Samuel Lowenberg - Independent Journalist biography articles articles

Soft money on the sly

Legal Times  October 19, 1998, Monday


A trip to the Federal Election Commission reveals that several cigarette makers maxed out on their contributions to the re-election campaign of Senate Majority Leader Trent Lott (R-Miss.) over the past two years. But that's not all they gave him.

It takes a trip to the Virginia State Election Board in Richmond to learn that Lott received an additional $10, 000 each from R.J. Reynolds, Philip Morris, and UST Public Affairs Inc., the political arm of the United States Tobacco Co., a fact that showed up in no federal records at all.

The approximately $200, 000 Lott has gathered into the nonfederal account of his New Republican Majority Fund, which also includes $10, 000 contributions from Federal Express and Archer Daniels Midland, was funneled through a little known loophole in the federal campaign finance laws that allows so- called leadership PACs to open soft money accounts.

And what has the money been used for? Pretty much anything the senator wants, judging from disclosure statements on file in Virginia. So far, recipients of Lott's largess range from anti-abortion groups to gubernatorial candidates. So while these soft-money donors and several others did not violate any laws against contributing directly to Lott's election, they are providing him with funds that help him win friends and influence races well beyond Capitol Hill-- or the reach of regulators.

Two congressional staffers who work on campaign finance reform and several staffers at the FEC expressed surprise that leadership PACs could open soft money accounts. "This is a new and very disturbing development, " says one veteran of last summer's campaign finance hearings.

Yet the phenomenon of leadership PACs maintaining soft money accounts has, in fact, been going on for years. But it has become increasingly common in the last few years and could expand dramatically as the 2000 presidential election approaches.

In addition to Lott, other members of Congress are taking advantage of this little-regulated cash conduit. They include such party chieftains as Sens. Don Nickles (R-Okla.), Edward Kennedy (D-Mass.) and Bob Kerrey (D-Neb.) and House Majority Whip Tom DeLay of Texas.

"Soft money contributed to political parties barely scratches the surface of the extent of soft money in the political process, " says Craig Engle, general counsel to the National Republican Senatorial Committee.

Soft money is loosely defined as a political contribution not given directly to federal candidates and therefore not regulated by the FEC or any federal law. Soft money contributors can include corporations or labor unions, both of which are prohibited by federal law from giving money directly to individual candidates, though they can contribute to them through their political action committees.

Leadership PACs, in turn, were developed by members of Congress--especially those with presidential ambitions--to raise money and distribute it to other federal candidates in order to curry favor with colleagues. Indeed, several dozen members of congress have run such PACs over the last few years. But a loophole allows leadership PACs to open soft money accounts in some states--Virginia is a favorite--enabling federal officeholders to accept money that would be prohibited under federal election law.

The cigarette makers who anted up for Lott's Virginia PAC, for example, could have made contributions to Lott in other states as well, with the amounts subject only to state law. More than 28 states, in fact, have no contribution limits for PACs, according to The Boston Globe.

Lott's office would not comment on the record for this story. Two top campaign finance lawyers, who asked not to be named and who in total represent more than a dozen leadership PACs, estimate that about half have soft money accounts.

These accounts can be used for virtually anything, as long as they don't directly help a federal candidate's election campaign. The Virginia account of Lott's New Republican Majority Fund, for instance, gave $5, 000 each to the Committee for a Strong and Effective NRA and to the Susan B. Anthony List, an anti-abortion group. The fund even spent nearly $12, 000 financing Lott's "Singing Senators" record.

For a national leader like Lott, soft money can be used to gain both local and federal support in one shot. That the Mississippi senator gave money from his Virginia account to both the Republican Caucus of the Virginia Legislature and to Sen. Dirk Kempthorne (R-Idaho), who is running in the Idaho governors race, brings him the gratitude of not only local politicians but also their representatives in Congress.

"We just wanted to maximize the number of ways we can raise money, " says a source who has done work at Lott's fund and asked not to be named. "There are a lot of major contributors that would rather give non-federal money" because they don't want to be on FEC records, he says.

Campaign finance watchers see such uses of leadership PACs, which ostensibly were set up to help in federal races, as a disturbing trend.

"It illustrates the problem--that leadership PACs are vehicles for special interests to give money to candidates to evade federal campaign finance laws, " says Donald Simon, executive vice president of the campaign watchdog group Common Cause. "The problem is compounded when these leadership PACs have nonfederal accounts because you are allowing money to flow to federal office holders outside the federal rules."

FEC officials had no comment on the issue, on the grounds that it is not within their purview since state leadership PACs are nonfederal funds. But campaign finance reform advocates call this hypocritical, since leadership PACs are supposedly a federal creature. Furthermore, the FEC has asserted jurisdiction over soft money before when, in 1991, it required the national parties to report the soft money contributions they receive.

But leadership PACs are not required to register their soft money accounts with the FEC except to the extent that they use that money in conjunction with federally regulated funds--so-called hard dollars--to pay for administrative costs. Engle, of the National Republican Senatorial Committee, says top members of Congress have begun opening soft money accounts "because party leaders understand that they have both federal and non federal authority and obligations."

A veteran Democratic campaign manager points out that while leadership PACs give hard money to support congressional candidates directly, soft money helps to "condition the environment" around federal candidates. Nonetheless, many leadership PACs have chosen to forgo soft money accounts. Texas Rep. Dick Armey's Majority Leader's Fund, for instance, does not have a soft money account because such funds are politically tainted, according to fund treasurer Dan Morgan. "We just go for the above board stuff and don't mess with it at all, " he says.

That perceived taint prompted Sen. Robert Torricelli (D-N.J.) to closed his state account, Torricelli PAC, in 1996. His chief of staff, James Fox, says the account was closed because Torricelli worried it was unseemly to take soft money during a Senate race. But the $600, 000 Torricelli raised and spent up to that point, according to National Journal, probably did not hurt his Senate bid.

But soft money is integral to Sen. Bob Kerrey's leadership PAC, says its executive director, Steve Jarding, who estimates that at least half of the Nebraska Democrat's PAC's $1 million is soft money. He says a conscious decision was made to have the fund, BACKPAC, take mostly soft money because Kerrey is the head of the Democratic Senatorial Campaign Committee, and Kerrey did not want it to seem as if he was competing with his fellow senators for coveted hard dollars.

So far, Kerrey's PAC has given as much as $50, 000 to gubernatorial candidates in Nebraska, New Hampshire, and South Carolina. Jarding says that to comply with various state rules, the PAC has had to set up bank accounts or register with the state in Iowa, New York, and New Hampshire--the last even requiring an instate treasurer.

One of the pioneers of the soft-money leadership PAC was Sen. Kennedy, according to a former staffer. This staffer, who worked for Kennedy in 1981, says Kennedy was considering a presidential bid in 1984 and so needed to gather as much money as he could to establish a strong national political network.

"Everybody at that point in time was trying to find different uses for soft money, " says the former staffer, who asked to remain anonymous.

According to the staffer, Kennedy used his fund for "get out the vote" programs for Democrats across the country.

Larry Makinson of the nonpartisan Center for Responsive Politics says the current wave of soft money has been made possible by this year's large number of noncompetitive congressional races controlled by incumbents. The result is that the leadership has a "tremendous amount of resources this year, and they are putting it where it will serve them best several years down the road, " says Makinson. "We are seeing consolidation based on power, and they are using their money very pragmatically from a political point of view."

When the millennium hits, he says, it will bring not only a presidential election but congressional redistricting, both of which demand the currying of favor with state political leaders.

"The closer the calendar gets to zero- zero, the more money winds down from Congress to the state level, " says Makinson.

Heard in the Corridors . . . The National Association of Realtors has picked up Lee Verstandig to head its lobbying operation. The former Reagan White House aide comes to the NARby way of The Wexler Group . . . Burson-Marsteller has picked up five new staffers: Gary Auxier, who was most recently at the National Smokers Alliance; Julie Anbender, who was previously at the Immigration and Naturalization Service; Susan Newberry, who directed Pfizer's Viagra launch when she was with Ruder Finn; Laurie Adler from the Aerospace Industries Association; and Greg Wilson, a grass-roots specialist from the U. S. Chamber of Commerce.

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