The foundation did not, however, manage the course, and its role was limited to that of a bank. It would take in the money, put it in its bank account, and when presented with bills that were approved, would pay those bills.

The management of the course was contracted to another organization called the Washington Policy Group. This was a private corporation set up by Jeffrey Eisenach, who was at the time GOPAC's executive director. Mr. Eisenach resigned from GOPAC on June 1st of 1993 to take over the operation and management of the course through the Washington Policy Group.

Mr. Eisenach, in fact, played a similar role through the Washington Policy Group with the American Opportunities Workshop and American Citizens' Television. In fact, when Mr. Eisenach wrote to the Kennesaw State College Foundation to propose a contract for his company to manage the Renewing American Civilization course, in the letter he states that that project was indeed very similar to the American Opportunities Workshop and the American Citizens' Television project. As such, he had very much experience in this field and knew about all the aspects and problems that would be presented when he took on the Renewing American Civilization project.

Following the Washington Policy Group's management of the course, a new 501(c)(3) organization became involved. That was known as the Progress and Freedom Foundation. This was also a creation of Mr. Eisenach's. He was its founder, he was its president, and the organization took over the management of the course after the Washington Policy Group.

First, it did it while it was at the Kennesaw State College Foundation, and then it moved on and took over the course management at Reinhardt College.

The course moved to Reinhardt College because of some controversy that arose while it was at Kennesaw State. There had been some complaints by people, faculty members primarily at Kennesaw State College, that the course was being used to disseminate a political message.

Following these complaints and during the first year of the course being taught at Kennesaw State College, the Board of Regents made a decision that elected public officials could not teach at State schools. Because of this, it was decided that the course would be moved to a private, non-state school.

The course was moved to Reinhardt College. It stayed there for 1994's winter quarter and 1995's winter quarter. While at Reinhardt, the Progress and Freedom Foundation assumed full responsibility for the course. Instead of receiving payments in a contract sense, the Progress and Freedom Foundation handled fundraising, took in all the money and paid all the bills.

The only role for Reinhardt College was to rent its television production facilities to the Progress and Freedom Foundation for the course and to provide the site for the course to be presented and the faculty member.

In reviewing the course prior to taking on its role with it, Reinhardt College appreciated the fact that there were really two things going on with the course: One, it was a college course, and that they wanted to have it taught at its institution. But the other

was what it perceived to be a political project. This involved the dissemination of the course.

As a result, Reinhardt College made it clear to Mr. Eisenach that they would only be involved in the course itself. Any of the fundraising, any of the dissemination, any of the things it viewed as being part of the political project, it would not be involved in.

The charges in the Statement of Alleged Violation involve failure by Mr. Gingrich to seek legal advice. A few comments on the setting for that would be appropriate.

Under the Internal Revenue Code, a 501(c)(3) organization must be operated exclusively for exempt purposes. The presence of a single nonexempt purpose, even if insubstantial in nature, will destroy the exemption of the organization, regardless of the number or importance of truly exempt purposes that are present.

Conferring a benefit on private interests is a nonexempt purpose. Under the Internal Revenue Code, a 501(c)(3) organization is also prohibited from intervening in political campaigns or providing any support to political action committees. These prohibitions reflect the congressional concerns that taxpayer funds are not to be used to support political activity.

During the preliminary inquiry, the subcommittee consulted with an expert in the law of tax-exempt organizations, and Members of the subcommittee did their own research and read voluminous materials involved in this area. Mr. Gingrich's activities on behalf of the American Opportunities Workshop, the American Citizens' Television, and the Renewing American Civilization projects, as well as the activities of others that were done with Mr. Gingrich's knowledge and approval in regard to those organizations, were reviewed by the tax expert.

The expert concluded that those activities violated the status of the organizations under 501(c)(3) in that, among other things, those activities were intended to confer more than insubstantial benefits on GOPAC, on Mr. Gingrich, and on Republican entities and candidates.

At Mr. Gingrich's request, the subcommittee also heard from tax counsel that he had retained for purposes of this preliminary inquiry. While that counsel is an experienced tax attorney with a sterling reputation, he has less experience in dealing with tax-exempt organization law than does the expert retained by the subcommittee.

According to Mr. Gingrich's tax counsel, the type of activity involved in the American Opportunities Workshop, the American Citizens' Television and the Renewing American Civilization projects, would not violate the status of the relevant organizations under 501(c)(3). In his opinion, once it was determined that an activity was in fact educational, as defined by the IRS, and did not have the effect of benefiting a private interest, it did not violate the private benefit doctrine as we described above.

In the view of Mr. Gingrich's tax counsel, the motivation on the part of an organization or its agents is irrelevant. He was further of the opinion that an organization does not violate the private benefit prohibition or political campaign prohibition through close association or support of a political action committee, unless the orga

nization calls for the election or defeat of an identifiable political candidate.

Both the subcommittee's tax expert and Mr. Gingrich's counsel, however, were asked about what kind of advice they would have given Mr. Gingrich had he come to them before embarking on any of these projects. Each of them had the same conclusion: They would have advised Mr. Gingrich not to use the 501(c)(3) organizations he had used for the purposes he had used them.

The subcommittee's tax expert based his opinion on the fact that it would have been a violation of 501(c)(3). Mr. Gingrich's tax counsel based his opinion on the fact that the mixture of policy and tax deductible donations is, in his words, an explosive mix. It draws the attention of the IRS. It raises red flags, and he would not advise a client to do so.

Based on the evidence that was before the subcommittee, it was also clear that Mr. Gingrich had intended that the American Opportunities Workshop and American Citizens' Television project and the Renewing American Civilization projects would have substantial partisan political purposes. In addition, Mr. Gingrich was also aware that political activities in the context of 501(c)(3) organizations were problematic. Prior to embarking on these projects, Mr. Gingrich had been involved with another organization that had direct experience with the private benefit prohibition in a political context. This organization was called the American Campaign Academy.

In 1989, a tax court opinion was issued, less than a year before Mr. Gingrich set out on the American Opportunities Workshop and American Citizens' Television project. In that opinion, the American Campaign Academy was denied exemption under 501(c)(3) because even though it was educational, the court ruled that it was providing an impermissible private benefit to Republican candidates and entities.

Close associates of Mr. Gingrich were principals in the American Campaign Academy. Mr. Gingrich was a teacher at the American Campaign Academy, and Mr. Gingrich told the subcommittee that he had been briefed at the time of the tax controversy involving the Academy and was very well aware of its legal problems as they were progressing.

In addition, Mr. Gingrich had stated publicly, at least in regard to the Renewing American Civilization project, that he viewed his activities as being very aggressive in regard to 501(c)(3) law. He stated he was going right up to the line and taking risks in that regard.

Taking into account Mr. Gingrich's experience, his background, his sophistication with tax-exempt organizations, and his status as a Member of Congress, required to maintain high ethical standards, the subcommittee concluded that Mr. Gingrich should have known to seek appropriate legal advice to ensure that his conduct in regard to these projects conformed with 501(c)(3). The subcommittee was also of the opinion that had Mr. Gingrich sought and followed such advice, after having set out all the relevant facts, circumstances, plans and goals of these projects, the 501(c)(3) organizations would not have been used as they had been and the taxpayer subsidies which resulted would not have occurred.

In responding to the complaints that were filed in this case concerning the Renewing American Civilization aspect of it, before it came to the subcommittee, before a preliminary inquiry had been instituted, Mr. Gingrich submitted several letters to the committee on the subject.

His first letter was dated October 4. It was in response to the initial complaint that had been filed in the matter. That initial complaint addressed the tax issues involving the Renewing American Civilization course. It addressed issues involving whether or not there were official congressional resources used in developing that course and one or two other issues.

In the October 4 letter, Mr. Gingrich did not address the tax issues, but primarily addressed the issue of whether congressional resources had been used for the purpose of developing the course.

In that letter, Mr. Gingrich stated that GOPAC, among other entities, had paid people to work on the course. After he made this response, the committee sent Mr. Gingrich a letter saying: Thank you, that helps in regard to the use of official resources for unofficial activities, but there is still a question of the tax issue raised by the complaint and we would like you to address it.

Specifically, the committee wanted to know if there were any partisan political aspects to the course and they wanted to know about GOPAC's involvement in the project.

Mr. Gingrich's letter in response was dated December 8, 1994. It was prepared by his attorney, but it was read, approved, and signed by Mr. Gingrich. In that letter, Mr. Gingrich stated that the course had no partisan political aspects to it, that his motivation for teaching the course was not political, and that GOPAC was neither involved in the course nor received any benefit from any aspect of the course.

In his testimony before the subcommittee during the preliminary inquiry, Mr. Gingrich admitted that those statements were inaccurate.

When an amended complaint in this matter was filed with the committee in January 1995, Mr. Gingrich's attorney responded to that complaint on his behalf. In a letter dated March 27, 1995, Mr. Gingrich's attorney addressed all the issues that were involved in the amended complaint, including the Renewing American Civilization tax issue. The letter was signed by Mr. Gingrich's attorney, but Mr. Gingrich reviewed it and approved it prior to its being delivered to the committee.

When asked about this letter, Mr. Gingrich stated in the course of the preliminary inquiry, Mr. Gingrich stated that if there had been anything inaccurate in that letter, he would have told his attorney to change it.

Similar to the letter of December 8, the letter of March 27 stated that the course had no partisan political aspects to it, that Mr. Gingrich's motivation for teaching the course was not political, and that GOPAC had no involvement in and received no benefit from any aspect of the course.

In his testimony before the subcommittee concerning these letters, Mr. Gingrich admitted that these statements were not true. In looking at the letters and talking to Mr. Gingrich and his attorney, it was clear that the goal of these letters was to have the

complaints against Mr. Gingrich dismissed. What was also clear was that all of the people who were involved in drafting or editing the letters, or reviewing them for accuracy, only Mr. Gingrich had personal knowledge of the facts contained in the letters regarding the course.

The facts in the letters that were inaccurate, incomplete, and unreliable, went to the heart of the issues that were being considered by the committee.

In reviewing the evidence concerning both the American Opportunities Workshop and American Citizens' Television project and the Renewing American Civilization project, certain patterns became apparent. In both instances, GOPAC had initiated the use of the message that was in each of those projects as part of its political program to build a Republican Majority in Congress.

In both instances, there was an effort to have the material appear to be nonpartisan on its face, yet serve as a partisan political message for the purpose of building the Republican Party.

Under the methodology test, as it is known, of the Internal Revenue Service, both of these projects did qualify as educational. However, they both had substantial partisan political aspects to them. They were both initiated as political projects, both motivated, at least in part, by political goals.

The other striking similarity in both situations is that GOPAC was in need of a new source of funding for the projects and turned them over to 501(c)(3) organizations for that purpose. Once the project had been established in a 501(c)(3) organization, however, the same people continued to manage it as had done so at GOPAC, the same message was used as when it was at GOPAC, and the dissemination of the message was directed towards the same goal as the project as was intended when it was at GOPAC.

The only significant difference was that the activity was now founded by a 501(c)(3) organization. This is not a situation where one entity develops a message through a course or a television program for purely educational purposes and then an entirely separate entity, independently decides to adopt that message for partisan political purposes. Rather, this was a coordinated effort to have the 501(c)(3) organizations help in achieving a partisan political goal in both instances, the idea to develop the message and disseminate it for partisan political use came first. The use of the 501(c)(3) came second as a source of funding.

This factual analysis was accepted by the Members of the subcommittee and myself. However, there was a difference of opinion as to the result under Section 501(c)(3) when applying the law to these facts. As I had said, the subcommittee's expert was of the opinion that these facts presented a clear violation of 501(c)(3). Mr. Gingrich's tax attorney disagreed. Both, however, would have advised their client in these situations not to use a 501(c)(3) organization for these purposes.

Some Members of the subcommittee and I agreed with the expert that was retained. Other Members of the subcommittee were troubled by reaching this conclusion and believed that the facts of this case presented a unique situation that had not previously been addressed by the legal authorities. As such, they did not feel comfortable supplanting the functions of the Internal Revenue Service