Many exploit loopholes in finance law

Think you've got a right to know the names of the people paying for attack ads in a local congressional race?

Curious what the Sustainable World Corp. is and why it cares who the next U.S. president is?

These mysteries and plenty more are brought to you despite campaign finance reform.

This is the first presidential election since Congress tried to limit the influence of big contributors. While reformers can point to some successes, the highly touted effort has done little to tie the hands of wealthy donors, said Southern Methodist University political scientist Cal Jillson.

And in many ways, it's harder than ever to keep track of who's providing the cash that paves the way to victory in November.

• Independent political groups gained clout under the new rules. That's because they can take the multimillion-dollar donations that the parties no longer can. But these groups are sometimes hard to track, and they can take advantage of loopholes in the law that keep donors' names secret. Democrats have a big early lead in raising money through such groups, but Republicans are working to catch up.

• Corporate executives, attorneys and people in other professions are finding it easier to bundle piles of cash for their favored candidates. Why? Because the maximum amount an individual can give a candidate doubled under the new rules.

• Special interest groups that run many of the attack ads escaped the overhaul effort, and such ads continue flooding airwaves in states where the presidential race is tightest. A few wealthy Texans provided much of the initial funding for the highest-profile effort so far -- Swift Boat Veterans For Truth's ads slamming Sen. John Kerry's record in Vietnam.

Why should average voters, who may never give money to candidates, care? Because in plenty of instances big donors have gained access, influence and government appointments.

"Wealthy people have a right to participate in politics," Jillson said, "but they don't have a right to control it."

Campaign finance reform was supposed to choke off much of the money flowing from wealthy donors to candidates' political parties.

The goal was to force those seeking office to make a greater effort to gather broad public support.

That's happened. President Bush and Kerry have used the Internet to raise tens of millions of dollars, much of that from donors giving a few hundred dollars or less. Boosted by those donations, each candidate has raked in more than $200 million, shattering contribution records.

Those hoping to buy favor with the candidates can still make their presence felt, thanks to a practice known as "bundling." They ask a bunch of their employees, friends or stockholders to give individual contributions that add up to a big amount of cash. Then they take credit for the fund raising.

In 2000, the Bush campaign turned bundling into an art form by creating a category of donors it dubbed Pioneers, people responsible for bringing in at least $100,000.

The new campaign finance rules make it easier to collect bigger pots of money because individuals can now give $2,000 to a candidate, instead of the old limit of $1,000.

How much difference has that made? Bush now has a category of givers called Rangers, who bring in at least $200,000. And Kerry has created his own classifications for givers who amass donations.

"The bundlers are the real new power brokers," said Larry Noble, executive director of the Center for Responsive Politics. "I wouldn't be surprised to see some bundlers end up as ambassadors."

The increase in bundling is one example of the failure of the McCain-Feingold legislation, said campaign finance analyst Dwight Morris.

"Reform was not reform," said Morris, whose firm analyzes contribution data for the Star-Telegram. "All it did was actually increase the ability of people to throw money at the election."

Most Americans got their first exposure to an obscure part of the campaign finance machine through TV ads questioning Kerry's record of valor in Vietnam.

Swift Boat Veterans for Truth -- the group that paid for the ads -- is what's known as a 527. The title comes from the IRS tax code governing scores of committees created to influence elections.

Such groups were around the last time Americans picked a president. In fact, a 527 funded by Dallas businessman and GOP stalwart Sam Wyly was credited with helping torpedo Sen. John McCain's presidential bid with ads slamming his environmental record.

These groups have taken on added importance under the new rules. That's because they can still take unlimited contributions from all donors, while the political parties cannot.

The groups can work for or against a candidate, so long as they're not directly tied to the campaign or a political party. But most major 527 groups are run by operatives with historical ties to the candidates and parties.

Donors' names are supposed to be disclosed at regular reporting periods. But campaign finance experts worry that there are ways around the requirement and that the government isn't doing much to make sure the groups comply.

One of this year's biggest political contributors is Linda Pritzker of Houston. She donated $900,000 in her own name to a pro-Kerry group. Then, in December, she created Sustainable World Corp. and kicked in another $4.1 million through it.

Because Pritzker's name isn't tied to Sustainable World in corporate records filed with the state, her involvement could have remained a mystery. But a leader of Joint Victory Campaign 2004 told reporters that Sustainable World was Pritzker's corporation.

Some campaign finance experts said the law has another loophole. This one apparently allows 527s to pay a 35 percent tax on a contribution instead of disclosing the donor's name.

About three dozen 527s have delayed reporting some donations, sometimes waiting until well after elections are over, said Derek Willis, who tracks campaign contributions for the Center for Public Integrity. Those donations totaled more than $15 million, but Willis said there is little evidence that the IRS penalized the offenders.

Last month, IRS officials pledged to more aggressively monitor the political organizations.

But there's disagreement over what the rules are. Some argue that the Federal Election Commission should enforce donation limits on 527s. Among those complaining is the Bush campaign; Republicans have lagged far behind Democrats in building 527 organizations.

But Republicans are ramping up their efforts. In the coming weeks, expect the November Fund -- a 527 funded by business groups including the U.S. Chamber of Commerce -- to take aim at Kerry.

Campaign watchdog organizations fear that another kind of group is gaining clout in the wake of campaign finance reform.

That's because these groups -- 501(c) organizations -- won't have to report any of their financial activity until the end of the year, long after the money they've spent has had its impact.

These groups are supposed to act on behalf of various causes and issues. The NAACP and the National Rifle Association, for example, take part in various politically related activities, including voter registration and advocacy.

Such groups can't directly campaign for or against a candidate. But they can run ads that criticize a candidate's stance on a particular issue -- a distinction that some say is meaningless.

That's what's happened this year in the 32nd Congressional District race, which pits U.S. Rep. Martin Frost, a Democrat, against U.S. Rep. Pete Sessions, a Republican.

Early in their campaigns, both candidates said they didn't want outside groups running attack ads.

But the Coalition for the Future American Worker has run TV and radio ads criticizing Frost's stance on some immigration-related legislation. The ads never say to vote against Frost and don't mention Sessions.

Coalition spokesman Ira Mehlman said the ads' goal is to pressure candidates to address issues such as amnesty for illegal immigrants, which the group opposes. He said his group isn't trying to influence the election outcome. He also declined to release names of individual donors.

Public Citizen, a campaign watchdog organization, recently analyzed 501(c) activity in 2002 and found that most of these organizations that were politically active favored Republican candidates.

Some experts believe 501(c) groups will step up efforts as the election draws near.

"I expect 501(c)s to be used and abused in a fairly flamboyant way," said Fran Hill, a University of Miami professor who specializes in tax law and campaign finance issues.

While Hill believes the campaign finance legislation brought about some needed changes, she said wealthy Americans "who somehow think their voices should be louder than the rest of us" are finding ways to maintain their influence.

"Reform comes in America incrementally," Hill said. "You solve some problems, others become relatively more prominent, then you solve them. ... We muddle through, step by step."

Not all TV political ads are created equal. Different strings are attached to the money behind the message, depending on who's paying:

The Media Fund is one of the primary advocacy groups creating TV ads supporting Kerry and bashing Bush. The Fund is what's known as a 527 committee, in reference to the section of the IRS tax code that permits its existence. Unlike the candidates or their parties, 527s can take unlimited donations. The Media Fund has received millions from financier George Soros and insurance-industry tycoon Peter Lewis. The groups can perform a wide range of functions -- from running attack ads to get-out-the-vote drives -- but can't be officially tied to a candidate or party. However, 527s on both sides are operated by people who once had plenty of such connections.

The Coalition for the Future American Worker has been paying for ads that attack U.S. Rep. Martin Frost's stand on immigration laws. The coalition was created under a different part of the IRS tax code; it's what's known as a 501(c)(4) group. That matters because the coalition never has to divulge the names of its donors. Groups such as the coalition can't run campaign ads for or against candidates, but they can focus on issues. The result is that they can criticize candidates on specific topics.

Some TV ads are funded by the candidates' own campaigns. Fund raising by both candidates has shattered records, with each raking in more than $200 million. Campaign finance reforms boosted their fund-raising ability by doubling the amounts that individuals can give, to $2,000. A number of wealthy donors "bundle" donations from their co-workers and friends, sometimes bringing the total amount they are credited for raising to more than $200,000.

The following Section 527 organizations -- political groups that operate outside the official political party structure -- raised the most money to influence federal elections through June 30, the most recent date for which complete figures are available.

Joint Victory Campaign 2004, the fund-raising arm for two other pro-Democrat 527 groups $41.7 million Media Fund, the main TV ad-buying arm for the leading pro-Democrat 527 groups $28.1 million America Coming Together, the voter registration and mobilization arm for the leading pro-Democrat 527 groups $26.9 million Service Employees International Union, a labor group supporting Sen. John Kerry and the Democrats $15 million American Federation of State, County and Municipal Employees, a labor group supporting Kerry and the Democrats $13.4 million MoveOn.org, a pro-Kerry organization that has paid for anti-Bush ads $9.1 million New Democrat Network, supports Democratic candidates with a special emphasis on reaching Hispanic voters $7.5 million

Note: The Joint Victory Campaign, Media Fund and America Coming Together work in concert, and the JVC splits its money among the other two organizations. Therefore, adding the figures for these three groups would overstate the total amount raised.

These Texans play prominent roles in 527s, which haul in and spend money to influence the vote.

The former House majority leader is co-chairman of FreedomWorks, a new organization also led by fellow Republicans Jack Kemp, a former congressman and presidential candidate, and C. Boyden Gray, who served as White House counsel to the elder President Bush. FreedomWorks represents a merger of two organizations -- Citizens for a Sound Economy and Empower America -- that joined partly in response to the rise of several large Democrat-backed groups, a spokesman said. FreedomWorks, which hopes to spend $10 million this year, focuses on "free-market economic issues," but among its activities has been working to get independent presidential candidate Ralph Nader on the ballot in several states. Campaign analysts say a Nader candidacy would pull votes from Kerry, but the FreedomWorks spokesman said the group's goal is to foster more debate about issues important to the organization by including Nader.

A co-chairman of Sen. John Edwards' unsuccessful presidential bid, Baron is now chief fund-raiser for the Democratic National Committee's Kerry-Edwards Victory 2004 organization. Kerry and President Bush can no longer raise funds because each is receiving $75 million in taxpayer money to campaign. But Baron's committee and its GOP counterpart can continue to raise money and spend it in support of their party's candidate. The DNC has reported taking in about $50 million. The Republican National Committee reports almost $97 million.

The daughter of former Gov. Ann Richards has built a career working for various causes. She headed the Texas Freedom Network, which fought the GOP's right wing, and most recently worked for Rep. Nancy Pelosi, D-California. Now, Richards heads America Votes, the umbrella organization for the major 527 groups supporting Kerry. Richards' role involves coordinating the groups' activities, including voter-registration drives and get-out-the-vote efforts in more than a dozen hotly contested states.

He is the biggest initial donor to Swift Boat Veterans for Truth, the group running TV ads claiming that Sen. John Kerry, the Democratic presidential nominee, lied about his service in Vietnam. Perry, who owns a Houston-based home-building company, gave an initial $100,000 to get the group off the ground, and some reports indicate that he has given more, though the Swift Boat group doesn't have to report new donors until Sept. 30. Perry has been a major donor to GOP candidates in Texas for several years.

Perhaps the lowest-profile of the nation's mega-givers, Pritzker is a member of a wealthy family that counts the Hyatt hotel chain among its fortunes. She gave $900,000 to the Joint Victory Campaign, the fund-raising machine fueling two major pro-Democrat groups. Then, the Houstonian created Sustainable World Corp., which gave about $4 million. Sustainable World's accountant says Pritzker created the corporation hoping that her name wouldn't be tied to the donation, but one of the Joint Victory Campaign's organizers divulged her identity. All the money donated by Sustainable World purportedly came from Pritzker, but there's no way to know for sure.

-------------------------------------------------------------------------------- Mark Horvit, (817) 390-7087 mhorvit@star-telegram.com

This part is kind of hard to read in the original article:

Joint Victory Campaign 2004, the fund-raising arm for two other pro-Democrat 527 groups $41.7 million

Media Fund, the main TV ad-buying arm for the leading pro-Democrat 527 groups $28.1 million

America Coming Together, the voter registration and mobilization arm for the leading pro-Democrat 527 groups $26.9 million

Service Employees International Union, a labor group supporting Sen. John Kerry and the Democrats $15 million

American Federation of State, County and Municipal Employees, a labor group supporting Kerry and the Democrats $13.4 million

MoveOn.org, a pro-Kerry organization that has paid for anti-Bush ads $9.1 million

New Democrat Network, supports Democratic candidates with a special emphasis on reaching Hispanic voters $7.5 million

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