparent violation of federal law. Other transactions initially portrayed as involving foreign money, such as contributions from persons associated with the Hsi Lai Temple, turned out not to involve foreign money, but the apparent improper use of domestic funds. Many of the transactions demonstrate that, during the 1996 election cycle, the DNC had deficient procedures for supervising fundraisers and detecting foreign contributions and exercised inadequate oversight, including instances in which DNC senior officials who observed questionable fundraising practices or contributions failed to take the action needed to prevent problems or wrongdoing. Still other transactions expose existing vulnerabilities in federal election law, which, although intended to prohibit foreign money in U.S. elections, is not always as clear or as strong as required. One critical question examined by the Committee was whether either party made a systematic attempt to solicit foreign funds for use in campaigns. After a year-long investigation, the Committee found no documentary or testimonial evidence indicating a deliberate plan by the DNC to pursue foreign funds.1 The Committee did obtain documentary and testimonial evidence that the RNC established and funded a tax- exempt organization called the National Policy Forum (``NPF'), helped it solicit foreign funds, and then used a portion of those funds to advance Republican electoral activities in the 1994 and 1996 election cycles. In Senator Glenn's words, NPF presents the only known case ``where the head of a national political party knowingly and successfully solicited foreign money, infused it into the election process, and intentionally tried to cover it up.'' 2 --------------------------------------------------------------------------- Footnotes at end of chapter. --------------------------------------------------------------------------- A second important issue addressed by the Committee's investigation involved allegations that the Chinese government had devised a plan to, in Chairman Thompson's words, ``pour illegal money into American political campaigns'' and which affected the 1996 congressional and presidential elections.3 In the end, the evidence before the Committee demonstrated that Chinese government officials had proposed a plan during the last election cycle designed to promote China's interests with members of Congress and state legislators, not with presidential candidates. There was not sufficient evidence to support the conclusion that any Chinese government funds actually made their way into the 1996 federal elections, congressional or presidential, and there was no evidence that any steps that may have been taken by the Chinese government affected the 1996 presidential race. The evidence before the Committee indicates that foreign money, as a whole, provided a small fraction of the contributions involved in the 1996 elections. During the 1996 election cycle, the Democratic Party received over three million contributions totalling about $346 million and returned fewer than 200 individual contributions totalling about $3 million, of which an even smaller fraction involved foreign money.4 The Republican Party received about $555 million in contributions and has returned about $137,000 in foreign contributions, and there is another $1 million that should also be returned, as this Report will explain.5 The evidence before the Committee also shows that, while contributors did win access to senior decisionmakers, none obtained a change in U.S. domestic or foreign policy. Although foreign contributions did compromise a small portion of campaign contributions during the 1996 election cycle and U.S. policy was not altered, the seriousness of the problem is established by the many disturbing facts that were uncovered or substantiated during the investigation with respect to both parties. As the chapters on John Huang and Charlie Trie demonstrate, deficient DNC oversight in monitoring fundraising activities and detecting foreign contributions allowed a number of contributions derived from foreign sources to enter the campaign finance system. The chapters on Ted Sioeng and Michael Kojima demonstrate that similar oversight deficiencies affected the Republican Party.6 The chapters on NPF and Representative Kim document two instances in which foreign funds were deliberately pursued. Together, these chapters demonstrate that both parties failed to adequately investigate large contributions for possible illegal involvement of foreign nationals or possible use of foreign funds; that both parties failed adequately to search out and stop the pursuit of illegal foreign contributions; and that both parties wooed large contributors by providing access to the White House, presidents, vice presidents, and other senior government officials. The Kojima chapter demonstrates that these tactics and the resulting stain on the federal campaign finance system are not new. LEGAL ANALYSIS The federal law barring foreign contributions in U.S. elections is set forth in section 441e of Title 2 of the U.S. Code. Section 441e is intended to prohibit foreign money from playing any role in U.S. elections, but the statutory language is not as clear or as strong as needed and should be strengthened. Weaknesses in the existing legal prohibition may hinder the criminal prosecutions and civil enforcement actions needed to keep foreign money from influencing U.S. elections. Section 441e(a) states: It shall be unlawful for a foreign national directly or through any other person to make any contribution of money or other thing of value, or to promise expressly or impliedly to make any such contributions, in connection with an election to any political office . . . or for any person to solicit, accept, or receive any such contribution from a foreign national.7 ``Foreign national'' is defined in section 441e(b) to include: (1) a foreign government or foreign political party; (2) an individual who is not a U.S. citizen or legal permanent resident; or (3) a partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country. Section 441e's foreign money ban contains a number of ambiguities which have been partially resolved by the Federal Election Commission (``FEC'') and Department of Justice. For example, the key FEC regulation, 11 C.F.R. 110.4, states that section 441e's foreign money ban applies not only to contributions by foreign nationals, but also to campaign expenditures by foreign nationals.8 In addition, the regulation states that the statutory ban extends not only to federal elections, but also to state and local elections.9 A third ambiguity is the statutory language applying the foreign money ban to contributions made ``in connection with an election,'' which has led to questions of whether the statute permits soft money contributions by foreign nationals to parties or others for non-election-related activities, such as payments for office building construction or issue ads.10 Clear legal prohibitions on foreign nationals in these three areas--campaign expenditures, state and local elections, and soft money contributions--are vital to keeping foreign money from influencing U.S. elections. While most are addressed administratively, section 441e's foreign money prohibition would clearly benefit from improved statutory language. A fourth set of issues involves foreign corporations which establish subsidiaries in the United States. The statute is silent on how these corporate entities are to be treated. The FEC has determined that they may make campaign contributions under certain circumstances. The key FEC regulation states that a ``foreign national shall not direct, dictate, control, or directly or indirectly participate in the decisionmaking process'' of a U.S. corporation with regard to ``election- related activities, such as decisions concerning the making of contributions or expenditures'' or the administration of a PAC.11 A 1982 FEC advisory opinion holds that a U.S. subsidiary of a foreign corporation may lawfully make campaign contributions in state and local elections, provided that the subsidiary is organized under the laws of a state in the United States, its principal place of business is in the United States, and no foreign national controls or participates in the contribution decision.12 One FEC Commissioner strongly dissented, stating: The plain language of Section 441e explicitly prohibits ``a foreign national directly or through any other person to make any contribution . . .'' in connection with an election. [The US subsidiary] is a ``person'' under the definition in the Statute. . . . The fact that the foreign national's assets go through a USA subsidiary does not make a difference. . . . The facts of this case are conclusive that the ultimate source of the contribution will be [the foreign national]. [The foreign national] owns [the U.S. subsidiary]. They bought it. They paid for it. It's theirs. But it cannot contribute its money to our elections. Despite this and other dissenting opinions taking the same position,13 the FEC continues to permit U.S. subsidiaries of foreign corporations to make soft money contributions if the subsidiary operates under U.S. laws, in the United States, and without the participation of a foreign national in its contribution decisions. In addition, a 1992 FEC advisory opinion states that a U.S. subsidiary of a foreign parent must be able to ``demonstrate through a reasonable accounting method that it has sufficient funds in its account, other than funds given or loaned by its foreign national parent,'' to pay for its campaign contributions.14 The opinion states that a foreign parent corporation ``cannot replenish all or any portion of the subsidiary's political contributions.'' The opinion cites approvingly an earlier advisory opinion prohibiting campaign contributions by a subsidiary ``predominantly funded by a foreign national parent, and whose projects were not yet generating income.'' 15 These rulings attempt to ensure that a U.S. subsidiary of a foreign corporation pays for its campaign contributions with domestic and not foreign money. These FEC rulings do not, however, resolve a key legal issue for U.S. subsidiaries--the type of accounting demonstration required. During the Committee's hearings, a question was raised as to whether the 1992 FEC advisory opinion requires U.S. subsidiaries to demonstrate that their contributions are made from domestic profits or net earnings, in order for these contributions to satisfy FEC regulatory requirements.16 The opinion's actual language is less explicit, however, requiring only a demonstration ``through a reasonable accounting method'' that ``sufficient funds'' are in the subsidiary's account to pay for the contribution, not counting ``funds given or loaned by its foreign national parent.'' This language could be interpreted to require the subsidiary to demonstrate only that, at the time of the contribution, it had sufficient domestic funds in its account to pay the contributed amount, without reference to its ultimate net earnings or profits during a particular period of time. Since both intrepretations of the 1992 advisory opinion are reasonable, clarifying legislation or additional regulations are needed to ensure that subsidiaries are fully informed of their legal obligations with respect to such contributions. The following chapters demonstrate how compliance with section 441e's foreign money ban can be difficult, even for campaign organizations acting in good faith. With respect to contributors who are individuals, one key difficulty is ascertaining a person's legal status as a U.S. citizen or legal permanent resident. Neither candidates nor political parties have ready access to personal immigration and citizenship data.17 It also can be difficult to determine whether a U.S. citizen or legal resident who receives money from abroad, either from a business or relative, is properly using his or her own money to make a contribution or is instead making an illegal contribution in the name of another.18 With respect to corporations, it can be difficult for a campaign organization to determine whether a foreign national is participating, directly or indirectly, in a corporation's contribution decisions. It is also difficult to determine whether a corporation has sufficient domestic funds to pay for its contributions, or whether a foreign parent is planning to replenish a subsidiary's campaign contributions.19 These practical enforcement problems 20 are in addition to statutory ambiguities that should be resolved through legislation clarifying and strengthening section 441e's foreign money ban.21 footnotes 1 DNC finance chair Richard Sullivan testified that no DNC plan for pursuing foreign money ever existed: Sen. Glenn. I would like to know if at the DNC when you were there, there was ever any guideline put out to go for foreign money, and let me clarify. I do not mean money raised from American citizens of foreign extraction. I do not mean foreign money that is legal from green card holders in this country or things like that. I am talking about going after foreign money from abroad and bringing it back into our political system. Was there ever any such guideline with regard to foreign money by that definition that you had at the DNC? Sullivan. No. Sen. Glenn. Did Mr. Fowler [Chairman of the DNC] ever discuss the possibility of going into that area and trying to raise money from abroad, foreign money as I defined it? Sullivan. No. Sen. Glenn. Was there ever any discussion pro or con about whether you would even consider something like that? Sullivan. No. Sen. Glenn. Was there ever any communication or even a hint from the President or the Vice President that we should include foreign money? Sullivan. No. . . . Sen. Torricelli. [W]as there ever any discussion of duplicating the Republican National Committee's efforts with the National Policy Forum by using a tax-free vehicle, which became a conduit for foreign money? Sullivan. No. Richard Sullivan, 7/9/97 Hrg., pp. 30-31, 116; DNC Chairman Fowler testified: During the 1995-96 electoral cycle, we at the Democratic National Committee made mistakes. . . . Those mistakes, however, were mistakes of process, not intent. If any member of our staff or anyone associated with our fundraising efforts did things that were illegal or unethical, they did so in violation of our policies. Our vetting was deficient, but our purpose and values were good and proper. To the best of my knowledge, there was no intent by DNC officials to accept money from illegal foreign sources. . . . If there was a plot or conspiracy to pump money illegally into the Democratic National Committee coffers, no one told me about it. And to my knowledge, it did not happen. Donald Fowler, 9/9/77 Hrg., pp. 4-5. \2\ Senator Glenn, 7/8/97 Hrg., p. 22. See Chapter 3 on the National Policy Forum. The evidence before the Committee includes a resignation memorandum by NPF President, Michael Baroody, which cites Chairman Haley Barbour's inappropriate ``fascination'' with soliciting foreign money for NPF; an NPF document listing ``foreign'' contributions as a fundraising option; and testimony and documents describing the successful solicitation of several foreign contributions. In the most significant transaction, documents and testimony chronicle how NPF, with the assistance of Barbour and the RNC, obtained a $2 million loan in October 1994, collateralized with $2 million in certificates of deposit paid for with funds transferred from Hong Kong dollars at the direction of a foreign national, Ambrous Young; how $1.6 million of the loan proceeds were immediately transferred to the RNC and used in its 1994 election efforts; how Barbour met with Young on a yacht in Hong Kong in 1995 to ask him to forgive repayment of the loan; how NPF unilaterally stopped repayment five months before the 1996 elections, thereby halting a cash drain on the RNC which had been supplying the repayment funds; and how, after the election, NPF settled the loan with RNC funds wired to Hong Kong under an arrangement that allowed non-repayment of approximately $800,000. \3\ Chairman Thompson, 7/8/97 Hrg., pp. 2, 4. \4\ See FEC filings for Democratic National Committee, Democratic Senatorial Campaign Committee, and Democratic Congressional Campaign Committee; Exhibit 62: DNC In-Depth Contribution Review, DNC 0134-45. \5\ See FEC filings for Republican National Committee, National Republican Senatorial Committee, and National Republican Congressional Committee. To date, the Republican Party has returned a $15,000 foreign contribution made in 1995 by Methanex Management, Inc., a U.S. subsidiary of a Canadian corporation; and about $122,000 in foreign contributions made from 1991 through 1994 by Young Brothers Development (USA). See, for example, Roll Call, 10/21/96 (Methanex contribution); New York Times, 5/9/97 (Young Brothers contributions). The NPF has apparently returned a $50,000 foreign contribution made in 1996 by Panda Industries, Inc., a company owned by a foreign national, Ted Sioeng. See Newsday, 9/14/97. The Republican Party has not returned $800,000 retained in 1996 from NPF's default on a loan transaction involving a foreign national and foreign dollars from Hong Kong; $25,000 from a 1996 contribution by a foreign organization, the Pacific Cultural Foundation, which is based in Taiwan; or $215,000 remaining from a 1992 contribution by Michael Kojima that apparently utilized foreign funds from Japan. Each of these matters is discussed in the following chapters. \6\ See also Part 3, chapters 21 and 22 on contributions in the name of another affecting both parties in 1996. \7\ 2 U.S.C. 441e. \8\ 11 C.F.R. 110.4(a)(1). The need to ban campaign expenditures as well as contributions by foreign nationals is illustrated, for example, in an incident involving the Embassy of India in Washington, which, in 1996, sent an unknown number of mailings to Indian-American voters in New Jersey discussing one of the candidates running for the U.S. Senate. The 1/30/96 letter, which was addressed to ``Friend'' from Ambassador Shyamala Cowsik, Deputy Chief of Mission at the Embassy, states: ``As you know, Congressman Robert Torricelli (D-NJ) is . . . currently running for the New Jersey seat being vacated by Senator Bill Bradley. You also know that Congressman Torricelli has consistently been a strong critic of India. He was, in 1995, the original co- sponsor, along with Congressman Dan Burton, of the amendment (H.R. 1425) to suspend development assistance to India.'' See also The Ethnic NewsWatch, 11/15/96. \9\ 11 C.F.R. 110.4(a)(1). Section 441e bars a foreign national from making a ``contribution'' in connection with ``an election.'' ``Contribution'' is defined in section 431(8)(A) of the law in terms of an election ``for Federal office.'' This limiting language in the definition of contribution may create an ambiguity as to whether the foreign money ban extended to Federal, state and local elections, which is resolved in the regulation. \10\ See, for example, Legal Times, 1/6/97. FEC Advisory Opinon 1984-41 determined that it was acceptable for a foreign national to contribute $500,000 to a U.S. charitable organization to broadcast issue ads criticizing the ``liberal bias'' of the media. These ads did not mention candidates, political parties, or elections. The FEC deadlocked on three other proposed ads that did mention candidates, parties or elections, and so provided no guidance on whether foreign money may be used for those issue ads. \11\ 11 C.F.R. 110.4(a)(3). \12\ FEC Advisory Opinion 1982-10. \13\ See, for example, dissenting opinion in FEC Advisory Opinion 1992-16. \14\ FEC Advisory Opinion 1992-16. \15\ FEC Advisory Opinion 1989-20. \16\ See Committee hearing on 7/15/97. \17\ No federal database exists with citizenship information for persons born in the United States; campaign organizations have to obtain such information from the birth records maintained by individual states and U.S. territories. While the U.S. Immigration and Naturalization Service does maintain a database of information about naturalized citizens and legal permanent residents, federal law prohibits the release of such personal information without the written permission of the person that is the subject of the inquiry. See 5 U.S.C. 552(b)(6) and 552a; 28 C.F.R. Part 16. Even if a campaign organization were to obtain written permission from a donor to request citizenship or immigration information, replies to such inquiries would likely consume too much time to be of practical use during a campaign. \18\ 2 U.S.C. Sec. 441f states: ``No person shall make a contribution in the name of another person or knowingly permit his name to be used to effect such a contribution, and no person shall knowingly accept a contribution made by one person in the name of another person.'' \19\ See, for example, testimony of Thomas R. Hampson, an experienced corporate investigator specializing in evaluating foreign companies. Thomas R. Hampson, 7/15/97 Hrg., p. 62. Hampson was asked by the Committee to examine companies related to Indonesia's Lippo Group, including Hip Hing Holdings, a U.S. corporation. He testified that a reasonably thorough search over two weeks of a number of different public databases did not enable him to determine the gross or net income of Hip Hing Holdings in the year in which it made a contribution to the DNC. Thomas R. Hampson, 7/15/97 Hrg., pp. 82-84. He indicated that this information is not a matter of public record nor easily accessible, even to an expert investigator. \20\An illustration is provided by In re Kramer, FEC MUR 4398, an FEC civil enforcement action settled by conciliation agreement dated 8/ 22/96. Thomas Kramer, a foreign national, contributed a total of $322,600 in illegal campaign contributions during the 1994 election cycle to both parties at the state, local and national level. He made these contributions directly, through several Florida corporations he controlled, and through several individuals used as contribution conduits. His donations included $205,000 to the Florida Republican Party and $65,000 to the DNC. His lawyer was quoted in the press as saying that ``no fundraiser had ever inquired into Kramer's immigration status or refused his funds because he was a foreign national'' and that Kramer first learned he might be violating the law from reading a newspaper article. Associated Press, 7/18/96. Kramer voluntarily contacted the FEC, which ultimately fined him $323,000. The press reported that some campaign organizations were resisting refunding his illegal contributions. The Florida Republican Party, for example, initially wrote to Kramer that his contributions ``had been received in good faith and, therefore, were not available for refund,'' though it later returned a portion of the funds. The Kramer case illustrates the widespread lack of awareness and understanding of the law, the ease with which illegal foreign contributions enter the campaign finance system, and an enforcement apparatus that took action in this matter only after being contacted by the wrongdoer. \21\ S. 25, the McCain-Feingold bill, would make a number of the legislative remedies needed to clarify and strengthen section 441e. PART 1 FOREIGN INFLUENCE Chapter 2: The China Plan In early 1997, news reports appeared alleging that U.S. federal intelligence agencies had discovered an attempt by the government of the People's Republic of China (``Chinese Government'') to increase its influence in the U.S. political process. From February through December 1997, the Committee considered these allegations. The information gathered by the Committee shows that during the 1996 federal election cycle, Chinese Government officials decided to attempt to promote China's interests with the United States Congress, state legislatures and the American public. Following the 1995 congressional resolution advocating that Taiwanese President Lee be permitted to visit the U.S., as well as President Lee's subsequent visit, the Chinese Government determined that Congress and state officials were more influential in foreign policy decisions than the Chinese Government had previously believed. The Chinese Government's efforts have become known in the media as ``the China Plan.'' The Committee's public discussion of the China Plan began on July 8, 1997, when Chairman Thompson opened the first day of public hearings by asserting that the China Plan was ``hatched during the last election cycle by the Chinese Government and designed to pour illegal money into American political campaigns.'' The Chairman explained that the information before the Committee indicated that the Chinese Government had apparently taken legal steps pursuant to the plan, such as hiring lobbying firms, contacting the media and inviting more Congress members to visit China. He also asserted that ``[a]lthough mostdiscussion of the plan focuses on Congress, our investigation suggests it affected the 1996 Presidential race and State elections as well.'' The Chairman's assertions implied that the non-public information presented to the Committee included evidence that the Chinese Government's activities had affected, or had some meaningful impact on, the 1996 elections. Based on the evidence presented to the Committee, the Minority makes the following findings: (1) Following the 1995 congressional resolution advocating that Taiwanese President Lee be permitted to visit the U.S. and President Lee's subsequent visit, Chinese Government officials decided to attempt to increase the Chinese Government's promotion of its interests with the U.S. Congress, state legislatures and the American public. These efforts, which became known in the media as ``the China Plan,'' reflected the Chinese Government's perception that Congress was more influential in foreign policy decisions than it had previously determined. (2) The non-public information presented to the Committee to date does not support the conclusion that the China Plan was aimed at, or affected, the 1996 presidential election. (3) Although some steps were taken to implement the China Plan, the non-public information presented to the Committee to date does not support the conclusion that those steps involved Chinese Government funds going to federal campaigns, either congressional or presidential. During the Committee's public investigation, the Committee learned that contributions derived from foreign funds made their way into the 1996 federal election. The non-public information presented to the Committee, however, does not support the conclusion that these contributions were tied to the China Plan, or to Chinese Government officials. The non-public information presented to the Committee does support the conclusion that the China Plan was implemented with a relatively modest sum of money that was spent on lobbying Congress, paying for members of Congress to visit China, and increasing public relations with Chinese Americans. (4) The non-public information presented to the Committee raised questions regarding the political activities of one individual investigated by the Committee, Ted Sioeng, but the information available to date was insufficient to support the conclusion that his activities in connection with the political contributions made by his daughter or by his associates in the United States were connected to Chinese Government officials or the China Plan. For information on Sioeng's activities explored during the Committee's public investigation, see Chapter 7 of this Minority Report. Chapter 3: The National Policy Forum One of the most striking examples of foreign money in federal elections involved the National Policy Forum (``NPF'')--Young Brothers Development loan transaction. Republican National Committee (``RNC'') Chairman Haley Barbour used grants and loans from the RNC to create NPF in 1993 (which applied for tax-exempt exempt status under section 501(c)(4) of the U.S. tax code as a social welfare organization). NPF was designed to advance the Republican Party's agenda. In the hope of finding funds to repay the RNC's loans, Barbour targeted foreign sources of money. At the request of Barbour, Ambrous Young, a Hong Kong businessman, agreed to post $2.1 million in collateral, transferred from his Hong Kong business, for a bank loan in the same amount to the NPF. NPF transferred the loan proceeds to the RNC, which used them to help Republican candidates in the 1994 Congressional elections. NPF eventually defaulted on the bank loan. The RNC paid $1.3 million to Young, but refused to repay the balance, resulting in an $800,000 benefit of foreign money to the RNC. Based on the evidence before the Committee, we make the following findings regarding NPF and this transaction: (1) RNC Chairman Haley Barbour and the RNC intentionally solicited foreign money for the NPF. (2) The NPF was an arm of the RNC and, as the Internal Revenue Service concluded, was not entitled to tax-exempt status as a social welfare organization under section 501(c)(4) of the U.S. tax code. (3) Barbour solicited Ambrous Young, a foreign national, and Young agreed to provide the collateral for a loan to NPF for the purpose of helping Republican candidates during the 1994 elections. (4) The evidence before the Committee strongly supports the conclusion that Barbour and other RNC officials knew that the money used to collateralize the NPF loan came from Hong Kong. Barbour's testimony that he did not know about the foreign source of the loan collateral was not credible. (5) As a result of NPF's default on the loan, the RNC improperly retained $800,000 in foreign money during the 1996 election cycle. Chapter 4: John Huang John Huang, an American citizen who emigrated from Taiwan in 1969, is a former Lippo Group executive, Commerce Department official, and Democratic National Committee (``DNC'') fundraiser. Huang engaged in a number of activities that were improper and possibly illegal during and prior to his tenure at the DNC. In the end, the DNC returned over $1.7 million of the almost $3.5 million in contributions attributable to Huang. The Committee investigated whether Huang engaged in improper fundraising activities. In addition, the Committee examined allegations that Huang acted as an agent for a foreign government or entity. Based on the evidence before the Committee, we make the following findings regarding Huang's activities: (1) John Huang engaged in a number of improper and possibly illegal activities during and prior to his service as a DNC fundraiser. These activities ranged from failing to ensure the legality or propriety of the contributions he solicited, to obtaining foreign reimbursement for a 1992 corporate contribution he directed, to possibly soliciting foreign contributions. In addition, he appears to have improperly solicited several contributions during his tenure at the Commerce Department, in possible violation of the Hatch Act. (2) There is no evidence before the Committee that DNC officials were knowingly involved in Huang's misdeeds, but the DNC did not adequately supervise Huang's fundraising, did not adequately review the contributions that Huang solicited, and did not respond appropriately to warning signs of his improper activities. The DNC could have avoided some of Huang's misdeeds had it more closely supervised Huang's activities and had it not unwisely abandoned its previously-existing system for checking the propriety of large contributions. (3) Huang contributed and raised substantial sums of money to benefit the DNC in order to gain access for himself and his associates to the White House and senior Administration officials. (4) The evidence before the Committee does not establish that Huang served as a spy or a conduit for contributions from any foreign government, including the People's Republic of China. The Committee's investigation yielded no direct support for the allegation that Huang acted as either a spy or a conduit for any foreign government. (5) The evidence before the Committee does not establish that Huang either misused his security clearance or improperly disseminated classified information during his service at the Commerce Department. (6) The evidence before the Committee does not allow for any definitive conclusion regarding the nature of Huang's interactions with the Lippo Group during his tenure at the Commerce Department andthe DNC. Huang's frequent contacts with Lippo-related entities and his intermittent use of an office across the street from the Commerce Department to receive faxes or mail cast suspicion on Huang's activities while working for the Commerce Department. Nevertheless, the absence of specific evidence on the nature of his contacts with Lippo or the contents of the materials he received makes it difficult to draw any conclusions regarding actual misconduct or a conflict of interest within the meaning of the ethics laws governing federal employees. (7) Neither Huang's hiring at the Commerce Department nor his receipt of a security clearance was inappropriate. At the time of Huang's hiring, all Commerce Department political appointees received interim clearances as a matter of course, a practice the Department subsequently discontinued. Chapter 5: Charlie Trie Yah Lin ``Charlie'' Trie, an American citizen who emigrated from Taiwan in 1974, raised and contributed substantial sums of money to benefit the Democratic National Committee (``DNC'') and raised funds for the Presidential Legal Expense Trust (``PLET'') during the 1996 election cycle. Trie, who owned a restaurant in Arkansas and became a friend of then-Governor Clinton, opened a Washington, D.C.-based import-export company in 1992, apparently to take advantage of his relationship with the President-elect. He and his business associates had frequent access to the White House. In April 1996, President Clinton appointed Trie to the Commission on United States- Pacific Trade and Investment Policy. Trie's international business dealings with Ng Lap Seng (also known as Wu), a wealthy Macao businessman, raised questions about the source of Trie's contributions. Based on the evidence before the Committee, we make the following findings regarding Trie's activities: (1) Charlie Trie contributed and raised substantial sums of money to benefit the DNC in order to gain access for himself and his associates to the White House and senior Administration officials. (2) Trie and his businesses received substantial sums of money from abroad and used these funds to pay for some or all of the $220,000 in contributions that Trie, his family and businesses made to the DNC. The evidence before the Committee suggests that some of the contributions may have been illegal, and, in fact, Trie was recently indicted with respect to some of these contributions. Trie has pleaded not guilty. The DNC returned all $220,000. (3) Trie and Wu used individuals who were legally permitted to make campaign contributions as conduits to make contributions to the DNC, in apparent violation of law. (4) There is no evidence before the Committee that any DNC officials were knowingly involved in Trie's misdeeds, but the DNC did not adequately review the source of Trie's contributions and did not respond appropriately to warning signs of his improper activities. (5) The evidence before the Committee does not establish that the Government of the People's Republic of China provided money to Trie or directed Trie's actions. (6) The Presidential Legal Expense Trust, a private trust not involved in campaigns, acted prudently and responsibly in its dealings with Trie. (7) There is no evidence before the Committee that Trie, Wu, or anyone associated with them had any influence or effect on U.S. domestic or foreign policy. Chapter 6: Michael Kojima Michael Kojima, a Japanese-born American citizen, first gained public notice as a ``deadbeat dad'' who failed to pay child support but gave $500,000 to the Republican Party to sit with President Bush at a fundraising dinner in 1992. This contribution, which the evidence before the Committee strongly suggests Kojima paid for with funds obtained from Japanese businessmen, appears to be the second largest source of foreign money for either party during the 1990s--surpassed only by the $800,000 obtained by the RNC from a Hong Kong corporation through the National Policy Forum. Kojima's story has since gained importance as an example of a little-known contributor whose large contribution should have been investigated before being accepted and should have been returned when evidence emerged that it was from foreign sources. Kojima's dealings with the Republican Party and the Bush administration provide a context for understanding how many of the events on which the Committee focused its attention had precedent in previous campaigns and Administrations. The Kojima matter illustrates that the receipt of large foreign contributions, the provision of special access to large contributors, and the use of the White House for fundraising purposes are neither unprecedented practices nor confined to one party. Based on the evidence before the Committee, we make the following findings with respect to Kojima's activities: (1) Michael Kojima contributed substantial sums to the Republican Party in order to gain access for himself and his associates to President Bush and Bush administration officials and the help of U.S. embassies abroad. With the help of a Republican fundraising organization, the Presidential Roundtable, and because of his status as a contributor, Kojima obtained access to U.S. embassy and foreign officials to advance his private business interests. (2) Kojima's $500,000 contribution to the Republican Party appears to have been derived from foreign funds. As a result of his substantial contributions, Kojima was able to bring ten Japanese nationals with him to a 1992 dinner with President Bush. According to some of those foreign nationals, they provided Kojima with significant sums of money for the express purpose of facilitating their attendance at the dinner. (3) The RNC has improperly retained $215,000 in apparent foreign funds contributed by Kojima. (4) The Republican Party failed to conduct an adequate investigation of Kojima even when it had information that the source of the funds was questionable. Chapter 7: Ted Sioeng Ted Sioeng, an Indonesian-born businessman who is not a U.S. citizen or a legal resident, and other members of the Sioeng family contributed to both Republican and Democratic organizations during the 1990s. Sioeng has longstanding relationships with business interests in the People's Republic of China (``PRC'') and owns a pro-PRC newspaper in California. The evidence before the Committee paints a disturbing picture of fundraisers from both political parties courting an individual (Sioeng) who, because of his status as a foreign national, had no ability to make or direct legal contributions under U.S. election laws. Based on the evidence before the Committee, we make the following findings with respect to political contributions from Sioeng and related persons: (1) The evidence before the Committee strongly suggests that Ted Sioeng, a foreign national, was directly or indirectly involved in a number of contributions to Democrats and Republicans. (2) Matt Fong, California State Treasurer, did not exercise appropriate diligence in personally soliciting and receiving $100,000 in contributions from Sioeng and helping solicit a $50,000 contribution to NPF from a Sioeng-owned company. Fong has since returned the $100,000 he received; NPF has reportedly returned the $50,000 it received. (3) The evidence before the Committee does not allow for any conclusion as to whether Sioeng served as a conduit for contributionsfrom any foreign government, including the Government of China. (4) Sioeng's contributions enabled Sioeng and his associates to gain access to senior figures in both the Democratic and Republican parties, including President Clinton, Vice President Gore, and House Speaker Gingrich. Chapter 8: Jay Kim In July 1997, Representative Jay Kim (R-Ca.) and his wife, June Kim, pled guilty to numerous violations of federal campaign finance laws arising out of his 1992 and 1994 campaigns. The violations were part of a scheme which funneled over $230,000 in illegal corporate funds, some of which were directed by Korean nationals, into Kim's campaigns. Five corporations pled guilty to making illegal contributions, and Kim's campaign treasurer, Seokuk Ma, was convicted of soliciting and accepting illegal contributions. Some of these violations occurred well after the Kims became aware that they were targets of a federal investigation. Based on the evidence before the Committee, we make the following findings regarding activities by the Kims: (1) The Kims appear to have continued some of the same troubling practices during the 1996 election cycle that laid the foundation for the criminal misconduct in the prior two election cycles, including using a campaign treasurer with no knowledge of federal election law and instructing the treasurer to sign blank checks and blank Federal Election Commission forms. (2) The evidence before the Committee suggests that June Kim's recently-disclosed book deal with a South Korean publishing company may be an attempt to inappropriately channel foreign money to the Kims. PART 2 FINDINGS ON INDEPENDENT GROUPS Chapter 9: Overview and Legal Analysis (1) Independent groups, including tax-exempt organizations, corporations and unions, spent large sums of money to influence the public's perception of federal candidates and campaigns and the outcome of certain elections in 1996. (2) During the 1996 election cycle, tax-exempt organizations spent tens of millions of dollars on behalf of Republican and Democratic candidates under the guise of issue advocacy, in violation of the spirit and possibly the letter of the tax code and election laws. Despite their election-related activity, none of these organizations registered with or disclosed their activities to the FEC. Moreover, because of restrictions in the tax code with respect to such tax-exempt organizations, these organizations may have violated their tax status. (3) Although many groups conduct activities that influence the public's perception of federal candidates and campaigns, they either are not required, or do not, register with or disclose their activities with the FEC. Chapter 10: The Republican Party and Independent Groups The Republican National Committee (``RNC'') used tax-exempt organizations for partisan political purposes during the 1996 election cycle. The RNC channeled over $5 million--directly from party coffers--to organizations supposedly independent from the Republican Party, and collected and delivered significant additional sums from third parties to these groups. Some of these organizations then used the funds to help Republican candidates win election; two were actually founded and controlled by RNC officials. Other tax-exempt organizations served as conduits for Republican donors who used the organizations to conceal their identities and evade federal ceilings on campaign contributions. Based on the evidence before the Committee, we make the following findings with respect to the Republican network of independent organizations: (1) The Republican Party financed and participated in election-related activities by tax-exempt organizations, in part to evade the limits of federal election laws and to use the organizations as surrogates for delivering the Republican Party's message. (2) The RNC directly funded, for purposes that benefited the Republican Party, a number of tax-exempt organizations that were supposed to operate in a non-partisan manner. (3) The RNC also solicited, collected and delivered third- party funds to tax-exempt organizations for election-related activities to benefit the Republican Party. (4) The RNC instructed and helped Republican candidates to coordinate their campaign activities with independent groups. Chapter 11: Americans for Tax Reform Despite a commitment to nonpartisanship in its incorporation papers, ATR engaged in a variety of partisan activities on behalf of the Republican Party during the 1996 election cycle. For example, ATR accepted $4.6 million in soft dollars from the Republican National Committee (``RNC'') and spent them on election-related efforts coordinated with the RNC. ATR acted as an arm of the RNC in promoting the Republican agenda and Republican candidates, while shielding itself and its contributors from the accountability required of campaign organizations. Although ATR's refusal to comply with Committee document and deposition subpoenas has kept the Committee from learning the full extent of ATR's involvement with the RNC in the 1996 elections, the evidence before the Committee strongly suggests coordinated campaign efforts between the RNC and ATR that appear to have circumvented hard and soft money restrictions, evaded disclosure requirements and abused ATR's tax-exempt status. Based on the evidence before the Committee, we make the following findings with respect to ATR's activities: (1) The Republican National Committee improperly and possibly illegally gave $4.6 million to Americans for Tax Reform to fund issue advocacy efforts including mail, phone calls, and televised ads. By using ATR as the nominal sponsor of issue advocacy efforts, the RNC effectively circumvented FEC disclosure requirements and the requirement to fund 65% of the cost of its issue advocacy with hard (restricted) money. (2) By operating as a partisan political organization on behalf of the Republican Party, Americans for Tax Reform appears to have violated its status as a tax-exempt, social welfare organization under section 501(c)(4) of the tax code. (3) ATR's issue advocacy activity was conducted, in part, by an affiliate called the Americans for Tax Reform Foundation, which appears to be a violation of the foundation's status as a 501(c)(3) charitable organization, contributions to which are tax deductible. Chapter 12: Triad and Related Organizations Triad Management Services, Inc. is a for-profit corporation owned by Republican fundraiser Carolyn Malenick. Malenick incorporated Triad in the spring of 1996, but appears to have operated the business as an unincorporated entity since at least early 1995. Triad holds itself out as a consulting business that provides advice to conservative donors about how to maximize their political contributions. Triad oversaw advertising in 26 campaigns for the House of Representatives and three Senate races. Triad also advised at least 53 Republican candidates on ways to improve their campaigns. Despite Triad's refusal to fully comply with the Committee's subpoenas for both documents and testimony, substantial evidence of wrongdoing by Triad wasdeveloped by the Minority. Based on the evidence before the Committee, we make the following findings with respect to the activities of Triad and two non-profit organizations which it established: (1) The evidence before the Committee suggests that Triad exists for the sole purpose of influencing federal elections. Triad is not a political consulting business: it issues no invoices, charges no fees, and makes no profit. It is a corporate shell funded by a few wealthy conservative Republican activists. (2) Triad used a variety of improper and possibly illegal tactics to help Republican candidates win election in 1996 including the following: (A) Triad provided free services to Republican campaigns in possible violation of the federal prohibition against direct corporate contributions to candidates. These services included raising funds for candidates, providing consulting advice on fundraising and political strategy, and providing staff to assist candidates. (B) The evidence before the Committee suggests that Triad was involved in a scheme to direct funds from supporters who could not legally give more money directly to candidates, through political action committees (``PACs''), and back to candidates. Triad obtained from Republican candidates names of supporters who had already made the maximum permissible contributions and solicited those supporters for contributions to a network of conservative PACs. In many instances, the PACs then made contributions to the same candidates. (C) Triad operated two non-profit organizations--Citizens for Reform and Citizens for the Republic Education Fund--as allegedly nonpartisan social welfare organizations under 501(c)(4) of the tax code and used these organizations to broadcast over $3 million in televised ads on behalf of Republican candidates in 29 House and Senate races. Using these organizations as the named sponsors of the ads provided the appearance of nonpartisan sponsorship of what was in fact a partisan effort conducted by Triad. Neither organization has a staff or an office, and both are controlled by Triad. Over half of the advertising campaign was paid for and controlled by the Economic Education Trust, an organization which appears to be financed by a small number of conservative Republicans. Chapter 13: Coalition for Our Children's Future Coalition for Our Children's Future (``CCF'') is a tax- exempt organization under section 501(c)(4) of the tax code. Between its creation in mid-1995 and the November 1996 election, CCF spent over $5 million on advertising in targeted Congressional districts. Based on the evidence before the Committee, we make the following findings with respect to CCF's activities: (1) Haley Barbour and others associated with the RNC created Coalition for Our Children's Future (``CCF'') as a purportedly nonpartisan, tax-exempt social welfare organization under 501(c)(4) of the tax code and used CCF to carry out issue advocacy campaigns on behalf of Republican candidates and against Democratic candidates in 1995 and the first part of 1996. (2) The evidence before the Committee suggests that several Republican candidates solicited contributions for CCF from their own supporters and coordinated with CCF to secure issue ads that they believed would help their candidacy. (3) The evidence before the Committee suggests that in October 1996, CCF funded televised ads attacking Democratic candidates with money donated by a contributor who obtained a confidentiality agreement and oversaw development of the ads. Based on the evidence before the Committee, it is likely that this contributor was the Economic Education Trust, the same entity that funded and perhaps controlled the development and placement of ads through two tax-exempt organizations operated by Triad. Chapter 14: Christian Coalition The Christian Coalition was founded by Reverend Marion G. (``Pat'') Robertson, a former Republican candidate for president, with $64,000 in seed money from the National Republican Senatorial Committee (``NRSC''). Its longtime executive director was Ralph Reed, a Republican activist. In spite of Reed's extensive Republican political experience, Robertson's ties to the Republican Party, and the infusion of start-up funds from the NRSC, the Christian Coalition applied for tax-exempt status as a nonpartisan social welfare organization under section 501(c)(4) of the tax code. The application has been pending and unapproved for over seven years. In 1996 the Federal Election Commission (``FEC'') brought suit in federal court against the Coalition for allegedly coordinating election-related activities with Republican candidates during the 1990, 1992, and 1994 election cycles. Despite the Christian Coalition's refusal to respond to the Committee's subpoena, the Minority was able to develop information about the Coalition's election-related activities. Based on the evidence before the Committee, we make the following finding with respect to the Christian Coalition's activities: Although the Christian Coalition has applied for status as a 501(c)(4) organization and claims to be a nonpartisan, social welfare organization, the evidence before the Committee suggests that the Christian Coalition is a partisan political organization operating in support of Republican Party candidates. The evidence of partisan activity includes: spending at least $22 million on the 1996 elections; working to distribute 45 million voter guides manipulated to favor Republican candidates; and endorsing Republican candidates at organization meetings. Chapter 16: The Democratic Party and Independent Groups In 1996, the Democratic National Committee (``DNC'') contributed approximately $185,000 to five independent, tax- exempt organizations, most of which were involved in voter registration activities. In addition, Democratic Party officials directed contributions to some of these organizations. Independent groups associated with Democratic issues also spent millions of dollars on issue ads, direct mail, and related organizing activities largely benefiting Democratic candidates. Based on the evidence before the Committee, we make the following findings with respect to the Democratic Party and its activities involving independent organizations : (1) During the 1996 election cycle, several independent groups spent millions of dollars to promote Democratic issues and possibly Democratic candidates through issue advocacy, and voter education and registration. (2) The evidence before the Committee, however, suggests that the Democratic Party did not play a central role in financing, or coordinating with, these groups. Chapter 17: Warren Meddoff Shortly before the 1996 election, Florida businessman Warren Meddoff approached President Clinton at a Florida fundraiser concerning a possible $5 million donation to the President's campaign from Meddoff's associate. Subsequently contacted by Harold Ickes, White House Deputy Chief of Staff, Meddoff told Ickes that his associate wanted to make at least some of his contributions tax deductible. Ickes prepared a memo suggesting some possible tax-exempt and tax deductible recipients. After sending the memo to Meddoff, Ickes received word that a DNCbackground check of Meddoff and his associate raised serious questions and that it would be better for the DNC to decline Meddoff's offer of contributions. Ickes and Meddoff dispute what happened next. Meddoff testified that Ickes told him to ``shred'' the memo; Ickes testified that he merely told Meddoff that the memo ``was inoperative.'' Based on the evidence before the Committee, we make the following findings regarding these events: (1) There is no evidence before the Committee suggesting that Harold Ickes or any DNC official acted illegally in their dealings with Warren Meddoff. Current law does not prohibit a federal government employee or party official from directing contributions to tax-exempt organizations. (2) It would have been more prudent, as Ickes himself testified, for Ickes to have immediately referred Meddoff to the DNC. Meddoff sought suggestions on how to make a tax- deductible contribution that would help President Clinton's campaign. The Committee does not have sufficient evidence to determine whether the organizations recommended by Ickes were actually engaged in any partisan political activities. Ickes's opinion that a contribution to such groups would benefit the President's campaign does not establish that these organizations were engaged in any activities that would have been inconsistent with their tax-exempt status. (3) The DNC acted appropriately by checking the backgrounds of Meddoff and his associate and ultimately refusing their proposed contribution. (4) Meddoff is not a credible witness. His explanation to the Committee of two past proposals on behalf of two different persons to contribute $5 million to the Republican Party in one case and the Democratic Party in the other case; his admission of involvement in conduct that appears to be an attempt to bribe a federal official; his apparent threats to his former employer and a DNC fundraiser; and the fact that he never met the person on whose behalf he was allegedly making a $5 million contribution to help President Clinton, cast significant doubt on his credibility. Chapter 18: Teamsters During the reelection campaign of International Brotherhood of Teamsters President Ron Carey, consultants working for Carey's campaign launched a ``contribution-swapping'' scheme to help raise money for their campaign. As these fundraisers have acknowledged in court proceedings, they illegally asked a number of groups to donate money to Carey's campaign in exchange for donations to those groups from the Teamsters union funds. As a small part of this scheme, one of these consultants, Martin Davis, sought the help of DNC officials in locating donors willing to give money to Carey's campaign and promised greater Teamsters donations to Democratic party organizations in return. Evidence before the Committee suggests that DNC officials took little action in response to this request but that they did make an ultimately unsuccessful effort at directing to the Carey campaign the donation of an individual who sought to donate to the DNC, but whose foreign citizenship made her ineligible to make that donation. Based on the evidence before the Committee, we make the following findings regarding these events: (1) The evidence before the Committee indicates that the DNC's efforts at finding a donor for the Carey campaign were limited to exploring the legality of a possible donation from one individual to the Carey campaign, but that donation did not ultimately occur because the potential donor was not eligible, under labor laws and Teamsters'' rules, to contribute to the Carey campaign. (2) Nevertheless, Martin Davis's comments to DNC officials should have led them to suspect that Davis was improperly seeking to influence the use of Teamsters funds to benefit the Carey campaign. DNC officials should have immediately refused to take any action in response to Davis's request. Chapter 19: The Democratic Party and Other Independent Groups During the 1996 federal election cycle, there were allegations that ostensibly independent, tax-exempt groups engaged in improper or illegal partisan political activity. The alleged activity ranged from broadcasting issue ads that in reality were candidate ads, to closely coordinating with one of the national political parties. Unfortunately, the vast majority of allegations against independent groups remain unexplored by the Committee because subpoenas issued to most of these groups were not complied with or enforced. Despite these and other limitations, allegations regarding groups traditionally associated with the Republican Party are addressed in Chapters 10-15. Allegations regarding groups traditionally associated with the Democratic Party, and including those that were explored in public hearings, are addressed in Chapters 17-18. This chapter addresses, to the extent possible based on evidence submitted to the Committee, allegations regarding certain other groups traditionally associated with the Democratic Party. Based on the evidence before the Committee, we make the following findings regarding these allegations: (1) During the 1996 election cycle, several independent groups spent millions of dollars to promote Democratic issues and possibly Democratic candidates through ``issue advocacy,'' voter education and voter registration. (2) The Committee, however, uncovered no evidence that the Democratic Party played a central role in contributing to, or coordinating with, these groups. The Democratic National Committee contributed only $185,000 to such groups in 1996, compared to over $5 million the Republican National Committee contributed to conservative groups in the last half of 1996 alone. PART 3 FINDINGS ON CONTRIBUTION LAUNDERING/THIRD PARTY TRANSFERS Chapter 20: Overview and Legal Analysis The Federal Election Campaign Act (``FECA'') provides that ``no person shall make a contribution in the name of another person or knowingly permit his name to be used to effect such a contribution, and no person shall knowingly accept a contribution made by one person in the name of another person.'' 2 U.S.C. Sec. 441f. This prohibition serves two purposes. (1) It helps guarantee that persons and entities otherwise prohibited from making political contributions cannot evade those restrictions by making donations using other peoples'' names. (2) It ensures that no one seeking to influence elections with their money can circumvent the election laws' requirement of contributions limits and full public disclosure by offering their money in someone else's name rather than their own. The Committee's investigation examined a number of individuals alleged to have engaged in activities that violated this prohibition. A number of individuals in both the Republican and Democratic parties made contributions to candidates for federal office and political parties through persons who were eligible to contribute, in apparent violation of the Federal Election Campaign Act. Chapter 21: Contributions to the Democratic Party The Committee examined a number of allegations of contributions to the DNC that were ``laundered'' or made in the name of persons who were not the real source of the contributions. Based on the evidence before the Committee, we make the following findings regarding these contributions, all of which have been returned by the DNC: (1) The evidence before the Committee shows that a number of individuals made contributions to the DNC or Democratic organizations in the name of others. Some of these were hard (restricted) money contributions, in which case they may be improper or illegal; some of these were soft (unrestricted) money contributions, in which case they may be technically legal, but result in inaccurate contribution records at the FEC. Among those whose activities the Committee investigated are: (A) Charlie Trie/Ng Lap Seng (``Wu''): Trie and Wu used Keshi Zahn to arrange to have two legal permanent residents, Yue Chu and Xiping Wang, contribute $28,000 in hard (restricted) money to Democratic campaign organizations and reimbursed them. There is no evidence before the Committee to suggest that either Chu or Wang understood that their actions potentially violated campaign finance laws. Trie and Wu also used Zahn to make a $12,500 hard (restricted) money contribution to the DNC. (B) Pauline Kanchanalak: Kanchanalak used her mother-in- law's money to fund $253,500 in contributions to the DNC, $26,000 of which was hard (restricted) money. Although both Pauline Kanchanalak and her mother-in-law Praitun Kanchanalak were legal permanent residents of the U.S. and each, therefore, lawfully could make contributions in her own name, the $26,000 contribution of her mother-in-law's money in Kanchanalak's name appears to violate Section 441f. (C) Yogesh Gandhi: Gandhi, a legal permanent resident, appears to have used an associate's foreign-source money to fund a $325,000 contribution in soft (unrestricted) money in connection with a DNC fundraiser. Gandhi's bank records reveal that he would not have been able to make that contribution without significant wire transfers from Yoshio Tanaka, a Japanese national who attended a DNC fundraiser with Gandhi. Evidence before the Committee supports the conclusion that Tanaka transferred the money to fund Gandhi's contribution. (D) Arief and Soraya Wiriadinata: The Wiriadinatas, at one time legal permanent residents, made contributions of over $425,000 to the DNC, $20,000 of which appears to be hard (restricted) money contributions. The contributions were made in checks drawn on bank accounts funded with overseas transfers from Soraya Wiriadinata's father. In light of representations from Soraya Wiriadinata that her father transferred Soraya's own money, the evidence before the Committee does not establish that the $20,000 in hard money contributions came from another. (2) The evidence before the Committee does not support a finding that any DNC official knowingly solicited or accepted contributions given in the name of another. Hsi Lai Temple event On April 29, 1996, Vice President Gore attended a DNC- sponsored and John Huang-organized event at the Hsi Lai Temple in Hacienda Heights, California. Vice President Gore's briefing papers for the event described it as an outreach event with members of the Asian-American community, but much controversy has arisen regarding allegations that the DNC improperly used a religious institution to host a fundraising event and that the Temple funneled money through its monastics to the DNC. Based on the evidence before the Committee, we make the following findings regarding the event at the Hsi Lai Temple: (3) From the perspective of Vice President Gore and DNC officals, the Hsi Lai Temple event was not a fundraiser. There is no evidence before the Committee that Vice President Gore knew that contributions were solicited or received in relation to the Temple event. The information received by the Vice President regarding the event described it as an opportunity for the Vice President to meet with members of the local Asian- American community. John Huang assured DNC Finance Director Richard Sullivan that the event was not a fundraiser, but instead would involve community outreach. Moreover, the event had none of the features of a fundraiser: no tickets were taken or sold at the door; the speakers did not solicit donations; and most of those who attended did not contribute to the DNC. (4) John Huang and Maria Hsia used Vice President Gore's appearance at the Temple to raise money for the DNC. Although the event itself was not a fundraiser, Huang and Hsia, unbeknownst to DNC officials or the Vice President, used it as an opportunity to raise money for the DNC. Both before and after the event, they suggested to Temple officials that they collect contributions in connection with the Temple event. Their efforts eventually yielded $65,000 in contributions from persons associated with the Temple. (5) There is no evidence before the Committee to suggest that the money donated in connection with the Hsi Lai Temple event was foreign in origin. (6) Many of the donations made in connection with the Hsi Lai Temple event appear to have violated federal campaign laws prohibiting contributions in the name of another. The Temple reimbursed the monastic donors for their contributions. There is evidence to suggest that most of those writing the checks did not understand that they were potentially violating federal election law. Nevertheless, there appears to be little doubt that most, if not all, wrote the checks to the DNC only because the Temple asked them to do so and with the understanding that they would not fund the contributions themselves. (7) There is no evidence before the Committee that any DNC official knew that contributions made by Hsi Lai Temple monastics were of questionable legality. Chapter 22: Contributions to the Republican Party The Committee refused to devote sufficient resources, despite repeated requests to do so by the Minority, to investigating allegations of laundered contributions to the Republican Party, including the Dole for President campaign, RNC, and other Republican organizations. The Committee took testimony at one of the Minority's three days of hearings on the laundering scheme of Simon Fireman, a national vice chairman of the Dole for President finance committee, and had evidence with respect to other cases of proven and alleged laundered contributions to Republican organizations. Based on the evidence before the Committee, we make the following findings regarding these contributions to the Republican Party all of which have been returned: (1) Simon Fireman, a national vice chairman of the Dole for President campaign, used his company, Aqua Leisure Industries, Inc., to reimburse contributions to several Republican Party organizations made in the name of employees of Aqua Leisure. Over $100,000 in contributions made by employees of Aqua Leisure to the Bush-Quayle campaign, the RNC, and the Dole for President campaign were actually corporate contributions from Aqua Leisure. Fireman was convicted for his offenses. (2) Empire Sanitary Landfill, Inc. reimbursed its employees forover $110,000 in contributions the employees made to the Dole for President campaign and other Republican campaigns. Empire was convicted for its offenses. (3) DeLuca Liquor & Wine, Ltd. reimbursed five of its employees for $10,000 in contributions the employees and their spouses made to the Dole for President campaign. (4) There is no evidence before the Committee that anyone in the Dole for President campaign, the Bush-Quayle campaign or the RNC, other than Simon Fireman, knew about the above activities. PART 4 FINDINGS ON SOFT MONEY AND ISSUE ADVOCACY Chapter 23: Systemic Problems of the Campaign Finance System The Committee's investigation into campaign financing during the 1996 election cycle exposed a system in crisis, with the worst problems stemming not from activities that are illegal under current law, but from those that are legal. The massive use of soft, or unrestricted, money is a relatively new phenomenon in the campaign financing system. Since 1988 it has become the crux of many of the problems examined by the Committee, including the offers of access for large contributions and the use of party-run issue ads on behalf of candidates. Based on the evidence before the Committee, we make the following findings with respect to the role of soft money and issue advocacy in the 1996 elections: (1) The most insidious problem with the campaign finance system involved soft (unrestricted) money raised by both parties. The soft money loophole, though legal, led to a meltdown of the campaign finance system that was designed to keep corporate, union and large individual contributions from influencing the electoral process. (2) The vast majority of issue ads identified specific candidates and functioned as campaign ads. (3) Both parties went to significant lengths to raise soft money, including offering access to party leaders, elected officials, and exclusive locations on federal property in exchange for large contributions. Both parties used issue ads, which were effectively indistinguishable from candidate ads and which--unlike candidate ads--can be paid for in part with soft (unrestricted) money, to support their candidates. PART 5 FINDINGS ON FUNDRAISING AND POLITICAL ACTIVITIES OF THE NATIONAL PARTIES AND ADMINISTRATIONS Chapter 24: Overview and Legal Analysis During the 1996 election cycle, spending by candidates, their campaign committees, political parties, other political committees and persons making independent expenditures totaled a record-breaking $2.7 billion. Of that amount, the Democratic and Republican Parties together spent almost $900 million, or one-third of the total. The two presidential candidates, President Clinton and Senator Dole, together spent about $232 million, or almost 10 percent of the total. One of the primary objectives of the Committee's investigation was to investigate allegations of improper and illegal activities associated with fundraising by both parties used to finance this campaign spending. The allegations examined include the alleged misuse of federal property and federal employees to raise funds, the sale of access to top government officials in exchange for campaign contributions, and the circumvention of campaign spending restrictions through such devices as issue advocacy and coordination between the parties and their presidential nominees. I. Fundraising Practices of the National Parties Chapter 25: DNC and RNC Fundraising Practices and Problems The Committee investigated a number of the allegations of improper conduct by the DNC during the 1996 election cycle, taking 38 days of depositions, conducting 14 interviews, receiving five days of public testimony and receiving over 450,000 pages of unredacted DNC documents. Despite repeated requests from the Minority, allegations against the RNC were not fully explored by the Committee, which took only two depositions and one day of public testimony from RNC officials limited to issues involving the National Policy Forum. Although the RNC and DNC subpoenas were virtually identical, the Committee received only 70,000 pages of RNC documents, many of which were heavily redacted. The RNC's failure to comply with the Committee's document subpoena or to make RNC officials available for depositions, prevented the Committee from learning the true scope of the Republican Party's campaign activities during the 1996 election cycle. Based on the evidence before the Committee we make the following findings with respect to the overall fundraising practices of the national parties: (1) The evidence before the Committee establishes that both political parties engaged in questionable fundraising practices. Both parties scheduled events at government buildings and promised access to top government officials as enticements for donors to attend fundraising activities or make contributions. Both parties used their presidential candidates to raise millions of dollars in soft money donations in addition to the $150 million provided in public financing for presidential campaigns. Both parties worked with their candidates to design and broadcast issue ads intended to help their candidates' election efforts. (2) The RNC's activities were subject to some of the same or similar problems as the DNC's activities. The RNC received foreign contributions, gave access to top Republican leaders for large contributions, held fundraising-related events on federal property, engaged in coordination between the Presidential campaign and the national party and used supposedly nonpartisan, tax-exempt organizations for partisan purposes. (3) The compliance systems of the DNC in the 1996 campaign were flawed. Although the evidence before the Committee indicates that the DNC fundraising staff as a whole attempted to do their job in accordance with the law, isolated failures of supervision coupled with a compelling desire to raise more money led the DNC to accept hundreds of thousands of dollars in contributions it otherwise would not have accepted. Despite these problems, the overwhelming majority of contributions received by the DNC appear to have been legal and appropriate. (4) The position taken by the Republican Party in the 1992 and 1994 election cycles that it had no obligation to investigate contributions or contributors is troubling. The evidence before the Committee is insufficient to evaluate the compliance procedures of the RNC during the 1996 election cycle. Because the Committee did not have the full cooperation of the RNC in complying with the Committee's subpoenas and requests for information (and the Committee failed to enforce the subpoenas), the Committee failed to fully assess the RNC's practices and procedures for insuring the legality and propriety of major contributions. II. Use of Federal Property and Contributor Access Chapter 26: Telephone Solicitations From Federal Property Documents produced to this Committee by both the DNC and the White House indicate that on a number of occasions the DNC requested the President and the Vice President to make telephone calls to solicit funds for the DNC. The Committee reviewed evidence, including testimony and documents relating to the circumstances surrounding these calls and analyzed the laws applicable to these calls. The Committee also investigated whether past presidents and other federal officials had made fundraising phone calls. Based on the evidence before the Committee, we make the following findings with respect to fundraising calls made by the President, the Vice President, and past presidents and top officials: (1) Telephone calls made on federal property to solicit contributions from persons neither on federal property or employed by the federal government have been made by elected officials from both parties and prior administrations. (2) There was nothing illegal about the one solicitation telephone call known to the Committee made by the President. (3) There was nothing illegal about the solicitation telephone calls made by the Vice President. Chapter 27: White House Coffees and Overnights Beginning in late 1994 and continuing through the end of the 1996 campaign, the President hosted a number of small events known as ``coffees'' at the White House, some of which were sponsored by the DNC Finance Division. Others were sponsored by the DNC Political Division and the Clinton campaign. The DNC and the President viewed the coffees as a means for the President to reconnect with, spread his message to, and motivate his political and financial supporters. Over 1,000 people attended these coffees. The Committee examined these events and reviewed allegations that they included a number of persons who should not have been granted access to the President and violated federal law prohibiting the solicitation or receipt of contributions in federal buildings. The Committee also reviewed evidence on allegations that the President improperly offered overnight visits to a number of DNC contributors. Based on the evidence before the Committee, we make the following findings regarding the White House coffees and overnights: (1) The evidence before the Committee does not indicate that the DNC coffees at the White House violated existing law. The evidence before the Committee did not establish that anyone solicited contributions at the coffees, and, in any event, indicated that all but one of the coffees (about which the Committee heard no testimony) occurred in areas of the White House where solicitations are not prohibited by law. (2) Affording campaign contributors access to White House events, often where the President is in attendance, has been a bipartisan practice over the years, but the DNC's use of these events, such as coffees and overnights, during the last election cycle was extensive and created an appearance of offering access to the White House in exchange for campaign contributions. There is no evidence before the Committee that the coffees or overnights were offered in return for campaign contributions. (3) The DNC used poor judgment in permitting several persons of questionable affiliation or character to attend coffees as a favor to DNC contributors. Chapter 28: Republican Use of Federal Property and Contributor Access The practice of granting large contributors access to elected officials and special locations on federal property, such as the White House, is a longstanding fundraising technique that has been used by both political parties. In response to claims that practices under the Clinton Administration were ``unprecedented,'' this Chapter examines how the Republican Party and preceding Republican Administrations have used the White House as a fundraising tool, provided access to elected officials for large contributors, and appointed large contributors to positions within the government. Based on the evidence before the Committee, we make the following findings with respect to the offers of access by the Republican Party: (1) In the 1996 election cycle, the Republican Party continued its longstanding practice of raising money by offering, and providing, major contributors with access to top Republican federal officials. These offers of access are central components of Republican donor programs such as Team 100 and the Republican Eagles. They started in the 1970s and continue today. (2) Federal property has routinely been used by the Republican Party in its fundraising efforts. The RNC has hosted fundraising events on Capitol Hill, at the Bush White House, the Pentagon, and at other federal government locations. (3) The Bush Administration rewarded major contributors with significant government positions, including ambassadorships. Chapter 29: Democratic Contributor Access to the White House From 1993 through 1996, the Democratic National Committee organized numerous events attended by the President, Vice President or First Lady to which it invited supporters of the Democratic Party and their guests. Many of these events were at the White House. The Committee investigated the procedures used by the White House and the DNC to assess and approve individuals invited by the DNC to attend events in the White House. Based on the evidence before the Committee, we make the following findings with respect to Democratic contributor access to the White House: (1) From 1993 through 1996, White House procedures for assessing and approving individuals invited by the DNC to attend events in the White House were similar to the procedures used by prior administrations, but such procedures were inadequate. The White House Office of Political Affairs relied on the DNC (and in prior administrations, the RNC) to assess the appropriateness of attendees at DNC (RNC) events at which the President was present. Unfortunately, from 1993 through 1996, the DNC did not adequately perform that function. (2) When asked to provide information regarding the foreign policy implications arising from DNC-organized events, the National Security Council performed its function. Unfortunately, prior to 1997, the White House did not have a formal structure to adequately assess and approve all attendees at DNC events where the President was present. Chapter 30: Roger Tamraz Roger E. Tamraz is an American businessman involved in investment banking and international energy projects. In the mid-1990s, he sought to become a ``dealmaker'' in an oil pipeline project that would cross the Caspian Sea region. In the hope of obtaining U.S. Government support for his project, Tamraz used his past relationship with the Central Intelligence Agency (``CIA''), met with mid-level U.S. Government officials, and made political contributions to the Democratic Party. The Committee's investigation focused on whether officials of the CIA, the National Security Council, the DNC, the White House, or the Department of Energy improperly promoted Tamraz's pipeline proposal or gave him access to high-level government officials; why Tamraz was permitted to attend DNC events in the White House when staff had recommended that he not have any contact with high-level officials; and whether U.S. policy on the Caspian Sea pipeline changed as a result of Tamraz's political contributions or access to governmental officials. Based on the evidence before the Committee, we make the following findings with respect to the matters involving Roger Tamraz: (1) Roger Tamraz openly bought access from both political parties. (2) Tamraz's attendance at DNC events was based on hispolitical contributions and was unwise given the warnings that he might misuse such attendance. DNC Chairman Donald Fowler endorsed Tamraz's attendance at these events, despite early warnings from DNC staff and opposition from NSC officials and Vice President Gore's staff. (3) A Central Intelligence Agency official promoted Tamraz's pipeline proposal in 1995, despite knowing that the NSC opposed it. (4) An Energy Department official promoted additional political access for Tamraz in 1996, despite knowing that the NSC and other officials opposed it. (5) U.S. policy in the Caspian Sea was not affected by Tamraz's lobbying, political contributions, or presence at DNC- related events. This policy was solidified in early October 1995 and did not incorporate any aspect of Tamraz's proposal. Chapter 31: Other Contributor Access Issues Johnny Chung, a Taiwanese-American businessman, delivered a $50,000 check made payable to the DNC to the White House in 1995. The Committee investigated whether Margaret Williams, Chief of Staff to the First Lady, acted appropriately when she was given this check. The Committee also reviewed whether Chung's access to the White House--over 32 visits in 1995--was appropriate. Based on the evidence before the Committee, we make the following findings with respect to Chung's contributions and access: (1) The evidence before the Committee shows that even though Chief of Staff to the First Lady, Margaret Williams, immediately placed the contribution from Johnny Chung to the DNC in the mailbox, it would have been more prudent for her to have refused to accept the check from Chung and told him to give it directly to the DNC. (2) Chung's access to the White House, which was based in part on his contributions to the Democratic Party, was excessive and inappropriate. On one occasion Chung was permitted to bring foreign business associates to view the President's delivery of a radio address without appropriate vetting by the DNC or the White House. iii. coordination between the national parties and their candidates Chapters 32 and 33 During the 1996 election cycle, the Democratic National Committee (``DNC'') and the Republican National Committee (``RNC'') coordinated issue advocacy campaigns with the Clinton campaign and the Dole for President campaign, respectively. Both presidential campaigns paid for this issue advocacy with millions of dollars in soft (non-restricted) money that the candidates themselves helped to raise. Based on the evidence before the Committee, we make the following findings with respect to this matter: (1) Both the Clinton campaign and the Dole for President campaign benefited from spending by their respective parties in excess of the spending limits applicable to presidential candidates who accept public financing. (2) Coordination of issue advocacy between the Clinton campaign and the DNC and between the Dole for President campaign and the RNC was legal under current campaign finance laws. (3) Both presidential campaigns coordinated fundraising to pay for the issue advocacy of their respective parties. PART 6 FINDINGS ON ALLEGATIONS OF QUID PRO QUOS Chapter 34: Overview and Legal Analysis Chapter 35: Hudson Casino The Committee investigated and held a day of hearings on the Department of the Interior's decision to deny a controversial application of three Wisconsin Indian tribes to take control of land near Hudson, Wisconsin, to open a casino. Both the nearby Minnesota tribes who opposed it and the Wisconsin tribes making the application hired lobbyists who contacted various Administration officials in an attempt to influence the Interior Department's final decision. The local Hudson community and local, state and federal officials in Wisconsin from both parties opposed the application. Both before and after Interior's decision on the application, the Minnesota tribes opposing it made significant donations to the Democratic Party. The Committee took testimony on whether political influence affected Interior's decision, with particular focus on a conversation Interior Secretary Bruce Babbitt had with Paul Eckstein, who was a longtime friend and a former law partner of the Secretary and who had been retained as a lobbyist for the Wisconsin tribes, on the day Interior issued the decision denying the application. Eckstein testified that he tried to get the Secretary to reconsider the Department's imminent decision to deny the application, and that during that conversation Secretary Babbitt mentioned that White House Deputy Chief of Staff Harold Ickes had directed the Secretary to issue the decision. Secretary Babbitt testified that his comment to Eckstein was a general statement reflecting the fact that Ickes was Secretary Babbitt's official contact in the White House and was intended to end an awkward and lengthy conversation with Eckstein. Based on the evidence before the Committee, we make the following findings regarding these events: (1) The evidence before the Committee supports the conclusion that Secretary Babbitt did not act improperly with respect to the Department of Interior's decision to deny the Hudson trust application. The evidence shows that Secretary Babbitt played no role in the Hudson trust decision, that he did not hear from, or talk to, Harold Ickes about the decision, and that the Interior officials who recommended denying the trust application had no knowledge of either campaign contributions by the opposing tribes or the alleged ``pressure'' from the White House or the DNC to deny the trust application. (2) However, Secretary Babbitt's actions with respect to Eckstein, his letters to Senators McCain and Thompson, and his testimony to this Committee regarding his conversations with Eckstein were unnecessarily confusing. Secretary Babbitt's letter to Senator McCain omitted the fact that Secretary Babbitt had invoked Ickes' name to Eckstein even though that allegation was at the center of Senator McCain's earlier letter to Secretary Babbitt. The Secretary's subsequent letter to Senator Thompson acknowledged that he did invoke Ickes' name with Eckstein, but said that he did so only as a means to terminate his conversation with Eckstein. Secretary Babbitt then testified to this Committee that, even though he had not spoken to Ickes about the trust application, he did not technically mislead Eckstein when invoking Ickes' name because the White House naturally wanted him to issue decisions in a timely way. These statements, when taken together, are confusing, but they are not directly inconsistent with the facts. Chapter 36: Tobacco and the 1996 Elections During the 1996 election cycle, tobacco companies contributed roughly $8.5 million in soft money to the Republicans, much of which was raised by Haley Barbour. There are grounds for suspecting that Barbour assisted the industry in exchange for campaign money, but the Committee did not investigate these troubling allegations. Chapter 37: Cheyenne-Arapaho Tribes of Oklahoma On June 17, 1996, two representatives of the Cheyenne- Arapaho Tribes of Oklahoma (``Tribes'') ate lunch with the President and five other guests at the White House. Two weeks later, the Tribes donated $87,671.74 to the Democratic National Committee (``DNC'). In August 1996, they contributed an additional $20,000 to the party. The Committee investigated allegations that the DNC solicited $100,000 from a politically naive and poor Native American tribe; improperly granted tribal members access to the President of the United States; and illegally promised the return of historic tribal lands currently used by the federal government in a quid pro quo exchange for a contribution from the Tribes' ``welfare'' fund. Although no public hearings were held regarding the Tribes and their contributions to the DNC, the Committee conducted interviews and depositions of witnesses, as well as a review of numerous documents. Based on the evidence before the Committee, we make the following findings regarding these events: (1) No arrangement existed, or was ever contemplated, between the Cheyenne-Arapaho Tribes of Oklahoma and the Democratic National Committee or the Administration to return tribal lands held by the federal government to the Tribes in exchange for a political contribution to the DNC. (2) The evidence before the Committee supports the conclusion that the DNC and the Administration acted properly and legally throughout the course of their dealings with the Tribes. PART 7 FINDINGS ON INVESTIGATION PROCESSES Chapters 38-41 Senate Resolution 39 directed the Senate Governmental Affairs Committee to conduct an investigation of illegal or improper activities in connection with the 1996 Federal election campaigns. By the specific terms of this resolution, the Committee was not to limit its investigation to the activities of only one political party or only one branch of government, but was to investigate and inform the public about the full nature of the problems associated with the last election cycle, regardless of the party with which those problems were associated. We make the following findings regarding the process by which the Committee conducted this investigation: (1) The Committee's investigation was not bipartisan. The Committee's investigation focused predominantly on persons and entities associated with the Democratic Party. The Majority devoted virtually no resources to exploring a variety of serious allegations against those affiliated with the Republican Party. Moreover, it refused to issue or enforce many of the Minority-requested subpoenas related to the Committee's mandate, simply because those subpoenas sought information from Republican-related persons and entities. When the Minority accumulated substantial evidence of Republican wrongdoing despite these significant limitations, the Majority refused to schedule hearings to allow for the public airing of this information. As a result, virtually all of the Majority's investigatory resources and Committee hearings focused upon activities involving the Democratic Party and its associates. (2) Although the Committee's investigation provided insight on the serious shortcomings in our campaign finance system, the failure to fully and impartially investigate wrongdoing in the 1996 federal elections, regardless of party, kept the Committee from fulfilling its mandate and eliminated the ability to produce a bipartisan report. The Committee's hearings did make a contribution to the public's understanding of the ways in which money influenced the 1996 elections. As a consequence of the investigation's partisanship, the Committee cannot credibly claim that it offered the American people a complete picture of the illegal or improper activity that occurred during the 1996 federal elections. The Committee virtually ignored at least half of the story of those elections, and the partisan framework in which it presented and interpreted the evidence it did uncover diminishes the Committee's ultimate findings and conclusions. (3) The Committee's failure to pursue enforcement actions against those who failed to comply with the Committee's subpoenas threatens to have lasting impact on the success and credibility of future Senate investigations. The Committee's acceptance of the refusal of groups and individuals to comply with the Committee's subpoenas will make objective investigations in the future much more difficult by emboldening persons and entities to ignore future Senate subpoenas. (4) The DNC made a good faith effort to comply with Committee requests. To this end, the Committee conducted 38 days of depositions, 14 interviews, and five days of public hearings of DNC witnesses. The DNC also produced over 450,000 pages of documents and hired over 30 additional staff to review and prepare documents for production to the Committee. (5) The RNC impeded the investigation. The RNC unilaterally redacted documents and appears to have intentionally withheld material documents. RNC witnesses failed to cooperate in scheduling depositions, and, in the instances where depositions were scheduled, they were unilaterally canceled. (6) Entities supportive of the Republican party impeded the investigation. Entities including the National Policy Forum, Americans for Tax Reform, and Triad intentionally impeded the investigation by failing to produce documents and witnesses under subpoena. (7) The White House Counsel's Office took appropriate and reasonable steps to discover the existence of responsive videotapes in response to the Committee's April 1997 document request. There is no evidence before the Committee to suggest that the White House Counsel's Office intended to obstruct the work of the Committee. (8) The evidence before the Committee is conclusive, based on exhaustive technical analysis, that none of the videotapes or audiotapes produced by the White House to the Committee have been altered in any way.