Thursday, January 05, 2006

Clinton Fund-Raising Group Is Fined for Understating Gifts

By JOSH GERSTEIN - Staff Reporter of the Sun
January 5, 2006

A fund-raising committee for Senator Clinton's 2000 campaign has agreed to pay a $35,000 civil penalty and to concede that reports it made to the federal government understated by more than $700,000 donations to a California celebrity gala held to benefit her Senate bid.

The agreement between the committee, New York Senate 2000, and the Federal Election Commission ends the campaign finance regulation agency's inquiry into a complaint filed in 2001 by an entrepreneur who financed the fund-raising concert, Peter Paul.

"The civil payment assessed to New York Senate 2000 resolves the question of underreported in-kind contributions, and there will be no further action on this matter," an attorney for the fundraising committee, Marc Elias, said.

The conciliation agreement, approved at a Federal Election Commission meeting last month, has not yet been made public. However, three sources with knowledge of the terms outlined the deal to The New York Sun.

Under the agreement, the committee will amend its public reports to show that Paul's in-kind gifts to the fund-raising concert were understated by $721,895. The committee and its treasurer, Andrew Grossman, agreed that there was probable cause to believe that the filings violated federal campaign finance law. However, the committee claimed that it relied on "reasonable processes" to verify the data it filed.

A spokesman for Mrs. Clinton, Philippe Reines, said the senator was not available for an interview yesterday.

A Republican campaign finance lawyer, Jan Baran, said of the settlement, "$35,000 is not chopped liver but it's not a big amount at the FEC."

The star-studded and star-crossed fund-raising event, held on August 13, 2000, has produced years of trouble for Mrs. Clinton and her campaign staff. The dinner and concert took place on a Brentwood estate just prior to the opening of the Democratic National Convention. Celebrities such as Cher, Jennifer Aniston, and Muhammad Ali offered performances and tributes to President and Mrs. Clinton from an elaborate outdoor stage specially constructed for the event.

A few days after the gala, the good feeling evaporated when the Washington Post reported that a key backer of the event, Paul, had three felony drug and fraud convictions from the 1970s and 1980s. Aides to Mrs. Clinton moved to distance her from the controversy, insisting that the primary financial support for the event came from Paul's publicly traded company, Stan Lee Media.

As Mrs. Clinton cruised to victory, the firm, which planned to produce cartoon-related Internet features, collapsed. Paul departed for Brazil and was later charged with stock fraud. The FBI opened an investigation into the 2000 fund-raising gala and Paul's claims that he paid nearly $2 million in expenses for the event, far more than the roughly $366,000 originally reported to the Federal Election Commission.

In late 2003, a federal grand jury in Los Angeles indicted the national finance director for Mrs. Clinton, David Rosen, on four counts of causing false campaign finance reports to be filed with federal authorities. The finance aide faced up to 20 years in prison.

Following a three-week-long trial in May 2005, a jury acquitted Mr. Rosen of all charges. Jurors said that spending on the gala clearly spiraled out of control, but prosecutors failed to prove that Mr. Rosen was aware of what was happening.

Mr. Elias, the lawyer for New York Senate 2000, stressed that both Mrs. Clinton and her campaign were cleared by the Federal Election Commission probe. "This agreement makes clear that there was no violation of federal election law by the Hillary Rodham Clinton for Senate Committee in connection with the August 13, 2000 event," he said in a statement.

In an interview yesterday, Paul said he was pleased with the Federal Election Commission's action. "The impact is everything I've been saying for four years is true. I gave a million-two. They lied about it," he said.

Paul vigorously disputed Mr. Elias's assertion that Mrs. Clinton and her campaign were not involved in the inaccurate reporting. "For Hillary to say she had nothing to do with this, again, is disingenuous," Paul said. "This is the biggest contribution to her campaign."

Paul noted that letters and legal papers sent to Mrs. Clinton through her attorney in 2001 included canceled checks showing his outlays for the gala concert, but the campaign continued to reaffirm the reports omitting those expenses."Not only did they ignore them, they hid them," he alleged.

Mr. Baran said the committees had a duty to fix their filings promptly if they were wrong. "If you're on notice that something that you previously reported is inaccurate, you're expected to amend your reports," he said.

New York Senate 2000 was set up by the Democratic Senatorial Campaign Committee and Mrs. Clinton's campaign to hold events where donations could be made in excess of the $2,000 a person limit under federal law at the time. The donations and the expenses for each fund-raiser were split between the Clinton campaign and the Democratic Committee.

At Mr. Rosen's trial, campaign aides testified that they were instructed to keep expenses low, even those borne by outside parties, in order to maximize the amount of so-called "hard money" that could be transferred to the Clinton campaign. Prosecutors suggested this was the motive for the underreporting. However, a Federal Election Commission analysis released at the trial found that a bookkeeper's decision to pay more expenses with hard money than the law required meant that, in the end, the understatement of Paul's in-kind donations did not benefit Mrs. Clinton's bid. Her campaign netted just $57,000 from the event, though more than $1 million went to national Democratic coffers.

The Federal Election Commission's action could be a boon to Paul, who has entered a guilty plea to a count of stock manipulation in connection with the failure of Stan Lee Media. Paul is awaiting sentencing and his cooperation with the election agency's probe could result in a more lenient sentence. "The more that my allegations are borne out as true, the better I can rehabilitate the image that's been created of me," he said. "I'm not a totally corrupt individual."

Mr. Elias said New York Senate 2000 would pay the $35,000 civil penalty, but it was not immediately clear whether Mrs. Clinton's campaign, the Democratic Senate committee, or a donor would pick up the tab. As of a few months ago, the all but defunct joint committee had only $3,452 on hand and reported unpaid legal bills of about $78,000.

The $35,000 penalty assessed against New York Senate 2000 is relatively mild compared to others imposed by the Federal Election Commission. In 2003, Senator Schumer's 1998 re-election bid was fined $130,000. In 1999, a committee supporting Republicans running for federal office in New York was hit with a $128,000 penalty.

The Clintons are also facing a civil suit from Paul in which he claims the campaign contributions were part of a scheme to defraud him and interfere with his business dealings. Paul asserts that Mr. Clinton promised to join the board of Stan Lee Media but backed out of the deal and contributed to the company's failure. A California appeals court recently gave Mrs. Clinton another chance to be dismissed from the suit, but it appears the litigation against Mr. Clinton will move forward even if she is dropped from the case.