Editor's Note: Due to a computer malfunction, much of the following article was omitted from yesterday's newspaper. The article is reprinted below in its entirety.
WASHINGTON -- If you're in the securities industry and gave money to House Ways and Means Committee members during the 1980s, you might be surprised to find out where it went.
Frank Guarini bought flowers. Tom Downey spent $15,000 on computer equipment. And Willis Gradison gave more than $200,000 to other people's campaigns.
All part of getting elected? Not so. The expenditures were made in the past two years with money left over when Guarini, Downey, and Gradison left Congress.
Those three and seven other Ways and Means members who gave up their House seats on Jan. 1, 1993, took with them more than $2 million in unused campaign funds, some of it supplied by the securities industry.
Nine of the 10 tax lawmakers received money in the late 1980s from law firms, underwriters, or trade associations with ties to the bond market. The contributors included the Public Securities Association; the Securities Industry Association; Goldman, Sachs & Co.; Merrill Lynch & Co.; Hunton & Williams; and Kutak Rock.
The former legislators could have put the money into their own pockets under a grandfather clause in federal election rules as long as they paid income tax on the funds, but all have declined to do so thus far. To be a so-called grandfather, a House member had to be elected before 1980 and leave Congress at the end of 1992.
Even so, the former members are still making use of their leftover campaign funds, as the law permits them to do. A few have made charitable donations, and one refunded a chunk of his war chest to contributors. But several former members have become Washington lobbyists, and they are doling out their funds as campaign contributions to their old colleagues who are still in the House.
The rules on unused campaign funds give former legislators a large amount of leeway. A spokesman for the Federal Election Commission said there is no deadline for terminating an old campaign fund, nor are there restrictions on how the money may be spent, though large receipts or disbursements trigger reporting and disclosure requirements. In addition, grandfathers have an unlimited amount of time to decide to convert their funds to personal use.
Several other House members not on Ways and Means have already converted their campaign funds. Two of the largest conversions were made in 1993 by Larry Hopkins, a former representative from Kentucky who pocketed $665,000, and Bob Traxler, a Michigan Democrat who converted $296,000.
One of the war chests to receive the most media attention over the past couple of years has been that of Rep. Dan Rostenkowski, D-Ill. As the 1992 election campaigns began, Rostenkowski had $1.2 million in his campaign fund and was widely expected to leave Congress at the end of 1992 so that he could convert that hefty sum to personal use. But Rostenkowski ran again and won, remaining in Congress and forfeiting his right to ever pocket his war chest.
Among the 10 former Ways and Means members, the biggest campaign war chest at the end of 1992 belonged to Brian Donnelly, a Democrat who represented Massachusetts' 11th District before retiring in 1992. Donnelly is best remembered by the municipal market for championing legislation to extend the tax exemption for mortgage revenue bonds, and for proposals to curb rental housing bonds and issuance costs.
By the end of 1992, Donnelly had amassed about $738,000 in his campaign fund.
Another grandfather with a big campaign fund is Willis Gradison, former Democratic representative from Ohio, who had about $458,000 in unused funds at the end of 1992, according to election commission records. And Dick Schulze, former Republican congressman from Pennsylvania, had a war chest of $260,000 at the end of that year.
Jenkins, a Democrat from Georgia, still had $393,000 in unused funds, while Guarini, a New Jersey Democrat, had about $262,000. Downey, a Democrat from New York, had $125,000 at the end of 1992, while Donald Pease, a Democrat from Ohio, had about $73,000.
Beryl Anthony, who had been the chief advocate of municipal bonds in Congress after creating the Anthony Public Finance Commission in 1988, had a relatively small war chest by the time he left Congress. The Arkansas Democrat, who had spent several hundred thousand dollars in a losing battle to keep his House seat, was left with about $11,000.
In even worse shape was Marty Russo, an Illinois Democrat, who after losing his re-election bid was deeply in debt at the end of 1992. He used the $4,400 left in his campaign fund to help defray his debts.
Guy Vander Jagt, a Republican from Michigan, reported a zero balance in his coffers at the end of 1992. Vander Jagt was the only one of the 10 Ways and Means members who did not appear to have received money from firms or associations tied to the securities industry.
For the half dozen members who were left with sizable war chests, most of their disbursements have been going to one of two areas: charity or politics.
Pease donated his entire $73,000 to the Community Foundation of Greater Lorain County, in his home state of Ohio. Guarini gave about 80% of his leftover fund, or $215,000, to St. Peter's College in Jersey City, N.J.
Donnelly has made more than $38,000 in charitable donations, mainly to scholarship funds at the University of Massachusetts and other schools in the Boston area. He also made a $6,400 disbursement to the Brian Donnelly State of Massachusetts Committee. Donnelly said in an interview that he set up the committee after returning to Massachusetts in 1993 because he was considering running in this year's gubernatorial race in that state.
But he decided not to run, and is leaving the $675,000 still in his campaign fund on hold for the time being. He was recently confirmed by the Senate as ambassador to Trinidad, and expects to serve there for the next three years, he said. After Donnelly returns to the United States he may decide to run for office again, and would then use his campaign fund for politics. If he decides not to reenter politics, he will donate the entire fund to charity, Donnelly said.
Jenkins, Gradison, and Downey, who are all now Washington lobbyists, have given nearly a quarter of a million dollars to other candidates, mainly those running for House seats in the 1994 elections.
Jenkins, now a tax lobbyist with Winburn & Jenkins, targeted his former colleagues on the House Ways and Means Committee. He gave $1,000 apiece to Rostenkowski; Rep. Sam Gibbons, D-Fla.; Rep. Barbara Kennelly, D-Conn.; Rep. Bob Matsui, D-Calif.; and Rep. Charles Rangel, D-N.Y. He gave $500 apiece to Rep. Bill Coyne, D-Pa.; Rep. Peter Hoagland, D-Neb.; and Rep. Lewis Payne, D-Va.
Schulze did not spend any of his $260,000, but notified the Federal Election Commission on July 28, 1993, that he was transferring the entire amount to a newly created political action committee, S-PAC, as he is permitted to do under commission rules.
Gradison, meanwhile, was the only member to return any of the money he received. In 1993, Gradison refunded $80,000 of his war chest to more than 200 individual contributors.
Downey appears to have been the most prolific spender in the first six months after leaving office. According to his campaign records, he disbursed a staggering $81,000 on "operating expenditures." They included about $15,000 for computer equipment, which Federal Election Commission rules permit Downey to convert to personal use at a later date if he so chooses.
Other operating expenses during the first half of 1993 included $15,000 for consultant fees, about $5,000 for legal services, and nearly $6,000 in telephone charges.