‘Newt Inc.’ Bankrupt as Campaign Operates on Shoestring
A presidential campaign bid, even a failed one, can open doors to lucrative career options, such as former Arkansas Governor Mike Huckabee’s Fox News contract.
In the case of Newt Gingrich, a financial comeback may be a harder climb.
The former U.S. House speaker’s time on the campaign trail has led to the shuttering of two businesses that generated $107 million in income during the last 10 years and helped him accrue at least $7.3 million in assets. His campaign is struggling, bouncing a $500 check for the filing fee in the June 26 Utah primary, and amassing almost $4.5 million in debt.
His future earnings potential is imperiled, public- relations advisers and Republican strategists said, in part because of his campaign rhetoric that derided “the Republican establishment” and vilified such previous consulting clients as Freddie Mac (FMCC), a government-backed mortgage lender.
“Newt has somewhat become a caricature of himself, and that’s not very good for business or rebuilding your brand,” said Mark Corallo, a Republican consultant and founder of a crisis-communications firm based in Washington, D.C. Corallo compared Gingrich to “a good TV sitcom that runs a little too long and becomes so predictable that nobody watches it anymore.”
Eddie Mahe, a Republican consultant, said he questions whether ”Newt Inc., in the sense that it was, ever comes back again.”
As former Pennsylvania Senator Rick Santorum suspended his campaign on April 10, Gingrich issued a statement saying he is “committed” to staying in the race through the August Republican nominating convention in Tampa.
He also urged Santorum’s former supporters to make donations to his campaign. “As the last remaining conservative in this race, we urgently need your financial support today,” Gingrich wrote in an e-mail fundraising pitch sent shortly after Santorum’s announcement.
R.C. Hammond, Gingrich’s spokesman, said that just as “wild card” baseball teams can go on to win the World Series, so, too, can Gingrich topple Romney if the former Massachusetts governor fails to reach the 1,144 delegates needed to secure the nomination. Barring a major setback, Romney will hit that number in mid-June, according to an Associated Press calculation.
In an April 8 interview on Fox News Sunday, Gingrich said his campaign is “operating on a shoestring.”
Building Newt Inc.
Gingrich, 68, built what he refers to as “Newt Inc.” after resigning as speaker in 1999, the end of a 20-year career as a legislator from Georgia. He earned $3.1 million in 2010 as head of two “think tanks” on K Street in Washington and as a paid speaker through his Gingrich Productions company that he runs with wife Callista Gingrich.
Between 2001 and 2010, the for-profit Gingrich Group LLC grossed $55 million, his campaign said in November. One of his first clients was Freddie Mac, which paid the firm $1.6 million over eight years to develop messages that would “contribute to the achievement of Freddie Mac business goals,” according to a contract the Gingrich campaign released in January.
Gingrich initially said he went to work for Freddie Mac as a “historian,” a description he took back when former officials at the mortgage company said he provided help in developing a message that could appeal to Capitol Hill Republicans.
Criticizing Freddie Mac
At a Dec. 30 Des Moines town hall meeting before the Iowa caucuses, Gingrich criticized his former employer, saying he wanted “to break up Fannie Mae and Freddie Mac because they are much too big and they’re out of control.”
The Gingrich Group in 2003 became known as the Center for Health Transformation and focused on advocating on health-care policy on Capitol Hill. Pharmaceutical Research and Manufacturers of America, the industry trade group known as PhRMA, was among the center’s clients, paying as much as $200,000 a year for membership, according to company documents.
The Gingrich Group filed for bankruptcy April 4 in Atlanta, where it has an office, indicating it intends to dissolve and liquidate its assets, which amount to less than $100,000, according to the court records. It reported owing the former speaker at least $5 million.
Gingrich’s nonprofit advocacy group, American Solutions for Winning the Future, raised about $52 million in contributions between its formation in 2007 and when it dissolved four years later, according to the Washington-based Center for Public Integrity, which tracks political expenditures.
Faltered Without Gingrich
Both groups were centered on Gingrich and, after he announced his presidential run in May, faltered without him at the helm, said Stefan Passantino, the campaign’s attorney who’d represented the Gingrich Group.
The collapse of the firms has left vendors in limbo. In October, a District of Columbia superior judge ordered American Solutions to pay $20,000 in rent to landlord BGW Limited Partnership for its seventh-floor office space. No payment has been made, said Steve Lustgarten, an executive with Blake Real Estate, a BGW affiliate.
With the bankruptcy last week of the health firm’s parent company, a fourth-floor office in the same building now sits vacant with mail piling up in front of the locked glass doors.
“We’re lucky enough to have both of them as tenants,” Lustgarten said, declining to comment further.
No Personal Liability
Because his businesses are legally separate entities and he severed ties with them, Gingrich doesn’t carry personal liability for their outstanding debts.
The former speaker does have at least one profitable outfit still operating. Gingrich Productions “is an active, thriving entity,” Passantino said. That business has continued its media and book contracts. Gingrich reported earning $541,600 in speaking fees, according to his 2010 tax filing, coordinated through Gingrich Productions. The Gingriches also took time out from the campaign to sell some of their books.
In his 11 months as a candidate, Gingrich has won two of 37 primary contests, in South Carolina and his home state of Georgia. The campaign had spent $19.2 million through the end of February, according to the Washington-based Center for Responsive Politics, which analyzes campaign finance reports.
The campaign owed $1.5 million by the end of February, according to the most recent FEC reports available. Gingrich said on Fox News Sunday that his campaign now is “slightly less than” $4.5 million in debt.
“We owe much more than we wanted to,” he said in an interview with Brit Hume. “Unfortunately, our guys tried to match Romney. It turned out we didn’t have anything like his capacity to raise money.”
Gingrich’s intital $500 check for the Utah filing fee bounced, prompting Mark Thomas, the state elections director, to send the campaign a certified letter on April 9 requesting payment.
A cashier’s check arrived today, Thomas said. Utah is the final state to hold a primary, on June 26. Hammond said the check had bounced because the campaign switched banks, not because of deficient funds.
Many of the debts listed in Gingrich’s latest FEC report are for consultants, including $1,666.66 to Rick Tyler. Tyler left Gingrich’s campaign last year and is a senior adviser to Winning Our Future, a super-political action committee supportive of him. The campaign also owed $903.28 to his daughter and campaign employee, Kathy Lubbers.
The debts reflect the one-time infrastructure of Gingrich’s campaign operation: He owes more than $30,000 each to the Patriot Group for security, Premiere Transportation for a bus charter, Pro Production Services for event production and Airnet Group for a “web hosting handset.” Another $75,642 was due to Moby Dick Airlines for charter planes.
Some smaller business outlets are also waiting for payments. Angel de la Portilla hasn’t been paid any of the $6,000 contract he had with the campaign to conduct Hispanic voter outreach in Florida, even though he’s been assured several times that “the check is in the mail.”
“That’s not a good way to do business,” said de la Portilla. “If there’s a problem, don’t lie. Pick up the phone and call to work out an arrangement.”
Hammond said the campaign is “paying off vendors as promptly as we are able to.”
To retire campaign debt after he’s left the presidential contest, Gingrich will have to raise money from donors who are limited to $2,500. While not obligated to do so, he could dip into his own pockets to pay off vendors, because he hasn’t used public financing for his run.
Michael Robinson, an executive vice president for Levick Strategic Communications in Washington who was a campaign official for Republican Presidents George H.W. Bush and George W. Bush, said Gingrich can build a post-presidential career, particularly if he can land a speaking role at the Tampa convention in August.
The former speaker’s campaign style -- his call for “big ideas,” his debate performances, his themes of $2.50 per gallon gas and space exploration -- could be leveraged into a money- making enterprise with the right support, Robinson said.
First, though, Gingrich “has to decide who he is and what he’s going to be,” he said. “There is a lot of confusion now about what his brand is, and the rest of the campaign is a moment to define what his future looks like.”
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