Thomas B. Edsall and David A. Vise,
"CBS Fight a Litmus Test for Conservatives: Helms Group Faces
Legal Hurdles in Ideological Takeover Bid," Washington Post
(Sunday, March 31, 1985) p. 1.
RALEIGH, N.C. - A high-tech political machine
armed with some of the most lucrative direct mailing lists in
the country and backed by Sen. Jesse Helms (R-N.C.) has drawn
the management of CBS Inc. into a fight for survival.
The contest pits CBS in an unprecedented battle
against an ideologically driven adversary, that openly claims
to be more interested in achieving political goals than in making
money on the deal.
Regardless of the outcome of this battle, the
Helms-CBS confrontation provides a litmus test of the ability
of the conservative movement to translate the power of its affluent
financial base into an ideological force in the marketplace. And
it already is providing a look at some legal liabilities within
the conservative political machine now under scrutiny by the both
government prosecutors and CBS lawyers.
The takeover bid by Fairness in Media, an ad hoc
committee run by the political allies of Helms, was launched in
January. Since then, CBS has hired a battery of top-dollar law
firms with the goal of discrediting the North Carolina-based political
machine in an attempt to uncover what it claims are improper political
fund-raising and other activities that violate federal law.
As part of this effort, CBS already has linked
officials of the Helms organization and its main /A16, Col 1/
lawyer in the takeover battle to a controversial tax-exempt foundation,
The Pioneer Fund. The fund has financed research into "racial
betterment" by scientists seeking to prove that blacks are genetically
inferior to whites.
The decision by Helms to expand his activities
beyond the arena of politics into the corporate takeover battleground
grows out of a deep, long-standing animosity among conservatives
toward major media outlets. Acquiring a large-circulation newspaper
or a network "is something that has been a dream of conservatives
for years," according to Howard Phillips, chairman of the Conservative
Caucus and an ally to Fairness in Media.
Richard A. Viguerie, the conservative fund-raiser,
said: "In order to accomplish what we want politically, there
is going to have to be a change in the media." Viguerie said he
is involved in an entirely separate venture with a group of "substantial"
conservatives who have hired financial specialists to find prospective
print and television media targets to buy or take over.
In the case of Fairness in Media, just days after
the November election, one man, Thomas F. Ellis, the backroom
architect of Helms' rise to political power, conceived of the
attack on CBS as a way to capitalize on President Reagan's landslide
victory and on Helms come-from-behind drive to win a third term
in the Senate.
The bid for CBS has proved to be a gold mine of
free publicity for Helms, who has piggybacked on the press' extensive
coverage of both corporate takeovers and legal libel battles between
public figures and the media. To gain an absolute majority of
stock, supporters of the conservative drive would have to put
up more than $1.5 billion, making Wall Street analysts very doubtful
of the probable takeover.
These same analysts, however, believe the FIM
bid has made CBS vulnerable to a takeover by a third party more
interested in the economics than the politics of the company.
Analysts point to the fact that the FIM publicity has drawn attention
to how much more the assets of the company are worth than the
current stock market price. CBS is vulnerable to a takeover because
more than 80 percent of its stock is held by the public, two-thirds
of it by institutional investors.
The public fight between CBS and Fairness in Media
began Jan. 10, when FIM filed papers with the Securities and Exchange
Commission indicating it would encourage conservatives to buy
CBS stock. FIM also said it would try to change what it believes
is the "liberal bias" in the network's news coverage.
FIM mailed a million letters, signed by Helms,
to conservatives asking them each to purchase 20 shares of CBS
stock, an unprecedented political effort to organize a large group
of individual stockholders to influence network news coverage
while generating enormous publicity for Helms.
FIM's filing with the SEC said the group was formed
on Nov. 13, 1984, by three North Carolina lawyers, R. E. Carter
Wrenn, Thomas F. Ellis and James Palmer Cain. The three all have
close ties to Helms. Wrenn is executive director of the National
Congressional Club (NCC), the nation's second-largest political
action committee, which supports conservative candidates for public
office. Ellis is chairman of NCC.
On Feb. 4, Rep. Philip M. Crane (R.-Ill.)said
that he was joining the FIM campaign, and on Feb. 8, FIM said
in a new SEC filing that it was considering a proxy campaign to
elect directors to the CBS' board and also said it had begun conducting
discussions with third parties about transactions to seek control
The documents did not identify the third parties,
but the Washington Post reported on March 20 that broadcasting
magnate Ted Turner told CBS lawyers he had held discussions with
Helms and FIM about launching a joint takeover bid for the network.
Turner has since told The Washington Post that he does not have
the money to make the bid.
On Aug. 28, 1982, Turner donated 21/2 hours of
prime time on his WTBS superstation to Helms and Crane for a television
documentary called "KGB: The Lie... and The Truth." The program,
an investigation into covert Soviet activities that threaten the
United States, was produced by the Coalition for Freedom, a Helms-supported
group, and hosted by Crane. It featured appearances by Helms and
Sen. John East (R-N.C.).
CBS stock has skyrocketed since its battle with
FIM began. On Jan. 10, the day FIM filed its initial papers with
the SEC, CBS stock closed at 721/2. On Friday, it closed at 1093/4,
driven upward not only by the Helms attack on the network but
also by speculation in media company stocks following the announcement
on March 18 that American Broadcasting Companies Inc. had agreed
to be acquired by Capital Cities Communications Inc. for more
than $3.5 billion.
The rise in the CBS stock has added strong economic
support to the Fairness in Media drive. Someone following the
recommendation to buy 20 shares on Jan. 10 would, by last Friday,
have realized a gain of $745, or 51 percent, on an investment
of $1,450, excluding brokerage fees. CBS charges in its lawsuit
against FIM that the group is "attempting to manipulate the market
in CBS stock through statements intended to create the false impression
that FIM's efforts will result in a tender offer or other conventional
takeover of CBS."
Some Wall Street analysts said they believe one
of the reasons why ABC Chairman Leonard Goldenson chose to sell
the company to Capital Cities was to avoid being the target of
hostile takeover bid.
Last week CBS gave its shareholder list to FIM
after the group agreed to restrict the use of the names. CBS said
it refused to give FIM the list until it received assurances that
the list would not be used for political fund-raising.
FIM said Friday it will not use the list to mail
stockholders information or launch a proxy fight before the CBS's
regular annual meeting on April 17. FIM claims it is willing to
realize its goal of influencing the network's new coverage.
Inside Helms' Empire
Fairness in Media is the most recent addition
to a multimillion dollar political empire of corporations, foundations,
political action committees and ad hoc groups built up over the
past 12 years by Jesse Helms, Tom Ellis and Carter Wrenn.
The political-money machine Helms and his allies
have established is conducting the drive to apply conservative
pressure on CBS. It financed the $500,000 needed for the cost
of the initial mailing, and it controls list upon list of donors
who have shown repeated willingness to pull out their checkbooks
when Helms writes letters to them about abortion, school prayer,
forced busing and now the "liberal bias" at CBS.
There are two key organizations in this empire.
The first is the National Congressional Club, a conservative political
action committee that raised $9.8 million in the 1982 election
cycle. In the 1984 cycle, the club raised $5.7 million while Helms
campaign committee raised $13.99 million, a record in a Senate
contest. The Congressional Club financially eclipses North Carolina's
Democratic and Republic Parties, each of which operate on annual
budgets of less than $500,000.
the second critical organization is a corporation
called Jefferson Marketing, viewed by many as one of the most
ingenious political inventions in recent memory. It is, in effect,
a corporate organization geared to providing conservative candidates
and causes the computerized technology of the 1980s.
Housed in a nondescript, three-story building
in a North Raleigh office complex, Jefferson Marketing has absorbed
much of the staff of the National Congressional Club and past
Helms campaigns under the protective cover of a private corporation,
and it has taken over such key activities as direct mail, staffed
phone banks, automated telemarketing and the production and placement
The critical importance of Jefferson Marketing
in the political structure is reflected by the fact that the National
Congressional Club, once the centerpiece of the Helms organization,
is now just a three-person operation -- Carter Wrenn and two secretaries
-- operating out of a third-floor, corner office in Jefferson's
headquarters, Jefferson, in the meantime, has grown to employ
Similarly, Fairness in Media is barely a one-man
operation: James P. Cain serving on a lawyer consultant basis.
FIM rents a makeshift office room from Jefferson Marketing and
uses the same receptionist, Johnnie Dean who also answers calls
for the National Congressional Club and for Jefferson Marketing.
Without Jefferson Marketing, it would appear that
the drive to persuade conservatives to buy CBS stock would be
a paper tiger. Jefferson advanced Fairness in Media a $500,000
line of credit to finance the million-piece mailing and subsequent
telephone follow-up calls, and it owns key lists of conservative
donors targeted in the drive.
Linking all these and a host of other groups,
however, is a system of interlocking directorates in which Ellis
and Wrenn are consistently the central players.
Ellis is chairman of the national Congressional
Club; principal stock-holder and a board member o the tax-exempt,
non-profit Educational Support Foundation that in turn owns Jefferson
Marketing and appointed the officers and directors of Jefferson
Marketing; a "founder" of Fairness in Media, and chairman of the
Coalition for Freedom, a tax-exempt foundation whose goal is to
finance conservative-oriented television programs. Wrenn holds
identical positions, except that he is executive director and
treasurer of the National Congressional Club and treasurer of
the Coalition for Freedom.
Tale of Two Lawsuits
The Raleigh, N.C.-based conservative political
machine that backs Helms and other conservative candidates for
political office is under pressure from separate lawsuits brought
by the Federal Elections Commission and CBS.
The FEC lawsuit filed last month charges that
the National Congressional Club has used Jefferson Marketing to
channel illegal contributions into a political campaign.
The FEC has charged that Jefferson Marketing Inc.
has provided fund-raising, media and other campaign services to
candidates at "less than the fair market value."
If a corporation, such as Jefferson Marketing
does not charge a campaign fair market value for its services,
the corporation is making illegal contributions, because corporations
cannot contribute to federal candidates and because the contributions
were not reported, according to federal election law.
The FEC named R.E. Carter Wrenn, the National
Congressional Club's executive director and treasurer, in its
suit. Wrenn told Congressional Quarterly in 1982 that Jefferson
Marketing, incorporated as a for-profit corporation, was "set
up to have an absolute minimal break-even situation and there's
never been any profits or dividends."
Later, testifying under oath in 1983 in a deposition
taken in connection with the FEC charges, Wrenn appeared to contradict
his comments to CQ. In the sworn testimony, he said: "If Jefferson
ever operated without a profit in dealing with a political entity,
that would be a problem. So, I have always advised them... [to]
always be sure to operate with a profit."
the FEC suit alleges that Wrenn, Ellis and other
NCC officials control Jefferson Marketing, and that Wrenn has
exercised "domination and control over the day -to-day operations
of Jefferson Marketing. Thus... Jefferson Marketing and the Congressional
Club are a single entity." A legal ruling to that effect would
mean both Jefferson Marketing and the NCC have violated federal
Paralleling the FEC, CBS charges in its lawsuit
that Congressional Club, Jefferson Marketing and other organizations
controlled by Wrenn and Ellis have failed to disclose their active
participation in the Fairness in Media attack on the network through
contributions of funds and personnel.
"Although styled a proxy contest, FIM's efforts
are in fact a vehicle to raise funds and publicize partisan political
views and individual candidates," the CBS lawsuit says. "... Defendants'
filings with the SEC fail to disclose the nature and extent of
financial support being received by FIM from NCC and Jefferson
The key in deciding who is right is a legal determination
of whether or not FIM and other Raleigh, N.C.-based political
committees supported by Helms and controlled by Wrenn and Ellis,
are, in reality, one organization.
Ellis refused to discuss the controversy. "I do
not talk to reporters. I've got a policy," he said. Wrenn, however,
said in response to both the CBS and FEC accusations:
"Our point is twofold: The FEC has argued that
because of my role in the club and the Educational Support Foundation,
that makes Jefferson Marketing a political entity and not a for-profit
corporation... we basically counter-argue that they have separate
bank accounts, separate tax accounts, separate business purpose....
What we have disputed with the FEC is they want Jefferson Marketing
to file federal reports on their income and expenditures. We don't
think they have the right to require that."
Edsall, Thomas B. and David A. Vise. "CBS fight a litmus test for conservatives: Helms group faces legal hurdles in ideological takeover bid." Washington Post 31 Mar. 1985: 1.