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  •   Gingrich to Pay Penalty With Dole Loan

    By John E. Yang
    Washington Post Staff Writer
    Friday, April 18 1997; Page A01

    House Speaker Newt Gingrich (R-Ga.) said yesterday he will pay the $300,000 penalty the House levied against him for violating ethics rules by accepting a loan from a surprising source -- Robert J. Dole, his onetime rival as leader of congressional Republicans.

    "I have a moral obligation to pay the $300,000 out of personal funds," Gingrich told the House in a 20-minute speech announcing his startling decision. "Therefore, as a person of limited means, I have arranged to borrow the money . . . [and] will personally pay it back. . . . Any other step would simply be seen as one more politician shirking his duty and one more example of failing to do the right thing."

    As he has in the past, Gingrich sought to limit his own culpability. "To the degree I have made mistakes, they have been errors of implementation but never of intent," he said as his wife, Marianne, watched from the gallery.

    Dole offered to make the loan, for which Gingrich will pay 10 percent interest. But neither the principal nor the accrued interest is due until the end of the eight-year loan period in 2005, when the combined total would be $643,000. Gingrich has said he would leave Congress by Jan. 3, 2003.

    The agreement also specifies that Dole cannot forgive the loan and that the loan would be replaced with a commercial bank loan if Dole ever becomes a registered lobbyist.

    In addition, the loan documents will include collateral and will specify that Gingrich will not use contributions from others to repay the loan, J. Randolph Evans, the speaker's ethics attorney, told reporters.

    Evans said the loan terms met the House rule's standard of being comparable to a commercial bank loan, but some House Democrats questioned whether the terms were preferential. The House ethics committee is reviewing the terms.

    "What average American could walk into their local bank -- take out a commercial loan for $300,000 with no collateral and no payments due until 2005?" asked House Minority Whip David E. Bonior (D-Mich.), Gingrich's most ardent House critic. "And on top of that, he wants to borrow the money from a former politician who recently signed on with one of the largest lobbying firms in Washington." Dole will join the law firm of Verner, Liipfert, Bernhard, McPherson and Hand next month.

    Dole said he is making the loan both out of friendship and to keep the Republican Party strong. "I wanted to help the Republicans and help Newt Gingrich get this behind him and behind the party and move ahead with the political agenda," he told reporters outside his downtown office.

    Dole said the money will come from personal savings. "I've been working for a long time," he said. "Saved some money."

    Gingrich chose to accept Dole's offer rather than going to a bank to avoid questions of whether the lending institution was giving him preferential treatment. "If we went to a bank, no matter what happened, my guess was we'd get ethics complaints down the road that there was favoritism," Evans said.

    By resolving the question of the $300,000 penalty, described as a reimbursement for part of the House ethics committee's expenses in investigating the allegations against Gingrich, the speaker is seeking to remove himself as a central issue for congressional Republicans.

    "This moves the agenda away from Newt Gingrich to policy," said Rich Galen, communications director for the GOP House campaign committee and a longtime Gingrich aide. "There's a lot of happiness it's obviously coming to a conclusion," said Rep. Mark Foley (R-Fla.). "It's a big relief."

    Gingrich's announcement -- all the more remarkable because its most surprising component did not leak to reporters -- caps a four-week period in which the speaker has shored up his standing among House Republicans. It began with tough talk to Chinese leaders during an 11-day trip to Asia and included tough talk at home on cutting taxes and shrinking the size of government.

    In his speech, Gingrich went out of his way to praise his wife, who had opposed using personal funds to pay the penalty. "I have never been prouder of Marianne than over the last few months," he said, triggering a standing ovation from Democrats and Republicans. "It was the courage of her counsel which always led me to do my best."

    At a key moment Wednesday night, as Gingrich, his wife and aides sat on the balcony outside his office overlooking the Mall and Washington Monument, Gingrich chief of staff Arne L. Christenson said a decision had to be made whether to move ahead with the loan and announce it the next day, participants recalled. Wordlessly, all eyes turned to Marianne Gingrich. She nodded and pointed her thumb up.

    "She could have dug her heels in," a close Gingrich adviser said. "To this second, she never thought this was fair."

    The loan from Dole to Gingrich is the latest chapter in the long relationship between the two, beginning with mutual sniping in the 1980s and developing into friendship as the two led the House and Senate in the 1990s.

    Dole told friends months ago that Gingrich's only political option was to pay the $300,000 with personal funds.

    During the Easter recess, according to a GOP source familiar with the discussions, Dole called Scott Reed, his 1996 campaign manager, to say he was prepared to help Gingrich with the money in any way that was legal.

    Reed first broached the subject with Gingrich and his political adviser, Joe Gaylord, early this month, saying the speaker was "on a roll" after his China trip and needed to put the penalty issue behind him quickly. "Everybody agreed it made sense," one source said.

    Dole first spoke to Gingrich about the loan by telephone Tuesday. When Dole made clear he was willing to lend the entire $300,000, Gingrich was astounded, one source said. The two met at the Capitol Tuesday evening and made the agreement.

    Dole told reporters yesterday he had considered asking former presidents Gerald R. Ford and George Bush to contribute to the loan. "It seemed to me it was sort of a responsibility for party elders, for senior leaders," he said. "This was having some impact on the agenda. . . . But I never pursued that."

    The loan was the best of the options available to him, Gingrich said in his speech, delivered to a House chamber packed with Republicans but with only about two dozen Democrats in attendance. Establishing a legal defense fund, he said, "would simply lead to a new controversy." Last week, Gingrich had asked for and got ethics committee approval to establish such a fund.

    Because the penalty was levied to cover part of the ethics committee's costs Gingrich caused when he gave the panel false information, which the speaker has blamed on attorneys, another option was suing those attorneys for the money. Gingrich said that remains "a future possibility for me as a citizen," but relying on it to pay the penalty "could take years in court."

    Some lawmakers in both parties had said they did not want Gingrich to set a precedent by personally paying a disciplinary penalty that many of his supporters see as politically motivated. To address those concerns, the speaker asked the House to pass a resolution "affirming that this is a voluntary action on my part. And that it will establish no precedent."

    The speaker and his advisers hope yesterday's events will bring to a close the ethics case that has dogged Gingrich since September 1994, when the first complaint was filed.

    In December, Gingrich admitted he had brought discredit to the House and had broken its rules by failing to ensure that financing for two projects, including a college course he once taught, would not violate federal tax law and by giving the ethics committee untrue information. In what amounted to a plea bargain, Gingrich agreed to a House reprimand and the financial penalty in exchange for reduced charges against him.

    While the penalty has been described as a reimbursement, James M. Cole, the counsel the ethics panel hired for the investigation, has suggested it had as much to do with punishment as with repayment. "The number was not the product of a mathematical calculation," he said. "It was the product of a sense of the seriousness of the violation. . . . It needed to be high enough to send the message that this was, in fact, a very serious matter."

    House GOP leaders have been careful to describe the sum as a "cost assessment" or "reimbursement" rather than a "fine." That is because ethics committee rules say a fine is "appropriate in a case in which it is likely that the violation was committed to secure a personal financial benefit," and members have stressed that Gingrich did not reap a financial benefit in this case.

    Gingrich almost certainly could not pay the $300,000 in a single payment without the loan. As speaker, he is paid $171,500 a year. In 1995, he was paid $1.2 million in royalties for his best-selling book, "To Renew America," which is based on the college course at the heart of his ethics case. After expenses and a donation to charity, he was left with $424,000.

    Staff writers Charles R. Babcock and Dan Balz contributed to this report.


    Amount: $300,000.

    Rate: 10 percent, compounded annually. (This is the prime rate plus 1.5 percent.)

    Repayment: Due in 2005; no payments are required until then. If Gingrich waited the entire period before making any payments, he would owe $643,000.

    Dole's assets: With his wife, between $2.3 million and $7.7 million, according to a Senate report released last year.

    © Copyright 1997 The Washington Post Company

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