Gingrich Fires Back, But Tax Expert Says He's in 'World of Trouble'

June 16, 2011 — -- GOP Presidential contender Newt Gingrich attacked the "elite media" Wednesday for running "hit pieces" against him, even as tax and ethics experts were telling ABC News that the recent reports on a charity Gingrich founded have spawned serious questions about the former House Speaker's business and charity empire.

"I think he's in a world of trouble from a tax standpoint," said Marcus S. Owens, who ran the IRS Exempt Organizations Division for ten years, and who now works in private practice in Washington. "There are clearly enough questions there for the IRS to begin an investigation."

At issue are the activities of Gingrich's charity, Renewing American Leadership (ReAL), which was founded with a goal of promoting faith, freedom and free enterprise. The tax-exempt organization paid the salary of Gingrich's personal spokesman, bought Gingrich's books and DVDs, and provided Gingrich a copy of the fundraising list it spent more than $1 million to build. Over two years, ReAL made $220,000 in payments to Gingrich Communications, a for-profit business Gingrich owns.

Melanie Sloan, Executive Director of the good government group Citizens for Responsibility and Ethics in Washington, said she found those activities troubling. "Charities should be engaged in demonstrably charitable purposes," Sloan told ABC News. "Here, given that ReAL hasn't done anything other than send out fundraising appeals, creating a mailing list for Mr. Gingrich to use to contact his supporters, it appears the major, if not sole purpose of the group is to further his political ambitions."

Gingrich, who was campaigning in New Hampshire earlier this week, brushed off questions about those payments. He told an ABC News reporter, "I'm not concerned about that. The American people aren't concerned about that." His campaign later put out a statement saying ABC News had not found any evidence that Gingrich engaged in "any activity that was not fully supported by the law." On Wednesday, appearing on Fox News' "On the Record with Greta van Susteren," Gingrich went further, calling the report "inaccurate" and a "hit piece."

"A network who wants to do a hit piece will take what I said, twist it and decided to do with it what they want to because they get to edit it. I didn't get an offer from ABC to have an unedited sit down. I didn't get an offer to show exactly what I said," Gingrich said, "I had no reason to believe that a network that was out to do a hit piece would be in any way fair with anything I said to them."

Gingrich said the man who now runs the charity, Pastor Jim Garlow, told him that ABC News "actually literally didn't care what the facts were."

ABC News obtained the charity's publicly available tax forms, and a May 2011 audit of the charity conducted by the West Virginia Secretary of State's office. Reporters had lengthy and repeated contacts with the Gingrich campaign prior to publishing the first story at ABCNews.com and airing it on "Nightline" and "Good Morning America." An ABC News reporter met in person with Rick Tyler, who at the time was serving as Gingrich's campaign spokesman, and who had previously run the charity. ABC News sent a list of questions to Tyler, and later resent those questions to his replacement. ABC extended nine separate requests to the campaign in writing asking for an interview with Gingrich. All were declined.

Garlow voluntarily agreed to be interviewed on camera for the report, and spent nearly an hour answering questions from Chief Investigative Correspondent Brian Ross.

After the report aired, Garlow asked to clarify only two points from his interview. He said that while the charity could not buy Gingrich's books at a discount, as he had hoped, it did get them "at cost" and did not pay the full retail price. He also said Gingrich's posting on the charity web site endorsing Rep. Paul Ryan's budget plan was posted on the site in March 2010, before Gingrich was a candidate for president. Garlow has since had the Gingrich essay removed from the site.

Gingrich's complaints about the media also extended to NBC News for a report it aired about the role his wife Callista has played in his campaign.

None of those complaints appeared to alleviate questions from legal and ethics experts about Gingrich's charity and its activities.

False Statements Can Bring Criminal Charges

Over the past three years, ReAL raised millions of dollars through direct mail solicitations -- several of which came in letters typed on Gingrich stationery, and signed by the former House Speaker. The letters included pointed critiques of President Obama, touted Gingrich's views on national policy issues, and offered to send copies of Gingrich's books and DVDs in exchange for contributions.

Charities are not supposed to engage in political activity or support the work of profit-making enterprises. Owens said the activities described in the ABC News report are likely to provoke questions from IRS agents. Owens said the IRS has been "more aggressive than it's ever been" in policing the way charities fill in their tax forms, known as 990s.

In 2009, ReAL wrote on its 990 form that its director and president was Rick Tyler, who was also working as Gingrich's spokesman. The form reported that Tyler was unpaid. Where the form asks, "Did any [officer] receive or accrue compensation from any unrelated organization for services," the charity responded, "No."

But when ABC News asked charity officials to explain why ReAL had paid more than $220,000 to Gingrich Communications, Tyler said it was to cover his salary and health insurance costs. Gingrich's charity should have disclosed on the 990 that it was making payments to a for-profit business that had such close ties to Gingrich, Owens said.

"I think there are a lot of issues there," Owens said. "And those are just the ones uncovered by looking at public documents. I mean, who knows what's really going on. [Gingrich] likes to live a very fancy lifestyle. When you see an individual with a very expensive lifestyle affiliated with an organization like that, you start to wonder if there are internal controls to see if that money isn't leaking over. The IRS will be looking at that."

Owens said 990s are filed under penalty of perjury, and making false statements can bring civil or criminal charges.

Gingrich campaign spokesman Joe DeSantis disputed the suggestion that the charity's funds were used for anything other than the tax-exempt group's stated goals. He said ReAL's payments to Gingrich Communications to cover Tyler's salary were "perfectly normal."

"It is perfectly normal for a 501c3 to pay a management fee to compensate another organization for the part-time services of its Executive Director," DeSantis said. "Both ReAL and Gingrich Communications were scrupulous about ensuring that each entity entirely paid for any resources it used. Great care was taken to ensure against any commingling of funds or misappropriation of resources."

DeSantis confirmed that the candidate received names from the charity's fundraising list, but said they were "only the names that responded posivitely to fundraising letters signed by Gingrich." He said this is a standard practice in fundraising.

Sloan, of the good government group Citizens for Responsibility and Ethics in Washington, said she wants to see authorities take a closer look at the charity's activities. She noted that in 1997, Gingrich was censured by Congress for improperly using charitable donations for political purposes and was fined $300,000. The fine stood even though the IRS eventually cleared Gingrich, determining he had not violated the law.

"Charities and politics don't mix," she said. Gingrich "should know this better than anyone."

Editor's note: The action she refers to was an official Congressional reprimand, not a formal censure, which is more serious.

Click Here for the Blotter Homepage.

Over the past three years, ReAL raised millions of dollars through direct mail solicitations -- several of which came in letters typed on Gingrich stationery, and signed by the former House Speaker. The letters included pointed critiques of President Obama, touted Gingrich's views on national policy issues, and offered to send copies of Gingrich's books and DVDs in exchange for contributions.

Charities are not supposed to engage in political activity or support the work of profit-making enterprises. Owens said the activities described in the ABC News report are likely to provoke questions from IRS agents. Owens said the IRS has been "more aggressive than it's ever been" in policing the way charities fill in their tax forms, known as 990s.

In 2009, ReAL wrote on its 990 form that its director and president was Rick Tyler, who was also working as Gingrich's spokesman. The form reported that Tyler was unpaid. Where the form asks, "Did any [officer] receive or accrue compensation from any unrelated organization for services," the charity responded, "No."

But when ABC News asked charity officials to explain why ReAL had paid more than $220,000 to Gingrich Communications, Tyler said it was to cover his salary and health insurance costs. Gingrich's charity should have disclosed on the 990 that it was making payments to a for-profit business that had such close ties to Gingrich, Owens said.

"I think there are a lot of issues there," Owens said. "And those are just the ones uncovered by looking at public documents. I mean, who knows what's really going on. [Gingrich] likes to live a very fancy lifestyle. When you see an individual with a very expensive lifestyle affiliated with an organization like that, you start to wonder if there are internal controls to see if that money isn't leaking over. The IRS will be looking at that."

Owens said 990s are filed under penalty of perjury, and making false statements can bring civil or criminal charges.

Gingrich campaign spokesman Joe DeSantis disputed the suggestion that the charity's funds were used for anything other than the tax-exempt group's stated goals. He said ReAL's payments to Gingrich Communications to cover Tyler's salary were "perfectly normal."

"It is perfectly normal for a 501c3 to pay a management fee to compensate another organization for the part-time services of its Executive Director," DeSantis said. "Both ReAL and Gingrich Communications were scrupulous about ensuring that each entity entirely paid for any resources it used. Great care was taken to ensure against any commingling of funds or misappropriation of resources."

DeSantis confirmed that the candidate received names from the charity's fundraising list, but said they were "only the names that responded posivitely to fundraising letters signed by Gingrich." He said this is a standard practice in fundraising.

Sloan, of the good government group Citizens for Responsibility and Ethics in Washington, said she wants to see authorities take a closer look at the charity's activities. She noted that in 1997, Gingrich was censured by Congress for improperly using charitable donations for political purposes and was fined $300,000. The fine stood even though the IRS eventually cleared Gingrich, determining he had not violated the law.

"Charities and politics don't mix," she said. Gingrich "should know this better than anyone."

Editor's note: The action she refers to was an official Congressional reprimand, not a formal censure, which is more serious.

Click Here for the Blotter Homepage.