McCain: FEC ‘Enabling’ 527s

Posted March 10, 2004 at 6:35pm

With time constraints precluding a quick legislative remedy to prevent outside groups from spending millions of dollars in soft money to influence the 2004 elections, several Capitol Hill lawmakers sought to ramp up pressure on the Federal Election Commission to crack down on 527 organizations.

“What we need today is for the FEC to enforce the law the way it should be enforced, or the FEC should be dramatically restructured,” Sen. John McCain (R-Ariz.), a lead sponsor of the Bipartisan Campaign Reform Act of 2002, declared at a lively Senate Rules and Administration Committee hearing Wednesday morning.

One of the FEC’s leading critics, McCain accused the commission of serving as a “political enabler” with regard to so-called 527 groups, which are organized under Section 527 of the Internal Revenue Code and have proliferated with intensity since the enactment of BCRA.

Democrats, in particular, have established an elaborate network of 527 groups which are raising millions of dollars in unlimited donations from corporations, labor unions and wealthy individuals, to wage a multipronged assault on President Bush and Congressional Republicans.

The groups have come under attack by an unlikely coalition of Republicans and members of the reform community who allege that the groups are violating federal campaign finance laws by not registering with the FEC as political committees.

“We’ve now driven the money away from the candidates, away from the parties … to these little organizations that have a post office box somewhere,” complained Sen. Rick Santorum (R-Pa.). “And we don’t know who’s giving the money.”

McCain, however, laid the blame for the emergence of such entities squarely at the feet of the FEC.

“The FEC has been wrong with respect to its treatment of 527s for years, and the agency needs to get its house in order fast, and make clear that a Section 527 group — a group that has voluntarily identified itself for tax law benefits as a ‘political organization’ — must comply with the federal election laws when its major purpose is to influence federal elections,” said McCain, who lashed out specifically at FEC Commissioners Ellen Weintraub, a Democrat, and Brad Smith, a Republican.

McCain also took aim at Democratic election lawyer Bob Bauer, who is a legal adviser to several of the Democratic-leaning 527s under scrutiny. McCain brandished a letter Bauer wrote in 1999 to then-Attorney General Janet Reno asking for a criminal investigation of efforts by Rep. Tom DeLay (Texas) and Speaker Dennis Hastert (Ill.) to establish a 527 group called the Republican Majority Issues Campaign.

Bauer noted in his correspondence to Reno that RMIC was “claiming tax-exempt status as a ‘political organization’ under Section 527 of the Internal Revenue Code, but … willfully refusing registration and reporting of expenditures and contributions received.”

“I agree with Mr. Bauer’s analysis of federal election law relating to 527s and federal political committees as stated in this letter,” McCain said. “Unfortunately, Mr. Bauer and his law firm are now representing 527s who want to engage in the sort of activity which they argued only a few years ago was ‘illegal’ and required criminal investigation.”

In a telephone interview Wednesday afternoon, Bauer rejected the notion that he was trying to have it both ways.

Bauer said McCain’s impression was a “function of how confusing the law is and how often people coming to this statute walk away with wildly different impressions about what the law does and doesn’t do and what the law currently is.”

Bauer said the activities addressed in his 1999 letter were different from those of the 527 groups at the center of controversy today, because they were controlled by federal candidates — in that case, DeLay and Hastert.

Moreover, the FEC since that time had an opportunity to express an advisory opinion on a 527 group — the Committee on Clean Air, which ran “issue ads” attacking McCain in the 2000 presidential primary — and in a 3-3 split decision declined to say that the group had violated any rules by not registering as a federal political committee.

Other witnesses at Wednesday’s hearing, meanwhile, remained skeptical that the FEC, which recently initiated a rulemaking on the furiously debated topic, would actually be able to sort out the contentious issue before the November elections.

The rulemaking’s chief focus is on whether the FEC should amend its current definition of the terms “political committee” and “expenditures” — a move that could pull 527s, and potentially other groups, under the FEC’s purview.

Larry Noble, the executive director for the Center of Responsive Politics and former general counsel of the FEC, and Ohio State University Law School professor Ed Foley both expressed their opinion that the FEC’s regulations should clearly reflect the two-pronged approach, determined by both federal statute and court interpretation, as to when an organization qualifies as a federal political committee.

A group qualifies as a federal political committee if its “major purpose” is influencing elections of candidates to federal office and the group makes expenditures of at least $1,000 a year to influence a federal election.

But Noble called the FEC’s massive and complicated 108-page notice of proposed rulemaking — which contains as many questions as it does potential answers — a “recipe for making sure they don’t finish the rulemaking this election cycle.”

McCain indicated he would pursue other avenues if the agency refuses to take action.

“If the FEC doesn’t act … we’ll go to court,” warned the Arizona Republican.

McCain indicated he thought Weintraub was out of line when she recently opposed the FEC’s rulemaking process and said she would “not be rushed to make hasty decisions, with far-reaching implications, at the behest of those who see in our hurried action their short-term political gain.”

Retorted McCain: “What in the world role does Ms. Weintraub have to discuss the political implications of anything?”

He also criticized the FEC’s Smith for having said recently, “Now and then the Supreme Court issues a decision that cries out to the public, ‘We don’t know what we’re doing!’” and “McConnell is such a decision.”

“What an extraordinary statement from a public official whose statutory responsibility is to enforce the laws of the land as written by Congress, signed by the president, and upheld by the Supreme Court!” McCain said, adding that it is “statements like this that point out the need for fundamental reform of the FEC.”

Smith, who observed the hearing from his seat just a few feet behind McCain, said later that he thought it “unfair that Senator McCain wants to personalize these things” and felt that his words had been taken “out of context.”

As for the topic at hand, Smith challenged the Senator’s assertion that 527s were necessarily a problem in need of an instant FEC fix, although he did agree that the commission would do well to examine the issue.

“We have 66 Members of Congress who’ve written to us, saying ‘We didn’t intend to regulate these groups,’” Smith said in an interview after the hearing. He added that simply following the suggestion of folks like McCain and Noble could result in a “massive expansion of regulation” that would “bring in many groups outside the system.”

“I think to reach the conclusion that all these groups are federal political committees requires some twisting of that statute,” Smith said.

Smith said he felt Santorum brought up a valid point when he asked witnesses why groups focused on issues could potentially get away with running ads critical of federal candidates, while 527 groups running perhaps identical ads would theoretically have to be subjected to regulation by the FEC.

“If George Soros gives $20 million to ACT or $20 million to NARAL, what’s the difference,” Santorum asked the campaign finance experts, who attempted to explain that the Supreme Court has recognized greater First Amendment protection for issue-oriented groups like the 501(c)(4) NARAL, than for 527 groups like ACT, which focus on election activity. “I can guarantee you, when NARAL runs ads against me, they are doing so to defeat me in an election — it’s no different than America Coming Together” running ads attacking Santorum.

David Mason, another Republican who sits on the FEC, said he found the Rules Committee hearing helpful, but said he still hasn’t decided what his position will be on the rulemaking.

“I do think … the lack of a definition of ‘major purpose’ — now 30 years after Buckley [v. Valeo] — is a problem,” said Mason, who noted that under the current environment, that “missing element that would be desirable for the commission to rule on.”