Last year's Republican Convention was supposed to put San Diego on the map and boost Mayor Susan Golding’s political aspirations. But a little more than a year after the delegates departed from what turned out to be the most expensive political. convention in the nation's history, auditors for the Federal Flections Commission (FEC) have accused city hall, the Republican convention committee, and the convention’s San Diego host committee of skirting or breaking the law. Fueling the fire is the fact that the convention’s largest benefactor — with a gift of S1.5 million — was tobacco giant Phillip Morris, and the executive director of the host committee was Jack Ford, son of ex-President Gerald Ford and a longtime Golding friend and political ally.
If draft allegations of improper disclosures and violations of federal prohibitions against out-of-town contributors are upheld by the full commission during a meeting next month in Washington, D.C., San Diego taxpayers may have to foot the expense of legal bills and fines that could he imposed by the FEC for flouting federal campaign financing laws. At the very least, the national Republican party may be forced to refund to the government S3.7 million in allegedly misspent federal funds, and the charges could prove an unwelcome diversion for Golding's senate campaign, already facing rocky times in the wake of a California poll showing a slip in her statewide support.
The alleged shenanigans by San Diego and Republican party officials harken back to 1972, when Richard Nixon was forced to move the GOP convention from San Diego to Miami after revelations that Nixon justice department officials cut deals in exchange for convention cash from IT&T, the conglomerate that owned Sheraton Hotels. That scandal rankled San Diego Union-Tribune publisher and Nixon intimate Jim Copley, who long had coveted the chance to be the hometown host of Nixon’s renomination. Copley died two years later.
Many of the current allegations center around a city-run, tax-deductible foundation intended to allow Copley’s widow Helen to donate $500,000 to defray expenses of the 1996 GOP convention. Copley — famous for hosting elaborate parties for political insiders and the media at each quadrennial GOP convention — had, like her husband, aspired to bring the Republicans to San Diego, at least in part to exorcise the ghost of the 1972 debacle. Copley’s oldest lieutenant, Union-Tribune editor-in-chief Herb Klein, a one-time Nixon staffer, also held a fierce desire to have the convention here. Their aspirations coincided with Golding’s wish to turn the national spotlight on herself prior to making a bid for the U.S. Senate. Thus, the stage seemed set for success when, in the fall of 1994, Golding announced that she was going to Chicago to cut a deal with Republican officials to bring the convention to San Diego.
But in the frantic bidding war between cities for convention hosting rights, San Diego had always been regarded by most outsiders as an underdog. Contrary to what Republicans said in public, it wasn’t just that the city’s convention center was too small. Although party officials complained to reporters that the hall’s ceiling was too low, in private they were more worried about whether the city could come up with enough money to provide the kind of extravagance they and the Democrats had become accustomed to every four years. Under federal law. Democrats and Republicans each receive about $12.4 million of taxpayer money to pay for their respective conventions. By accepting federal funds, the parties are supposed to agree that they will spend no more than that for the conventions. In reality, however, $12.4 million is just the beginning.
The law has a loophole allowing cities that play host to the conventions to establish host committees, which hit up private donors for additional convention support. Money for the host committees is supposed to come only from local sources — corporations and individuals who have direct ties to the community. The restriction is supposed to ensure that donors are opening their wallets to promote the city where the convention is being held, not seeking to buy the favors of the political party that is holding it.
Cities like New York, Chicago, San Francisco, and Los Angeles are filled with big companies and wealthy individuals who can legitimately meet the law’s residency test. San Diego, on the other hand, is not as flush. Much of the local industry here is made up of small companies and speculative start-ups that can’t be counted on to ante up amounts of cash that both Republicans and Democrats demand as the price of bringing their conventions to town. The big savings and loans, including Home Federal and Great American, once the financial stalwarts of Ronald Reagan’s rise to the presidency, were wiped out in the scandals of the 1980s.
Thus, when Susan Golding, accompanied by then-City Manager Jack McGrory and a contingent of San Diego dignitaries — including then-City Attorney John Witt and then-Assistant City Attorney Curtis M. Fitzpatrick — and Mark Braden, a Washington lawyer hired to represent the city in its convention bid, traveled to Chicago in December of 1994 to negotiate the city’s proposed financial package to GOP bigwigs, skeptics abounded. But after a six-hour bargaining session, Golding emerged to tell a Union-Tribune reporter that “things went well. We even laughed some of the time.”
Others were not as sanguine. The Union-Tribune reported at the time that the deal with the Republicans called for the city to come up with $20 million, more than $16 million of that to be from private donors, to be solicited by the host committee. Golding said that the cost was “capped” at $23 million. But that price would prove badly underestimated. If San Diego were restricted to gathering money from local sources, where would all that private money come from? That dilemma would later lead host committee fundraisers, led by Golding, to stretch the definition of a San Diego company to include Manhattan-based Phillip Morris.
By the time the final balloon had dropped, total convention costs had grown to more than $47 million, including the $12.4 million in federal funds. The balance of about $35 million consisted of $23 million raised from private donors by the host committee and $12.8 million more from city taxpayers. $5.2 million of the host committee’s take was channeled to it through a tax-exempt foundation the city council established called the ”Special Events Fund.”
Although much of that money would come from outsiders and become a source of controversy, one very special local donor had used the fund to seek anonymity. In the spring of 1995, a reporter for the Render inquired about the identity of a donor who had given the Special Events Fund $500,000. Aides to then-City Manager lack McGrory refused to provide the information, claiming that since the fund was operating as a nonprofit, tax-exempt foundation run by the city, it could keep its records secret. In response, the reporter filed a public records act request, the first step of a legal process to compel the city to produce the information.
But before the mandatory ten-day waiting period elapsed, the donor herself provided her identity. On the front page of the Union-Tribune. the newspaper revealed that U-T publisher Helen Copley was the mysterious benefactress. The paper reported she had “voluntarily” come forward after previously telling city officials not to Finger her as the donor. Critics began to wonder what other secrets the city was keeping.
Copley would turn out to be one of the few convention benefactors who complied with the federal mandate that host committee donors be local. In November 1995, Golding downplayed the dearth of local money collected by the host committee. “All of the companies that are contributing do business in San Diego. They are San Diego companies with Sart Diego interests,” she told the Union-Tribune, which reported that, despite the mayor’s protestations to the contrary, the hulk of host committee money was coming from “outside California” and included Dole Foods and Phillip Morris. Defense contractor SAIC was the only local company to give $100,000 or more, the U-T reported.
After the convention, rumors circulated that the city and host committee had stretched the campaign finance laws to the limits. The Union-Tribune reported that McGrory had used what the paper called his “uncontested mastery of city finances” to “sanitize” the final budget numbers. “The process is ‘so impossible to follow’ that no one but McGrory and his staff know if their numbers are true,” the paper quoted an unidentified city councilmember as saying. “I’m hard-pressed to believe this is all we spent,” the councilmember reportedly said. “What (McGrory) has done is stated estimates, but estimates that aren’t true. It is difficult in an event this size to keep track of what we’re spending. There is a lot of soft money unaccounted for.” In an interview with the U-T, McGrory acknowledged that some city personnel costs weren’t included in the grand total but otherwise denied he had played fast and loose with the numbers.
Earlier this year, auditors from the Federal Elections Commission descended on San Diego and Chicago, conducting the mandatory postelection audits of the host committees of both parties, as required by federal law. As auditors went over the books in San Diego, the paper trail of invoices and contributions soon became more Byzantine.
In addition to the host committee, the auditors also checked out the official Republican “arrangement committee,” which accepted and spent the $12.4 million in federal funding earmarked for staging the convention. The auditors also took a look at the San Diego Convention and Visitors Bureau.
The bureau, known as ConVis, draws approximately 80 percent of its $11.46 million annual budget from city taxes on hotel and motel rooms, with much of the rest coming from dues of its 1500 members. On September 4, 1996, about a month after the convention ended, ConVis registered with the FEC as yet another GOP convention “host committee.” In January 1997, ConVis filed a statement with the FEC, saying it had made $500,000 in contributions to the main host committee, along with $350,000 in hotel commissions.
ConVis also disclosed it had “administered a ‘Youth Fund Account,’ on behalf of the (Republican) Committee on Arrangements,” the audit report says, which received $368,000 from approximately 1500 students and sponsors. The money was used to pay for the Young Voter Program, which introduced high school students to politics. Republican-style. “ConVis did not disclose on their reports the source of these funds, nor did they disclose any expenditure made with this money,” the audit report says.
When auditors asked to see a written contract between the host committee and ConVis, they were told a formal agreement didn’t exist. Instead, ConVis chief financial officer jack Saniga submitted an affidavit in which he explained that the bulk of the youth fund money, $260,000, had been spent to construct a temporary “Youth Pavilion” in Embarcadero Park near the convention center. “The youths gathered at the Pavilion for entertainment events ranging from speeches by party luminaries to music.” Another $15,000 paid for hotel rooms for staff.
Both ConVis and the Republicans contend that all expenditures were aboveboard and in compliance with federal law. The audit staff, noting that the Republican Committee on Arrangements had “failed to provide records” such as “copies of any checks issued by ConVis...(and) copies of the invoices from the vendors and deposit slips with copies of deposited items and credit memos,” said it was reserving its opinion, pending a federally mandated audit of ConVis, which has yet to be performed. “The audit staff cannot state an opinion on the accuracy of the information supplied by the Committee (on Arrangements) until the completion of this audit. After the audit, additional recommendations may be appropriate.”
But ConVis was just the beginning. The auditors reserved their most serious criticism for the city and its host committee. In its draft report, dated November 26, the FEC staff alleged that the San Diego City Council set up what was known as the Special Events Fund to accept out-of-town donations — which weren’t legal for the host committee itself to accept — and then funnel them back to the host committee. The allegedly illegal contributions total about $1.8 million.
According to FEC spokesperson Sharon Snyder, there has never been a case like San Diego’s in the history of the FEC. “We’ve got host committee and convention committee audits back to whenever they started, ’76. There’s been nothing to this degree, no; but like the lawyers would say, each case stands alone.” Noting that the Chicago audit of the Democrats has yet to be completed, a source adds: “If the same situation happened in Chicago (as in San Diego), it didn’t happen to the same degree (as in San Diego).” “During our review of the receipts of the (city’s) Events Fund, we identified $1,827,350 in donations that did not appear to be from donors in the San Diego metropolitan area. This included $252,000 from apparent corporate sources and $1,574,850 from individuals and other entities,” the audit report says.
Despite Golding’s 1995 insistence that all contributions were coming from local sources, the city attorney now contended that the law was ambiguous and implied that individual contributions need not be local. The FEC draft audit report disputes that view. “It is clear that all contributions must be focal, whether corporate or individual, and that the entire $1,574,850 from non-local individuals and other entities should not have been accepted.”
In defense of the $252,000 in out-of-town corporate contributions questioned by the audit, the city attorney “provided a letter from the (contributing) corporation’s Associate General Counsel that states, in part, that its chemical segment supplies raw materials to a plant in San Diego for one of its customers.” FEC auditors responded that “the fact that a corporation makes sales to one customer in the Metropolitan Area [fails to establish] that it has offices or facilities located within the Metropolitan Area.”
The city also argued that the Special Events Fund might also have theoretically been used to raise funds for the Super Bowl, and donations made to it were therefore not “restricted” to the Republican convention. The FEC staff rebutted, quoting a long list of donors who accompanied their checks with personal letters to Golding earmarking their money for the convention.
“One piece of correspondence accompanying a check states that ‘I am pleased to enclose a check for $100,000 indicating support for the August 1996 Republican National Convention to be held in San Diego. We look forward to an interesting convention this year.’ Another letter stated, ‘Enclosed please find a check in the amount of $75,000 as a contribution to the City of San Diego Convention fund to offset partially the City’s expenses in hosting the 19% Republican National Convention.’ “
City records obtained under the California Public Records Act indicate that Golding and Jean Andrews, a professional fundraiser paid by the city, along with Union-Tribune editor-in-chief Herb Klein, who was on the host committee, and host committee fundraiser Fred Bush scoured the nation for special-interest money.
In a July 1996 memo to Klein and host committee chairman Jerry Parsky, Andrews wrote about using Chargers owner Alex Spanos to raise money from Greek sources: “Can you put Deloitte & Touche, Robert Weaver, on Alex Spanos... phone list b/c of the Greek business connection he referred to at the July 12 lunch?”
A sheet of fundraising “talking points” prepared by Fred Bush for Pacific Telesis chairman Phillip Quigly makes no mention of the local source limitation and in fact appears to encourage out-of-towners to give. “We had hoped there would be more California companies on the Host Committee by now. This is not just San Diego’s convention, it is California’s convention,” the memo says. “The companies in California must set the precedent and an example for other corporations around the country to follow. If California does not support the Convention, why should a company from New York or Texas?”
In response to Bush’s appeal, millions of dollars poured into the host committee from across the country. The money was used for everything from bunting to television production to lavish media events. Communications giant AT&T donated $50,000 on condition the money be used by the host committee for a VIP party featuring Golding and Governor Pete Wilson. Some of Helen Copley’s money, donated to the tax-deductible Special Events Fund foundation, went to logistical support for a huge fireworks show and invitation-only outdoor extravaganza the Copley Press threw for the national media.
In his response to the auditor’s report, the city attorney contended that Golding’s many mailings and fundraising sessions in her city hall offices were designed to “ ‘showcase our great city’ and not to channel contributions to a particular convention.” The donations, the attorney maintained, were therefore legal. The FEC staff replied that Golding’s fundraising letter, cosigned by four members of Congress and chairman of the host committee, “was on behalf of the committee. The text leaves no doubt for which convention effort funds are being solicited.”
“If the commission agrees with the staff that this is what happened, and they don’t always agree,” explains FEC spokesperson Sharon Snyder, “then you’ve got what in effect is a corporate contribution, which is a no-no. A corporate contribution is not allowed, period. What I’m trying to say without saying it is, a thousand or two is one thing. Three some odd million is another.
“Host committees are set up to promote the city and the commerce of the city. But what’s involved in that audit report is that they were more or less going beyond the scope of what they were set up to do. They were supposed to promote their city, not to dump otherwise impermissible funds into a publicly funded convention.”
Debbie Kelly, a spokesperson for the San Diego chapter of the American Lung Association, says she isn’t surprised to hear of the auditors’ findings. She says she vividly remembers meeting with host committee executive director Jack Ford and asked him not to accept money from tobacco companies such as Phillip Morris. “This is money that is available because the industry is addicting people to a lethal product and killing 400,000 Americans every year. Thousands of people in San Diego have paid with their lives to produce a profit to enable Phillip Morris to make these contributions.”
According to Kelly, Ford, Susan Golding, and other host committee members rejected the lung association out of hand. “They basically said they didn't care what the source of the money was. They were going to take money from whoever gave it to them.
“The host committee portrayed the convention as though it was some sort of civic event, like a Fourth of July fireworks show, but it was just a big orgy for lobbyists and special interests,” says Kelly, who worries that the contributions the tobacco companies made to the host committee may influence city council votes on pending antismoking ordinances.
“I think everybody would agree that this whole thing about soft money contributions is just a scandal. I don't think Americans are deceived into thinking that special-interest groups aren’t driving hard bargains with soft money.”
The FEC audit argues that the host committee was as culpable as the city. “It appears that the (Host) Committee was involved with officials of the City in raising money for the Events Fund, was aware of how money was raised for the account, and was aware of the donor designations. The audit staff believes that for the above reasons, the Committee was, or should have been, aware that funds forwarded to it from the Events Fund were not raised in accordance with the regulation and should not have been accepted.”
The staff also charges that both the host committee and the city paid for direct convention expenses that by law should have been borne by the Republican Committee on Arrangements. “The audit staff recommends that the Commission determine that the Host Committee made contributions totaling $2,128,122 and the City of San Diego made a contribution of $38,638 and that this total of $2,166,760 is repayable to the United States Treasury.” Allegedly improper expenditures included $106,000 made by the host committee and $38,638 made by the city for delegate and press credentials; $44,000 paid by the host committee to AT&T for a “voter tabulation system” on the convention floor; and $2,128,122 paid by the host committee to David J. Nash Associates, Inc., for a variety of television production services that auditors alleged should have been booked as direct convention expenses.
Included in the $2.1 million Nash tab picked up by the San Diego host committee was a $75,000 film shoot in Russell, Kansas, hometown of GOP presidential nominee Bob Dole, featuring a “walking tour led by Sen. Nancy Kassebaum.” In its response to the auditors’ criticism, the Republican Arrangements Committee argued that the video, which was never shown, was created to “entertain the delegates during a planned lull in the convention proceedings.”
Therefore, the arrangements committee maintained, the expenditure was permissible under a regulatory provision allowing host committee payments for “those expenses incurred for welcoming the convention attendees to the city, such as expenses for information booths, receptions, and tours.” According to the audit report, the host committee, “acknowledging that it should not have paid this expense,” has asked the arrangements committee for reimbursement.
To become final, the audit report must be approved by four members of the Federal Elections Commission, Snyder says. “The staff makes recommendations to the commissioners, and it’s up to the commissioners to make the decision, and it takes at least four — right now, five — because we don’t have a full complement, to approve a recommendation or to make a different recommendation than that,” she says. At this stage of the investigation, city representatives will not be allowed to testify. “The only people who will be discussing this at the meeting would be FEC staff and FEC commissioners.”
If the auditors’ findings are approved by the commission, the city and the host committee, along with other parties named in the allegations, may face further action.
“This is an audit report. Anyone who receives public funds gets audited, so the audit report is dealing with what repayments [to the U.S. Treasury are due], if any, and why. There can also afterwards be compliance matters that also have to do with the same violations, but that would be like a penalty phase. That would not be something that would become public until (the investigation] is all done.”
In the past, Snyder says auditors’ findings approved by the commission have become the basis for further action. “If you had been following in 1992 and 1988 all the primary campaigns and convention committees and the general election and whatnot, you could probably tell — if there were certain findings and actions in a final audit report — that would lead you to think that there might eventually be a compliance action or not.”
If the FEC approves the staff recommendations at its meeting next month, Snyder says, the arrangements committee, the city, and the host committee may ask for an appeal hearing before the FEC. An adverse decision could be further appealed through the federal courts. If the findings survive that process, says Snyder, the next step “is to have the [arrangements] committee make the repayments to the U.S. Treasury, that’s repayments of funds that they were given. The second step would be if we decided to pursue it even further and say, ‘You violated the law, you will pay a civil penalty of this much.’ That so-called compliance process could run simultaneously [with] the appeals process.”
— Matt Potter