$Unique_ID{bob01020} $Pretitle{} $Title{Iran-Contra Affair: The Report Chapter 4A Private Fundraising: Channell-Miller} $Subtitle{} $Author{Various} $Affiliation{} $Subject{channell conrad miller ibc nepl north contras fundraising public fraser} $Date{1987} $Log{} Title: Iran-Contra Affair: The Report Author: Various Date: 1987 Chapter 4A Private Fundraising: Channell-Miller While donations from other countries and profits from the Iran arms sales provided most of the money for lethal assistance to the Contras after the Boland Amendment, the network of private foundations and organizations formed by Carl R. "Spitz" Channell and Richard R. Miller also played a role. Channell's principal organization, the tax-exempt National Endowment for the Preservation of Liberty (NEPL), used White House briefings and private meetings with the President to raise more than $10 million from private contributors, almost all for the Contra cause. Over half of this total came from two elderly widows - Barbara Newington and Ellen Garwood - who made the bulk of their contributions after receiving private and emotional presentations by Lt. Col. Oliver North on the Contras' cause and military needs. One dozen contributors accounted for 90 percent of NEPL's funds in 1985 and 1986. Of the $10 million that was raised, only approximately $4.5 million was funneled to, or spent on behalf of, the Contras, including more than $1 million for political advertising and lobbying. The rest was retained by Mil]er and Channell for salaries, fees, and expenses incurred by their organizations, including compensation to their associates, David Fischer and Martin Artiano. The NEPL money spent for direct and indirect assistance to the Contras was disbursed primarily by Miller at the direction of North. Approximately $1.7 million was "washed" by Channell through Miller's domestic and Cayman Island entities - International Business Communications (IBC) and I.C., Inc. - to the Enterprise, where it was commingled with funds from third-country contributions and the Iranian arms sale. Another $1 million was passed at the direction of North through Miller's entities to accounts controlled by Adolfo Calero, and approximately $500,000 was distributed at North's request to other persons and entities engaged in activities relating to the Contras. Channell and Miller made elaborate efforts to conceal the nature of their fundraising activities and North's role. Certain funds received by NEPL for Contra assistance were allocated on Channell's books to a project denominated "Toys," a euphemism for weapons. The NEPL and IBC employees were instructed to refer to North by a code name, "Green." Funds were transferred to the Contras, not directly - which would be traceable - but through Miller's anonymous offshore entity, I.C., Inc. North misrepresented to several White House officials the nature of the network's fundraising activities. For instance, the President apparently was led to believe that the funds were being raised for political advertising; the President's Chief of Staff, Donald Regan, was deliberately kept in the dark by North and Admiral John Poindexter; and North misrepresented to Congress and White House personnel the nature of his involvement in the activities of NEPL and IBC. As a result, the network was able to operate successfully until the latter part of 1986, when increased Government aid to the Contras and public disclosure of both the Iranian arms sales and the Contra resupply network made further assistance efforts unnecessary and unwise. By using a tax-exempt organization to funnel money to the Contras - for arms and other purposes - Channell and Miller provided tax deductions to donors. As a result, the U.S. Government effectively subsidized a portion of contributions intended for lethal aid to the Contras. In the spring of 1986, Channell and Miller pled guilty to criminal tax charges of conspiring to defraud "the United States Treasury of revenues to which it was entitled by subverting and corrupting the lawful purposes . . . of NEPL by using NEPL . . . to solicit contributions to purchase military and other non-humanitarian aid for the Contras." At his plea hearing, Channell identified Miller and North as his co-conspirators. The Background Carl R. "Spitz" Channell Channell, 42, was raised in Elkton, West Virginia. He attended American University from 1963 to 1968 and then, for a brief period, the Union Theological Seminary in Virginia. He left to join the Army and, after service for 3 years, received an honorable discharge. In 1976, Channell began to work for Terry Dolan, the founder of the National Conservative Political Action Committee (NCPAC). His initial responsibility was assisting in Congressional campaigns. After the 1978 elections, Dolan asked Channell to shift to fund-raising. To Channell's own surprise, he was an instant success, and was named by Dolan as NCPAC's first national finance chairman, In that position, Channell concentrated on NCPAC's "high dollar donor program" and set up a number of briefings in Washington for potentially large contributors. This fundraising method was to become the standard operating procedure for the Channell-Miller network, In 1982, Channell left NCPAC to form his own political consulting organization, the Channell Corporation, to offer fundraising advice to campaigns and candidates. By 1984, he began to establish a network of other politically-oriented foundations. First, he founded the American Conservative Trust (ACT) as a Political Action Committee (PAC). At approximately the same time, he incorporated NEPL and sought Internal Revenue Service (IRS) recognition of NEPL as a tax-exempt foundation under Section 501 (c)(3) of the Internal Revenue Code. In its application for tax-exempt status, NEPL asserted that it was formed "to educate members of the general public on American political systems and societal institutions." The application further stated that this education was to be accomplished through the study of the development of American political systems and the influence of such systems on societal institutions in the United States. NEPL indicated to the IRS that it would collect information on these topics, make that information available to the general public, and eventually conduct seminars. On December 12, 1984, the IRS issued a determination letter stating that, based on the information contained in NEPL's application and assuming that its operations would be consistent with the program outlined in the application, NEPL qualified as an exempt organization under Section 501(c)(3). [Channell formed additional entities between 1983 and 1986. The American Conservative Trust State Election Fund (ACT-SEF) was formed as a state PAC to take advantage of state laws allowing corporate contributions to such entities. "Sentinel" was formed in 1983 as a lobbying organization under Section 501(c)(4) of the tax code. The "American Conservative Foundation," a 501(c)(3) corporation also established in 1983, was intended to focus on issues that were "more worldwide in scope and interest" than NEPL. The "Anti-Terrorism American Committee" (ATAC) was formed in 1986 as a PAC focusing on "congressional attitudes toward terrorism and policies associated with terrorism." "Grow Washington" and "Hill Potomac" were corporations established to pursue specific initiatives that, according to Channell, never materialized. Those entities have therefore remained inactive and unfunded. In 1986, Channell assumed control of another conservative organization, Western Goals, which had been established by the late Representative Larry McDonald. Channell Dep., 9/1/87, at 62-66.] According to Channell, when he formed NEPL in late 1984, most "Washington insiders" doubted that anyone could raise money to advance foreign policy. Channell, however, believed that he could succeed because his major donors were committed to President Reagan and his philosophy toward foreign affairs. At first, NEPL concentrated on raising funds to publicize "European issues," e.g., SALT, summits, and nuclear freeze proposals. In January 1985, after NEPL ran a large newspaper advertisement congratulating President Reagan on his inauguration, Channell received a call from Edie Fraser of the public relations firm, Miner & Fraser. According to Channell, Fraser indicated that she admired the ad and asked for NEPL's assistance in organizing and promoting a fundraising dinner for the Nicaraguan Refugee Fund (NRF). This was Channell's introduction to the Contras' cause. To assist him, Channell recruited Daniel Conrad, a fundraising consultant from San Francisco, with whom Channell had dealt on earlier occasions. Conrad came to Washington, and together he and Channell initiated NEPL's involvement in the Nicaraguan issue. Daniel L. Conrad Conrad, 44, received a bachelors degree in English and Political Science from Northwestern University in 1965. He also did graduate work in philosophy and business at Northwestern and the University of Michigan. In the late 1960's, after short stints as a management trainee at Ford Motor Company and a fundraiser for Northwestern, Conrad joined Harvey Fundraising Management of Milwaukee, Wisconsin, as a field director for campaigns. In the early 1970's, after a brief career as a stockbroker, Conrad started his own firm, the Institute for Fundraising, in San Francisco. It was a sole proprietorship that presented seminars, produced manuals, and offered consulting services in the field of fundraising. In the late 1970's, Conrad incorporated his business as Public Management Institute (PMI), which evolved from a training and consulting services firm to one primarily engaged in the publishing of periodicals and reference materials on financial grants and capital campaigns. Conrad himself continued, however, to consult on fundraising matters. Conrad first met Channell in 1978 or 1979 at a seminar on fundraising being taught by Conrad in Alexandria, Virginia. After their initial meeting, Channell called Conrad periodically for informal advice on fundraising. In 1983 or 1984, Channell hired Conrad as a consultant to advise him on how to build a political consulting business, an assignment that lasted approximately 1 week. Given Channell's history of looking to Conrad for advice, it was natural for Channell to ask Conrad to assist him in fundraising for the Contras - even though Conrad had never been involved in political fundraising and had no particular interest in the Nicaraguan issue. Their financial arrangement was never formalized. According to Conrad, Channell just gave him money periodically. For his efforts on the NRF dinner, for example, Conrad recalls receiving $10,000 or $15,000 from Channell, $10,000 from the NRF, and $1,500 from Miner & Fraser. After that time, Conrad's compensation "kept changing," with Channell deciding at various intervals how much to pay him. According to Conrad, he signed on with Channell's organizations more as a matter of friendship than as a matter of business. Although Conrad had no formal position or title, he served initially as the number two person in each of Channell's organizations. Channell eventually gave him the title, "Executive Director." When Conrad joined Channell, the common offices for Channell's various entities were in a small townhouse at 305 4th Street, NE, in Washington, D.C. Later, in August 1986, as money from Contra donors rolled in, they moved to luxurious and spacious new quarters in National Place, 1331 Pennsylvania Avenue, NW, Washington, D.C., and hired additional staff and fundraisers. Lines of authority in Channell's organization were informal. Fundraisers reported either to Conrad or Channell, who shared responsibility for training them. Channell, however, was generally in charge of preparing the script to be used for soliciting prospective donors. Richard R. Miller and IBC Miller, 35, received a bachelors degree in 1976 from the University of Maryland. During parts of 1979 and 1980, he served as director of broadcast services for the Reagan campaign. William Casey, Director of the 1980 Presidential campaign, furloughed him when funds ran short but then rehired him. During the furlough, Miller formed Ram Communications, a short-lived public relations firm. After the 1980 election, Miller served on the transition team and then briefly as special assistant to the director of public affairs in the Department of Transportation. From February 1981 to February 1983, he was chief of news and public affairs for the Agency for International Development (AID). He was then promoted to public affairs director at AID, where he remained until 1984. Upon leaving AID, Miller established IBC as a sole proprietorship to engage in media relations, strategic planning for public affairs, political analysis, and executive branch liaison. In 1984, he began to work with Francis Gomez who recently had left his position as Deputy Assistant Secretary for Public Affairs in the State Department. Miller had first met Gomez in February 1982. Immediately upon leaving the State Department in February 1984, Gomez received a contract from the State Department to assist its newly formed Office of Public Diplomacy for Latin America and the Caribbean (S/LPD) with public relations advice and support. The original purchase order for the contract specified that Gomez was to write talking point papers on Central America, prepare speaker kits, identify and refute distortions and false allegations regarding U.S. policy, draft sample speeches, prepare op-ed pieces and feature articles, assist Central American refugees and exiles visiting Washington, arrange media events for them, and make them available for Congressional interviews. This contract was renewed with Gomez in May 1984 and then assumed by IBC in August or September 1984. Before it terminated in September 1986 after several renewals, Gomez and IBC received a total of $441,084 from the State Department. [In Audit Report No. 7PP-008, July 1987, the State Department's Office of Inspector General filed its conclusions reached after a special inquiry into the awarding and supervision of these contracts with Gomez and IBC. That report concluded, in summary, that, while the original contract was justifiable, its utility became questionable during its later stages. The Inspector General also criticized the sole-source, noncompetitive process for awarding and administering the contracts, especially the classification of one version of the contracts as "SECRET," indicating that the classification was unjustified and improper. Audit Report at 32-33.] By mid-1984, with the assumption of the State Department contract, IBC was functioning as an informal partnership between Miller and Gomez, even though Gomez was technically a subcontractor to IBC. At a later time, Miller and Gomez would each establish personal corporations - Miller Communications, Inc. and Gomez International, Inc. - and, effective January 1, 1986, would restructure IBC into a partnership of those two entities. There is not, however, any written partnership agreement. [In July 1986, IBC entered into a joint venture with David C. Fischer & Associates, a consulting firm founded by a former aide to President Reagan. R. Miller Dep., 8/20/87, at 93-95.] In September 1984, IBC also began to represent one of Adolfo Calero's organizations, the Nicaraguan Development Council (NDC). Initially, IBC charged NDC $3,000 a month for public relations services, a fee that was later raised to $5,000 a month when IBC hired a full-time employee to do work for NDC. This relationship gave Miller and Gomez significant opportunities to work closely with Calero, Alfonso Robelo, and Arturo Cruz. In the course of assisting the Contras with their public relations, Miller was introduced to North, apparently by either Otto Reich or Jonathan Miller (no relation) - Director and Deputy Director of S/LPD - who were IBC's principal contacts at the State Department. In early 1985, Richard Miller became involved with the NRF dinner, with which Channell and Conrad were also engaged. This was the beginning of their relationship, although the dinner demanded little of their respective energies and was organized and run principally by others. The NRF Dinner According, to Channell, the NRF dinner had to be postponed several times and was an organizational disaster. When it finally took place on April 15, 1985, President Reagan attended and delivered the keynote address. The NRF dinner proved to Channell that large and expensive functions were not an efficient method of raising money for the Contras, but the President's commitment to the Contra cause convinced Channell that the Nicaraguan issue was fertile ground for fundraising and public education. Thereafter, Channell and Conrad, with the assistance of Miller, concentrated on private meetings with potential large donors, who would be given an audience with North and, in some cases, a photo opportunity with the President. The idea of focusing on potential big givers to the Contras was not new. Edie Fraser, one of the principal organizers of the NRF dinner, testified that at the suggestion of the State Department she met with North on December 11, 1984, to seek White House "participation" in the dinner. At that meeting, Fraser mentioned the Sultan of Brunei to North as a possible contributor to the NRF. Fraser explained that the Sultan had come to her attention because he had made a contribution to UNICEF in honor of Mrs. Reagan. On December 28, 1984, Fraser sent further biographical information on the Sultan to North, but does not know if North ever followed this lead. On March 4, 1985, Fraser sent additional information to North on the planned dinner. At the bottom of the cover letter she added a handwritten note: "Ollie, Very Imp., Two people want to give major contribs i.e. 300,000 and up if they might have one 'quiet' minute with the President." According to Fraser, she added this note to the letter because of her conversations with Channell and Conrad, who suggested that some of their contributors might make large donations to the NRF dinner if they could meet alone with President Reagan. As far as Fraser can recall, she added the number of donors ("two") and the possible amount of money ("300,000") to her note to give the offer some definition. She cannot be sure that either Channell or Conrad were that specific in their conversations with her. Neither Channell nor Conrad recall discussing such an offer with Fraser. Fraser received no response from North regarding the offer. In fact, Fraser says she never heard from or spoke to North again after their initial meeting on December 11, 1984. Her letters were not answered by North; someone else at the White House ultimately assumed responsibility for liaison with the group planning the dinner. NEPL and IBC Meet In late March 1985, prior to the NRF dinner, Channell called the office of Edward Rollins, then White House Political Affairs Director, to ask how NEPL could help support "the President's agenda in Central America." Rollins's office referred the call to John Roberts, then a White House aide, who agreed to have lunch with Channell and Conrad. At that lunch, according to Channell, Roberts responded to their interest in the Nicaraguan issue by stating that they should talk to Miller and Gomez, the principals of IBC. Roberts told Channell and Conrad that IBC was "the White House outside the White House" on this issue. Shortly thereafter, Channell and Conrad set up a meeting with Miller. [With respect to this conversation, Roberts told the Committees in an interview that he possibly described Miller as "fronting for the State Department" or as "in the family." Roberts Int., 7/17/87.] Roberts had called Miller prior to that meeting and alerted him to the referral, suggesting that Channell and Conrad wanted to "help the President" on Nicaragua. In particular, Roberts told Miller that Channell and Conrad wanted to do a media campaign. Roberts did not mention any possibility of direct financial assistance to the Contras.