Showdown at Gucci Gulch

by Alan Murray

  Lobbyists—or often their young, lower-paid legal assistants—lined up early each morning to get seats at the tax-writing markups. At Ways and Means, before the sessions were closed to the public, some eager committee-watchers would arrive as early as 5:30 A.M. to get at the head of the queue and have a chance for a front-row seat. The line sometimes stretched the entire length of the hallway, a city block long, and then wrapped around the corner. There were so many people that it looked like the committee was giving something away—which, at times, it was.

  The lines were immense each day, no matter what subject the committee was discussing. Representative Pete Stark, Democrat of California, devised a formula to explain the phenomenon, which was equally pronounced in both the Senate and the House: “The fewer the number of taxpayers affected, and the more dull and arcane the subject, the longer the line of lobbyists.” Some of those standing in the hall or sitting in the Senate’s wired-for-sound auditorium two floors below billed their clients upward of $400 an hour for their loitering. Others charged as much as $10,000 a month per client.

  The involvement of lobbyists extended beyond the sterile halls of congressional office buildings. Washington was a virtual money machine, and lobbyists provided much of the fuel. Fundraisers of one kind or another were held almost every night of the week, and lobbyists would stuff checks in their pockets and jump from one to another. It was as if there were a nightly sale, and the members of Congress were the merchandise. Evenings were filled with so much drinking and eating at fundraiser cocktail parties that several of the biggest lobbyists in town had to put themselves on “controlled fasts” under the care of a diet doctor during the tax-reform effort. J. D. Williams, Tommy Boggs, James Free of Charls E. Walker Associates, Robert Barrie of General Electric, and Geoffrey Peterson of the Distilled Spirits Council all decided that they did not have to be the fattest corporate lobbyists in town to be the most successful.

  Staying slim was not an easy discipline to maintain. On one night alone in 1985, whole troupes of lobbyists sped the half-mile from a $500-a-head fundraiser for John Duncan of Ways and Means to another $500-a-head event for Chairman Rostenkowski’s PAC. In addition to shrimp, ice cream, and beer, those who attended the Rostenkowski fundraiser received buttons that read: I DID BETTER THAN WRITE ROSTY.

  The results of this spree were obvious to anyone who paid a visit to the public-disclosure room of the Federal Election Commission in downtown Washington. The crowded, bustling office was located at the far end of the K Street corridor where many of the capital city’s twenty thousand or so lobbyists kept their posh offices. There, in row upon row of photostats and microfilm, were the detailed records for the millions of campaign dollars that each year flowed from special-interest PACs into the campaign chests of the nation’s elected representatives.

  The largesse was gruesome in its volume. Lawmakers from an earlier era would probably have been ashamed to collect so much money from so many special pleaders or, at least, to allow the public to know that they did. But times had changed; expectations were different in 1985 and 1986. Politics and money were as inseparable as salt and pepper.

  During the eighteen months that ended June 30, 1986—the period that encompassed most of the congressional tax-reform debate—PACs contributed the staggering sum of $66.8 million to House and Senate candidates, according to a Wall Street Journal tabulation. That was a 32-percent increase from the record $50.7 million they had given to congressional candidates during the comparable period in the previous election cycle. That, in turn, was more than double the amount that was given two years earlier.

  As the favored targets of money-laden PACs, members of the congressional tax-writing committees found it particularly easy to fill their campaign coffers. In 1985, congressional tax writers received $19.8 million in campaign contributions, a remarkably large sum considering there was not even an election that year. What’s more, that was double the amount they raised in 1983, according to Common Cause. Of this total, $6.7 million came from special-interest PACs, which was two and a half times their 1983 giving. The twenty members of the Senate Finance Committee banked a total of $11.8 million in 1985, up from $6.4 million in 1983. The thirty-six members of the Ways and Means Committee received nearly $8 million in 1985, up from $3.5 million two years earlier.

  Tax bills brought out the greed in everybody involved, and tax reform was the ultimate tax bill. Iowa Republican Charles Grassley explained the surge in giving that occurred between 1983 and 1985 this way: “We didn’t have a tax bill in 1983,” the senator told the Los Angeles Times. “Now people are anticipating a major tax bill.” The effort promised to leave no corner of the nation’s massive tax code untouched, and that meant billions of dollars of special breaks were on the chopping block.

  Members were eager to cash in. In normal times, a ticket to a congressional fundraiser would cost $250. But with tax reform, the admission price doubled and sometimes quadrupled for Ways and Means and Finance Committee members. Representative Frank Guarini, Democrat of New Jersey and a junior member of Ways and Means, hosted breakfasts that commanded $1,000 per person. Representative Ronnie Flippo, Democrat of Alabama and a relative newcomer to Ways and Means, threw large cocktail parties and dinners that cost $500 and $1,000 a shot. Guarini explained the premium pricing to The Washington Post:

  So many different industries and groups stand to be affected by this, and there’s a lot of anxiety. When there’s that much concern, the opportunities for fundraising increase. People want to have access. They want to put their two cents in. Or their thousand dollars.

  The hunger for money was insatiable. The ascendance of expensive television advertising made the cost of getting elected astronomical, even for candidates from the most rural states and far-flung districts. Expenditures of hundreds of thousands of dollars were routine in House elections; many millions of dollars were spent on Senate races. Even politicians with secure seats sought contributions. The more money they had, the more they could contribute to their colleagues. The more they gave away, the more powerful they could become in Congress. Members like Representative Jim Wright of Texas did not have any worries about their own re-elections, but they hoarded hundreds of thousands of dollars as “leadership funds,” which they distributed to fellow House members to help secure votes for their own moves up the leadership ladder. This generosity helped to elevate Wright from majority leader to speaker at the end of 1986.

  From January 1, 1985, to June 30, 1986, the top recipients of PAC contributions in the Senate included Finance Committee members Bob Dole ($839,319), Steve Symms of Idaho ($870,560), and Charles Grassley of Iowa ($668,526). During 1985, while Ways and Means was considering tax reform, the top PAC recipients in the House included Ways and Means members Sam Gibbons of Florida ($317,096), Henson Moore of Louisiana ($333,620), James Jones of Oklahoma ($343,592), and Wyche Fowler of Georgia ($223,060).

  So much money was floating around Washington that even lawmakers themselves began to look askance. Rostenkowski, whose own panhandling missions to Los Angeles, New York, and St. Louis brought him more than $500,000 during the tax-reform years, told The Wall Street Journal that he was “nauseated” at the influence that campaign money seemed to have on some of his own Ways and Means members. GOP Senator Barry Goldwater of Arizona, who was always one to speak his mind, agreed: “It is not ‘We, the people,’ but political action committees and moneyed interests who are setting the nation’s political agenda and are influencing the position of candidates on the important issues of the day.”

  When normal channels for this lucre were tapped out, members and contributors resorted to more creative—and more questionable—routes. Federal election laws that limited contributions were routinely circumvented to channel even more money into the coffers of politicians. New terms were invented to describe the different routes. There was hard money: straight contributions subject to federal limitation; and soft money: indirect gifts of services, such as telephone banks and studio time, which
were not subject to any legal restraint and which aided candidates without going directly into their treasuries. In addition to campaign funds, members also received “honoraria” for giving speeches, or in some cases, just for showing up at meetings with well-heeled pleaders—that money went directly into the lawmakers’ pockets. Tax writers regularly jetted all over the nation to address groups that wanted favors done in the tax-reform bill, charging two thousand dollars a pop.

  Occasionally, even top aides to tax-writing members dipped into this brimming money pot. Bill Diefenderfer, Packwood’s big-bellied top man at the Finance Committee, moaned about his loss of income when he left a job as a lobbyist to return to Packwood’s service during tax overhaul. But he managed to supplement his lower salary ($72,000 a year) by accepting honoraria for giving speeches in such places as New York, Chicago, and Boca Raton, to groups with an interest in tax overhaul. In 1985, he gave fifteen speeches and pocketed $14,250. He spoke to Northwestern Mutual Life, the Real Estate Tax Institute, the American Trucking Association, and the Grocery Manufacturers of America, among others.

  In 1985, the top honoraria recipients in the Senate, according to Common Cause, included tax writers Bob Dole ($127,993), John Chafee of Rhode Island ($57,606), Charles Grassley of Iowa ($55,460), and Bill Bradley ($46,800). In the House, big honoraria recipients included Ways and Means members Bill Frenzel ($48,500), Pete Stark ($47,800), Bob Matsui ($38,250), and James Jones ($35,834). Some of this money was given away by the members to charity, but not all of it.

  The benefits from the lobbyists went beyond honoraria. An investigation by Common Cause found that, in addition to the typical $1,000 or $2,000 speaking fee, some groups also picked up the tab for members and their families during extended stays at the posh resorts where speeches were delivered. Senator David Durenberger, Republican of Minnesota, and his two sons got the equivalent of more than $5,000 in travel costs for a six-day trip to Puerto Rico from groups seeking to keep the island’s tax credit. Senator Max Baucus, Democrat of Montana, and Representative Phil Crane, Republican of Illinois, and their wives received separate week-long Caribbean cruises from cruise-line companies. Representative Barbara Kennelly, Democrat of Connecticut, and her husband received a six-day stay in Pebble Beach, near Carmel, California, at the expense of the Connecticut Business and Industry Association, according to Common Cause.

  The top honoraria recipient in the House in 1985 was Rostenkowski. He took thirty-six trips and had earnings of $137,500, most of which went to charity. He did not disclose the destinations of his trips, having been burned in the past by revelations of his excursions at special-interest expense. Instead, he listed “travel” or “travel and lodging with spouse” beside the name of each trade association or business group that picked up his tab.

  When it came to raising money from special interests, Senator Packwood was the champ. As Finance Committee chairman, he possessed enormous power, and as a result, he became a magnet for campaign contributions from almost every monied interest and political action committee in the nation. He was Congress’s top PAC-man. During the eighteen months of the tax-reform effort, Packwood outpaced any other member of Congress in special-interest PAC receipts with $992,017.

  Contributions came from almost everywhere; he received the maximum $5,000 contribution allowed by law for his primary campaign from ninety-six different interest groups, according to one calculation. Between 1981 and the time of his general election in 1986, he had collected from all sources well over $6 million, which was nearly nine dollars for every person who eventually voted for him in the general election.

  Packwood put together a sophisticated system to haul in this loot. He hosted exclusive breakfast meetings of insurance executives, union leaders, and anyone else who would contribute $5,000 to his campaign. The contributors got the benefit of Packwood’s opinions during the monthly meetings in his office, and Packwood, in turn, got the benefit of using the groups as a base for further fundraising. Packwood also had an aggressive direct-mail drive that targeted groups that supported his pro-Israel, pro-women’s rights, and pro-abortion stands. That effort raised more than $3 million.

  In addition, Packwood was the beneficiary of a gaping loophole in the campaign-contribution laws. In 1985, a committee of successful insurance salesmen funneled more than $168,000 into Packwood’s reelection fund. The group, called Alignpac, was formed to beat back reform proposals to tax inside buildup on insurance policies and deny deductions for interest paid on money borrowed against policies. Alignpac managed to circumvent the federally imposed $5,000-per-election limit on PAC-giving by urging its members to make checks out directly to Packwood rather than to the PAC. The committee then bundled the checks together and sent them out to the lawmaker’s campaign headquarters.

  In 1985, Packwood hit the road and held a series of ten $1,000-a-plate fundraisers at the nation’s big-money centers. The stops included the Helmsley Palace in New York City, the Loews Anatole Hotel in Dallas, the Mayflower Hotel in Washington, and the Ritz Carlton Hotel in Chicago. The spree netted $2.4 million, and during one night at the Century Plaza Hotel in Los Angeles, Packwood raised half a million dollars, which was more than he spent in his entire first campaign for the Senate in 1968.

  “Raising money for Bob Packwood is like making love to a seven-hundred-pound gorilla,” Lester Pollack, a longtime Packwood friend, told The Washington Post. “It doesn’t make a difference when you get tired.”

  Over the years, Packwood’s contributors were amply rewarded for their check-writing stamina. Like most of his colleagues on the Finance Committee, Packwood was no champion of tax reform. Reform meant cleansing the code of credits, deductions, and exclusions. Packwood saw his job as doing the exact opposite. An unabashed advocate of using the income tax to give incentives to private industry and to promote social action, he managed to enact so many tax preferences that his staff thought of the long list as a kind of “Packwood plan.”

  Though Packwood claimed to be as “predictable as the sun rising” when it came to taxes, there was little else predictable about the aggressive chairman. He was a man with a long history of doing the opposite of what people expected him to do. Indeed, few members of Congress were harder to understand or to categorize than Robert William Packwood. He had a bright, if sometimes undisciplined, mind; a bulldog nature that refused to accept defeat; and an openness, some say a naïveté, that permitted him to take huge risks.

  Packwood’s family history possessed more than a hint of this volatile nature. His great-grandfather was an adventurer and a con man, an opportunist and a legislator. Bob Packwood loved to tell his story. It goes like this:

  William Henderson Packwood, a native of Illinois, joined the army and served in California at the time of the great gold rush. The temptation of riches was too much to pass up, and he promptly deserted to seek his fortune. But he did not find gold. He was captured and sentenced to serve a term as a prison laborer in the godforsaken wilderness north of California known as the Oregon Territory. As luck would have it, he was shipwrecked en route off the coast of what is now Curry County in southernmost Oregon. He put down roots there long enough to prosper and get elected to the fledgling state’s constitutional convention in 1857. He traveled to Salem to attend the conclave and liked the city so much that he never returned to the remote outback he came from. He did travel, however, to eastern Oregon, where he allegedly bilked gold miners in a scam that involved a waterway that he promised, but never built. Despite these undertakings, he managed to remain prominent in state politics.

  Bob Packwood’s father—William Packwood’s grandson—was not a criminal, but he was a lobbyist and was closely involved in the political life of Oregon all his life. Frederick William Packwood worked for thirty years representing the interests of the Associated Oregon Industries, a business group, before the state legislature. A bitter dispute over the organization’s stand against workmen’s compensation caused the elder Packwood to leave the organization and to make a
startling change in his allegiance. Frederick Packwood was fired from the business association and promptly went to work for the nation’s largest labor group, the AFL-CIO. Years later, his son would become one of the few politicians who backed the causes of both organized labor and business.

  Following in his father’s footsteps, Bob Packwood showed an early interest in politics. He studied political science at Willamette University, where one of the teachers was Mark Hatfield, later Packwood’s senior colleague from Oregon in the Senate. He attended faraway New York University Law School on scholarship, did a brief stint as an Oregon Supreme Court law clerk, and then went to work as a labor lawyer, representing management. At age twenty-seven, he became the Republican county chairman in heavily Democratic Portland. Three years later, in 1962, he was elected to the Oregon State House by dint of his political savvy and a studious avoidance of issues. His sparsely worded campaign brochures featured an oversized photograph of Packwood with his golden hair coiffed like the youthful Jack Kennedy. He served in the legislature for three two-year terms before attempting a dark-horse candidacy against Senator Wayne Morse, an Oregon institution in the U.S. Senate since 1944.

  When Packwood started his drive for the Senate, only 10 percent of the electorate had any notion who he was, but that did not stop the ambitious young legislator. He positioned himself to the right of Morse, especially on the issue of the U.S. involvement in Vietnam. He criticized the senator for voting to cut off funding for the war, and he made an issue out of Morse himself. Packwood successfully painted the senator as an outcast in his own party, unable to win federal money for the state. He also played up the advantages of his own youth against Morse’s sixty-eight years. It was a finely tuned political campaign effort, which included an army of young volunteers and plenty of lawn signs and bumper stickers. Packwood won by the narrow margin of 3,293 votes out of the 814,000 cast. He was sent to the Senate as its youngest member, at the age of thirty-six.