Breaking Campaign Laws: Crime That Does Pay

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Crime does pay…when it comes to breaking campaign finance laws.

A few days ago, the Federal Elections Commission settled a case against the Media Fund, a pro-Democratic 527 group that spent more than $50 million in so-called soft money in 2004 trying to influence the presidential election that year. What was the penalty assessed? $580,000. The Media Fund–which was partly bankrolled by George Soros–will have to pay that much in a fine. It sure sounds like a lot, but it’s only a wee bit more than 1 percent of the money the group, which was headed by Harold Ickes, the former White House deputy chief of staff for President Bill Clinton, pumped into the campaign.

The FEC declared that the Media Fund, which is no longer active, had violated campaign finance laws by using unlimited contributions from labor unions and other financial benefactors (soft money, that is) for ads supporting John Kerry and attacking George Bush. (Here’s one critical deconstruction of a Media Fund ad.) Lawyers for the Media Fund and other 527s have argued that in 2004 such activity was believed to be legal by the folks running 527s (which take their name from the provision of the tax code that applies to them), and the FEC has stated that the Media Fund did operate in accordance with the advice it received from its attorneys. But the FEC has ruled that only political committees that register with the FEC and abide by contribution limits and public disclosure requirements can directly attempt to influence a presidential election.

The Media Fund is the latest target of the FEC’s crusade against the largely unregulated 527s that were operating in 2004. It has also gone after America Coming Together, another pro-Democratic campaign group, and two pro-GOP outfits: Progress for America Voter Fund and the Swfit Boat Veterans for Truth. (After the passage of the McCain-Feingold campaign finance reform law, groups like these became major recipients of the soft money that used to flow to the political parties.) All together, these four groups spent $200 million in what the FEC has determined to be illegal soft money. All together, these four groups have to pay $2.4 million in fines.

These punishments–while historic for the FEC–will hardly serve as a deterrent. Such fines, which come long after the offending activity transpired, can easily be considered an inconvenience, the cost of doing business. They will do little to persuade political operators on both sides to throttle back.

Democracy21 and the Campaign Legal Center griped about this in a statement released on Monday:

The long delay in resolving The Media Fund case and the relatively minimal fine imposed on The Media Fund provides another powerful example of why case-by-case enforcement against 527 groups by itself will not work. It also shows why illegal activities by 527 groups will continue to undermine the nation’s campaign finance laws, unless the FEC acts to issue proper regulations and impose prohibitive fines.

Unless the FEC moves quickly to make clear to political operatives that they will see much tougher enforcement by the FEC in the 2008 election, including fines commensurate with the size of the violations, we are facing huge illegal expenditures by 527 groups and other groups in the 2008 presidential and congressional elections, for the third federal election in a row.

Meanwhile, the FEC was scheduled on Tuesday to vote on rules changes related to a recent Supreme Court decision that gutted part of the McCain-Feingold law. The commission was considering two alternatives. One would allow corporations, labor unions, and nonprofit groups to pay for so-called issue ads that mention political candidates but compel this funding to be reported to the FEC. The other would permit this funding without any disclosure requirements. An issue ad supposedly concerns a policy matter and doesn’t call for electing–or diselecting–anyone. But it can be directed at a candidate. (Think of a spot like this: “Hillary Clinton wants to give homosexuals special rights. Giving homosexuals special rights is wrong. Tell Hillary Clinton that giving special rights to homosexuals is wrong. By the way, did we mention that Hillary Clinton supports special rights for homosexuals?”)

So a 527 free-for-all is likely to occur in 2008. Those groups prepared to do whatever it takes to win will be operating under more permissive rules and, best of all for them, will not have to fear violating the laws that do remain.

UPDATE: On Tuesday afternoon, the FEC voted 4 to 1 to approve a rule that partially preserves the ban on using soft money for campaign ads, but the new rule does create a loophole–in keeping with that recent Supreme Court decision–for ads that are deemed, wrongly or rightly, “genuine issue ads.” Public Citizen, a reform group, says, “While this rule is the decent outcome from a devastating Supreme Court decision, voters should be aware that far more sham issue ads paid for by corporate interests are likely to overwhelm the airwaves in the upcoming election.”


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