Newt Gingrich Inc.: How the GOP hopeful went from political flameout to fortune
By Karen Tumulty and Dan Eggen,
Anyone who doesn’t believe in an afterlife must not live in Washington. Rarely, however, has reincarnation been so lucrative as it has for the man who now tops some polls for the 2012 Republican presidential nomination.
Former House speaker Newt Gingrich transfigured himself from a political flameout into a thriving business conglomerate. The power of the Gingrich brand fueled a for-profit collection of enterprises that generated close to $100 million in revenue over the past decade, said his longtime attorney Randy Evans.
Among Gingrich’s moneymaking ventures: a health-care think tank financed by six-figure dues from corporations; a consulting business; a communications firm that handled his speeches of up to $60,000 a pop, media appearances and books; a historical documentary production company; a separate operation to administer the royalties for the historical fiction that Gingrich writes with two co-authors; even an in-house literary agency that has counted among its clients a presidential campaign rival, former senator Rick Santorum (R-Pa.).
Separate from all of that was his nonprofit political operation, American Solutions for Winning the Future. Before it disintegrated this summer in Gingrich’s absence, American Solutions generated another $52 million and provided some of the money that allowed the former speaker to travel by private jet and hired limousine.
Along the way, Gingrich has become a wealthy man, earning $2.5 million in personal income last year, according to his financial disclosure form.
As unforgiving as Washington can be, it has long had a soft spot for its has-beens, even those who gave up power in defeat or disgrace.
There is a well-trodden path from Capitol Hill to downtown law and lobbying firms, where former members of Congress can earn a far better living than they did when they were on the taxpayer’s dime — and still have afternoons free for golf.
But that would be a narrow and confining existence for a man who has always considered himself a transformational figure, and even a historic one.
“He just had a vision for being a great citizen,” said Evans, who set up Gingrich’s business operation and served as its chairman. “He looked for ways to participate in the dialogue that was going on.”
In advance of his presidential run, Gingrich disentangled himself from his business empire. His presidential campaign even had to pay $8,400 to Gingrich Productions for the right to use the domain name www.newt.org.
However, some of his dealings have come under new scrutiny as Gingrich’s campaign, which collapsed in June, has experienced a resurrection of its own.
Most controversial has been up to $1.8 million he collected in consulting fees from Freddie Mac, a government-backed firm whose lending practices conservatives blame for creating the conditions that enabled the housing crisis.
Gingrich and his allies portray his financial success as a natural result of a penchant for coming up with big ideas and his flair for selling them. They contend — and there is no evidence to the contrary — that Gingrich has never engaged in lobbying.
“I understood Washington reasonably well, as well as I understand the country reasonably well,” Gingrich said in an interview. “So if you’re looking for strategic advice, I was on the short list of people available, and in the same tradition as [former secretary of state] Jim Baker or anybody else who has been a very, very senior person.”
However, many critics say he was hired because of his influence and access.
“The reason someone would hire Gingrich was that he was former speaker of the House, he had good connections to Republicans and good knowledge of how Washington works,” said Bill Allison, editorial director of the Sunlight Foundation, which tracks lobbying and money in politics. “He may have steered clear of what the legal definition of lobbying is. But people were hiring him for the same reasons that they hire lobbyists, which was to help them achieve their objectives with the government.”
In one 2004 presentation, his Center for Health Transformation think tank enticed prospective members with “access to Newt Gingrich” and “direct Newt interaction,” as well as “access to top transformational leadership across industry and government.”
Newt Inc.’s start
What has become known as Newt Inc. had a modest beginning, a few months after his unceremonious resignation as speaker in the wake of GOP losses in the 1998 midterm elections. Gingrich’s tenure as speaker had been a bumpy one, begun in the glory of the first House takeover by Republicans in 40 years but later beset by an ethics inquiry, a government shutdown and even an attempted coup by other GOP House leaders. His fellow Republicans had come to regard Gingrich as a liability.
Cast out by official Washington, Gingrich gathered his most loyal friends to figure out what to do next.
“It was the first time he had been unemployed since grad school. He had to figure out how to earn a living,” said Steve Hanser, who was chairman of the history department at West Georgia College when Gingrich taught there in the early 1970s and has been a mentor to him since.
Those at the session, according to various recollections, included Hanser; Gingrich’s attorney, Evans, who had also been his student at West Georgia and had at one point lived in Gingrich’s basement; Nancy Desmond, a onetime campaign volunteer who had been chief of staff in Gingrich’s Georgia congressional office; and Gingrich’s daughter Kathy Lubbers.
Most of his tight circle would later share in Gingrich’s business ventures, holding ownership stakes in its various private subsidiaries, as would his third wife, Callista.
“This is the core group of people who stood by him during his fall, when he stepped down from the House, went through the divorce, all of that,” said one former business associate, who requested anonymity in order to speak candidly. “So these are the people he will stand by, no matter what.”
Gingrich’s financial situation in those days was made all the more dire by the fact that he had already gone through one expensive divorce, and it would soon be followed by another.
“The point was, he needed money. The question was, what can you do?” Hanser said. “In almost all of the years I knew him, he was broke — mostly owing money.”
As they discussed his options, Gingrich was clear about what he did not want to do. He would not pitch a commercial product, as his former Senate counterpart Bob Dole was then doing for the erectile dysfunction drug Viagra, or as any number of other former celebrities had done in those “Do you know me?” ads for American Express.
He wanted to make sure his new life allowed time for thinking, learning and, a favorite pastime, visiting zoos.
Gingrich also said he wouldn’t lobby. Asking his old congressional colleagues for favors would be demeaning for himself and the speakership he once held, he said.
And what constitutes lobbying?
“Anything that looks like, smells like, walks like an attempt to influence legislation on behalf of a client for money,” Evans said. He added that, internally, the organization applied what it called “the Washington Post test: If The Washington Post considered it lobbying, so did we.”
But that left plenty of other ways to make a living. The easiest and most obvious: hitting the lecture circuit, which Gingrich quickly did, along with signing on as a Fox News commentator. All of which boosted sales of his books and documentaries.
“I was charging $60,000 a speech on the road, and I was doing 50 to 80 speeches a year,” Gingrich recalled. “So take the books, where you could often do things with the speeches, go to a book signing at a place where you’re going to give a speech, and then you’re on television, so people can remember what you are doing.”
On Saturday at a Books-A-Million in Naples, Fla., more than 500 ticket holders lined up and waited for hours to have their books, T-shirts or other memorabilia signed by Gingrich and his wife. With two titles by the former speaker available and a children’s title by Callista, store officials said they had sold at least 400 books.
Slower to get started was his consulting practice.
“We didn’t make any money for quite a while,” said Hanser, who recalled that it took at least a year to turn even a modest profit.
When a corporation signed on as a client, Gingrich said, he would throw in a couple of speeches gratis, “so just the market value of that was over $100,000. It was a deliberately integrated strategy.”
Gingrich thought of himself as a big-concept guy, and his high-altitude approach did not always mesh with the more prosaic concerns of his clients.
In 2001, for instance, he signed up as a consultant with the Pharmaceutical Research and Manufacturers of America, one of Washington’s most powerful and well-funded industry lobbying groups. One former PhRMA executive recalled the contract as being “in the neighborhood” of $150,000 — substantial, but not a huge sum by association standards.
“We were reluctant to bring him on, because it was shortly after he left the speakership and because he was so radioactive,” said the former PhRMA executive, who still works in the industry and spoke on the condition that he not be identified. “But he was doing some of the best thinking at the time on health care.”
Still, while PhRMA was concerned about issues such as protecting U.S. manufacturers from cheap, re-imported drugs, Gingrich was counseling the industry to upend its business model. At one point, he urged PhRMA to set up a Travelocity-like Web site where consumers could compare drug prices at, say, Wal-Mart with those at CVS.
That idea and many others did not go over well with PhRMA officials. In early 2002, they let Gingrich’s contract expire.
Gingrich began to consider setting up an enterprise where he would be in charge of the agenda. His for-profit Center for Health Transformation, which opened in 2003, ultimately became his biggest financial bonanza.
Corporations and industry groups lined up to join the think tank’s roster of supporters, paying annual “membership levels” that ranged from $20,000 to $200,000.
So what did businesses get out of associating with Gingrich?
“In addition to advice on their business models, people want to feel that they’re part of the discussion here in Washington,” said former Gingrich aide Ed Kutler, who is now a Washington lobbyist and took some of his clients to visit the former speaker. “They want to know how to talk about their issues and how to think about Washington.”
One business that saw that as an opportunity was Novo Nordisk, a Denmark-based drug firm that specializes in diabetes treatments. It paid a total of $1.2 million to Gingrich’s foundation over six years as a “founding charter member.”
“It was strictly a business, nonpolitical relationship,” Novo Nordisk spokesman Ken Inchausti said. “We admired his leadership on issues related to health-care delivery systems. We thought the CHT brought something to the table to us in terms of finding ways to help people prevent diabetes.”
Gingrich loaned his celebrity to causes that, whatever their other merits, could also be good for Novo Nordisk’s bottom line. For instance, he was the keynote speaker at Novo Nordisk’s “diabetes summit” in 2005 and joined the company in issuing a “call to action” to fight diabetes in Texas and Georgia.
Gingrich’s consulting business and think tank had more than 300 members and clients, generating gross revenue of nearly $55 million between 2001 and 2010, according to a statement by former Gingrich aide Desmond, who remains chairman and chief executive of the operation.
Since his departure to run for president, however, much of the business operation he built has been struggling to keep going without its star attraction.
Gingrich relinquished ownership of his private holdings, transferring much of it to Gingrich Productions, a company headed by his wife.
Along with his rising fortunes came a change in Gingrich’s lifestyle. As House speaker, he had worn $30 neckties and was known to duck into the discount salon chain Bubbles for haircuts. But as his fortune grew, his tastes and his shopping habits migrated upscale. He ran up bills at Tiffany & Co. that brought embarrassment to his presidential campaign and delight to late-night comedians.
Those bills became public shortly after Gingrich’s campaign fell apart in June — an implosion caused in part by his public disappearance on a cruise in the Greek islands with his wife.
While he had been building his business, some of Gingrich’s expensive lifestyle had been paid for by his nonprofit group, American Solutions for Winning the Future.
American Solutions spent $6.6 million on private air travel through Moby Dick Airways — a private charter service favored by many Republicans — during its four years of existence, amounting to about 13 percent of the group’s budget, according to a Washington Post analysis of disclosure records.
The former business associate of Gingrich’s, who was familiar with his finances, said Gingrich for at least two years insisted upon flying private charter jets everywhere he traveled, with most of the costs — ranging from $30,000 to $45,000 per trip — billed to American Solutions.
Gingrich aides would scramble to come up with American Solutions-related events to justify the billing, even if the actual reason for the trip was something connected to his health-care think tank, book sales or other profit-making venture, this source said.
The tab for private chauffeurs, primarily to ferry Gingrich and his wife, reached $200,000 to $300,000 per year, the source said.
“The unwritten rule was that Newt was doing everything he was doing for American Solutions, even though he clearly wasn’t,” the source said. “It was very excessive.”
Evans, however, disputed that, saying that Gingrich’s attorneys and accountants “flyspecked” every transaction to make sure that it was accounted for properly, and that the appropriate taxes were paid.
“If there was an American Solutions-paid-for plane, there was an American Solutions purpose and event,” Evans said.
The former speaker needed to charter aircraft because he could not make all his commitments on a commercial airline schedule, Evans said, adding that the high cost of his and his wife’s travel was “a product of how much they were going, not how they wanted to get there.”
Gingrich’s travel habits also contributed to his presidential campaign’s near-demise this summer. The campaign disclosed more than $1 million in debt in July, nearly half of which was owed to Moby Dick Airways.
For Gingrich, running for president has meant a big pay cut — and trimming back on luxuries. But in many ways, he suggested in an interview last month, it feels like a return to normal.
“I’ve been flying commercial my whole life,” Gingrich said. “I ran for Congress for five years and lost twice. Yeah, I lived off the land in the ’70s.”
And if the White House doesn’t work out, might he rebuild Newt Inc.?
“Sure,” he said. “I don’t know that I would do anything as big as the center. Certainly, I would have an adequate career.”
Staff writer Amy Gardner in Naples and staff researcher Lucy Shackelford contributed to this report.
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