Newsweek, January 24, 2000
Headline: The Money Machine
Byline: Michael Isikoff

You’ve probably never heard of Heinz Prechter. The diminutive 57-year-old Bavarian immigrant made a fortune by inventing the sunroof for the auto industry. He is known by his friends for his good cheer and for driving expensive, German-made sports cars through the streets of Detroit at high speeds. The name Brad (Fargo) Freeman may not be familiar, either. Freeman made millions as a merchant banker in Los Angeles. A bon vivant who squires models around Beverly Hills, Calif., Freeman is known for his practical jokes, like placing for sale signs on the manicured lawns of his business buddies.

Prechter and Freeman and a half dozen or so other wealthy Republican businessmen deserve to be better known—as potential kingmakers. If George W. Bush survives John McCain’s challenge and goes on to win in November, the biggest single reason may be money. Through 1999 Bush had raised a staggering $67 million, four times as much as McCain and more than the two Democratic rivals, Gore and Bradley, combined. Bush has raised so much that he has been able to forswear federal matching funds, freeing him of campaign spending limits. After the primaries, when the Democratic nominee will be tapped out, Bush can afford to keep his ads on TV up until the summer conventions.

To hear the governor’s campaign aides talk, he has been the beneficiary of spontaneous, down-home enthusiasm. At last count, more than 170,000 individuals have written checks that, by law, cannot exceed $1,000 apiece. "This has been a totally grass-roots, broad-based individual effort across America," says Don Evans, the silver-haired Midland, Texas, oilman who oversees Bush’s fund-raising. "People talk about special interests," says Freeman, who is Bush’s top moneyman in California. "How can you have special interests when you have 170,000 donors?"

The answer is: by knowing how to manipulate the rules. Bush’s money machine has been carefully constructed by a small group of men who are experts at the art of "bundling" $1,000 contributions. All presidential campaigns exploit such techniques, but, profiting from flush times, the Bush team has taken the game to a new level. The story of how these champion fund-raisers chose Bush as their standard-bearer may be the most important saga of the campaign. It reveals to what degree the governor has benefited from a powerful network of wealthy businessmen, who are likely to have his ear if he is elected president.

Their common bond is making money, giving money to the Republican Party and manly pursuits, like hunting and golf. In addition to Prechter, Freeman and Evans (who recruited Bush to his Bible-study group), the core players include Peter Terpeluck, a high-energy Washington lobbyist; Tom Kuhn, president of the Edison Electric Institute, lobbying arm of the electric-power industry; Ray Hunt, scion of the Texas oil fortune, and John Hennessy, a Wall Street investment banker. Their friends include pharmaceutical heir Robert Wood Johnson, who this week bought the New York Jets for $635 million and entertained his cronies on one Bush hunting trip by bringing along an elephant gun. About 150 of these champion fund-raisers have been designated as "Pioneers" by the Bush campaign. Each has raised more than $100,000 in $1,000 donations, and many have personally given hundreds of thousands of dollars in "soft money" to the Republican Party.

Most of Bush’s core moneymen are not likely to ask him for jobs or explicit favors. "I don’t have an agenda—and I don’t give a hoot about being in government," Prechter told NEWSWEEK. One of Prechter’s fund-raising associates remarked, "He does this because he loves being a player, loves being a part of the action." Even so, Prechter has profited in the past from his Bush associations. Named to accompany President Bush on a trade mission to Japan in 1992, Prechter used the trip to sign a lucrative deal granting his American Sun Roof Co. rights to put sunroofs on Hondas. (Prechter said the deal was in the works before the trip.)

Many Washington lobbying groups, whose clients will have large stakes in any Bush administration, have jumped on the bandwagon. The heads of two dozen powerful trade associations—representing steel, chemical, electric power, oil and other industries—have been holding regular conference calls about how to help Bush and have been pushing their members to contribute. The campaign has assigned "tracking code" numbers to these trade-association heads. Staffers call that a bookkeeping device, but the Bush campaign and the lobbyists use the numbers as a kind of scorecard. In an internal memo obtained by NEWSWEEK, Edison Electric chief Kuhn, a Bush classmate at Yale, reminded power-company executives to include the industry’s tracking code on the bottom of their checks for a Bush fund-raiser. Written on Bush campaign stationery, the May 27, 1999, memo states, "It does insure that our industry is credited, and that your progress is listed among the other business/industry sectors." Various groups have been competing for the biggest war chest. Tom Hammonds, president of the Food Marketing Institute, estimates his industry has kicked in "just under $500,000" to Bush’s campaign. Frederick Webber, president of the Chemical Manufacturers of America, puts the figure for his group at about $350,000. The American Petroleum Institute’s Red Caveney has helped steer more than $1 million in oil money into the Bush coffers.

This money machine was gearing up before Bush declared, even privately, that he was a candidate for president. Some of the men behind the money are driven less by personal loyalty to Bush than by the need to find an electable candidate—a conservative without a hard edge. Prechter, who for many years has been the principal fund-raiser for Gov. John Engler of Michigan, began noticing Bush at meetings of the Republican Governors Association during the mid-‘90s. He was struck by how the crowds parted when the Texas governor walked in the room. "I just had a gut feeling," he recalls. "He was a winner. I started quietly networking." Prechter began working the phones and chatting up Bush’s "star quality" to his fellow GOP moneymen. One of them recalls being lobbied by Prechter in the men’s room as they stood at the urinal.

Bush himself was coy about running. At the dedication of the George Bush Presidential Library at Texas A&M in November ‘97, the moneymen were disappointed by the younger Bush’s reluctance to give them a sign to start gathering checks in earnest. The governor said that he was worried about exposing his teenage daughters to the rigors of a presidential campaign, and he still had to get re-elected in Texas in November ‘98. Still, Bush did not say no. In February ‘98, Prechter invited a dozen or so of the heaviest hitters in the GOP to his 10,000-acre cattle ranch outside tiny Wheeler, Texas. The event became known as "the Hunt," and in retrospect, it was a turning point. Donning 10-gallon hats and cowboy boots, the moneymen watched Bush address some Eagle Scouts and their parents in a local high-school auditorium. They sat around Prechter’s fireplace and peppered Bush with questions, then everyone donned camouflage and went bird hunting. The fat cats were sold. Bush’s teasing, masculine manner was comforting to the business tycoons, all of them successful, middle-aged white men. "We all looked at each other and thought the same thing," recalled Hennessy, the Wall Street banker. The word went out: if Bush was willing to take the plunge, the big fund-raisers would ensure he had the resources to win.

Quietly over the next year the moneymen expanded Bush’s financial reach—throwing gala fund-raisers for him in Los Angeles and Washington. Then, starting in 1999, small groups of bankers and corporate tycoons started flying to Austin for private lunches at the governor’s mansion. The financial base of the Republican Party—computing entrepreneurs from Silicon Valley, chemical company CEOs, Wall Street bankers—was getting locked up, even though Bush had yet to declare. When he finally did on June 12, 1999, he already had $15 million in the kitty.

Typical was this scene in Bush’s private dining room last March. After the governor made his breezy presentation to a group of two dozen pin-striped executives, Evans stood up and announced that he hoped each of the guests would make "a significant contribution." Herb Collins, a Massachusetts real-estate mogul, popped up his hand. "We’re going to do $250,000 for you in Boston!" he exclaimed. There was a hush, then a whistle from someone in the crowd. A quarter of a million? From the most liberal city in America? Before long, the CEOs were clustered around Evans, throwing out bigger numbers. Political experts are awed by the Bush fund-raising prowess. "I have never seen anything like this," said Stan Huckaby, a consultant who tracks political fund-raising. "Is phenomenal the right word? I don’t think that does it justice."

Backed by his father’s national network, Bush started out with a Texas money machine that generated $41 million for his two gubernatorial campaigns. Strategists also relied on the fund-raising operations of GOP governors loyal to Bush, including Michigan’s Engler, Oklahoma’s Frank Keating and Pennsylvania’s Tom Ridge.

The real key to Bush’s unprecedented fund-raising success, however, has been his Pioneers. They use their contacts to start a chain: one man recruits 10 friends willing to chip in the maximum of $1,000 apiece. They in turn recruit 10 more friends each. "It’s sort of like an Amway deal," says Louis A. Beecher Jr., a Texas oil baron and early Pioneer.

Under federal law, corporations can’t contribute directly to a candidate. But by bundling, the Pioneers work around those rules. Consider Vinson & Elkins, the blue-chip Houston-based law firm (which also lobbies in Washington for banking, energy and gambling interests). As a firm, it can’t give Bush a dime. But senior partners Joe Allen and Tom Marinis, both Bush Pioneers, arranged for their partners, associates and spouses to donate a total of $185,000 to Bush’s campaign. Likewise, Ken Lay, the chairman of Enron, an energy conglomerate, wrote top company executives asking them to make the "maximum" contribution to Bush—and ended up collecting $92,000.

As long as employees aren’t overly pressured, bundling is legal, and all campaigns do it. But Bush’s Pioneers have done it more vigorously than most. Take FirstEnergy Corp., an Ohio utility. At its annual meeting last August, about 170 top executives heard a pitch for Bush from Anthony Alexander, the firm’s general counsel. Alexander passed out donation forms. Within a few days he had $72,000 for Bush—all "strictly voluntary," says FirstEnergy spokesman Ralph DeNicola. Maybe so, but FirstEnergy was recently sued by the Environmental Protection Agency for violating the Clean Air Act. The Bush campaign is hardly promising that a Bush administration would drop the lawsuit. But the governor is known to favor voluntary pollution cutbacks rather than mandatory rules. Lobbyist Webber arranged for a group of chemical-industry CEOs to fly to Austin to talk to Bush—then threw a Bush fund-raiser at the annual meeting of his association, pulling in $100,000. Webber concedes that this generosity is directly related to Bush’s willingness to listen to the industry’s views. "We feel a lot more comfortable with Bush," he says.

This fall, while the press was following John McCain around New Hampshire, Bush was continuing to meet with corporate executives and other high rollers sent to him by the Pioneers. While McCain was charming reporters on the bus, Bush has continued to stay far ahead in the money race, raising $10 million to McCain’s $6.1 million between September and January. The weeks ahead will test whether the Bush money machine pays off.

How They Did It: Here Are Two Letters Used to Solicit Funds for George Bush’s War Chest

Through 1999, candidate George W. Bush had raised a staggering $67 million, four times as much as John McCain and more than his two Democratic rivals, Al Gore and Bill Bradley, combined.

What’s his secret? A money machine that has been carefully constructed by a small group of men who are experts at the art of soliciting contributions.

Here are excerpts from two letters mailed by political heavy hitters, aimed at drumming up cash for the Bush campaign.

The first is from Tom Kuhn, president of the Edison Electric Institute, a lobbying arm of the electric power industry. The memorandum was written on George Bush’s Presidential Exploratory Committee stationary.

TO:

FROM: TOM KUHN

RE:      JUNE 22 RECEPTION WITH GOV. GEORGE W. BUSH

DATE:  MAY 27, 1999

My personal thanks to all of you for taking a leadership role in gathering support for the June 22 reception honoring Governor George W. Bush. I believe that it will be a great evening, and I know that the electric utility industry will show their continued support and enthusiasm for the Governor’s exploratory campaign committee.

Enclosed is a copy of the June 22 invitation, along with a list of cities and dates for upcoming fundraising events. We can give you as many invitations as you need to mail out to friends and colleagues...

As you know, a very important part of the campaign’s outreach to the business community is the use of tracking numbers for contributions. Both Don Evans and Jack Oliver have stressed the importance of having our industry incorporate the #1178 tracking number in your fundraising efforts. LISTING YOUR INDUSTRY’S CODE DOES NOT PREVENT YOU, ANY OF YOUR INDIVIDUAL SOLICITORS OR YOUR STATE FROM RECEIVING CREDIT FOR SOLICITING A CONTRIBUTION. IT DOES ENSURE THAT OUR INDUSTRY IS CREDITED, AND THAT YOUR PROGRESS IS LISTED AMONG THE OTHER BUSINESS/INDUSTRY SECTORS. If you have any questions about your industry’s tracking information, please do not hesitate to let me know.

I look forward to working with you and will help in any way that I can to support your efforts on behalf of our industry...

The second is from Ken Lay, chairman of Enron, an energy conglomerate. He wrote top company executives asking them to make the "maximum" contribution to Bush-and ended up collecting $92,000.

May 6, 1999

Dear [First name],

Earlier this month, Governor George Walker Bush formed a committee to explore the possibility of running for President in 2000. The reaction across Texas and America has been enthusiastic and well founded.

As Texans, we have witnessed first hand the tremendous ability and tenacity of our Governor. Instead of offering opinions on everything under the sun, he focuses on tangible results and achieves them...

That is why I want you to join me in telling the governor, "You would be a great President. You should run in 2000."

I hope you will join me as a volunteer and affirm your strong support for his race by making the maximum contribution of $1,000 per person or $2,000 per couple...

Thank you for your consideration.

Sincerely,

Ken Lay

P.S. I invite you to join me as a volunteer fundraiser if you are supportive of this effort. Due to the ever increasing demands of the numerous early state primaries and limits of contributions, Governor Bush will be required to reach people who have previously never been involved in a presidential campaign. If you would like to try to raise some additional money for Governor Bush from your friends and family, please contact...

Professor’s Notes:  For the 2004 Presidential campaign, the new elite of the donors are the rangers, people who raise $200 thousand dollars for the Bush campaign.    Because of his ability to raise large amounts of campaign money, George Bush has once again decided to forego accepting public financing for the Republican primary so that he will be able to raise and spend as much as he wants; present estimates are that the Bush campaign intends to spend $200 million to secure an uncontested Republican nomination for President.

Ken Lay (who wrote the letter above) CEO of the Enron Corporation was associated with one of the biggest business scandals in recent years. After years of phony accounting to show profits where there were none, the Enron Corporation (America’s second biggest corporation at the time) went bankrupt.  This bankruptcy caused huge financial losses for people and state pension funds that had innocently invested money in the corporation.  Enron workers were left with no retirement money and were even prevented from selling their own Enron stocks while corporate executives cashed out big before the news of the bankruptcy became public.  In addition, by manipulating the energy market in California, Enron alone is said to have cost California ratepayers $40 billion in excess payments for electricity.

The 2008 election promises much of the same.  According to a February 7, 2007 article in the Washington Post,  Senator Hillary Rodham Clinton invited about 70 top fundraisers [billionaire Hollywood moguls, millionaire lawyers and venture capitalists from around the country] to a reception at her Washington home.   The high-dollar rainmakers committed to collect at least $250,000 each during the presidential campaign for Clinton, and many have pledged $1 million.

Update: The Trump campaign plans to copy the Bush fund raising effort in Trump’s bid for re-election in 2020.  “Raising $100,000 would qualify the bundler for a “Builders Club,” which comes with perks such as campaign dinners, briefings and “commemorative Trump Victory gifts,” according to a packet reviewed by The Wall Street Journal.” Other fundraising tiers include Club 45 where donors are asked to raise, at least, $45,000 and the Trump Train for those who raise, at least, $25,000.

Questions:

1.  Why do you think that Congress passed limits on the amount of money an individual can contribute to federal candidates?  Does the ability of politicians to raise large amounts of money reflect popular enthusiasm for a candidate or an end run around the spirit of campaign finance limits?  If the latter, what, if anything, would you do to curb this practice?  Explain why.