05-18-2002

Campaign Finance: Under Fire

President Bush had barely finished signing a sweeping campaign finance
reform bill when many of the law's chief advocates in April launched a new
offensive in their ongoing battle for tougher campaign finance law
enforcement.


After years of blasting the Federal Election Commission as weak and
ineffective, the reformers upped the ante and called for the FEC to be
abolished and replaced by a new, more powerful enforcement agency run by a
single administrator.


The reformers' assault comes as the six-member commission tackles one of
the most difficult assignments in its 27-year history: writing the rules
to implement the historic campaign finance law that Bush signed on March
27. The anti-FEC crusaders-a group that includes former FEC Chairman
Trevor Potter and veteran campaign reform advocate Fred Wertheimer-warn
that the commission's structure could pose serious problems in
implementing the new law that, among other things, bans the national
parties from raising and spending the unlimited and unregulated soft money
they've become addicted to in recent elections.


But this in-your-face strategy poses a danger. By directly attacking the
agency that is writing the new rules, do the reformers risk undermining
the very law they worked so long to see enacted?


The reformers say no, insisting that real campaign reform won't happen
until the FEC is gone from the scene. "We've got a commission that
created the problem (of soft money), nurtured the problem, protected the
soft-money system, and now is supposed to implement the new law to end the
problem," says Wertheimer, president of the group Democracy
21.


In an effort to bolster their case, Wertheimer, Potter, and about a dozen
other prominent reformers on May 15 released a 142-page study by Democracy
21 that rips the FEC for a history of failures to enforce federal campaign
financing laws and calls for an end to the commission. It was no accident
that the reformers' report came out just a week after a contentious May 9
public hearing at which the FEC began the rule-making process by issuing a
draft of the proposed soft-money regulations and asking for public
comment.


Responding to the harsh criticism, FEC Chairman David M. Mason warns that
if the decibel level gets too loud, it could backfire and retard the whole
process. "If they [reformers] insist on making a really big deal and
engaging in a prolonged and vigorous campaign to trash the commission,
that will detract from our effort to try to get the regulations
written," Mason told National Journal.


And in a jocular jab, Mason, a former senior fellow at the conservative
Heritage Foundation, branded the reform effort's leader "J. Edgar
Wertheimer."


Public pyrotechnics don't usually accompany the start of a federal
agency's rule-writing process. But it's hardly business as usual these
days at the FEC, which in the eyes of regulators and campaign finance
lawyers faces a double challenge: It must write clear, effective rules to
cover a wide range of possible campaign activities, and it must complete
the job in a very short time frame. The regulations on soft money, for
example, are supposed to be finished by the end of June, while the rest of
the regulations must be completed by December.


The Bipartisan Campaign Reform Act, which takes effect after the November
5 election, will force big changes on party committees, candidates, and
outside interest groups. Several provisions in the law, with their arcane
language and definitions, are expected to spark intensive fights during
the rule-making. One example is the law's ban on the use of soft money by
corporations and unions to pay for certain broadcast issue ads in the 60
days before a general election.


Another provision involves what state and local party committees-as
opposed to national committees-can and cannot do in the area of soft
money. For instance, while the law bars the national parties from spending
soft money after this year, it allows contributions of up to $10,000 to
state and local party committees for get-out-the-vote activities.
Separately, there's the thorny issue of defining "coordination"
between candidates, party committees, and outside groups and how to curb
it, as the new law requires.


"On the whole, in rule-making, the devil is in the details,"
Potter says. "There will be a lot of jousting because the political
parties and other groups will be looking for ways to loosen the act or
gain partisan advantage."


The jousting began even before the rule-making commenced. Last month, the
congressional sponsors of the law-two Republicans and two Democrats in the
House and Senate-wrote to FEC Commissioners Mason and Bradley Smith,
saying they should remove themselves from the rule-making process. The
letter zinged the two commissioners, who are both Republican appointees,
for their "inappropriate and ill-advised intervention" into the
congressional debate on campaign finance reform, a reference in part to a
joint letter by Mason and Smith that backed an argument used
unsuccessfully by the bill's opponents to try to kill it.


Mason and Smith deny they acted improperly and insist they are committed
to upholding the new law despite their reservations about it. "What I
think of the law is water under the bridge," says Smith. He says he
now has a job to do and he intends to do it fairly. Separately, Smith
predicts that "you'll hear howling" over the FEC's proposed
rules from both opponents of the campaign finance law and from
reformers.


Among the loudest opponents of reform during the public rule-making
process will be the AFL-CIO, the U.S. Chamber of Commerce, and the
National Rifle Association, whose campaign activities will be curtailed
under the new law. These and other opponents are pursuing a two-track
strategy: They are pushing for narrow regulations, and they have filed
lawsuits in the hope that the courts will block key provisions.


Adding to the noise, two other commissioners-Democratic appointee Karl
Sandstrom and Republican appointee Michael Toner-are under fire from
reform advocates. Reformers complain that Sandstrom has often sided with
GOP commissioners on enforcement-related matters, and they have been
pressing Democratic leaders to replace him (his term expired more than a
year ago). Sen. Majority Leader Thomas A. Daschle, D-S.D., on May 10
announced he was recommending that President Bush nominate election law
lawyer and former House staffer Ellen Weintraub to replace
Sandstrom.


Toner, who recently came to the FEC from his post as chief counsel at the
Republican National Committee, is being watched closely by reformers, who
fear he may be weak on enforcement issues. The other commissioners are
Democrats Scott E. Thomas and Danny L. McDonald, each of whom has served
for more than two decades.


Meanwhile, tensions among the commissioners are rising. At the May 9
hearing, Thomas complained that Sandstrom, Smith, and Toner had changed
language from an earlier staff draft of the regulation. The changes,
Thomas said, had the effect of narrowing the impact of the rules. Most
notably, he cited the fact that the term "soft money" had been
dropped in favor of the more euphemistic expression "non-federal
funds."


Some independent analysts seem pessimistic about the FEC's ability to
accomplish its mission. "I think the agency has grown weaker and
weaker over time," says Darrell West, a political science professor
at Brown University. "Commissioners have been appointed who seem
openly disdainful of the agency's historical mission. It makes you wonder
how committed they are to enforcing campaign finance rules." West
says that it "will make all the difference in the world in terms of
implementation" whether the commissioners write regulations that are
broad or narrow.


The law's congressional sponsors are also suspicious of the FEC as it
begins writing the regulations. "It's very important to remember that
it was not change in the law or a court opinion that turned on the spigot
of soft money. It was the FEC," recalls Sen. John McCain, R-Ariz.,
who co-sponsored the new law with Sen. Russell Feingold, D-Wis. And
despite the pledges of impartiality by Mason and Smith, McCain says he
feels "deep concern" about the roles that the conservative duo
will play as the agency proceeds with its work.


Looking ahead, McCain, Feingold, and House sponsors, Reps. Christopher
Shays, R-Conn., and Martin T. Meehan, D-Mass., are considering a bill that
would overhaul the FEC to increase its effectiveness and clout.
"Reforming the FEC is part of the equation of cleaning up
elections," Meehan contends.


To be sure, congressional foes haven't abandoned their battle to kill
campaign finance reform. Sen. Mitch McConnell, R-Ky., who for years
stymied passage of a reform bill, was joined by a number of co-plaintiffs
in filing the first lawsuit challenging the constitutionality of the new
law. McConnell argues that the FEC "doesn't allow partisanship"
and is structurally sound. He says that the reformers who blast the
commission "want to turn the FEC into the FBI. These people want to
abolish the agency and turn it into a national Gestapo to stamp out
[political] speech."


Past as Prologue


Why is the atmosphere at the FEC so highly charged? Past controversies at
the commission offer a guidepost.


The FEC was born out of the Watergate scandal, when reforms passed in 1974
set up a six-member commission to oversee campaign finance laws and
establish regulations. By law, the agency can include no more than three
members of one party. The president appoints commissioners, subject to
Senate confirmation; traditionally, key members of Congress have
recommended names to the White House.


The FEC has been widely criticized since its inception as a "captive
agency" whose budget and powers are under the thumb of those it's
supposed to regulate-elected politicians. The agency's reputation among
campaign finance analysts and experts is that it's lax, slow on
enforcement, and prone to deadlocks because of the
three-Democrat/three-Republican structure. (A two-thirds vote is needed to
take action.)


"It was intended to be an agency that would have great difficulty
reaching consensus on any controversial matter," observes Larry
Sabato, a government professor at the University of Virginia. "The
last thing Congress wants is an active, fully empowered FEC. At the FEC,
partisanship is the central qualification. That's not true at other
[government] commissions."


No issue so infuriates the agency's critics as its history on soft money.
These large, unregulated contributions from individuals, corporations, and
unions had been barred by law until the FEC issued a then little-noticed
advisory opinion in 1978 that allowed national party committees to raise
and spend unregulated funds for get-out-the-vote drives and
"party-building activities." In the 24 years since then, soft
money has become the parties' vehicle of choice to pay for now-ubiquitous
campaign issue advertisements.


In the `90s, waves of soft money swamped American elections. The 2000
election cycle saw $495 million in soft money contributions, compared with
$262 million just four years earlier and $86 million in the 1992
cycle.


The FEC's professional staff has recommended enforcement actions on key
matters that the commissioners voted not to pursue. FEC auditors argued
that the `96 television spots run by the Democratic and Republican
national committees, and paid for with millions in soft money, were
basically campaign ads for presidential candidates Bill Clinton and Bob
Dole, who starred in them. The ads, the auditors maintained, effectively
violated the pledges by both campaigns to limit their spending in exchange
for receiving public funding.


In a 6-0 vote, however, the commissioners sided with the campaign
committees and ruled that no repayment of funds was necessary. Later, in a
series of 3-3 votes, the commissioners split as to whether the ads were
true issue ads aimed at influencing the policy debate or in effect
campaign ads, as the FEC staff asserted.


Reflecting on his own experience as a commissioner, Potter says that when
the staff has presented sufficient evidence to warrant an investigation,
the commission historically has been willing to take that first step. But
in a number of recent cases, particularly those involving the two parties'
soft-money-funded issue ads in the 1996 and 2000 elections, "the
commission has refused to open an investigation despite strong evidence of
illegal wrongdoing," he says.


Mason and Smith, the agency's two prominent GOP conservatives who came
aboard in the last few years, counter that they've worked to improve the
FEC's effectiveness, in part, by using administrative fines to penalize
campaigns for late or inadequate disclosure. Civil penalties, according to
Smith, have ranged from $125 up to $16,000.


Smith denies that the commission is a "toothless tiger."
Instead, he likens it to a "toothless anaconda" that has helped
to strangle the political process. In a law journal article early this
year, Smith argued that the FEC's enforcement actions are causing the
biggest problems, because these actions impose "a substantial burden
on small committees and campaigns and are having a chilling effect on some
political speech."


Smith, who was an adjunct scholar at the libertarian Cato Institute, notes
that the FEC has lost court cases and has seen some regulations struck
down as unconstitutional. Smith testily adds that the FEC's critics
"can be wrong, too. In fact, they're wrong all the time. What they
really want is to appoint the commissioners." Mason, too, fires back
at critics saying they shouldn't become "attack dogs."


Potter takes strong exception to attacks on the FEC's record in the
courtroom, saying that the commission "has been doing a better job in
handling the small, relatively minor cases" but is "ducking its
responsibilities in the bigger, important cases. It has never lost a court
case trying to regulate party use of soft money."


Another former high-level FEC insider, Larry Noble, who served for 13
years as general counsel and now heads the nonpartisan Center for
Responsive Politics, points out that the FEC recently started another
round of rule-making aimed at lowering the penalties under the
administrative fines program. "This speaks volumes to the culture of
the place," he says. More broadly, Noble says that the agency is
"very far away from having sufficient resources to enforce the old
law, let alone the new law. Generally, requests for staff increases were
treated negatively by the Hill."


Over the years, some FEC commissioners have pressed their colleagues to
take more vigorous action on big cases, but usually with little success.
Probably more than any other member, Democrat Thomas has criticized fellow
commissioners for their failure to pay enough attention to campaign
finance laws.


"I've said that our job is not to pretend that we're wearing black
robes," says Thomas, who started at the FEC as an intern shortly
after it was created. "We should always be defending the law and
defending existing regulations."


To his chagrin, Thomas says he's often "on the [losing] side of the
vote that wanted to investigate or go forward." Complainants who have
sought investigations, he adds, "can't get anywhere, because our
lawyers are very good at arguing that those people don't have legal
standing."


Battling Over the New Regs


Given the spotlight that's now focused on the FEC, and the sharp conflicts
among the commissioners, there's little doubt that the campaign finance
rule-making will generate plenty of fireworks. The hard decision of
whether to draft the regulations narrowly or broadly will create most of
the pyrotechnics. Many experts say that narrow rules will tend to lead to
loopholes, while broad regulations will lessen the possibility of
political parties evading the law.


"I have no doubt that Republicans and Democrats and their outside
allies will come in and try to get the FEC to draw narrow rules and to
interpret the statute to allow activities that the sponsors didn't
intend," Noble predicts.


Some of the commissioners say that much of what Congress passed in the law
is unclear. "There are a number of provisions which either have a
degree of vagueness or incompleteness in terms of their application,"
says Mason, adding that the commission will have to fill in the gaps. In
other sections of the law, Mason says, Congress gave the commission
"great latitude and [a] significant policy-making
[role]."


Some election law experts, such as Republican Jan Baran with Wiley Rein
& Fielding, say that there's a basic tension at work in the process.
"As a matter of administrative law, an agency cannot rewrite a clear
law," Baran says. "But in an unclear situation, the FEC has
limited leeway to develop regulations to create new law."


Most analysts see a few key areas that should spawn extensive comments and
pressure from outside groups during the public rule-making process. These
potential donnybrooks include provisions on soft-money limits for state
parties; rules on coordination; and the definition of electioneering
communication.


On soft money, for example, Baran says there can be different
interpretations of what constitutes a "solicitation" and who's
covered by that term. State party chairmen appear to be covered, he says,
since they sit on the boards of national party committees. "This
creates a catch-22," Baran points out. "If state party chairmen
are agents of the national party, then they're barred from soliciting
money for their own state parties." Baran worked on a suit against
the new law that was filed on May 7 by the California Republican and
Democratic Party committees. The suit raised this issue as well as
others.


Another tricky matter in the soft-money area centers on a provision in the
law that was sponsored by Sen. Carl Levin, D-Mich. The provision allows
corporations and unions to continue donating up to $10,000 in soft money
to state and local parties for grassroots and get-out-the-vote activities
in federal elections. (The reform law still allows soft money to be raised
by state and local committees in unlimited amounts for non-federal
elections.)


Previously, many states used separate "allocation" formulas that
required them to spend different percentages of soft and hard money on
grassroots activities in federal races. But given the new soft-money
limits for state parties under the Levin amendment, the parties will
likely be pushing for allocation formulas that would be more lenient than
the existing ones. "One option under the Levin amendment is to make
it unified in all the states and very generous," says Bob Bauer, a
Democratic lawyer with Perkins Coie, whose clients include the two
Democratic congressional campaign committees.


Still another dustup will probably occur over how the two main parties can
pay for their national conventions, given the prohibitions on the raising
and spending of soft money. In recent presidential cycles, both national
party committees have been heavily involved with their convention host
committees, which have often raised tens of millions of dollars in soft
money to put on the quadrennial events. "I don't see how you can have
much more than a big conference call without soft money," says James
Bopp, a prominent Indiana-based election law specialist with Bopp, Coleson
& Bostrom.


One of the biggest regulatory battles is expected on the issue of
coordination, which essentially deals with discussion and
information-sharing among candidates, political parties, and outside
groups. Mason, for one, believes that the FEC has considerable leeway in
developing new regulations. Congress "obviously didn't like" the
existing rule, he says. "But rather than writing new statutory
language, they gave us fairly broad instructions about what we were to
consider and some off-limits areas."


Noble, however, argues that Congress "punted" on the definition
of coordination, leaving the FEC with "some discretion but clearly
not unlimited discretion." Congress, he adds, was "not
happy" that the FEC a few years ago adopted a narrow definition of
coordination as laid out in a federal District Court ruling in a case
involving the Christian Coalition. In that case, the court rejected the
broad definition of coordination that the FEC had been applying and
ordered the commission to use a narrower standard that applies to specific
activities and agreements on a case-by-case basis.


"The coordination problem is particularly acute for the NRA and other
organizations whose boards include members of Congress," says Charles
J. Cooper, the NRA's lead attorney in its suit against the law. The
coordination question becomes tricky when a board member of a
special-interest group also happens to be a member of Congress who confers
with others about an issue advertising campaign. The NRA board, for
instance, includes Rep. Bob Barr, R-Ga., and Sen. Larry Craig,
R-Idaho.


By passing the reform law, Congress is telling the FEC to go back to the
drawing board and once again come up with a broader definition. In
response, several outside groups that favor the agency's narrower existing
definition have filed lawsuits arguing that the law infringes on free
speech.


The AFL-CIO, the NRA, and other groups are likely to weigh in heavily on
the provision on "electioneering communications," which bars
them from spending soft money on broadcast issue ads that name candidates
during the 60-day period before a general election. "The key issue
for us is whether we can communicate on issues and on legislators without
committing a crime," says Laurence E. Gold, the associate general
counsel at the AFL-CIO.


Bopp and other lawyers who have filed the court challenges predict that
public comments to the FEC during the rule-making will be voluminous.
"Since every player in our democracy is adversely affected by the new
law except for incumbents, the wealthy, and the media, you can expect a
wide range of comment from many of the groups that have filed suits,"
says Bopp, who represents McConnell in his suit and who represents 16
other plaintiffs that include some state party chairmen and outside
groups.


Bopp also thinks that reform advocates could find themselves in an
interesting dilemma. Notwithstanding their ardent championing of the law's
sweeping provisions, Bopp says they may be "somewhat conflicted"
given the many legal challenges already filed against it. "The
reformers may be tempted to encourage the FEC to narrow parts of the law
so that it will withstand litigation," he adds.


Like FEC commissioners Mason and Smith, Bopp says the FEC is well-suited
to handle enforcement matters and that the reformers' call to replace the
agency with an administrator is way off base. "If we end up with a
single person making enforcement decisions, this will be the most
important job in America," says Bopp. "That person will be in
charge of political speech for everyone in our democracy."


With all this incoming flak, it's easy to imagine that reform champions
such as Potter and Wertheimer might be having second thoughts about their
FEC reform project, or at least the timing of it. But to hear them tell
it, there's absolutely no reason to switch gears. "In the long run,
the new law won't work any better than the old one unless there are
structural changes in the FEC," Potter says.


And Wertheimer, with a note of mischief in his voice, says, "The FEC
is in the spotlight, right where it belongs."


Peter H. Stone

National Journal