Oct 12, 2006 -- The Campaign Legal Center and Democracy 21 File FEC Complaint Against 527 Groups for Spending Money to Influence 2006 Congressional Races in Violation of Federal Campaign Finance Laws

Democracy 21 and the Campaign Legal Center today filed a complaint with the Federal Election Commission (FEC) charging that the Economic Freedom Fund (EFF), a pro-Republican 527 group, and Majority Action, a pro-Democratic 527 group, are spending soft money to influence the 2006 congressional elections in violation of the federal campaign finance laws.

According to the FEC complaint, longstanding federal campaign finance laws and Supreme Court decisions, including the McConnell decision, make clear that 527 groups spending money to influence federal elections are required to register as federal political committees and comply with federal campaign finance laws, including limits on the contributions they receive.

Despite these requirements, 527 groups have failed to register as political committees and have improperly spent large amounts of soft money to influence the 2004 presidential elections and are now improperly spending millions of dollars of soft money to influence the 2006 congressional elections, the complaint states.

According to the complaint, both EFF and Majority Action, organized under Section 527 of the Internal Revenue Code, are, by definition, a "political organization" that is operated "primarily" for the purpose of influencing candidate elections.

The complaint states that EFF and Majority Action have as their major purpose influencing federal elections, have raised and spent substantial sums to influence federal elections, and therefore are required to register as federal political committees and comply with federal campaign finance laws.

In 2004, Democracy 21, the Campaign Legal Center and the Center for Responsive Politics filed a number of similar complaints with the FEC against six 527 groups spending soft money to influence the presidential election. More than two years later, the FEC still has not taken any public action on the pending complaints regarding five of the 527 groups. The complaint against the sixth 527 group was dismissed by the FEC this year on the ground that the group ended up not running any ads. (All of the complaints can be found at www.democracy21.org)

"The failure of the FEC to require 527 groups to comply with federal campaign finance laws has resulted in blatant, flagrant circumvention of the campaign finance laws by 527 groups in the 2004 and 2006 federal elections," according to Democracy 21 President Fred Wertheimer.

"The complaint our groups have filed today continues our battle to force the FEC to do its job and properly enforce the campaign finance laws against 527 groups, which are wrongly injecting tens of millions of dollars in unlimited soft money into federal races," Wertheimer said. "We are committed to working at the FEC, in the courts and in Congress to end the soft money abuses of 527 groups in time for the 2008 presidential and congressional elections."

"The Commission has proven incapable of resolving the 527 issue on a case by case basis, or worse simply unwilling to do so," said J. Gerald Hebert, Executive Director of the Campaign Legal Center. "All but one of the complaints filed from the 2004 election cycle are still pending."

"Another election season is upon us and, tragically for our democracy, the FEC has once again failed to act to reign in abuses by 527 groups," Hebert added. "The Commission has ignored Congressional intent and scathing rebukes by the courts, but the FEC's failures to date do not mean that the law can be violated with impunity indefinitely."

According to the complaint, reports filed with the IRS show that EEF was established on August 1, 2006. Reports filed with the FEC show that, as of October 9, 2006, EFF has raised at least $5,050,225, with $5 million coming from just one single donor, Bob Perry, the complaint states.

In the 2004 elections, Perry donated $4.45 million to Swift Boat Veterans for Truth and $3 million to Progress for America Voter Fund, two pro-Republican 527 groups that spent large amounts of soft money to defeat Democratic Presidential nominee John Kerry and re-elect President Bush, the complaint states.

According to the complaint, reports filed with the FEC show that, as of October 9, 2006, EEF has spent at least $2,120,893 during the 2006 congressional elections . The group has funded TV ads, direct mailings and other communications attacking Representatives Allan Mollohan (D-WV), Jim Marshall (D-GA), John Barrow (D-GA), Leonard Boswell (D-IA), Darlene Hooley (D-OR) and Baron Hill (D-IN).

According to the complaint, Majority Action was established on July 12, 2005, and has filed reports with the IRS and the FEC showing that, as of October 6, 2006, the group has raised at least $1,382,250 and has spent at least $384,816. The contributions to the group include $500,000 from Adam Rove, $170,000 from George Soros, $100,000 from John Hunting, $100,000 from Linda Pritzger, $150,000 from SEIU entities and $50,000 from the American Federation of Teachers.

The complaint notes that according to a press release issued by Majority Action, "Majority Action is led by veteran Democratic campaign operatives and has a leadership board that consists of prominent political figures, including several former Members of Congress, two former Democratic National Committee Chairmen and two former DCCC Chairmen."

The complaint also notes that a n article in the Washington Post (September 7, 2006) states that "the goal of Majority Action, according to co-chairman Joe Andrew, is to level the financial playing field in Republican-held seats where a potential national wave could wipe out a number of incumbents." Joe Andrew is a former national Chairman of the Democratic National Committee.

The complaint cites the Post article as stating, "Majority Action's founders have insisted the organization will succeed where other outside groups — which can accept contributions of unlimited size — targeting House and Senate races have failed because of the high-profile figures aligned with the effort and the amount of attention being paid to the fight for control of this cycle."

The Post article also stated that "Andrew said Majority Action has a 'seven-figure' budget—between $8 million and $10 million, an informed source said—and was spending in the 'six figures' in individual House districts," according to the complaint.

The complaint states that according to information found in Majority Action's press releases and on its Web site, Majority Action has funded ads attacking House Speaker Dennis Hastert (R-IL), and Representatives James Walsh (R-NY), Deborah Pryce (R-OH), Dave Reichert (R-WA), Thomas Reynolds (R-NY), Chris Chocola (R-IN), Thelma Drake (R-VA) and Don Sherwood (R-PA).

As in previous FEC complaints they have filed against 527 groups, Democracy 21 and the Campaign Legal Center noted in the complaint the role played by the FEC in the past in subverting the nation's campaign finance laws. The complaint noted the Supreme Court decision in McConnell which found that FEC regulations had been responsible for establishing the soft money system, and had "subverted" and "invited widespread circumvention" of the Federal Election Campaign Act.

According to the FEC complaint filed today:

It is critically important that the Commission not repeat this history here. The Commission must take steps to ensure that it does not once again invite "widespread circumvention" of the law by licensing the injection of massive amounts of soft money into federal campaigns, this time through section 527 groups whose major, indeed overriding, purpose is to influence federal elections.

In September 2004, Representatives Christopher Shays (R-CT) and Marty Meehan (D-MA) filed a lawsuit challenging the FEC for its failure to issue regulations to require 527 groups to comply with the campaign finance laws. The FEC responded to the lawsuit by stating it had decided to enforce the laws against 527 groups by using case-by-case adjudications rather than by issuing regulations on 527 groups.

On March 29, 2006, Judge Emmett Sullivan of the federal district court in Washington, D.C. ruled that the FEC had "failed to present a reasoned explanation" for its decision to terminate its rulemaking on 527 groups without issuing any new regulation on such groups. Judge Sullivan found that "judging from FEC's track record in the 2004 election, case-by-case adjudication appears to have been a total failure."

In addition to noting that the FEC's enforcement approach was a "total failure" in the 2004 election, Judge Sullivan also criticized the FEC for failing to "explain how piecemeal adjudication could be executed on a sufficiently timely basis to be effective."

Judge Sullivan wrote that "the FEC's track record indicates the opposite is true. Cases arising from the 2004 campaign have languished on the Commission's enforcement docket for as long as 23 months, with no end in sight, even as the 2006 campaign has begun."

The court also stated, "This merely demonstrates the patent inadequacy of the case-by-case approach. The FEC can take years to complete an administrative action, and penalties, if they come at all, come long after the money has been spent and the election decided."

Judge Sullivan remanded the case back to the FEC and ordered the agency either to articulate a more persuasive case for enforcing the laws against 527 groups on case-by-case adjudication or to promulgate new regulations for 527 groups.

After the FEC failed to respond to the court order for more than six months, Representatives Shays and Meehan filed a motion with Judge Sullivan on September 13, 2006 and asked the court to set a deadline for the FEC to comply with the court's order. Judge Sullivan has scheduled a hearing on the motion for November 2, 2006.