Tom DeLay Sets Up Bogus Children's Charity to Rake Unlimited Corporate Contribututions
Delay's at it again. Using charity as a scam to raise campaign money.

http://www.nytimes.com/2003/11/14/politics/14DELA.html?hp=&pagewanted=print&position=

November 14, 2003

G.O.P. Leader Solicits Money for Charity Tied to Convention

By MICHAEL SLACKMAN

It is an unusual charity brochure: a 13-page document, complete with pictures of fireworks and a golf course, that invites potential donors to give as much as $500,000 to spend time with Tom DeLay during the Republican convention in New York City next summer — and to have part of the money go to help abused and neglected children.

Representative DeLay, who has both done work for troubled children and drawn criticism for his aggressive political fund-raising in his career in Congress, said through his staff that the entire effort was fundamentally intended to help children. But aides to Mr. DeLay, the House majority leader from Texas, acknowledged that part of the money would go to pay for late-night convention parties, a luxury suite during President Bush's speech at Madison Square Garden and yacht cruises.

And so campaign finance watchdogs say Mr. DeLay's effort can be seen as, above all, a creative maneuver around the recently enacted law meant to limit the ability of federal officials to raise large donations known as soft money.

"They are using the idea of helping children as a blatant cover for financing activities in connection with a convention with huge unlimited, undisclosed, unregulated contributions," said Fred Wertheimer, president of Democracy 21, a Washington group that helped push through the recent overhaul of the campaign finance laws.

Other lawmakers may well follow Mr. DeLay's lead. Already Senator Bill Frist, the majority leader, is planning to hold a concert and a reception in conjunction with the convention as a way of raising money for AIDS charities.

Mr. DeLay's charity, Celebrations for Children Inc., was set up in September and has no track record of work. Mr. DeLay is not a formal official of the charity, but its managers are Mr. DeLay's daughter, Dani DeLay Ferro; Craig Richardson, a longtime adviser; and Rob Jennings, a Republican fund-raiser. Mr. Richardson said the managers would be paid by the new charity.

Mr. Richardson said the goal was to give 75 percent of the money it raised to children's charities, including some in the New York area. He said the charity also planned to hold other events at the Super Bowl.

But because the money collected will go into a nonprofit organization, donors get a tax break. And Mr. DeLay will never have to account publicly for who contributed, which campaign finance experts say shields those who may be trying to win favor with one of the most powerful lawmakers in Washington.

Mr. Richardson dismissed such criticism. He said that every convention had parties and that by doing this Mr. DeLay was giving some money to worthy causes. He said Mr. DeLay had a long record of providing money to neglected children through his own DeLay Foundation for Kids, based in Houston.

"We are using the opportunity to throw parties, which happen anyway, but to give money back to abused and neglected children," Mr. Richardson said.

The brochure was obtained by The New York Times last Friday and aspects of it were reported yesterday in the newspaper Roll Call in Washington.

When both parties hold their presidential nominating conventions next summer, it will be the first time that they are staging the events under the constraints imposed by the new election law that limits the ability of federal officials to raise soft money. Though most Congressional leaders raised soft money over the years, Mr. DeLay has often been distinctively aggressive in his efforts.

Mr. DeLay is not alone in trying to find a way to continue to offer entertainment to those attending the convention, including a seat at his dinner table.

Like Mr. DeLay, Dr. Frist, a Tennessee Republican, is tying charity fund-raising to the convention. He is planning to play host to a reception and a concert at Rockefeller Center during the convention that promises to donate money to five AIDS charities.

In a letter sent out on behalf of the "Senator Frist Charitable Event," potential donors — the top tier is $250,000 — are advised, "This is the only event during the convention which Senator Frist will personally host."

A spokesman for Dr. Frist said that the effort was in the early planning stages and that the senator had not yet set up a charitable organization to collect the money.

But his plan is not as ambitious as Mr. DeLay's. Mr. DeLay, among other things, is offering donors private dinner with himself and his wife; the chance to participate in a golf tournament; a late-night party with a rock group; access to a luxury suite for elected officials and donors; as well as the yacht cruise, tickets to Broadway shows and more. Other elected officials are welcome at all of these events.

But by holding events at the convention — and working under the auspices of a charity — Mr. DeLay has stepped into an ethical gray area, election law and tax law experts said.

"The event itself is being put on in a political atmosphere," said Larry Noble, executive director of the Center for Responsive Politics in Washington and a former general counsel to the Federal Elections Commission. "It is clearly playing off DeLay's political leadership, and playing to people who find it in their political interest to be at the Republican convention."

"In that sense it is political," he added. "But does it make it a political activity on behalf of the charity?"

Mr. Richardson said the new charity has filed a request with the Internal Revenue Service for tax exempt status, which if granted would prohibit the organization from supporting a political candidate.

It would also mean part of the donations would be tax exempt — the amount contributed, minus the fair market value of what the donors get, or enjoy, in their time with Mr. DeLay.

The I.R.S. is barred by law from confirming or denying it has an application. But Marcus S. Owens, who served for 10 years as director of the exempt organization division of the I.R.S., said the link between the charity sponsored event and the Republican convention could raise a red flag at the tax agency.

"It's a factor that suggests the organization may not be nonpartisan, that there may be an element of endorsement involved in the organization's activities," Mr. Owens said.

Whatever its ultimate virtues, the DeLay fund-raising brochure displays a certain out-of-date understanding of the New York scene.

The brochure, in which the size of donations are named for more — or less — exclusive neighborhoods, starts at the Upper East Side as the top $500,000 tier and it ends with Greenwich Village for $10,000, perhaps suggesting Mr. DeLay's people have not surveyed the recent asking prices of town houses in the downtown neighborhood. He also placed Midtown (at $50,000) above SoHo (at $25,000).

"Midtown would be a lot less expensive than SoHo or the Village," said Tory Masters, of Intrepid New Yorker, a relocation firm in Manhattan. "I don't know what they are talking about."

Flake to urge Hastert: Reject DeLay legislation
By Bob Cusack

Trying to kill legislation championed by the No. 2 Republican in the House, a conservative lawmaker is planning to make his case to the chamber’s top decision maker, House Speaker J. Dennis Hastert (R-Ill.).

To the dismay of Rep. Jeff Flake (R-Ariz.) and some large corporations, House Majority Leader Tom DeLay (R-Texas) is seeking to insert a controversial Cuba trademark measure into the defense authorization bill, which is now in conference.

DeLay’s bill — as well as alternative approach crafted by Flake and Rep. Charlie Rangel (D-N.Y.) — were both crafted so that the U.S. trademark laws would be in compliance with a World Trade Organization (WTO) ruling. The WTO has held that parts of a law passed in 1999 violate the agreement on trade-related aspects of intellectual property rights and has given the United States until the end of this year to change it.

Several large companies are lobbying against House Majority Leader Tom DeLay’s bill.

Critics of DeLay’s bill say the measure would only benefit rum maker Bacardi-Martini Inc. and harm other businesses that have a significant financial interest in a post-Fidel Castro Cuba.

The majority leader has repeatedly criticized Castro and has vigorously fought legislative efforts to normalize relations with the communist regime. DeLay believes his legislative fix, which has not been formally introduced, would protect U.S. interests and hurt Castro.

Flake calls DeLay’s arguments “baloney,” adding, “He’s wrong. … [His] bill would only help one company.”

The Arizona legislator says businesses “are incensed” about the possibility of DeLay’s bill being signed into law, adding that he is planning to talk directly with Hastert on the issue. That conversation is expected to take place within the next week.

Hastert’s stance on the DeLay bill is politically intriguing. Two large Illinois-based companies, Boeing and Caterpillar, are members of the National Foreign Trade Council, which supports Flake’s legislation (H.R. 2494).

Caterpillar also signed on to a letter that indirectly criticized DeLay’s measure by saying Flake’s bill is “the only way” to comply fully with international obligations and protect U.S. trademarks.

A Hastert spokesman did not return phone calls seeking comment.

This complicated intellectual property debate has pitted some conservatives against DeLay, a major policymaker in the conservative movement. It has also put DeLay and major employers on opposite sides in a fierce lobbying effort that will likely be decided over the next several weeks.

Companies that support Flake’s bill include DaimlerChrysler, DuPont, Ford Motor Co., General Motors, Halliburton, Eastman Kodak, and the Grocery Manufacturers of America.

These companies point out that there are more than 5,000 trademarks registered in Cuba that are vulnerable to counterfeiting and infringement.

Industry lobbyists say they have to tread lightly, acknowledging the awkwardness of taking on DeLay.

Flake, meanwhile, is talking tough. He told The Hill, “We wanted to [fix] this quietly, but if we have to make a lot of noise, we will.”

The outspoken Arizona legislator is known for bucking his leaders on key matters; he voted against the House GOP Medicare reform bill, supported the drug reimportation measure and endorsed a bill that seeks to lift the travel ban to Cuba.

Other House Republicans who support H.R. 2494 include Jim Ramstad (Minn.), Judy Biggert (Ill.), Amo Houghton, Jr. (N.Y.), Nancy Johnson (Conn.) and George Nethercutt (Wash.).

Opponents of DeLay’s bill maintain that it would help Bacardi secure the rights to the rum label “Havana Club” while jeopardizing the trademarks of other companies. These officials say DeLay seeks to change parts of the law that WTO objected to instead of repealing them – as Flake’s bill would do.

They add that unless the law is completely repealed, Castro could have a legal basis to infringe on all American trademarks registered in Cuba. If Bacardi’s label is protected, Castro might infringe on other trademarks in retaliation.

Bacardi’s problem is that Pernod-Ricard, a French company that works with the Cuban government to sell a Havana Club rum, has argued that it has the rights to the label. This dispute moved from the courts to Congress after the 1999 law was
passed.

DeLay spokesman Jonathan Grella maintains DeLay’s approach would protect U.S. companies from “predatory” French businesses that work closely with Castro.

Citizens Against Government Waste, a conservative group, has also spoken out against DeLay’s effort to help Bacardi.

Bacardi officials did not return phone calls seeking comment.

Flake and three House Democrats last month notified the House and Senate committees on armed services of the DeLay bill. The Oct. 14 letter stated, “It is important to note that the [DeLay language] did not go through the committee process. … It would be unfortunate if the purported ‘fix’ language also was not properly reviewed in the Judiciary Committee.”

A House Armed Services aide declined to comment on the fate of the DeLay language, saying only that a vote on the defense authorization conference report is expected soon.

John Ullyot, a spokesman for the Senate Armed Services Committee, declined to comment but pointed out the DeLay language was not included in either the House or Senate bills.

Lobbyists who support Flake’s measure say they expect DeLay to attach his language to any vehicle that is moving through Congress this year.

A legal watchdog group, Citizens for Responsibility and Ethics in Washington, has called on the IRS to investigate why the Americans for a Republican Majority Political Action Committee failed to report Bacardi as a contributor to a 2002 golf event hosted by DeLay in Puerto Rico.

The group’s director, Melanie Sloan, said, “This is just another example of Tom DeLay playing fast and loose with ethics laws.”

Grella has disputed claims that DeLay’s actions are a result of Bacardi’s political contributions.

An IRS spokesman said the agency never comments publicly on whether an investigation requested by a third-party has been launched.