Direct-Mail Deviltry
Byron, Christopher M.
Christopher M. Byron Direct-Mail Deviltry The shady economics of interest group fundraising could come back to haunt conservatives. ered his ties with one of his direct-mail fundraisers, the...
...Viguerie himself wouldn't comment, but the North campaign's lawyer, Mark Braden, confirmed that for all practical purposes he's gone, saying that he wouldn't be doing any more fundraising off existing campaign lists...
...Generating one's own lists is lucrative, but this is not to ignore the service fees from the mailing itself...
...The UCC signed a five-year fundraising contract with the marketing company Watson & Hughey in 1984, giving W&H control over most of UCC's assets and fundraising activities...
...Such games play into the hands of conservatism's critics, and inevitably erode public confidence not just in the messenger but, ultimately, in conservatism itself...
...That right could turn out to be an enormous asset for Viguerie, who left the North campaign in September under circumstances that are still not entirely clear...
...Form 990 filings for United Seniors show the same general arrangement...
...Viguerie launched the Seniors Coalition in 1989 as a spin-off of a group called the Taxpayer Education Lobby...
...Everyone will want it...
...Many of today's big players in political fundraising have passed through Viguerie's shop, where, say insiders, the practice of setting up postage syndicates actually began...
...The General Accounting Office is looking into the so-called Normandy Foundation, headed by onetime JFK flack Pierre Salinger, in which the Winchell organization has played a role...
...In other words, the Coalition actually spent roughly 80 per cent of the money it collected in 1993 not on program services but on fundraising solicitations to "educate" the public...
...That is, Stephen Winchell & Associates Inc.—the for-profit marketing firm that prepares the mailings—wound up one way or another absorbing 80 percent of the $11 million the Coalition took in last year...
...The United Cancer Council, the defendant in the case, is a 501(c)(3) organization (a charity to which donations are tax deductible), but the decision could have repercussions for 501(c)(4) outWhen the catastrophic health tax law was repealed, the group moved in yet another direction, seizing onto fears of the elderly regarding the solvency of the Social Security system...
...Apparently, Viguerie's performance had been found unsatisfactory...
...In 1991, SCAT was spun off as a separate fundraising venture all its own—the Seniors Coalition—but the distance hardly seems what one would call arm's length...
...Some campaign insiders say he quit, others say he was fired...
...That is not enough to cover the roughly $700,000 in overhead (list rental, postage, printing, etc...
...Contacted for this story, Shaker insisted that Washington Marketing has never done any work for ACHCR, and that his own involvement with the Council was strictly as "volunteer president...
...Meanwhile, a case before the U.S...
...Close-to-the-wind direct-mail marketing may have gone too far...
...L ast spring, Arkansas Democratic Senator David Pryor complained of the inaccuracy and unfairness of attacks on the Clinton health care bill by little-known but apparently well-heeled direct-mail groups...
...n fact, rather than being a monolithic, well-oiled and well-financed operation, the much-dreaded conservative fundraising machine turns out to be an industry of cash-starved mom-and-pop operators aiming to hit it big through dubious business practices...
...To use reasonable assumptions by industry standards: If only 1.5 percent (roughly 50,000 people) respond to the mailing, offering donations averaging $12, the company takes in $600,000...
...Sounds like this is exactly how a donor might have hoped the Coalition spent his or her money, right...
...Washington Marketing designs and writes direct-mail solicitations, then negotiates printing contracts with production companies...
...All that need be done thereafter is to file an annual IRS Form 990 stating the group's public purpose and showing the money was received and how it was spent...
...Yet under terms confirmed by Richard Norman, as soon as the election is over, Viguerie can begin renting out the North lists he created to whatever groups want them—even though doing so will automatically degrade their value to the North campaign itself...
...This money is then lent out—at interest rates that can reach 48 per cent or more annually—to enable cash-squeezed marketing companies to finance their direct-mail campaigns...
...In 1992, as reported by William McGurn in National Review, GOP fundraiser Ann Stone set up a pro-abortion group called "Republicans for Choice," then steered much of its fundraising business to certain marketing companies she either owned or controlled...
...News & World Report, and others...
...The Seniors Coalition's IRS Form 990 for calendar year 1993 shows that the organization collected roughly $11 million in public donations while laying out less than $1.4 million for "fundraising...
...When the catastrophic health tax law was repealed, the group moved in yet another direction, seizing onto fears of the elderly regarding the solvency of the Social Security system, and began sending out fundraising letters on that topic too...
...Two other Viguerie executives—Chip Heartfield and Jeremy Squire—headed up the Coalition's marketing...
...Shaker was emphatic that no money from the Council ever went to Washington Marketing or indeed any other business entity that he, Shaker, had any association with...
...This was an exaggeration of what the bill actually proposed: to make it a crime for anyone to bribe a government health care employee...
...The Seniors Coalition and United Seniors Direct mail is a clubby, ingrown world in which everybody knows everybody, and no one on the outside gets to play...
...How does a group like the ACHCR benefit...
...W&H began a series of fundraising promotions, most of them sweepstakes mailings, to beef up UCC's mailing list and generate income...
...There are "printers' reps" who solicit contracts for various printing plants, and on and on...
...Other top Viguerie executives—among them Chip Heartfield, Jeremy Squire, Sandy Butler, James Martin, George McDonnell, and Earl Chester—also departed to start or become involved with operations on their own...
...It could wind up affecting the whole field of tax exempt fundraising...
...A hint at the group's real agenda could be found in the mailing's final words: "Send the American Council For Health Care "At least 30 percent of the companies in this business are out-and-out frauds," says Denison Hatch, publisher of Who's Mailing What, America's top direct-mail trade journal...
...Don Brumbach, a sales executive for Cyril Scott Co., of Lancaster, Ohio, says his company has done direct-mail print jobs for many conservative political groups in Washington—the American Council included—and that the brokerage firm for the Council's work on Cyril Scott print jobs is none other than Shaker's company, Washington Marketing...
...In 1993, the Association took in roughly $5.3 million from donations, while claiming to pay back out nearly $3 million on program services (listed as "public awareness" and "public advocacy") with only about $970,000 going for actual fundraising...
...His wife is a volunteer, too...
...According to the campaign's finance director, Richard Norman, by mid-September the organization had raised "close to $14 million"—an astounding sum for a first-time candidate for political office—from its mailing list, typically by sending out letters portraying North as a lone champion of conservatism who is under attack by the "liberal media...
...How It Works Anyone can create a political fundraising/education group under Sec...
...Consider the American Council for Health Care Reform...
...ered his ties with one of his direct-mail fundraisers, the Coalition for Freedom, after the IRS charged that the group had been run, in part at least, for the financial benefit of insiders...
...Nor do these groups seem finicky about the conservativefits—such as issues-oriented fundraising groups—that don't allow tax deductions...
...Shaker runs a for-profit company out of the same address called the Washington Marketing Group...
...Finally, the company has now added 50,000 names of proven check writers to a list that it can rent out to others...
...But a search of news archives reveals no mention of the organization prior to 1993...
...We wanted to bring in new blood," he said...
...The process starts with renting mailing lists from legitimate institutions, ranging from the Heritage Foundation and Citizens for a Sound Economy to Newsweek, U.S...
...Recently, ACHCR sent out a mass mailing solicitation that carried the headline "Five Years In Jail If You Buy Extra Care...
...Yet it wasn't long before United Seniors also took up the health care cause...
...It's the for-profit marketing company that lurks in the background that makes the money—from fees collected on each mailing the marketing company puts out...
...One doesn't even need to file any organizing documents: Just make the decision to go into business and start raising money...
...Marketing companies have been known to send out up to 2.8 million pieces of third-class mail—enough to fill ten eighteen-wheelers...
...Where did the politics of the issues they take on...
...In reality, more than $4.2 million got spent on fundraising mailings with an "education" fig leaf...
...Folks who rise to the bait and send in contributions ranging from $25 to $500 or more, are culled off into a new list of actual donors—a list that belongs jointly to North and to his marketers, the most prominent of whom is Richard A. Viguerie, the reigning dean of direct-mail fundraising for the conservative right...
...An instructive example of the economics of mailing lists—and of the dubious value of direct mail to conservative causes—is the Senate race of Oliver North...
...The American Spectator November 1994 31 Reform your check for as much as you can afford...
...He refused to reveal which direct-mail marketing and/or print brokerage companies the Council typically uses...
...No one need approve of Clinton's health care program—or any other part of his agenda—to be alarmed at this bizarre offshoot of conservative fundraising, which makes money through the mass mailing of fear...
...The bulk of it roughly $7.5 million—went for "program services," which the Coalition listed as "public education" and "lobbying activities...
...In 1992, when the group's ties to the convicted extortionist, Alexander, began to generate bad publicity, Heartfield 32 The American Spectator November 1994 and Squire resigned the account, leaving the business in the hands of Steve Winchell, the same Viguerie associate who'd given business to Aldige (by now a Coalition board member) after he had parted ways with Viguerie as well...
...rest go...
...We thought we could do it more successfully financially through others," said Braden...
...Little if any of this $32 million wound up with UCC, which filed for bankruptcy in 1990...
...Senate Republican Jesse Helms of North Carolina has an almost legendary addiction to direct mail...
...That group had initially been set up to raise money on prayer-inschool issues...
...And these people—having already demonstrated their generosity—could be counted on to make further contributions when solicited again...
...No direct-mail effort better illustrates the incestuousness of the industry—and the possibility for abuses that such clubbiness fosters—than the Seniors Coalition and its various spinoffs...
...It's an open question, in fact, whether direct mail is helping conservative causes or strangling them...
...Raising Money to Raise More Money These groups all bring in substantial annual donations, but virtually all the money seems to wind up being plowed back into overhead...
...There was Steve Winchell, who left in 1976 to start his own operation...
...30 The American Spectator November 1994 Renting mailing lists from a variety of conservative sources, North has built a nationwide conservative constituency the equal to any in the country...
...The organization's address turns out to be a private home in Arlington, Virginia, owned by one William Shaker...
...Winchell's job as Viguerie's number two man was eventually filled by James Aldige, who departed in 1986 to set up Dominion Direct Marketing and Publishing, and thereafter became a consultant to Winchell...
...The marketing company then begins "prospecting," or sending out an initial mass-mailing...
...There are "list brokers" who promote the mailing lists of just about any magazine or mail order catalogue you can think of...
...Until earlier this year the National Republican Congressional Committee maintained a long-standing relationship with direct-mail marketer Stephen Winchell, whose clients include Empower America and other conservative groups...
...In a similar spirit, the Seniors Coalition began a recent mailer calling for the preservation of Medicare Benefits—a non-conservative position if there ever was one...
...Changes Coming The Postal Service is now probing the activities of the Seniors Coalition and has recently investigated United Seniors as well...
...Philip M. Alexander, a Washington-based direct mail marketer for conservative groups (and this magazine), has described the whole joint-ownership concept as amounting to little more than a "fee enrichment scam"—increasing the revenues to the marketing company while eroding the earnings potential of the list to the fundraiser itself...
...Pressed further, Shaker said, "This is a hostile interview," and hung up the phone...
...Basically, it doesn't...
...In many cases, the resulting donations wind up principally benefiting the fundraisers themselves...
...501(c)(4) of the IRS Code...
...In fact, once again these were "joint costs...
...Then, when Congress passed a law in 1989 calling for the financing of catastrophic health insurance with a tax on Medicare benefits to the elderly, the Viguerie group latched onto the issue, raising money as the Seniors Coalition Against the Tax (SCAT...
...According to the Coalition's filing, the $1.4 million in fundraising and the $7.5 million in program services, are actually "joint costs"—they reflect a combined educational campaign and fundraising solicitation...
...Calling itself "60-Plus," this group is headed by James Martin, who worked for Viguerie in the early 1970s...
...The basic gimmick is for afor-profit marketing company either to create or sign up an issue oriented 501(c)(4) fundraising group, then to use the group to generate fee income...
...Pryor was close to the truth, as many who don't necessarily share his politics would agree...
...Some $28 million in contributions was raised during the life of the contract—as well as $4 million more from renting out the sweepstakes-generated mailing lists...
...Sandy Butler...
...T his nationwide network of more than 200,000 through-the-mail givers can be counted to go on supporting North long after the Virginia Senate race between himself and his randy Democratic rival, Chuck Robb, is over and forgotten...
...There are "creative shops" that consist of as few as one or two people writing copy...
...Wonder why...
...In September, however, Helms sevChristopher M. Byron is a contributing editor of Esquire...
...There are even "postage syndicates," to cover the undefrayable costs of launching a mailing...
...Pryor charged that the groups weren't interested in the issue at all, but had simply seized upon it as a way to wring contributions out of the elderly...
...Tax Court may hold that companies that surrender too much control to outside marketing groups become mere subsidiaries of those groups—and could lose their tax-exempt status...
...And who should be heading the organization up but yet another old Viguerie hand, Ms...
...The goal: to start creaming potential donors from some magazine or catalogue company's mailing list...
...Indeed, a government victory would greatly intensify IRS scrutiny of marketing companies throughout the industry—and inevitably, of the fundraising organizations that use them...
...Since the Post Office doesn't operate on credit, and since banks and other normal sources of capital aren't willing to front the money needed to get a mailing under way, groups of investors willkick in $5,000 or more apiece to create so-called "postage syndicates...
...This is the most closely watched case the Tax Court has had in years," says Washington tax lawyer Bruce Hopkins...
...Well, read on...
...James Aldige—the one-time Viguerie employee who later became a consultant to Winchell—was named a member of the Coalition's three-man board...
...But a big payoff lies just ahead...
...Such mailings could lead to a backlash against all direct-mail fundraising—a development that is bound to be uncomfortable for all sorts of political conservatives, who have in recent years used it prolifically...
...More recently, a third health-care-related fundraising group has appeared...
...Critics like Hatch say that many direct-mail fundraisers are little more than chain-letter bucket shops, raising money by intimidating tempting targets—mainly the elderly who often have nothing more to do with their lives than watch TV and wait for the mail...
...The solicitation is made from a list that the fundraiser now owns outright, and thus doesn't have to shell out rental money to use...
...Meanwhile, Viguerie had set up yet another fundraising shop—the United Seniors Association—to raise money in support of a balanced budget amendment...
...Interestingly, rates of giving rise dramatically—to as much as 10 percent of the entire list—when such people are resolicited...
...But is this a proper way to make use of the names of conservative donors, who give generously to a particular campaign, then find themselves shopped around to countless others...
...The letter asserted that each $25 contribution "will pay for the printing and mailing of 100 more kits like this one...
...A committee spokesman says the relationship was terminated because Winchell's company was not performing satisfactorily...
...For starters, the prospecting effort has "mined" 50,000 names from the rented list, adding these to its own list of members...
...According to the mailing's letterhead, it was established in 1983...
...Thereafter, with the Clinton administration championing health care reform, the Seniors Coalition started thumping on that issue too...
...CI 34 The American Spectator November 1994...
...SCAT was headed by a shady type named Dan Alexander, who had served time in federal prison for shakedowns on school construction projects in Alabama...
...The North list will be the hottest thing on the market," says one direct-mail player...
...At least 30 percent of the companies in this business are out-and-out frauds," says Denison Hatch, publisher of Who's Mailing What, America's top direct-mail trade journal...
...Meanwhile, the campaign's contract with Viguerie allows him to use the list in the future to raise money for yet more bootstrap candidacies such as North's...
Vol. 27 • November 1994 • No. 11
