Washington's Other Scandal | frontline online
navigation, see below Interview: Elizabeth Stein

elizabeth stein
Stein served as Counsel to the Senate Committee on Governmental Affairs in its investigation of the 1996 election. As part of the Committee's Minority staff, she was one of a handful of attorneys responsible for the investigation into the activities of Triad and its affiliated nonprofit organizations. Over the course of its investigation, the Committee subpoenaed and reviewed more than 1,500,000 pages of documents, took 200 depositions and conducted more than 200 witness interviews. The Committee held 32 days of hearings, taking public testimony from 72 witnesses.

The Committee looked at the White House scandals but it also looked at -- you also looked [at] another insidious development that arose in the 1996 election, the so-called independent expenditures for so-called issue ads. Describe what that is for me.

Triad is a for-profit corporation that the committee investigation believes was created in '95-'96 to influence federal elections. One of the things Triad did was set up shell corporations, essentially, tax-exempt organizations.....The sole thing those corporations did was to air attack ads in various races across the country. An issue ad is any political ad that says anything that it wants about a candidate, but it very carefully avoids certain words, like "vote for," "defeat," or the candidate's name, you know, and clear expressions of support or defeat. And the other key thing is, as long as you avoid those words, there's no requirement that it be disclosed in any way.

The Annenberg Institute did a study of issue ads in the 1996 election and found that something like 80 percent of all issue ads didn't have to deal with a certain issue but were in fact attack ads.

So you had in effect tax-exempt organizations, often in conjunction with a candidate or a party, violating the spirit if not the letter of the law.

Absolutely.

How did they operate?

Well, they operated in lots of different ways. The most egregious ones basically set up what can really be characterized as shell corporations. They filed, you know, a paper set of articles of incorporation. They didn't hire staff. They didn't really have an office or a phone number or really even a purpose. Their sole purpose was to air issue ads.

And they would spend hundreds of thousands of dollars doing this.

And you would never know where the money came from, who was behind them, who was paying for them?

That's right.

What is Triad Management?

Triad is a for-profit corporation that the committee investigation believes was created in 1995 and 1996 in order to influence federal elections. One of the things that Triad did was set up two shell corporations, essentially, tax-exempt organizations. One was called Citizens for Reform and the other was called Citizens for the Republic Education Fund, and the sole thing that those corporations did was to air attack advertising in various races across the country.

And what was strange about that?

Most of the time in the past, when we've seen organizations that air advertising in political races, they're known organizations with a real membership, that stand for a key issue or a key purpose. Things that come to mind are abortion groups, the National Rifle Association, unions, groups with membership bases that stand for a certain known position.

Triad's groups were essentially shells. They had no existence, they had no purpose, they had no staff, they had no office.

What did they do?

They aired advertising.

Here's what your report says: "the evidence before the Committee suggests that Triad exists for the sole purpose of influencing federal elections. It is a corporate shell funded by a few, wealthy conservative Republican activists."

That's what the investigation showed.

So what's wrong with it?

Well, there's nothing wrong with influencing federal elections, but when you set out to do that, the law provides a certain framework that you have to abide by. And one of the key requirements is that you have to register and disclose publicly to voters what the sources of your money are, where it's coming from and how you're spending it. And Triad did not do that.

So, essentially, are you saying -- is the report suggesting it was a money laundering scheme?

It allowed wealthy individuals to put more money into the election process than they would otherwise legally have been allowed to do.

Okay, so you have Triad, which is a for-profit organization, whose purpose is to influence elections, and it has two arms that are shells, in a sense, that are its airwings, its air force. It runs television ads against candidates, right?

Right.

It gets its money from something called the --

The Economic Education Trust. It went out, we think and hired political consultants, planned an issue ad campaign in key districts that were important to whoever was running the trust, and spent between $1 and $3 million dollars doing that.

And what was its relationship to Triad?

As near as we can tell, the Economic Education Trust basically shopped for organizations to run money through in an effort to keep its existence hidden. So its relationship to Triad is essentially -- it went shopping for organizations, and Triad was one that it found.

And who gives that money to the Economic Education Trust?

What the report says and what the evidence the committee developed suggests is that the Economic Education Trust is funded by Koch Oil, which is possibly the second largest privately held company in the country.

Is Koch the primary supplier of money for Triad?

It certainly gave the most money for the advertising that Triad did in 1996.

Who else did?

An individual named Robert Cone supported Triad in its early days. There was a second trust that gave money for advertising to Triad in 1996, which the committee report found is possibly funded by Robert Cone. Again, there's no definitive evidence that that's the case.

Some other sources on the committee actually gave us some of the documents that the committee was able to obtain in your investigation. And these are the deposit records from the bank where Triad was operating. And they show that at least until mid-June to the end of 1995, Triad was primarily financed by monthly payments of $25,000 from one Robert Cone. July 1995, Robert Cone, Elverston PA, $25,000; September '95 Robert Cone, $50,000; October '95, Robert Cone, $25,000; November '95, $25,000; December '95, Robert Cone, $50,000.

Then, when you turn to the 1996 deposits, you get some extraordinary amounts being transferred by wire. February '96, unknown, by wire, $75,000; March '96, unknown, by wire, $50,000; April '96, unknown, by wire, $50,000. And then in July of 1996, just a few months before the election, $300,000 transferred to Triad from unknown, by wire. $125,000 a month later, unknown, by wire. I mean, those are large sums of money.

What did you learn about Triad's donor list, the total number of donors, 500, 5,000? What?

No, Triad had a small number of donors, probably under 50.

That few?

I think that many organizations that fund issue advocacy are funded by a few donors. And there's very little evidence to support that because these organizations guard their donor list very closely and in fact use it as a marketing tool to get, to raise money. They basically say to people: "Give us money, no one will know."

Subpoenas were issued by the Committee for all the principals of Triad, and those individuals refused to appear for deposition.

All of them?

All of them.....The Committee was notified that Triad did not intend to honor their deposition subpoenas and all senior level people refused to appear or refused to answer questions.

So you were left to whatever meager records you could find?

That's right.

So much of what Triad did obviously is still not visible to the public?

That's right.

What about Charles and David Koch?

The Committee developed circumstantial evidence that the Koch family and Koch Industries, which is a major oil company that's based in Wichita, Kansas, may have funded the Economic Education Trust.

What can you tell me about the Economic Education Trust?

The Economic Education Trust, as much as the Committee was able to determine, consists of a bank account which spent as much as $3 million dollars, sent two various groups including Triad and Triad's co-other group, Citizens Reform and Citizens for the Republic. And that money was used to air issue advertisements, as much -- over $1 million was spent in Kansas alone.

Was that legal?

I'm not sure whether what the Economic Education Trust did is legal or not. What it did though was to set up very purposefully, a series of companies, which protected the identity of the people providing money, which was ultimately used for political advertisements.

So these rich, very rich people using this camouflage, could get money to candidates of their stripe, whom they've supported and wanted to help, without the candidate's opponent or the voters knowing where that money came from?

Exactly, and in fact a political consultant that we believed worked for the Economic Education Trust, publicly told a group of other political consultants that his clients had set up foundations and trusts and other subterranean organizations for the purpose of airing issue advertisements, and that they had to remain secret, and the effects of their activity were largely underestimated.

In fact, he said, "many of the people I worked with were most concerned with remaining anonymous while still having a major impact on federal elections."

That's right.

Doesn't that go to the very heart and soul of democracy, that private citizens shouldn't manipulate public policy and leave no footprints and no fingerprints?

I think it's even more than that. Essentially, they're purchasing elections. And you know, the other point to make was that 1996 was just an initial round. There's going to be many, many more groups out there running advertisements in 1998, and especially in 2000.

The sophistication that these campaigns used was very impressive. They spent close to as much money as the campaigns themselves did in the last two weeks of the election. They aired television advertisements, radio advertisements. They had people calling voters, encouraging them to vote for particular candidates, and they were, they sent mailers.

They basically attacked from all fronts. And that kind of activity, that close to an election, is confusing to voters. They don't know where it's coming from and they don't have time, candidates don't have time to respond when it's wrong or false.

Your report says, "investigators have information that very strongly suggests the Koch family and Koch Industries were a major funding source for Triad and the Coalition for our Children's Future." What's the evidence? Do you have documents for this?

Our evidence is largely circumstantial. The Committee, the minority chief counsel wrote to the chairman of Koch Industries relatively early in the investigation, asking him if he'd be willing to be interviewed by the Committee, and he refused. Or actually I shouldn't say that, he never responded. So the Committee never had much luck in actually talking to the Kochs directly.

What the Committee did develop is a startling coincidence in terms of where Koch family members individually and the corporate PAC made contributions, and where advertising, that we believe was funded by the Economic Education Trust, was ultimately aired. There was a big overlap in places where Koch Industries had business or financial interests and where advertising supported by the Economic Education Trust was aired.

What about the Coalition for Our Children's Future?

The Coalition for Our Children's Future received $800,000 in October of 1996. They executed a confidentiality agreement and refuse to tell anyone, including their own Board of Directors, what the money was for, or where it came from.

You mean there was an agreement between the donor and the Coalition?

And the organization.

That guaranteed anonymity?

Absolutely.

To the donor?

Yes.

And you could not unplug that?

The organization repeatedly refused to produce the confidentiality agreement to the Committee, such that the Committee would know who it was. And they repeatedly refused in deposition to reveal the identity of the donor.

You found that a few weeks before the 1996 elections, the Coalition put some $700,000 into ads, phone calls and mailings. What was going on there?

The Coalition had been approached by a political consultant, who sought to give them money in exchange for running an advertising campaign through the Coalition for Our Children's Future. They ran advertisements in key states and spent hundreds of thousands of dollars attacking candidates.

Attacking candidates? This was not "issue advertising," it wasn't saying this is a great issue, you should understand it.

If you looked at a single advertisement, I don't believe that you could tell me what the issue that Coalition for Our Children's Future supported, was.

Certainly a lot of what was said to be issue advertising in 1996, was nothing of the sort. It didn't have anything to do with a particular ideology of a group, or a single issue. What it had to do with was attacking candidates on issues where they were vulnerable.

You say essentially in 1995 and early 1996, the Coalition operated as a shadow campaign for the Republican National Committee, airing advertising in support of the Republican Balanced Budget and Medicare legislation, at the same time the Democratic National Committee was airing advertising on the same subject. So it's nothing wrong there, right, tit-for-tat?

Well, essentially what it allowed the Republican party to do was to conserve its own resources, its own money for actual elections. While the DNC was out spending its money, the RNC was sitting on it, on their money.

Yet at the same time, what the evidence showed was that high ranking officials within the RNC had conceived the idea of Coalition for Our Children's Future and had recruited all its staff and its Board members from Republican party sources.

Well, if these advertisements had been paid for by the Republican party, they would have had to use a combination of what is called hard and soft money, soft money meaning unlimited contributions from corporations. Hard money is valuable money that can be used, can be given to candidates and can be used to influence federal elections, and they would have had to use a combination of those.

Since they took it outside, and ran it through Coalition for Our Children's Future, the amount of money that they could use and the type of money that they could use, was unrestricted. The other benefit is that they could offer once again to contributors the secrecy of the confidentiality of not having that money disclosed.

And one of the things that we saw is that Coalition for Our Children's Future raised a lot of money from tobacco companies. Tobacco was becoming a more sensitive issue or tobacco contributions were becoming much more sensitive at that time.

Did you find any evidence that the Coalition ever engaged in any other activity other than the creation and airing of advertising?

Nothing, they raised money.

For advertising?

For advertising.

But no evidence of any social welfare work?

No.


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