Gingrich to pay tab with loan from Dole $300,000 for penalty to be repaid in 8 years with personal funds

April 18, 1997|By Susan Baer | Susan Baer,SUN NATIONAL STAFF

WASHINGTON -- In a twist that stunned many of his colleagues, House Speaker Newt Gingrich announced yesterday that he was obtaining a personal loan from former Republican presidential candidate Bob Dole to pay the $300,000 ethics penalty levied against him last winter.

Gingrich, speaking from the House floor with more defiance than contrition, said that after considering several options, he concluded he had a "moral obligation" to pay the money out of his own pocket.

"As a person of limited means, I have arranged to borrow the money from Bob Dole, a close personal friend of impeccable integrity," the Georgia Republican said, "and I will pay it back."

Republicans, who packed the House chamber for Gingrich's announcement, gave him a standing ovation and hearty handshakes. But Democrats, who largely stayed away, expressed reservations about the unorthodox arrangement between two politicians who have not always been comrades.

Gingrich's lawyer, J. Randolph Evans, said the loan, for the full $300,000 amount, would be paid at an annual interest rate of 10 percent -- the prime rate plus 1.5 percent -- and has to be paid in full within eight years.

Comparing the note to a student loan, he said Gingrich would not have to make any payments until 2005, although interest will compound. By paying nothing until the due date, Gingrich would have to pay about $640,000.

If the speaker leaves office in 2002, as he has said he plans to do, he could raise all of the money from lucrative jobs, book deals and speaking fees that are likely to come his way in his post-congressional life.

'Investment' in GOP's future

Dole, the former Senate majority leader who with his wife, Elizabeth, has assets estimated at more than $4 million, said in a statement, "I consider this not only an opportunity to support a friend, but a long-term investment in the future of our party."

Political Washington reacted with surprise and amusement, since the two men were anything but ideological soulmates. Many recalled that Gingrich once labeled the more moderate Dole the "tax collector for the welfare state."

After a two-year investigation by the House ethics committee, Gingrich admitted last December that he had brought discredit upon the House by violating its rules. He said he failed to get proper legal advice in his use of tax-exempt organizations and admitted that he submitted inaccurate information to the ethics committee. He said he did not do so knowingly.

For his actions, House members voted in January to formally reprimand Gingrich -- the first such disciplinary action against a speaker -- and to impose a $300,000 penalty that Republicans have characterized as a "reimbursement" rather than a fine.

Republicans insisted yesterday that Gingrich's decision to pay the penalty with personal funds would finally put the matter to rest. "He's done the right thing," said Rep. Peter T. King of New York, often critical of the speaker. "We should go on from here."

'It's over,' Armey says

House Majority Leader Dick Armey of Texas said the speaker's actions reflected "a level of compliance and integrity that I have not seen before in this body and have rarely seen in this town."

"It is the end," he said of Gingrich's ethics troubles. "It's over."

But Democrats signaled that the controversy may not be over, raising questions about possible conflicts of interest arising from Dole's new position with a law firm that engages in lobbying, as well as the terms of the loan.

"Could you get this loan at a bank?" asked Maryland Rep. Benjamin L. Cardin, a former member of the ethics committee that recommended the monetary penalty.

Democrats raise questions

Cardin said he thought Gingrich was doing the right thing by using personal funds, but questioned whether the loan from Dole was comparable to a loan available to average citizens at a commercial bank. If not, the Baltimore Democrat said, the arrangement could be considered a gratuity, thus a violation of the House gift ban.

"Is this a sweetheart deal for Newt Gingrich?" asked the speaker's chief nemesis, Democratic whip David E. Bonior of Michigan.

Evans said the loan meets commercial bank standards. A loan obtained from a commercial bank might have posed conflicts, he said, since many banks have business pending before Congress.

Meg VanDeWeghe, a professor of finance at the University of Maryland business school and a former banker at J. P. Morgan, said the terms of the loan sounded "relatively reasonable." But, she added, "It looks more like a loan to a small company than a loan to an individual. Maybe that's how they were looking at it, since Gingrich is in a position to generate cash flows more like a small company than an individual."

Although he called himself a man of "limited means," Gingrich is paid a salary of $171,500 a year and earned more than $400,000 from a 1995 book. Evans said the speaker's payments will come largely from the money he will make once he leaves office, when his earning power will likely be considerable.

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