WASHINGTON -- Newt Gingrich holds himself up as a model of fiscal discipline. "If the U.S. government was as debt-free as I am, everybody in America would be celebrating," he told reporters last year.
What may be true for Gingrich personally, however, has rarely been the case for organizations he runs. Gingrich's presidential campaign is basically broke. The latest financial disclosure reports show that his campaign closed out the month of January with $1.73 million in debt and a scant $1.79 million in cash on hand, just enough to cover expenses that included private jets and unusually large personal reimbursements. The highly publicized injection of more than $11 million from casino magnate Sheldon Adelson into a super PAC backing Gingrich's campaign has fueled the perception that Gingrich is flush, but Adelson's money won't keep the lights on at campaign headquarters.
Instead of withdrawing from the race, as candidates typically do when they run out of money, Gingrich has barreled ahead. In the past month, he has hired additional staff, made costly trips to California and Arizona, and scheduled a week's worth of campaign appearances in Tennessee and his home state of Georgia ahead of the March 6 Super Tuesday primaries.
Gingrich, who did not respond to questions from The Huffington Post, is by no means the first presidential candidate to run up dangerously high debts on the campaign trail. Where the former House speaker is concerned, however, this combination of mounting bills, shrinking prospects and questionable expenses has three decades of precedent behind it.
Interviews with Gingrich's former colleagues and a review of thousands of official documents by The Huffington Post reveal a previously unexplored side of his career: a striking pattern of financial mismanagement at the political and nonprofit groups that Gingrich has created, steered and abandoned over the past 30 years. While the high-profile ethics investigations of the 1990s focused on the narrow legality of Gingrich's individual schemes, their disastrous record as a whole has been largely overlooked.
Since 1984, Gingrich has launched 12 politically oriented organizations and initiatives based in Washington. Of those, five have been investigated by the Internal Revenue Service and the House Ethics Committee, another five closed down with debts totaling more than $500,000, and two were subject to legal action.
According to former colleagues and subordinates, Gingrich burns through money by repeatedly expanding his plans and ignoring warnings from staff about the finances of his projects. Now, the same pattern is threatening his presidential campaign.
"The best way to say it is that Newt has no brakes and no rear view mirror," observed one former adviser who still speaks highly of Gingrich, but who requested anonymity because he is forbidden from speaking to the media in his current job.
"So he never pulls back, and he never learns from the past."
That criticism may be missing the point, however. "Part of the reason Gingrich employs nonprofits and 527s [political advocacy groups] so liberally is that the debts from these groups never attach to him personally, because they're incorporated," said Bill Allison, editorial director at the Sunlight Foundation, a nonprofit political watchdog group. "That's the beauty of sticking to all these groups -- it's that they don't stick to Gingrich."
'WHEN I SEE SOMETHING ISN'T WORKING, I CUT MY LOSSES'
According to a veteran adviser, Gingrich's first deadbeat operation was a 501(c)3 nonprofit called the American Opportunity Foundation (AOF), which he created with a group of political consultants in 1984, during his third term as a Republican congressman from Georgia's 6th District. (A 501(c)4 group, American Opportunity Inc., was created at the same time, but never utilized.)
The mission of AOF was to conduct nonpartisan research, according to its IRS incorporation papers. The group's research topics, however, were rife with political buzzwords, such as how to lessen "the burdens of government."
The conflict between AOF's stated purpose and its real activities came to a head less than a month before the 1984 election, when reports surfaced that AOF had staged events on college campuses hailing President Ronald Reagan's achievements. The law expressly forbids 501(c)3 nonprofits from participating in political campaigns to the benefit of one candidate or another.
The bad press resulted in questions about AOF's legitimacy. Gingrich quickly stepped down as AOF's chairman and severed his ties to the group.
The campus events had cost approximately $15,000, equivalent to $33,900 today, and Gingrich left the bill for his two lead consultants, business partners Ladonna Lee and Henry "Eddie" Mahe. Mahe and Lee expected Gingrich to bring in donations to pay for the events, according to a source close to AOF.
"Eddie and Ladonna were screwed by him," said the source. "I remember Ladonna telling Eddie, 'If you get involved with Newt again, I'm dissolving our partnership.'"
Today, Mahe and Lee are employed by the law firm Foley & Lardner, where Lee is vice chair of the government and public policy practice and Mahe is a strategic communications consultant. Mahe declined to comment for this story, but Lee said she could not recall specifically how AOF ended or whether there were any leftover debts.
"I fully appreciate the role of nonprofits and their success ratio," she said, adding that she had voted for Gingrich in the Colorado Republican primary earlier this year.
When asked whether AOF had fulfilled its mission, Lee paused. "I don't know that it lived out its mission," she said, "but I do know that Newt was never part of the business dealings of any of these entities, and I never saw Newt in a meeting about business."
Although Lee may have intended her comment to absolve Gingrich of responsibility for the debt left at AOF, other longtime Gingrich associates say that it is precisely this lack of financial involvement, coupled with his willingness to abandon initiatives abruptly, that lies at the core of his management problems.
Lee herself described Gingrich's pattern of abandonment in a 1995 Vanity Fair interview, saying, "Gingrich would always get people started on a project or a vision, and we're all slugging up the mountain to accomplish it. Newt's nowhere to be found. … He's gone on to the next mountaintop."
A consultant who worked with Gingrich in the 1980s said, "I heard a staffer question Newt about a cost that was over budget once, and instead of telling the kid what to do next, Newt just said, 'When I see that something isn't working, I cut my losses.'"
Following the demise of AOF, Gingrich turned his energies to the American Campaign Academy (ACA), a group founded in 1986. The academy was funded by the National Republican Congressional Committee, and it ran a 10-week, nuts-and-bolts course on campaign management. Gingrich taught part of the course during his fourth term in Congress, and a number of his associates and staffers served on the academy's board.
Like AOF before it, ACA hoped to receive 501(c)3 nonprofit status so its donors could deduct contributions to the group from their income taxes. ACA's application for tax-exempt status touched off an unexpected, high-profile battle with the IRS, however, that ended when a federal court decided that ACA's purpose was more political than purely charitable and that it had misrepresented its real intent in its application. The IRS, the court ruled, was correct in denying ACA tax-exempt status.
After three years of operating with money from the NRCC while the IRS case wound its way through the courts, ACA dissolved in 1990, less than 12 months after the final decision was handed down.
'NEWT WANTED TO SEND THEM NEWT'
Gingrich wrote in his 1998 memoir, "Lessons Learned the Hard Way," that by the time ACA closed, he knew that the Republican Party "needed alternative means of communication than just the mainstream media" to broadcast its political agenda.
By 1989, as the House minority whip, he had begun devising a new way to use his leadership PAC, dubbed GOPAC, to "disseminate" a "full-fledged, intellectually complete doctrine" that he was creating for the Republican Party, according to a GOPAC memo from November of that year.
The ideas would come from Gingrich, of course, which left only the question of how to fund the dissemination part of his master plan. He later wrote in his memoir that he was inspired by a 1989 exposé in National Journal about how "certain politicians had been using tax-exempt organizations to finance some of their activities."
Gingrich said the scale of the overlap between members of Congress and nonprofits was "astonishing," and although the article was meant as an indictment of the practice, he apparently saw it as a primer. "Thus, when it came time to expand our mission by having me teach a new course," he wrote, "I felt we had ample precedent for how to proceed."
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| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
Posted: 03/02/2012 7:53 am