“How You Raise Money” in D.C. (Hint: “Frugging”)

WaPo on Gingrich's "money-making machine"

That Newt Gingrich’s sanguinely named 527 group, American Solutions for Winning the Future, “pulls in big money” has been reported. (And, because it is a 527, we also know from where this money is pulled—including six- and seven-figure chunks from Las Vegas billionaire Sheldon Adelson, North Carolina real estate investor Fred Godley, Ohio insurance billionaire Carl Lindner, and NASCAR executive James C. France.) That Gingrich, largely through this 527, “outdoes other [presidential] hopefuls” or, “raised more last year than the three next most prolific fundraisers eyeing Republican presidential bids combined,” too, has been reported.

How does Gingrich’s 527 do all this “outdoing?” Kudos to the Washington Post for getting at that today, beginning with this anecdotal lede:

Dallas businesswoman Dawn Rizos received the unexpected invitation by fax: Come to a “private dinner” with Newt Gingrich in Washington, where you will be named an “entrepreneur of the year.”

The catch: Rizos had to pay a $5,000 membership fee to Gingrich’s group, American Solutions for Winning the Future, to get the award.

Gingrich, a former House speaker, media pundit and possible Republican presidential candidate, knows how to bring in money - lots of money.

But his hard-sell tactics can sometimes go awry. It turned out that Rizos owns an upscale nude-dancing club. When Gingrich’s group found out, it canceled the 2009 award and returned the money.

“We were very keen to do this; it seemed like a fun hand-shaker-type thing,” said Michael Precker, a spokesman for Rizos’s club, the Lodge. “I guess it shows how you raise money in Washington.”

Or, at any rate, it shows how American Solutions—which “ranks as the largest money-making machine of its kind in the country, collecting more than $52 million in its first four years”— raises money. How else do they do it? Frowned-upon phone solicitations (and here, another hat tip to the Post for bringing a fun new word into readers’ vocabularies —at least, this reader’s):

According to complaints on consumer-focused Web sites, some American Solutions calls begin with slanted polling questions before proceeding to a request for money. The tactic, known as “fundraising under the guise of research,” or frugging, is discouraged as unethical by trade groups such as the Marketing Research Association.

And while Gingrich’s group “seem[s] to be really good at raising a lot of money,” as the president of the American Institute of Philanthropy tells the Post, it doesn’t seem to be good at “raising money very efficiently.” More on that:

American Solutions also has drawn criticism because it spends nearly $2 on fundraising for every $3 it brings in - about twice the figure for many nonprofit groups, experts said. In 2009, for example, the group reported spending $8.8 million for professional fundraising, about 61 percent of total revenue. Since it launched in 2007, the group has spent $6.6 million on private air travel through Moby Dick Airways, accounting for nearly 13 percent of the group’s budget, records show.

While Gingrich could not, by law, use his 527 cash to finance a presidential bid (which the Post doesn’t but should have explicitly told readers), some of American Solutions’ “resources,” the Post notes, “could give Gingrich a major advantage in the GOP field.” Resources such as the group’s “2 million name contact list,” and a donor base that includes several billionaires as well as “300,000 contributors who gave $200 or less.” Also: “frugging” expertise.

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Liz Cox Barrett is a writer at CJR. Tags: , , , ,