Finance Minority Staff Releases Report on EOs' Abramoff Dealings

The Senate rules give the Committee on Finance jurisdiction over revenue matters, and thus the Committee is responsible for conducting oversight of the administration of the federal tax system, including matters involving abusive acts by tax-exempt organizations. The Committee takes particular interest in ensuring that tax laws affecting donors and exempt organizations operate in a manner that benefits the American public. This investigation has been conducted not only to inform the Committee and the public about the specific organizations connected to Mr. Abramoff, but also to provide a broader picture of issues to be considered by Congress and the public with regard to tax-exempt organizations, including charitable organizations.

On September 22, 2005, Senator Charles Grassley and Senator Max Baucus, Chairman and Ranking Democratic Member of the Committee, authorized, on behalf of the Committee, the issuance of subpoenas to Mr. Abramoff's former employers, Greenberg Traurig LLP and Preston Gates LLP. The subpoenas sought any and all communications of Jack Abramoff as well as financial records.

Along with the e-mails and other documents provided to the Committee in response to the subpoenas, Committee Minority staff reviewed e-mails made public by the Committee on Indian Affairs. The Committee on Indian Affairs also shared with the Committee e- mails within the jurisdiction of the Committee that the Committee on Indian Affairs had not previously made public.

In its review of the materials, the Committee's Minority staff discovered actions taken by several tax-exempt organizations that raise serious legal and policy questions. The Minority staff focused on five organizations that appeared, in the context of the reviewed material, to be willing to provide certain services for Mr. Abramoff's clients in exchange for payments. They are:

• Americans for Tax Reform,

• National Center for Public Policy Research,

• Toward Tradition,

• Council of Republicans for Environmental Advocacy, and

• Citizens Against Government Waste.

• helping to hide sources of funds by laundering payments and then disbursing funds at Mr. Abramoff's direction,

• taking payments in exchange for writing newspaper columns or press releases that put Mr. Abramoff's clients in a favorable light,

• introducing Mr. Abramoff's clients to government officials in exchange for payment, and

• agreeing to act as a front organization for congressional trips paid for by Mr. Abramoff's clients.

E-mails subpoenaed by the Committee do not implicate the Cato Institute. The correspondence clearly shows, however, that the taxexempt organizations listed above -- not just the individuals directly involved -- took payments when their employees agreed to write such articles favorable to Mr. Abramoff's clients.

This type of activity indicates that these tax-exempt organizations engaged in what amounted to profit-seeking and private benefit behavior inconsistent with their tax-exempt status. And by virtue of the tax benefits, other taxpayers implicitly subsidized this behavior. Thus, these tax-exempt organizations appear to have perpetrated a fraud on other taxpayers.

In conducting its investigation, the Committee Minority staff:

• reviewed e-mails provided to the Committee in response to subpoenas issued in September 2005,

• reviewed e-mails provided to the Committee by the Senate Committee on Indian Affairs,

• reviewed e-mails that the Committee on Indian Affairs released to the public,

• reviewed publicly available Forms 990, Return of Organization Exempt from Income Tax, for the organizations in question,

• reviewed publicly available information relating to the organizations in question, including reports, financial statements and press releases,

• interviewed representatives of the organizations, both in person and through written questions,⁵

• reviewed media accounts published since the The Washington Post first reported on Mr. Abramoff's financial relationships with Indian tribes in February 2004,

• obtained the assistance of the staff of the Joint Committee on Taxation, with respect to technical explanations of present law pertaining to tax-exempt organizations and charitable contributions, and

• obtained the assistance of Senate legal counsel in seeking documents.

The Supreme Court has held that the "presence of a single [nonexempt] purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly [exempt] purposes.⁷ Applying this test, the Court held that an organization with an "important" nonexempt purpose was subject to tax.

An organization described in section 501(c)(4) must be organized primarily for the promotion of social welfare. This "primary purpose" test is satisfied if an organization is primarily engaged in promoting in some way the common good and general welfare of the people of the community. If an activity that does not promote the social welfare, alone or taken together with other activities that do not promote the social welfare, constitute the primary activities of an organization described in section 501(c)(4), the organization would not be eligible for continued exemption from tax as an organization described in section 501(c)(4). Some courts have held that a section 501(c)(4) organization is not entitled to continued exempt status if its non-exempt activities are "substantial". See, e.g., Vision Service Plan v. United States, 2006-1 U.S.T.C. (CCH) paragraph 50, 173.

Similarly, if a section 501(c)(4) organization's activities are merely incidental to, or secondary to, benefits provided to private persons, the organization generally would not be eligible for continued exemption from tax as an organization described in section 501(c)(4).

Private Inurement and Private Benefit

Organizations described in section 501(c)(3) and 501(c)(4) are subject to the prohibition against private inurement, under which no part of the net earnings of the organization may inure to the benefit of insiders of the organization, such as officers, directors and key employees. An organization that violates this prohibition may have its exemption revoked. As an alternative, or in addition, to revocation, a violation of the inurement prohibition may give rise to intermediate sanctions under IRC section 4958 against the disqualified person who receives an excess benefit and an organization manager who participates in an "excess benefit transaction" (essentially an inurement transaction) knowing that it is an excess benefit transaction.

In general, section 501(c)(3) (but not section 501(c)(4)) organizations also are prohibited from conferring more than an incidental private benefit on any individual or entity. This private benefit prohibition is broader than the private inurement proscription, in that the private benefit prohibition is not limited to benefits provided to insiders of the organization. If private benefit exists, it must be incidental in both a qualitative and quantitative sense to the public benefit. To be qualitatively incidental, a private benefit must occur as a necessary concomitant of the activity that benefits the public at large; in other words, the benefit to the public cannot be achieved without necessarily benefiting private individuals.⁸ Such benefits might also be characterized as indirect or unintentional. To be qualitatively incidental, a benefit must be insubstantial when viewed in relation to the public benefit conferred by the activity.⁹ If an activity provides a direct benefit to private interests, however, it does not matter if the benefit is qualitatively insubstantial -- "the direct benefit is 'deemed repugnant to the idea of an exclusively public purpose' and the organization cannot be exempt under section 501(c)(3)."¹⁰

Unrelated Business Income Tax

The unrelated business income tax generally applies to (1) income derived from a trade or business, (2) that is regularly carried on by the organization and (3) that is not substantially related to the performance of the organization's tax-exempt purposes. In very general terms, to be a trade or business, an activity must be carried on with the intent to earn a profit. To determine whether a trade or business is "regularly carried on," one generally must compare the activity to similar activities conducted by taxable organizations.¹¹ In general, to be substantially related to an exempt purpose for purposes of unrelated business income tax, there must be a causal relationship, and the activity must contribute importantly to the achievement of the purpose.¹²

Lobbying and Campaign Activities

Organizations described in section 501(c)(4) generally may engage in an unlimited amount of lobbying, provided the lobbying is related to the organization's exempt purposes. A section 501(c)(4) organization, however, may only engage in lobbying that is unrelated to its exempt purposes provided that such lobbying, together with other "unrelated" activities, are not the primary activities of the organization.

As indicated above, some courts have held that a "substantial" amount of nonexempt activity will defeat exemption as an organization described in section 501(c)(4). Unlike section 501(c)(3) organizations, section 501(c)(4) organizations are not subject to specified limits on the amount of lobbying activity that they may undertake; rather, the organization's lobbying activities (like its other activities) are examined to determine whether they are exempt or non-exempt activities for purposes of the section 501(c)(4) primary purpose test.

Other Relevant Tax Penalty Provisions

IRC Section 6701 generally imposes a monetary penalty against any person (1) who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim or other document, (2) who knows (or has reason to believe) that such portion will be used in connection with any material matter arising under the internal revenue laws and (3) who knows that such portion (if so used) would result in an understatement of the liability for tax of another person. If, for example, it were established that an exempt organization had unrelated business taxable income, but did not report such income, persons involved in the failure to report the income could be liable for aiding and abetting the understatement of tax liability, provided that the specific requirements of section 6701 are met with respect to the assistance or advice provided in connection with the preparation of Form 990 or Form 990-T.

IRC Section 7206 imposes substantial criminal penalties (including monetary fines and/or imprisonment) in the event that a person (among other things) (1) makes and subscribes any return, statement or other document, that contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or (2) willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim or other document, that is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim or document. If, for example, an exempt organization had, but did not report, unrelated business taxable income, and the person who signed the organization's return under penalty of perjury knew that such income improperly was excluded from the return, then that person potentially could be subject to criminal penalties under section 7206. Also, any person who did not sign the return, but willfully aided in or advised regarding the preparation of a false or fraudulent return, arguably could be subject to penalties under section 7206.¹³

IRC Section 7201 imposes substantial criminal penalties (including fines and/or imprisonment) for tax evasion. Specifically, section 7201 provides that any person who willfully attempts in any manner to evade or defeat any federal tax or the payment of tax shall, in addition to other penalties under law, be guilty of a felony.

Charitable Contribution (and Other) Deductions

Under certain circumstances, a contribution to a membership organization (whether or not a section 501(c)(3) organization) that would not be deductible as a charitable contribution may be deductible as a business expense under section 162. However, such a deduction generally is disallowed under IRC section 162(e) if the contribution is made for the purposes of facilitating lobbying. In addition, a charitable deduction for a contribution to a section 501(c)(3) organization generally will be denied in situations where the donee organization conducts lobbying activities on a matter of direct financial interest to the donor's trade or business, where a principal purpose of making the contribution is to avoid the lobbying expense disallowance rule under section 162(e).¹⁴

The definition of lobbying under section 162(e) is broader than the definition that is used, for example, for purposes of determining whether a section 501(c)(3) organization exceeded its lobbying limits. For example, under section 162(e), the term "lobbying" includes certain communications with the general public or with executive branch officials.

In general, a section 501(c)(4) organization that incurs lobbying and political expenditures (as described in section 162(e)) must provide notice to its members of the portion of dues allocable to such expenditures and must report such expenditures to the IRS.¹⁵ If a membership organization does not provide the requisite notices to its members, the organization must pay a tax at the highest corporate income tax rate on the amount of such expenditures.¹⁶

ATR was founded in 1985 by Grover Norquist, who is its current president. According to media reports, he and Mr. Abramoff have been friends since they were college students in Massachusetts, where they organized support for Ronald Reagan's presidential candidacy in 1980. When Mr. Abramoff became national chairman of the College Republicans, he made Mr. Norquist his executive director. The two later worked together at the conservative advocacy group Citizens for America (before Mr. Norquist founded ATR).

After Mr. Abramoff became a lobbyist in the mid-1990s, the two corresponded by e-mail, occasionally discussing proposed payments from Mr. Abramoff's clients and what those clients wanted from ATR. Other ATR employees corresponded with Mr. Abramoff and his colleagues, as well.

Those e-mails from and to Mr. Abramoff, his colleagues and ATR officials indicate that ATR:

• accepted payments from clients of Mr. Abramoff with the agreement to write checks to third parties as Mr. Abramoff directed, with ATR retaining a portion of the funds on at least one occasion,

• accepted payments from clients of Mr. Abramoff with tacit or explicit agreements to perform services such as writing newspaper columns favorable to the clients, and

• accepted payments from clients of Mr. Abramoff while agreeing to introduce them to government officials, including then-White House Senior Advisor Karl Rove.

In an e-mail to Jeffrey Ballabon, then executive vice president of public affairs for Primedia Inc.'s Channel One Network, Mr. Abramoff indicated how much he valued his relationship with Mr. Norquist. Mr. Abramoff told Mr. Ballabon that he strongly opposed putting another lobbyist in contact with Mr. Norquist: "We should not fully (or perhaps even partially) trust this guy and certainly we should not be giving our hard won assets or contacts. The quickest way to lose the interest of Sheldon, Grover et al is to 'hand them over' to another lobbyist." Mr. Ballabon responded, "ABSOLUTELY! We are not sharing our friends."

Last year Mr. Norquist told the Boston Globe that ATR passed along $1.15 million of the $1.5 million that ATR received from the Mississippi Band of Choctaw Indians to anti-gambling groups trying to block a casino in Alabama.²⁰ E-mails indicate how those financial arrangements were made.²¹

On September 24, 1999, Mr. Abramoff sent himself a reminder:

Call Ralph re Grover doing pass through

On October 3, 1999, Mr. Abramoff sent another reminder to himself:

Yes, it will.

On February 7, 2000, Mr. Abramoff told Mr. Reed:

On February 17, 2000, Mr. Reed told Mr. Abramoff that pro- gambling forces were saturating the radio waves and aggressively lobbying the legislation:

The documents reviewed by the Minority staff raise several issues with respect to ATR's compliance with current tax laws. As a threshold issue, many of the activities alleged in the e-mails reviewed by the Minority staff indicate that ATR may not be primarily operating to further social welfare purposes, which is a necessary condition of tax-exempt status as a section 501(c)(4) organization. In addition, the documents raise questions whether ATR should have reported income from some of its activities as taxable income. Finally, the e-mails raise questions as to whether insiders at ATR, including Mr. Norquist, used ATR primarily for their own or Mr. Abramoff's private benefit. Violations such as these could, under certain circumstances, result in penalties under current law, including excise taxes on officers of ATR, revocation of ATR's exempt status, and even criminal tax fraud penalties.

First, if it were established that the transfers through ATR were undertaken for the sole purpose of concealing the identity of the transferors (pro-gambling interests) from the ultimate transferees (anti-gambling interests), ATR's facilitation of such transfers would not further ATR's tax-exempt purposes (or any legitimate social welfare purpose). Second, Ralph Reed told Abramoff that pro-gambling forces were engaging in aggressive lobbying and "introducing a different local bill each day, trying to keep us on the defensive." Abramoff responded, "ATR will be sending a second $300K today." If it were established that ATR used the $300,000 for lobbying relating to gambling issues, arguably such activity could be considered as unrelated to ATR's tax-exempt purposes.

If these transactions, together with any other activities that are unrelated to ATR's exempt purposes, constituted the primary activities of ATR, then ATR's primary purpose would not be a social welfare purpose and ATR would not be eligible for continued exemption from tax as an organization described in section 501(c)(4).

In addition, if it were established that the benefits to the community resulting from ATR's activities were merely incidental to, or secondary to, benefits provided to Mr. Norquist and other private persons, ATR might not be eligible for continued exemption from tax as an organization described in section 501(c)(4).

A strong case can be made that the "pass through" of anti-gambling funds was not related to ATR's exempt purposes, and that it constituted a trade or business regularly carried on by ATR. To the extent ATR recognized revenue as a result of the transactions, such revenue would be taxable as unrelated business taxable income. Whether the activity is a trade or business and is regularly carried on would require an inquiry into, among other issues, whether the activity was undertaken for a profit and whether the activity was undertaken with the frequency with which similar activities are undertaken by for-profit organizations.

The e-mails do not contain facts sufficient to show whether Mr. Norquist received more than fair market value compensation for the services he provided to the organization. In one e-mail, Mr. Abramoff states that he "need[s] to give Grover something from helping" with a "pass through" transaction. If it were established that this fee were in fact paid to Mr. Norquist by ATR (or if it were paid directly by Mr. Abramoff to Mr. Norquist for services that ATR provided to Mr. Abramoff or his clients) and Mr. Norquist did not earn the compensation by providing services to ATR with a value equal to or greater than the fee, the payment potentially could have resulted in an excess benefit to Mr. Norquist, who is an insider (or "disqualified person"). Under such circumstances, private inurement arguably also would have occurred, ATR could face revocation of its exempt status, and Mr. Norquist (in his capacity as a disqualified person and also possibly as an organization manager) could face penalty excise taxes ("intermediate sanctions") under section 4958.

If it were established that contributions by an Abramoff corporate client to ATR were for lobbying within the meaning of section 162(e), then a business expense deduction should not have been claimed for such a contribution.

In written answers to Minority staff questions, Mr. Norquist and ATR officials declined to disclose information about donors to ATR, whether Mr. Abramoff's clients contributed and when.

Brown-Forman

On October 22, 1995, one of Mr. Abramoff's colleagues at Preston Gates suggested that they solicit help from Mr. Norquist as tax reconciliation legislation proceeded to conference. Mr. Abramoff responded by saying that Mr. Norquist did not want to personally represent Brown-Forman; instead, Mr. Norquist wanted a payment to ATR. Of Mr. Norquist, Mr. Abramoff wrote:

On January 30, 1996, Bruce Heiman, a colleague of Mr. Abramoff at Preston Gates, discussed the fact that Microsoft had retained Mr. Norquist as a lobbyist and mentioned that under the then-new Lobbying Disclosure Act, Mr. Norquist would have to register:

On May 10, 1998, James Lucier with ATR wrote to Mr. Abramoff asking for help getting money he thought was owed to him from an Abramoff client, Business Software Alliance ("BSA").²⁴ Mr. Lucier complained that the contribution to ATR was meant for him but that he had not received it.

In 1999, as a coalition of opponents sought to remove Channel One from public school classrooms, Mr. Abramoff and his clients looked in part to tax-exempt organizations to provide public support for Channel One. One argument was that Channel One offered tax savings for state and federal governments.

Mr. Ballabon with Channel One wrote to one of the Preston Gates lobbyists, Amy Berger, on January 12, 1999:

Mr. Abramoff wrote to Mr. Ballabon on February 3, 1999, regarding providing money to ATR for a dinner series.

On April 24, 2000, ATR was included in a list of organizations to contact on Channel One:

In its "Gimme Five" report, the Committee on Indian Affairs concluded that Mr. Abramoff reached out to ATR in making the case for the Choctaw tribe to help contact members of the House Ways and Means Committee. Nell Rogers, the tribe's planner, told the Committee on Indian Affairs that the money was not to support the "general work" of ATR but for specific tax issues important to the tribe. According to the report, the Choctaw paid ATR $60,000 in 1995 and $25,000 in 1999.

On May 20, 1999, Mr. Norquist wrote to Mr. Abramoff:

Magazine Publishers of America

On March 13, 2000, Mr. Heiman of Preston Gates informed colleagues that the lobbying team won a new client, Magazine Publishers of America (MPA). The organization opposed a proposed postal increase. Mr. Heiman's lobbying budget included a $20,000 contribution to ATR. On March 15, 2000, Mr. Abramoff sent Mr. Heiman a message with the subject line "Grover":

In late 2003 and early 2004, e-mails show there was an effort to obtain funds from DH2, Inc., a mutual fund firm and a client of Mr. Abramoff's, for ATR to publish a newspaper column favorable to DH2's stance on mutual fund legislation pending in Congress. On November 18, 2003, Michael E. Williams with Greenberg Traurig wrote to Mr. Abramoff:

50K

The next day, Mr. Abramoff wrote to Mr. Williams:

On February 18, 2004, Dan Clifton at ATR apparently was trying to solicit contributions from an investment-banking coalition. Kenneth Newton, a senior director for Commonwealth Capital Advisors, told Mr. Clifton in an e-mail that his coalition was unsure about the arrangement.

Actions taken by ATR were arguably not consistent with the organization's exempt purposes, and, if such activities together with other "unrelated" activities described in this report constituted the "primary" activities of ATR, it could be determined that ATR should not qualify for continued exempt status under section 501(c)(4).

Another issue relates to retaining a fee for purposes of publishing articles. If it were determined that the articles were not substantially related to an exempt purpose of ATR, and the activity was a trade or business regularly carried on, then the income from the activity should be taxable as unrelated business taxable income. This would require an inquiry into, among other issues, whether the activity was undertaken for a profit and whether the activity was undertaken with the frequency with which similar activities are undertaken by for-profit organizations.

The e-mails do not appear to contain facts sufficient to indicate whether any officers, directors or other "insiders" of ATR may have received more than fair market value compensation for the services provided to the organization.

Further, if contributions by a corporate client of Mr. Abramoff to ATR were for lobbying within the meaning of section 162(e), a business expense deduction should not have been claimed for such a contribution.

E-mails indicate that ATR invited Mr. Abramoff's tribal clients to take part in the dinners with President Bush and state legislative officials and even arranged a meeting with Karl Rove after Mr. Abramoff promised a donation from an African nation.

White House Meetings

In an April 27, 2001, e-mail to Mr. Abramoff, Mr. Norquist wrote:

Introductions for Congo Representative

On July 9, 2002, Mr. Abramoff told Mr. Norquist that he needed his help with regard to someone who would be attending a function that night:

On November 7, 2003, Michael Smith, a lobbyist at Greenberg Traurig, wrote to Todd Boulanger at Greenberg Traurig:

If it were established that any payment by Mr. Abramoff's client to ATR was a payment for the service of introducing the client to Mr. Rove, and such service was a trade or business not substantially related to ATR's exempt purposes and was regularly carried on, the payment could be unrelated business taxable income.

Amy Ridenour, NCPPR's president and a founder of the organization, first met Mr. Abramoff when they were members of the College Republicans. In testimony before the Committee on Indian Affairs and in an interview with Finance Committee staff, Ms. Ridenour said that her organization accepted donations from Mr. Abramoff's clients and routed money as Mr. Abramoff directed. Mr. Abramoff served on NCPPR's board of directors.

E-mail exchanges among Ms. Ridenour, Mr. Abramoff, and Mr. Abramoff's colleagues and clients indicate that CREA/Ms. Ridenour:

• accepted payments from Mr. Abramoff's clients and then acted as the front organization to pay for trips by members of Congress, their staff members and others,

• accepted payments from Mr. Abramoff's clients and then wrote checks as Mr. Abramoff directed, and

• accepted contributions from Mr. Abramoff's clients and then performed services such as writing favorable newspaper columns and speaking in favor of clients' causes.

U.S. Commonwealth of the Northern Mariana Islands

Ms. Ridenour said Mr. Abramoff believed that the "full story" on the U.S. Commonwealth of the Northern Mariana Islands ("CNMI") was not getting out, so he arranged "fact-finding" trips for employees of think tanks, Members of Congress, congressional staff, and others. She said Mr. Abramoff asked that NCPPR become a sponsor so that Members of Congress and their staffs could attend and abide by the rules. She said she had no objections because she had gone on such a trip and it had been truly educational. "As far as I knew for years, he, they went, sat in a room like I did, talked about OSHA violations, I don't know," Ms. Ridenour told Committee staff.

Patrick Pizzella, a colleague of Mr. Abramoff's at Preston Gates, wrote to Mr. Abramoff on July 1, 1996, to explain how they planned to funnel money to NCPPR to pay expenses related to a trip to the CNMI. Mr. Pizzella is referring to Doug Bandow, who went on the trip:

On January 20, 2000, Mr. Abramoff wrote to Ed Buckham at Alexander Strategy Group to say that he was planning a golf trip to Scotland that clients would sponsor:

A section 501(c)(3) organization must be organized and operated exclusively for exempt purposes. If it could be determined that congressional trips financed through NCPPR, taken alone or together with any other activities that are unrelated to NCPPR's exempt purposes, comprised more than an insubstantial part of NCPPR's activities, this could result in revocation of NCPPR's tax-exempt status. In addition, if it were established that facilitating transfers for private parties became an important purpose of NCPPR, a compelling argument could be made that NCPPR has a substantial nonexempt purpose and is not entitled to tax exemption under section 501(c)(3).

If it were established that NCPPR's financing of congressional trips was not substantially related to NCPPR's exempt purposes and that the activity was a trade or business that was regularly carried on, the income from that activity would be taxable as unrelated business taxable income. This would require an inquiry into, among other issues, whether NCPPR undertook the activity for a profit and whether NCPPR undertook the activity with the frequency with which similar activities are undertaken by for-profit organizations.

With significant additional factual development, it may be possible to show that legislators who participated in trips that were not of an educational nature (but were instead merely golf trips) and those who financed such trips might have received a more than incidental private benefit from NCPPR. The penalty for providing a more than incidental private benefit would be revocation of NCPPR's tax-exempt status.

If it were established that the trips coordinated by NCPPR were undertaken for the purpose of contacting Members of Congress or their staffs about specific legislation, the trips could have constituted lobbying activity for purposes of determining whether NCPPR has exceeded applicable section 501(c)(3) lobbying limits.

If it were established that an Abramoff client received a substantial return benefit for a contribution to NCPPR, the contribution should not have been deductible as a charitable contribution. If NCPPR engaged in lobbying (within the meaning of section 162(e)) on matters of direct financial interest to an Abramoff client and the contributions were made with a principal purpose of avoiding nondeductibility as a business expense under section 162(e), then the contribution should not have been deductible as a charitable contribution. Further, if contributions by a corporate client of Mr. Abramoff to NCPPR were for lobbying within the meaning of section 162(e), a business expense should not have been claimed for such a contribution.

Slate reported on an April 16, 1999, e-mail from Ms. Ridenour to Mr. Abramoff in which Ms. Ridenour stated that she sent a letter to Insight magazine regarding labor practices in the CNMI. She states that she sent the letter "at Shawn and Dennis's request," referring to members of Mr. Abramoff's lobbying team.³¹ Twelve days later, she sent the lobbying team a copy of a news release that she wrote on the same subject. "I will mail you some paper copies to Dennis's attention in case you want pretty ones for the client or circulation anywhere else," Ms. Ridenour wrote in the e-mail included in the Slate article.³²

Channel One Network

E-mails indicate that Ms. Ridenour wrote newspaper columns at the direction of Mr. Abramoff's client Primedia Inc. She maintains that she did such work "independent of" and "without regard to" Primedia's contributions.³³

In 1999, Mr. Abramoff and his associates discussed with Jeff Ballabon, who at the time was executive vice president of public affairs for Primedia's Channel One Network, the best way to fend off a coalition seeking the network's ouster from public school classrooms.

Mr. Abramoff's colleague, Amy Berger, wrote on April 12, 1999:

On October 29, 2001, Mr. Ballabon at Primedia wrote to Mr. Abramoff regarding Ms. Ridenour:

On March 17, 2000, Bruce Heiman at Preston Gates told Mr. Abramoff that a $10,000 contribution to NCPPR would be part of the lobbying budget for their new client, Magazine Publishers of America:

Ukraine

Mr. Abramoff wrote to his colleagues on February 19, 2000, to inform them that they had a new client: Ukraine. Dennis Stephens, a colleague, wrote to Abramoff on February 22:

Tax Issues

The e-mails cited above show a pattern of NCPPR producing public relations materials favorable to Mr. Abramoff's clients. Actions taken by the organization potentially were not consistent with the organization's exempt purposes, and, if such activities taken alone or together with other unrelated activities including those described in this report, were substantial in relation to exempt activities, or if such activities amount to a substantial nonexempt purpose, it could be argued that the organization should not qualify for continued exempt status under section 501(c)(3).

Another issue is whether one or more private persons received a more than incidental private benefit as a result of the actions of NCPPR. For example it could be argued that Mr. Abramoff or his clients received a substantial private benefit from NCPPR's publication of an article favorable to them. Such an approach would be supported by the finding of additional facts that demonstrate that the organization undertook the activity primarily to benefit Mr. Abramoff or his clients and only secondarily to further exempt purposes.

If it were established that a client of Mr. Abramoff received a substantial return benefit from a contribution to NCPPR, then the contribution should not have been deductible as a charitable contribution. If NCPPR engaged in lobbying (within the meaning of section 162(e)) on matters of direct financial interest to an Abramoff client and the contributions were made to avoid nondeductibility under section 162(e), then the contribution should not have been deductible as a charitable contribution. Further, if contributions by a client of Mr. Abramoff to NCPPR were for lobbying within the meaning of section 162(e), a business expense deduction should not have been claimed for such a contribution.

On May 25, 2000, Mr. Abramoff wrote to associates in his office:

In an e-mail dated October 1, 2002, Mr. Abramoff wrote to Michael Scanlon:

If it were established that NCPPR retained a fee for purposes of facilitating transactions designed solely to disguise the identity of the transferor, and that the activity was a trade or business regularly carried on, then the income from the activity would be taxable as unrelated business taxable income. This would require an inquiry into, among other issues, whether the activity was undertaken for a profit and whether the activity was undertaken with the frequency with which similar activities are undertaken by for-profit organizations.

With additional factual development, it may be possible to show that NCPPR directly provided a more than incidental private benefit to Mr. Abramoff. As mentioned above, certain e-mails suggest that Mr. Abramoff may have owed a personal debt to Ralph Nurnberger and that he satisfied this personal debt by directing that a portion of a $1 million contribution made by his client to NCPPR be disbursed by NCPPR to Mr. Nurnberger's company. If the use of NCPPR's charitable assets to satisfy Mr. Abramoff's personal debt constituted a prohibited private benefit, then the penalty could be revocation of NCPPR's tax-exempt status.

With additional factual development, it might be determined that the NCPPR transactions conferred a prohibited private benefit on: (1) Ralph Nurnberger or his company; (2) any Abramoff client who benefited from a "pass through" transaction; and/or (3) other recipients of grants from NCPPR that resulted from a pass through transaction designed to conceal the identity of the original contributor.

If it were established that an Abramoff client received a substantial return benefit for a contribution to NCPPR, then the contribution should not be deductible as a charitable contribution. If it were established that NCPPR engaged in lobbying (within the meaning of section 162(e)) on matters of direct financial interest to an Abramoff client and the contributions were made to avoid nondeductibility under section 162(e), then the contribution should not have been deductible as a charitable contribution.

Certain e-mails suggest that Ms. Ridenour undertook certain pass through transactions with the intent of "pumping up" certain of NCPPR's "ratios." The e-mails do not make clear what ratios Ms. Ridenour was attempting to inflate. If it were established that such ratios comprised part of NCPPR's Form 990 or another filing with the IRS (such as a computation of NCPPR's public support for purposes of its non-private foundation status), then it could be argued that Ms. Ridenour or others at NCPPR could be liable for aiding and abetting the understatement of NCPPR's tax liability.

In testimony by Ms. Ridenour before the Committee on Indian Affairs ("Gimme Five" report, page 302), she indicated that $450,000 was to be disbursed by NCPRR to the Capital Athletic Foundation, Mr. Abramoff's private foundation. If it were established that Mr. Abramoff had contributed such funds to NCPPR and earmarked the funds for distribution to Capital Athletic foundation and obtained a greater charitable deduction than he would have received if he had contributed the money directly to the foundation, it could be argued that Mr. Abramoff should be liable for tax evasion under section 7201. In addition, if it were established that persons affiliated with NCPPR knowingly facilitated the arrangement, it is possible that such persons aided and abetted the understatement of Mr. Abramoff's income tax liability.

Mr. Abramoff pleaded guilty to conspiracy, mail fraud and tax evasion on January 3, 2006. In pleading guilty to tax evasion, Mr. Abramoff admitted to using a public policy organization (unnamed in the plea agreement) for which he served as director to receive income and to make expenditures for his own personal benefit. "Through these activities, Abramoff and others intended to and did benefit Abramoff, the entities he controlled or financially supported, and the public policy organization."³⁷

CAGW's primary exempt purpose, as listed on its IRS Form 990, is "to perform nonpartisan research and analysis on waste and inefficiency in the government and to conduct educational programs to eliminate government waste." It is organized under section 501(c)(3).

The group is listed in e-mails as one that Mr. Abramoff and his colleagues thought they could turn to for a friendly op-ed piece or letter to the editor in exchange for a payment to the organization. In his response to staff questions, CAGW's president, Tom Schatz, stated that the organization is independent and nonpartisan and that it was not "affiliated" with Mr. Abramoff and therefore did not play a role in Mr. Abramoff's client relationships.

Nevertheless, Mr. Abramoff and his colleagues appear in their correspondence to have assumed such a relationship existed. When Mr. Abramoff's client Magazine Publishers of America ("MPA") opposed a proposed postal-rate tax increase, and Mr. Abramoff and his colleagues sought public relations help to make the case against the increase to Congress, they turned to CAGW.

Magazine Publishers of America

On March 13, 2000, Bruce Heiman at Preston Gates informed his colleagues that the firm had won a contract to represent MPA. Mr. Heiman suggested that $80,000 of the budget be used for "think tanks," with the $80,000 to be allocated among several groups, including $10,000 to CAGW. On March 17, 2000, Mr. Heiman wrote to Mr. Abramoff to ask him to approach Tom Schatz, president of CAGW:

Mr. Schatz, in his response to Committee staff's questions, said that CAGW did receive a donation from MPA but would not say how much, other than that it was less than one-half of 1 percent of CAGW's total revenue in 2000. Mr. Schatz said CAGW had a history of working on issues related to perceived waste at the Postal Service and that MPA never required that CAGW undertake a specific activity. He said CAGW did exchange information with representatives of MPA but only as part of its use of a broad array of sources. "However, final decisions to write, edit, and produce specific documents are made exclusively by CAGW staff," Mr. Schatz stated in his written response.

Mr. Schatz said further that magazine publishers may have incidentally benefited but that the primary purpose of CAGW's involvement was to save Americans money.

Channel One Network

In 1999, Mr. Abramoff and his associates solicited help from several tax-exempt organizations, including CAGW, for help serving their client, Channel One Network. In a written response to Minority staff questions, Mr. Schatz said CAGW has never received a contribution from Channel One. He reiterated in a telephone interview that the organization also never received a contribution from Channel One's parent company, Primedia Inc.

On January 25, 1999, Amy Berger wrote to Mr. Abramoff about Council Nedd, at the time a CAGW employee:

Another issue is whether one or more private persons who are not insiders of the organization directly received a more than incidental private benefit as a result of the actions of CAGW. For example, depending on the facts, it is possible that Mr. Abramoff or his clients received more than incidental private benefit as a result of CAGW's publication of an article favorable to them. Such an approach might be bolstered by any facts that demonstrated that the organization undertook the activity primarily to benefit Mr. Abramoff or his clients and only secondarily to further exempt purposes.

If it were established that a client of Mr. Abramoff's received a substantial return benefit from a contribution to CAGW, the contribution should not have been deductible as a charitable contribution. If it were established that CAGW engaged in lobbying (within the meaning of section 162(e)) on matters of direct financial interest to a client of Mr. Abramoff and the contributions were made to avoid nondeductibility under section 162(e), the contribution should not have been deductible as a charitable contribution.

After Ms. Norton became Secretary of the Interior, Mr. Abramoff arranged to meet Ms. Federici⁴² and, e-mails show, directed his clients to make payments to CREA. Later, he referenced those payments when encouraging Ms. Federici to make his clients' arguments with senior officials at the Department of Interior. In her responses, Ms. Federici seemed eager to comply.

Ms. Federici raised funds from Mr. Abramoff's clients, and then contributors were given a chance to speak one-on-one with Interior Department officials.

Through her attorney, Ms. Federici declined an interview request by Committee staff investigators.

The Committee on Indian Affairs reported that from 2001 to 2003, Mr. Abramoff arranged for Indian tribes to contribute at least $250,000 to CREA, sometimes under false pretenses. Ms. Federici told staff of the Committee on Indian Affairs that Mr. Abramoff or his clients contributed about $500,000 to CREA. The Committee on Indian Affairs' report concluded that, with the exception of the Choctaw tribe, there is "no evidence that the tribes gave to CREA because of any interest in CREA's mission. . . . Ample evidence indicates that she [Ms. Federici] repeatedly told Abramoff that she would talk with a particular senior Interior official to help ensure that the concerns of Abramoff's clients were addressed."⁴³ Indeed, the Committee on Indian Affairs concluded that documents suggest that Mr. Abramoff helped CREA "because, or in exchange for, special favors that Federici had promised to do for him or his tribal clients at Interior."⁴⁴

Hiring at the Department of the Interior

On January 30, 2001, Ms. Federici wrote to Mr. Abramoff:

On March 22, 2001, Mr. Abramoff wrote to Kathy Van Hoof, Coushatta attorney:

In 2001, CREA put together a Trustees Circle that provided contributors one-on-one access to Interior Department officials for a $50,000 contribution. On August 7, 2001, Mr. Abramoff wrote to Kevin Ring at Greenberg Traurig:

On January 3, 2002, Todd Boulanger at Greenberg Traurig wrote to Mr. Abramoff regarding Ms. Federici:

On January 27, 2002, Mr. Abramoff wrote to Ms. Federici:

Mr. Abramoff solicited Ms. Federici's help in helping his client, the Saginaw Chippewa tribe, fight a casino project proposed by the Gun Lake tribe. Mr. Abramoff called the project a "disaster in the making."

On December 4, 2002, Mr. Abramoff wrote to Ms. Federici:

CREA began hosting dinners at Mr. Abramoff's restaurant, Signatures, and Mr. Abramoff picked up the tab.

Mr. Abramoff wrote to Ms. Federici on April 5, 2002:

Mr. Abramoff wrote to Ms. Federici on September 24, 2002:

On December 16, 2002, Mr. Abramoff wrote to his former assistant, Susan Ralston, suggesting that her new employer, Karl Rove, meet with Ms. Federici:

On January 6, 2003, Mr. Abramoff asked Ms. Federici for a favor regarding the Mashpee Wampanaog Tribe:

The "contributions" to CREA described above should be characterized as fees paid by Mr. Abramoff or his clients in exchange for CREA's services in lobbying individuals at the Department of the Interior. Lobbying for a fee should be viewed as inconsistent with CREA's (or any other nonprofit's) tax-exempt purpose. It could be argued that CREA was acting on behalf of Mr. Abramoff's firm for purposes of lobbying the government, which should not be an exempt purpose for CREA. If these activities, taken alone or together with any other activities that are unrelated to CREA's exempt purposes, constituted the primary activities of CREA, CREA arguably should not be eligible for continued exemption from tax as an organization described in section 501(c)(4).

In addition, issues outlined in the Committee on Indian Affairs report raise questions of private inurement. In her deposition to the Committee on Indian Affairs staff, Ms. Federici said she could not recall having drawn a salary from CREA from 1997-2000. "It is noteworthy that Federici's salary from the CREA appears to have spiked during the period that Abramoff's tribal clients contributed to the CREA," the Committee on Indian Affairs concluded.⁵⁰

If, as suggested by the e-mails above, CREA retained a fee in exchange for taking actions that were unrelated to CREA's exempt purposes on behalf of an Abramoff client, the fee income arguably is not derived from an activity that is substantially related to the performance of the organization's tax-exempt purpose. Under such circumstances, if the activity also constitutes a trade or business and is regularly carried on, arguably the income from the activity should be taxable as unrelated business taxable income. This would require an inquiry into, among other issues, whether the activity was undertaken for a profit and whether the activity was undertaken with the frequency with which similar activities are undertaken by for- profit organizations.

If it were established that contributions by a corporate client of Mr. Abramoff's to CREA were for lobbying within the meaning of section 162(e), a business expense deduction should not have been claimed for such contributions.

Mr. Abramoff served on the organization's board of directors until 2004. He served two terms as its chairman. E-mails show that Mr. Abramoff could turn to Rabbi Lapin for a friendly newspaper column that put a client in a positive light. Indeed, the email communication indicates that Mr. Abramoff planned how best to use Rabbi Lapin as a resource.

For example, in an e-mail exchange with Amy Berger, an associate at Preston Gates, Mr. Abramoff suggested that they avoid having Lapin write a letter on behalf of a client, Channel One Network. Ms. Berger already had a copy of such a letter and wanted to "get them to Jeff [Ballabon, with Channel One] for his approval." Mr. Abramoff's response indicates that he needed to use Lapin for another purpose to benefit the same client: "I don't want Rabbi Lapin to do this. We are going to need him to discreetly call [James] Dobson to get Jeff a meeting, so I don't want to put him out publicly again yet."⁵²

In a telephone call with Minority staff, Rabbi Lapin said Toward Tradition is in the process of shutting down as a result of negative publicity related to the investigation of Mr. Abramoff. He said the corporation had not "folded" yet but that legal steps were being taken to do so.⁵³

Channel One Network

On March 11, 1999, Rabbi Lapin sent a copy of a proposed newspaper column to Mr. Abramoff and Mr. Ballabon of Channel One. The op-ed piece⁵⁴ was titled, "Is Making an Honest Living Immoral? Your Children Think So." Mr. Ballabon wrote back to Lapin and Mr. Abramoff:

Magazine Publishers of America

Toward Tradition is one of the organizations that Mr. Abramoff and his colleagues turned to in 2000 when it needed public-relations help for its client, Magazine Publishers of America.

Mr. Abramoff wrote to Mr. Heiman on May 9, 2000, with the subject line "replacement for Americans for Economic Growth":

On September 15, 2000, Mr. Abramoff asked Rabbi Lapin for a list of awards they could say he won to help him get into the Cosmos Club in Washington.

On December 13, 2000, Mr. Abramoff sent an e-mail to Ms. Ralston:

With additional factual development, it may be possible to show that one or more private persons who are not insiders of the organization directly received a more than incidental private benefit as a result of the actions of Toward Tradition. For example, depending on the facts, it may be possible to show that Mr. Abramoff or his clients received a substantial private benefit from Toward Tradition's publication of an article favorable them. Such an argument might be bolstered by any facts that demonstrated that the organization undertook the activity primarily to benefit Mr. Abramoff or his clients and only secondarily to further exempt purposes.

If it were established that an Abramoff client received a substantial return benefit from a contribution to Toward Tradition, the contribution should not have been deductible as a charitable contribution. If it were established that such organizations engaged in lobbying (within the meaning of section 162(e)) on matters of direct financial interest to an Abramoff client and the contributions were made to avoid nondeductibility under section 162(e), the contribution should not have been deductible as a charitable contribution.

The Minority staff found a large number of questionable activities by the nonprofits named in Mr. Abramoff's and other's e- mails. It appears that lobbying, public relations work and, in some cases, disguising the source of funds was conducted by the nonprofits examined in this report. A variety of tax-law standards for the operation of nonprofits may have been violated.

In general, a substantial part of a tax-exempt entity's activities cannot be for the benefit of a for-profit entity. Mr. Abramoff used nonprofit organizations for his lobbying practice. These organizations clearly acted to benefit Mr. Abramoff and his lobbying interests. If it is found that these activities were a substantial or a primary activity of these organizations, then the exemption from taxes for these nonprofit entities could be revoked.

The private inurement and private benefit prohibitions also are at issue. Although the staff did not find direct evidence of violations of these two prohibitions, there are significant indications that such violations occurred.

Substantial issues related to the unrelated business income tax are raised by the e-mails. In general, charities and social welfare organizations are subject to tax on income from for-profit activities that are not substantially related to exempt purposes. Based on the information contained in this report, there is a strong likelihood that lobbying, public relations work and disguising the source of funds for a specific "client" for a fee are not charitable or a social welfare purpose and income from such activities may be subject to the unrelated business income tax.

IRC Section 162(e) provides that business expenses can be deducted, including contributions to nonprofit organizations. However, if a contribution to a section 501(c)(3) or 501(c)(4) organization is made in connection with lobbying by such organizations, then that payment cannot be deducted. Did companies or organizations deduct as a business expense payments to nonprofit organizations involved with Mr. Abramoff that were then used to advance a lobbying agenda?

At least three additional provisions of the tax code should be analyzed in light of the materials described in this report:

• Section 6701 generally imposes a monetary penalty against any person who assists in the preparation of a document that understates the liability for tax of another person.

• Section 7206 imposes substantial criminal penalties on a person who produces a tax return made under penalty of perjury which that person does not believe to be true. If it were established that the exempt organization had, but did not report, unrelated business taxable income, and the person who signed the organization's return under penalty of perjury knew that such income improperly was excluded from the return, such person arguably could be subject to criminal penalties under Section 7206.

• Section 7201 imposes substantial criminal penalties for tax evasion -- any person who willfully attempts in any manner to evade or defeat any federal tax on the payment of such tax could be guilty of a felony.

Regardless of the outcome of additional investigations, what should not be tolerated are tax breaks given to so-called nonprofit organizations that perform lobbying, public relations and/or disguising the source of funds for a fee. These activities cannot be defended because they violate the principle that these section 501(c)(3) and 501(c)(4) organizations are to be organized for charitable or social welfare purposes.

Activity that is no different from the operations of lobbying and public relations firms -- who are paid by clients to lobby and do public relations on a specific issue -- should not be treated as a social welfare activity and granted tax-favored status. What is the rationale for allowing tax-favored entities, organized as nonprofits, to engage in the same behavior as lobbying and public relations firms? If this activity is permitted, then should not lobbying firms and public relations firms enjoy the same tax-exempt status?

We recommend the Committee consider legislation clearly addressing the practices exposed in this report. The Minority staff has developed the following options for discussion with the Majority staff and Members of the Finance Committee.

2. Alternatively, provide that if a contribution is accepted by a section 501(c)(4) organization (whether or not it engages in lobbying activity) with any expectation of a quid pro quo, then the contribution income is treated as income from an unrelated trade or business (and thus is subject to unrelated business income tax).

3. Require that section 501(c)(4) organizations that engage in lobbying publicly disclose all corporate donors.

4. Impose an excise tax on section 501(c) organization managers that knowingly accept and disburse contributions for the primary purpose of facilitating a transaction for the benefit of the contributor if the transaction does not directly further exempt purposes.

² Eamon Javers, Op Eds for Sale, BusinessWeek Online, Dec. 16, 2005. See Appendix.

³ Citizens Against Government Waste is affiliated with a 501(c)(4) organization called Council of Citizens Against Government Waste, but the reviewed materials do not mention Council of Citizens Against Government Waste.

⁴ Americans for Tax Reform is affiliated with a 501(c)(3) organization, Americans for Tax Reform Foundation.

⁵ Committee staff invited Italia Federici, president of CREA, to be interviewed by staff. Her attorney declined the request on Ms. Federici's behalf, stating that she would plead her Fifth Amendment rights rather than answer staff questions.

⁶ Treas. Reg sec. 1.501(c)(3)-1(c)(1).

⁷Better Business Bureau of Washington, D.C. v. United States, 326 U.S. 279, 283 (1945).

⁸ See American Campaign Academy v. Commissioner, 92 T.C. at 1076.

⁹ Bruce R. Hopkins, The Law of Tax-Exempt Organizations, sec. 19.10 (8th ed. 2003).

¹⁰ G.C.M. 37789 (Dec. 18, 1978).

¹¹ See, e.g., Treas. Reg. sec. 1.513-1(c)(2)(i).

¹² Treas. Reg. sec. 1.513-1(d)(2).

¹³ See also section 7207 (regarding fraudulent returns, statements or other documents).

¹⁴ Sec. 170(f)(9).

¹⁵ Sec. 6033(e).

¹⁶ Sec. 6033(e)(2).

¹⁷ ATR website, http://www.atr.org/home/about/index.html.

¹⁸ Letter from Cleta Mitchell, attorney for ATR, July 24, 2006.

¹⁹ Lobbying disclosure reports for eLottery Inc. and Mississippi Band of Choctaw Indians indicate that Abramoff represented them at the time of the payments described in the e-mails.

²⁰ Michael Kranish, Antitax activist says he got $1.5 million from tribes, The Boston Globe, May 13, 2005. See Appendix.

²¹ The text of the e-mails included in this report appears as written in the original e-mails. In most cases, only excerpts are included. All e-mails cited in this report are included in the Appendix.

²² "Gimme Five" report, p. 27.

²³ Redacted by Senate Committee on Indian Affairs.

²⁴ Lobbying disclosure reports from the period covered in the e-mails indicate that Mr. Abramoff represented Business Software Alliance.

²⁵ Grover Norquist, Tuning in to Channel One, Washington Times, Jan. 30 1999. See Appendix.

²⁶ Peter Ferrara, The Clear Benefits of Channel One, Americans for Tax Reform policy brief, May 19, 1999. See Appendix.

²⁷ Mr. Norquist published two Washington Times op-eds on the subject of postal increases during this time period: Marvin Runyon: Former postmaster makes a killing, March 31, 2000; and Harry Potter Goes Postal, July 25, 2000. See Appendix.

²⁸ Michael Kranish, Antitax activist says he got $1.5 million from tribes, The Boston Globe, May 13, 2005. See Appendix.

²⁹ National Center for Public Policy Research website, http://www.nationalcenter.org/.

³⁰ "Gimme Five" report, p. 36.

³¹ Dennis Stephens and Shawn Vassell were lobbyists at Preston Gates.

³² Timothy Noah, Think Tanks for Sale, Slate, March 28, 2006. See Appendix.

³³ Committee staff interview with Amy Ridenour, June 26, 2006.

³⁴ Amy Ridenour, Postal Service's exorbitant price increases may stamp cancel on your favorite magazine, Knight Ridder/Tribune News Service, May 13, 2000. See Appendix.

³⁵ Interview with Ms. Ridenour, June 26, 2006.

³⁶ Susan Schmidt and James Grimaldi, Non Profit Groups Funneled Money for Abramoff, Washington Post, June 25, 2006. See Appendix.

³⁷ Abramoff plea agreement, Jan. 3, 2006. See Appendix.

³⁸ The Citizens Against Government Waste website is at www.cagw.org.

³⁹ Leslie K. Paige, Mail Monopoly, CAGW Wastewatcher, May 2000. See Appendix.

⁴⁰ "Gimme Five" report, p. 323.

⁴¹ The CREA website is at www.crea-online.org.

⁴² According to the "Gimme Five" report, p. 323, Ms. Federici told staff of the Committee on Indian Affairs that she met Mr. Abramoff at a football game with Mr. Norquist.

⁴³ "Gimme Five" report, pages 13 and 14.

⁴⁴Id.

⁴⁵ Redacted by Senate Committee on Indian Affairs.

⁴⁶ "Gimme Five" report indicated, p. 331, that Mr. Abramoff wanted help with the Bureau of Indian Affairs' tribal insurance policy.

⁴⁷ Redacted by Senate Committee on Indian Affairs.

⁴⁸ Redacted by Senate Committee on Indian Affairs.

⁴⁹ Redactions by Senate Committee on Indian Affairs.

⁵⁰ "Gimme Five" report, p. 323.

⁵¹ E-mail from Rabbi Lapin to Susan Ralston, Abramoff's assistant, May 10, 2000.

⁵² E-mail from Mr. Abramoff to Amy Berger, Oct. 18, 1999.

⁵³ Telephone call with Minority staff, July 17, 2006.

⁵⁴ Rabbi Daniel Lapin, Channel One and its generosity under attack from those who would prefer to use tax dollars for same equipment, Knight Ridder/Tribune News Service, April 15, 1999. See Appendix.

⁵⁵ "Jack Abramoff and Toward Tradition," by Rabbi Daniel Lapin, www.towardtradition.org/jack_abramoff_and_TT.htm. See Appendix.

Dear: * * *

Americans for Tax Reform ("ATR") is in receipt of your letter dated June 30, 2006, requesting information regarding ATR, its personnel, its donors, and other specific information about the organization.

As a preliminary statement, as you may or may not know, ATR is a nonprofit, tax exempt corporation established under I.R.C. § 501(c)(4) whose principal purpose is increasing public awareness about the size and regulations of government and rallying support for lower taxes and smaller government.

As a § 501(c)(4) social welfare and grassroots lobbying organization, contributions to ATR are not tax-deductible to its donors. While the Senate Committee on Indian Affairs in its 'investigation' and report references certain charitable organizations with respect to the use and/or misuse of the tax exempt purpose of certain § 501(c)(3) organizations, ATR is not a charitable organization. No "abuse(s)" of ATR's exempt status have occurred nor is there any evidence of 'abuse' of ATR's tax exempt status. Further, as long as ATR expends its funds in keeping with its general purpose and permissible activities under provisions of applicable law, there is no 'abuse' of ATR's tax status by virtue of ATR's involvement in state level, grassroots campaigns on issues.

In addition, there is no revenue impact for the federal treasury regardless of the amount of contribution(s) received by ATR because contributions to ATR are not tax deductible to its donor(s).

Several questions contained in your letter are apparently based upon communications (including emails) which reference ATR, but which, as you are aware through conversations with the undersigned, neither ATR nor its officers, employees or counsel have received or been allowed to review. It is not reasonable to expect ATR to testify to or comment upon communications which are not being made available to the organization and its counsel to review and research. All communications must be considered within the context in which they were sent or received.

Accordingly, absent the opportunity to review the referenced emails, including the communications that preceded and followed each email referenced in your letter, it is not possible for ATR to respond to questions regarding those communications.

In response to the questions you have propounded to ATR regarding contributions and/or ATR donors, please be advised that the identity of donors to ATR is protected from disclosure pursuant to 26 USC § 6104(d)(3)(A). During the course of the investigation conducted by the Senate Committee on Indian Affairs, ATR steadfastly maintained its statutory right of protection from forced disclosure of donor information to the Committee. The American Civil Liberties joined with ATR in sending letters on three separate occasions to the Senate Committee on Indian Affairs protesting the efforts of the Committee to force ATR to disclose statutorily protected confidentiality of donor information and identity.

ATR exercises its statutory right not to disclose such information and therefore respectfully declines to answer questions related to the disclosure of ATR donor identity.

1. Has ATR or ATRF or any of the organizations' executives performed services for any registered lobbyist (or client of a registered lobbyist at the direction of [sic] suggestion of such lobbyist), such as agreeing to publish an article, whether or not for a fee?

No.

2. If so, in any such case, was there an understanding, implicit or explicit, that a contribution would be provided to ATR or ATRF in exchange for such service?

Not applicable. See Response to Question #1

3. Mr. Abramoff said in an e-mail on October 24, 1995, that a $50,000 contribution to ATR would get Mr. Norquist to do "everything they need him to do to win "for a company represented by Preston Gates. Does this describe an agreement Mr. Norquist made with regard to Mr. Abramoff's client?

Absent the opportunity to review the communication to which this question relates, ATR lacks sufficient information to respond to Question #3.

4. On March 10, 1996, Mr. Abramoff wrote to a fellow lobbyist at Preston Gates to say that Mr. Norquist is getting anxious that he doesn't yet have a $10,000 contribution to ATR for Jim Lucier, who is "doing a great job on this. " To what does this refer? What was Mr. Lucier doing for an Abramoff client that involved being paid $10,000 through a contribution to ATR.

Absent the opportunity to review the communication to which this question relates, ATR lacks sufficient information to respond to Question #4.

5. Two years later, on May 10, 1998, Mr. Lucier complained to Mr. Abramoff in an e-mail that his annual bonus checks from Business Software Alliance and Americans for Computer Privacy weren't being swiftly delivered to him. Mr. Lucier told Mr. Abramoff that the money was for work he does at ATR. Mr. Abramoff subsequently said that Mr. Norquist knew the money was for Mr. Lucier but that Mr. Norquist thought BSA was "shortchanging" him by $30,000.

Jim Lucier is a former employee of ATR but has not been employed by ATR in some time. Absent the opportunity to review the communication to which this question relates, ATR lacks sufficient information to respond to Question #5. Further, it would appear that the communication referenced in Question #5 was between parties other than ATR.

6. On May 20, 1999, Mr. Norquist wrote to Mr. Abramoff asking the status of the "Choctaw stuff" and saying he had a $75,000 hole in his budget from last year. What is the Choctaw stuff?

ATR has a long history of working with the Mississippi Choctaw tribe and its representatives and leaders on a variety of issues, including co-publishing a book regarding the free enterprise successes of the tribe entitled Choctaw Revolution.

7. On November 11, 1999, Mr. Abramoff told an ATR employee, Peter Ferrara, that Mr. Norquist wanted money Mr. Abramoff intended for Mr. Ferrara to go through ATR as a contribution. When did Mr. Ferrara work for ATR? What was his job ?

Peter Ferrara was Chief Economist at Americans for Tax Reform in the late 90s. He was a writer and analyst for ATR.

8. Mr. Ferrara was quoted last year as saying it is common to take money in exchange for writing op-ed articles. Did payments to him for writing op-eds go through ATR when he was an employee there?

ATR is not aware of payments to Peter Ferrara for any op-eds he wrote on behalf of ATR. Mr. Ferrara had permission to perform work outside of his salaried responsibilities on behalf of ATR, but ATR has no record or knowledge of that work or any compensation he may have received for performing such work.

9. In May 1999, ATR issued a press release saying Channel One Network was good for taxpayers and students. Was Primedia, Inc. or Channel One a donor to ATR at that time?

ATR declines to respond to questions regarding the identity of or contribution from any donor. ATR can state that it has a long history of supporting competitive sourcing for government services.

10. How much money has ATR received from Primedia or Channel One Network? When were those donations received?

ATR declines to respond to questions regarding the identity of or contributions from any donor.

11. On March 17, 2000, Preston Gates employees proposed a lobbying budget for their client, Magazine Publishers of America, that included a $20,000 contribution to ATR. How much did Magazine Publishers of America contribute to ATR? What are the dates of those donations?

ATR declines to respond to questions regarding the identity of or contribution from any donor.

12. In late 2003 and early 2004, did ATR get a contribution from DH2 in this time period?

ATR declines to respond to questions regarding the identity of or contribution from any donor.

Please contact the undersigned if you have additional questions regarding ATR that are within the scope of information that ATR is capable of providing, the confidentiality of which is not protected by law.

Dear:

It was a pleasure meeting with you on June 26, 2006, regarding our client, the National Center for Public Policy Research ("NCPPR"). As promised, we are providing you with further information relating to the contributions NCPPR received from Channel One and Magazine Publishers of America. We are also enclosing general information about NCPPR that outlines its history and its current charitable activities.

With regard to Channel One, in May 1999, NCPPR produced a White-Paper entitled "Activists Take Aim at Corporate Involvement in Schools." This paper, written by Amy Ridenour, discusses the Channel One program in public schools. (Exhibit A) As discussed at our meeting, the White-Paper discusses broad federalism issues, and whether local public, private and parochial schools should be able to make the choice that is best for their individual school, rather than have the choice made for them by the Federal government.

To our knowledge, NCPPR has only received two grants from Channel One. The first grant, in the amount of $10,000, was received on June 17, 1999. (Exhibit B.) The second grant, in the amount of $49,000, was received on November 20, 2001. (Exhibit C)

As we discussed at our meeting, NCPPR received an invoice dated November 20, 2001, from Capital Campaign Strategies for research and consulting services, in the amount of $44,000. (Exhibit D) NCPPR paid the invoice on November 21, 2001. (Exhibit E)

No additional press releases, white papers, or opinion editorials related to the Channel One issues, including commercialization in schools, could be located through a search of the files of NCPPR, or through an Internet search.

Finally, to our knowledge, NCPPR received two donations from the Magazine Publishers of America, each in the amount of $10,000. The first grant was received on May 25, 2000, and was for educational programs. A copy of NCPPR's register, reflecting the 2000 grant, is included at Exhibit F. The second grant was received on March 12, 2002, and was for general support. A copy of NCPPR's register and a copy of NCPPR's deposit slip are attached at Exhibit G.

Should we find any additional information, we will notify you immediately. If you have any additional questions, please do not hesitate to contact me at 202.624.7371.

I am responding to your letter of June 22, 2006, which asks questions about the actions of tax-exempt organizations "affiliated with the lobbying operations of Jack Abramoff," or "that appear to have played a role in Mr. Abramoff's client relationships." We note that we requested a copy of the emails to which you refer in your letter, but that we were not permitted access to them. Therefore, our answers may not be as complete as possible since we have not read the underlying material that formed the basis for the questions.

We also request that any information disclosed herein about any contributor to Citizens Against Government Waste (CAGW), including names and donation amounts, be kept strictly confidential. As you may be aware, in NAACP v. Alabama, 357 U.S. 449 (1958), a unanimous Supreme Court held that a compelled disclosure of the NAACP's membership lists would have the effect of suppressing legal association among the group's members. Only an "overriding valid interest of the State," something not present in the NAACP case (nor in the Senate Finance Committee's request for information), could justify the state of Alabama's actions. That decision applies to the list of contributors to any nonprofit organization (including CAGW).

CAGW was established in 1984, following the release of the Grace Commission report, which was formally known as the President's Private Sector Survey on Cost Control. President Reagan established the commission by executive order in January, 1982. He named business leader J. Peter Grace as chairman of the commission, asking that Peter and his team "work like a tireless bloodhound" to uncover waste, fraud, abuse, and mismanagement throughout the federal government.

The Grace Commission was funded by the private sector, and cost taxpayers nothing. Its executive committee consisted of 161 senior private sector leaders, and it was staffed by more than 2,000 volunteers. The commission made 2,478 recommendations that would have saved taxpayers $424.4 billion over three years. The report contained 47 volumes and 1.5 million pages of additional material that covered every aspect of the federal government's activities.

When the commission finished its work, President Reagan asked Peter Grace not to let the report gather dust on a shelf. Mr. Grace teamed up with Pulitzer Prize-winning columnist Jack Anderson to form CAGW. The organization's mission is to work for the elimination of waste, fraud, abuse, and mismanagement in government with the goal of creating a government that manages its programs with the same eye to innovation, productivity, and economy that is dictated by the private sector.

Since CAGW was founded in 1984, it has amassed a record of $825 billion in savings for America's taxpayers and attracted more than one million members and supporters to its cause. CAGW enjoys a solid reputation among the media and policymakers for sound, user-friendly, and incisive research and has earned the respect of members of Congress from both sides of the political aisle.

CAGW relies solely on the support of individuals, foundations, and corporations to underwrite its research and educational activities, and does not accept government funding. In 2005, 81 percent of CAGW's contributions came from individuals and 19 percent from foundations and corporations.

As described in CAGW's application for recognition of exemption under Section 501(c)(3) of the Internal Revenue Code, dated July 2, 1984, Part III, Section 3 (Exhibit A), "The purpose of the Foundation is to conduct nonpartisan research and analysis of waste and inefficiency in government. The Foundation will also publish and disseminate information and conduct educational activities in this regard." . . . "Although the Foundation plans to perform research and analysis with its own staff, it will capitalize on existing sources of opportunities for cost savings as reported by the CBO, GAO, the Inspector Generals, the President's Private Sector Survey on Cost Control and other such sources. The Foundation plans to involve local citizen committees and groups and will disseminate information and conduct its education and publishing activities using the media (printed, television and radio) public service advertisements, a speaker's bureau, publications, magazines, newsletters, etc." In other words, CAGW utilizes a broad array of information sources for an agenda that is as wide in scope as the operations of government at every level (federal, state and local). It always exercises its own discretion to decide which issues it will research and publicize at any particular time.

As an independent, private, nonpartisan, nonprofit organization, Citizens Against Government Waste (CAGW) was not "affiliated with" Mr. Abramoff's lobbying operations, and therefore could not have "played a role in Mr. Abramoff's client relationships."

Question 1: While CAGW's long-standing policy, based on the NAACP case, is not to discuss donors or the amounts they contribute, we will confirm that CAGW received a contribution from The Magazine Publishers of America (MPA) on July 28, 2000. The amount was less than one half of one percent of CAGW's total revenue for 2000. (See also question 12 below.)

Question 2: Consistent with its mission to work for the elimination of waste, fraud, abuse, and mismanagement in government with the goal of creating a government that manages its programs with the same eye to innovation, productivity, and economy that is dictated by the private sector, CAGW researches, promotes, and publicizes public policy on a wide variety of issues. CAGW had a history of working on issues related to the Postal Service for 16 years prior to the receipt of support from MPA, and continues such work to this day. Since the contribution was considered as general operating support consistent with CAGW's charitable purpose, there was no requirement that any specific activity be undertaken by CAGW. Since CAGW has not been granted access to Mr. Abramoff's emails, the organization cannot know exactly what MPA expected or was told by third parties.

Question 3: As an independent, nonpartisan, nonprofit organization, CAGW has published dozens of articles on a variety of postal issues consistent with its mission as described in response to question two. The organization's involvement in postal issues can be traced directly to the Grace Commission's report on Boards/Commissions Business II and the appendix that addressed U.S. Postal Service issues (Exhibit B). We have enclosed all of the written material that we could find related to the Postal Service.

Consistent with CAGW's charitable purpose "to perform research and analysis with its own staff . . . and "capitalize on existing sources of opportunities for cost savings as reported by the CBO, GAO, the Inspector Generals, the President's Private Sector Survey on Cost Control and other such sources," (See Exhibit A), the organization did exchange information with representatives of MPA as part of its use of a broad array of resources. However, final decisions to write, edit, and produce specific documents are made exclusively by CAGW staff.

Regarding postal rate increases, the Grace Commission report on Boards/Commissions Business II, pp. 190-197, specifically addressed that subject matter. The first article subsequent to the commission's report that is available in our records was a Fall 1990 Government WasteWatch article citing wasted time at the Postal Service. In total, there were eight articles in Government WasteWatch, one in Wastewatcher, a letter to the editor of The Washington Post, and four press releases on postal issues prior to the receipt of the July 28, 2000 contribution from MPA. CAGW's activities on postal reform continue to this day.

Therefore, any publications or public statements issued by CAGW regarding postal reform are based on CAGW's extensive knowledge of the subject matter and on a wide variety of sources, including the Grace Commission. CAGW had no need to rely on any "argument" from MPA; indeed, Wastewatcher is one of numerous CAGW publications that have included information on postal reform.

Finally, as stated in our response to question two, MPA's contribution was classified as general operating support, a classification approved by CAGW's accountants, and therefore was not restricted to any specific activity or usage.

The following material is enclosed:

Government WasteWatch (Exhibit C)

While preventing a postal rate increase may incidentally benefit magazine publishers and other mailers, including nonprofit organizations like CAGW itself, the primary purpose of CAGW's efforts to publicize the argument against unwarranted increases in postal rates (as well as other postal reforms) is to save Americans money. CAGW's documented track record dating back many years and extensive activities on postal reform, as well as the miniscule amount contributed to CAGW by MPA, belie the implication that CAGW was doing anything in "exchange" for the general operating support provided by MPA. As an unrestricted contribution, the funds received from MPA were available for CAGW to use for any activity consistent with its charitable purpose.

Question 5: The MPA contribution went to CAGW, which is a 501(c)(3) organization.

Question 6: CAGW did not pay taxes on the MPA contribution. It was considered general operating support for the organization's charitable purpose. The organization has no information about MPA's actions regarding a tax deduction.

Question 7: CAGW was not "involved" in Mr. Abramoff's lobbying contract with Channel One. (See question 8 below, citing the fact that CAGW never received any contribution from that company.) However, the lack of financial support was irrelevant to CAGW's interest in the subject matter. Once again, because the committee has not provided copies of Mr. Abramoff's emails, it is not possible for us to respond further to this question.

In regard to Channel One, CAGW has been concerned with a wide variety of education issues for 22 years, starting with the Grace Commission Report on the Department of Education and the appendix thereto (Exhibit H). Since Channel One provided school districts with electronic equipment and maintenance that many could not afford, as well as an award-winning news program each day, all at no cost to taxpayers, it was consistent with CAGW's activities in the field of education to conduct research and publish information about the network's activities.

In general, CAGW engages in a myriad of issues that are related to its mission of uncovering, publicizing, and eliminating wasteful government spending. The organization utilizes a broad array of resources for obtaining information. Public and private sector sources include the federal budget; legislation; current and former members of Congress and staff; the Congressional Budget Office; the Office of Management and Budget; the Government Accountability Office; inspectors general; whistleblowers; the Internet; the Grace Commission reports; analyses and studies by nonprofit organizations; the media; CAGW members; companies; trade associations; and ordinary Americans concerned about wasteful spending. CAGW has many ongoing relationships with individuals throughout the public and private sector. In some instances, CAGW approaches them; in other cases, these individuals approach CAGW to determine if there is a common interest in an issue. The final determination whether to engage CAGW resources on any issue is made by senior CAGW staff and CAGW's Board of Directors. That decision is based on whether the subject matter is related to CAGW's mission of fighting wasteful spending at all levels of government.

Following the Grace Commission report, our available records indicate that CAGW first published information on education issues in the Winter 1991 Government WasteWatch. That was followed by 11 Government WasteWatch articles, two Wastewatcher articles, three press releases, and two special reports prior to the material published in regard to Channel One. The publications on Channel One include a January 22, 1999 press release; an article in the Spring 1999 Government WasteWatch, pp. 4-5; an article in the Summer 2000 Government WasteWatch, p. 16 (Exhibit I); and a passing mention in both the 1999 Congressional Pig Book Summary, p. 28 and the 2000 Congressional Pig Book Summary, p. 31 (Exhibit N).

CAGW has issued the following in regard to education:

Government WasteWatch (Exhibit J)

Question 9: See question 8.

Question 10: The discussion in the prior answers addresses how the activities associated with MPA and Channel One are related to CAGW's charitable purpose. In the case of the Postal Service and education, these issues have been appropriate for CAGW's research and education activities since its inception, as both were broadly covered in the Grace Commission report. CAGW's conducted research and issued publications on postal reform prior to the receipt of a contribution from MPA, and has continued such activities subsequent to the cessation of contributions from MPA.

Question 11: It is appropriate for anyone or any entity, including individuals, foundations, and corporations, to make contributions to CAGW. There is nothing that prevents CAGW or any other nonprofit organization from seeking support directly or indirectly from a corporation.

Referring again to the July 2, 1984 application for recognition for exemption, Part III, Section 1 (Exhibit A), "It is anticipated that the bulk of the Foundation's financial support will come from contributions by individuals, corporations, non-profit organizations and the government." Section II states: "The Foundation's initial fund raising activities will consist of direct mail solicitations to individuals, and direct mail and personal solicitations to corporations and non-profit organizations." . . ." . . . it is anticipated that additional fund raising activities will be approved by the Board of Directors after the Foundation becomes operational." Corporations include trade associations, law firms, and other entities.

While CAGW does not speak directly to every contributor, it is clear that donors have the expectation that CAGW will do everything it can to eliminate wasteful spending. Sometimes, that expectation is broad -- reducing the deficit -- and sometimes that expectation is narrower -- eliminating the Bridge to Nowhere in Alaska. However, every action that CAGW takes is related to its mission, as described above, and has a broad-based benefit to Americans.

Question 12: CAGW also received a second and final contribution from MPA in 2001. Once again, it was less than one half of one percent of CAGW's total revenue. In regard to other clients of Mr. Abramoff, since we have no knowledge of or access to Mr. Abramoff's client list, we cannot know whether or not Mr. Abramoff "arranged other donations" from his clients.

In conclusion, given CAGW's history of support for Postal Service reform, there can be no doubt that regardless of Mr. Abramoff's emails and any false promises he might have made to his clients as reported in the press, the contributions from MPA received by CAGW were considered as general support for its ongoing work on that subject matter, not as a request for a specific action. Any reasonable examination of CAGW's charitable purpose and its previous and ongoing activities on postal service reform belies the accusation that CAGW was "affiliated" with MPA or any client of Mr. Abramoff's, or that there was anything abnormal about the contribution that would lead CAGW to consider the contribution as being unrelated to its charitable mission and therefore subject to taxation. The question is not why did MPA consider supporting CAGW; the question is why would the organization not consider supporting CAGW.

CAGW's activities related to Channel One took place regardless of any financial support. This is further evidence that CAGW's decisions on issues are based, first and foremost, on whether they are related to the organization's mission to work for the elimination of waste, fraud, abuse, and mismanagement in government with the goal of creating a government that manages its programs with the same eye to innovation, productivity, and economy that is dictated by the private sector.

We hope this response addresses the committee's questions. Please feel free to contact me if you require any additional information.

Let me attempt to answer your questions to the best of my ability:

Now, imagine we discover that the federal government decides to mandate that cafeterias in the veterans hospital and federal building, as well as the restaurant in the airport, all must refuse the offer. Not only must these government-run food establishments decline the free processor, but they also are instructed that the Acme Company and its cooking oil deserve condemnation in the strongest terms. While trying to decide what to make of this, we hear that taxes are to be raised to enable government kitchens to purchase food processors and, as for oil, well, they will just have to do without. Well, imagine no longer, this is really happening.

The above scenario is taking place today, though not in the food service industry, but in education. Channel One Network has provided television sets, videocassette recorders, satellite dishes and more than 7,000 miles of cable -- in all about half a billion dollars of infrastructure -- to America's classrooms. It offers about two hours of top quality educational programming each day, ranging from history to math, along with a ten-minute news program. All this, which is provided for free to interested schools, is made possible by two minutes of commercials.

Schools are signing on rapidly and renewing their contracts at the above mentioned 99% rate. Two thousand private schools, which really do feel accountable to their parent bodies, have become eager Channel One users. Encouragingly, they are joined by 10,000 public schools which, likewise, have renewed with alacrity. Yet, from the way Channel One detractors speak, one would suppose they consider it an enemy of education. So evil must it be, that despite the fact that it particularly helps poorer school districts, they are attempting to mandate that such schools do without the benefits offered. Or are they? No, as it happens, they still want the equipment. It is just that they prefer buying it from the proceeds of taxation to receiving it from the private sector. Surely taxpayers would want to know what is going on here.

This is not the only example of prejudice toward America's private sector. In Seattle recently, a highly regarded local businessman, Stuart Sloan, made a long-term commitment of over a million dollars per year to an inner-city public school. What was the initial reaction of the educational bureaucracy and local communal activists to Sloan's generosity? They responded with open skepticism and distrust, which delayed implementation of the gift for a full year.

The same educators and political leaders who never feel any unease over spending unlimited public funds (that is, wealth forcibly extracted from its owners) took many months to decide whether or not they could even accept a magnificent offer of private, voluntary charity. As if its private source might somehow fatally taint the entire educational enterprise. Furthermore, educrats who have unhesitatingly implemented, and subsequently abandoned countless inane and destructive ideas, now warn us of the need to carefully test and measure the effects of Sloan's contribution.

One wonders what happened to this passion for empirical testing in the case of publicly funded disasters such as "whole language," "new math," and bilingual education. It appears that government provided education abhors private innovation or generosity while developing a growing appetite, if not an addiction, to money claimed from taxpayers.

1. The defendant is entering into this agreement and is pleading guilty freely and voluntarily without promise or benefit of any kind, other than contained herein, and without threats, force, intimidation, or coercion of any kind.

2. The defendant knowingly, voluntarily and truthfully admits the facts contained in the attached Factual Basis for Plea.

3. The defendant agrees to waive indictment and plead guilty to the offenses charged in the attached Information which are:

A. one count of conspiracy to violate the following federal laws in violation of 18 U.S.C. § 371:

(1) honest services wire and mail fraud, in violation of Title 18 U.S.C. 1341, 1343 and 1346;

(2) mail and wire fraud, in violation of 18 U.S.C. §§ 1341 and 1343;

(3) bribery and honest services fraud of public officials, in violation of 18 U.S.C. §§ 201(b), 1341, 1343 and 1346;

(4) post-employment restrictions for former Congressional staff members, in violation of 18 U.S.C. § 207(e);

B. one count of honest services mail fraud, in violation of 18 U.S.C § § 1341, 1346 and 2; and

C. one count of evasion of federal income tax, in violation of 26 U.S.C. § 7201. The defendant admits that he is guilty of these crimes, and the defendant understands that he will be adjudicated guilty of these offenses if the Court accepts his guilty plea.

4. The defendant understands the nature of the offenses to which he is pleading guilty, and the elements thereof, including the penalties provided by law. The maximum penalty for violating the law specified in the Information is:

A. Count 1 (Conspiracy): five years of imprisonment, a fine of $250,000 or not more than the greater of twice the gross gain or twice the gross loss, and a mandatory special assessment of $100;

B. Count 2 (Honest Services Mail Fraud): twenty years of imprisonment, a fine of $250,000 or not more than the greater of twice the gross gain or twice the gross loss, and a mandatory special assessment of $100;

C. Count 3 (Tax Evasion): five years of imprisonment, a fine of $250,000 or not more than the greater of twice the gross gain or twice the gross loss, the costs of prosecution, and a mandatory special assessment of $100;

The parties understand that the statutory maximum term of imprisonment for the three offenses charged in the Information is 30 years. The defendant understands that the Court may impose a term of supervised release to follow any incarceration, in accordance with 18 U.S.C. § 3583. The authorized term of supervised release for each of the counts is not more than three years. The defendant also understands that the Court will impose restitution, and may impose costs of incarceration, supervision and prosecution.

5. The defendant understands and agrees that restitution to victims in the offense described in Count 1 of the Information is mandatory. The loss to the victims as a result of crimes charged in Count 1 of the Information is estimated to be approximately $25,000,000, The defendant agrees not to transfer or otherwise encumber his assets except with notice to, and consent of, the undersigned representatives of the United States until such time as this agreement is filed with the Court, at which point the defendant must seek leave of Court to transfer or otherwise encumber his assets. The parties agree that the defendant will not be required to obtain the consent of the United States for property transfers necessary to pay ordinary living expenses, ordinary business expenses and attorneys fees. The defendant agrees as part of this agreement that he will provide to the United States detailed and accurate information identifying all of his income, assets, expenses and liabilities within 45 days of the date of this agreement in a format requested by the United States and will truthfully answer all questions relative to his finances. Thereafter, the defendant will provide on a monthly basis or as otherwise requested a report of ail financial transactions valued at $2,500 or more, including all income, expenditures and transfers of funds or property.

6. This agreement does not resolve the defendant's civil tax liability for any years and does not bind the Internal Revenue Service in any way regarding its efforts to examine or collect defendant's civil tax liabilities. The defendant agrees that he will cooperate fully with the Internal Revenue Service in determining any tax liabilities (civil or criminal) of any entities or persons for any years relating to this prosecution, including but not limited to his personal tax liabilities for the years 2000 through 2003, and in paying all appropriate tax liabilities, penalties and interest. To this end, the defendant specifically agrees to file complete and accurate amended individual income tax returns, Forms 1040X, for tax years 2000 through 2003, as soon as possible upon the signing of this plea agreement, and in any event, no later than the time of the defendant's sentencing. If for any reason complete and accurate returns, prepared in accordance with the revenue agent's report dated November 28, 2005, are not filed by the time of defendant's sentencing, the United States will no longer be bound by the terms of paragraph 11(c) below. The defendant further agrees to waive the statute of limitations with respect to the assessment and collection of his taxes due and owing for these tax years. The defendant also agrees to provide the Internal Revenue Service with all requested documents and information for purposes of any civil audits, examinations, collections, or other proceedings, and to waive any rights regarding disclosure to the Internal Revenue Service Examination and Collection Divisions of all documents obtained and reports produced during the criminal investigation, including but not limited to tax return related information and information obtained from the defendant pursuant to grand jury subpoena. Nothing in this agreement shall limit the Internal Revenue Service in its assessment and collection of any taxes, penalties and interest due from the defendant or other parties. The defendant agrees to waive venue for any tax charges for purpose of this plea agreement and any rights he may have under 18 U.S.C. § 3237(b).

7. The defendant also agrees to pay restitution to the Internal Revenue Service pursuant to 18 U.S.C. § 3663(a)(3). The defendant further agrees that, pursuant to 18 U.S.C. § 3663(a)(3) and this agreement, the Court will order as restitution the amount of the criminal tax computation which the defendant agrees is $1,724,054, and which will be applied to the defendant's civil tax liability for the years 2001 through 2003, as later determined by the Internal Revenue Service.

8. If the Court accepts the defendant's plea of guilty and the defendant fulfills each of the terms and conditions of this agreement, the United States agrees that it will not further prosecute the defendant for crimes described in the factual basis attached as Exhibit A or disclosed by the defendant in debriefing sessions with the United States on or before January 3, 2006. Nothing in this agreement is intended to provide any limitation of liability arising out of any acts of violence.

9. The defendant understands and agrees that federal sentencing law requires the Court to impose a sentence which is reasonable and that the Court must consider the advisory U.S. Sentencing Guidelines in effect at the time of the sentencing in determining a reasonable sentence. Defendant also understands that sentencing is within the discretion of the Court and that the Court is not bound by this agreement. Defendant understands that facts that determine the offense level will be found by the Court at sentencing and that in making those determinations the Court may consider any reliable evidence, including hearsay, as well as provisions or stipulations in this plea agreement. Both parties agree to recommend that the sentencing guidelines should apply pursuant to United States v. Booker and the final Sentencing Guidelines offense level as calculated herein provides for a reasonable sentence. Defendant further understands the obligation of the United States to provide all relevant information regarding the defendant, including charged and uncharged criminal offenses, to the United States Probation Office. The United States agrees to recommend that any sentence imposed in this case run concurrently to any sentence imposed in United States v. Jack A. Abramoff, No. 05 CR 60204 (SDFL) ("SDFL Case"). Moreover, the United States agrees to recommend that the conduct at issue in the SDFL Case is not relevant conduct for sentencing purposes in the instant plea provided that the defendant is found guilty in the SDFL Case by plea or otherwise. Defendant also states that he has had ample opportunity to discuss, and has in fact discussed, the impact of the sentencing guidelines and the statutory maximum sentence with his attorney and is satisfied with his attorney's advice in this case.

10. Except to the extent it would be inconsistent with other provisions of this agreement, the United States and the defendant reserve, at the time of sentencing, the right of allocution, that is the right to describe fully, both orally and in writing, to the Court the nature, seriousness and impact of the defendant's misconduct related to the charges against him or to any factor lawfully pertinent to the sentence in this case. The United States will also advise the court of the nature, extent and timing of the defendant's cooperation. The defendant further understands and agrees that in exercising this right, the United States may solicit and make known the views of the law enforcement agencies which investigated this matter.

11. The defendant and the United States agree that the following United States Sentencing Guidelines ("U.S.S.G.") apply based upon the facts of this case:

a. The parties agree that the 2003 Sentencing Guidelines Manual governs the guideline calculations in this case. All references in this agreement to the U.S.S.G. refer to that manual.

b. The parties agree that the total offense level applicable to the defendant's offense conduct is Level 31. This level is calculated as follows:

 I. Fraud Offenses:

d. The defendant understands that his Criminal History Category will be determined by the Court after the completion of a Pre- Sentence Investigation by the U.S. Probation Office. The defendant acknowledges that the United States has not promised or agreed that the defendant will or will not fall within any particular criminal history category and that such determinations could affect his guideline range and/or offense level as well as his final sentence. The parties understand that the order in which the pleas are entered or sentences are imposed in the SDFL Case and the instant matter could result in the imposition of an additional criminal history category and an increased period of incarceration. Consequently, if a plea or sentence in the SDFL Case results in a criminal history category greater than I, and the defendant has fully complied with all provisions in this agreement, the United States agrees to recommend a downward departure based on U.S.S.G. Section 4A1.3(b).

12. The defendant and the United States agree that neither party will seek or advocate for or suggest in any way an adjustment to or a departure from the sentencing guidelines other than those explicitly set forth in this agreement or for a sentence outside of the range determined to be applicable under the advisory Sentencing Guidelines, provided that those guidelines are calculated as set forth above. In the event that the defendant breaches any term of the plea agreement, the United States may move for upward departures based on any grounds the United States deems appropriate.

13. The parties agree that U.S.S.G. § 5E1.2 provides that the Court shall impose a fine for a guideline offense at level 31 of $15,000 to $150,000, unless the Court finds that the defendant is unable to pay a fine. The defendant understands that the Court must order that the defendant make restitution to victims of these offenses for the full amount of the loss.

14. The defendant agrees to fully cooperate in this and any other case or investigation with attorneys for the United States of America, and federal and state law enforcement agencies by providing truthful and complete information, evidence and testimony, if required, concerning any matter. The defendant understands that if he makes material false statements intentionally to law enforcement, commits perjury, suborns perjury, or obstructs justice, he may be found to have breached this agreement and nothing in this agreement precludes the United States of America or any other law enforcement authority from prosecuting him fully for those crimes or any other crimes of which he may be guilty and from using any of his sworn or unsworn statements against him. The defendant understands that this plea agreement is explicitly dependent upon his providing completely truthful testimony in any trial or other proceeding, whether called as a witness by the United States, the defense or the Court.

15. Further, in the event that the United States determines in its exclusive discretion that the defendant has fully complied with this agreement and provided "substantial assistance" to law enforcement officers in the investigation and prosecution of others, the United States agrees it will file a motion for a downward departure pursuant to Section 5K1.1 and 18 U.S.C. § 3553(e) of the United States Sentencing Guidelines or Rule 35 of the Federal Rules of Criminal Procedure, respectively. Such assistance by the defendant shall include his cooperation in providing truthful and complete testimony before any grand jury and at any trial as requested by the United States and in interviews by investigators. If the United States files a motion either under § 5K1.1 of the guidelines or Rule 35, both parties will have the tight to present facts regarding Abramoff's cooperation in any judicial district and to argue for the extent of the departure that is appropriate based on the defendant's cooperation. However, the defendant further understands that the decision whether to depart, and the extent of any departure for substantial assistance is the exclusive province of the Court.

16. The United States cannot and does not make any promise or representation as to what sentence the defendant will receive or what fines or restitution the defendant may be ordered to pay. The defendant understands that the sentence in this case will be determined solely by the Court, with the assistance of the United States Probation Office and that the Court may impose the maximum sentence permitted by the law. The Court is not obligated to follow the recommendations of either party at the time of sentencing. The defendant will not be permitted to withdraw his plea regardless of the sentence recommended by the Probation Office or the sentence imposed by the Court.

17. The defendant, knowing and understanding all of the facts set out herein, including the maximum possible penalty that could be imposed, and knowing and understanding his right to appeal the sentence as provided in 18 U.S.C. § 3742, hereby expressly waives the right to appeal any sentence within the maximum provided in the statutes of conviction or the manner in which that sentence was determined and imposed, including on the grounds set forth in 18 U.S.C. § 3742, in exchange for the concessions made by the United States in this plea agreement. This agreement does not affect the rights or obligations of the United States as set forth in 18 U.S.C. § 3742(b), If the United States appeals the defendant's sentence, the defendant will be entitled to appeal his sentence as set forth in 18 U.S.C. § 3742(a) as to any aspects of his sentence inconsistent with the sentencing provisions of this agreement.

18. If the defendant fails to comply with any of the terms and conditions set forth in this agreement, the United States may fully prosecute the defendant on all criminal charges that can be brought against the defendant. With respect to such a prosecution:

a. The defendant shall assert no claim under the United States Constitution, any statute, Rule 410 of the Federal Rules of Evidence, Rule 11(e)(6) of the Federal Rules of Criminal Procedure, or any other federal rule, that the defendants statements pursuant to this agreement or any leads derived therefrom should be suppressed or are inadmissible;

b. The defendant waives any right to claim that evidence presented in such prosecution is tainted by virtue of the statements the defendant has made; and

c. The defendant waives any and all defenses based on the statute of limitations with respect to any such prosecution that is not time-barred on the date that this agreement is signed by the parties.

19. If a dispute arises as to whether defendant has knowingly committed any material breach of this agreement, and the United States chooses to exercise its rights under Paragraph 18, at the defendant's request, the matter shall be submitted to the Court for its determination in an appropriate proceeding. At such proceeding, the defendants disclosures and documents shall be admissible and the United States shall have the burden to establish the defendant's breach by a preponderance of the evidence.

20. The parties agree that if the Court does not accept the defendant's plea of guilty, then this agreement shall be null and void.

21. The defendant understands that this agreement is binding only upon the Public Integrity Section and the Fraud Section of the Criminal Division, and the Tax Division of the United States Department of Justice. This agreement does not bind any other prosecutor's office or agency. It does not bar or compromise any civil claim that has been or may be made against the defendant.

22. This agreement and the attached Factual Basis for Plea constitute the entire agreement between the United States and the defendant. No other promises, agreements, or representations exist or have been made to the defendant or the defendant's attorneys by the Department of Justice in connection with this case. This agreement may be amended only by a writing signed by all parties.

1. From 1994 to 2004, Abramoff was a Washington, D.C. lobbyist. In 1994, Abramoff joined a law and lobbying firm ("Finn A"). In January 2001, Abramoff joined a second law and lobbying firm ("Firm B").

2. At all relevant times, Abramoff solicited and obtained business with groups and companies throughout the United States, including Native American tribal governments operating, and interested in operating, gambling casinos. Abramoff sought to further his clients' interests by lobbying public officials, including Members of the United States Congress. Abramoff also sought to further his clients' interests by recommending vendors for grass roots work, public relations services and election campaign support. Typically, Abramoff communicated with his clients by interstate electronic mail, interstate telephone calls, and private or commercial interstate mail carriers.

3. From March 2000 through 2001, Michael Scanlon ("Scanlon") worked for Firm A and Firm B in Washington, D.C. as a public relations specialist engaged in providing public relations services to clients throughout the United States. At these firms, Scanlon worked on many matters, often together with, and at the direction of, Abramoff. Abramoff was influential in Scanlon being hired by both firms,

4. In or about January 2001, Scanlon established a business called Capital Campaign Strategies LLC which had its principal offices in Washington, D.C. Capital Campaign Strategies LLC was formed to provide grass roots work, public relations services, and election campaign support. Scanlon also formed other companies that were used primarily to receive money for the services and work performed by others (collectively referred to as "CCS"). The services that CCS provided frequently involved use of interstate mail and telephone calls. Payments were often made by interstate wire transfer or checks that foreseeably caused interstate funds transfers between banks.

5. In May 2003, Abramoff established a business called GrassRoots Interactive ("GRI"), which had its principal offices in Silver Spring, Maryland. Abramoff represented that GRI would provide grass roots work, public relations services, and election campaign support.

6. In July 1999, Abramoff established a private foundation called Capital Athletic Foundation ("CAF") for which he sought and received federal tax-exempt status, in part to provide funding for a non-profit school. In November 2001, Abramoff organized a solely owned entity, Kaygold, LLC. Abramoff used these entities in part to receive funds for his personal benefit, to conceal the destination of the funds, and, with respect to CAF, to evade income taxes. Payments were often made by interstate wire transfer or checks involving interstate funds transfers.

Fraud Based on Violations of Abramoff's Duty of Honest Services

7. Abramoff was hired by at least four Native American tribes with gaming operations to provide professional services and develop programs to limit market competition or to assist in opening casinos. In 2001, Abramoff and Scanlon agreed that Abramoff would encourage his existing and potential clients to obtain grass roots and public relations services as a critical part of the lobbying program and strategy that Abramoff had been hired to provide. Abramoff promoted and recommended primarily CCS to provide this grass roots and public relations work. The prices CCS charged for its services were significantly in excess of CCS's costs.

8. Abramoff and Scanlon knew and agreed that Abramoff would receive fifty percent of the net profits received by CCS from those clients. Most of the payments from clients under the contracts with CCS were made to CCS. Scanlon then paid Abramoff his share of the net profits to various organizations that Abramoff controlled. The transfer of funds to Abramoff foreseeably involved the interstate transfer of funds.

9. Abramoff and Scanlon understood that the payments to Abramoff would not be disclosed to Abramoffs and Scanlon's four clients. Abramoff and Scanlon understood that disclosure of the profit-sharing arrangement to the clients would likely jeopardize the contracts for services and/or the profit margins of both Abramoff's law firm and CCS because disclosure could encourage the clients to seek competitive proposals from other vendors. Abramoff knew that his clients could receive the same services at significantly reduced prices because the quoted prices incorporated the undisclosed fees Scanlon paid to Abramoff of approximately fifty percent of CCS's net profits.

10. Abramoff promoted himself as having knowledge superior to his clients regarding lobbying and grass roots activity. Abramoff encouraged his clients to trust his judgment in these matters. Abramoff knew his clients did in fact trust and rely upon him in these matters. Abramoff further knew he had a duty to disclose all relevant facts to his lobbying clients, including conflicts of interest and any financial interest in fees paid to others.

Mississippi Tribe

11. In 1995, Abramoff was hired by a Native American Indian tribal client based in Mississippi ("Mississippi Tribe") to hire him to provide lobbying services on various issues. Abramoff used his knowledge of lobbying and grass roots work, which was superior to the Mississippi Tribe's knowledge of these areas, to secure the trust and confidence of the Mississippi Tribe.

12. In early 2001, Abramoff recommended and advised the Mississippi Tribe to hire CCS, while concealing the fact that Abramoff would receive approximately fifty percent of the net profits from the Mississippi Tribe's payments to Scanlon.

13. From June 2001 until April 2004, the Mississippi Tribe paid Scanlon and related entities approximately $14,765,000. Abramoff and Scanlon concealed from the Mississippi Tribe that approximately fifty percent of the profit, approximately $6,364,000 including money not passed through CCS, was paid to Abramoff pursuant to their undisclosed arrangement.

Louisiana Tribe

14. In March 2001, Abramoff and Scanlon successfully solicited a Native American Indian tribal client based in Louisiana ("Louisiana Tribe") to hire them to provide lobbying and grass roots services to the tribe. Abramoff used his knowledge of lobbying and grass roots work, which was superior to the Louisiana Tribe's knowledge of these areas, to secure the trust and confidence of the Louisiana Tribe.

15. In March 2001, after CCS had been paid for the first project, Abramoff advised the Louisiana Tribe to rehire CCS, while concealing the fact that Abramoff would receive fifty percent of the profits from the Louisiana Tribe's payments to CCS.

16. From March 2001 to May 2003, the Louisiana Tribe paid CCS and related entities approximately $30,510,000. Abramoff and Scanlon concealed from the Louisiana Tribe that approximately fifty percent of the profit, approximately $11,450,000, was paid to Abramoff pursuant to their undisclosed arrangement.

Michigan Tribe

17. In January 2002, Abramoff and Scanlon successfully solicited a Native American Indian tribal client based in Michigan ("Michigan Tribe") to hire them to provide lobbying and grass roots services. Abramoff used his knowledge of lobbying and grass roots work, which was superior to the Michigan Tribe's knowledge of these areas, to secure the trust and confidence of the Michigan Tribe.

18. In June 2002, Abramoff advised the Michigan Tribe to expand its contract with CCS, while concealing the fact that Abramoff would receive approximately fifty percent of the profits from the Michigan Tribe's payments to CCS.

19. From June 2002 to October 2003, the Michigan Tribe paid Scanlon and related entities approximately $3,500,000. Abramoff and Scanlon concealed from the Michigan Tribe that approximately fifty percent of the profit, approximately $540,000, was paid to Abramoff pursuant to their undisclosed arrangement.

Texas Tribe #1

20. In February 2002, Abramoff and Scanlon successfully solicited a Native American Indian tribal client based in Texas ("Texas Tribe #1") to hire them to provide lobbying and grass roots services designed to reopen Texas Tribe #1's gaming operations that had been closed by Texas authorities because Texas Tribe #1 did not have federal or state authority to operate a casino. Specifically, Abramoff and Scanlon represented that they would work first to open the casino as a Class II gaming facility and then work to expand Texas Tribe #1's casino as a more lucrative Class III facility. Abramoff and Scanlon further proposed that, in return for their work, Texas Tribe #1 would pay CCS $4,200,000 in fees and make additional and substantial political campaign contributions at the direction of Abramoff and Scanlon. Abramoff falsely represented that he would work for free to represent Texas Tribe #1, all the while concealing from the Texas Tribe #1 that approximately fifty percent of CCS's net profits, approximately $1,850,000, was paid to Abramoff pursuant to his undisclosed arrangement with Scanlon.

21. At no time did Abramoff, Scanlon, or others working with them disclose to Texas Tribe #1 that, beginning in 2001, Abramoff, Firm B, and Scanlon had collected millions of dollars in fees from the Louisiana Tribe to oppose all gaming in the Texas legislature. Abramoff's conduct prevented consideration by Firm B of whether to disclose his representation of Texas Tribe #1 pursuant to the Lobbying Disclosure Act.

22. After being retrained by Texas Tribe #1 in early 2002 to reopen its casino through federal legislation, Abramoff continued representing the Louisiana Tribe for millions of dollars in fees. Pursuant to this representation of the Louisiana Tribe, Abramoff failed to disclose to Texas Tribe #1 that he opposed legislation in the 2003 Texas state legislative session that would have provided a basis to reopen Texas Tribe #1's casino under state law. Abramoff knew that Texas Tribe #1 supported and promoted this legislation while he worked to prevent its passage for the benefit of his other client, the Louisiana Tribe.

Wireless Company

23. From January 2001 until April 2004, Abramoff was employed by Firm B. As an employee of Firm B, Abramoff had a duty to act in Firm B's best interests and not to divert lobbying fees owed to Firm B.

24. In 2001, Abramoff was hired by a wireless telephone company ("Wireless Company") to undertake a lobbying effort to assist Wireless Company in securing a license to install wireless telephone infrastructure for the United States House of Representatives. In 2001 and early 2002, Abramoff and his Firm B colleagues lobbied for the Wireless Company without any formal retainer agreement. Rather than make lobbying payments to Firm B, Abramoff directed Wireless Company to make payments totaling at least $50,000 to CAF.

25. At no time did Abramoff inform his employer, Firm B, of the $50,000 in payments to CAF, of which Firm B was entitled to a portion.

Fraud Based on Abramoff's Affirmative Misrepresentations

Michigan Tribe

26. From June 2002 to November 2002, Abramoff and a former lobbying colleague, who was also a former congressional staffer ("Staffer A") successfully solicited the Michigan Tribe for a $25,000 payment to CAF. Instead of using the funds for CAF, Abramoff used this money for his personal and professional benefit to partially pay for a golfing trip to Scotland for himself, public officials, members of his staff and others.

Distilled Beverages Company

27. On or about June 6, 2002, Abramoff and Staffer A successfully solicited one of Firm B's clients, a distilled beverages company, for a $25,000 payment to CAF. Instead of using the funds for CAF, Abramoff used this money for his personal and professional benefit to partially pay for a golfing trip to Scotland for himself, public officials, members of his staff and others.

New Mexico Tribe

28. In February 2002, Abramoff and others successfully solicited a Native American Indian tribal client based in New Mexico ("New Mexico Tribe") to hire them to provide lobbying and grass roots services to the tribe.

29. In March 2002, the New Mexico Tribe paid Scanlon and related entities approximately $2,750,000. Abramoff and Scanlon materially understated to the New Mexico Tribe the size of CCS's profit margins and concealed from the New Mexico Tribe that CCS's profit margin was approximately eighty percent and that approximately fifty percent of the net profit, $1,175,000, was paid to Abramoff pursuant to the undisclosed arrangement. At no time prior to March 2004 did Abramoff or others inform Firm B or the New Mexico Tribe of the undisclosed payments.

Manufacturing and Services Company

30. On May 2, 2003, Abramoff sent a business proposal to a manufacturing and services company ("Company A") to handle its lobbying effort regarding a tax issue. In addition to his services, Abramoff recommended that Company A hire GRI, while concealing from Company A his interest in GRI. In his proposal, Abramoff falsely advised that GRI had no relationship with Abramoff's law and lobbying firm, even though GRI was controlled by Abramoff and paid the vast majority of its profits to Abramoff or entities he controlled. Additionally, Abramoff represented to Company A that he was negotiating on their behalf with GRI to try to save Company A money, when in fact he was simply getting a high price on services that he controlled and from which he would profit.

31. In May and June 2003, Company A paid GRI, directly and through Firm B's bank account, approximately $1,841,429. Abramoff and entities he controlled received approximately $1,655,695 from GRI.

Corruption of Public Officials

32. Beginning as early as January 2000, Abramoff, Scanlon and others engaged in a course of conduct through which one or both of them offered and provided a stream of things of value to public officials in exchange for a series of official acts and influence and agreements to provide official action and influence. These things of value included, but are not limited to, foreign and domestic travel, golf fees, frequent meals, entertainment, election support for candidates for government office, employment for relatives of officials, and campaign contributions. As one part of this course of conduct, things of value were offered to and given to a Member of the United States Congress ("Representative #1") and members of Representative #1's staff, including, but not limited to:

a. All-expenses-paid trips, including a trip to the Commonwealth of the Northern Marianas Islands ("CNMI") in 2000, a trip to the Super Bowl in Tampa, Florida in 2001, and a golf trip to Scotland in 2002;

b. Numerous tickets for entertainment, including concerts and sporting events;

c. Fundraising events, including providing box suites and food at various sport and concert venues and at a restaurant in the Washington, D.C. area owned by Abramoff;

d. Campaign contributions to campaign committees and to political action committees and organizations, including, but not limited to, the following:

i. $4,000 in contributions to Representative #1's campaign committee in 2000; and

ii. A $10,000 contribution to the National Republican Campaign Committee ("NRCC") in 2000 at Representative #1's request;

e. Regular meals and drinks at an upscale restaurant owned by Abramoff in Washington, D.C.; and

f. Frequent golf and related expenses at courses in the Washington, D.C area.

33. As part of this course of conduct, Abramoff, Scanlon and others provided things of value to public officials in exchange for a series of official acts and influence, and agreements to provide official acts and influence, including, but not limited to, agreements to support and pass legislation, agreements to place statements in the Congressional Record, agreements to contact personnel in United States Executive Branch agencies and offices to influence decisions of those agencies and offices, meetings with Abramoff and CCS's clients, and awarding contracts for services with CCS and Abramoff's law firms. As one part of this course of conduct, Representative #1 and members of his staff agreed to use and did use their official positions and influence, including, but not limited to, the following:

a. Travel by a senior staff member of Representative #1 with others in January 2000 to CNMI for the purpose of assisting Abramoff, his firm and others in obtaining and maintaining lobbying clients;

b. Representative #1's agreement in March 2000 to place a statement drafted by Scanlon into the Congressional Record that was critical of the then-owner of a Florida gaming company, and was calculated to pressure the then-owner to sell on terms favorable to Abramoff and his partners;

c. Representative #1's agreement in October 2000 with Scanlon to insert a statement into the Congressional Record which praised the new owner of the Florida gaming company, Abramoff's business partner;

d. Representative #1's agreement in approximately August 2001 to use his position as Chairman of a Committee of the House to endorse and support a client of Abramoff as the provider of wireless telephone infrastructure to the House of Representatives;

e. Representative #1's agreement in approximately March 2002 that, as the Co-Chairman of a Conference Committee of House and Senate Members of Congress, he would introduce and seek passage of legislation that would lift an existing federal ban against commercial gaming in order to benefit a client of Abramoff and CCS, Texas Tribe #1;

f. Representative #1's agreement in approximately June 2002 that as the Co-Chairman of a Conference Committee of House and Senate Members of Congress, he would introduce and seek passage of legislation that would lift an existing federal ban against commercial gaming for another Native American Tribe in Texas ("Texas Tribe #2") at Abramoff's request;

g. Representative #1 met in August 2002 with representatives of Texas Tribe #1 to assure them that they were effectively represented by Abramoff and that he continued to agree to work to pass the legislation they wanted;

h. Representative #1's agreement in December 2002 to seek support from a Member of another Committee of the House of Representatives for passage of legislation to lift the federal gaming ban for Texas Tribe #1;

i. Representative #1 met in 2002 with a Native American Tribal client of CCS and Abramoff from California ("California Tribe") to discuss Representative #1's agreement to assist in passing legislation regarding taxation of certain payments received by members of the California Tribe, and to assist in an issue relating to a post office of interest to the California Tribe;

j. Representative #1 agreed to meet with some of Abramoff's clients and others in Russia while Representative #1 was there on official business in August 2003 to, among other things, influence the process of obtaining a visa for travel to the United States for the relative of one of Abramoff's clients; and

k. Representative #1 at various times, directly and indirectly, contacted public officials at additional government agencies and offices on behalf of clients of Abramoff and CCS in an effort to influence decisions and actions by those officials.

34. As one part of the same course of conduct outlined in paragraphs 32 and 33 above, in June 2002, Abramoff informed Representative #1 that Texas Tribe #1 was raising funds to pay for a golfing trip to Scotland that Representative #1 and members of his staff were to, and did, attend. In August 2002, Texas Tribe #2, at the request of Abramoff and Texas Tribe #1, sent a $50,000 check made out to CAF via private interstate mail delivery to Abramoff at 1101 Pennsylvania Ave, N.W., Washington, D.C.

35. As one part of the same conduct outlined in paragraphs 32 and 33 above, beginning at least in 1999 through January 2001, Abramoff and others sought Staffer A's agreement to perform a series of official acts, including assisting in stopping legislation regarding internet gambling and opposing postal rate increases. With the intent to influence those official acts, Abramoff provided things of value including, but not limited to, from June 2000 through February 2001, ten equal monthly payments totaling $50,000 through a non-profit entity to the wife of Staffer A. The total amount paid to the wife of Staffer A was obtained from clients that would and did benefit from Staffer A's official actions regarding the legislation on internet gambling or opposing postal rate increases.

36. As one part of the same course of conduct outlined in paragraphs 32 and 33 above, beginning in March 2002, Abramoff and a former staffer to Representative #1 ("Staffer B") contacted Representative #1, officials employed by the Office of Representative #1, and officials employed by a House Committee ("Committee") of which Representative #1 was the chairman. These contacts occurred within one year of Staffer B having served as the Chief of Staff for Representative #1 and Staff Director of the Committee. Abramoff intended that Staffer B communicate with Representative #1, his staff, and the Committee staff for the purpose of influencing official action on behalf of Abramoff's and Staffer B's clients, including Texas Tribe #1 and Wireless Company.

Tax Evasion Offense

37. During the calendar year 2002, Abramoff had and received a substantial amount of income from the conduct discussed in paragraphs 1 through 31. In order to conceal this income from the Internal Revenue Service and others, Abramoff used entities exempt from taxation under Title 26, United States Code Section 501(c), including a private foundation he created and a public policy organization for which be served as a director, to receive income and to make expenditures for his own personal benefit. To further conceal this income, Abramoff and others created, or caused to be created, false invoices and false entries to financial records, which made it appear as if the funds had been received and expended for tax-exempt purposes. In fact, Abramoff and others knew that these activities constituted a misuse of these tax-exempt entities. Through these activities, Abramoff and others intended to and did benefit Abramoff, the entities he controlled or financially supported, and the public policy organization.

38. On or about October 15, 2003, Abramoff signed and filed a false and fraudulent joint U.S. Individual Income Tax Return, Form 1040, which underreported Abramoff's total income for 2002. Specifically, Abramoff willfully and intentionally failed to report the income received from the illegal schemes described in paragraphs 1 to 32 above resulting in the evasion of approximately $628,557 in individual income taxes for the 2002 tax year.

39. Abramoff signed and filed false and fraudulent Returns of Private Foundations, Forms 990PF, which misrepresented the receipt of diverted funds as charitable donations and mischaracterized personal and business expenditures as being used for a tax exempt purpose.

40. Furthermore, Abramoff caused false Returns of Organizations Exempt from Income Tax, Forms 990, to be filed by a public policy organization, which misrepresented the receipt of diverted funds as charitable donations and mischaracterized personal and business expenditures of Abramoff as being used for a tax exempt purpose.

41. Abramoff engaged in similar evasive conduct for the tax years 2001 and 2003. Due to this and other evasive conduct, Abramoff attempted to evade approximately $1,724,054 in individual income taxes for the 2001 through 2003 tax years.

The preceding statement is a summary, made for the purpose of providing the Court with a factual basis for my guilty plea to the charges against me. It does not include all of the facts known to me concerning criminal activity in which I or others engaged. I make this statement knowingly and voluntarily and because I am in fact guilty of the crimes charged.

Date: 1/3/06