Newt Gingrich and his sleazy ways: A history lessonDecember 5, 2011: 11:38 AM ET
Gingrich's work for Freddie Mac reminds us that Gingrich has always invoked the "historian" label to excuse his most questionable conduct.
By Roger Parloff, senior editor
The views expressed here are his own.
FORTUNE -- Young conservatives were apparently taken aback by recent revelations that late-surging GOP presidential candidate Newt Gingrich had, between 1999 and 2008, received at least $1.6 million in payments from the now-seized mortgage giant Freddie Mac. While Freddie was, in anyone's book, a contributor to the great financial crisis that still afflicts us, it was, in the view of most Republicans, an archfiend on the level of Lex Luthor.
But aside from the substantive questions Gingrich's lucrative assignment raised—exactly what services had he performed for Freddie?—it was also an embarrassment at a more elementary, glass-house-stone-throwing level, since Gingrich had so recently and contemptuously denounced Rep. Barney Frank for his ties to Freddie (FMCC).
Then, as Gingrich bullied his way past questions about his Freddie assignment, his hypocrisy was soon eclipsed by his breathtaking lack of candor. He offered a series of belligerently delivered but utterly inconceivable explanations of his work for Freddie, beginning with the inevitable whopper: He had been acting as its "historian."
I say "inevitable" because, as we oldsters know, Gingrich has always invoked his status a "historian" or "educator" to excuse his grubbiest, borderline-illegal politicking. It's his calling card, his tell-tale modus operandi, and—when in trouble—his reserve-chute rip-cord.
So gather round, young voters, and I'll tell you the story of how Gingrich became Speaker. Fellow oldsters may find this enlightening, too, because when you live through a story that dribbles out of a period of years, with professional spinners raising smokescreens and barking denials at every turn, it's often hard to keep track of the big-picture story line.
If some readers find this piece unusually partisan for Fortune, I protest that I am simply acting here—as Gingrich has so often claimed to—as a nonpartisan educator. Nevertheless, as readers will see, I will depart from the Gingrich educational paradigm in one important respect: I won't force taxpayers to subsidize the costs of disseminating my vitriol.
Back in 1990, when Democrats still held the House and before many of today's young voters were born, then Rep. Gingrich conceived a plan to produce a series of television programs that would be played at workshops in 600 cities around the country. The project was said to be designed to create "a citizen's movement," but it was also intended as "a tool to recruit non-voters and people who were apolitical to the Republican Party." (Unless otherwise indicated, quotations in this article come from the Report of the Select Committee on Ethics that studied Gingrich's conduct throughout 1996. Since Republicans took control of the House in 1995, Republicans controlled this committee throughout its investigation. Its conclusions were nearly unanimous—endorsed 7 to 1—and were then ratified by the full House by a 395 to 28 margin.)
The TV shows and workshops were at first funded by GOPAC, the political action committee that then said its mission was "to create and disseminate the doctrine which defines [the] Republican Party in such a way as to elect candidates, capture the United States House of Representatives and become a governing majority at every level of Government." Gingrich was GOPAC's general chairman.
The shows consciously avoided using explicit partisan language, so as not to put off nonvoters and apolitical types. But, as one GOPAC official responsible for the content later testified, "it was a message that Republican principles are sound principles, . . . that a smaller government is frequently better than a larger government, that it is better to reduce taxes than raise taxes. . . . It is Republican kinds of issues."
The shows were expensive to produce and by mid-1990 they were absorbing 62% of GOPAC's budget. So Gingrich and others at GOPAC decided to transfer the project funding to a 501(c)(3) "educational" charity, which would then solicit tax-deductible donations. To legally do so, a charity must be organized "exclusively for religious, charitable, scientific . . . or educational purposes" and may not "participate in or intervene in . . . any political campaign." (Donations to GOPAC itself, a political action committee, were clearly not deductible.)
GOPAC enlisted a then-dormant 501(c)(3) organization, called the Abraham Lincoln Opportunity Foundation (ALOF), to serve as its fund-raising vessel. "ALOF operated out of GOPAC's offices" and virtually all its officers and employees "were simultaneously GOPAC officers and employees."
Next, in 1993, Gingrich devised a course, called Renewing American Civilization, which was to be another "recruiting tool for GOPAC and the Republican Party." Again, the course eschewed overtly political language, but it set up a dichotomy between the failed "bureaucratic welfare state," which was said to be the source of the nation's problems, and the "opportunity society," which was what was needed to replace it. GOPAC had extensively tested these terms in focus groups and "Gingrich sought to have Republican candidates adopt the Renewing American Civilization message in their campaigns." In his own campaign, "Gingrich used the term 'welfare state' as a negative label for Democrats and the term 'opportunity society' as a positive label for Republicans."
GOPAC was in financial straits so, again, it decided to seek tax-deductible funding for the project through a 501(c)(3) foundation. It chose one affiliated with Kennesaw State College, a Georgia school where Gingrich first arranged to give the course. The foundation, however, outsourced all course management and fund-raising functions to a Washington-based consulting firm run by Jeffrey Eisenach, who resigned his position as GOPAC's executive director in order to perform this role.
Half of the 40-hour course was taught by Gingrich personally. His classes were taped and re-aired at hundreds of remote locations in conjunction with more workshops. Gingrich's role in the course, according to the committee report, "was to be the 'advocate of civilization,' the 'definer of civilization,' the 'teacher of the rules of civilization,' the 'arouser of those who form civilization,' the 'organizer of the procivilization activists,' and the 'leader (possibly) of the civilizing forces.' "
Once the course got underway, some Kennesaw college faculty members complained that it was political propaganda. Eventually the Georgia Board of Regents blocked Gingrich from teaching the course there or at any other state college.
Gingrich then relocated it to a private college, and began soliciting tax-deductible donations through a different 501(c)(3) called the Progress and Freedom Foundation (PFF). PFF was headed, again, by former GOPAC executive director Eisenach.
"Aggressive" interpretation of the law
So far as the select committee could ascertain, neither Gingrich nor anyone else asked a lawyer whether the use of any of these 501(c)(3) organizations—the Abraham Lincoln Opportunity Foundation, the Kennesaw college foundation, or the Progress and Freedom Foundation—as a means of seeking tax-deductible support for these GOPAC-conceived projects was legal. The select committee later found this omission troubling, because Gingrich's "status as a Member of Congress obligated [him] to maintain high ethical standards," which would include making sure he was acting lawfully. The committee's concern was heightened by the fact that Gingrich admitted being "very well aware of" a 1989 ruling by the U.S. Tax Court which had stripped the American Campaign Academy—another politically-motivated "educational" institution where Gingrich taught—of its 501(c)(3) status after concluding that it "conducted its educational activities with the partisan objective of benefiting Republican candidates and entities."
Later, Gingrich freely admitted that his lay interpretation of the law was "aggressive," but said he saw that as a virtue. ''Goes right up to the edge," he told the New York Times. "Doesn't go over the edge. Doesn't break any law. . . . It's entrepreneurial. It's risk-taking.''
In September 1994, Gingrich's opponent in his campaign for reelection filed a complaint against him with the House Ethics Committee alleging, among other things, that he was misusing tax-exempt organizations in connection with his Renewing American Civilization course.
Gingrich replied in October with a letter urging dismissal of the complaint, but the letter didn't address his use of tax-exempt organizations. So the committee asked him to do so.
In a second letter—"read, approved, and signed" by Gingrich in December 1994—Gingrich asserted, among other things:
1. [The course] was, by design and application, completely non-partisan. . . .
2. The idea to teach ''Renewing American Civilization'' arose wholly independent of GOPAC, because the course, unlike the committee, is nonpartisan and apolitical. My motivation for teaching these ideas arose not as a politician, but rather as a former educator and concerned American citizen …
3. … ''Renewing American Civilization'' and GOPAC have never had any official relationship. …
4. GOPAC … is a political organization whose interests are not directly advanced by this non-partisan educational endeavor. …
5. As a political action committee, GOPAC never participated in the administration of ''Renewing American Civilization.'' …
6. Where employees of GOPAC simultaneously assisted the project, they did so as private, civic-minded individuals contributing time and effort to a 501(c)(3) organization. …
Gingrich later made essentially the same claims in a third letter, filed in March 1995, after an expanded ethics complaint was filed against him in the new session of Congress. (Now Gingrich was Speaker.)
In December 1995 the House ethics committee rejected Gingrich's bid to nip the ethics complaint in the bud and, instead, appointed a subcommittee and special counsel to investigate. They did so for most of the next year.
Once documents emerged and testimony was taken, it became apparent to all that none of the six above-quoted assertions Gingrich had made in his letters were defensible.
Gingrich denied having intentionally misled anyone, but did admit in November 1996 that these key contentions had been "inaccurate, unreliable, and incomplete." The fact that he had made these false statements became the subject of additional ethics charges against Gingrich.
In testimony before the select committee in December 1996, Gingrich blamed his false statements on his hazy recollection, his busy schedule, his lawyer, and his staff. "I erroneously, it turns out, relied on others to verify the accuracy of the statements and responses," he testified in December 1996. "This did not happen. As my counsel's testimony indicates, there was no detailed discussion with me regarding the submissions before they were sent to the committee."
Gingrich's then counsel, Jan Baran, didn't remember things the way Gingrich did, and he quit representing Gingrich a few days later. He told the AP, "I wish to make clear that my firm did not submit any material information to the ethics committee without Mr. Gingrich's prior review and approval."
The day after the AP reported Baran's remarks, Baran and Gingrich's press secretary appeared together at a press conference to announce that Baran was back on Gingrich's legal team, though in a reduced role.
The next day—facing the prospect of a publicly televised trial of the charges against him—Gingrich and the Select Committee worked out a negotiated deal. Gingrich agreed to admit that he had "failed to take appropriate steps to ensure" that the projects were using tax-exempt organizations appropriately, and he admitted that he "should have known" that his letters of December 1994 and March 1995, trying to head off the inquiry, were "inaccurate, incomplete and unreliable." He was "reprimanded" and fined $300,000—unprecedented sanctions for a Speaker of the House. (The committee took no position on the unsettled question of whether Gingrich's use of the tax-exempt organizations had been illegal. In later years IRS examiners, in separate proceedings, rendered contradictory rulings on that question. They found that the Abraham Lincoln Opportunity Fund had misused its tax-status, but that the Progress and Freedom Foundation had not.)
The deal included a negotiated public announcement, with both sides agreeing to make no further public comment and "this includes having surrogates sent out to comment." On the same morning the deal was announced, however, Gingrich was tape-recorded in a telephone conference call with House Republican leaders orchestrating the public statements they would make when the agreement was announced. The subcommittee concluded that Gingrich had violated the agreement, but it took no punitive action—perhaps in part because the conversation had been intercepted illegally. (A Florida couple, using a police scanner, had illegally eavesdropped on the cellphone that one participant to the call had used.)
And that, young voters, is the tale of how Professor Gingrich became Speaker, the controversies that ensued, and the candor with which he dealt with them. This is the man who is now vying for frontrunner in the campaign to become the Republican nominee for President of the United States.
As Gingrich, the historian, would no doubt warn you: Those who cannot remember the past are condemned to repeat it.