Research paper by Marcus Stern

Confidential DRAFT ONLY NOT For Circulation or Quotation Research Paper:

Saxby Chambliss’ Lobbyist-Financed Slush Fund How a Senator Turned a Political Action Committee (PAC) Into a Slush Fund For Luxury Golf Resorts and Corporate Jets With Money from Lobbyists and Their Clients

Introduction Republican Don Nickles of Oklahoma retired from the US Senate at the end of 2004 in order to establish a Washington lobbying office, and he bequeathed his political action committee, the Republican Majority Fund, to Sen. Saxby Chambliss of Georgia. “He is very well liked by the business community and he is a very competitive golfer,” Nickles said of Chambliss.1 A Political Action Committee (PAC) is an organization that can receive political contributions in order to make political gifts to other campaigns. Many corporations, business associations, and unions establish PACs from the contributions of their executives and members to increase their contributions to political campaigns. For example, while an individual is limited to $2300 in contributions to any a federal candidate in a general election, a PAC can contribute as much as $5,000.2 During the last decade, an increasing number of members in both the US Senate and the US House of Representatives have created PACs -- in addition to their own campaign re-election committees -- in order to raise money to help other candidates of the same political party. These are often called “Leadership PACs” since incumbents can enhance their standing among colleagues in their own party by helping to finance their campaign from the funds they raise through leadership PACs.3

Roll Call, June 7, 2005. “Quick Answers to PAC Questions,” Federal Election Commission (FEC), 2008, http://www.fec.gov/ans/answers_pac.shtml. 3 See data from the Center for Responsive Politics at http://www.opensecrets.org/pacs/industry.php?txt=Q03&cycle=2008. 2

Expenditures of Senator Chambliss’ Republican Majority Fund, 2007-08 According to the Federal Elections Commission, Saxby Chambliss’ Republican Majority Fund (RMF) spent more than $600,000 from January 1, 2007 through August 30, 2008.

The RMF expenses in 2007-08 include the following

categories5: PAC Contributions to Federal Campaigns Overhead Expenses Entertainment Expenses

$137,000 $229,352 $256,095

In effect, RMF spent $4 in overhead and entertainment for every $1 it contributed to a federal political campaign since the start of 2007. The cost of overhead alone has been $93,000 above and beyond the PAC’s total political contributions to federal elections– the sole reason for a PAC to exist. Both the percentage of RMF’s overhead costs (39 percent) and total amount is unusually large. The primary overhead expenses include the following subtotals: Recipient

Rizzo, Laura Koch & Hoos LLC Foley & Lardner, LLP Wachovia Bank

Amount $191,132 $23,732 $11,519 $2,294

These funds involve a $9,000 monthly retainer to Ms. Laura Rizzo and monthly payments on an average of almost $2,000 to a political consulting firm founded and operated by the RMF’s volunteer treasurer, Mr. Theodore Koch. The largest expense category of Senator Chambliss’ PAC during the last two years amounts to more a quarter of a million dollars and involves different entertainment costs ---primarily at the nation’s most exclusive, luxury and golf resorts. These expenses also involve the costs of charter and corporate jets to 4

FEC Committee Summary Reports, http://herndon1.sdrdc.com/cgi-bin/cancomsrs/?_08+C00296640. The details of disbursement data come from the Center for Responsive Politics, which collects FEC data. See http://www.opensecrets.org/pacs/lookup2.php?cycle=2008&strID=C00296640. Some small differences exist in the overall data between those reported at the FEC and the Center for Responsive Politics web sites. Primarily, small differences relate to the amount of RMF expenditures to other political action committees. 5

travel to resorts, primarily in California and Florida, and the cost of fine dining across the country. The PAC’s entertainment expenses that total more than $5,000 are as follows: Resort/ Recipient Ritz Carlton Naples Boca Raton Resort Caves Valley Golf Club The Ritz-Carlton Lodge Pebble Beach Resorts Ruth’s Chris Steak House The Greenbrier Belle Haven Golf Shop Pasatiempo Golf Club Federal Express Corporation Jonathans Landing Golf Club The Breakers Palm Beach Chandler, Michael E. Monterery Peninsula Country Club

Amount $57,894 $34,595 $32,210 $26,742 $16,341 $14,780 $7,500 $7,087 $6,334 $6,301 $6,137 $6,000 $5,828 $5,828

This list shows that RMF funds of over $200,000 during the last 20 month enabled Senator Chambliss to enjoy and entertain at some of the nation’s most exclusive and top-rated golf resorts. These resorts include: the Ritz Carlton in Naples Florida; the Boca Raton Resort in south Florida; the Lodge at Pebble Beach, California; the private Monterey Peninsula Country Club, the Breakers Resort at Palm Beach, Florida, the Pasatiempo Golf Club in San Cruz, California, the secluded Greenbrier golf resort in West Virginia, and the Ritz Carlton Lodge in Greensboro, Georgia. The full list of expenses (See Appendix 1) also includes golf and entertainment at the Inn of Spanish Bay, one of the three exclusive resorts at Pebble Beach. Also, a disbursement in early 2008 at the Belle Haven Golf shop in Alexandria, Virginia, a suburb of Washington, is listed as a $7,087 expense for “Golf Supplies.” From a chronology of dates on which RMF bills were paid, it appears that Senator Chambliss had the pleasure of 20 different outing at golf resorts and golf clubs across the country during the last 20 month. Expenditure records

document the following dates and locations of Senator Chambliss’ 12 golf outings with his PAC funding during the first 8 months of 2008: Caves Valley Golf Club, Owings Mills, MD

$16,658

1/2/2008

$228

1/18/2008

$12,321

1/25/2008

Pasatiempo Golf Club, Santa Cruz, CA

$170

2/20/2008

Inn at Spanish Bay, Pebble Beach, CA

$1,208

2/21/2008

Ritz Carlton Naples, Naples, FL Pasatiempo Golf Club, Santa Cruz, CA

$33,493 $1,949

3/26/2008 3/4/2008

Pasatiempo Golf Club, Santa Cruz, CA

$4,215

4/8/2008

$16,901

4/22/2008

The Breakers Palm Beach, Palm Beach, FL

$4,000

4/30/2008

Pebble Beach Resorts, Pebble Beach, CA

$2,800

5/6/2008

7500

8/8/2008

LaPlaya Beach Restaurant, Naples, FL The Ritz-Carlton Lodge, Greensboro, GA

Ritz Carlton Naples, Naples, FL

The Greenbrier Source: Center for Responsive Politics

FEC records also show that Chambliss’ RMF incurred the cost of using a corporate jet from the Federal Express Corporation and a private jet apparently owned by Michael Chandler, a retired executive of the General Dynamics Corporation (a large of federal government contractor) who has a home in Pebble Beach. The full list of RMF expenses also includes PAC bills for chartering additional private airplanes for entertainment and for renting limousines. This practice of entertaining at the nation’s best resorts and traveling there on chartered and corporate jets is apparently not an entirely new pattern for Senator Chambliss. Data compiled from FEC records by NPR’s Marketplace

Business Report reveals that from December 2004 through December 2007 Chambliss spent more of his PAC money on “golf and luxury resorts” than any other US Senator.6 Similarly, in March of 2006, shortly after public revelations of the scandal involving lobbyist Jack Abramoff, the Congressional Quarterly’s Political Money 6

See “The PAC Men, Full Speed Political Spending” American Public Media’s Marketplace distributed on NP. See http://marketplace.publicradio.org/features/pac/category.php?cat=RESORTS.

Line

reported that Senator Chambliss ranked 3rd among all US Senators in

spending money to reimburse corporations for jet travel from 2001 through 2005. (The other two senators who used corporate jets more were the Senate’s Republican Majority Leader Bill Frist and the Senate’s only current, independent member, Joseph Lieberman.) In early 2006 Senator Chambliss told a national reporter: “The way you get there is less important than what you do while you are there.”7 There is no available government record to indicate exactly what Senator Chambliss did at the luxury and golf resorts after arriving on corporate and chartered jets; however, it is unlikely that he resisted the world-famous golf courses. Each of the exclusive resorts where Chambliss’ spend more than $5,000 during 20 months of 2007-08 has an expensive, nationally recognized golf course. This can be no accident. Golf Digest in 2005 ranked Senator Chambliss as the second best golfer in the US Senate and the 33rd best golfer within political circles of the nation’s capitol, including Washington lobbyists. Amid this group, the Senator’s son, Clarence “Bo” Chambliss, a DC lobbyist for the Mercantile Exchange Group, was ranked as Washington’s 8th best golfer.8 In addition, past news reports illustrate that Senator Chambliss has been commonly mentioned in the news coverage of events where Washington lobbyists and federal elected officials mingle, especially on exclusive golf courses.9 For example, a Bloomberg News story mentioned Saxby Chambliss in a story about the use of PAC funds to finance members of Congress’ entertainment at luxury resorts. (In examining PAC spending during the first five months of 7

New York Times, March 8, 2006. “Washington’s Top 200: Golf Digest Political Rankings,” at http://www.amview.com/amview_contents/news/golfdigest_october2005_1.pdf. Senator Chambliss in late 2005 also skipped a week of Senate deliberations in order to golf with Tiger Woods. See Roll Call, November 8, 2005. 9 “McCray, Oxley, and Delay Use Contributions for Jets, Resorts, Golf,” Bloomberg News, October 10, 2005 at http://www.bloomberg.com/apps/news?pid=10000103&sid=a.wihIcOy2Sw&refer=us ; ABC News: The Blotter: “Lobster with Kerry: $25,000. Golf with Chambliss: $15,000. Access to Congress: Priceless. October 18, 2006, at http://blogs.abcnews.com/theblotter/2006/10/lobster_with_ke_1.html ; also see “Lobbyist Lure GOP: ‘Indulge Yourself,’ USA Today, August 29, 2004 at http://www.usatoday.com/news/politicselections/nation/president/2004-08-29-lobbying_x.htm. 8

2005, Senator Chambliss ranked 2nd among US Senators during that period of time and 7th among all elected Washington officials in the amounts spent on golf and luxury resorts. He was slightly behind Republican Majority Whip Tom Delay, who afterwards was convicted of misusing PAC funds.) There is also no FEC document that evidences everyone whom Senator Chambliss has entertained with his PAC funds at the various luxury resorts. Four individuals other than Chambliss are specifically identified as receiving reimbursements for expenses from RMF during the last 20 months at or near the time of a resort-related expense. One was Senator Chambliss’ chief of staff, Charlie Harman, who was for ten years a lobbyist for Blue Cross Blue Shield in Washington. A second person was Bill Jones, chairman of the board of the Sea Island Resort on the coast of Georgia; the third was Michael Chandler, a retired executive of General Dynamics who has a home in Pebble Beach, and the fourth was Kenneth Kies, a registered Washington lobbyist who represents wide range of clients including mortgage bankers, insurance companies, and other corporations involved n the financial markets. FEC records for the two previous years (2005-06) reveal 8 more individuals or companies who were apparently reimbursed for some cost involved in joining Chambliss at golf and luxury resorts. Three were corporations (Aegon USA, Waddell and Reed, and Chenega Global Services); one person was the manager of the Moultrie (Georgia) Airport Authority; and four were Washington lobbyists or lobbying firms (Bardes Clark, Patrick Raffiniello, Jeffries Murray, and “Bo” Chambliss, the Senator’s son and a full-time lobbyist). Revenue of Senator Chambliss’ Republican Majority Fund, 2007-08 During the last 20 months, Saxby Chambliss’ Republican Majority Fund (RMF) has raised approximately $589,000 to supplement its starting balance of less than $100,000 on January 1, 2007. FEC records divide the income of PACs into 2 categories: contributions from individuals and gifts from other PACs. In 2007-08, Senator Chambliss’ PAC raised $52,500 from individuals and the remaining $534,250 from other PACs. Almost all these PAC contributions came 6

from those of corporations, corporate and industry associations, and executives of those corporations and associations.10 An examination of the details of RMF’s revenue in 2007-08 in comparison with records from the Secretary of the US Senate reveals that almost all individual gifts to Senator Chambliss’ PAC -- more than 90 percent—came from registered lobbyists in Washington (Appendix 2): Individual Gifts to Chambliss' PAC 2007-08 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Other

Lobbyists Contributions Lobbyist's Client CEO

Source: FEC, Center for Responsive Politics, Secretary of the US Senate

In total, $50,500 of $52,500 in individual gifts came from Washington lobbyists (including $2500 from Faud El-Hibri, CEO of BioSolutions, who is not a registered lobbyist but is represented by a lobbyist who also contributed to the PAC personally). In essence, virtually all of the RMF’s revenues from individuals in 2007-08 have come from lobbyists in Washington. This pattern divulges only the beginning of the role of Washington lobbyists in financing Senator Chambliss’ leadership PAC. RMF receipts from PAC contributions during the last 20 reported months reveals that much of the $588,846 that Chambliss raised for his PAC is money from the corporations and business associations that these same lobbyists represent on Capitol Hill. During 2007-08, $239,500 came to Chambliss from the PACs of the clients of the lobbyists who contributed almost all of the individual funds to Chambliss’ RMF. Another $30,000 came from independent PACs to which top executives of the clients of the lobbyists contributed significant sums; another $20,000 came 10

FEC Records at http://images.nictusa.com/cgi-bin/fecimg/?C00296640.

from the PACs of corporations represented by lobbyists who are family members of Chambliss or his PAC consultant. And, another $74,500 in RMF gifts came in 2007-08 from the PACs of the clients of lobbyists who contributed personally to Chambliss’ RMF in 2005-06. When combined, all PAC gifts related to lobbyists connected to Chambliss constitute almost 2 out of 3 of all dollars raised in 2007-08 for Chambliss’ leadership PAC (Appendix 3). Lobbyist Related Gifts To Chambliss PAC

Thousands $

300 250 200 150 100 50 0 07-08 Lobbyists

Family-Related

05-06 Lobbyists

Exec Connected

Source: FEC, Center for Responsive Politics

It is noteworthy that, according to government documents, all of the lobbyists who joined Senator Chambliss at one of his golf outings also made personal contributions to Chambliss’ PAC. Summary and Conclusions An analysis of the expenditures and revenues of the Republican Majority Fund demonstrates that Senator Chambliss’ PAC has spent far more money on overhead and entertainment than on political contributions to candidates. In fact, Senator Chambliss’ expenses in his PAC for overhead and entertainment at golf and luxury resorts, transport on corporate and chartered jets, fine dining, and limousine services during 2007-08 has exceeded his political gifts by a ratio 4 to 1. In other words, for every $1 Chambliss has spent to fulfill the purposes of a political action committee, he has spent $4.00 on overhead for the committee and to support a lavish style of entertainment and travel.

Ninety-three percent of RMF’s overhead expenses – nearly $230,000 – has gone during 2007-08 to a PAC consultant whose spouse is a registered lobbyist for corporations that contribute to Chambliss’ PAC and to the political consulting firm of the PAC’s volunteer treasurer. The largest amount of RMF expenditures during the last 20 reported months --- more than a quarter of a million dollars-- has gone towards Senator Chambliss’ expensive entertainment of lobbyists and the executives whose corporation the lobbyists represent. These expenditures have amounted to an average of $12,804.75 per month as a private entertainment fund for use at the most exclusive luxury and golf resorts and for travel in corporate and chartered jets. In turn, many of the same lobbyists and their clients whom the Senator has entertained have financed most of Senator Chambliss’ lavish entertainment. Virtually all of the individual contributions to Chambliss’ PAC in 2007-08 came from lobbyists and 62 percent of the PAC contributions came from PACs of the clients and executives represented by the same lobbyists, by other lobbyists who contributed to RMF in 2005-06, and by lobbyists who are close family members of Chambliss’ and his PAC consultant. In essence, Senator Chambliss has turned a political action committee in to a personal slush fund to enable a style of entertaining and high life, usually at world-famous resorts and golf courses, that his own income will not support. At most of these resorts, it appears that Senator Chambliss has been entertaining many of the same lobbyists, executives, and corporations who are, in effect, financing his leadership PAC and his extravagant life style. Political actions committees were not created for the primary purpose of allowing US Senators to enjoy a millionaire’s life style on or off the golf course with funds provided by Washington lobbyists and their clients. In fact, current federal law prohibits Senator Chambliss from receiving gifts directly from lobbyists. The law applies to any gift of any amount if the lobbyist is not a family

member. For example, current federal bars Senator Chambliss from accepting a lobbyist’s offer to pay for a shared meal or a drink at a bar.11 In effect, Senator Chambliss has been using his PAC as a slush fund for extravagant entertainment in an evasive attempt to accept money and gifts from lobbyists. The money of lobbyists and their clients go into Senator Chambliss’ PAC. He is able to travel regularly throughout the year, often traveling on corporate and chartered jets, to luxury golf resorts (only one of which is in Georgia) in order to enjoy entertaining at exclusive golf resorts many of same lobbyists and lobbyists’ clients whose money finances the entertainment. While there is no record showing that Senator Chambliss has accepted a cup of coffee from a lobbyist directly, he has accepted indirectly hundreds of thousands of their dollars which he has used primarily to finance his regular stays at golf resorts. It is matter for federal and state authorities to determine if Senator Chambliss has violated federal ethics laws by using his lobbyist-financed PAC to do indirectly in a big way what the ethics laws prohibit him from doing directly even in a small way. But, at the same time, this much is absolutely clear from government records: Senator Chambliss has misused and manipulated a political action committee into a personal slush fund financed by some of the nation’s most powerful lobbyists and their clients primarily for his extravagant entertainment and association with the people who finance his elevated life style. Senator Chambliss has violated the public trust and his compact of public service with the people of Georgia.

Jack Maskell, Lobbying Congress: An Overview of Legal Provisions and Congressional Ethics Rules,” (Congressional Research Service, October 24, 2007), pp.19-21 at http://digital.library.unt.edu/govdocs/crs/data/2001/meta-crs-1903.tkl.