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Paid for by...Behind the Presidential Ad Wars: Who's Paying for What?
By Darrel Rowland
The Columbus Dispatch
  • Go back to Tracker -- Summer 2000

    Three little words.

    To the Republican Party, they were worth about $30,000 apiece.

    While many political reporters wrote about the high-priced ad war launched last month in presidential battleground states by the national Democratic and Republican parties, few took note of the "paid for by" disclaimer at the end of the commercials.

    Usually the obligatory statement of who picked up the tab for a political ad is a throwaway line.

    Not this time.

    That's because the TV spots are but one of several ways in which national and state political parties are working together in a scheme to evade federal election law.

    Reporting the latest campaign finance abuses has become a regular staple of covering an election. Our vocabulary has grown to include such obscure (to the public) terms as hard and soft money, 527 groups, issue ads and independent expenditures.

    Stories on these topics usually emanate from Washington and contain primarily a national perspective. But we journalists outside the Beltway - especially those of us in the presidential battleground states - are missing a major opportunity to serve our readers if we drop the story there.

    That's because political parties in many of our states are witting co-conspirators with their national counterparts in this ongoing game to go over, under, around and through campaign finance laws.

    In Ohio, we noticed that while the so-called "issue ads" (another scam that we won't cover here) touting George W. Bush and Al Gore were bankrolled by the national parties, the little-noticed disclaimer showed the commercials officially were "paid for by" the Ohio Republican Party and the Ohio Democratic Party.

    Why the ruse?

    This is where you earn those big bucks they shell out to hard-nosed, insightful journalists.

    To discover how campaign finance laws are being abused, you first must have a basic familiarity with the law itself.

    Remember that while all dollars may be green, under federal campaign law some are more valuable than others.

    "Hard" money is the most coveted because those dollars can be spent on virtually anything related to a campaign, including payments directly on behalf of a candidate. However, hard money also is harder to get because there are stringent limits on how much a contributor can give and restrictions on who can donate.

    "Soft" money is the most plentiful because there are few restrictions on giving. Donors - usually big unions, corporations or wealthy individuals - are limited only by the size of their checkbook. However, the use of soft money is restricted; the cash is not supposed to go directly to a candidate, for instance.

    Thus, the game is to preserve precious hard dollars, and shift all spending possible to soft dollars.

    Here is what some reporters don't realize: Under a quirky, little-known rule, the Federal Elections Commission mandates that the kind of ads airing in battleground states must be funded with a certain percentage of hard money. The complicated formula established by the FEC is based on the number of statewide races in each state in a particular year.

    The key - and the motivation for political mischief - is that the hard money percentage is higher for the national parties than the state parties.

    For example, if the Republican National Committee had directly purchased the $400,000 worth of pro-Bush ads initially purchased in Ohio, the RNC would have had to pay 65 percent of the cost in hard money, or $260,000.

    But the Ohio GOP had to pay only a 43 percent share of hard money, or $172,000.

    Thus funneling the money through the state party saved the GOP nearly $90,000 in precious hard dollars - about $30,000 per word of the disclaimer.

    The Democrats did the same thing for the pro-Gore spots airing in Ohio.

    How do you do this story? First, check the disclaimers on the ads to see whether your states' parties are listed as funding the spots.

    Next, find out the amount of the ad buy either from the TV stations or (we found this to be much faster) from the state parties, who keep track of the other party's ads as well as their own.

    Then get the hard money percentage for your state from either the FEC or your state parties. Finally, calculate how much hard money your state party saved by lending its name to the ad.

    While this practice is not necessarily against the law (although the FEC's general counsel and staff thought so), remember that in campaign finance, it's not necessarily what's illegal that's outrageous, but what's been deemed legal.

    "Practically speaking, there are no rules at all this year," says Larry Makinson, executive director of the Center for Responsive Politics. "It's a complete free for all."

    There's other fun stuff to check for on the state level as well: Directed contributions and selling money.

    The former seems primarily a Democratic practice. In 1992 and especially in 1996, top officials of the Democratic National Committee directed several big donors to give money to the state parties, who then forwarded the cash to Washington - where FEC reports would merely show a check from the party, not the individual donor.

    That means nosy reporters who wanted the full picture of Democratic fund-raising were forced to check records in state capitals, not just the FEC.

    The Ohio Democratic Party's top contributor in 1992 was Indonesian billionaire James Riady of the Lippo Group, who sent a $75,000 check less than a week before the November election. The state party chairman at the time didn't even know who Riady was until the Democratic fund-raising scandal surfaced after the 1996 election.

    Four years ago the Ohio party got donations of as much as $75,000 from the head of the national trial lawyers association; a combined $53,000 from Thai businesswoman Pauline Kanchanalak and her sister-in-law, Duagnet "Georgie" Kronenberg; and others with no connection to Ohio, such as the $25,000 from Little Rock, Ark., lawyer Joseph Giroir Jr., who worked in Hillary Clinton's law firm.

    The popularity of directed contributions has dimmed a bit because Democrats had to return hundreds of thousands of dollars after the 1996 election because of questions about the origin of the money. Kanchanalak and Kronenberg pleaded guilty just last month (June 2000) to making illegal campaign contributions in exchange for access to President Clinton and other top administration officials.

    How to ferret these out? Don't forget the fundamentals: Make sure you look closely at the contributions to your state parties' federal account. If somebody out-of-state is giving five-figure donations, you're onto a story.

    While such quasi-money laundering has not showed up yet in Ohio this year, yet another dodge around federal regulations is operating at warp speed.

    Since not all campaign dollars are equal, the parties have developed their own little black market to trade hard and soft money - a practice sometimes referred to as "selling money."

    These little-noticed dollar deals are lucrative, netting a "profit" of $250,000 for the Ohio Republican Party and $350,000 for the Ohio Democratic Party since mid-1995.

    The $600,000 combined haul for Ohio parties stems from the insatiable demand for hard money in Washington, which causes the national parties to offer generous premiums to state parties who ship them hard dollars. For example, three times last year Ohio Democrats traded $50,000 in hard money to the Democratic National Committee for $60,000 - a 20 percent premium - in soft money that the Ohio party can spend more easily than their national counterparts. Similar transactions took place between the state party and both the Democratic Congressional Campaign Committee and the Democratic Senatorial Campaign Committee.

    The Republican National Committee has been even more generous, awarding up to 50 percent premiums to the Ohio GOP.

    This practice is the hardest to track because of the blizzard of checks typically flowing back and forth between the national parties and state headquarters.

    At The Columbus Dispatch, we purchased data from the Campaign Study Group, run by Dwight Morris, formerly of the Los Angeles Times. Otherwise, we were looking at sorting out $18 million sent by national parties to Ohio, and $5 million by Buckeye State parties back to Washington over the past decade.

    Once you obtain the campaign finance data, a sort by date should prove useful; we found a sort by amount was even better to match up the money trades.

    Still, pinning down the exact "profit" earned by a state party in these dollar deals is problematic even with the best data. We showed Ohio party folks our crunched numbers, and they simply provided the actual totals - which they almost bragged about. After all, it earns political leaders points with the faithful to be helping out the nationals and profiting the state parties at the same time.

    Darrel Rowland, an IRE member for more than 20 years, is public affairs editor of The Columbus Dispatch.