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Speaker and His Directors Make the Cash Flow Right

By David Maraniss and Michael Weisskopf
Washington Post Staff Writers
Monday, November 27, 1995; Page A01

In the annals of the House Republican revolution, a pivotal moment came last April when an unsuspecting corporate lobbyist entered the inner chamber of Majority Whip Tom DeLay, whose aggressive style has earned him the nickname "the Hammer." The Texas congressman was standing at his desk that afternoon, examining a document that listed the amounts and percentages of money that the 400 largest political action committees had contributed to Republicans and Democrats over the last two years. Those who gave heavily to the GOP were labeled "Friendly," the others "Unfriendly."

"See, you're in the book," DeLay said to his visitor, leafing through the list. At first the lobbyist was not sure where his group stood, but DeLay helped clear up his confusion. By the time the lobbyist left the congressman's office, he knew that to be a friend of the Republican leadership his group would have to give the party a lot more money.

It didn't take long for the word to spread around town about the Hammer and his book. By some accounts – apocryphal as it turns out -- DeLay even made lobbyists turn to their contribution totals and initial them, like a report card. Such stories actually make DeLay's job easier. When an aide once asked whether efforts should be made to quell the legend, DeLay leaned back in his chair and said, "No, let it get bigger."

Inside the House Republican leadership, the former pest exterminator from Houston is the enforcer. His mission is to ensure that money flows along the same stream as policy, that the pro-business deregulatory agenda of the House Republicans receives the undivided financial support of the corporate interests that benefit from it. His motto is an unabashedly blunt interpretation of the dictums of Speaker Newt Gingrich: "If you want to play in our revolution, you have to live by our rules."

The role of money in the revolution has been obscured by the titanic clash with President Clinton and the Democrats over balanced budgets and the reshaping of the federal government, but it is part of that larger struggle. Money is at the center of Gingrich's transformation of the House. With the new alignment of ideological allies in the business and political worlds, there are unparalleled opportunities for both the people who give the money and the people who receive it.

It is such an obvious quid pro quo that it goes almost unnoticed. From House Republicans come measures that gratify industry: weakening environmental standards, loosening workplace safety rules, limiting the legal liability of corporations, defunding nonprofit groups that present an opposing view. From the beneficiaries of that legislation come millions of dollars in campaign contributions.

"The Republicans have a wonderful situation," said one trade association president, a longtime Democrat. "They don't have to prostitute themselves. They are ideologically in sync" with the corporate PACs. "Every politician dreams of being able to meet your conscience and raise money at the same time."

Yet money is also the source of increasing tension among House Republicans that could ultimately weaken them, if not tear them apart. The conflict, in essence, is between ideology and populist reform. One wing wants to collect as much corporate money as possible to sustain and expand the revolution. Another wing fears that this will disillusion voters who brought the Republicans to power to change the traditional ways of doing business in Washington. Gingrich stands in the middle aware, people around him say, that his tenure could depend in part on his ability to resolve the conflict.

Gingrich, DeLay and their comrades have set in motion a historic shift in campaign giving. As recently as 1993 the National Republican Congressional Committee, the main vehicle for fund-raising for House GOP candidates, was millions of dollars in debt. But by soliciting contributions from the corporate world through a combination of tenacity, cheerleading and intimidation – "playing offense" all the time, as DeLay describes it – the revolution has established a formidable money machine. The turnaround has been dramatic. House Republicans received 58 percent of the money from the top 400 PACs during the first six months this year and their numbers are rising every month. Last year two of every three PAC dollars went to the ruling Democrats. The trend is evident in all industries, including those with traditional Democratic ties.

The Transportation Political Education League, for example, gave only 3 percent to the Republicans last year but 42 percent this year. The No. 1 corporate contributor to the GOP in 1995, United Parcel Service, which worked closely with DeLay and the leadership in fighting federal workplace safety regulations, also made a decisive partisan transformation, its contributions going from 53 percent Democratic to 71 percent Republican in one year.

The once-threadbare NRCC raised a record $18.7 million from January through June, four times as much as its Democratic counterpart. Its two elite organizations, which offer private sessions with House leaders at the Capitol Hill Club, are suddenly fat and happy: 225 corporations and political action committees have joined the House Council at $5,000 apiece, and 150 are enrolled in the Congressional Forum for $15,000 to $20,000 each. Rep. Bill Paxon of New York, the NRCC's chairman, estimates that he has met privately with "200 to 300" chief executive officers of Fortune 500 companies to make his pitch.

"If you believe in the revolution and what's happening, then it's time to follow common sense," Paxon tells them. "Why do you support the enemy? Why do you give money to people who are out there consciously every day trying to undermine what's good for you?" He often leaves, Paxon says, with a financial pledge.

Another $20 million, double the Democratic number, has come to the party in unrestricted contributions known as soft money, used for party rebuilding efforts, voter drives and policy initiatives. Leading the way in the soft money realm this year have been tobacco companies that, concerned about regulation by the Food and Drug Administration, gave a record $1.5 million to the Republicans during the first six months, tenfold what they gave two years ago.

Gingrich, DeLay, Majority Leader Dick Armey of Texas and Republican Conference Chairman John Boehner of Ohio all have established separate PACs this year with goals of raising millions of dollars more. Gingrich's new PAC, dubbed "Monday Morning" in honor of a refrain from his swearing-in speech, has already raised more than $330,000, with pledges of an additional $60,000 since its inception a few months ago.

Advised by kitchen cabinets of industry lobbyists, these leadership fund-raising operations will distribute money to Republican congressional candidates, strengthening the bond between the revolution and industry while reinforcing the loyalty of House colleagues to Gingrich and his lieutenants.

The freshman class, 73 Republican newcomers who consider themselves the vanguard of the revolution, has proved as ambitious in the fund-raising realm as elsewhere. They have bumped up the average price of a fund-raising ticket fourfold from the previous term to $1,000, hired professional consultants to run their events and solicit contributions, and formed steering committees of lobbyists to advise them. Almost all have liquidated their campaign debts in the first 10 months of their first term, and more than half belong to the NRCC's $100,000 Club, having at least that much cash ready for next year. The average Republican freshman raised $123,000 in the first six months, nearly double the amount of their Democratic colleagues.

Even reform-minded freshmen who oppose PACs have pursued them aggressively. Sam Brownback of Kansas solicited Washington lobbyists to contribute to a fund-raising event for him soon after he had returned from Ross Perot's United We Stand convention in August. There he had given a speech denouncing the Washington lobbying scene as "a domestication process where you bring in new, fresh legislators and then you start to try to tame them and assist them with gifts and meals and trips almost like you would a horse with a sugar cube." Several lobbyists who received Brownback's fund-raising invitation angrily turned him down.

The Right Course

A few days after the House Republicans took power last January, DeLay turned to one of his most trusted allies in the lobbying community, David Rehr of the National Beer Wholesalers Association, and said, "I want you to do something with the freshmen just to get them on the right course." Rehr was a member of a small group of Washington lobbyists who had remained loyal to the Republicans throughout the long period of Democratic control. His informal duties now included serving as a PAC adviser to both DeLay and the NRCC.

Rehr set up a seminar at NRCC headquarters entitled "Seven Steps in Liquidating Your Debt and Building for the Future," and more than a quarter of the freshman class attended. Rehr instructed them to set up steering committees of PAC supporters to be their "eyes and ears" in the Washington community. He suggested that they contact the NRCC and House committee chairmen for a list of PACs relevant to their committee assignments.

Make contacts personally, Rehr, whose own PAC contributed $144,492 to the House Republicans in the first six months this year, advised the freshmen. If a PAC opposed them during the campaign, they should not take it personally. Those PACs, he said, should now be considered "additional prospects."

Rehr is among a new breed of Capitol Hill operators on the rise, fortyish, ideological and fervently committed to the House revolution and its two primary bankers, DeLay and Paxon. The lobbyists span the corporate world, commanding networks of business allies along with large PACs of their own organizations. Dan Mattoon of BellSouth, another lecturer at the NRCC seminar, is the leadership's main link to local telephone companies. Bob Rusbuldt, a top insurance lobbyist, taps the financial resources of the related fields of mortgage banking and real estate. Jim Boland of Philip Morris draws from the tobacco industry and its food subsidiaries. Freelance lobbyists such as former Bush White House aide Gary Andres bring lists of diverse clients and the ability to penetrate new fund-raising channels.

The Republican takeover has been a time for "cashing in," as a PAC director close to Gingrich put it, and also a time for "getting right." Lobbyists whose PACs or clients once gave heavily to Democrats have been eager to show they found religion, leading to such scenes as the one late one recent night at one of the steak and cigar restaurants fashionable along Pennsylvania Avenue.

"Man," said a lobbyist approaching a GOP leadership aide and pleading to be restored to good graces, "just want to tell you, we've given like 70 percent to you guys now."

DeLay, for his part, has launched what has come to be known as the "K Street Strategy," named for the downtown Washington avenue lined with lobbying headquarters, law firms and trade associations. The strategy is to pressure those firms to remove Democrats from top jobs and replace them with Republicans.

Headhunters now call DeLay's office in search of recommendations. When one corporation lobbyist sought a meeting with the whip, DeLay telephoned the firm's CEO and complained that his agent in Washington was "a hard-core liberal." If the company wanted to get in to see him, DeLay added, "you need to hire a Republican." The hard-core liberal lobbyist was soon transferred to London.

One drug company hired a Democrat to head its office, but after he was unmasked at a DeLay fund-raiser, he called the whip's office the next day to plead that his firm not be scorned by the House Republicans. His position was only temporary, he said, and he would soon be replaced by someone more aligned with the revolution.

"There are just a lot of people down on K Street who gained their prominence by being Democrat and supporting the Democrat cause, and they can't regain their prominence unless they get us out of here," said DeLay. "We're just following the old adage of punish your enemies and reward your friends. We don't like to deal with people who are trying to kill the revolution. We know who they are. The word is out."

At times, Republican leaders have had to choose between friends, and money may have been a factor. When the Commerce Committee voted on a sweeping telecommunications deregulation bill in May, for example, its legislation appeared to favor AT&T and other long-distance firms over the regional Bell companies. A last-minute amendment by Chairman Thomas Bliley would have complicated entry of the seven regional Bells into the long-distance market. AT&T has a plant in Bliley's Richmond district and a new PAC profile: reversing a past preference for Democrats, it has given 58 percent to GOP lawmakers this year.

But the baby Bells, with combined PAC donations double those of AT&T and with influential lobbyists such as Mattoon, appealed the decision. Help came from Paxon and deputy whip Denny Hastert of Illinois, both Commerce Committee members who had voted for the Bliley provision as part of the May bill. But after hearing from Bell lobbyists, they argued for change at a Speaker's Advisory Group meeting in early July, contending that the Bells would be prevented from competing, a participant said. Gingrich directed Bliley to "rescrub" the bill, and by mid-July the Bliley provision was deleted. Two weeks before the new bill passed the House, Pacific Telesis Group's chief executive hosted a fund-raiser for Gingrich at his San Francisco home, raising $20,000.

Paxon said he was guided by his "driving passion" for deregulation, not fund-raising calculations, in siding with the Bells. "I haven't sat down with a legislative calendar," he said, "and said this is the time to go after this industry group."

But some fund-raising efforts have been less than subtle. Ways and Means Committee Chairman Bill Archer lectured corporate leaders not to give to Democrats. In an Oct. 23 letter, signed by the Oklahoma GOP delegation, corporate lobbyists were told that they were expected to support freshman Tom Coburn in his tough reelection race.

"As you are courted by others to get involved in this race, we want to make our position clear," the letter read. "We strongly support our good friend and colleague, Tom Coburn, and we will be unified as we work on his behalf. We trust you will join us in our effort and certainly not oppose us."

That letter was mild compared with a similar dispatch earlier in the year from DeLay, a no-nonsense missive that helped establish his reputation as "the Hammer." Days before freshman Randy Tate of Washington state was to hold a fund-raiser in Washington, DeLay sent out a letter listing the exact sum each PAC had given to the losing cause of Tate's Democratic opponent in 1994, Mike Kreidler.

While he was "surprised to see you opposed Randy Tate," DeLay wrote, "you now have the opportunity to work toward a positive future relationship." The note got more demanding – "your immediate support for Randy Tate is personally important to me and the House Republican leadership team" – before closing with an offer of redemption: "I hope I can count on you being on the winning team."

The aftermath of that letter captures DeLay's unapologetic mode of operation. A reporter received a copy of it and called DeLay's PAC director, Karl Gallant. Gallant asked the reporter how he obtained the letter. When he was told it came from a lobbyist, Gallant responded, "That tells me it's effective. They want you to write a negative story so we'll back off. You just made my day."

DeLay agreed, distributing the article to his colleagues. "It had great impact," DeLay said later. "It raised him {Tate} a bunch of money. We know who we sent the letters to and who we got checks from."

One other result: Kreidler recently decided not to challenge Tate in 1996, citing as one factor his difficulty in raising PAC money.

Out of the Valley

For Gingrich, learning the value of fund-raising has been a gradual process. Staffers at the NRCC in the 1970s and early 1980s would roll their eyes when the small-college history professor with mutton-chop sideburns strolled through the door, knowing they were in for a long day of lectures on the Ming dynasty and a barrage of expensive ideas for promoting his conservative opportunity society. "In those early days Newt was very naive about money," said Steve Stockmeyer, then the executive director of the NRCC. "He was always coming up with ideas on how to spend it, not raise it."

But despite his early naivete about the ways of money, Gingrich, more than DeLay or any other figure, was most responsible for turning the revolution into a money machine.

Two years ago the financial situation for the Republicans seemed bleak. They were "walking in the valley of the shadow of death," as Paxon, installed by Gingrich as chairman of the NRCC, put it.

They were the minority party in the House and Senate and without the White House. Their fund-raising relied largely on a direct-mail list that had become utterly obsolete. Of the more than 1 million names on it, only one in 10 had given to the party in recent years. Many were in nursing homes or dead. But by April 1994 Gingrich had become convinced that the Republicans would seize control of the House that year. He went over to the NRCC and wrote personal appeals for funds claiming that the Republicans would soon be in the majority.

"Gingrich was for my purposes the whole ballgame when we wanted to raise money," said Grace Wiegers, then director of fund-raising for the NRCC and now the head of Gingrich's leadership PAC, Monday Morning.

In August and September he met individually with more than 150 Republican members, assigning fund-raising tasks and goals to each. Incumbents from safe seats were asked to raise $50,000 for Republican challengers or vulnerable colleagues. Ranking minority members of House committees made pledges to Gingrich to raise even larger amounts traveling for other candidates on the road.

When the revolution arrived, Gingrich had a system already in place for maintaining and expanding the money operation. DeLay would be his hammer. Paxon would serve as cheerleader. Majority Leader Armey would position himself as ideological arbiter, attacking corporations for funding nonprofit agencies that opposed the revolution. Conference Chairman Boehner would nourish business coalitions, bringing them in for regular Thursday sessions to plan how the corporate world could advance conservative policy. Committee chairmen Bliley of Commerce, Archer of Ways and Means and Bud Shuster of Transportation would cultivate industries in their turfs.

The lines between elected revolutionaries and their business cohorts occasionally blurred. Lobbyists helped DeLay write his regulatory moratorium bill. Shuster raised money for the revolution with the assistance of his former political aide, Ann Eppard, a lobbyist whose clients included Amtrak, Conrail, Federal Express and the Pennsylvania Turnpike Authority, all of whom had issues pending before Shuster's committee.

Eppard maintains a close relationship with her old boss. At the same time that she was soliciting money from industry for the "Bud Shuster Portrait Committee" which commissioned a painting of the chairman in his committee room, she was also sending out fund-raising letters for Republican candidates. One to industry colleagues on behalf of a Virginia candidate ended with the boldfaced assertion: "This dinner is of personal importance to Chairman Shuster."

The Handshake

Given the place Gingrich assigned to fund-raising, his handshake agreement with President Clinton in June to form a bipartisan commission on campaign finance reform took his allies by surprise. More than any other act, it revealed the tensions within his revolution.

At the next meeting of the House leadership, the tone, said one participant, was, "Why the hell did you go and do that?"

Armey, responsible for scheduling the revolution's legislative agenda, worried about how he would be able to fit the issue into an already packed calendar. DeLay, and to a lesser degree Paxon, questioned whether the timing was right and whether the Republicans should cede anything to Clinton and the Democrats now that the revolution's money machine was operating so effectively. Gingrich's response was that the handshake "buys us time." He needed to think the issue through, he said.

Another wing of Gingrich's House, represented by populist freshmen Brownback and Linda Smith of Washington, along with veteran moderate Christopher Shays of Connecticut, was pushing Gingrich from the other side. If the Republicans did not clean up Washington and prove that they were not continuing business as usual, they said, the revolution would collapse from a fatal flaw of political hubris. If reform did not happen on the Republican watch, said Shays, it would become "our Achilles' heel." While Shays and Brownback took Gingrich's handshake with Clinton as a sign that he supported reform, Smith was skeptical. She said she thought he was just stalling.

Gingrich found himself in a familiar position: on both sides of a debate and looking for another way entirely. He understood the call for reform and had a lingering resentment toward PACs for funding the Democrats when they controlled Congress. But he also, he and his aides say, felt equally strongly that the revolutionaries should not unilaterally disarm themselves while they were engaged in a more profound struggle of what he called the "Information Age."

The real fight, Gingrich told his aides, was not over money but information and how it is disseminated. Money was one weapon in that struggle and important to the movement as a way to counter the American mass media, which the speaker considered largely hostile to the revolution.

Gingrich said as little as possible about the issue after the handshake, promising that at some point he would deliver a white paper on the subject. As months went by, the reformers grew increasingly agitated. At Shays's request, Gingrich met with the reformers in his office late on the afternoon of Sept. 29 just before the Columbus Day break. While Shays hoped to discuss another reform issue involving a gift ban, the meeting devolved into a tense confrontation over campaign finance reform between Gingrich and Smith, who had just planted a story with conservative columnist Robert Novak in which she said that the leadership was not telling the truth about their intentions on reform.

"He got so mad. He kicked the staff out and yelled at them, he was so unhappy," Smith recalled. The session was "testy and pointed," according to Brownback. Gingrich was overwhelmed by other concerns that day, including Medicare and Bosnia. He was late for a meeting at the White House, and freshman Smith kept jabbing at him.

Noting that Smith was working with Common Cause and United We Stand in pushing campaign reform, Gingrich told her that she had to decide whether she wanted to be an outsider or work with the House leadership. "Whatever you decide is okay with me," he said. "We just have to know."

Smith wanted to know why Gingrich needed a time-consuming commission, why he could not just support legislation eliminating PACs, as he had when he was in the minority. She told the speaker that he tried to carry too much of the burden himself and that he should let others take the load on this issue.

Then, according to Smith's recollection of the scene, corroborated by others in the room, "Newt looked at me and said, Nobody can do it but me! I have the most experience. I'm the only one who can do this. I'll just have to take some time this week and write a paper on it.' "

Shortly after that meeting the leadership announced that the Oversight Committee would hold hearings on campaign finance reform starting Nov. 2 and that Gingrich would be the first to testify. One aide took memos from a group of informal advisers, including Stockmeyer, the former NRCC director who now ran the National Association of Business PACs. PACs were invented as a reform in the 1970s, he noted, and another round of reforms doing away with them would probably create a system that was worse.

Sen. Mitch McConnell of Kentucky sent a letter over to the House noting that the Republicans had killed campaign finance reform before the 1994 elections – "proof positive that this issue is not a hindrance to us at the polls." In a handwritten P.S., McConnell added: "We'd be foolish to throw away our ability to compete."

Another Gingrich aide began piecing together his speech. He plunged into a long assigned reading list and followed up on the speaker's request to compare the amount of money spent in political campaigns with what is spent in advertising products. Companies spent $100 million selling two stomach acid pills recently, he discovered, one-sixth of the total amount spent on all congressional campaigns last year. One of the great myths of American politics, Gingrich concluded, was that campaigns are too expensive. He believed that most of the criticism of the campaign system came from "nonsensical socialist analysis based on hatred of the free enterprise system."

Smith was sitting one row behind Gingrich and off to his right when he delivered those conclusions at the hearing. She wanted to watch his eyes and his facial expressions as a means of gauging his earnestness, she said, but as he continued to attack the reformers, including some of the groups she had been working with, she became increasingly distraught.

"His anger at the media drove what he said," she concluded. She retreated to her office, where she reached a final decision on Gingrich's earlier ultimatum to her. She would work from the outside.

The Competition

Gingrich's lieutenants expressed satisfaction with his speech. If reform is inevitable, they say, it will not involve the elimination of PACs and it will not diminish the role of money in the revolution. DeLay said he would work the system until PACs gave an appropriate amount to the Republicans. "Ninety percent would be about right," he declared. DeLay has a running competition with Gingrich over who can raise more money. There are scores of revolutionaries doing the same thing, but he is not worried that they might trip over each other.

"It's a big country," said the Hammer.


A WONDERFUL SITUATION

"The Republicans have a wonderful situation. They don't have to prostitute themselves. They are ideologically in sync {with corporate PACs}. Every politician dreams of being able to meet your conscience and raise money at the same time."
– Longtime Democratic trade association president

NO HINDRANCE AT POLLS

Sen. Mitch McConnell of Kentucky sent a letter over to the House noting that the Republicans had killed campaign finance reform before the 1994 elections – "proof positive that this issue is not a hindrance to us at the polls." He added a handwritten P.S., at right: "We'd be foolish to throw away our ability to compete."

TAKEN BY SURPRISE

Gingrich's handshake agreement with President Clinton in June to form a bipartisan commission on campaign finance reform took his allies by surprise. At the next meeting of the House leadership, the tone, said one participant, was, "Why the hell did you go and do that?"

HATRED OF FREE ENTERPRISE

One of the great myths of American politics, Gingrich later concluded, was that campaigns are too expensive. He believed that most of the criticism of the campaign system came from "nonsensical socialist analysis based on hatred of the free enterprise system."


© Copyright 1995 The Washington Post Company

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