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Teamsters And The Dems: Give A Lot, Get A Lot?

How the Teamsters scandal could tar the Democrats

A month before Election Day, 1996, Democratic fund-raiser extraordinaire Terence R. McAuliffe was right where you would expect him to be--working the phones in a second-floor office behind the U.S. Capitol. After pulling in $43 million as finance chairman for the Clinton-Gore reelection committee, McAuliffe had taken on a fresh assignment: raising money for congressional candidates.

McAuliffe's new title was chairman and chief fund-raiser for Unity '96, an umbrella group formed by House and Senate campaign committees and the Democratic National Committee (DNC). As such, he broached a novel idea to Matthew H. Angle, executive director of the Democratic Congressional Campaign Committee (DCCC): Did Angle know of a donor who might write a check to Ron Carey? The Teamsters chief's reelection bid faced a tough challenge from James P. Hoffa. Angle, in a Senate deposition, says he was told by McAuliffe that "if the DCCC could help Carey, then we could get contributions back to the DCCC."

Angle ran the idea past Representative Martin Frost (D-Tex.), the DCCC chairman. They took a pass. But McAuliffe persisted. He raised the idea with Rita M. Lewis, then-finance director of the Democratic Senatorial Campaign Committee, who discussed it with her boss, Senator Bob Kerrey (D-Neb.).

These conversations have become the focus of a federal grand jury in Manhattan that is investigating whether Democratic fund-raisers conspired to find donors for Carey's campaign in hopes of getting back hefty union contributions. The case threatens to drag the Dems even deeper into the controversy over questionable fund-raising practices.

The yearlong probe into abuses by Carey's campaign consultants has now widened to include McAuliffe; his then-deputy, Laura A. Hartigan; and ex-DNC Finance Director Richard L. Sullivan. Sources close to the investigation say none of them has been targeted by the grand jury, but they remain a focus of the probe. All three deny wrongdoing and through their lawyers say they are cooperating with the investigation.

RIPPLES. Of all the finance inquiries, the Teamsters case is the only one so far that has had serious legal consequences. Carey's campaign manager and two consultants have pled guilty in federal court to charges relating to laundering campaign funds. Ex-Teamsters political director William W. Hamilton Jr. was indicted on Apr. 27 by the federal grand jury in New York and is fighting charges of embezzlement, fraud, and perjury. One election monitor overturned Carey's victory; another barred him from running again, giving Hoffa the pole position in a rerun slated for the fall.

The charges against the Carey campaign include embezzlement of nearly $1 million in Teamsters funds in a complex series of money-laundering maneuvers. In one alleged case, wealthy donors were induced to contribute to Carey; then Teamsters money was used to back left-wing causes that the donors normally would have supported. Carey denies he was involved in--or even knew about--the swaps.

One such plan allegedly involved the Dems, and Hamilton's indictment may provide a road map for U.S. Attorney Mary Jo White's possible case against party officials. Her office is focusing on activities from June to November, 1996, when both Clinton and Carey were frantically raising money.

Early that June, Carey campaign adviser Martin Davis met with McAuliffe, a close friend. Davis, who has since pled guilty to fraud and conspiracy, told prosecutors that he offered to raise $1 million for Clinton in exchange for help for Carey. The offer to help Clinton was not in itself unusual. Since Carey had become head of the International Brotherhood of Teamsters in 1992, the union had donated some $8.5 million to Democratic candidates and been granted access to the President's inner circle on important labor matters.

But McAuliffe says Davis never mentioned a quid pro quo and that he referred Davis to Hartigan. On June 17, McAuliffe and Hartigan escorted Davis to a lunch with Clinton at the White House attended by eight other donors. Six days later, the Teamsters gave $236,500 to state Democratic parties.

Sullivan and Davis have also testified that they discussed Davis' swap idea at an early June lunch, arranged and attended by Hartigan, at The Palm restaurant in Washington. And at a Senate hearing last fall, a DNC aide laid out how he researched, at Sullivan's request, whether a Philippine exec who could not legally give to the DNC might instead give to Carey. Because employer donations are barred in Teamster elections, the exec's money was rejected.

"UNDERSTOOD." In September, 1996, after McAuliffe took on his new duties at Unity '96, Davis says McAuliffe asked him for a $500,000 contribution. "It was understood between us that he and others would try to identify a person who would contribute $100,000 to the Carey campaign," Davis told prosecutors. McAuliffe denies this.

When McAuliffe mentioned to Lewis of the Senate campaign committee that finding a Carey donor would get a contribution back for Unity '96, she took the idea to Kerrey. The senator consulted with Bernard Rapoport, a Waco (Tex.) insurance executive who has close ties to labor and is one of the Democrats' biggest donors. Together, they decided not to pursue the swap idea. Both Kerrey and Rapoport have been interviewed by the U.S. Attorney's office.

McAuliffe's lawyer, Richard Ben-Veniste, says his client "put no pressure on anyone or even encouraged anyone. He just put it out there." He adds that McAuliffe never pursued the swap proposal with any donors, either. Congressional campaign committee director Angle agrees that his conversation with McAuliffe lasted only a few seconds and that the idea was immediately dropped. "Apart from not being legal or proper, it wasn't practical," says Angle. Lewis did not return phone calls.

Lewis now works for Washington Group, a lobbying and consulting firm led by John D. Raffaelli. Until 1995, Raffaelli was McAuliffe's law partner, and they remain close friends. In early 1996, he and McAuliffe were hired to help lobby the AFL-CIO Executive Council to switch its union credit-card program from the Bank of New York to Household International. Carey campaign consultant Davis was hired for the same project, though under a separate contract. Household won the business and agreed to advance the AFL and its member unions $40 million, which helped labor to pump millions into the '96 elections. Sources close to the investigation say the U.S. Attorney is interested in whether the credit-card deal played a role in the swap schemes.

The U.S. Attorney may decide not to press charges because thus far, there is no evidence that attempts to swap donors with the Democrats were successful. But with the Teamsters treasury out about $600,000, it's clear that Carey's campaign, at least, thought it had a deal with the Dems. If that's the case, it could come back to haunt Democrats this fall when Republicans try to make systemic corruption--from the White House on down--a cutting issue.

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