It was a few days before Christmas 1996, and David Bonior was not in the holiday spirit. With a characteristically grim look on his face, the Michigan Democrat walked into the House Radio-TV gallery to express his outrage at the ethical transgressions of Speaker Newt Gingrich. “Anyone who has engaged in seven years of tax fraud to further his own personal and political benefits is not deserving of the speakership,” Bonior told reporters. “Mr. Gingrich has engaged in a pattern of tax fraud, lies, and cover-ups in paving his road to the second highest office in the land.”
As he had several times since the Republican takeover of the House, Bonior called on the speaker to resign immediately. But he said whatever Gingrich might do, the issue would inevitably move beyond the House Ethics Committee, which was then conducting a long-running investigation. “I would expect the Justice Depaitnient, the FBI, a grand jury, and other appropriate entities to investigate,” Bonior said. “I don’t see any way they can ignore this.” In the end, he predicted, the speaker would likely face criminal charges.
Bonior wasn’t alone in making such allegations. Fellow Democrat John Lewis accused Gingrich of engaging in a “massive tax-fraud scheme.” George Miller of California said his actions were designed “to defraud the tax laws of the country.” And Colorado’s Pat Schroeder concluded, “We might as well rip up all the laws, rip up all the rule books, if the guy at the head can thumb his nose at them.”
At the center of the controversy was a course Gingrich taught from 1993 to 1995 at two small Georgia colleges. The class, called “Renewing American Civilization,” was conceived by Gingrich and financed by a tax-exempt organization called the Progress and Freedom Foundation. Gingrich maintained that the course was a legitimate educational enterprise; his enemies contended that it had little to do with learning and was in fact a political exercise in which Gingrich abused a taxpayer-subsidized foundation to spread his own partisan message.
The accusation, started by a small group of Democrats but amplified in thousands of press reports, led to the Ethics Committee investigation, which in turn led Gingrich to make a limited confession of wrongdoing in January 19 97. The speaker pleaded guilty to the previously unknown offense of failing to seek detailed advice from a tax lawyer before proceeding with the course, and he also admitted that he had provided “inaccurate, incomplete, and unreliable” information to Ethics Committee investigators. In return, the House reprimanded Gingrich and levied an unprecedented $300,000 fine.
But the matter didn’t end there. As David Bonior had hoped, another government agency—the Internal Revenue Service— began an investigation of Gingrich. During a probe that took three years, the IRS carefully combed through the records of the college course, the workings of the Progress and Freedom Foundation, and the ways in which both related to Gingrich’s political network. After finishing the investigation early this year, the IRS sent the foundation a densely written, highly detailed 74-page report which reached this conclusion: Gingrich acted completely within the law. There was no massive tax-fraud scheme .
Of course, by that time no one could undo the damage to Gingrich ; he was out of Congress, widely assumed to be guilty, and $300,000 poorer after paying the fine with his own money . The report’s main value appeared to be as a correction of the historical record .
But it might ultimately be more than that . At some point in the not-too-distant future, the IRS investigation could become a key element of Gingrich’s rehabilitation . For a variety of reasons-among them his unstoppable stream of big ideas and his unmatched ability to raise large sums of money-Gingrich might well return to the front ranks of the Republican Party .
Cleared of accusations of wrongdoing, he might engineer a return to the national political stage much like Richard Nixon did after his own period of exile following electoral defeats in 196o and 1962. The IRS clearance could be the first small, but necessary, step of Newt Gingrich’s comeback.
Professor Newt
Despite the intensive press coverage of the Gingrich ethics investigation — a database search of major media outlets reveals more than io,000 references to the speaker’s ethics problems during the six months leading up to his reprimand— there was little coverage of the actual content of “Renewing American Civilization.” Even after the release of the Ethics Committee’s 1,271-page report, which included detailed information on the course, few reporters took a close look at the substance of the classes.
The IRS, however, took a very close look. Investigators obtained tapes and transcripts of each session during the two years the course was taught at Kennesaw State College in northern Georgia, as well as videotapes of the third year of the course, taught at nearby Reinhardt College. IRS officials examined every word Gingrich spoke in every class; before investigating the financing and administration of the course, they first sought to determine whether it was in fact educational and whether it served to the political benefit of Gingrich, his political organization GOPAC, or the Republican Party as a whole.
The course consisted of ten classes, each hvo hours long. Most of the time was taken by Gingrich’s lectures, although there were occasional guest speakers. The first class was an introductory session in which Gingrich lectured on the uniqueness and diversity of the United States—praising leaders like Franklin D. Roosevelt, Harry Truman, and Ronald Reagan. He also introduced a number of his favorite themes: the “Third Wave” information revolution, the rise of world markets, and the destructive effects of the welfare state.
In the next session, Gingrich discussed the idea of individualism and the concept of equal opportunity. In the third class, he spoke on the subject of personal strength and integrity, which he told students was vital for a healthy and free society. He singled out leaders like John Lewis for particular praise (the same Lewis who would later accuse Gingrich of operating a massive taxfraud scheme). In the fourth class, Gingrich laid out his ideas on entrepreneurial free enterprise, with particular emphasis on the work of management guru Peter Drucker. In the next class, he examined the American spirit of invention and discovery, which, he warned, could be hobbled by bureaucracy, centralization, and excessive taxation. In the sixth class, Gingrich held forth on the concept of quality as outlined by Edwards Deming, a business theorist who was one of the speaker’s idols. Gingrich devoted the seventh class to the “Third Wave” teachings of Alvin and Heidi Toffler.
The eighth class discussed the world economic market; Gingrich again stressed his theme of the lassitude and decay of the welfare state versus the dynamism of society based on equal opportunity. The next-to-last class dealt with the American culture of violence and those who are working to change it; Gingrich admiringly described the efforts of Jimmy Carter, whom he called the most influential former president in modern times. The tenth and last class session was a restatement of all the earlier lectures with an emphasis on how they might apply to the twenty-first century.
The course reading list was classic Gingrich eclecticism. It included the Constitution, the Federalist Papers, speeches on welfare by former New Jersey Democratic Senator Bill Bradley, Profiles in Courage by John F. Kennedy, I Have a Dream: Writings and Speeches That Changed the World by Martin Luther King, Jr., The Third Wave, and The Disuniting of America by Arthur Schlesinger, Jr. In the dry assessment of the IRS, the syllabus contained “several works by persons associated with the Democratic Party and fewer works identified with Republicans.”
After examining each lecture and the course reading list, IRS investigators concluded the course was not political. “The overwhelming number of positions advocated in the course were very broad in nature and often more applicable to individual behavior or behavioral changes in society as a whole than to any `political’ action,” investigators wrote.
For example, the lecture on quality was much more directly applicable to individual behavior than political action and would be difficult to attempt to categorize in political terms. Another example is the lecture on personal strength where again the focus was on individual behavior. In fact, this lecture placed some focus on the personal strength of individual Democrats who likely would not agree with Mr. Gingrich on his political views expressed in forums outside his Renewing American Civilization course teaching. Even in the lectures that had a partial focus on broadly defined changes in political activity, such as less government and government regulation, there was also a strong emphasis on changes in personal behavior and non-political changes in society as a whole.
The IRS also checked out the evaluations written by students who completed the course. The overwhelming majority of students, according to the report, believed that Gingrich knew his material, was an interesting speaker, and was open to alternate points of view. None seemed to perceive a particular political message.
“Most students,” the IRS noted, “said that they would apply the course material to improve their own lives in such areas as family, friendships, career, and citizenship.”
Impure Thoughts
It should be said that James Cole, the outside counsel hired by the Ethics Committee to investigate Gingrich, reached a similar conclusion; after much study, he conceded that the course was educational. But Cole warned the committee not to be fooled by the actual content of the classes; Gingrich, he said, had given the lectures a patina of academic respectability even as he pursued a partisan goal. “There was an effort to have the material appear to be nonpartisan on its face,” Cole told the committee in January 1997, “yet serve as a partisan political message for the purpose of building the Republican Party.” Gingrich, Cole said, repeatedly worked code words into his lectures. The phrase “welfare state” was a coded negative label for the Democratic Party; the term “opportunity society” was positive code for Republicans.
But the real clincher was Gingrich’s original motive in designing the course. The speaker, according to Cole’s theory of the case, was looking for a way to spread his political views. He came up with the idea of creating a college course and then devised a way to use a tax-exempt foundation to pay the bills. “The idea to develop the message and disseminate it for partisan political use came first,” Cole told the committee. “The use of the 5o1(c)(3) [the Progress and Freedom Foundation] came second as a source of funding.” Thus, Cole concluded, the course was “motivated, at least in part, by political goals.” Cole further explained to the committee that any political motive, even a hint of a political motive, was enough to taint a tax-exempt foundation. “The presence of a single non-exempt purpose…will destroy the exemption of the organization,” he said, “regardless of the number or importance of truly exempt purposes that are present.”
It was, to Gingrich’s supporters and many disinterested observers, a frightening standard. Cole seemed to be saying that the standard for determining whether any laws were broken was not whether laws were in fact broken but whether any unclean intent lurked in the heart of the suspect under investigation. Fortunately for Gingrich, the IRS applied a different standard. Rather than focus narrowly on motive, the IRS asked four questions as it tried to determine whether the course and its funding were legal. One, was the Progress and Freedom Foundation operated for educational purposes? Two, did the foundation benefit private interests? Three, did the foundation play a role in political campaigns? And four, did the foundation’s money go to the private benefit of any person?
And the answers were: no, no, no, and no. “The central problem in arguing that the Progress and Freedom Foundation provided more than incidental private benefit to Mr. Gingrich, GOPAC, and other Republican entities,” the IRS wrote, “was that the content of the Renewing American Civilization course was educational…and not biased toward any of those who were supposed to be benefited.” The IRS went on to note that “the Renewing American Civilization course taught principles from American civilization that could be used by each American in everyday life whether the person is a welfare recipient, the head of a large corporation, or a politician. The class evaluations and letters indicated that people taking or viewing the class used the class principles for personal improvement.”
The decision was a resounding victory for Gingrich —and, for his supporters, a reaffirmation of common sense. “It’s a very slippery slope to make the validity of the 501(c)( 3 ) turn on motive,” says James Holden, a Washington tax expert who served as Gingrich’s attorney during the committee investigation. “People create 5o1(c)(3)’s for all sorts of motives—sometimes to advance one’s image in the community, sometimes for business motivations. If you meet your 5o1(c)(3) obligations, the purpose for which you formed it should be immaterial.”
Still, James Cole remains unconvinced. “I have heard from tax lawyers who say the IRS is wrong,” he said in an interview with TAS. “Gingrich had a stated purpose of using the course to build the Republican Party. The issue comes down to motive.”
Get Thee to a Lawyer
Cole’s conclusions on motive and the true nature of the course were just preliminiaries to the Ethics Committee’s final decision. At the end of the investigation, Cole and the committee decided that regardless of whether or not the course was within the law, Gingrich should have known better than to undertake such a project. “Taking into account Mr. Gingrich’s experience, his background, his sophistication with tax-exempt organizations, and his status as a member of Congress required to maintain high ethical standards,” Cole reported, an investigating subcommittee “concluded that Mr. Gingrich should have known to seek appropriate legal advice to ensure that his conduct in regard to these projects conformed with 5o1(c)(3).”
It was, to Gingrich and his allies, a peculiar accusation. All during the investigation, they had tried to tell the committee that they did seek legal advice—lots of it—before beginning the class. “We had two lawyers who looked over our shoulder on this thing,” recalls Jeffrey Eisenach, the close Gingrich associate who heads the Progress and Freedom Foundation. “Then Kennesaw State had lawyers looking at it. Then we had an opinion from a former head of the IRS. The whole notion that he didn’t consult enough lawyers was a farce.”
But Cole and the Ethics Committee maintained that Gingrich had not consulted the right lawyers. The committee’s chosen expert, a Washington attorney named Celia Roady, concluded that the college course violated the law. When Gingrich hired yet another lawyer, Holden, who argued that the course was legal, Cole made it clear he was not terribly impressed. “While that counsel [Holden] is an experienced tax attorney with a sterling reputation,” Cole told the committee, “he has less experience in dealing with tax-exempt organizations than does the expert retained by the subcommittee [Roady].”
So Gingrich was in a no-win situation. He was told that he should have gotten more legal advice, but when he got more legal advice he was told it was the wrong legal advice. And then, when it turned out in fact to have been the right legal advice, he was told he was to blame for all the fuss. “He did not take the trouble to get the advice he should have, and as a result, this matter is here today,” Cole told the committee.” The [investigating] subcommittee decided that, regardless of the resolution of the tax question, Mr. Gingrich’s conduct in this regard was improper, did not reflect creditably on the House, and was deserving of sanction.”
So the bottom line was: It didn’t really matter whether or not the course conformed with the law. It’s a decision that Cole is happy to defend. “What the committee found,” he explains, “was that this was so controversial, that it was so close a call, that a prudent person would have gone to a lawyer and said, ‘Give me your best view on this.”‘ In fact, Cole thinks the issue of legal advice was so important that the committee would have been better pleased if Gingrich had received the wrong advice.
“Even if it turned out that the IRS said it wasn’t okay,” Cole says, “if he had prudently sought legal advice, I think the committee would have given him a walk on that.”
By the way, Cole and the committee managed to learn just about everything there was to know about the advice Gingrich received—because they deposed his lawyers. “Newt waived attorney- client privilege,” says Gingrich attorney Jan Baran, who, along with other Gingrich counsel, was questioned under oath by Cole and his investigators. Given the privilege battles that have characterized recent White House scandals, that in itself is extraordinary. “It was unbelievable that the committee was even seeking to depose lawyers,” Baran says. “I’m not aware of the Ethics Committee ever having sought the testimony of any member’s personal lawyer. Ever.”
Inaccurate? Incomplete? Unreliable?
The other charge to which Gingrich pleaded guilty was giving “inaccurate, incomplete, and unreliable” information to investigators. The charges were based on two letters Gingrich’s attorney prepared—which were approved and signed by Gingrich — in response to committee questions about the course. The first letter was sent in December 1994 and the second in March 199 5. They were weighty documents. The March letter, for example, was 52 pages long, had 31 exhibits, which took up another 235 pages, and took an attorney 1 40 hours to prepare. It was presented to Gingrich for his signature during the last week of the “loo Days” in which he pushed a dizzying array of reforms through the House of Representatives. The earlier letter was of similar size and was written while Gingrich was managing the transition to a Republican Congress after the 1994 election.
Describing the first letter, Cole told the committee that Gingrich “stated that the course had no partisan political aspects to it, that his motivation for teaching the course was not political and that GOPAC was neither involved in the course nor received any benefit from any aspect of the course.” Gingrich made essentially the same points in the March letter. Those assertions formed the basis of the charge that he provided inaccurate information to the committee. But some of those statements look quite different in light of the IRS decision.
The course had no partisan political aspects to it. Cole and the committee believed Gingrich was lying when he insisted that the course was non-partisan. But the IRS ruling could not be any clearer on this question; Gingrich was telling the truth.
His motivation for teaching the course was not political. Again, Cole and the committee believed Gingrich was lying. But given the IRS decision, this accusation in effect condemns Gingrich’s motives for behaving lawfully. And besides, even if one assumes that Gingrich has political motivations for everything, it is also beyond dispute that Gingrich, who had been a college professor before going to Congress, also had educational motives for his decision to teach the course.
GOPAC was neither involved in the course nor received any benefit from any aspect of the course. The IRS found that GOPAC did not receive any benefit from the course, so Gingrich was right again. He was, however, wrong when he said GOPAC had not been involved. The IRS, like the committee before it, found that people affiliated with GOPAC “were involved in the development of the course content, fundraising, and other logistics.” But the IRS noted that Gingrich took care to keep GOPAC separate from the course by “the prompt establishment of the Progress and Freedom Foundation as a broadly funded, fully separate entity from GOPAC.” In addition, while Gingrich’s letter was wrong in denying any GOPAC involvement, it is not at all clear that he was trying to fool the committee. In interviews with committee investigators, he openly conceded the GOPAC connection— in effect correcting his letter.
Given those facts, in retrospect one has to ask: Why did Gingrich plead guilty and agree to pay such an enormous fine? To grasp the answer, one has only to remember the white-hot environment of the months following the Republican takeover of Congress. “The atmosphere at the time was so rancorous, partisan, and personal that everyone, including Newt, was desperately seeking a way to end the whole thing,” recalls Gingrich attorney Jan Baran. “He was admitting to whatever he could to get the case over with.”
“By the time you got to late 1996, he had lost the substantive argument,” Jeffrey Eisenach recalls, “which was: is it okay for a politician to teach a clearly non-partisan college course?” Even though Gingrich believed—correctly, as it turned out—that the answer was yes, he was under almost daily attack from Bonior and other Democrats who leveled accusation after accusation against him. In all, they filed more than 8o ethics complaints against the new speaker; all except the college course matter were thrown out by the committee.
Gingrich could either confess to a set of charges that he and his supporters knew to be without merit, or fight a protracted and damaging battle on the college course while still potentially facing other charges. Pleading guilty, even agreeing to pay the fine, seemed the only way for Gingrich to keep his job and his political future. “He’d gotten himself into an ugly situation, and he had to get out,” says Eisenach. “It was pragmatism over principle.”
What? Us Wrong?
Gingrich has declined to speak to reporters about the IRS report. When the news was announced, he issued a brief statement.
“I consider this a full and complete vindication,” he wrote. “I urge my colleagues to go back and read their statements and watch how they said them, with no facts, based on nothing more than a desire to politically destroy a colleague.”
If any Democrats followed Gingrich’s advice, they kept it to themselves; no one who accused the speaker of wrongdoing has publicly expressed any second thoughts after the IRS decision. David Bonior’s office did not return five calls seeking comment.
A spokesman for John Lewis said simply, “The congressman has no comment on the matter.”
That’s not a surprise; how could they possibly benefit by admitting that Newt Gingrich was right and they were wrong? But one might expect a more thoughtful reaction from the other players in the Gingrich affair—the journalists who followed events closely and reported them to the nation.
On January 18, 1997, the day after Cole presented his report to the Ethics Committee, the Washington Post’s front-page banner headline was “Gingrich Actions `Intentional’ or ‘Reckless’: Counsel Concludes That Speaker’s Course Funding Was ‘Clear Violation’ of Tax Laws.” That same day, the New York Times ran eleven stories on the Gingrich matter, four of them on the front page (one inside story was headlined, “Report Describes How Gingrich Used Taxpayers’ Money for Partisan Politics”). On television, Dan Rather began the “CBS Evening News” by telling viewers that “only now is the evidence of Newt Gingrich’s ethics violations and tax problems being disclosed in detail.”
Other networks and newspapers covered the story in a similar fashion. But the intensity of their coverage was noticeably absent when the IRS report was released.
Remember the more than 10,000 references to the Gingrich ethics fight at its most heated moments? Another database search reveals a few more than ioo references to the IRS report. The Washington Post ran a brief story on page five. The Times ran an equally brief story on page 23. And the evening newscasts of CBS, NBC, and ABC—which together had devoted hours of coverage to the question of Gingrich’s ethics—did not report the story at all. Not a word.
The Nixon Scenario
Had the IRS ruled against Gingrich— had it found him guilty of tax fraud—it is safe to say that any future political plans Newt Gingrich might have been cherishing would have been effectively destroyed. But that is no longer a worry, and it may turn out that the IRS clearance was the first step of Gingrich’s political recovery.
The report has given new momentum to a comeback scenario that has been circulating among Newt-watchers. The scenario, best expressed in a column by the Washington Post’s David Broder, is the following:
Gingrich is down and seemingly out now, but so was Richard Nixon after his losses in the 196o presidential race and 1962 California governor’s race. In fact, Gingrich has not suffered nearly as much.
“The defeats Nixon suffered in 1960 and 1962 were far more damaging than Gingrich’s abandoning the speaker’s chair to atone for Republican midterm election losses,” Broder wrote in a column last November. “And yet Nixon came back to win the presidency in 1968.” That is an understatement to some Gingrich partisans.
“He went into voluntary exile because his third victory in a row wasn’t as big as people thought it would be,” says one confidant. “Gingrich’s position is far stronger than Nixon’s.”
But Gingrich is radioactive now, just as Nixon was in 19 64. And a Republican victory in the presidential race might well destroy his chances by establishing a new party leader. But if the GOP loses, Gingrich could position himself to become a top contender for the 2004 nomination.
There are already signs he is thinking about just that. Party insiders expect Gingrich to work hard and travel extensively to campaign for Republican congressional candidates in 2000. “In the last two months of that election, he’ll be all over the country trying to elect House Republicans,” says another well-connected Republican. “That’s what Nixon did in ’66.”
And Gingrich will do much more than simply lead cheers. He is by far the biggest fundraiser in the Republican lineup. In the 1998 election cycle, he made more than 400 campaign appearances in more than 200 cities in 48 states, raising millions of dollars for the party. That drawing power will be another key to his rehabilitation.
“I honestly believe that if the Republicans do not win the White House,” the well-connected Republican continues, “the morning after the election, Newt Gingrich will be the leading candidate for the election in 2004 — whether he wants it or not.”
Such a notion runs dramatically counter to the conventional wisdom. A recent New York Times Magazine article reported that “the retrospective view inside the party is that Gingrich is at the heart of practically everything that went wrong in the last few years.” While that is a dramatic overstatement, there are real problems with the Nixon Scenario—not the least of which is Gingrich himself.
“It’s plausible,” says yet another Republican who knows Gingrich well, “but I think the question is whether the mistakes he made as speaker were a learning experience for him or rather were evidence of some immutable aspects of his personality. That’s something you only learn with time.”
In the meantime, Gingrich is staying above the fray—and making money. After leaving Congress with virtually no net worth—that S300,000 fine didn’t help—he is now making speeches at $50,000 per appearance. He has also joined a few corporate boards and is considering other business opportunities.
Whatever he does in the short run, it seems likely that Gingrich will attempt some sort of political comeback, because it is simply impossible for him to stop being Newt Gingrich. “His mind hasn’t stopped racing,” says one Republican who knows him well. And Gingrich’s mind races faster than anyone else’s in the party. It’s easy to make fun of his ideas—a game that’s probably more popular among Republicans than Democrats—but it’s hard to deny that Gingrich has ideas. Who are his rivals in that department? Dennis Hastert? Steve Largent? Any of those currently pursuing the Republican presidential nomination? It’s not even close.
And now he is free of one potential handicap. The IRS report makes official what should have been clear all along: that the ethics jihad against Gingrich was just politics, and dirty politics at that. Should Gingrich re-emerge as a political force, his enemies will no doubt try again—but the next time, perhaps, the political world will look at their charges with a more critical eye.
