A New Channel for Soft Money Starts Flowing

Pazartesi, Kasım 12, 2007

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A New Channel for Soft Money Starts Flowing

The so-called Wounded Warriors Act, legislation intended to improve health care for veterans, has attracted nearly unanimous, bipartisan support in Congress. So why would the newly formed Foundation for a Secure and Prosperous America begin running a television commercial urging the citizens of South Carolina to tell Congress to pass it?

The answer lies in the commercial’s glowing images of Senator John McCain, the Arizona Republican banking on a South Carolina victory to jump-start his cash-poor Republican primary campaign. The group that paid for the advertisement operates independently of Mr. McCain’s campaign, but was set up and financed by his supporters seeking to help him as much as possible up to the limits of the law.

The initial spending on the commercial, according to the group, is modest — commercials on the Fox News Channel in South Carolina only — but it represents the first trickle in a flood of hundreds of millions of dollars that are expected to pour from all sides into groups reminiscent of the Swift Boat Veterans for Truth of 2004, built to influence voting outside of campaign law limitations. The amount could swamp the record-breaking tens of millions that the top candidates are raising for their own, closely regulated campaign accounts.

Mr. McCain has crusaded for years against just this sort of unencumbered political spending and has publicly called upon the foundation to stop the advertisement, a request competitors say seems half-hearted and the group’s leader has ignored.

Thanks to a recent decision by the Supreme Court, most of these groups, including the McCain-friendly foundation, will be able to operate with even less public disclosure than such entities did in 2004.

Fortunes are massing to support candidates from across the political spectrum. Two weeks ago, for example, a group including the Hollywood producer Steve Bing and the financier George Soros, met at the Mandarin Oriental hotel in Washington to plot ways of channeling money into advertisements and get-out-the-vote activities for the Democratic nominee.

Michael Vachon, an adviser to Mr. Soros, declined to comment on any meetings, but said, “I expect that Mr. Soros will continue to support grass-roots voter-mobilization efforts, as he has in the past.”

Last week, as the first step in that effort, a group including John Podesta, the chief executive of the Center for American Progress, a liberal research center, and a former chief of staff for President Bill Clinton, and Anna Burger, a senior official of the Service Employees International Union, filed papers to form a nonprofit group.

On the Republican side, longtime party stalwarts, including the Las Vegas casino mogul Sheldon Adelson, have been shoveling funds into a group called Freedom’s Watch, which plans to help support the election of the Republican Party’s nominee.

But as the effort in South Carolina shows, the groups are already beginning to play a role in the internal party battling this primary season, and reports abound in the small community of campaign donors that others are on the way.

The group running the commercial in South Carolina is registered as a 501(c)(4) nonprofit corporation. As such, it is allowed to raise and spend unlimited amounts from individuals without any disclosure, as long as it can argue that it is more concerned with the promotion of an issue — like the final passage of the Wounded Warriors bill — than the election of a candidate.

The lack of disclosure makes it hard to tell how the group spends its money, and impossible to say where it gets its money, and whether its donors have already donated directly to candidates.

The group was started by Rick Reed, whose firm helped produce the 2004 Swift Boat advertisements that questioned Senator John Kerry’s war record in a way that Democrats, and even Mr. McCain, said was unfair — but, also, in a way that both sides agree did great damage to Mr. Kerry’s presidential campaign. Mr. Reed is also a long-time strategist for Mr. McCain, working for his 2000 presidential campaign and briefly for his 2008 campaign, before it ran short on money and trimmed its operations.

The group is running its first advertisements in a crucial early voting state, South Carolina, just as Mr. McCain’s campaign is poised to accept federal matching funds and thus internal spending limits. Mr. McCain was badly beaten in the state in 2000.

Mr. McCain immediately called on the group to cease its activities when its existence was first reported, by The Associated Press, on Friday. Mr. McCain said on Fox News Sunday that he had not spoken to Mr. Reed to ask him to do so directly.

“I have not called Rick Reed because I don’t know what his involvement is,” Mr. McCain said. “I have condemned those ads.”

Mr. McCain’s opponents have called his condemnation disingenuous. Referring to the 2002 campaign finance law that Mr. McCain sponsored with Senator Russ Feingold, Democrat of Wisconsin, a spokesman for Mitt Romney, Kevin Madden, said, “Isn’t it ironic that the author and champion of the McCain-Feingold campaign finance reform bill now has a soft-money effort created on his behalf?”

Mr. Reed said in an interview that his group was indeed financed largely by supporters of Mr. McCain, but that it was not expressly put together to help his former client. Mr. Reed declined to name the group’s backers, and said he was duty bound to ignore Mr. McCain’s request to stop running the commercial.

Mr. Reed said his group intended to be around after the presidential election to promote candidates who were in line with the group’s considerably broad stated purpose: to inform “the public and opinion leaders as to how we can best assure that America remains secure and prosperous.”

Mr. Reed said, for instance, that his group was concerned that Congress was not moving fast enough on the Wounded Warrior legislation.

“We’re a foundation,” Mr. Reed said. “We’re starting in South Carolina because we think that’s a good climate for us based on the issues we care about the most.”

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The commercial also features complimentary images of Senator Lindsay Graham, Republican of South Carolina, and Representative John Shadegg, Republican of Arizona, both of whom are up for re-election, as well as negative portrayals of Democrats like Representative David R. Obey of Wisconsin, whose constituents may also soon see the commercial in their states, Mr. Reed said.

“It’s hardly a presidential campaign ad,” Mr. Reed said, adding, “We would hope it doesn’t hurt people we agree with.”

The South Carolina group is an early example of two changes in the legal landscape that are combining to push more spending on the 2008 election out of the glare of public disclosure.

First, in June, the Supreme Court struck down a ban in the 2002 McCain-Feingold campaign finance laws on political advertisements by corporations, including nonprofit groups, within 30 days of a primary and 60 days of a general election. In its decision, Federal Election Commission v. Wisconsin Right to Life Inc., the Supreme Court ruled that the right to free speech protected any such advertisements except those that could only be interpreted as appeals to vote for or against certain candidates.

(Lawyers for Mr. McCain filed a brief arguing unsuccessfully to uphold the restrictions.)

The decision removed virtually any restrictions on these groups’ ability to advertise, and made nonprofit corporations, with their few disclosure requirements, the tool of choice for big donors looking to influence elections because of their wide latitude to advertise.

They can now run explicitly political advertisements that mention specific candidates right up to Election Day, as long as they have some other ostensible purpose — even one that closely resembles a candidate’s campaign themes.

“The line between genuine and sham ads is always going to be subject to debate and, in some sense, in the eye of the beholder,” said Marc Elias, a Democratic campaign finance lawyer.

Second, the Federal Election Commission has made it increasingly difficult for outside advocacy groups to operate as many did in 2004, acting as so-called 527 groups, named for a section of the tax code that allows them to try to influence elections as long as they disclose their donors and expenses.

The F.E.C. issued fines against many of the most active outside groups in 2004 for violating the accounting rules. The result has been a shift away from 527 groups toward operating in the form of nonprofit, educational organizations, like the South Carolina group.

“One of the ironies of the F.E.C. enforcement approach is that it has driven these groups into other vehicles that have less disclosure,” said Jan Baran, a Republican election lawyer.

Mr. Reed, however, said his group might have to disclose the names of its donors if it moved on to expressly advocated the election of the candidate it deemed best suited to its cause. He said that was something they would consider but were not planning. But, he added, Mr. McCain would be worthy of such an action.

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