Gingrich fighting massive debt racked up in campaign’s extravagant early days

December 6, 2011

Even as he surges ahead in the polls, Republican presidential candidate Newt Gingrich is struggling to get out from under a mountain of debt from luxury jets and other pricey expenses racked up in the early weeks of his campaign.

Creditors say Gingrich has begun paying back nearly $1.2 million in bills he owed at the end of September, and his spokesman says most will be taken care of by the end of the year. Other debts — including $42,000 owed to Gingrich himself for the campaign’s use of a mailing list — have already been paid, ahead of those owed to other vendors, according to aides and disclosure records.

The debt puts Gingrich further behind in his ability to match opponents’ spending in early-voting states, where he has just started to pay for advertising and is scrambling to catch up on staffing. He has been forced to scrimp on even basic expenses for much of the campaign and has only recently been able to expand his office presence in Iowa and South Carolina.

Although campaigns often operate in the red, Gingrich’s debts are unusually high — he spent nearly $3 for every $2 he raised. Mitt Romney, by contrast, reported no debt last quarter.

Many of the bills date to the start of Gingrich’s campaign in the spring, a time marked by extravagant spending on $30,000 jet flights and upscale hotels. The high campaign expenditures, along with Gingrich’s personal spending on Tiffany jewelry and a cruise in the Greek isles, contributed to a mass resignation of staffers in June that nearly torpedoed his presidential aspirations.

“We are beginning to pay off our debts and obligations that the campaign owed. That will be an ongoing process,” campaign spokesman R.C. Hammond said. “We have passed a threshold here. Our fundraising has been consistently good for a number of weeks.”

Gingrich’s financial health could prove crucial in the coming weeks as he attempts to hold on to his sudden lead over Romney and other Republican candidates in many state and national polls. Romney reported raising $32 million through September — more than 10 times the amount Gingrich reported — allowing him to easily fund major advertisements and organizing efforts for early contests in Iowa, New Hampshire and South Carolina.

Gingrich aides say he is catching up after a surge of fundraising in recent weeks, and the campaign aired its first television commercial on Monday with a $250,000 ad buy in Iowa.

“I think we’ll have enough money,” Gingrich told reporters in Johnston, Iowa, last week. “We’ll never have as much money as Mitt Romney, but I think we’ll have enough money. We’ll have a sufficiency to be very, very competitive.”

Bills for private jets

Nearly half of what Gingrich owed at the end of the third quarter was due to Moby Dick Airways, a private jet broker, which has been waiting since June for more than $451,000 from the campaign. The company arranges private charter flights for Republican politicians, speechmakers and other public figures, and it earned more than $6.6 million in business from Gingrich’s now-defunct nonprofit group, American Solutions for Winning the Future.

Disclosure records suggest that Gingrich, as a presidential candidate, racked up private-jet charges at a rate of about $100,000 a week with Moby Dick until his campaign imploded in early June, leaving most of the balance unpaid until now.

“I have information from them saying they will pay it, and I am trusting that,” Roy Oakley, Moby Dick’s president, said in an interview last week. “It’s not unheard of, but we don’t usually have this kind of problem.”

Other top creditors listed by the Gingrich campaign at the end of the third quarter were McKenna Long & Aldridge of Atlanta ($203,000), which Gingrich has used for legal services for years; High Tech Win of Austin ($91,000), which along with its parent company billed about $700,000 to the Gingrich campaign for Web site services; and CMDI ($50,000), a Falls Church data-management firm.

Several top creditors did not respond to telephone or e-mail messages. McKenna spokeswoman Sabrina McGowan declined to comment, citing client confidentiality.

One of the campaign’s biggest creditors is Gingrich himself, who billed his campaign more than $125,000 for a mailing list and travel expenses, about half of which remained unpaid at the end of last quarter.

Hammond said about $42,000 of the debt owed to Gingrich in the second quarter was for the cost of the candidate’s personal mailing list, which he sold to the campaign. Hammond said Gingrich was paid for the list in the third quarter. The payment does not appear to be disclosed as required on Federal Election Commission reports, something Hammond said might have been an oversight.

The payment suggests that Gingrich was reimbursed ahead of other creditors for a list that he could have given to the campaign as an in-kind contribution.

Lawrence M. Noble, a campaign finance lawyer and former FEC general counsel, said candidates commonly allow such debts to sit on the books in order to pay other bills first, though there is no legal requirement to do so. Noble said not reporting the payment to Gingrich for the list would be a violation of disclosure laws.

Gingrich, who presided over a $150 million financial empire after leaving Congress, has largely blamed his earlier financial problems on former employees, many of whom have gone to work for rival candidate Rick Perry. Former aides, meanwhile, complain bitterly about the spending habits of Gingrich and his wife, Callista, and have bristled at the candidate’s statements blaming staff members.

“We kept arguing over campaign expenses, over very, very lavish travel expenses,” said one former Gingrich adviser, who spoke on the condition of anonymity to talk candidly. “I don’t know how you can blame staff for travel costs when you’re choosing what jets you’re flying on.”

Campaigning frugally

Gingrich and his aides say he has cut back on spending dramatically since the campaign’s near-collapse in June, always flying commercial and sometimes driving himself to appearances. He often stayed with friends, such as former Iowa congressman Greg Ganske, though he has recently gone back to lodging in name-brand hotels.

In addition, the candidate regularly piggybacks on already scheduled public gatherings, with the aim of attracting free “earned media,” or press coverage, rather than buying ads or paying for his own events. Last week in Iowa, for example, Gingrich appeared at a conservative group’s pizza party, addressed a Nationwide Insurance forum, appeared at a conference of electrical co-ops and was the keynote speaker at a local GOP dinner.

The Gingrich campaign reported collecting about $2.9 million in contributions through Sept. 30, and Hammond said about $4 million more came in from October until mid-November. He declined to say how much has been collected since then; the next FEC reports are not due until January.

On Wednesday, more than a dozen K Street lobbyists are sponsoring a Washington fundraiser for Gingrich at the Occidental Grill & Seafood restaurant, with tickets going for $1,000 per person. “There is a groundswell of support for Newt,” said lobbyist Daniel F.C. Crowley of K&L Gates, one of the dinner’s co-sponsors.

Rick Tyler, a former Gingrich spokesman who left the campaign in June but remains supportive of his candidacy, said he is confident that Gingrich will get his finances in order.

“Newt will pay them, I’ve got no question in my mind about that,” Tyler said. “He’s got integrity, and he pays his debts.”

Staff writer Jason Horowitz in Iowa and staff researcher Lucy Shackelford in Washington contributed to this report.

Deputy editor, National politics
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