Nov 21, 2002 -- Press Release: "Shadow Parties" Challenged

"Shadow Parties" Challenged

Legal Center Joins Other Groups in Filing Complaint with FEC; Agency Asked to Halt Illegal Soft Money Schemes

The Campaign and Media Legal Center today joined Democracy 21, Common Cause, and the Center for Responsive Politics in filing a complaint with the Federal Election Commission (FEC) challenging schemes by both major political parties to violate the new campaign finance law's soft money restrictions. The complaint urges the Commission to open an investigation into this matter immediately and put a halt to these efforts.

Trevor Potter, General Counsel to the Legal Center and former FEC Chairman, urged the Commission to act quickly and forcefully to terminate these schemes to violate the new campaign finance law: "It is obvious that some Washington political operatives do not want to believe that anything has changed with the passage of the Bipartisan Campaign Reform Act—that soft money can continue to be raised and spent by the parties and their agents for federal election purposes. This willful blindness to the new law is offensive to our system of lawmaking, and destructive to our democratic process. Although the McCain-Feingold and Shays-Meehan bills were overtly opposed by the Republican leadership in Congress and covertly attacked by Democratic Party officials as the bills were working their way through the legislative process, Congress still acted to reform the federal campaign finance system. The BCRA was passed by bipartisan majorities of both Houses of Congress, and signed by a Republican President."

"Polling shows that Americans overwhelmingly want to change the role of big money in politics, but they often place a lower priority on 'campaign finance reform' proposals in those polls -- precisely because they are skeptical of the value of any change, because they think that the political players will find ways to avoid any new laws. The drafters of the new Act were of course aware of the danger of circumvention. Party lawyers have been talking for several years about launching connected outside groups, and using associations of state parties, to avoid the soft money ban of the new law. The new law was written carefully to prohibit such activity. Now, a handful of Washington operatives are challenging that ban, refusing to recognize that the world of big money in federal elections has actually ended. Or, perhaps, they are gambling that the Federal Election Commission will be unwilling to enforce the new law. The time to stop this sort of activity and recognize the change in the political culture mandated by the new reform law is now. In the past, parties and their agents engaged in clear violations of the campaign finance laws by acting incrementally, and claiming that 'both sides do it.' In the past, the FEC let them get away with it. The entire history of the creation and increasingly widespread use of soft money is this sort of downward spiral. Now, Congress has clearly spoken, and a new federal campaign finance system is in effect. We need to close the door firmly on the past. We cannot let the downward spiral begin again."

The complaint focuses on two newly created political entities - the Leadership Forum and the Democratic State Parties Organization. The Leadership Forum is led by House Majority Leader-elect Tom DeLay's former Chief of Staff and other individuals with close ties to the National Republican Congressional Committee (NRCC). Press accounts indicate that the Leadership Forum received a $1 million soft money transfer from the NRCC shortly before Election Day 2002. In late October, the chairman of the NRCC was quoted in The Hill as saying, "We want to make sure there are adequate conduits for our supporters to help get our message out . . . we're having stuff set up right now. . . We're making sure there are appropriate routes so that issue advocacy continues." In a New York Times story, a prominent Republican strategist characterized the Leadership Forum as "the House go-to operation."

According to its Articles of Incorporation, the Democratic State Parties Organization (DSPO) is to consist of Democratic state parties. Reportedly, it would have the same legal status as a state party. It is headed by a recent chair of the Association of State Democratic Chairs and a vice-chair of the Democratic National Committee (DNC). According to The New York Times, at a secret party conclave in mid-October attended by top Democratic fundraisers, DNC Chair Terry McAuliffe said that he expected DSPO to raise approximately $40 million in soft money before the 2004 presidential election and urged attendees to "'take [DSPO's President's] phone calls.'" The head of DSPO told the Times that the organization will spend large checks on get-out-the-vote efforts.

The Bipartisan Campaign Reform Act of 2002 bans all raising and spending of soft money not only by national parties but also by entities "directly or indirectly established, financed, maintained or controlled" by national parties. Moreover, it requires state parties and any entities they establish, finance, maintain or control to spend only federally regulated funds - and no unlimited soft money - on advertisements promoting or attacking Federal candidates and voter mobilization activities in connection with elections where Federal candidates are on the ballot.

The complaint alleges that the NRCC, the Leadership Forum, and its officers are pursuing a scheme to raise and spend soft money in connection with the 2004 Federal elections, in violation of the law. In light of the NRCC's $1 million soft money transfer to the Leadership Forum on the eve of the 2002 elections, the Forum is subject to the full soft money ban applicable to entities financed by national parties and cannot serve as a "go-to operation" for soft money election activity. Similarly, the complaint alleges that the Democratic State Party Organization, its President, the DNC, and Terry McAuliffe are engaged in an illegal scheme for DSPO to raise and spend soft money on voter mobilization efforts in the 2004 elections. A key charge centers on the fact that state parties and entities maintained or controlled by state parties may not spend unlimited soft money on get-out-the-vote activity affecting Federal elections.

Notably, the schemes involving the Leadership Forum and DSPO are not protected by the regulatory "grandfather clause" adopted by the Federal Election Commission (which is separately being challenged in court as "arbitrary and capricious"). While the "grandfather clause" forecloses the Commission from scrutinizing certain conduct occurring before November 6, 2002, it does not prevent the agency from taking account of donations made to "shadow party entities" that are not spent down by November 6^th. Likewise, conduct occurring after November 5, 2002 - such as control of DSPO by state parties and their agents - would not be protected from Commission scrutiny. The complaint also notes other links between the political parties and these two organizations and urges the Commission not to apply the "grandfather clause" so as to shield any entity created to evade new soft money restrictions from full scrutiny of their party ties.

The complaint requests that the Commission "immediately open an investigation" into the DSPO and Leadership Forum schemes and "expeditiously seek to stop the illegal activity." It also notes that these schemes appear to be part of a "broad and ongoing pattern of evasion" of the new campaign finance law by both major political parties, citing news accounts identifying other newly created entities with close ties to the national parties as vehicles for evasion of the law. To learn more about the Leadership Forum, DSPO, and other "shadow groups," as well as their links to national parties, please see "The Shadow Soft Money Committees of the National Parties," prepared by Democracy 21, The Campaign and Media Legal Center, and Common Cause.

The Campaign and Media Legal Center is a nonpartisan organization established in January 2002 to represent the public interest in strong enforcement of campaign finance and campaign media law. Through its legal staff, it participates in the administrative and legal proceedings in which the nation ' s campaign and media laws are interpreted and enforced. Trevor Potter , former FEC Commissioner and Chair, is General Counsel of the Center. Based in Washington , the Legal Center is associated with the University of Utah's Campaign and Media Studies Program, created to support inquiry and action on these issues through academic research, conferences, and internship programs. The Program and the Legal Center have received generous financial support from The Pew Charitable Trusts.