Amicus Curiae Brief — McConnell v. Federal Election Commission

=~ i

oa ‘ i Supreme Court. US

FILED

No. 02-1674 & Consolidated Cases : f

2003

IN THE OFFICE OF THE. CLERK }

Supreme Court of the United States

SENATOR MITCH MCCONNELL, et a/..

Appellants/Cross-Appellees,

V.

FEDERAL ELECTION COMMISSION, et a/.,

Appellees/Cross-Appellants.

On Appeal from the United States District Court

for the District of Columbia

BRIEF OF COMMON CAUSE AND AARP AS

AMICI CURIAE IN SUPPORT OF THE

CONSTITUTIONALITY OF THE BIPARTISAN

CAMPAIGN REFORM ACT OF 2002

Of Counsel: DONALD J. SIMON *

SONOSKY, CHAMBERS, SACHSE

ENDRESON & PERRY LLP

1425 K Street NW, Suite 600

DANIEL B. KOHRMAN

AARP FOUNDATION

LITIGATION .

MICHAEL SCHUSTER Wasnmgton, DC 20005

AARP (202) 682-0240

601 E Street, N.W. Counsel for Amici Curiae

Washington, D.C. 20049 Common Cause and AARP

(202) 434-2060

August 5, 2003 * Counsel of Record

EE TT

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D.C. 20001

TABLE OF CONTENTS

ee Ee (qeveseneenecenemnens

I.

II.

IV.

ERS oe eo ee

The Court Has Long Recognized That Anti-

Circumvention Measures Serve A Compelling

Purpose in Ensuring That The Campaign

Finance Laws Are Effective..................:cccceseeeees

Over the Last 25 Years, the Soft Money

System Has Evolved into a Massive Scheme

for Political Parties, Federal Candidates and

Campaign Donors to Circumvent the Federal

Campaign Finance Lawg..................csscccsseseeeees

A. Phase One: 1978-1988—The creation of

the soft money system based on the fiction

that soft money does not affect federal

I a iiccinsnntstrtnciontinaeoninivetnesinsnninaen

B. Phase Two: 1988-1996—The integration

of soft money into the presidential

I scctinereereenntienenimennenionsinnnne

C. Phase Three: 1996-2002—The expansion

of the soft money system from the “ground

ggg MERIEU ET DU EEE

Congress Crafted BCRA’s Soft Money Ban To

Ensure That It Would End the Circumvention

of the Campaign Finance Laws......................00

(i)

11

13

17

26

ii

TABLE OF CONTENTS—Continued

Page

A. The total ban on national party soft money

1S ROOSEBETY ncccccessc1sesesesinsamennnnnmaentiataa 27

B. The ban on state party soft money for

“Federal election activities” is necessary..... 27

C. The coverage of “voter mobilization”

QCHIVILIES 1S MECESBATY .........ccccresccccsseccssesccess 29

NC LLIUTBIOIN .xccccsccncsccscssccscscesssennesesnsessnmnensntennnnannnsas 30

TABLE OF AUTHORITIES

CASES Page

Austin v. Michigan State Chamber of Commerce,

I I I on cccnisnscesccunsosoncosenssecccosvecse 9

Buckley v. Valeo, 424 U.S. 1 (1976) .......:.cccccccceeeee passim

California Medical Association v. FEC, 453 U.S.

aie ie terendsciteincatansananesenennence 7

Common Cause v. FEC, 692 F. Supp. 1391

a 12, 13

Common Cause v. FEC, 692 F.Supp. 1397

EEE a 13

FEC v. Beaumont, 123 S. Ct. 2200 (2003) =.......... passim

FEC v. Colorado Republican Federal Campaign

Committee, 533 U.S. 431 (2001) «0.0.0... 1,2,7

FEC v. National Right to Work Committee, 459

i icncstacaccncncnncadasensenscnenace 9

Nixon v. Shrink Missouri Government PAC, 528

ETA 1,2

STATUTES, REGULATIONS AND

AGENCY MATERIALS

Federal Election Campaign Act of 1971, Pub. L.

I i cicnesncischacsssacsncnsantence passim

| ee 12

nas sncessennnsnssesccccensovsoses 12

so csssccrnccnncontconeneceesoosccees 29

es OOo ccsscsccbsncasencvsunceseseocscscscses 29

is ee TE TID ccccnccccnccesnccssccsscssoscoes 9

ee 9

se 7,8

Be Oe MET TED cccccsconceccscessesescesecceeooss 29

Eee 28

as tt TT eccrasasaccnsesessousevscessonsecess 9

eT 12, 28

iV

TABLE OF AUTHORITIES—Continued

Page

BUBB. QOD recccarecnseccsnsccesensnssessnnsssnsrssasesons 4,9

2 UBL. GORI cccccccctcsrerennecncessersemnnninemaneene 28

Bipartisan Camraign Reform Act of 2002, Pub.

L. No. 107-155, £16 Stat. Bl ....cccccccccccccccesccceseses passim

RI cecctsicrccsnssccocssicsnnavsiteentnssensncssesensensssvensnnets 28

BEB cancccncenssscescesnsinentsnseesensanevesomenssonssessasestiontes 29

B FEIN ED csccccccscencvessesesesesssnesesnesneseonannenseinsacss 9

1 SEI oecccccescsssscaseenocessensrensssasemnsetetenenteseesnin 9

0 SO snceseseevescnnscisnencnennesnseniocionnonimcnsuoneinsatonsen 9

Federal Election Campaign Act Amendments of

1974, Pub. L. No. 93-443, 88 Stat. 1263 ........... 8, 10

Federal Election Campaign Act Amendments of

1979, Pub. L. No. 96-187, 93 Stat. 1339 ........... 12

BG UBL. 9 SERIE cnccrsesscscessccsccccncssescssscvssseseee 17

11 C.F.R. § 104.8(€) (2002).................cscccrreeeees 13

ies 8) 8”. 11

Toes Be | eee 13

Tees SP 8k le: 21

Ties eet ly: en 21

FEC Rulemaking Petition: Notice of Avail-

ability, 50 Fed. Reg. 477 (Jan. 4, 1985)............. 12

FEC Rulemaking Petition: Notice of Disposi-

tion, 51 Fed. Reg. 15,915 (April 29, 1986)........ 12

Methods of Allocation Between Federal and

Non-Federal Accounts; Payments; Reporting,

55 Fed. Reg. 26,058 (June 26, 1990).............04+ 13

Response to FEC Advisory Opinion Request

1976-72 (October 6, 1976)..........ccsssseeereeeeeeeees |

Response to FEC Advisory Opinion Request

1976-83 (October 12, 1976)..........:cccceseeereeeeeees 11

FEC Advisory Opinion 1978-10 (August 29,

DFID scciesvesesnnststinsnsteennensamdasianinndaianiananiananinn 11

~e;,

Vv

TABLE OF AUTHORITIES—Continued

FEC Advisory Opinion 1979-17 (July 16, 1979)...

FEC Advisory Opinion 1995-25 (August 24,

PUTED Schinccniedcinaniciitaiiiniditbinduiiemmpeunnatenineiensinninietie

Statement of Reasons of Comm. Scott E. Thomas

in Jn the Matter of Dole for President, Inc. et

al., MURs 4553 & 4671 (FEC May 25, 2000)..

Statement of Reasons of Comm. Scott E. Thomas

in Jn the Matter of Ashcroft Victory Committee

et al., MUR 4994 (FEC Dec. 19, 2001).............

LEGISLATIVE HISTORY

The Final Report of the Senate Select Committee

on Presidential Campaign Activities, S. Rep.

No. 93-981, 93d Cong., 2d Sess. (1974)............

Investigation of Illegal or Improper Activities in

Connection with 1996 Federal Election Cam-

paigns: Hearings Before the Senate Committee

on Governmental Affairs, 105th Cong., S. Hrg.

Page

12

18

23

i Ee 4, 19, 20, 22

Investigation of Illegal or Improper Activities in

Connection with 1996 Federal Election

Campaigns, Final Report of the Committee on

Governmental Affairs, S. Rep. No. 105-167,

105th Cong., 2d Sess. (1998)...............cccscccssseees

NEWS ARTICLES

Brooks Jackson, Bush and Dukakis Presidential

Campaigns Each Spent More than $100

Million, Wall St. J., Dec. 11, 1988.......0000..0..

Brooks Jackson, Democrats’ Coffers Fill Up as

Fat Cats Seek Bigger Role in Party, Walf St.

ES IE iieriiniiedntaaieiiineenteninnsiminaaninniniie

passim

vi

TABLE OF AUTHORITIES—Continued

Brooks Jackson, GOP Is Aiming New Fund Drive

at Big Donors, Wall St. J., Aug. 17, 1988 .........

Charles Babcock, $/00,000 Donations Plentiful

Despite Post-Watergate Restrictions, Wash.

Prat, Sat. ZZ, IDG cccccesevesssscveseosscosesssscesscvsnnsece

Charles Babcock, DNC Diverted Controversial

Donations, Wash. Post, Apr. 13, 1997..............

Charles Babcock, Fund-Raisers Gear Up for Fall

Race, Wash. Post, June 27, 1988 ...................004

George Archibald, Banana Baron Peeled off Half

a Mil; White House Paid Back in WTO Fight,

Warts. Tienes, Ame, Fay FOGG cccccccscsecssssscsssssscsssee

Howard Kurtz, DNC Issue Spot Touts Gore's

Medicare Plan, Wash. Post, Jun. 8, 2000..........

Howard Kurtz, GOP Launches Its First Salvo in

‘Issue’ Ad War, Wash. Post, Jun. 11, 2000........

Ira Chinoy, DNC Donors Also Gave to State

Groups, Wash. Post, Jan. 26, 1997 .........:c0ce00+

John M. Broder, Democrats Able to Circumvent

Donation Limit, N.Y. Times Dec. 22, 1999.......

Marc Lacey, House Subpoenas Torrance Busi-

nessman, L.A. Times, Nov. 8, 1997...............0

Michael Weisskopf, The Busy Back-Door Men,

eR: TE, Dig GG eicicncnitntnnnneviincinnntnecinnen

Neil A. Lewis, The 2000 Campaign: The Dona-

tions; 2 Groups Ask Justice Dept. To Investi-

gate Parties’ Ads, N.Y. Times, Jul. 28, 2000....

Peter Marks, Some Soft Money to Pay for Gore

Ad Blitz, N.Y. Times, Jun. 7, 2000 ....................

Richard Berke, Big Money's Election Year

Comeback, N.Y. Times, Aug. 7, 1988..............

Page

Vii

TABLE OF AUTHORITIES—Continued

Page

Richard Berke, Contributors Help Dukakis by

Avoiding Limits He Set, N.Y. Times, Oct. 31,

Richard Berke, /n Election Spending, Waich

Ceiling and Use a Loophole, N.Y. Times, Oct.

SEE rete ene no Soi RO aC 16

Thomas Edsall, GOP Plans Big-Donor Drive,

Wash. Post, Aug. 16, 1988..........cccccccceeeeeeeeeeee 15, 16

Thomas Edsall, Soft Money Competition: GOP

Seeking $50 Million from Big Donors, Wash.

RI, SN TT tice iesietteradscarteiiiscceciceiiitaiiaeas 15

Thomas Edsall, ‘Victory Fund’ Raises Millions

for Party, Wash. Post, July 19, 1988.00.00... 15, 16

MISCELLANEOUS

Brooks Jackson, Broken Promise: Why the Fed-

eral Election Commission Failed (1990)........... 15

Common Cause, The Soft Money Finale!, Follow

the Dollar Report (Apr. 7, 2003)...........0.c0cc00. 10.

Common Cause, “National Parties Raise Record

$470.6 Million In Soft Money During The

2001-2002 Election Cycle Before New Law

Takes Effect” (Jan. 6, 2003) ............ccccccccceeeeeeeee 25

Common Cause, TJhe Money Trail: The

ET a Ca oo eC 20

Common Cause, The Money Trail: The

EER SE Se TEE 20

Notification to the Court Pursuant to 28 U.S.C.

§592(b) of the Results of Preliminary Inves-

tigation filed in In re William Jefferson Clinton

(D.C. Cir. Dec. 7, 1998) (Independent Counsel

EE Er ee Cae vee 22

Sebastian Junger, The Perfect Storm (1997).......... 18

Expert Report of Thomas E. Mann.................... 14, 17, 26

i i

INTEREST OF THE AMICI CURIAE '

Common Cause is a nonprofit, nonpartisan citizens’ orga-

nization with approximately 200,000 members and supporters

nationwide. Common Cause has had a longstanding concern

with the growing problem of soft money in the federal

political process, and has publicly advocated for con-

gressional action to ban soft money in order to restore

integrity to the electoral system. Common Cause was a strong

advocate for congressional enactment of the Bipartisan

Campaign Reform Act of 2002, Pub. L. No. 107-155, 116

Stat. 81 (BCRA).

AARP is a nonprofit membership organization with more

than thirty-five million persons age 50 and older that is

dedicated to addressing the needs and interests of older

Americans. AARP is nonpartisan and does not support or

oppose any candidate for public office. Nor does it contribute

money to political candidates’ campaigns or to political

parties. Older Americans have made clear their interest in

promoting and protecting the integrity of our nation’s

electoral processes. Because of the significance of campaign

finance reform to its members, AARP was active in

supporting enactment of the BCRA, including through

grassroots efforts across the nation.

SUMMARY OF ARGUMENT

BCRA serves compelling governmental interests not only

in “preventing corruption and the appearance of it that flows

from munificent campaign contributions,” Nixon v. Shrink

Missouri Gov't PAC, 528 U.S. 377, 390 (2000), but also in

closing the enormous loopholes in the law that have been

used for “circumvention of [valid] contribution limits,” FEC

v. Beaumont, 123 S. Ct. 2200, 2207 (2003), quoting FEC v.

' Letters of consent to the filing of this brief from all parties have been

lodged with the Clerk. No counsel for a party authored this brief in whole

or in part, and no person or entity, other than the amici curiae, made a

monetary contribution to the preparation or submission of this brief.

2

Colorado Republican Federal Campaign Comm., 533 U.S.

431, 456 (2001) (Colorado Republican II).

The soft money system?--addressed by Title I of BCRA--

grew over time into nothing less than a massive scheme for

circumventing the contribution limits and source prohibitions

of the federal campaign finance laws--measures that, over the

last hundred years, have been enacted by Congress and

sustained by this Court as necessary to preserve “the will-

ingness of voters to take part in democratic governance.”

Shrink Missouri, 528 U.S. at 390.

Soft money was not created by Congress. Rather, it was a

loophole opened in the law by the Federal Election Com-

mission in 1978, through administrative interpretations that

allowed first, state parties, and then national parties, to raise

and spend funds not subject to federal contribution limits and ~

source prohibitions for voter activities--such as voter

registration and get-out-the-vote drives--that clearly affected

federal elections.

The soft money system changed character and scale in

1988 when it became an integrated part of that year’s presi-

dential campaign. Both presidential candidates, working

closely with their national party committees, organized

$100,000 donor clubs, and incorporated the raising and .

spending of soft money into their presidential campaign

strategies. This new organizing focus doubled the amount of

soft money raised, and injected it directly into the presidential

campaign in a major fashion.

The soft money system changed yet again in the 1996

election, this time even more catastrophically, when it mu-

tated from paying for just the “ground” war of grassroots

voter activities to also paying for the “air” war of mullti-

million dollar television campaigns that promoted the

? Soft money, simply put, is money that does not comply with the

contribution limits, source prohibitions and reporting requirements of

federal law.

enh Se

3

presidential candidates. An- unprecedented quarter of a

billion dollars of soft money was raised by the national

parties, much of it by the presidential candidates themselves.

Tens of millions of dollars of soft money was channeled

through state party accounts to pay for candidate-specific

broadcast ads controlled by the presidential campaigns, in

what amounted to a sophisticated scheme for evasion of the

law. In so doing, the presidential candidates also dodged the

spending limits they had agreed to as a condition of their

receipt of public funds, thus undermining key aspects of the

presidential public financing system as well.

During the 1990’s, the soft money system spread also to

the congressional level where, in an innovation that emerged

by the end of the decade, “joint fundraising committees” were

developed as vehicles for congressional candidates to raise

soft money in their own names, and then funnel those funds

through party accounts to be spent on candidate-specific ads

promoting their congressional campaigns.

By 2002, the last election conducted prior to the effective

date of BCRA, the soft money system had grown to half a

billion dollars—all of it from sources or in amounts that may

not be contributed or spent to influence federal elections.

Soft money became not just a loophole in the law, but a

systemic circumvention so massive as to virtually overwhelm

the law.

The enactment of BCRA was a necessary congressional

response to this evisceration of the federal election laws, not

just as a step to address the corruption and appearance of

corruption caused by soft money, but also as an anti-

circumvention measure intended to repair and restore laws

that this Court has deemed “critical . . . if confidence in the

system of representative Government is not to be eroded to a

disastrous extent.” Buckley v. Valeo, 424 U.S. 1, 27 (1976),

4

quoting Civil Service Comm'n v. Nat'l Ass'n of Letter

Carriers, 413 U.S. 548, 565 (1973).°

ARGUMENT

I. Introduction

In 1997, in the midst of a major congressional investigation

of the campaign finance abuses that occurred during the 1996

presidential election, Democratic National Committee (DNC)

fundraiser Johnny Chung was quoted as saying, “The White

House is like a subway: You have to put in coins to open

the gates.”

Chung was in a position to know. According to the final

report of the investigation conducted by the Senate Govern-

mental Affairs Committee (“Thompson Committee”), Chung

made soft money donations totaling $366,000 to the DNC

from August 1994 through August, 1996.° And in the two

year period ending in February, 1996, Chung obtained access

to the White House on 49 occasions—“access that he used. . .

to further his interests with foreign business clients . . . .”°

Further, according to the Thompson Committee,

> Although this brief focuses on the circumvention of the campaign

finance laws caused by soft money, and addressed by Title | of BCRA, the

amici also strongly support the other provisions of BCRA, including Title

ll, which responds to the equally serious problem of sham “issue”

advocacy that has been used as a means for corporations and labor unions

to circumvent, on a massive scale, the longstanding prohibition on the

spending of corporate and labor treasury funds “in connection with”

federal elections. 2 U.S.C. § 441b.

* Mare Lacey, House Subpoenas Torrance Businessman, L.A. Times,

Nov. 8, 1997, at Al2, quoted in Investigation of Illegal or Improper

Activities in Connection with 1996 Federal Election Campaigns, Final

Report of the Committee on Governmental Affairs, S. Rep. No. 105-167,

105th Cong., 2d Sess. (1998) (“Thompson Committee Report”) at 783.

* Thompson Committee Report, supra note 4, at 783, 795.

° Jd. at 783. The Report notes that in a newsletter to his company’s

shareholders, Chung “boasted of his political clout, claiming that he /had

‘built up connections to easily arrange visitations to the White House and

meetings with the President.’” /d. at 785.

5

There can be no question that Chung’s contributions to

the DNC helped give him this access to the President

and the First Lady. So close was the nexus between

Chung’s donations and his visits, in fact, that White

House officials actually collected money from him in the

First Lady’s office in exchange for allowing him to bring

a delegation of his clients to White House events.’

Johnny Chung’s analogy of the White House to little more

than a coin-operated gateway for the sale of access and

influence is a fitting epitaph for the debasing effect of soft

money on the American political process.

An equally dispiriting picture was painted by Roger

Tamraz, another DNC donor who figured prominently in

the Thompson Committee investigation. Described by the

Committee as “an unrepentant access-purchaser,” id. at 2907,

Tamraz donated a total of $300,000 of soft money to the

DNC and various state party committees or campaigns

between July 1995 and March 1996, all at the DNC’s request.

Id. at 2913-14. In apparent exchange for these donations,

Tamraz sought, and received, access to an array of DNC and

government officials in an effort to win U.S. backing for an

oil pipeline project he was promoting in central Asia.” DNC

chairman Don Fowler personally interceded with officials at

the Central Intelligence Agency and the National Security

Council in an effort to help Tamraz, id. at 2917-18, who

attended six events with President Clinton from September

1995 through June 1996. /d. at 2920. Tamraz spoke on

several occasions with the President, who directed his chief of

staff, Mack McLarty, “to follow up” on Tamraz’s requests.

Id. at 2920, 2929. McLarty did so in numerous ways,

” Id. at 783.

* When asked at the hearings if “one of the reasons” he gave this

money was to get access to government officials, Tamraz replied,

“Senator, I’m going even further. It’s the only reason--to get access. . . .”

Id. at 2913, n.46.

6

enlisting officials from the Department of Energy in the effort

to promote Tamraz’s mission. /d. at 2925-28.

Although Tamraz clearly succeeded in buying access to the

highest levels of government in exchange for his $300,000 of

donations, he did not ultimately succeed in his goal of

obtaining government support for his project. But his own

conclusion was not that money fails to buy policy, but rather

that he had not given enough money. He told the Thompson

Committee, “I think next time, I'll give 600,000 [dollars].”

Id. at 2930.

The Thompson Committee investigation followed months

of front-page headlines about a wide range of scandals arising

out of the fundraising practices of the 1996 campaign. These

scandals included:

* The “sale” of White House access to major donors

through “coffees,” overnight stays in the Lincoln Bed-

room and other presidential events. /d. at 191-499.

¢ The funneling of funds into U.S. elections from foreign

nationals to influence U.S. policy through political

contributions. /d. at 2499-2517.

¢ The influence that political donations may have had on

federal review of Indian casino operations. /d. at 3165-

3547.

* The use of non-profit groups as “fronts” for funneling

party soft money into federal campaigns. /d. at 5974-81

(Minority Rpt.). \

Although diverse stories, these scandals of the 1996 cam-

paign are unified by a common thread-—soft money.

Protections against the pernicious influence on federal

elections of corporate and union donations, and of unlimited

individual contributions, had been put in place by Congress

over time since the beginning of the last century. These laws

were enacted precisely in order to prevent the same reality

and appearance of corruption and influence-peddling that

were graphically on display in the 1996 campaign. But by

that campaign, the rise of soft money as a means to

eo. ‘

7 :

circumvent the federal campaign finance laws had become so

dominant that the longstanding regulatory regime had all but

collapsed. The result, as stated by the Thompson Committee,

was that the President and his aides “left themselves open to

strong suspicion that they were selling not only access to high

ranking officials, but policy as well.” /d. at 3.

Il. This Court Has Long Recognized that Anti-

Circumvention Measures Serve a Compelling

Purpose in Ensuring that the Campaign Finance

Laws Are Effective.

Last Term, in Beaumont, this Court once again recognized

the important role played by anti-circumvention measures in

protecting the integrity of the campaign finance laws. In

upholding a ban on corporation contributions, the Court said

that “[q]uite aside from war-chest corruption and the interests

of contributors and owners,” the restriction on corporations

was separately justified because it “hedges against their

use as conduits for ‘circumvention of [valid] contribution

limits.” 123 S. Ct. at 2207, quoting Colorado Republican II,

533 U.S. at 456. As the Court noted in Colorado Republican

II, “all Members of the Court agree that circumvention is a

valid theory of corruption. . . .” 533 U.S. at 457.

Precisely because “substantial evidence demonstrates how

candidates, donors and parties test the limits of the current

law,” id., anti-circumvention measures are necessary. While

corporations were the vehicle threatening circumvention in

Beaumont, it was the political parties that posed the same

danger in Colorado Republican Il. There, the Court upheld

limits on party coordinated expenditures in order to prevent

the use of parties “as conduits for contributions meant to

place candidates under obligation,” id. at 452, and to forestall

their “exploitation as channels for circumventing contribution

and coordinated spending limits. ... ,” id. at 455.

Similarly, in California Medical Ass'n. v. FEC, 453

U.S. 182, 197-98 (1981), the Court upheld the limit on con-

tributions to multi-candidate political committees, 2 U.S.C.

8

§ 441a(a)(1)(C), in order “to prevent circumvention of the

very limitations on contributions that this Court upheld in

Buckley.” And in Buckley, the Court sustained the aggregate

anaual limit on contributions by an individual, because it

“serves to prevent evasion of the $1,000 contribution limita-

tion by a person who might otherwise contribute massive

amounts of money to a particular candidate through...huge

contributions to the candidate’s political party.” Buckley, 424

U.S. at 38.

BCRA is, at bottom, an anti-circumvention measure. By

1996, the growth of soft money had caused, in-the words of

the Thompson Committee, “the erosion of safeguards in U.S.

election law designed to guard against political corrup-

tion... .”’ BCRA was enacted precisely to close the soft

money loophole, to repair this erosion, and to prevent the

continued evasion of current law.

Ill. Over the Last 25 Years, the Soft Money System

Has Evolved into a Massive Scheme for Political

Parties, Federal Candidates and Campaign Donors

to Circumvent the Federal Campaign Finance

Laws. ,

The enactment of the Federal Election Campaign Act

Amendments of 1974, Pub. L. 93-443, 88 Stat. 1263 (FECA),

was 2 milestone in the effort to limit the deleterious influence

of large campaign contributions on the federal political

process. Based on evidence of serious improprieties resulting

from the flow of campaign contributions in the 1972 presi-

dential election, and the concomitant public concerns arising

out of the Watergate investigation, '° Congress enacted FECA

in order to, inter alia, limit the amount of money that donors

* Thompson Committee Report, supra note 4, at 33.

' The Final Report of the Senate Select Committee on Presidential

Campaign Activities, S. Rep. No. 93-981, 93d Cong., 2d Sess. (1974).

9

could give to federal candidates, and to political commit-

tees, including party committees.'? These contribution limits

were upheld in Buckley because they serve a compelling

governmental interest in dealing “with the reality or appear-

ance of corruption inherent in a system permitting unlimited

financial contributions, even when the identities of the

‘ contributors and the amounts of their contributions are fully

disclosed.” 424 U.S. at 28.

So too, FECA re-codified the longstanding prohibition on

contributions and expenditures by corporations and labor

organizations in connection with federal elections.'? “The

overriding concern behind the enactment” of this prohibition

“was the problem of corruption of elected representatives

through the creation of political debts. The importance of the

governmental interest in preventing this occurrence has never

been doubted.” FEC v. Nat'l Right to Work Comm., 459 U.S.

197, 208 (1982), quoting First Nat'l Bank of Boston v.

Bellotti, 435 U.S. 765, 788 n. 26 (1978); see also Beaumont,

123 S. Ct. at 2206. These provisions also seek “to eliminate

the distortion caused by corporate spending” in the political

process, Austin v. Mich. State Chamber of Commerce, 494

U.S. 652, 660 (1989), and to protect shareholders and union

members from having their funds “used to support political

candidates to whom they may be opposed,” Nat'l Right to

Work, 459 U.S. at 208.

''2 U.S.C. § 441a(a)(1)(A) (limit of $1,000 per election). This amount

was increased by BCRA to $2,000 per election. See BCRA § 307(a)(1).

2 2USC. § 441a(a)(3) (2002) (aggregate individual limit of $25,000

per year to all candidates and committees). This limit was increased by

BCRA to $95,000 per two-year election cycle. See BCRA § 307(b). In

the 1976 FECA Amendments, contributions to national party committees

were made subject to a limit of $20,000 per year, 2 U.S.C. § 44la(a)

(1)(B), an amount now increased by BCRA to $25,000 per year. BCRA

§ 307(a)(2).

'' 2 U.S.C. § 441b. For a history of this prohibition, see generally FEC

v. Nat'l Right to Work Comm., 459 U.S. 197, 208-09 (1982).

10

Shortly after the enactment of the 1974 FECA Amend-

ments, the soft money system developed as a means to evade

these contribution limits and source prohibitions.

Over the last 25 years, and until the effective date of

BCRA, soft money donations have consisted of the unlimited

sums--in some cases considerably more than $1 million from

a single donor--given to the national or state political parties

by corporations, labor organizations and wealthy individuals,

and then spent by the parties, in conjunction with their federal

candidates, on activities that were intended to influence, and

that had the effect of influencing, federal elections."

The soft money system, which began in 1978, just four

years after passage of the FECA, developed slowly at first,

but then grew with escalating velocity. By the 1996

presidential election cycle, the soft money system had

become little more than a massive scheme for circumventing

the federal election laws.

'* For instance, the American Federation of State, County and Munic-

ipal Employees (AFSCME) gave $7.4 million in the period January 1,

2001 through November 5, 2002, virtually all of it to the Democratic

Party. The Pharmaceutical Research & Manufacturers of America

(PhRMA) in the same period gave $3.4 million, virtually all to the

Republican Party. The two major parties together collected a total of

$470 million in soft money in that period. See Common Cause, The Soft

Money Finale!, Follow the Dollar Report (April 7, 2003), available at

http://www.commoncause.org/publications/april03/040703.htm.

The most cynical form of soft money comes from “double givers”--

those who make large contributions to both parties in the same election

cycle. In the 2002 cycle, there were 37 donors who gave $250,000 or

more to both political parties. These included AT&T, which gave $1.5

million to the Democrats, and $1.7 million to the Republicans; the Philip

Morris Companies, which gave $625,000 to the Democrats and $2.2

million to the Republicans, and Microsoft, which gave $2.7 million to the

Democratic party committees and $852,000 to the Republican com-

mittees. /d.

a8 SE Te et ee

ee eee

A. Phase One: 1978-1988--The creation of the soft

money system based on the fiction that soft

money does not affect federal elections.

The soft money system was founded on a regulatory fiction

promulgated by the Federal Election Commission-that

spending by the political parties on “mixed” activities such as

voter registration or get-out-the-vote drives which, by their

nature, affect federal, as well as non-federal, elections, can be

parsed into those separate components, and that the non-

federal portion can be funded by soft money without those

funds affecting federal elections.

This conclusion was first set out by the FEC in a 1978

advisory opinion that reversed a position the Commis«.o° had

taken just two years earlier. In the earlier opinion, the FEC

had held that state parties had to pay for “mixed” voter

activities using solely hard money, i.e., monies raised under

the federal law rules, because those activities affected federal

elections, even in part.'°

But in its 1978 advisory opinion, the FEC opened the door

to soft money in federal elections by reversing itself and

holding that such mixed activities could be financed with a

combination of federal and non-federal funds.'°- The Com-

mission left it up to the discretion of the parties to decide on

the proper mixture of such funds, requiring only that the

allocation be made on a “reasonable basis.”'’ This ruling

allowed state parties to spend soft money on activities that

would affect federal elections."

'S Response to FEC Advisory Opinion Request 1976-72 (Oct. 6, 1976);

see also Response to FEC Advisory Opinion Request 1976-83 (Oct. 12,

~ 1976).

'° See FEC Advisory Opinion 1978-10 (August 29, 1978).

'” See 11 C.F.R. § 106.1(e) (1978) (permitting allocation to be made

“in proportion to the amount of funds expended on federal and nonfederal

elections, or on another reasonable basis”).

'’ This included not only get-out-the-vote and voter registration drives,

but also “generic” party activities, such as ads that say “Vote Republican.”

12

Not surprisingly, the national parties soon followed suit. In

1979, the FEC opined that the national parties, as well, could

open non-federal accounts to raise soft money, and that the

same allocation principles would apply to national party

expenditures. -

In November 1984, Common Cause petitioned the FEC to

institute a rulemaking to reverse these administrative inter-

pretations, arguing that soft money was being used in a

wholesale manner to influence federal elections.”” After a

two-year consideration of the petition, the Commission

denied the request.”' Common Cause then sued the FEC for

abuse of discretion.

'° See FEC Advisory Opinion 1979-17 (July 16, 1979). In 1979, Con-

gress amended the FECA to encourage state parties to spend money on

grassroots activities such as voter registration and get-out-the-vote

drives. See Federal Election Campaign Act Amendments of 1979, Pub. L.

No. 96-187, 93 Stat. 1339. Contrary to the belief of some, these

Amendments did not authorize the soft money system. Although the 1979

Amendments provided that money spent by state parties on certain

grassroots activities was exempt from the definition of “expenditure,” and

thus exempt from the overall limit on party spending in 2 U.S.C.

§ 441a(d), the law expressly stated that the money spent for these

activities is subject to federal contribution limits and source prohibitions.

2 U.S.C. § 431(9)(B){ viii), (ix) (exempting certain voter activities from

the definition of “expenditure” provided “such payments are made from

contributions subject to the limitations and prohibitions of this Act”).

Thus, the importance of the 1979 amendments was to provide greater

room for state parties to spend money on grassroots voter activities, but

not to authorize that spending be done with non-federal funds. See

Thompson Committee Report, supra note 4, at 4463-4.

0 See FEC Rulemaking Petition: Notice of Availability, 50 Fed. Reg.

477 (Jan. 4, 1985) (citing Letter of November 5, 1984 from Fred Wer-

theimer, President of Common Cause, to Lee Ann Elliott, chair, Federal

Election Commission). ;

7! FEC Rulemaking Petition: Notice of Disposition, 51 Fed. Reg.

15,915 (April 29, 1986), quoted in Common Cause v. FEC, 692 F. Supp.

1391, 1393 (D.D.C. 1987).

eee

13 -

The district court ordered the FEC to issue new regulations,

finding that the agency had acted contrary to law by allowing

the parties too much discretion in determining the miature of

hard and soft money to spend on mixed activities.” After a

year passed without action by the Commission, the court

again ordered the agency to act, noting that “it is undisputed

that there is a public perception of widespread abuse,

suggesting that the consequences of the regulatory failure

identified a year ago are at least as unsettling now as then.””°

Finally, three years later, in 1991, the FEC promulgated new

regulations on soft money, but in effect only codified the

existing soft money system by establishing specific per-

centages for the allocation of hard and soft money in different

scenarios.” In addition, the regulations, for the first time,

required the national parties to disclose their soft money.”

B. Phase Two: 1988-1996--The integration of soft

money into the presidential campaigns.

While the FEC was engaged in its protracted rulemaking

process, the use of soft money in federal campaigns under-

went dramatic change in the 1988 presidential campaign. The

nascent soft money system had operated at a comparatively

modest level in prior election cycles, with both national

parties raising and spending a total of about $20 million in

*? 692 F. Supp. at 1396. In fact, the court noted that the Commission

might reasonably conclude “that no method of allocation will effectuate

the Congressional goal” that only hard money be spent on activities

influencing federal elections. /d. (emphasis in original).

> Common Cause v. FEC, 692 F. Supp. 1397, 1399 (D.D.C. 1988).

** See Methods of Allocation Between Federal and Non-Federal Ac-

counts; Payments; Reporting, 55 Fed. Reg. 26,058 (June 26, 1990)

(codified at 11 C.F.R. § 106.5 (1991)) (establishing several methods and

formulae for allocation that depend on whether the spending is by a

national or state party committee, whether the spending is in a presidential

or non-presidential election year, and whether the activity being funded is

party administrative costs, generic voter drives, or fundraising).

*° Id.; see also 11 C.F.R. § 104.8(e)(2002).

14

non-federal funds in each of the 1980 and 1984 campaigns.”°

In 1988, however, this amount doubled--to a total of $45

million.”’

Soft money in the 1988 cycle for the first time became an

integrated part of the major party presidential campaigns,

organized and directed by the top strategists and fundraisers

of those campaigns. Democratic nominee Governor Michael

Dukakis and Republican nominee Vice President George

Bush, in conjunction with their national parties, system-

atically solicited individuals for six figure contributions to

their respective political partics—-amounts far in excess of

federal contribution limits.

The spiral of soft money fundraising began with the

Dukakis campaign which, led by its treasurer and chief

fundraiser Robert Farmer, initiated a program to solicit

$100,000 contributions from wealthy individual donors.” At

© Expert Report of Thomas E. Mann, available in the record at DEV

(Defendants’ Evidentiary Volume) |, Tab 1, at Table 1, National Political

Party Spending, 1976-2000.

27 ng

78 See Charles Babcock, $/00,000 Donations Plentiful Despite Post-

Watergate Restrictions, Wash. Post, Sept. 22, 1988, at A27 (“Spurred by

competition between presidential fundraisers, the number of $100,000

donors in this election year has already surpassed that in the 1972

Watergate era, when alleged abuses triggered reform in federal election

financing.”); Brooks Jackson, Democrats’ Coffers Fill Up as Fat Cats

Seek Bigger Role in Party, Wall St. J., July 19, 1988, at 60 (“Fat cats are

back, more numerous and playing a bigger role in Democratic politics

.... More than 200 people have become Democratic Party ‘trustees’ by

agreeing to give $100,000 for the fall campaign, or to raise such an

amount from others.”’).

’ Brooks Jackson, GOP Is Aiming New Fund Drive at Big Donors,

Wall St. J., Aug. 17, 198, at 44 (“The see-sawing spending war was

touched off weeks ago by Michael Dukakis’s chief fundraiser, Robert

Farmer . . . Mr. Farmer stunned the political community by announcing

his intention to raise a total of $50 million in party funds, including much

soft money, to be spent in addition to the $36 million in public funds to be

spent directly by the Dukakis campaign.”). See also Charles Babcock,

15

first, the Bush campaign attacked the Dukakis soft money

operation as, according to deputy campaign manager Richard

Bond, “illegal on its face.””’ Shortly thereafter, however,

when it failed to stop the Dukakis soft money effort, the Bush

campaign moved to match, and then out-raise it.°' The Bush

“Team 109” fundraising campaign of $100,000 soft money

donors was headed by Robert Mosbacher, who had been

serving as the chief fundraiser for the Bush presidential

campaign.”

Thus, the chief fundraiser for each presidential candidate

headed each party’s soft money fundraising drive. According

to The Wall Street Journal, 267 individuals and corporations

made contributions of up to $100,000 to the Bush effort,

while a top Dukakis fundraiser said “his $100,000 club

numbered 130 individuals.””’ Ultimately, each presidential

campaign raised more than $20 million in soft money.**

Fund-Raisers Gear Up for Fall Race, Wash. Post, June 27, 1988, at Al;

Thomas Edsall, ‘Victory Fund’ Raises Millions for Party, Wash. Post,

July 19, 1988, at A21 (Edsall, Victory Fund).

*° Thomas Edsall, GOP Plans Big-Donor Drive, Wash. Post, Aug. 16,

1988, at Al (Edsall, Big Donor Drive). See also Brooks Jackson, Broken

Promise: Why the Federal Election Commission Failed 52 (1990)

(Jackson, Broken Promise).

*' Richard Berke, Big Money's Election Year Comeback, N.Y. Times,

Aug. 7, 1988, at ES (“‘The Democrats are saying that they’re going for the

big money,’ said Robert A. Mosbacher, Jr., finance chairman of the Bush

campaign. ‘And I don’t think there’s much we can do about it but match

them.’”); Thomas Edsall, Soff Money Competition: GOP Seeking $50

Million from Big Donors, Wash. Post, Aug. 16, 1988, at Al (Edsall, Soft

Money) (“For the GOP, the decision to go with Team 88 represents a

major policy change. As recently as three weeks ago, top officials of Vice

President Bush’s campaign described the almost identical Democratic

program as blatantly illegal. . . . According to Mosbacher, ‘We intend to

match the Democrats plus $1.””).

*? Edsall, Soft Money, supra note 31.

* Brooks Jackson, Bush, Dukakis Presidential Campaigns Each Spent

More than $100 Million, Wall St. J., Dec. 11, 1988.

4 Jackson, Broken Promise, supra note 30, at 54.

16

The 1988 presidential campaigns were involved not only in

raising soft money but in spending it as well. A spokesperson

for the RNC soft money effort said “the decision on how to

spend Team 88 money will be made primarily by key

officials of the Bush campaign, including Lee Atwater, the

campaign manager and [Richard] Bond [the deputy campaign

manager] . . . [T]he basic criterion in picking states to benefit

from the fund will be the closeness of the presidential race.””°

Soft money was used in the 1988 election to perform vital

“ground war” functions for the presidential campaigns--such

as get-out-the-vote and other field operations.”*° In Illinois,

for example, The New York Times reported that the Dukakis

campaign had only five paid staff members. But it shared

office space with Campaign °88, a “state party” operation

organized by the DNC and employing 115 workers across the

state, paid for with a budget of $2 million in soft money.

Peter Kelly, chairman of the California Democratic Party,

told the Times that the “whole theory behind” the 1988 soft

money effort was to raise enough money to help Dukakis win

the state.°* In short, the 1988 presidential campaigns were

structured as two parallel operations--an official campaign

receiving public funds and subject to a spending limit, and an

*> Edsall, Big Donor Drive, supra note 30.

© T. Edsall, Victory Fund, supra note 29 (“The money raised by the

Victory Fund and Victory 88 will be used to finance what is known as the

‘ground war’ of the campaign: get-out-the-vote drives, voter registration,

direct mail and voter list development. To the degree a soft money

campaign is successful, it permits the presidential campaign to spend a

high percentage of the $46.1 million in federal money each nominee

receives on the ‘air war’--television advertising and moving the

candidates around the country.”).

*? Richard Berke, /n Election Spending, Watch Ceiling and Use a

Loophole, N.Y. Times, Oct. 3, 1988, at A23.

*® Richard Berke, Contributors Help Dukakis by Avoiding Limits He

Set, N.Y. Times, Oct. 31, 1988, at BS.

anna!

17

unofficial campaign raising and spending unlimited amounts

of soft money.”

C. Phase Three: 1996-2002--The expansion of the

soft money system from the “ground war” to

the “air war.”

If the 1988 campaign saw soft money being used to pay for

presidential “ground war” activities, the 1996 campaign saw

soft money spent to finance presidential “air war” efforts as

well. Beginning in late 1995, President Clinton’s reelection

campaign used millions of dollars of soft money to fund so

called “issue” ads run through the DNC or Democratic state

parties. In reality, those ads were nothing more than

candidate-specific campaign ads promoting the President’s

re-election effort. By early 1996, the presidential campaign

of Senator Robert Dole followed suit.

The explosive growth of soft money in the 1996 cycle--

from a total of $80 million in 1992 (itself a near-doubling

from the amount in the 1988 cycle) to more than triple that

amount, over $271 million, in 1996*°--was fueled by the

* This dichotomy illustrates another major harm caused by the soft

money system--the subversion of not only the contribution limits and

source prohibitions of federal law, but the spending limits of the public

financing system as well. Under 26 U.S.C. § 9003(b), a major party

nominee who receives public funds is prohibited from raising or spending

any additional funds for his or her general election campaign. But since

1988, while party nominees have made a binding commitment to limit

their general election spending to the amount of the public grant, they

have then solicited soft money donations to their political parties and

controlled the spending of that money through their parties to advance

their campaigns. The spending limit on which the grant of public funds is

conditioned has become largely meaningless. Thus, the injection of scft

money into the middle of presidential campaigns has dramatically under-

mined key purposes of the presidential public financing law--“to reduce

the deleterious influence of large contributions on our political process . . .

and to free candidates from the rigors of fundraising.” Buckley, 424

U.S. at 91.

* Mann Expert Report, supra note 26, at Table!. -

18

collision of the soft money loophole with the sham “issue” ad

loophole, in a “perfect storm” that effectively destroyed the

barriers between hard money and soft money spending in

federal elections.*' In short, the political parties, working in

close conjunction with their presidential candidates, started to

spend soft money to pay for the broadcast of candidate-

specific campaign ads that simply avoided the use of express

advocacy phrases like “vote for” or “vote against.”

There was no foundation in law for this development. In

Buckley, this Court made clear that the “express advocacy”

test was intended to address a problem of vagueness en-

countered in regulating the political activities of “an individ-

ual other than a candidate or a group other than a political

committee,” Buckley, 424 U.S. at 79. Thus, the “express

advocacy” test was not meant to apply to spending by

candidates and political parties, whose expenditures, this

Court said, do not present comparable issues of vagueness

because their activities “can be assumed to fall within the

core area sought to be addressed by Congress. They are, by

definition, campaign related.” Id.”

Nonetheless, in late 1995, the DNC, working under the

direction and control of the Clinton re-election campaign,

began to use soft money to fund an aggressive nationwide

program of TV ads promoting President Clinton and his

*' Sebastian Junger, The Perfect Storm (1997).

* The DNC claimed that its new use of soft money was permitted

under FEC Advisory Opinion 1995-25 (Aug. 24, 1995), which held that

“legislative advocacy media advertisements” run by a national party

committee could be funded with an allocated mixture of hard and soft

money. But this claim was wrong: the Commission’s opinion was

explicitly based on the condition that the ads would not refer to a federal

candidate, or if they did so at all, would not contain any “electioneering

message.” See FEC Advisory Opinion 1995-25, n.1.

19

policies, or criticizing Senator Dole.*’ These ads were

written, edited, produced, directed and targeted by Clinton

campaign officials, and the President himself was personally

involved in the effort. The ads were run in key “battle-

ground” states for the 1996 presidential election.”

By early 1996, Republican nominee Senator Robert Dole

and the RNC began running a similar TV ad campaign, using

soft money to promote Dole’s candidacy.*° That effort was

coordinated by the Dole campaign.*’

* A typical Clinton/DNC soft money ad was called “Finish,” and

promoted President Clinton while criticizing Senator Dole:

Head Start. Student loans. Toxic cleanup. Extra police. Anti-drug

programs. Dole, Gingrich wanted them cut. Now they’re safe.

Protected in the "96 budget--because the President stood firm. Dole,

Gingrich? Deadlock. Gridlock. Shutdowns. The president’s plan?

Finish the job, balance the budget. Reform welfare. Cut taxes.

Protect Medicare. President Clinton says get it done. Meet our

challenges.

See Thompson Committee Report, supra note 4, at 4478. See also

Investigation of Illegal or Improper Activities in Connection with 1996

Federal Election Campaigns: Hearings Before the Senate Committee on

Governmental Affairs, 105th Cong., S. Hrg. No. 105-300 Part VIII (1997)

(“Thompson Committee Hearings”) 277-317 at 301 (letter from Ann

McBride, President of Common Cause, to Attorney General Janet Reno

(October 9, 1996) (“Common Cause Letter’) at 25).

“ See Thompson Committee Report, supra note 4, at 107-129.

* The evidence discussing the efforts by the Clinton and Dole cam-

paigns to promote their candidates using ads run through their respective

political parties and paid for with soft money is extensively discussed in

the letter of October 9, 1996 sent by Common Cause to the Department of

Justice seeking an investigation of these practices as violations of the

campaign finance laws. See Common Cause Letter, supra note 43.

*° Id. A typical Dole/RNC soft money ad was called “Stripes,” and

criticized President Clinton:

Bill Clinton, he’s really something. He’s now trying to avoid a

sexual harassment lawsuit claiming he is on active military duty.

Active duty? Newspapers report that Mr. Clinton claims as

commander in chief he is covered under the Soldiers and Sailors

Relief Act of 1940, which grants automatic delays in lawsuits

‘

20

The two presidential campaigns and their parties ultimately

spent more than $60 miliion during the 1996 election on ads,

funded in substantial part with soft money, that praised their

candidate or criticized the opposing candidate by name.

Much of this money was solicited by the presidential

candidates or their campaign fundraisers, and donated to the

national party committees, which then transferred a mixture

of hard and soft money funds to particular state parties. The

state parties immediately transferred the same funds back to

the Washington, DC-based media consultants for the

presidential campaigns, who then placed the ads in the name

of the state party.”*

This flow of funds highlights the integral role in the

soft money system played by the state parties, which acted as

little more than conduits for injecting soft money into the

against military personnel until their active duty is over. Active

duty? Bill Clinton, he’s really something.

Common Cause Letter, supra note 43, at 36.

*’ See Thompson Committee Report, supra note 4, at 8294-8305

(Minority Rpt.).

** To trace just two of several hundred similar transactions documented

in the evidence compiled by Common Cause, the DNC on November 17,

1995 transferred $81,070 in soft money to the California Democratic

Party, and on November 21, 1995 transferred $39,930 in hard money. On

November 22, 1995, the California Democratic Party transferred $81,070

in soft money and $39,930 in hard money to Squier, Knapp, Ochs

Communications, a media consultant for the Clinton presidential commit-

tee, to pay for a broadcast ad aired in the name of the state party.

Similarly, on June 24, 1996, the RNC transferred $780,870 in soft money

to the California Republican State Party, and on June 25, 1996, it

transferred $384,608 in hard money. On June 25, 1996, the California

state party sent $780,870 in soft money and $384,608 in hard money to

Multi-Media Services Corp., a media buyer in Alexandria, Virginia that

made the media buys for the Dole campaign and was headed by the chief

pollster for Dole. See Common Cause, The Money Trail: The Democrats

(1996) and The Money Trail: The Republicans (1996), in the record at

DEV 36, Tab 9 and Tab 10; see also Thompson Committee Report, supra

note 4, at 4467.

21

presidential campaigns. Most of the soft money deployed in

the 1996 campaign by the national parties was routed through

the state parties and then paid out to the media consultants for

the presidential campaigns. This was done in order to

maximize the amount of soft money that could be used to

fund the ads.*”

But substantial amounts of soft money also were donated

directly to the state parties at the behest of national party

officials, thus bypassing the national party accounts in order

to avoid federal reporting requirements.’ Thus, for instance,

at the same time that “Vice President Gore was attacking the

Republican National Committee as ‘just about a wholly

owned subsidiary of the tobacco industry,” DNC fundraisers

asked R.J. Reynolds Tobacco Co. to make campaign con-

tributions through state Democratic parties.””'

And there are many other examples. Roger Tamraz, for

instance, made most of his contributions directly to Demo-

cratic state parties, at the direction of DNC officials,

including $100,000 to the Virginia state party and $25,000 to

the Louisiana state party.’ Another controversial DNC fund-

raiser, John Huang, solicited $482,500 in soft money that was

* FEC allocation regulations more leniently regulated state parties, and

allowed them to spend a greater proportion of soft money on an ad, than

could the national party in airing the same ad. Compare 11 C.F.R.

§ 106.5(b) (2002) (allocation of expenses between federal and non-federal

activities by national party committees) with id at § 106.5(d) (2002)

(allocation by state and local party committees).

* See Charles Babcock, DNC Diverted Controversial Donations,

Wash. Post, April 13, 1997, at Al (“Democratic National Committee

officials channeled millions of dollars in campaign donations to state

Democratic parties last year, effectively hiding big contributions from

tobacco, gambling and other special interests . .. Because the money was

not deposited in the accounts of the national party, the identities of the

es not appear on the DNC’s federal disclosure reports.”).

I

*? See Thompson Committee Report, supra note 4, at 2913-14.

22

given directly to Democratic state parties in 1996.° Carl

Lindner, chairman of Chiquita Brands and a longtime

Republican donor, “quietly gave $415,000 to about two dozen

Democratic state parties . . . in April 1996, only hours after

the [Clinton] administration formally challenged European

Union trade sanctions against Central American bananas

grown by Chiquita.”

In October, 1996, Common Cause filed a complaint with

the Justice Department that urged the appointment of an

independent counsel to conduct a criminal investigation into

the “knowing and willful” violation of the federal election

laws arising from the use of soft money by both parties and

both presidential campaigns in the 1996 election.” A parallel

complaint was filed with the FEC, calling on the agency to

pursue civil violations of the law.

After a two year criminal investigation, the Attorney

General ultimately closed the Justice Department’s inquiry

without taking action,” and referred the matter for civil

*? See Ira Chinoy, DNC Donors Also Gave to State Groups, Wash.

Post, Jan. 26, 1997, at Al.

“George Archibald, Banana Baron Peeled off Half a Mil; White

House Paid Back in WTO Fight, Wash. Times, Aug. 25, 1997, at Al.

According to Time, “DNC officials instructed Lindner to give directly to

state party coffers, which are subject to far less public scrutiny than

federal election accounts.” Michael Weisskopf, The Busy Back Door

Men, Time, March 31, 1997, at 40.

*> See Common Cause Letter, supra note 43.

© Notification to the Court Pursuant to 28 U.S.C. § 592(b) of the

Results of Preliminary Investigation filed in In re William Jefferson

Clinton (D.C. Cir. Dec. 7, 1998) (Independent Counsel Division). The

Attorney General did not conclude that the soft money advertising was

lawful, but only that the campaigns acted pursuant to advice of counsel,

and therefore lacked the requisite specific intent to commit a criminal

violation of the law. /d. at 8.

hr POLO EE gE eR He

23

enforcement to the FEC which also--contrary to the advice of

its staff--failed to act.°”

In the absence of any law enforcement action, the abuses of

1996 became the established practices of subsequent cam-

paigns. Both presidential candidates in the 2000 election

cycle raised soft money, which was funneled through national

party accounts to state party accounts and then used to fund

so-called “issue” ads promoting their campaigns.”®

*’ See Statement of Reasons of Comm. Scott E. Thomas in In the

Matter of Dole for President, Inc. et al., MURs 4553 and 4671 (FEC May

25, 2000) at 2-5, available at http://www.fec.gov/members, thomas/

Thomasstatement05.htm (recounting procedural history of the FEC’s

consideration of the audit and enforcement actions involving the 1996

presidential campaign spending). On most of the series of votes about

whether to proceed with the enforcement actions, the Commission

deadlocked by a vote of 3-3, thus resulting in the closure of the

matters. /d.

8 See e. g., Howard Kurtz, DNC Issue Spot Touts Gore's Medicare

Plan, Wash. Post, June 8, 2000, at A4:

The Democratic National Committee unveiled its first issue ad

designed to boost Vice President Gore’s campaign yesterday,

featuring Gore calling for expanded Medicare benefits to shield the

elderly from “ridiculously high prices for prescription medicines.”

While Democratic National Chairman Joe Andrew ... described

the commercial as a “party-building” spot, it never mentions the

Democratic Party. Instead, the 30 second ad spotlights Gore and a

Web site touting “the Gore Plan,” and is produced by Gore’s media

consultants, including Carter Eskew and Robert Shrum. . . .

The ad is financed in part by controversial “soft money” dona-

tions to the party that are supposed to be used to generate support

for the party and not to explicitly promote a specific candidate.

See also Peter Marks, Some Soft Money to Pay for Gore Ad Blitz, N.Y.

Times, June 7, 2000, at A28. The RNC shortly followed suit, running

similar ads praising its nominee, George Bush. See Howard Kurtz, GOP

Launches Its First Salvo in ‘Issue’ Ad War, Wash. Post, June 11, 2000,

at A4.

Common Cause (joined by Democracy 21) again filed complaints with

the Department of Justice and the FEC arguing that this use of soft money

was illegal. Neil A. Lewis, The 2000 Campaign: The Donations; 2

24

During the 1990’s, soft money also migrated from the

presidential to the congressional level, where it was raised by

congressional candidates and used, first, for grassroots

activities and then, for broadcast ads to promote congres-

sional candidates.

There is no clearer illustration of this point than in the

growth of soft money raised by the congressional campaign

committees of both parties. These committees are national

party entities that consist in their entirety of sitting Members

of Congress in both Houses, and that have the purpose of

electing candidates of each party to the House and Senate.””

Notwithstanding this exclusively federal campaign func-

tion, all four congressional committees have raised and spent

huge sums of soft money, exposing the myth that soft money

is used only for non-federal purposes. In the 2002 election

cycle, for instance, the DCCC raised $53.7 million in soft

money, more than three times what it had raised in the 1998

cycle. The NRCC similarly tripled its 1998 soft money total,

to $60.7 million in the 2002 cycle. The two Senate campaign

Groups Ask Justice Dept. To Investigate Parties’ Ads, N.Y. Times, July

28, 2000, at Al6. Both complaints were ultimately dismissed without

action.

*° The Democratic Congressional Campaign Committee (DCCC), for

instance, describes itself as “the only national party committee whose

principal mission is to elect Democrats to the House of Representatives.”

See DCCC website at http://www.dccc.org/about/. Similarly, the

Democratic Senatorial Campaign Committee (DSCC) describes itself as

“the national committee of the Democratic Party formed to elect

Democratic members of the United States Senate.” See DSCC website at

http://www.dscc.org/information/about/. To the same effect, the National

Republican Senatorial Committee (NRSC) says on its website, “It is our

sole responsibility to make sure that Republican Senate candidates are

elected to the United States Senate.” See NRSC.org website at http://

www.nrsc.org/nrscweb/aboutus/. The National Republican Congressional

Committee (NRCC) describes itself as “governed by its chairman, U.S.

Rep. Tom Reynolds (NY-26), and an executive committee composed of

Republican members of the U.S. House of Representatives.” See NRCC

website at http://nrec.org/nrcccontents/issuesagenda/overview.shtml.

25

committees did even better. The DSCC raised a total of

$85.9 million in soft money in 2002, over four times what it

raised in 1998. The NRSC increased its soft money from

$23.2 million to $54.1 million.” With regard to the soft

money practices of the party congressional campaign com-

mittees, the Thompson Committee Minority Report noted:

Like the national party committees, the parties’ national

senatorial and congressional campaign committees raise

and spend soft money in ways that render prohibitions

on corporate and union contributions virtually mean-

ingless. Senatorial and congressional campaign commit-

tees are intended, as their names imply, to help elect

United States Senators and Representatives. . . . The

amounts of soft money raised [in 1996] by the House

and Senate committees increased dramatically over

previous years, demonstrating the greater importance of

soft money in the last election cycle.”

But the apotheosis of the soft money infiltration into

congressional campaigns came with the development of

congressional “joint fundraising committees”--which were in

essence nothing more than dedicated soft money accounts for

specific congressional candidates. These joint committees,

used by more than 20 Senate campaigns in 2000, were typic-

ally formed between the candidate’s campaign committee and

the senatorial campaign committee of the candidate’s national

party. A Senate candidate typically solicited both soft and

hard money for his or her designated joint committee. The

hard money contributions would be disbursed to the

* See Common Cause, “National Parties Raise Record $470.6 Million

In Soft Money During The 2001-2002 Election Cycle Before New Law

Takes Effect” (Jan. 6, 2003), available at http://www.commoncause.org/

news/default.cfm? ArtID=83.

*' Thompson Committee Report, supra note 4, at 7518 (Minority Rpt.).

The report also states: “Experts agree that soft money into the House and

Senate campaign committees stretches to the limit the credibility of the

argument that the money is being used only for party building and not to

elect federal candidates.” /d. at 7527, n. 27.

26

candidate’s authorized campaign committee, and the soft

money would be sent to the party senatorial committee, which

would place the money in party soft money accounts. The

party committee would then typically transfer the soft money

to the state party of the Senate candidate who raised the

money, which would then spend it for candidate-specific

“issue ads” and other voter activities to support the Senate

candidate.” In effect, these joint fundraising committees

allowed Senate candidates to raise soft money in their own

name and for their own campaigns. All pretense of doing

anything else was dropped.”

The growing use of soft money in congressional races in

the 2000 cycle, combined with its continuing use in the

presidential campaign, resulted yet again in the near doubling

of the soft money raised, from $271 million in 1996 to $498

million in 2000. The soft money system had now

mushroomed into a loophole of nearly half a billion dollars.

IV. Congress Crafted BCRA’s Soft Money Ban To

Ensure That It Would End the Circumvention of

the Campaign Finance Laws.

Congress wrote Title | of BCRA in light of this history of

how the soft money system actually evolved, and how it

actually worked. Practical experience shows that the

-provisions of Title I are each necessary to close the soft

money loophole. Three points in particular are crucial.

® See John M. Broder, Democrats Able to Circumvent Donation Limit,

N.Y. Times, Dec. 22, 1999, at Al.

* In April 2000, Common Cause and Democracy 21 filed a complaint

with the FEC, alleging that these joint fundraising committees were

illegal. The FEC ultimately dismissed the complaint without action. See

Statement of Reasons of Comm. Scott E. Thomas in /n the Matter of

Ashcroft Victory Committee et al., MUR 4994 (FEC Dec. 19, 2001)

available at http://www.fec.gov/members/thomas/thomasstatement4 | .html.

* Mann Expert Report, supra note 26, at Table 1.

a, _

ee we eyes

27

A. The total ban on national party soft money is

necessary.

Experience shows, as this Court has recognized, that

parties act as agents “on behalf of those who seek to produce

obligated officeholders.” Colorado Republican II, 533 U.S.

at 452. The relationship between national parties and federal

officeholders is so inextricably intertwined--as noted above,

four of the six national party committees are in fact nothing

more than associations of federal officeholders--that to serve

anti-corruption purposes effectively, a soft money ban must

preclude the national parties from raising or spending any soft

money, for any purpose. Otherwise, national party officials

will continue, as they have, to broker access to and influence

with federal officeholders for those who donate large amounts

of soft money to the national parties, even if the parties spend

that money for purportedly non-federal purposes. Likewise,

national party officials will continue, as they have, to direct

donors like Roger Tamraz or Carl Lindner to make large

contributions directly to state parties or candidates in a cor-

rupt relationship that exchanges money for access to, or

benefits from, federal officeholders. With regard to the

national parties, Congress correctly recognized that the nub of

the issue is how the money is raised, not how it is spent.

B. The kan on state party soft money for “Federal

election activities” is necessary.

The history of the soft money system recounted above

demonstrates why Congress was correct to extend Title I of

BCRA to the state parties, which have been integral par-

ticipants in the funneling of soft money into federal elections.

The state parties have been the willing vehicles through

which national parties and federal candidates have operated--

to transfer, direct and spend soft money funds for federal

electora! purposes. Indeed, as the flow of funds in the 1996

campaign shows, the state parties have been used as eager

conduits to “game” the allocation rules specifically in order

to maximize the amount of soft money that could be spent. If

28

Congress had failed to take account of the role of the state

parties in this history, and had banned soft money only for

national party committees, the entire soft money system

would simply have shifted to the state party level and re-

created itself there.

But this history also shows that the objections to BCRA by

the Political Party Appellants are based on little more than

hyperbole. BCRA is not the radical new regulatory regime

they describe. State parties have for decades operated under

federal rules that, inter alia, require them to use exclusively

hard money for ads that expressly advocate the election of

federal candidates, and to limit their contributions to, or

spending in coordination with, federal candidates.

Moreover, since 1978, the state parties had operated under

a federal allocation system that required them to use hard

money to pay at least part of the costs of voter mobilization

activities that affected federal elections (even if these activ-

ities also affected state and local elections)--a federal regula-

tory regime that Congress ultimately found was inadequate to

protect compelling federal interests.

Thus, BCRA does not suddenly impose federal rules on

state parties where none had existed before. Instead, it simply

defines, by statute, certain state party activities that Congress

correctly deemed to affect federal elections, and substitutes

one allocation system for another: instead of funding these

activities with a mixture of hard money and soft money, the

parties are now to fund them with a mixture of hard money

and limited soft money funds raised pursuant to the Levin

Amendment.” If a state party wishes to avoid the conditions

° 2 'U.S.C. § 441a(a)(2)(A) (contribution limit); 2 U.S.C. § 441a(d)

(coordinated spending limit).

6 2 U.S.C. § 441i(b)(2) (added by BCRA § 101(a)) (Levin Amend-

ment). The Levin Amendment illustrates the particular care that Congress

took in balancing the need to protect federal interests in preventing

corruption, against its concern that state parties continue to have adequate

resources to engage in grassroots voter drive activities. Not only did

- ———

29

placed on the use of Levin funds, it is free to spend entirely

hard money for these activities. The state party has the

choice. And by the same token, Congress has left wholly

unregulated by federal law a wide range of state party

activities that are directed solely to state and local elections.°

C. The coverage of “voter mobilization” activities

is necessary.

Prior to the 1996 campaign, the soft money system oper-

ated exclusively through party spending on voter mobilization

activities such as voter registration and GOTV drives, and

generic campaign ads. That kind of spending--as the vivid

experience of the 1988 presidential campaign shows--was

how the soft money system worked. If Congress had failed to

cover these activities in BCRA, the reform law would do little

more than codify the pre-1996 soft money system, which was

already a system awash in “Team 100” type donors who were

solicited by the presidential campaigns for donations then

spent on the “ground war” to affect federal elections.

This history alone refutes the district court’s conclusion

that such voter mobilization activities do not directly or

sufficiently affect federal elections. Common sense also

Congress double the individual contribution limit on hard money dona-

tions to state parties, BCRA § 102 (codified at 2 U.S.C. § 441a(a)(1)(D)),

but in the Levin Amendment, it also provided state parties with an option

to raise funds under more liberal rules for certain voter mobilization

activities, in order to ameliorate the impact of BCRA on state parties.

*’ BCRA itself expressly excludes from the definition of “Federal

election activity” essential state party functions such as making contribu-

ions to state and local candidates, all “public communications” (such as

party-funded campaign ads) referring to state or local candidates if the

communications are not otherwise “Federal election activity,” the costs

of state and local conventions, and the costs of grassroots campaign

materials that name only state or local candidates. 2 U.S.C. § 431(20)

(B){i)-(iv). In addition, any other state party spending that is not within

the definition of “Federal election activity,” 2 U.S.C. § 431(20)(A), is also

excepted, such as voter registration drives prior to 120 days before a

federal election, or party administrative costs.

30

counsels that when state parties spend money to register their

core voters and get them to the polling booth where they will

cast votes on ballots that contain federal candidates, such

spending will necessarily and substantially benefit federal

candidates and affect those federal elections. Even if the

party’s “message” in turning out voters is a generic one that

promotes the party without mentioning any candidates, or is

one directed solely to state and local races, there is no doubt

that the voters who are brought to the polls then cast their

ballots in federal races as well. That impact, and the history

of circumvention which is the defining characteristic of the

soft money system, amply justify Congress’ judgment to

include such spending within the definition of “Federal

election activity.”

CONCLUSION

The Court should sustain the constitutionality of BCRA as

a measure necessary to address the dangers of corruption and

the appearance of corruption caused by the rise of soft money

in American campaigns, and as a necessary anti-circum-

vention measure to close the soft money loophole.

The Party Appellants erroneously equate a loss of soft money

funding for their voter mobilization activities with a limit (or even, ban)

on the activities themselves. Nothing could be further from the truth.

Although the Party Appellants repeatedly refer to Title | as a “spending

limit,” e.g., Br. at 48, 50, or even, a “pure expenditure limit,” id at 39,

that is a clear mischaracterization. The state parties are free to engage in

as much voter mobilization activity as they wish, and to spend as much as

they want on such activities, so long as they use hard money, or funds

otherwise permitted by the Levin Amendment. This is no “spending

limit.” See Buckley, 424 U.S. at 21-22 (contribution limits upheld because

their effect “is merely to require candidates and political committees to

raise funds from a greater number of persons . . .”).

a,

Of Counsel:

DANIEL B. KOHRMAN

AARP FOUNDATION

LITIGATION

MICHAEL SCHUSTER

AARP

601 E Street, N.W.

Washington, D.C. 20049

(202) 434-2060

August 5, 2003

Respectfully submitted,

DONALD J. SIMON *

SONOSK Y, CHAMBERS, SACHSE

ENDRESON & PERRY LLP

1425 K Street NW, Suite 600

Washington, DC 20005

(202) 682-0240

Counsel for Amici Curiae

Common Cause and AARP

* Counsel of Record