November 2, 1997

After 1996, Campaign Finance Laws in Shreds

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    WASHINGTON -- The Senate investigation into campaign finance abuses in the 1996 election has produced a confusing picture for the public, a tangled saga of intrigue and overzealous fund-raising.

    But beneath the cloudy surface of the Senate hearings, one clear picture has emerged: The post-Watergate campaign finance laws that were passed to restrict the influence of special interests in politics have been shredded.

    Those laws, enacted by Congress in 1974 following the trauma of Watergate, were broadly aimed at limiting the influence of large, special interest donors. There were three pillars of the legislation: Individual campaign contributions to federal candidates were limited to $1,000 per election; there would be partial public financing of the presidential election and limited spending by the presidential candidates who received taxpayer money, and it was mandated that all contributions above $200 would be fully and publicly disclosed.

    The present round of Senate hearings began last July with accusations, never proven, of political meddling by the government of China and ended, on Thursday, with charges of influence-peddling by Indian casino operators.

    The cast of witnesses showcased a dizzying number of walk-on characters, including the former chairmen of the Democratic and Republican National Committees, an armada of White House lawyers, shadowy donors with diverse business agendas, a Central Intelligence Agency officer identified only as Bob, and, on Thursday, the Secretary of the Interior Bruce Babbitt.

    What has the public learned from the new proceedings? Not enough, say the critics of Sen. Fred Thompson, the R-Tenn., who led the Senate inquiry as chairman of the governmental affairs committee. They carp that the hearings were unfocused and did not draw enough blood from Democrats.

    On Friday, Thompson announced that he was suspending the hearings and expected to complete his investigation by Dec. 31. In a meeting with reporters, Thompson repeated some of his complaints about being stymied by White House stonewalling, uncooperative witnesses, political groups that would not turn over documents, and an indifferent public.

    He also conceded that his committee had not drawn a clear enough picture from the fund-raising imbroglios that were investigated, which he called "a big malleable mess."

    "It's a bunch of different scandals all intertwined but it has no consistent story line," he said.

    Testimony from the Thompson hearings has amply demonstrated that the three fundamental changes of the post-Watergate era were shot through with gaping loopholes in the 1996 election. While legal experts on campaign finance continue to spar over the legality of the elaborate end-runs around the election laws that were staged by the two political parties and the two presidential campaigns, there is broad agreement that the campaign finance system is now badly broken.

    But there is still broad disagreement over how to fix it.

    "What happened in 1996 is that we reached the final evolution of the post-reform era and the 1974 reforms were rendered meaningless," said Anthony J. Corrado, a professor of government at Colby College, who testified before the governmental affairs panel in September. "What the hearings exposed is that the gray areas of law are now greater than the clear prohibitions."

    The evisceration of contribution limits was colorfully illustrated at the Senate hearings by the testimony of an oil executive, Roger Tamraz, who bluntly told the Senate that he gave $300,000 to the Democratic Party to win access to the White House and President Clinton.

    Tamraz was just one among scores of contributors who were asked by top Democratic National Committee fund-raisers, some of whom also testified at the hearings, to give the Democratic Party large, soft-money contributions.

    Soft money refers to large contributions from corporations, labor unions and wealthy individuals raised by the two political parties outside the limits of the federal election law. The Federal Election Commission opened the door to these contributions in 1978 in an advisory opinion that permitted large contributions for party-building activities, as long as the money was not spent directly to aid particular candidates. But party-building was not why Tamraz and others gave to the Democratic National Committee.

    Soft money did not play a big role in presidential elections until 1988, when both the Democratic candidate, Michael J. Dukakis, and his Republican opponent, George Bush, benefited from donor clubs of $100,000 contributors that were established by the Democratic and Republican National Committees. The two parties raised $45 million in soft money in 1988.

    Eight years later, in 1996, the soft-money loophole became a $262.1 million money pit: The Republican Party raised $138.2 million in soft money, while the Democrats hauled in $123.9 million. The Democrats, relying on fund-raisers like John Huang and Yah Lin (Charlie) Trie, aggressively courted new soft-money donors. The Democratic Party had to return $3 million in questionable contributions, much of it raised from non-citizens.

    The Republicans, meanwhile, tapped a rich vein of corporate donors, with tobacco companies supplying more than $5 million. Republicans, too, found novel ways to exploit the generosity of big donors.

    A think tank affiliated with the Republican National Committee received a $2.2 million loan guarantee from a Hong Kong tycoon, an embarrassing fund-raising episode that ensnared another witness at the hearings, the former Republican Party chairman Haley Barbour. The finances of the think tank have been the subject of a federal grand jury investigation.

    Where did this torrent of soft money go? Much of it was spent on television advertisements underwritten and aired by the two political parties in ways that clearly benefited Clinton and his Republican opponent, Bob Dole. These issue ads made the presidential campaign spending limits all but meaningless. In the primaries, both Clinton and Dole faced a spending ceiling of about $29 million. For the general election, each candidate received $60 million in taxpayer money to run his campaign.

    Although he was not called to testify, Dick Morris, Clinton's former chief political consultant, was deposed by the Thompson committee. In a 500-page deposition, Morris made it clear that the spending limits were a major obstacle to the advertising strategy he envisioned for the Clinton-Gore campaign.

    In detail, he described his joy at learning of an alternative financing mechanism, with the democratic committee using soft money to pay for issue ads Morris helped create.

    In 1995, the FEC said that the political parties could underwrite issue advertisements to further their political agendas. The advertisements were not supposed to advocate the election of a specific candidate.

    Urged on by Morris, the democratic committee spent at least $32 million on early issue advertising. The advertisements, which began airing in mid-1995, were created by the Clinton-Gore team and prominently featured the president in patriotic settings.

    Having the Democratic Party foot the bill for this advertising let the Clinton-Gore campaign conserve its own resources for other spending. The advertisements helped Clinton build a formidable and early lead in the polls.

    After the White House belatedly released videotapes of the fund-raising coffees and lunches at which Clinton was the host, Thompson held several days of hearings focusing on the Democrats' issue advertising, which he said were illegal.

    After Dole hit the primary spending ceiling in early 1996, the Republican Party also began airing issue ads and spent more than $20 million on them. One Republican issue ad was a biography of Dole. Documents released by Democrats on the Thompson panel showed that Republican Party officials were worried that this biographical advertisement might not fit the legal definition of a party issue ad. Dole offered to testify before the Senate panel, but was not called.

    The Senate inquiry also revealed that the third fundamental of the federal election law, disclosure, was badly weakened. The Thompson committee had hoped to explore the activities of various nonprofit groups in the 1996 election, but most of the groups refused to turn over their donor lists and other sensitive information.

    The Democratic and Republican parties both steered wealthy donors to allied nonprofit organizations. There were benefits to the donors who followed this route. Some got tax deductions and none of the donors had to publicly disclose their contributions. The nonprofit groups that were major political players in 1996 raised more than $12.5 million.

    In a statement on Friday, Sen. Edward M. Kennedy, who was a champion and principal sponsor of the campaign finance laws passed in the 1970s, agreed that "they no longer do the job," in part because "fund-raisers have carved out loopholes to squeeze and skirt the laws." The Massachusetts Democrat is a co-sponsor of the McCain-Feingold bill, which would outlaw soft money and restrict issue advertising.

    An agreement was reached by the Senate on Thursday to bring the legislation up for a test vote in March.

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