CAMPAIGN FUND RAISING

By MICHAEL WEISSKOPF

Haley Barbour can't say he wasn't warned. The former Republican Party chief had hoped to partly finance a G.O.P. think tank that he had founded and chaired--the National Policy Forum--with foreign cash in 1993, but was waved off by its president. "It would be wrong to do so," wrote Michael Baroody in a confidential memo obtained by TIME. Barbour nevertheless lined up Hong Kong collateral for a $2.2 million loan to the Forum. The money helped free up funds for the successful Republican assault on Congress in 1994, and it aided the party again two years later when the Hong Kong guarantor absorbed $500,000 of the unpaid balance. Senate investigators are now trying to determine whether the Forum was used to launder foreign campaign funds. The controversy was foreshadowed in the memo by Baroody, who explained he was resigning partly over Barbour's "fascination" with foreign sources of funding. Baroody wrote that while the think tank's bid for nonprofit tax status required it to distance itself from partisan activities, staff members felt the group was "operated like a division" of the Republican National Committee. He cited examples of R.N.C. intervention to underline his "concern that separation between [the Forum] and R.N.C. is a fiction." A Barbour associate told TIME that all rules for nonprofits were strictly observed and that Baroody's caution on foreign cash was not heeded because nonprofits can legally raise overseas funds. Barbour voluntarily gave Senate investigators Forum documents dealing with the loan, but not Baroody's memo.

--By Michael Weisskopf