The Kiddie-Cash Caper

Gifts from minors are the next big campaign loophole.

Recent campaign-finance revelations have focused on the vast and unregulated sums of soft money that flowed through the 1995-96 campaigns. While much of this fund raising was sleazy, most of it was legal. But there is another category of sleazy giving where the law is not murky: “kiddie cash”–contributions made by parents in the name of their children.

The law here is simple. When it comes to hard-money donations, an individual can give only up to $2,000 to a federal campaign during an election cycle. But increasingly, many parents who have “maxed out” seem to be using their children’s names to give more. Unless it can be shown convincingly that a child actually directed the gift and controls the money in question, such contributions violate the law. Not only is giving more than $2,000 illegal, but giving money in another person’s name is also a violation. Fines range up to twice the size of the gift. If a campaign could be shown to have orchestrated such a “kiddie-cash” drive, the penalties are even more severe–up to five years in prison and a $10,000 fine for each count of “conspiracy to lie to the government.” A confidential Democratic National Committee fund-raising memo warned of the peril: “Reporting a contribution from someone in the name of someone else is a very serious offense–often resulting in criminal liability.”

T he law notwithstanding, candidates in both parties have stepped up their kiddie-cash collections. Contributions of more than $1,000 from persons listed as “students” in Federal Election Commission records have more than. In the 1993-94 cycle, Sen. Edward Kennedy, D-Mass., set the record for such collections: $65,000. In the run-up to the last presidential election, Clinton’s campaign took in more than $200,000 in kiddie cash, outscoring his opponent almost 6-to-1 (Bob Dole, who raised similar amounts of hard money, raised some $35,000 from kids last year).

The Gupta family of Omaha, Neb., is among the more generous sources of student cash. Vinod Gupta is the founder and CEO of American Business Information. Campaign gifts totaling $143,000 tied him at No. 135 on the Mother Jones list of top contributors. His sons, Jess (age 17), Benjamin (14), and Alexander (11), gave an additional $12,000. All this went to two campaigns–Clinton’s and Nebraska Gov. Ben Nelson’s–in which the senior Gupta had reached his maximum.

Jess, a student at Philips Exeter Academy, freely admits he had nothing to do with the donations. “Dad makes those donations in my name,” he says. Vinod Gupta insists his son was misquoted.

In fact, all the money came from trust funds set up in the names of the children, according to their father. This is a common practice among the kiddie-cash set. Yet the FEC has ruled in the past that donations from a source over which the donor does not have sole control are illegal.

T he Guptas are not alone in their familial largess. According to FEC records, at least 25 and perhaps 50 of the top 400 political donors last year (two in the top 10) were joined by one or more children or grandchildren, from preteens to grad students, in giving to their favorite candidates. These earned four White House sleepovers, eight White House coffees, two trade missions, and four memberships to the Republican Party’s Team 100.

Smaller givers are in good company as well. Among the somewhat less generous parents and other relatives of kiddie donors are Clinton Chief of Staff Erskine Bowles, the winemaking Gallos, the Florida sugar-cane Fanjuls, Wall Street billionaire George Soros, and former Tennessee Gov. Lamar Alexander.

Typical of a large-scale kiddie-cash operation are the Bransons of Dallas (No. 91 on the Mother Jones list). The Branson kids, Buck, Frank L. IV, and Jennifer, were listed as students on $10,000 worth of FEC filings, donations that added to their trial-lawyer parents’ $175,304. All the money went to candidates to whom their parents had already donated.

T he take may be even larger than the “student” donor tally indicates. A cross-check of names and addresses of known student donors with persons who left the “occupation” spot in other FEC filings blank (or listed college names/other employment) revealed another $800,000 in gifts from the same donors. The 17-year-old Jess Gupta (male student), for example, is listed as a “housewife” in another filing. The group of “student” donors who collectively gave $200,000 to Clinton used different designations when contributing an additional $100,000 to him and others.

In fact, there is no way to tell how many kids and how much money may be involved, since many FEC filings are incomplete. Last year the DNC fully identified only 65 percent of its donors.

H undreds of politicians attract small numbers of student contributions. But some campaigns seem to specialize in their receipt. More than 40 percent of the 1,746 such contributions made in the last cycle (up from only 401 in 1979-80) was received by just 14 candidates. (Click for a rundown of candidates and organizations that raised more than $20,000 from “students.”)

Did campaigns orchestrate such donations? Some evidence from public records is suggestive. In every case where I was able to establish a parent-child relationship, minors gave to exactly the same campaigns as their parents, almost always on the same day. Many are strategically timed. Ninety percent of Clinton’s 1992 student donations, for example, were raised during the primary, when his need for hard money was greatest and his donor base was smallest. (Incidentally, half of the 1992 donations failed, when first disclosed to the FEC, to reveal that the source was a student.) In Clinton’s last campaign, 40 percent of student donations came in just one month (September 1995)–half that in just two days.

M any of the young donors’ parents are longtime political activists who know the rules. Some were sophisticated campaign fund-raisers themselves. For example, David Grossman, the son of Steven Grossman (the DNC’s new head), contributed $25,000. When headed the Democratic Senatorial Campaign Committee in 1993-94, it raised about 50 grand in kiddie cash. (That election was a high-water mark for student donations in a nonpresidential year–twice the level of the 1989-90 campaigns.) Westbrook also had some familial help: His son, now college-age, has given more than $25,000 over the years.

Another big Democratic money raiser, Howard Glicken, also was helped by his sons. Glicken is credited with having brought in more than $2 million to the DNC and Clinton campaigns. Aaron and Stephen Glicken came up with extra donations for Clinton and for Sen. Tom Harkin of Iowa. Former MCA chairman Lew Wasserman raised more than $1 million for Clinton; his kids chipped in $8,000. Arthur Schechter raised $12 million for the Democrats; his offspring ponied up more than $6,000.

While Clinton won the kiddie-cash sweepstakes for the cycle, the leading contenders in the primary season were two cash-hungry Republicans: Texas Sen. Phil Gramm, who raised $75,000; and Lamar Alexander, who raked in $106,000 in student cash, mostly from home-state stalwarts. Alexander’s own high-school-age son chipped in, as did the children of one of Gramm’s finance chairmen. Whitewater investigator-in-chief Al D’Amato, R-N.Y., raised $40,000 from kids.

Even so, Democrats have dominated this field. On the list of the top 20 recipients of kiddie cash, Democrats outraised Republicans by about $100,000. Robert Torricelli, recently chosen to head up the party’s 1998 campaign efforts, was a leading recipient, taking in more than $30,000 from people listed as students in FEC records.

One obvious explanation for this dominance is that GOP advantages in fund raising drive Democrats to reach deeper into the pockets of their regulars. The Democrats’ big TV buys also increased their appetite for hard money: DNC rules require that part of each issue ad be paid for with hard money. As White House Deputy Chief of Staff Harold Ickes noted in a July 1996 memo, failure to raise enough hard money would mean that part of the soft money the DNC had amassed couldn’t be spent.

Another spur to kiddie-cash collectors is that the FEC has never shown much interest in pursuing the issue (though two adult daughters of one big giver, Harold C. Simmons, recently sued their father for dipping into their trust funds to make contributions in their names). Just recently, the commission, in negotiating a settlement with the campaign of Sen. Bob Bennett, R-Utah, dropped the matter of apparently illegal donations made in the name of the Huntsman chemical company children, one of whom was a severely retarded minor. (The contributions were returned after the FEC opened its investigation.) In other cases, the FEC accepted letters from 10-year-olds as sufficient proof that they controlled donation money, without ever interviewing the child. Even the lamest story does not seem to stir the commission’s suspicion. One father informed the FEC that his daughter earned the money for her $1,000 contribution from raising vegetables (cucumbers and onions, specifically).

Addendum (5/23): This week’s newspapers drew attention to one kiddie-cash case in which the government has apparently taken action. Nora and Gene Lum, two major Democratic fund-raisers, have agreed to plead guilty to felony charges that they arranged $50,000 in illegal political contributions in 1994. Their daughter, Trisha, has also been charged with a misdemeanor for acting as an illegal conduit for $10,000 in contributions.