Legal trickery

Issue advertising is one of the most insidious loopholes ever to be carved from the federal campaign finance laws
Analysis by Mark Brown
Illustration by Daisy Juarez

"October 16, 1998. Peter Fitzgerald finally speaks his mind. And it's scary," a narrator intoned ominously "Fitzgerald admits that in the Senate he would co-sponsor legislation to outlaw abortion. Fitzgerald is so extreme that he supports outlawing abortion in cases of rape. He supports outlawing abortion in cases of incest."

By then, most viewers probably had gotten the message and weren't even listening to the strange little wrinkle that came next. Instead of urging a trip to the polls to vote against Fitzgerald or in favor of his Democratic opponent, the incumbent U.S. Sen. Carol Moseley-Braun, the commercial concluded with this unusual call to action:

"Call your member of Congress. Tell them to oppose Peter Fitzgerald's plan to outlaw abortion." This was accompanied by another unusual twist flashing briefly across the bottom of the television screen: "Paid for by the Democratic Party of Illinois."

With those 23 words, this anti-Fitzgerald television ad, although clearly designed to promote Moseley-Braun's failing re-election effort, was magically freed from the normal restrictions of federal campaign finance regulations that bound the Carol Moseley-Braun for U.S. Senate Committee. Forget about the $1,000 limit on campaign contributions from individuals per election cycle, the $5,000 limit on donations from political action committees, the ban on contributions from corporations and labor unions. To pay the bulk of the cost for this ad and others like it, Moseley-Braun's allies in the Democratic Party were allowed to take donations in any amount from practically any source.

For the uninitiated, this is what has come to be known as "issue advertising," one of the most insidious loopholes ever to be carved from the federal campaign finance laws. Simply by refraining from the use of any language that could be construed as "express advocacy" — calling for the election or defeat of a given candidate — issue ads have been deemed not to be "election activity." That makes them eligible for "soft money" donations channeled through the political parties. In other words, it's Katie bar the door.

The Democratic Party of Illinois and the Democratic Senatorial Campaign Committee spent some $2 million on four separate issue ads attacking Fitzgerald in the recently concluded election. There was an ad slamming Fitzgerald's support for carrying concealed handguns that finished with the kicker, "Call Fitzgerald. Tell him to drop his plan." Another commercial portrayed him as wanting to "destroy public schools" and yet another tried to scare senior citizens about his views on Medicare and Social Security Both ended with the same alarm, "Don't let this happen. Call your member of Congress today," as if the end goal really had something to do with changing the minds of some congressmen.

The money spent on anti-Fitzgerald issue ads nearly matched the $2.5 million spent by the Moseley-Braun for

Senate campaign on its own commercials. And the combined $4.5 million spent on television advertising by both sources nearly equalled the $4.7 million spent by Fitzgerald on commercials during the general election campaign. That's right. Despite all the emphasis throughout the campaign on the better-financed Fitzgerald, and he certainly was, Moseley-Braun was able to keep pace in the most important aspect of modern campaigning — television by relying on the legal trickery of the issue ads.

The Moseley-Braun effort (her campaign would point out that it was legally the Democratic Party's effort) is believed to be the most extensive use of soft money ever in an Illinois election campaign, as long as you don't count the untold soft dollars that were poured into the state in support of President Bill Clinton's 1996 re-election. The soft-money effort on Moseley-Braun's behalf was also reportedly the biggest undertaken on behalf of any Democratic Senate candidate in the 1998 election.

Moseley-Braun's supporters say that any outrage over the issue ad strategy should be saved for opponents of campaign finance reform.

The outgoing senator is "very much in favor of campaign finance reform that would make the system more accountable and at the same time limit rich guys writing themselves big checks," says her press secretary Michael Briggs. "You play the game by the rules of the game as they now stand. She wasn't going to play touch football when everybody else was playing tackle."

Although Republicans didn't air issue ads on Fitzgerald's behalf, the omission apparently had less to do with moral opposition than political expediency With the ability to apply so much of his own wealth to the election campaign — Fitzgerald kicked in a combined $12 million for the primary and general — he didn't need to bother with the hassle of an issue ad effort.

"He was happy to sit back and play the role of this millionaire mudslinger," complains Briggs. Fitzgerald, who won in November, didn't even beef much during the campaign about the propriety of the issue ads used against him, noting that Republicans were using the same tactics in other races, but he tried to make the press aware that the soft money had erased most of his fundraising advantage.

The National Republican Congressional Committee announced during the fall campaign that it was spending $37 million on Operation Breakout, an issue advocacy effort that financed commercials in 34 states.

"It's a shell game," says Sheila Krumholz, research director of the Center for Responsive Politics, who calls the issue ad trick the "most outrageous development [in campaign financing] of the last few years." A particularly troubling aspect of this shell game is that it undermines the basic tenet of campaign finance reform: disclosure.

It would now take a team of forensic accountants to figure out who actually put up much of the money to finance Moseley-Braun's campaign. That's because it's no longer enough to just look at a particular candidate's disclosure reports to find out who is making donations to that campaign. The soft money that goes to pay for the issue ads is channeled through the political party apparatuses and lumped in with all other donations to the party committees when it is later publicly disclosed on campaign finance reports. The parties half-heartedly mouth the legal technicality that none of the donations they receive are "earmarked" for a particular candidate's benefit and that all donors are so informed, but you can bet there is hell to pay if $100,000 in donations arranged by one campaign is channeled somewhere else.

The really scary thing is that despite the legal ruse, the system of money and influence works pretty much the same as always: The people who donate soft money through a particular candidate's fundraising efforts are going to be looking for favors and access, and the people who solicited the money on behalf of that candidate are not going to lose track of who their friends are.

The soft money trail on behalf of Moseley-Braun was typically Byzantine. The Democratic Senatorial Campaign Committee, for instance, paid about $500,000 to air the first of the anti-Fitzgerald ads, while the Democratic Party of Illinois paid about $1.5 million to air the final three.

To finance the ads it sponsored, the state party received monies from the national Democratic senatorial committee, as well as a smaller portion from the Illinois Senate Victory Fund, a joint fundraising committee of the state party and the Moseley-Braun campaign that was organized for the sole purpose of collecting donations that otherwise would be prohibited. Donations to the Democratic senatorial committee, even those collected at fundraisers that were expressly held for the Moseley-Braun campaign, aren't separated in Federal Election Commission disclosure reports from the donations to all the other Democratic Senate candidates.

The only Moseley-Braun soft money that can be readily traced are the donations that flowed through the Illinois Senate Victory Fund, which files its own campaign reports. The Chicago Mercantile Exchange slipped her an extra $25,000 in this fashion, Emily's List chipped in with $20,000 and the Recording Industry Association of America Inc. gave $10,000.

Keep in mind that it would be illegal for the same corporate donors to contribute directly to her Senate campaign and that their political action committees would face the $5,000 limit.

Some of her other corporate donors included: Loop Capital Markets, a Chicago investment banking firm, $3,500; A. Finkl & Sons Co., a Chicago manufacturer, $3,000; NBMOA, Toledo, Ohio, $5,000; American Stores Co., Glendale, Ariz., $3,000; and SCR Medical Transportation Inc., Chicago, $1,500.

The Union League Club of Chicago was the setting in mid-October for a political fundraiser starring President Clinton. There was no secret about the purpose of the luncheon soiree — to benefit the re-election campaign of Moseley-Braun. But the money flowed through the Democratic senatorial committee, which officially ran the fundraiser. Vice President Al Gore and First Lady Hillary Rodham Clinton were also brought in for soft money fundraising events.

The parties try to make it simple for the donors, requiring them to write only one check, which is then apportioned to the appropriate accounts. If a donor gave $50,000, for instance, the first $1,000 went to Moseley-Braun's regular committee, the next $5,000 went to the senatorial committee's hard money accounts and the rest went into its soft money accounts.

Billie Paige, treasurer for both Moseley-Braun's campaign fund and the Illinois Senate Victory Fund, says the campaign hit upon the issue advertising strategy as the best means to make up for its fundraising disadvantage against the wealthy Fitzgerald. "I am not at all saying this is good public policy," Paige says. "It is legal under the current — God save us — campaign finance laws. Would we rather it didn't work this way? Yes."

Ironically, the soft money principles exploited by Moseley-Braun take advantage of the same U.S. Supreme Court precepts protecting campaign donations as free speech that allowed Fitzgerald to buy himself a Senate seat.

Democrats added an extra wrinkle to their issue ad strategy for this year to get around a requirement that soft money can only be used if it is "blended" with hard money. An anti-Fitzgerald commercial financed by the Democratic senatorial committee had to be paid with 65 percent hard dollars and 35 percent soft dollars under the Federal Election Commission's formulas, but for the Illinois Democratic Party to air the same ad, it needed only 22 percent hard dollars compared to 78 percent soft.

This is a major advantage because soft money is much easier to raise than hard money. That's why three of the four issue ads were financed, at least on paper, by the state party. The fourth ad (actually the first in the series) also was supposed to be paid for by the state party, but the staff of party chairman Michael Madigan balked, ostensibly out of concern that it did not pass legal muster. Both major political parties are currently fighting the election commission in court to allow state party committees to finance issue ads with 100 percent soft money

As one might imagine, the issue ad arena is an abyss over which political campaigns are walking a legal tightrope, or at least pretending to walk one. It is a measure of the situation that Madigan's point man on the issue ads wasn't some hotshot media consultant but his chief lawyer, Michael Kasper.

An especially gray area is how much the candidates' campaigns and the political parties are allowed to coordinate their strategies. The real concern for everybody involved is how to structure the interaction between the campaigns and the party organizations without going to jail.

Democratic lawyers in Washington advised candidates this year to take special steps to avoid running into legal hassles. They advised the candidates themselves to have no involvement in the issue ads and to use separate media consulting firms. Party leaders told candidates that the consulting firms could communicate with each other but that "there should be no buy swapping, e.g., 'you run party ads here and I'll run campaign ads there.'" Moseley-Braun used Eric Adelstein of Chicago to make her commercials, while the Democrats used the Washington-based firm of Shrum Devine Donillon.

"This is the first time we have seen the political parties so blatantly laundering the monies through the state parties," Krumholz says. The result is that the money is moving "completely under our radar."

Democratic strategists in Illinois privately concede the machinations are ridiculous.

The pattern around the country has been for the issue advertising loophole to be used for attack ads. A study by the Annenberg Public Policy Center of the University of Pennsylvania found that 51.5 percent of issue ads aired after September 1 were "pure attack," compared to only 23.9 percent of candidate campaign ads during the same period. U.S. Sen. Russell Feingold, a Wisconsin Democrat and author of a campaign finance overhaul that would ban soft money, gained national attention by disavowing issue ads on his behalf and telling party leaders to "get the hell out of my state."

Issue ads are at the center of the controversy over whether a special prosecutor should be named to investigate President Clinton's 1996 re-election campaign. Attorney General Janet Reno ruled in December that there is no need for a special prosecutor. Just weeks earlier, election commission staff recommended that Clinton and Republican nominee Bob Dole return millions of dollars that auditors say was improperly spent on issue ads. But the commission rejected the recommendation.

With all the discussion around the country these days about getting real campaign finance reform, the political combatants who have seen the issue ads proliferate have a different perspective. They see everything moving toward a totally wide open system.