Frontline; 1705; Washington's Other Scandal

BILL MOYERS: Across Lafayette Park from the White House, a room at the famous and fancy Hay-Adams Hotel can cost about $500. Here, night after night in 1995 and 1996, the president of the United States charged some of America's richest people 200 times that much just to have dinner with him.

FUND-RAISER: [to contributors] Thanks for your generosity. There's over a million dollars represented in this room. After tax.

BILL MOYERS: They were off-the-record, private sessions whose conversations you were never supposed to hear.

Pres. BILL CLINTON: [to contributors] -which is why what you have done is so important, because we were plumb out of cash by the end of the year.

BILL MOYERS: These White House videotapes reveal the heart of a Washington where money -not sex -is the obsession. The story is not what two consenting adults did in private, but what our two political parties are doing to an unsuspecting republic.

The campaign of 1996, which cost $2.2 billion, was the most expensive in history, and one of the most corrupting. Tonight we will show you how both parties contrived to bend and break the law. While Janet Reno reluctantly investigates White House fund-raising and Senate Republicans bury campaign finance reform, we will piece together the outlines of Washingtonís Other Scandal.

LYNN SHERR, ABC News: Many voters are sending a very simple message. It's, "President Clinton, we don't like what you're doing."

JEFF GREENFIELD, ABC News: I think the president is going to be hearing "Fasten your seatbelt. It's going to be a bumpy flight.

REPORTER: Here tonight, the mood is one of high anxiety.

BILL MOYERS: The story begins back in November, 1994, the night of the mid-term elections. Inside the White House, the results are coming.

PETER JENNINGS, ABC News: -are just the first results. It's going to be a long night.

BILL MOYERS: The Democrats would lose 8 Senate seats and a Whopping 52 seats in the House.

CAMPAIGN WORKER: Jesus. Jesus!

Rep. NEWT GINGRICH: This is truly a wildly historic night. I mean, this is just-[crowd cheers]

BILL MOYERS: It was a stunning repudiation of the Democrats and of Bill Clinton.

HAROLD ICKES, Deputy Chief of Staff, 1994-97: I think the most difficult meeting I had with the president was the night of that election, when I went over from my office in the West Wing to the residence, where he was, late at night, to tell him that we had, in fact, lost the Congress. He was, to put it mildly, very, very unhappy. And there was open talk among the inside circle about this president is-maybe his presidency is over.

DICK MORRIS, Political Consultant: He was very depressed. He was confused. He felt that he was a bit of a lame-duck president. I don't think he really believed in his capacity to come back, and it was just a question of counting down the months to his execution.

BILL MOYERS: The president himself secretly summoned Dick Morris, an old ally who once before had saved his political career. Morris will tell the president he must strike back -right away -with a blitzkrieg of television ads.

DICK MORRIS: During our years in Arkansas, where the president -then the governor -and I worked together, we found that it was very effective to nm ads in between elections, where we would shape the important issues and present them to the voters.

DOCUMENT: March 2,1995. Morris to the president: Recommend major use of paid media. Cost: $40 million. Coverage: 43 percent of the U.S. population. That covers 293 electoral votes, plus 22 easily winnable electoral votes.

HAROLD ICKES: It was not a genius idea. It was-you know, it was-it was an idea that we all agreed with. The real question was what were the ads going to say, when were they going to start to nm, and most critically, how were they going to be paid for?

DOCUMENT: May 16, 1995. Morris to the president: Need to get basic messages out to the public in the spring before political season is too far along. Subject of ads should be crime. Request approval to move ahead.

ANNOUNCER: [Clinton-Gore '96 Primary]

Committee television commercial] An officer killed in the line of duty, a father gunned down at work, a student shot at school-

BILL MOYERS: In July, 1995, Morris launches the first salvo in the Clinton-Gore re-election battle. He spends $2.4 million of the campaign's money for an election that is still 16 months away.

Pres. BILL CLINTON: [Clinton-Gore '96

Primary Committee television commercial]

-deadly assault weapons off our streets, 100,000

more police on the streets, expand the death penalty. That's how we'll protect America.

HAROLD ICKES: The money to finance that ad came-was paid for by the Clinton-Gore campaign. And I hit the ceiling and raised hell and went directly to the president. And I said, "This is your campaign. You're the boss. But if we are going to start spending Clinton-Gore campaign money this early -we only have $34 million to spend -we will run short, and we don't know what's going to happen coming out of the Republican primary. We don't know how much money they're going to have, when they're going to go on the air, and this is foolish beyond belief." He said, "Well, is there no other way we can do it?"

DICK MORRIS: Ickes was saying that, "We'll be spending money that we'll need for the rest of the election. We'll be spending money that we need for the future. We won't be able to raise the money that you're calling for."

BILL MOYERS: [on-camera] How did you think you'd get ads on the air?

DICK MORRIS: I am not an expert in fund-raising, so I had no specific ideas about it. But my relationship with Clinton has always been such that when I indicate to him what I think we need, he usually is able to come up with the money.

BILL MOYERS: [voice-over] The president knows where he can get the money: from rich donors like these. At a private dinner in the Hay-Adams, he will boast of the success of the air war Morris has begun.

Pres. BILL CLINTON: And we spent a couple million bucks on it, which is not a huge amount of money, to run a thousand points of coverage, which means everybody saw the ads about three or four times in 40 percent of the country. In that 40 percent of the country, there was a huge increase in my job rating on crime, and a substantial increase in my overall job rating.

BILL MOYERS: But if the president is to receive public funds to match the money he raises privately, he must agree to strict limits on what he can spend. That's the heart of the deal on public financing, the contract the president signs with the taxpayers. Dick Morris argues, "Forget it. Raise all the money privately."

DOCUMENT: Morris to the president. Need not to take federal funds. With federal funding limits, we have no ability to do T.V. in key primary states.

BILL MOYERS: Without the limits that are the condition of federal funding, Morris could blanket the early primary states with campaign ads.

DOCUMENT: Morris to the president: If exempt from federal limits, heavy push in New Hampshire, Arizona, Iowa. Need decision from-

BILL MOYERS: Morris's argument is hotly disputed inside the White House, where some understand what raising an unlimited amount of money will require.

HAROLD ICKES: Nobody disagreed with the advertising. The question was, could we raise the money that was going to be needed at the-at the-and spent at the rate of roughly a minimum of $1 million, and often ranging up into $1.5 million to $1.8 million a week, week after week after week, through the general election?

BILL MOYERS: [on-camera] Tens of millions

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of dollars you had to raise?

HAROLD ICKES: I estimated on my first memo that we would have to raise about $150 million for advertising.

BILL MOYERS: [voice-over] Morris presses the case to decline public financing. As usual, he knew polls would get the president's ear.

DOCUMENT: Morris: We're testing justification for no federal dollars in a poll. A. The president faces no primary, so we shouldn't take tax money. B. In an era of budget cuts, better to spend money on Head Start. C. Level the playing field with-

HAROLD ICKES: Dick came in and said, "Look, the public doesn't give a damn about this."

BILL MOYERS: [on-camera] He says forego public financing.

HAROLD ICKES: Yes, just spend it.

BILL MOYERS: Yeah, spend it.

HAROLD ICKES: Yeah, just spend it.

BILL MOYERS: Did you disagree with Morris when he said, "Let's just give up public financing

and raise all the money we need and spend it"?

HAROLD ICKES: Yes, I did disagree with him because I thought that we did not need the enmity of The New York Times, The Wall Street Journal, people like you, who would be down the back of our necks saying that the president of the United States should set the example and go under the Federal Campaign Finance Act.

BILL MOYERS: [voice-over] The president will decide that the political price of refusing public funds would be too high.

DICK MORRIS: Erskine Bowles, the deputy chief of staff, called me around July 10th, July 15th, and said, "I think you're going to lose the fight on federal money. I think the president's going to accept federal money and accept the limits. You need to come up with a plan B." And I said, "Well, what do you think it might be?" And he said, "Well, you know, there is something called issue-advocacy advertising." I had thought it was an either-or situation, that if we took public funding we would have limits, and if we didn't, we wouldn't. And I didn't understand there was another pot of money. It's a separate pot of money that you don't need to have limits for, but you can't advocate the election of the president in them.

BILL MOYERS: That other pot of money is known as "soft" money, money that can be raised and spent by the political parties for their own activities. The law clearly forbids its use in a presidential campaign. So in a trial run, the president's men experiment with laundering contributions through the state parties. On August 22nd, the Democratic National Committee sends $30,376 to Florida. That same day, $30,376 is sent from the Florida party back to Washington, straight to the company producing the Clinton-Gore advertising campaign.

ANNOUNCER: [Democratic National Committee television commercial] As Americans, there are something we do simply and solely because they are moral, right and good-

BILL MOYERS: In six states, ads produced by the Washington campaign team and "sponsored" by the DNC go on the air.

ANNOUNCER: [Democratic National Committee television commercial] -but because it was the right thing to do. The Republicans are wrong to want to cut Medicare benefits. And President Clinton is right to protect Medicare-

BILL MOYERS: The ad attacks the Republicans, but does not include the words "Vote for Bill Clinton." They claim it is an "issue" ad. It is now clear to the president that "Plan B" will let him have it both ways.

Pres. BILL CLINTON: It means that we can finance this campaign in 1995, so I don't have to worry about it in 1996. So this is a brilliant thing that they have done, this plan that you have participated in because-

BILL MOYERS: He can take public money and agree to the limits on spending by his campaign, and at the same time raise tens of millions of dollars in private money for the advertising blitz and spend it through the DNC.

DOCUMENT: September 7, 1995. Morris: Can we raise an additional $33 million for the DNC? Can we stop the DNC from spending the money on things other than our ads? [www.pbs.org: Read the Morris memos]

DICK MORRIS: In my own mind, I knew on September 7th the president was going to go ahead with this. And he knew that he had to mobilize, otherwise his presidency wasn't worth the paper it was written on.

BILL MOYERS: But the Democratic National Committee has to buy into the deal on September 10th, the DNC chairman, Don Fowler, is summoned to a Sunday night meeting at the White House with the president, the vice president and their team.

DON FOWLER, Chair, DNC, 1995-97: The whole gang was there, you might say, and there was an expansive discussion about the advisability of undertaking this television campaign. There was a statement made, and I don't remember who specifically made it, that it had been checked out and, yes, it's legal. And it is legal. Now the question came, how do we pay for it?

HAROLD ICKES: And I said, "We can raise it, but the only way we can raise it, Mr. President, is if you are going to devote a considerable amount of time, and if the vice president is going to devote a considerable amount of time to raising it." And he said, "I'm willing to do it." And I said, "Let's go."

BILL MOYERS: [on-camera] Did he raise a moral question?

HAROLD ICKES: He did not. He wanted to know whether it was legal. And his order to me was, "It's got to be legal." And it was legal.

BILL MOYERS: So he agreed to the advertising campaign, and he agreed to the recommendation that he would have to be deeply involved in raising that money.

HAROLD ICKES: Yes

BILL MOYERS: Himself. He couldn't delegate that.

HAROLD ICKES: And he was deeply involved.

BILL MOYERS: [voice-over] So the decision is made, and inside the White House the president and the vice president start dialing for dollars. There are overnight visitors where Lincoln slept, and coffees in the historic Map Room. With guest lists sent over from the DNC, the White House turnstile keeps on spinning. And only three days after that critical Sunday night meeting, the president receives some old friends in the Oval Office: the Indonesian tycoon James Riady, whose money helped Clinton win in 1992, and Riady's man, John Huang. It falls to Harold Ickes to follow up on the president's wishes.

DOCUMENT: October 2, 1995. Ickes notes. John Huang, Chinese-born, came to USA for graduate school. Says there is Asian-American money, particularly in California. Willing to work out of ONC, but needs a reasonable title.

BILL MOYERS: Eventually, Huang will be at the center of accusations of soliciting illegal contributions from foreign nationals. No one knows what John Huang says to the president when they meet, but Clinton himself will close the deal, pressing the party's finance chairman to give Huang the job, and the title he has insisted upon.

BILL MOYERS: [on-camera] He was given a title created just for him-

DON FOWLER: Yes.

BILL MOYERS: -a title that no other Democratic National Committee official held, Vice Chairman for Finance.

DON FOWLER: That's correct.

BILL MOYERS: Did you approve that?

DON FOWLER: Yes.

BILL MOYERS: Who recommended it?

DON FOWLER: I don't really know. It came to me from the finance chair.

BILL MOYERS: Why was the White House, and the president specifically, so focused on this one man?

DON FOWLER: I don't know. I cannot answer that.

BILL MOYERS: [voice-over] The answer is money, lots of money for those so-called "issue ads." And with Plan B, there is an added bonus. Because soft money is not regulated, corporations and unions can make direct contributions. There is no cap on how much a wealthy individual can give. The lid is off.

FUND-RAISER: Plus a couple who sent money that weren't able to be here -raised $625,000 to go with the approximately $1 million that Skip has come with. So today's event is, like, a $1.6 million.

HILLARY RODHAM CLINTON: That's amazing. That is just amazing.

BILL MOYERS: When the limits in the law do not apply, it's time for the camera to leave the room.

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DOCUMENT: Morris to the president: If we could raise $20 million to $24 million with $1,000 caps, why can't we raise $45 million with no caps?

Pres. BILL CLINTON: [to contributors] Thank you very much. First of all, I want to thank you for being here. We need the money. And we need to win this race.

BILL MOYERS: It was indeed a race for re-election, but it was also an arms race, money doing the work of missiles. And the commander-in-chief was consumed by it.

DICK MORRIS: There is no question that he had to spend an enormous amount of time raising money, and that it took him away from the duties of the presidency. It distracted him. He didn't like it. He hated every minute of it, but he felt he had to do it.

BILL MOYERS: [on-camera] Did you get

involved in raising the funds for the ads?

DICK MORRIS: No. No, I just spent it.

CAMPAIGN COMMERCIALS: Republicans cut school lunches, cut Head Start, cut child health care. Republicans will stop at nothing. Education, job training, more police -what President Clinton and the Democrats want. The president cuts taxes and protects our values, but Dole and Gingrich just walked away. Congress should not slash Medicare and Medicaid. Cut waste, control costs, save Medicare balance the budget -the right choice for our families.

DOCUMENT: September 13,1995. Dick Morris: Campaign/DNC advertising financial strategy. Now through November 15 -$10 million. Pay for it entirely with DNC money. Nov. 15 through Jan. 15 -$10 million all through DNC and state parties. These should run in swing states.

BILL MOYERS: [voice-over] "Swing states" is the giveaway. This is not issue talk, it's campaign talk, persuading voters in states where it counts. [on-camera] You got the commercials on the air. You prevailed, obviously. Right?

DICK MORRIS: Right.

BILL MOYERS: And you saw no conflict between his decision-the president's decision to take public financing and the decision to raise the money for the ads. You saw no conflict in that?

DICK MORRIS: I saw absolutely no conflict between the two because they were different pots of money with different objectives.

BILL MOYERS: [voice-over] What Dick Morris now claims were "different objectives" must be judged by his own words. Back in 1995, he knew exactly what they had to do to create legally acceptable "issue" ads out of what would otherwise be campaign ads.

DOCUMENT: Morris: Need to work to make it state parties. DNC running the ads. Create relationships in the ads to current legislation. Defend more Democrats, not just Clinton. Attack more Republicans, not just Dole. Run in non-primary states, as well.

Pres. BILL CLINTON: [to contributors] My original strategy had been to raise all the money for my campaign this year-

BILL MOYERS: And listen carefully. The president tells his big donors that their money will be laundered through the Democratic National Committee.

Pres. BILL CLINTON: [to contributors] And then we realized that we could run these ads through the Democratic party, which meant that we could raise money in $20,000 and $50,000 and $100,000 lots, so we didn't have to do it all in $1,000 and run down my-you know, what I can spend, which is limited by law. So that's what we've done.

BILL MOYERS: The operation is nm out of the White House.

DOCUMENT: November 1,1995. Memorandum for the president. Fund-raising projections of$5.5 million through December leave a potential debt of$I1.2 million.

BILL MOYERS: The president writes on the memo, "If I can help raise more, I will."

DOCUMENT: November 20, 1995. Ickes: Memorandum for the president. This confirms we are to identify Clinton-Gore donors who still have the capacity to give to the DNC for the calendar year 1995 for possible solicitation to raise funds for additional media in 1995.

Pres. BILL CLINTON: [to contributors] We picked where we advertised because those were the markets that have the largest number of persuadable voters.

HAROLD ICKES: The president was our best strategist, bar none. He has a phenomenal memory. He has a great eye for ads. I've seen Bill Clinton sit down to cut an ad.

DICK MORRIS: The president would closely edit the ads, help write the ads. He would criticize the visuals in the ads. He was heavily involved in the advertising.

BILL MOYERS: [on-camera] Did he enjoy this? Did he like to-

DICK MORRIS: He loved it. The president is a political consultant at heart who is president of the United States because it's his job.

Pres. BILL CLINTON: [to contributors] The lead that I enjoy today in the public opinion polls is about one third due to that advertising, and the fact that we've been able to shape the debates in that way. And it makes a huge difference.

BILL MOYERS: [on-camera] You didn't think that was cynical to say, "Let's take the money and find other ways to raise what we do need, and look the other way on the restrictions"?

HAROLD ICKES: I don't think it's cynical, Bill, as long as it's within the law.

BILL MOYERS: In the real world, is this a

distinction without a difference?

HAROLD ICKES: I think, from a legal point of view-and I really want to be very clear here, Bill. From a legal point of view, it is a great distinction and a very critical distinction. In the broader sense that I think you are asking that question, probably not.

BILL MOYERS: [voice-over] Five hundred and thirty-two people were served coffee in the White House. They, or their companies, would later contribute a total of$26.4 million, an average of $50,000 per person. The coffees were not called "fund-raisers" because money could not legally change hands inside the White House. But watch closely. A Puerto Rican developer named Ruben Velez was caught on videotape -he's in the left foreground, out of focus -trying to hand the DNC chairman an envelope full of checks.

RUBEN VELEZ: [at White House coffee] I have five checks here for you.

DON FOWLER: [at White House coffee] As soon as this thing is over, I'll call you and we'll get it done. I'm sorry, it slipped my mind. And I apologize.

BILL MOYERS: [on-camera] Is this what the fund-raisers, the coffees, were for?

DON FOWLER: Well, now, don't give Mr. Velez a hard time about that. He's a citizen. We asked him to help us raise some money. Citizens don't understand these technicalities. I don't-to my knowledge, he never, never spoke to the president about his difficulty, and his difficulty was egregious. I mean, it'd been tied lip in the bureaucracy for 15 years. I think Ruben Velez deserved some help.

BILL MOYERS: He didn't have to bring the checks?

DON FOWLER: No. No. Absolutely not.

BILL MOYERS: But you see the-

DON FOWLER: Please end that story.

BILL MOYERS: Yes?

DON FOWLER: I turned the money down in the White House. I want everybody to know that. I didn't take it. And I mean, he offered it there just because it was convenient. It wasn't because this was some sort of conspiracy.

BILL MOYERS: If Ruben Velez had been a shopkeeper from San Juan, would he have been at that coffee, at that fund-raiser?

DON FOWLER: If he'd have been a shopkeeper, probably no.

BILL MOYERS: People with money should not be able to buy more democracy than people without money.

DON FOWLER: But they do, and we all know it.

Pres. BILL CLINTON: [to contributors] I believe in raising money privately for political campaigns, and I believe-

BILL MOYERS: In 1996, a "For Sale" sign was hung on the White House.

Pres. BILL CLINTON: [to contributors] And I think it's okay if your investment gets you influence, but your investment shouldn't get you control.

MAN AT FUND-RAISER: It's not what Secretary Babbitt would want, necessarily, and you have to figure out in the political context where that works out with the environmental vote.

WOMAN AT FUND-RAISER: It's a modem, open-pit, earth-moving operation, and the issues are resolvable. .

Pres. BILL CLINTON: Do you think we can pass a decent bill in this Congress?

WOMAN AT FUND-RAISER: Yes, sir. I do.

OTHER VOICES: We do. We do. Yes.

Pres. BILL CLINTON: Why don't you give me an outline of what you want, and let me work with the government on it.

BILL MOYERS: In the aftermath of the money frenzy that engulfed the White House, 11 fund-raisers would be indicted.

REPORTER: Mr. Huang, did you do anything wrong?

BILL MOYERS: And John Huang, along with dozens more, would plead the 5th Amendment when summoned to appear before Congressional committees convened to investigate the scandal.

Sen. FRED THOMPSON [R], Tennessee:

Committee chair: Committee will come to order, please.

Sen. DON NICKLES [R], Oklahoma: Mr. Huang, just for an example-John Huang was in the White House over 100 times.

HAROLD ICKES: So what?

Sen. DON NICKLES [R], Oklahoma: Over a hundred times.

HAROLD ICKES: So what?

Sen. DON NICKLES [R], Oklahoma: And he raised $3 million. $1.4 million of that was either illegal or had to be returned.

HAROLD ICKES: Nobody is condoning that,

Senator Nickles. I've said that time and time again, and don't pin that on me.

Sen. DON NICKLES [R], Oklahoma: Well, the point being, your opening statement, and several of your statements-

BILL MOYERS: The president's men were on the defensive.

Sen. JOE LIEBERMAN [D], Connecticut: Did anybody say, "Hey, the lawyers tell us that technically this is legal, but is it right?"

HAROLD ICKES: Typically, as you usually do, you've asked a very profound question.

BILL MOYERS: Senator Joe Lieberman, a Democrat, sat on the investigating committee.

JOE LIEBERMAN: This is an extraordinarily shocking tale, one of many, in the '96 campaign. A man named Warren Meddoff comes up to President Clinton as he's going around the room, hands him a card, his card, and according to Meddoff, says to the president, "I can raise you $5 million dollars," gives him the card.

Harold Ickes calls this man, Meddoff. Meddoff says, "I have an associate who's prepared to give up to $5 million dollars, will give $1 million right away. And incidentally, my associate would like to receive a tax deduction for this."

Well, you know, stop the movie right here. And what does Harold Ickes do? And all of this is agreed on by both parties, Meddoff and Ickes. Ickes faxes Meddoff a list of tax -deductible, tax-exempt organizations that this individual can contribute to.

One, an individual can only give $2,000. Two, you can't deduct a political contribution.

So at the end of that, I said to Harold Ickes, who I know some, who's bright, who's not a law breaker-I said, "Harold, why did you do this?" And he put his head down and said, "We were all like Mad Hatters." And I'm afraid that's the truth.

BILL MOYERS: The Breakers Hote1. Palm Beach, 1997. Even as the Senate is investigating Democratic fund-raising excesses, the Republican Party gathers its biggest donors, those who gave at least $100,000 in soft money during 1996. They're called Team 100.

REPORTER: Why aren't you on the tennis court?

TRENT LOTT:, Republican Majority Leader:: Well, because I'm such a poor athlete, I can't do that sort of thing. You know, I just come and work and then go home.

REPORTER: Why do you oppose outlawing big contributions like this?

TRENT LOTT:: First of all, I don't know what you're talking about in terms of contributions, but-

REPORTER: You oppose outlawing contributions of $1 00,000 or more.

TRENT LOTT:: Look, I support people being involved in the political process. We support legal contributions. That's been the problem in the campaign last year, is illegal contributions from foreign sources and other sources.

BILL MOYERS: As a reward for their promises of money to come, these big givers get to spend three days behind closed doors with top Congressional leaders. The Republicans, too, have found ways to raise and spend campaign money outside the limits of the law.

REPORTER: So you would support asking these people to give even more money.

TRENT LOTT:: I think that for them to have the opportunity to do that is the American way.

Sen. BOB DOLE: [at campaign rally] If there's anything that frightens me more than four more years of Clinton and Gore, I can't think of it!

BILL MOYERS: In 1996, in Kansas, Bob Dole, the Republican nominee for president, wanted to make sure that a Republican was elected to fill the Kansas Senate seat he had vacated.

In the final weeks before the election, that race is a neck-and-neck contest between Republican Sam Brownback and Democrat Jill Docking.

JILL DOCKING: What's cooking, anything?

CAMPAIGN WORKER: Oh, nothing. There's a new ad out. You saw that, I assume.

JILL DOCKING: No, I didn't, but I heard about it. So did you see it?

ANNOUNCER: [campaign commercial] Jill Docking, liberal Democrat. When it comes to taxes, spending and balancing the budget-

BILL MOYERS: Twelve days before the election, Docking is hit by a campaign commercial out of nowhere. Someone is spending $400,000 attacking her.

ANNOUNCER: [campaign commercial] Jill Docking says her priority is a balanced budget, but won't tell Kansans her position on the balanced budget amendment.

CAMPAIGN AIDE: At the end of the ad, it says, "We're the Republic Education Fund," so it's some group that no one has ever heard of dumping money in on his behalf.

ANNOUNCER: [campaign commercial] We're The Citizens for the Republic Education Fund. And we believe you should know the facts.

BILL MOYERS: In fact, no one in Kansas had heard of the fund because it was a tax-exempt front set up by a company called Triad. Operating out of this Washington townhouse, Triad is the brainchild of a former fund-raiser for Oliver North.

ANNOUNCER: [Triad promotional video] Triad is an effective, comprehensive and new way for Republican donors to make their campaign contributions go further.

BILL MOYERS: Triad pitched anonymity to prospective Republican donors in its privately distributed sales video.

BOB CONE, Business Owner and Investor:

[Triad promotional video] A couple of years ago, when I got into the political scene and had to come to Washington with the issue that was pressing upon our company at that point in time, I had a difficult time getting around.

BILL MOYERS: Bob Cone is a satisfied client who endorsed Triad in its video.

BOB CONE: [Triad promotional video]I came down here and got involved and found out that through that process, that I could make a difference in the particular issue that we were discussing at that time.

BILL MOYERS: Cone's involvement with Triad was uncovered by Senate investigators, among them committee counsel Elizabeth Stein.

[on-camera] Here are some of the records you found. Triad business account, June '95 to December '95: Robert Cone, Elverson, Pennsylvania, $25,000; Robert Cone, Elverson, Pennsylvania, just two months later, $50,000; Robert Cone, one month later, $25,000; Robert Cone, $25,000; Robert Cone, one month later, $50,000. I mean, he was giving a lot of money to Triad.

ELIZABETH STEIN, Counsel, Senate Governmental Affairs Committee: Absolutely.

BILL MOYERS: [voice-ove1] But Cone had shown little interest in politics until 1994, when at least 10 children had died in the swinging cradles produced by his company, Graco Children's Products. When their parents threatened to sue, Cone and his brother began contributing to candidates who promised to limit a citizen's ability to sue corporate America. In 1995, Bob Cone became Triad's founding donor.

BOB CONE: [Triad promotional video] I realized that, as you go through this process, and you talk to the right people and you do the right things, you can bring issues to a conclusion. And yes, one person can make a big difference.

BILL MOYERS: The promise of anonymity - the chance through Triad to give large sums of money in secret -appealed to others.

ELIZABETH STEIN:You know, the law provides a certain framework that you have to abide by. And one of the key requirements is that you have to register and disclose publicly to voters what the sources of your money are, where it's coming from and how you're spending it. And Triad did not do that.

BILL MOYERS: But Triad's confidential records reveal that 85 percent of the money it spent on negative ads like those aired against Jill Docking came from just two sources: The Cone brothers, and something called the Economic Education Trust.

The question is, who or what is the Economic Education Trust? The man listed as Triad's contact for the Trust served on the steering committee of the Texas Dole for President campaign as the representative of Koch Industries.

And the Trust's official address is that of a powerful Washington law firm that happens to represent a company called Koch Industries.

Koch Industries is a Kansas-based conglomerate that has cultivated some influential friends.

BOB DOLE: [at Koch event] From London to Tokyo, Mexico City, Madrid and Switzerland to Singapore, Koch is ready to compete.

BILL MOYERS: The company is very big and very rich. David Koch, one of two brothers who control it, was vice chairman of Bob Dole's 1996 presidential campaign.

Like the Cone brothers, who started buying into candidates when they ran into legal troubles, the Kochs began putting lots of money into politics when their company's behavior created legal difficulties and unwanted attention. By 1996, in state after state at the center of Koch's business empire, legal problems were piling up. So watch where Koch Industries spends its money in the election. By late October, 1996, the Koch political action committee has reached the limit of what it can legally spend in at least six races in three key states. And that's when it gets interesting.

ANNOUNCER: [campaign commercial] We are Citizens for Reform, and we believe you should know-

BILL MOYERS: Negative ads produced by Triad's tax-exempt fronts suddenly begin to appear. In Kansas and Oklahoma, four candidates who have already received the legal limit from Koch's PAC now receive a windfall of more than $800,000 from Triad.

ANNOUNCER: [campaign commercial] Liberal Docking, conservative Brownback. We're the Citizens for-

BILL MOYERS: Following the money trail leads to another clue. On October 25th, just 11 days before the election, Triad received more than a million dollars in wire transfers from a Riggs Bank account in Washington. The account belonged to the Koch-funded Economic Education Trust. It was exactly this kind of hidden transaction that Republican operatives employed in a dizzying array of shells and non-profits to funnel millions of unreported dollars into the 1996 elections.

HALEY BARBOUR, Chair, RNC: [Senate committee hearing] After the last couple of weeks of things that were said that were baseless-

BILL MOYERS: Haley Barbour was chairman of the Republican Party in 1996.

HALEY BARBOUR: -I was eager, chomping at the bit to have a chance to testify.

Sen. DON NICKLES: Are you testifying under immunity? Did you and your attorney negotiate immunity?

HALEY BARBOUR: I'm not-I don't have any immunity. I didn't even get a tetanus shot.

Sen. DON NICKLES: You might need one, but-

BILL MOYERS: Barbour was himself responsible for setting up one of the non-profits used to launder money for television ads. It had a lofty name: The Coalition for Our Children's Future.

ELIZABETH STEIN: The Coalition for Our Children's Future received $800,000 in October of 1996. They executed a confidentiality agreement, and refused to tell anyone, including their own board of directors, what the money was for or where it came from.

BILL MOYERS: [on-camera] You mean there was an agreement between the donor and the Coalition?

ELIZABETH STEIN: And the organization.

BILL MOYERS: That guaranteed anonymity?

ELIZABETH STEIN: Absolutely.

BILL MOYERS: To the donor?

ELIZABETH STEIN: Yes.

BILL MOYERS: And you could not unplug that?

ELIZABETH STEIN: The organization repeatedly refused to produce the confidentiality agreement to the committee, and they repeatedly refused in deposition to reveal the identity of the donor.

BILL MOYERS: [voice-over] When Elizabeth Stein finally obtained the Coalition's bank records, they'd been blacked out to mask the name of the donor.

But there was one clue: the date. October 25th, the day the Coalition received the last transfer from its secret donor, is the same day that Triad received its million-dollar contribution from the Kochs' Economic Education Trust. The two transfers came from the same bank.

[on-camera] So these rich, very rich people, using this camouflage, could get money to candidates of their stripe, whom they've supported and wanted to help, without the candidate's opponent or the voters knowing where that money came from?

ELIZABETH STEIN: Well, I think it's even more than that. Essentially, they're purchasing elections.

JILL DOCKING: I congratulate Sam Brownback on his victory-

BILL MOYERS: [voice-over] In Kansas, Jill Docking lost in her bid to fill Bob Dole's Senate seat.

MAN AT PODIUM: The senior Senator from Kansas, Sam Brownback!

BILL MOYERS: Koch's man, the single largest recipient of Triad's secret money, won. But he was not alone.

Shielded from public view by the secrecy they had created, the Kochs used Triad and the Coalition for Our Children's Future to pipe $2.5 million into races in eight states in the crucial weeks just before the election. Sixteen of their candidates won.

Sen. FRED THOMPSON: [Senate committee hearing] The American people are united right now, I think, in their skepticism about this whole process and this whole place. Whatever we come up with is not going to be believed by the American people-

BILL MOYERS: It is small wonder the public might be skeptical.

Sen. SAM BROWNBACK [R], Kansas: [Se11ate committee hearing] Contributions to the temple were tax-exempt, is that correct?

BILL MOYERS: Senator Sam Brownback was named a member of the committee charged to investigate campaign finance abuses. His campaign would not come under public scrutiny.

HALEY BARBOUR: [Senate committee heari11g] I can't tell you what the Democrats did or didn't do. But I can tell you that the Republicans did not purposely, knowingly or intentionally violate any law-

BILL MOYERS: The committee took Haley Barbour at his word, even though Republican shells and shams that launder money undermine the fundamental premise that voters should know whose money is paying for campaigns.

Sen. FRED THOMPSON: [Senate committee hearing] A lot more information out there to get.

Sen. CARL LEVIN [D], Michigan: That mayor may not be true, but there's one way to find out. Give us our subpoenas.

Sen. FRED THOMPSON:You can quibble about subpoenas until the cows come home-

Sen. CARL LEVIN: This isn't a quibble.

Sen. FRED THOMPSON: Oh, it's a quibble.

Sen. CARL LEVIN: This is not a quibble.

Sen. FRED THOMPSON: It's been going on for six months.

BILL MOYERS: Just as witnesses who might have shed light on Democratic wrongdoing refused to answer subpoenas, so Republicans refused to cooperate.

Sen. JOHN GLENN [D], Ohio: [Senate committee hearing] I've been involved with this thing with you right from the start and have been dealt with unfairly.

BILL MOYERS: The investigation had turned into a mutual protection racket. Both Democrats and Republicans made sure the whole sordid truth of the 1996 elections would be kept from exposure. Three weeks before the investigation was shut down, Senate Republicans had killed efforts to eliminate soft money from campaigns. Just last month, another attempt at reform reached the Senate floor with majority support. The Republican leadership -once again -buried it. So the arms race in dollars continues to escalate, and so does the selling of democracy.

DON FOWLER: DNC Chairman 1995-97: Well, I don't want to get into the process of denying all of these allegations, but what we did was in harmony with the general practice of raising political money. Now, much has been made of lots of people in the Lincoln Bedroom, lots of people at those coffees. We did, and expanded on, and did a better job of what everybody else had done. I don't say that that's exactly how the system should work, but what we did was ethical, it was proper and it was legal.

BILL MOYERS: [on-camera] If selling access were a crime in Washington, if it were illegal, I mean, this would be an empty town, wouldn't it?

DON FOWLER: I think so. As you know, the term "selling" has lots of different connotations. The "quid pro quo" kind of selling is illegal, but creating the opportunity to make your case through contributions is standard fare.

BILL MOYERS: [Voice-over] The legality of White House excesses in 1996 may yet be investigated by an independent prosecutor. The attorney general is still trying to decide. But the real scandal is the legal bribery built into a system where your political worth is determined by your net worth.

Pres. BILL CLINTON: [to contributors] No matter what anybody tells you, personal validation still counts for a lot in this old world, and not everybody can have dinner with the president.

BILL MOYERS: Not everybody can have dinner with the president, and most who do are unwilling to discuss the price of a seat at his table. But we found one person with a story he would share.

CHARLES SURVEYOR, Former Tribal Chairman: I believe it was the Red Room we went to-one of-red, blue, and green, I believe-one of those three rooms.

BILL MOYERS: Charles Surveyor was chairman of the Cheyenne-Arapaho tribes of Oklahoma. In 1883 the federal government confiscated a 9,500-acre parcel of tribal land known as Fort Reno. Today there is speculation there may be oil and gas beneath it.

CHARLES SURVEYOR:We don't want no $100 million for our land or nothing. We want our land back, what's rightfully ours. That was all we wanted. That's still what we want.

ARCHIE HOFFMAN, Former Tribal Secretary: We knocked on every Senator's and Congressman's door in Washington, D.C. We went in there asking for help. Nobody said, "We'll help you." How are we going to get somebody's attention, you know?

BILL MOYERS: Attention would be paid, a Democratic fund-raiser told the tribes, if they made a sizable campaign contribution. That suggestion was debated in the tribal business committee.

MARGARET ANQUOE: [tribal business committee meeting] I don't think anyone disputes that a contribution this large would help the tribes.

ROBERT TABOR, Former Tribal Treasurer: [tribal business committee meeting] A hundred thousand-for us, it's a lot of money. And that, from what I gather, practically almost bankrupts us.

BILL MOYERS: The Cheyenne-Arapaho struggle with a hardscrabble existence. Unemployment can run as high as 60 percent, average income is $6,000 a year. The tribes own no casinos. They own a bingo hall, and what little money they do earn comes from there. For decades, tribal leaders have pinned their hopes on reclaiming Fort Reno.

CHARLES SURVEYOR:We discussed it amongst ourselves, the business committee, so we all decided to donate $100,000, which we did.

BILL MOYERS: They would then return to Washington, along with their attorney.

RICHARD GRELLNER, Former Tribal Attorney: After the tribes made the pledge and made the verbal commitment, then the president's re-election person here in Oklahoma called and said, as a result and in appreciation for, the tribes will have two seats to meet with the president on June the 17th.

CHARLES SURVEYOR:And the president walked in, and he gave us a little history of the pictures and furniture in there-you know, talked around a while. Then we went in there and ate, and we started talking. And you know, it was just-I hate to say B.S., but, you know, just everybody just shooting, talking about whatnot, you know? Then he asked me, "Do you have any important thing to say?" I got to our Fort Reno deal, and I talked and started going to a little history about that. And he asked his secretary, "Do you have anything on that?" She said yes, she had the whole package here and all that. And he said "Well, weî I can't quote the right words, but it was something like, "We'll look into it and see what can be done," or something to that effect, right there.

RICHARD GRELLNER: Oh, he was elated. It was like he had just went to the mountain and gotten the tablets!

CHARLES SURVEYOR:Well, if the president says he's going to do something, he'll do it, you know?

ARCHIE HOFFMAN: [tribal business committee meeting] So now we're getting involved in the political process. Everybody is starting to know who we are now. We've got a golden opportunity here. We're going to-we're just about to get off the ground. We're going to really go, you know?

RICHARD GRELLNER: And I started getting the phone calls, like, the week after they got back. "Where's the money? Where's the money." It happened continuously and more continuously. And I reassured them that the tribe was just going through, you know, its internal process.

ROBERT TABOR, Former Tribal Treasurer:

My wife and I, we had to go down to the Stillwater Bank in Oklahoma City. And on the way over I kept telling her, "I don't want to do this. I don't want to do it."

BILL MOYERS: Despite their treasurer's doubts, the business committee voted to send the money. So he cashed out all they'd saved from the bingo hall and wired $87,671.74 to Washington.

ROBERT TABOR: And I actually just started crying. You know, it's something-it's-I guess I'm soft-hearted because I care so much about my people, and it was just like taking something away from my kids, and I identify my tribal members as someone who I have to be responsible for. You know, and that's the way I felt, very emotional.

BILL MOYERS: But within weeks of their contribution, the tribes were told by Washington, "You're $13,000 short." After many dunning calls, the Democratic National Committee suggested that they make good on their pledge by contributing $20,000 to Bill Clinton's 50th birthday celebration. They did.

RICHARD GRELLNER: It was kind of interesting. When they were at the inaugural in January of 1997, one of the DNC officials that had solicited the money was driving this brand-new, you know, $100,000 car. And Charles made the comment, "I bet we bought that car."

BILL MOYERS: Because of their contribution, the tribes were now drawn into Washington's very high-stakes game.

ARCHIE HOFFMAN: So we were working with the Democrats. We were in thick with the Democrats because we gave a contribution. And after President Bill Clinton got in, well, then everything kind of got quiet there for a while, you know?

BILL MOYERS: Until they were introduced to Nathan Landow, a wealthy developer and long-time fund-raiser for Al Gore, who after the campaign was back in business as a Democratic fixer. Landow sent them to the lobbying firm of Peter Knight, the man who had served as chairman of the Clinton-Gore campaign, and told them something they hadn't expected.

RICHARD GRELLNER: Mr. Landow told us that you needed to hire this lobbying firm to help your issue, that the donation had nothing to do with where you're headed now, and this is a whole new process, and all that was an appreciation lunch.

BILL MOYERS: They learn that the price of retaining Knight's firms will be $100,000 down plus $10,000 a month. And Landow lays out the terms he wants for himself. His price is even higher. He wants 10 percent of any real estate development on Fort Reno, 10 percent of any income, and 10 percent of the revenues from oil and gas that might be found there.

ARCHIE HOFFMAN: I guess he did check into the Fort Reno property and found out about all that gas and oil under Fort Reno. So he seen money there, about $50 million. He wanted us to sign a contract giving him 10 percent of that, and he'd get that property back for us. And he said, but if we didn't do that, he said he'd make sure we never got that property back, you know?

BILL MOYERS: "They want the land given back to them on a platter," Landow told FRONTLINE when he refused an on-camera interview. "They brought in innocent people like me. They're a bunch of goddamn uneducated Indians."

RICHARD GRELLNER: He started out that, you know, "I didn't have the ability to get this done for the tribe." That evolved into, "If you don't do this, I'll make sure you don't get it back." So we were kind of in a position that, you know, of what became a stickler of a situation became a stick-up.

BILL MOYERS: The Cheyenne-Arapaho still do not have their land. What they do have is an understanding of the rules in Washington's greed-driven game. They can keep playing only if they can afford to keep paying. And they can't.

RICHARD GRELLNER: What used to be freedom of speech, you know, it may still be free, but the microphone is so expensive nobody can afford it. If you don't-can't buy access to the microphone, continued access, keep blurting out your message, then nobody's going to listen. Nobody's going to listen.

BILL MOYERS: [on-camera] You've said Bill Clinton identifies with people who have the, quote, "short end of the stick." And my question is how many of those people at the short end of the stick get invited to those White House coffees? And doesn't that fundamentally change the character of the party and the priorities of the president?

HAROLD ICKES: I think that it's a difficult question. The process is a very subtle one. I think there's no question that people are influenced by who they spend their time with. And unfortunately, given the way our political system is set up, our political system is based on private contributions. Where do private contributions come from? They can come from small people and-but the large people understand that if they give a contribution of serious magnitude, that they will at least get access to make their case.

The president has said time and time again, and I believe him, that he wants to see campaign finance reform. He is, however, not prepared to lay down what is available to him if the other sides aren't going to lay down what's available to them. And the other side's not prepared to do it.

BILL MOYERS: I can't believe that you really think this is the way we ought to be doing it.

HAROLD ICKES: No, I don't. Bill, I'm the first to say the system needs to be changed. I'm also a practical politician. And I think that Bill Clinton needed to be re-elected. I think it was good for the country.

DOCUMENT: Memorandum to the president. Harold Ickes estimates that we will need $1 million for potential campaign finance fines.

BILL MOYERS: [voice-over] The president responds: "Ugh."

If you believe the arms race in campaign money is undermining the very soul of our democracy, the Internet is a whole new forum for citizen activism. FRONTLINE's Web site for tonight's report offers an easy guide to getting informed and connected via the Web. With just a few clicks, you can check out your own candidates, their big donors, their voting records, where they stand on campaign finance reform and much, much more.