February 11, 2006 latimes.com
Abramoff's Charity Began at Home
The lobbyist admits he used nonprofits to evade taxes, pad his pockets and bribe officials.
By Chuck Neubauer and Richard B. Schmitt, Times Staff Writers

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WASHINGTON  In his own way, disgraced super-lobbyist Jack Abramoff engaged in many charitable endeavors over the course of his decade-long career as a Washington insider.

There was the time he laundered money through a religious group's accounts to try to bribe a congressional aide. He diverted funds from a youth athletic foundation to bankroll a golf junket for a congressman and to bolster the bank account of his Washington restaurant. He used two other nonprofits to line his own pockets with millions of dollars defrauded from clients.

Charities are supposed to advance the public interest, which is why they aren't taxed. But Abramoff, by his own admission, used them to evade taxes, enrich himself and bribe public officials, according to a plea agreement he signed with federal prosecutors in January.

"One of the most disturbing elements of this whole sordid story is the blatant misuse of charities in a scheme to peddle political influence," said Mark Everson, commissioner of the Internal Revenue Service.

Abramoff's use and misuse of nonprofits played a key role in each of the three counts of his indictment: conspiracy, mail fraud and tax evasion. He admitted evading $1.7 million in income taxes over three years, in part by using nonprofits to conceal personal income from the IRS.

The fast-growing ranks of tax-exempt, nonprofit organizations are tailor-made for operators like Abramoff.

The number of tax-exempt groups in the United States has tripled over the last three decades, but nonprofit groups usually pay no tax, so there is little incentive for the IRS to keep an eye on them.

The lack of oversight is especially meaningful in Washington, where trade associations, public-interest groups and grass-roots lobbying organizations all have tax-exempt status under generous IRS rules designed to foster public debate. Members of Congress are also getting into the act and forming their own charities.

Abramoff and a partner, Michael P.S. Scanlon, a onetime aide to former House Majority Leader Tom DeLay (R-Texas), admitted bilking Indian tribes out of tens of millions of dollars and attempting to bribe public officials. They used a network of charities and other nonprofits  some existing, some they created  to forge a full-service influence-peddling operation.

They included:

" The Capital Athletic Foundation, created by Abramoff as a sports-oriented youth charity. He funded it with millions improperly diverted from his lobbying clients and treated it as his "personal piggy bank," a lawmaker said, spending money on pet projects that had nothing to do with its stated purpose.

" The American International Center, a bogus "international think tank" at a beach house near Rehoboth Beach, Del. Abramoff and Scanlon used the center to collect millions from their lobbying clients and then send it to their personal bank accounts.

" Toward Tradition, a nonprofit in Mercer Island, Wash., that promotes "traditional Judeo Christian values" and was used to help Abramoff funnel an alleged $50,000 bribe of an aide to DeLay.

" The National Center for Public Policy Research in Washington, an obscure conservative organization that Abramoff used to defraud an Indian tribe and an offshore gaming alliance of at least $2 million for his and Scanlon's personal enrichment.

Abramoff's story is not just one of clever fraudsters, but of the seeming willingness of some donors and charities to look the other way. They say that they too are victims, although some experts question whether they were diligent enough.

Rabbi Daniel Lapin, the head of Toward Tradition, said he had no reason to be suspicious of a gift from an Abramoff client called eLottery, even though his organization is avowedly anti-gambling. Abramoff, a former board member of the group, was considered a trusted friend.

"Toward Tradition and I interact with thousands of individuals and hundreds of organizations every year," Lapin said in a statement. "It is just unrealistic to suppose that none of these relationships are ever going to become problematic. There was no reason for Toward Tradition to spurn Jack Abramoff's support."

Some experts say charities ask for trouble when they accept gifts with strings attached.

"The moment the donor appears to have a vested interest in who I hire and how I conduct my business & I think I have an obligation to look into that," said Diana Aviv, the president and chief executive of Independent Sector, a Washington-based coalition that lobbies on behalf of nonprofit groups.

The story of Abramoff's misuse of charities and nonprofits was pieced together from his plea agreement, nonprofit tax returns, interviews, and e-mails and other documents released by the Senate Indian Affairs Committee, as well as testimony from the committee's hearings on Abramoff.

The Senate Finance Committee is investigating Abramoff's use of charities and other tax-exempt organizations, and has requested detailed information from the Capital Athletic Foundation and the National Center for Public Policy Research

Abramoff, a Republican activist since college, became a lobbyist when the GOP captured control of Congress in 1994. He was good at his job. Among his early handiwork was helping to preserve tax breaks for the $20-billion-a-year Indian gaming industry, which bankrolls schools, hospitals and tourist attractions for the tribes.

By the new millennium, he was viewed as one of the most powerful and effective lobbyists in Washington. In January 2001, he moved his lobbying business to the new Washington office of the Greenberg Traurig law firm of Miami, which would become the base for an even more aggressive operation.

Abramoff, by then secretly in partnership with Scanlon, aggressively recruited new Indian tribes as clients. In addition to paying lobbying fees to Greenberg, Abramoff persuaded the tribes to send millions to Scanlon's consulting firm, Capitol Campaign Strategies, which performed "grass-roots and public relations work" for inflated fees.

Through that arrangement, according to their guilty pleas, the men secretly split about $40 million they stole from the tribes between 2001 and 2004.

Less than a year into his new job, Abramoff engineered his first major fraud involving a charity, converting a $1-million check that one of his new tribal clients, the Coushatta Tribe of Louisiana, had written to Greenberg for lobbying services.

He persuaded his new partners at Greenberg Traurig that the Coushatta intended the money as a contribution to a charitable organization, the Capital Athletic Foundation. Abramoff had organized the group a few years earlier. The law firm forwarded the money.

But he told Scanlon he wanted the money to first go through Greenberg to pump up its lobbying revenues so it did not drop out of the ranks of the top 10 lobbying firms. The tribe believed that the money was being used for lobbying or political activities on its behalf. Scanlon sent the tribe a fraudulent $1-million invoice on behalf of Greenberg  misspelling it "Greenburg"  for "public affairs services." Greenberg had not authorized the invoice; the Coushatta had not authorized giving the money to the Capital Athletic Foundation.

Abramoff had thus achieved an unusual twofer: He defrauded the tribe out of its money using the false Greenberg invoice, and then shook the money loose from Greenberg by telling his partners that it was a charitable donation from the Coushatta.

"In my personal view, this payment reveals the extent of Mr. Abramoff's shamelessness," David Sickey, a Coushatta tribal council member, told a Senate panel investigating Abramoff last fall.

Getting money from the Coushatta was "an absolute cake walk," Scanlon e-mailed Abramoff.

Greenberg Traurig fired Abramoff nearly two years ago after learning of "conduct we found unacceptable," the firm said in a statement. The firm said it was cooperating with investigators.

Abramoff's spokesman had no comment for this story. Scanlon's attorney did not respond to written questions.

The Coushatta check was the first of several large payments that Abramoff and Scanlon diverted from clients, often by laundering the sums through friendly charities. Abramoff used the $1 million as seed money for the athletic foundation, which he had formed in 1999 and was apparently his favorite "charity." It was established with the stated mission of funding sports programs in the Washington area. But tax records show that little money went for that purpose.

Soon after the Coushatta check was received, for example, Abramoff and a business associate discussed in e-mails depositing the $1 million in a Maryland bank headed by a friendly banker to help "grease" the way for obtaining a favorable bank reference letter for an oil-drilling venture in Israel. They deposited the money in the athletic foundation's account at the bank in November 2001, but it is not clear whether he got his letter or what happened to the oil deal.

In early 2002, the bank account grew when another tribal client  the Mississippi Choctaws  made the first of two $500,000 payments to the athletic foundation. Tribal leaders testified that they had been led to believe it would be "passed through" to other organizations that would support grass-roots projects to educate voters about Indian gaming issues.

Around the time the first $500,000 was received in the foundation's bank account, $200,000 was transferred out of the account to Livsar Enterprises, the holding company that Abramoff had set up to establish Signatures, the high-end restaurant he was getting ready to open the following month in Washington, The Times learned.

An e-mail exchange with his restaurant partner showed that Abramoff had been anxiously awaiting the Choctaw money as they scrambled to get the restaurant opened. The Choctaw money arrived Jan. 3. His partner wrote that night that a banker "really saved us today" by transferring money from the athletic foundation to the restaurant account. Money was transferred back a few weeks later.

The restaurant became a centerpiece of Abramoff's lobbying operation, where he wined and dined congressmen and their staffs as part of his acknowledged bribery schemes.

The athletic foundation gave Abramoff an aura of respectability around town. He once persuaded Washington Redskins owner Dan Snyder to lend his name to a fundraiser for the foundation, although the benefit never took place.

The athletic foundation also gave Abramoff access to millions for his pet causes, many of which dovetailed with his orthodox Jewish beliefs. The biggest beneficiary was Eshkol Academy, an Orthodox Jewish boys school he founded in Columbia, Md., which at least one of his sons attended. The foundation also sent $100,000 to an Israeli settler who ran a sniper training workshop for militant Jews.

Abramoff has admitted that he used the foundation to pay the $166,000 cost of a trip to play the storied St. Andrew's golf course in Scotland, which included Rep. Bob Ney (R-Ohio), two top aides and others.

Abramoff admitted in his plea agreement that the trip was part of a bribery scheme intended to offer "things of value" to Ney and his staff in exchange for a series of official acts. Ney, who has denied any wrongdoing, is under federal investigation.

Abramoff also acknowledged that in raising money toward the golf outing, he defrauded two clients that thought they were donating to an athletic foundation. He obtained $25,000 apiece from the Saginaw Chippewa Indian Tribe and SPI Spirits Group, the manufacturer of Stolichnaya vodka. Officials of the Chippewa tribe have said they made the donation because Abramoff told them it would impress DeLay.

There is no indication that DeLay knew his name was being used this way.

"The congressman would never allow his name to be used for nefarious purposes as is the case here," said DeLay spokeswoman Shannon Flaherty.

Abramoff told a fellow lobbyist at Greenberg Traurig, Tony Rudy, in an e-mail that the athletic foundation was "a foundation doing some issues education." But another lobbyist at the firm, Todd Boulanger, suspected something was awry.

Asked by Rudy to help raise funds from the Chippewa, Boulanger responded in an e-mail, "I'm sensing shadiness."

Rudy, a top aide to DeLay before going to work for Abramoff, figured in an earlier chapter of the lobbyist's saga.

It involved another node in Abramoff's network of nonprofits: Toward Tradition, the Judeo Christian group that supports "a moral public culture," according to its website.

In 2000, Abramoff got lobbying clients to give Toward Tradition $50,000 and he set the condition that it be used to hire Rudy's wife, when Rudy was on DeLay's staff. She was hired to organize a Washington political conference the nonprofit was planning.

Abramoff admitted in his plea bargain that the payment was intended to bribe the DeLay aide to help block legislative restrictions on Internet gambling and increases in postal rates. The money came from eLottery, an Internet lottery firm, and the Magazine Publishers Assn. The proposed Internet restrictions were voted down, and the rate increases were slowed.

Both organizations said they didn't know what the money would ultimately be used for. They said the contributions were made at the direction of Abramoff and his lieutenants in the hope of burnishing the clients' images among conservatives in power in Washington.

Rudy did not respond to several requests for comment.

For all the money that was coursing through his operation, Abramoff seemed under constant financial stress because of the drain from his school and restaurant.

Moreover, some of his tribal clients were starting to balk at his stiff fees. But he managed to tide himself over, and nonprofits were once again the vehicle.

One was the National Center for Public Policy Research, a small conservative Washington think tank on whose board Abramoff had sat for years. It was run by his old friend Amy Ridenour.

"I completely trusted Jack," Ridenour told the Senate Indian Affairs Committee investigating Abramoff in June. She told them she now believed he lied to her and defrauded her organization and the tribe.

Abramoff used the group as a money laundromat.

In 2002, he had the Choctaws write a $1-million check to the center, purportedly to educate the public on the benefits of Indian gaming. He convinced Ridenour that the tribe wanted to donate $450,000 to the athletic foundation and pay $500,000 to Capitol Campaign Strategies, Scanlon's consulting firm, for the educational work. The final $50,000 would go to a businessman to run the program.

She later learned the $50,000 paid a personal debt of Abramoff's. She also said she hadn't realized Scanlon was sharing his fees with Abramoff, or that the tribe had not authorized the payment to the foundation.

At a hearing in June, Sen. John McCain (R-Ariz.) accused Abramoff and Scanlon of profiting by $1 million in this deal and committing what "appears to be a $1-million fraud."

In 2003, Abramoff used the center again to convert $1.25 million from an offshore gambling client to a company called Kaygold, which turned out to be his personal holding company. It operated from his home and had no other employees.

Meanwhile, Scanlon turned to the "global think tank" he had set up in 2001, the American International Center, a nonprofit based near a vacation home he owned on the Delaware shore and which had no discernible assets or expertise. McCain called it a "gigantic scam."

Scanlon and Abramoff had convinced the Coushatta that their profitable central Louisiana casino was endangered by competition from another tribe and the possibility that Texas would legalize casino gambling.

On April 9, 2003, the Coushatta tribe paid the American International Center $2.3 million for political and grass-roots work. Four days later, Scanlon transferred $1.3 million to his consulting firm and $991,000 to Kaygold. Scanlon spent all but $15,000 of his share for work on his home and other personal needs.

"Where it went after that, the committee cannot yet say," McCain said at the Indian Affairs Committee hearing in November. "What it can say, however, is that the Coushatta apparently received little of the intended benefits for the vast sums it paid."

Later in 2003, a tiny Alexandria, La., newspaper, the Town Talk, revealed that the Coushatta had paid Scanlon's company $13.7 million for public relations work, a grossly inflated sum. Members of the tribe began to suspect they had been duped.

In early 2004, the Washington Post revealed more details of the fraud, including the fact that four tribal clients had paid $31 million to Scanlon's company at Abramoff's recommendation, triggering the Senate investigation.

Last month, Abramoff pleaded guilty and agreed to cooperate in a wide-ranging corruption probe of members of Congress and their staffs. He faces nine to 11 years in prison and penalties totaling $26.7 million.

Scanlon, who pleaded guilty in November to conspiring to defraud the Indian tribes and to bribe public officials, also is cooperating with investigators.

Abramoff's charities are dormant. His restaurant business is closed. His Jewish academy has shut down and is being sued by its former teachers for back pay.

Coushatta.net

THE NATION
Lobbyist Pleads Guilty in Corruption Probe
Michael Scanlon, once an aide to DeLay, says he and former partner Jack Abramoff conspired to bribe public officials and swindle tribes.
By Walter F. Roche Jr. and Chuck Neubauer
Times Staff Writers, November 22, 2005

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WASHINGTON  Promising to cooperate fully in a burgeoning federal probe that has engulfed Congress, a former partner of lobbyist Jack Abramoff entered a guilty plea Monday to a charge that he and the lobbyist conspired to bribe public officials, including a senior Republican member of Congress, and to defraud Indian tribes of millions of dollars.

"Guilty, your honor," Michael P.S. Scanlon told U.S. District Judge Ellen S. Huvelle, pleading to one criminal conspiracy count leveled against him.

Scanlon faces up to five years in prison and agreed to make restitution of $19.6 million, half the amount that prosecutors say he and Abramoff split in profits from four Indian tribes.

He was released on a $5-million unsecured bond and must give notice to the court and prosecutors before traveling out of the country.

The actual sentence to be imposed on Scanlon, a onetime aide to then-House Majority Whip Tom DeLay (R-Texas), is dependent on cooperation in the ongoing investigation, said one of his lawyers, Stephen Braga.

In the 18-page plea agreement made public after the hearing, prosecutors detailed evidence against Scanlon that would have been presented had his case gone to trial.

He and his lawyers agreed to all of the evidence. The new items include details on trips and other gifts made to the member of Congress and members of his staff.

The documents describe the recipient as "Representative #1." Details in the plea agreement describe actions taken by Rep. Bob Ney (R-Ohio), who chairs the House Administration Committee. He has repeatedly denied any wrongdoing.

"Any allegation that Rep. Ney did anything illegal or improper is false," his spokesman, Brian J. Walsh, said in a written statement. "This plea agreement mentions a number of unsubstantiated allegations, but in fact, many of the things suggested to have occurred did not actually take place."

Walsh said that whatever steps Ney took, "he did so based on his best understanding of what was right and not based on any improper influence&. All that this plea agreement shows is that Mr. Scanlon had a deliberate, secret and well-concealed scheme to defraud many people, and it appears, unfortunately, that Rep. Ney was one of the many people defrauded."

Scanlon's guilty plea is the latest development in a long-standing criminal investigation into Senate charges that he and Abramoff defrauded Indian tribes with casino gambling interests of millions of dollars in fees. Abramoff has not been charged in the case.

Another former Abramoff colleague, David H. Safavian, was charged last month with obstructing a federal investigation and lying to a federal investigator. He has entered a not-guilty plea but stepped down from his post as a top federal procurement official in the Bush administration before being arrested.

Scanlon was a spokesman for DeLay, who was the House majority whip when Scanlon left the public payroll to join forces with Abramoff in early 2000. He eventually formed his own firm, Capitol Campaign Strategies, which was one of the entities through which much of the $53 million in total payments from the Indian tribes flowed.

Records show that after joining with Abramoff, Scanlon  through one of his newly formed companies  purchased more than $1 million worth of real estate, much of it on the Delaware shore.

The relationship among Abramoff, Scanlon and Ney became evident through testimony and documents over the last year before the Senate Indian Affairs Committee.

New details in Monday's prosecution statement include a $10,000 contribution arranged by Scanlon at Ney's request to the National Republican Campaign Committee, and an all-expenses-paid trip for a Ney staff member to the Northern Mariana Islands in 2000. A golf trip to Scotland in 2002 by Ney and an aide had previously been detailed.

Among the new disclosures was the involvement of a California Indian tribe that had hired Scanlon and Abramoff to get support for legislation affecting the taxation of tribal members and for help with a post office.

The prosecutors did not name the tribe. However, lobbying reports show that the Agua Caliente tribe hired Abramoff's law firm in 2002 to represent it on post office matters.

According to the prosecution document, "Representative #1" met with representatives of the tribe to discuss his agreement to support the tax legislation and to assist in the post office matter.

Dressed in a dark suit with a polka-dot tie, Scanlon, 35, offered only the briefest comment after the 30-minute court hearing.

"He's regretful," one of his lawyers, Plato Cacheris, said to reporters.

Scanlon, standing in a steady rain outside the courthouse, said only, "You guys will be seeing me around."

Although Cacheris declined to predict whether any other people would be implicated, Scanlon's plea agreement alluded to that possibility.

His signed statement said the details disclosed in the agreement did "not include all of the facts known to me concerning criminal activity in which I and others engaged."

In an eight-page charging document made public Friday, prosecutors accused Scanlon of engaging in a conspiracy with "Lobbyist A"  understood to be Abramoff  to set up a kickback scheme under which the two split nearly $40 million in profits from fees paid by four Indian tribes with casino gambling interests.

The kickbacks, the document charges, were hidden from the clients who had been told the money was earmarked for specific purposes when, in fact, Scanlon and Abramoff "would use those funds for their own personal benefit."

According to the charges, Abramoff and Scanlon conspired to "corruptly offer and provide things of value" to unnamed public officials "in return for agreements to perform official acts" benefiting Scanlon, Abramoff and their clients.

Scanlon's plea agreement says that Ney agreed in March 2002 to introduce legislation that would allow the Tiguas, a Texas tribe and a Scanlon client, to reopen their shuttered casino. Six days later, Abramoff asked the tribe to send three checks to the congressman's political committees, according to Senate hearings. The tribe sent checks totaling $32,000.

In August 2002, Abramoff flew Ney, his chief of staff and others on a chartered jet to St. Andrews golf course in Scotland.

Ney reported to the House that the Scottish golf outing was paid for by a conservative think tank, the National Center for Public Policy Research  which the group denies.

Records released by the Senate committee show that Abramoff's private charity, the Capital Athletic Foundation, paid $166,634 for the trip.

It is against House rules for a lobbyist to pay for a congressman's trip.

Ney came to Abramoff's aid in 2000, inserting a statement in the Congressional Record criticizing the owner of a Florida gambling cruise ship company that Abramoff was trying to purchase but was facing resistance. After Abramoff's group bought the company, Ney inserted another statement praising the new owners.

According to documents filed by prosecutors, Scanlon and Abramoff also conspired to influence Ney to advance the application of one of Abramoff's clients to win a license to provide wireless telephone services to the House of Representatives.

Ney, acting as House Administration Committee chairman, awarded that licensing agreement on Nov. 26, 2002, to Foxcom Communication.

The agreement had an estimated $3-million value and Foxcom, now renamed Mobile Access Networks, hired Abramoff to represent it in the efforts to win the agreement.

The documents released Monday state that Ney agreed in August 2001 to use his position "to endorse and support a client" of Abramoff's, Foxcom.

"As one part of his course of conduct," the document states referring to Ney, "Representative #1 and members of his staff agreed to use and did use their official positions and influence" to perform a variety of actions for Scanlon, Abramoff and their clients.

The New York Times Writes That Jack Abramoff's Lawfirm, Greenberg Traurig, is Off the Hook

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