Fund-raisers, analysts spot potential loopholes in campaign finance rules

Posted: Friday, February 15, 2002

WASHINGTON -- Sweeping revisions in campaign laws approved by the House would markedly change the way big fund-raisers have been doing business but would leave avenues for corporations and unions to keep giving large donations.

Among places still open for big checks would be state and local political parties, presidential nominating conventions and tax-exempt groups increasingly involved in national politics.

''If you define the purpose of this bill to somehow take special-interest money out of politics, you've defined an impossible objective,'' said Michael Malbin, executive director of the Campaign Finance Institute and an advocate of the legislation.

The measure would bar unlimited, often five- and six-figure donations that unions, corporations and others now make to national party committees and to some lawmakers' party-building ''leadership'' committees.

Federal parties and candidates could no longer solicit such ''soft money,'' and state and local party committees could not spend it directly on federal candidates' behalf.

But fund-raisers and experts identify several avenues for continuing soft money:

State and local parties. The measure allows corporate, union and other donors to give state and local party committees up to $10,000 each in soft money, if state law allows. The money could be used to run generic get-out-the-vote and voter registration efforts or help state candidates or parties.

More than two dozen states allow donations of that size to political parties from unions or corporations.

Nonprofit groups, including ''issue'' committees that would not be run by party committees or candidates but would be like-minded and could even be run by former employees. Members of Congress could attend and even be advertised as featured speakers at the groups' fund-raisers, as long as the lawmakers did not raise or accept soft money for political purposes.

Tax-exempt groups organized under the IRS 527 section. These groups are permitted to engage in politics and can accept unlimited donations. They have been growing in numbers. Under the new law, if they should take large corporate donations, these groups would have some limits on their activities.

National political conventions and presidential inaugural committees. Corporations, unions and others could continue donating unlimited amounts to these quadrennial events.

Institutes, scholarship funds and other nonelection-related entities set up by members of Congress.

Experts also say the new legislation might encourage national parties that can no longer accept $100,000 checks to rely on the companies, which used to give the money, simply to run the political ads, phone banks and voter registration activities themselves.

That will raise new questions about what constitutes improper coordination.

The Federal Election Commission has been directed to set a new standard for illegal coordination. But FEC Chairman David Mason said the legislation is unclear about what that standard should be.

Larry Sabato, a University of Virginia political scientist, said he can foresee professional or ideological groups that now give a lot of soft money taking on get-out-the-vote and other party-building activities.

''It's a large river of money flowing, and it flows into many tributaries, kind of a reverse of nature,'' Sabato said. ''And if you block off one tributary, that means more money will flow into the other tributaries.''

Haley Barbour, former head of the Republican National Committee and now finance chairman for the National Republican Senatorial Committee, said he also expects to see special-interest groups take an increasing role in election activity.

''The real danger to the political system is you have these special interests raising money outside the party system, outside the political system, and those special interests start controlling the campaign agenda through the millions of dollars they spend on advertising,'' Barbour said.

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