WASHINGTON – Dallas businesswoman Dawn Rizos received the unexpected invitation by fax: Come to a “private dinner” with Newt Gingrich in Washington, where you will be named an “entrepreneur of the year.”
The catch: Rizos had to pay a $5,000 membership fee to Gingrich’s group, American Solutions for Winning the Future, to get the award.
Gingrich, a former House speaker, media pundit and possible Republican presidential candidate, knows how to bring in money – lots of money. But his hard-sell tactics can sometimes go awry.
It turned out that Rizos owns an upscale nude-dancing club. When Gingrich’s group found out, it canceled the 2009 award and returned the money.
“We were very keen to do this; it seemed like a fun hand-shaker-type thing,” said Michael Precker, a spokesman for Rizos’s club, the Lodge. “I guess it shows how you raise money in Washington.”
That brief interaction offers a telling glimpse into the workings of Newt Inc., a financial empire that could prove crucial in a bid for the White House.
Gingrich, who says he will announce a decision this month, has outraised Mitt Romney, Sarah Palin and every other potential GOP candidate with a political committee, according to a Washington Post analysis. His main advocacy group, American Solutions, ranks as the nation’s largest money-making machine of its kind, collecting more than $52 million in its first four years. Nearly two-thirds of that went to fundraising expenses that some experts describe as unusually high.
And that doesn’t count Gingrich’s vast constellation of other endeavors, including a consulting firm (Gingrich Group), a media company (Gingrich Productions), a Web portal (Newt.org), a religious nonprofit group (Renewing American Leadership) and a bilingual Hispanic news service (the Americano).
The indefatigable former congressman, 67, has written or co-written more than two dozen books, including four released in the past year. He’s a Fox News analyst and a fixture at events such as last week’s Conservative Political Action Conference in Washington.
Aides and others close to Gingrich say that his business ventures are mischaracterized by political opponents and adhere to the ethical norms followed by advocacy and nonprofit groups. That entrepreneurial zeal and network of contacts would serve him well in a presidential run, they say.
“There is no other political figure who has been out of office for 10 years who has maintained such a presence and name recognition. It’s clearly a plus,” said Rick Tyler, Gingrich’s longtime aide and spokesman.
Some Republicans, however, see Gingrich’s merchandising juggernaut as a potential drawback.
Former Minnesota Rep. Vin Weber, who chairs GOP hopeful Tim Pawlenty’s political action committee, said that Gingrich “has a very serious base of support” but that he would have to overcome past controversies to run for president.
“I think he will quickly become, for some period of time, one of the front-runners,” said Weber, a longtime Gingrich ally and former board member of American Solutions. “But he also carries with him – and I hate to use this term – baggage, a lot of things to explain.”
In 1997, Gingrich, who was House speaker until 1999, was ordered by his colleagues to pay a $300,000 penalty for failing to ensure that two nonprofit projects did not violate tax law and for providing false information to ethics investigators. The episode made Gingrich the first House speaker in 208 years to be reprimanded for his conduct.
The IRS later found that the two groups at the heart of the case violated no tax laws, which supporters characterize as a clear exoneration of Gingrich.
As a presidential candidate, Gingrich would have access to vast mailing and donor lists from more than a decade of selling group memberships, books, videos and other products. Sources say American Solutions alone has 2 million names on its contact list.
Those resources could prove a major advantage in the GOP field, which includes several hopefuls with relatively little experience with national fundraising. Gingrich’s donor base includes nearly 300,000 contributors who gave $200 or less to American Solutions, as well as wealthy benefactors such as casino magnate Sheldon Adelson, who gave $6 million.
Over the years, consumer advocates and some disgruntled donors have questioned Gingrich’s seeming penchant for aggressive tactics, including the heavy use of fundraising polls, blast-faxes and other techniques considered unsavory or even predatory by philanthropy groups.
In one typical example in 2009, American Solutions blast-faxed potential donors with a pitch to have their names included in a newspaper ad bashing the Obama administration. (At least one fax went to a Democrat, who leaked it to Politico.)
According to complaints on consumer-focused websites, some American Solutions calls begin with slanted polling questions before asking for money. The tactic, known as “fundraising under the guise of research,” or frugging, is discouraged as unethical by trade groups such as the Marketing Research Association.
American Solutions also has drawn criticism because it spends nearly $2 on fundraising for every $3 it brings in – about twice the figure for many nonprofit groups, experts said. In 2009, for example, the group reported spending $8.8 million for professional fundraising, about 61 percent of total revenue. Since it launched in 2007, the group has spent $6.6 million on private air travel through Moby Dick Airways, accounting for nearly 13 percent of the group’s budget, records show.
Daniel Borochoff, president of the Chicago-based American Institute of Philanthropy, said some of the approaches used by Gingrich’s groups “are the kind of tactics a bad charity uses.” He said nonprofits should strive to spend no more than 35 percent of their revenue on fundraising.
“They seem to be really good at raising a lot of money, but not at raising money very efficiently,” Borochoff said.
R.C. Hammond, a spokesman for American Solutions, said the group has heard few complaints, though he acknowledged that fundraising costs were high.
To get a return that helps us meet our budget, we have to make a significant investment,” Hammond said. “Political fundraising is a unique niche in the fundraising field; we have to do things a little bit differently.”
Most of Gingrich’s personal financial status remains unknown; his earnings are drawn from the Gingrich Group and other private entities, while his salary at American Solutions is listed on tax forms as “$0.” Gingrich’s home in suburban Washington is assessed at $1 million, down from $1.4 million in 2007, according to property records.
At American Solutions, Hammond notes that more than 90 percent of the group’s contributors have donated $200 or less. “It’s a broad coalition of Americans who support us,” he said.
But the group has also relied heavily on a few contributors who have given six- and seven-figure gifts. They include Adelson, North Carolina developer Fred Godley ($1.2 million), Ohio financier Carl Lindner ($690,000) and NASCAR executive James France ($350,000).
The fundraising continues. Just weeks ago, Rizos, the strip club owner, received a form letter from Gingrich that called Rizos “a key member of our American Solutions family of supporters.”
He also asked for more help: “Will you enclose a special year-end contribution of $1,000, or even as much as $2,000, to American Solutions, Ms. Rizos?”
- By Dan Eggen, The Washington Post