Shell Games: How Kerry’s Wealthy Advocates use 527s to Circumvent Campaign Finance Reform

Behind the curtain of John Kerry’s campaign, Kerry’s elite supporters are running a second operation – a smoke-and-mirrors shuffle to get big money around campaign finance reform.

When it comes to finances, not surprisingly, Kerry rejects transparency. To Kerry, even the standard, required disclosure of income tax returns to the congressional ethics committee is “very, very, very intrusive.”[1]

Is the financing of Kerry campaign activity something that we should care about? I think so. In 2002, the legislature passed an historic bill dubbed “McCain-Feingold Campaign Finance Reform.”[2] McCain-Feingold was designed to inject sanity to the big money budgets of today’s politics. First, McCain-Feingold banned soft money contributions to candidates. Furthermore, under the bill, an individual’s contribution to one candidate is capped at $2,000 (increased from $1,000 prior to the bill). The concept behind this is that candidates no longer should be able to sit back and cash in one or two big checks from billionaires to fuel their campaigns. Instead, they need to go out and truly rally support from the people, gathering thousands of little checks for $5 and $20, and perhaps some $2000 checks along the way.

In theory, McCain-Feingold is a great idea. In practice, it has proven a failure. Instead of causing candidates to achieve groundswell support and to fight for those $5 checks, big money liberal donors have found a novel legal loophole to get their loot to their chosen candidate.

-Using Environmental Groups to Conduct Campaign Activity- Billionaire financiers and fundraisers, such as George Soros, Harold Ickes and Teresa Heinz-Kerry, who are constrained by the limitations of McCain-Feingold, have turned to entities known as 527s. Because 527s are not regulated by the Federal Election Commission, their expenditures are not supposed to fund express advocacy for the election or defeat of candidates. Regardless, many 527s use their budgets for activities that go beyond voter education, beyond influencing support for candidates, and directly to outright campaign activity. There are numerous such organizations, but one of the more well known is the League of Conservation Voters (“LCV”), and the LCV provides a good case example of the loophole that allows wealthy donors to use 527s to circumvent the limit on campaign contributions.

While the LCV calls itself the “political voice of the national environmental movement,” it is in fact just another left wing big money incubator. Congressman George Radanovich (R-CA) summed up the partisanship of the LCV when he recently stated, “I wish the LCV spent half as much on actually protecting the environment as they do on fundraising and negative advertising.” [3]

As of June 27, 2004, the LCV had bankrolled about $2 million for the 2004 election cycle.[4] It has funded anti-Bush television advertisements in Arizona, New Mexico and Florida.[5]

The Florida advertisements are particularly partisan. They mislead voters into believing that Bush has authorized a new oil-drilling plan in the Gulf of Mexico that endangers the Florida coastline. What the advertisements do not say is that oil well development in the Gulf actually began under the Clinton watch, when Clinton opened up 6 million acres of undersea acreage for drilling. In fact, Bush curtailed the program, restricting the area where drilling may occur to 1.5 million deep-sea acres, and he also ordered a buffer of 100 miles between any drilling and the coastline. Even more peculiar, the anti-Bush spots fail to say that Kerry supports drilling in the Gulf. In 2001, Kerry argued that the “25 million undeveloped acres” in the Gulf of Mexico should be explored for drilling sites.[6] In April of this year, Kerry re-affirmed his support for deep sea drilling in the Gulf.[7]

Beyond partisan and misleading advertisements, the LCV also gives directly to the Kerry campaign. As of late January – many months ago – the LCV had given $18,528 directly to the Kerry campaign.[8] No doubt more money has funneled from the LCV to Kerry since then. So much for the $2,000 campaign limit under McCain-Feingold!

The LCV web-site trumpets an array of pro-Kerry messages. When I checked the site about one month ago, on July 2, the site read like a Kerry presidential billboard. The pro-Kerry messages eclipsed mere environmental propaganda. For example, the web-site touted Kerry’s “economic agenda.” According to the site, “Kerry has a comprehensive economic agenda that will help create 10 million jobs in his first term as President.”[9] On July 2, the LCV’s web-site also included a picture of Bush where he looked like he just choked on a sour grape, and it urged Americans to “join with thousands who have already signed up to defeat George W. Bush.” The site conceded that one of its primary missions is to organize efforts to get out the vote.[10]

Within the last couple weeks, I noticed that a few commentators from the press have raised questions about the partisanship of the LCV. A few days ago, on July 26, I checked the LCV’s web-site again, and I was unable to find the economic policy propaganda and the goofy picture of Bush that I had viewed weeks before. Without a doubt, the LCV started to feel some heat and changed the web-site format.

Today, while most of the LCV web-site appears to relate to environmental issues, it nevertheless remains nothing more than a blatant pro-Kerry advertisement. Most notably, it assigns “letter grades” to Kerry and Bush. According to the LCV, Kerry has an “A”; Bush gets an “F.”[11]

Considering where the LCV obtains its money, it is no surprise that the group quickly endorsed the Kerry campaign in January and is now actively campaigning on his behalf. For sure, the connection between the LCV and Kerry could not be clearer. Teresa Heinz-Kerry - who commands somewhere between $900 million and $3.5 billion in assets, owns several multi-million dollar mansions and travels from mansion to mansion in her personal Gulfstream jet [12] – and the organizations she controls have given to the LCV and to environmental groups whose executives serve on the LCV’s Board about one million dollars in recent years and about $4 million over the last dozen years.[13] Does anybody honestly believe that the LCV is ever going to allow even one penny of its money to go to anything that is not decidedly anti-Bush?

Using environmental groups to lobby support for Kerry is everything about money and power and has nothing to do with sensible environmental policies. If you are concerned about the environment, I will break the news – Kerry is the wrong guy for the job, even on that single issue.

I will leave the spin to the Kerry campaign. Here are the facts. Taken as a whole, the United States has the toughest environmental regulatory regime of any nation. In 1997, U.S. businesses spent $147 billion annually to comply with workplace rules, and about half of this spending was directed to compliance with environmental regulations.[14] To put that number in perspective, $147 billion in 1997 amounted to $7,904 for every American worker. Indeed, the burden of compliance fell even more heavily on small businesses, with $16,920 spent on compliance by small businesses, with large firms spending about $7,454 per employee.

While $147 billion is a lot of money, the cost of complying with endless rules and regulations has only increased since 1997. The number now stands at $160 billion – for the manufacturing sector alone! Thus, the dollar figure for all businesses is much more than $160 billion.[15] Beyond this private outlay to comply with regulations, in 2003, the federal government spent $26.9 billion to enforce regulatory compliance.[16]

The real environmental battleground lies not with adding more regulation and layers of paperwork to an already bloated regulatory regime, but with issues most Democrats are afraid to touch – illegal immigration and suburban sprawl. The failure of most environmental groups to tackle sprawl and combat the mass immigration problem simply illustrates that they have become per se political lackeys for the Democratic Party.

Kerry’s politically motivated plan to grant citizenship to the millions of illegal aliens who have illegally sneaked across our borders is the first of the final steps that will eliminate every remnant of open space left in our nation. According to a 1999 Sierra Club report, the U.S. loses 1 million acres of farmland and open space to sprawling development each year.[17] Furthermore, America’s population is expected to explode by 130 million people over the next 50 years, and 90% of the growth will come from illegal aliens and mass immigration beyond any reasonable level that America can sustain.[18] With Kerry in office, say hello to overcrowding and sprawl and say goodbye to farmlands, forests, wetlands and other open space.

The next time a group like the LCV tells you Kerry gets an “A” on the environment, laugh and ask who is paying its salary. Believe me, the armchair philosophers with fatcat money who sit on the boards of most environmental groups have nothing in common with regular, hard-working Americans.

If money is needed in a hurry, Kerry’s supporters may consider mechanisms other than 527s to finance advertisements. The Kerry campaigners could seek loans from billionaires including George Soros and Teresa Heinz-Kerry, who files separate income taxes from her husband.

We can look to past Kerry campaigns for guidance. In 1996, Kerry faced a tough challenge in his Senate re-election bid from Republican Governor William Weld. Going into the campaign, both candidates agreed to limit their personal spending in the campaign to $500,000. Kerry barely beat Weld. After the campaign, the press learned that Kerry’s campaign had received a last–minute infusion of $1.7 million from his wife. Kerry claimed that he did not violate the agreement with Weld because the $1.7 million was “a loan.”[19]

The Kerry-Weld incident occurred before the enactment of campaign finance reform, but Kerry’s breach of his agreement with Weld, or at least his creative interpretation of it, shows that he is willing to bend the rules to get what he wants. Indeed, Heinz herself has not ruled out the possibility of “making an independent campaign expenditure on [Kerry’s] behalf.”[20]

In September and October, if Kerry needs more money, a loan from those billionaires is not out of the realm of possibilities. With only a single personal check, they could more than double the money that the Kerry campaign has raised to date. ____________________________

[3] Press Release by the House Committee on Resources (http://www.aaenvironment.com/Pombo.htm) (last viewed July 2, 2004).

[4] See OpenSecrets.org (http://www.opensecrets.org/527s/527events.asp?orgid=46) (last viewed July 2, 2004).

[5] See The League of Conservation Voters Web-Site (http://www.lcv.org/news/NewsPrint.cfm?ID=2701&c=4) (viewed July 2, 2004 and July 26, 2004); James M. Taylor, LCV Launches Misleading Anti-Bush Ads in Florida, Environmental News (July 1, 2004) (available at http://www.heartland.org/Article.cfm?artId=15255 (last viewed July 26, 2004)).

[6] James M. Taylor, LCV Launches Misleading Anti-Bush Ads in Florida, Environmental News (July 1, 2004) (available at http://www.heartland.org/Article.cfm?artId=15255 (last viewed July 26, 2004)).

[9] See The League of Conservation Voters Web-Site (http://www.lcv.org/news/NewsPrint.cfm?ID=2701&c=4) (viewed July 2, 2004 and July 26, 2004).

[12] Kerry’s Wife Reportedly Controls Nearly $1B, The Los Angeles Times (http://aolsvc.news.aol.com/elections/article.adp?idp=20040627172609990006) (last viewed July 2, 2004).

[14] Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers 43 (U.S. Dep’t Commerce Jan. 2004).

[17] See Report by the Sierra Club (www.sierraclub.org/sprawl/report99/openspace.asp) (last viewed May, 2004).

[18] See Federation for American Immigration Reform web-site (www.fairus.org) and NumbersUSA web-site (www.numbersusa.com) (statistics last viewed in May, 2004).

[20] Matthew Continetti, Dream Palaces of the Kerry Campaign: John Kerry and Teresa Heinz-Kerry own a lot of real estate. But is any of it on foreign soil? The Weekly Standard (May 21, 2004).

The McCain -Feingold bill should have been vetoed at its conception. George Bush had faith that the Supreme Court would find it so stupid they would call it unconstitutionl, but his faith in the Supreme Court was wasted.

Unfortunately now its the law of the land, and though Republicans may abide by the spirit of it the Dems have run wild with the largest loophole jump in history.

Leaving on His Jet Plane

JohnDenver

All his records sealed, he’s ready to go.
He’s flipped and flopped, as we well know.
But we must now wake up,
And say goodbye.
Now the light is shining,
It’s a new morn.
His bus is waiting,
He’s holding corn.

Already he’s so funny,
I could cry.

So wave bye, don’t look at me,
Turn around and really flee.
Told you that, you really need to go.

He’s leaving, on his jet plane.
We all hope, he won’t be back again.
Oh John, we wish you’d go.

There’s so many times, he’s lied, we found.
We all just wish, he would leave town.
The words he says, they don’t mean a thing.
Everything he says, a lie to you.
As he flips and flops a time or two.
When he leaves town, much sunshine it will bring.

So wave bye, don’t look at me,
Turn now and really flee.
Told him that, he really needs to go.

We all hope, he won’t be back again.
Oh John, we wish you’d go.

Now the time has passed we’re tired of you.
Please be gone we won’t miss you.
We’ll hold the door, you get on your way.
Think about the time will come.
You will see that you are dumb.

We’ll recall the day we got to say.

So wave bye, don’t look at me,
Turn now and really flee.
Told him that, he really needs to go.

He’s leaving, on his jet plane.
We all hope, he won’t be back again.
Oh John, we wish you’d go.

Conspiracy Guy aka DIF 8/6/2004

Good observation about McCain's criticism of the swift boats. Why doesn't he say something about LCV and MoveOn instead?

Point out that the swift boat ads are the result of allowing these 527 organizations to advertise - organizations like MoveOn.org. Perhaps a suggestion that the campaign finance reform bill was deeply flawed is in order.

In theory, McCain-Feingold is a great idea. In practice, it has proven a failure.

No.
McCain-Feingold is an obvious abridgement of free political speech, but one the Supreme Court fosters, because the SCOTUS rarely shies from abridging speech when the abridgement can affect the outcomes of elections.
McCain-Feingold is an abysmal idea.
To any degree it is a failure, the failure is to be applauded.

In theory, McCain-Feingold is a great idea.

No, it was NEVER a great idea. The American political system may not be the best but, for all intents and purposes, it wasn't broken, either. And, it didn't need McCain's "fix" The full effect of CFR has yet to be felt. When anti-candidate ads and information (supposedly) are muzzled as we approach the election, the true purpose of CFR will be revealed. It's true purpose was to restrict our 1st Amendment rights . . . note, those our OUR 1st Amendment rights; not those of the media, Hollywood, the UN, the EU, the Muslims (no profiling, ya know), but OUR 1st Amendment rights. That's all it was ever intended to do.

And Bush signed it.

The concept of a campaign not controlled by one or two billionaires is a good idea. The problem is that it doesn't work. good to see NRA-ILA finally starting up their own 527, with a radio station. if the left does it, other groups should as well. why not?

The concept of a campaign not controlled by one or two billionaires is a good idea.

I agree. However, as the SCOTUS ruled on CFR, separating money from politics is impossible. Previously, we didn't know who all of the smokey backroom players were, we just knew that they were there. The difference is that McCain wasn't going after the money side of politics with CFR (what politician is going to cut their own political throat by killing the golden goose?), McCain was going after the 1st Amendment because the 1st Amendment was what killed his presidential aspirations in 2000; not money.

Soros would have been there this year with or without CFR; he just would have been more obvious. Te-RAAAAAAAY-ZAH! may or may not have been, depending on 4-month John's decision to run. So far, despite CFR, neither she nor John have been required to disclose her participation (and funding) of his campaign. With or without CFR, the 527s were already in existence, they just weren't as plentiful. So, CFR has only altered the way that money has been used, it hasn't really affected political contributions in the slightest. CFR's only true affect will be felt shortly as we reach the 60-day outer marker to the election. That's what McCain was after and that's what he achieved.

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