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D.C. Democrats Launch Big 527

Prominent liberal activists last week laid the cornerstone for a network of unregulated Democratic-leaning political groups that are expected to dump perhaps $100 million or more into media buys and voter outreach in the runup to the 2008 elections.

John Podesta, chief of staff in the Clinton White House and now president of the liberal Center for American Progress, Anna Burger, chairwoman of the labor coalition Change to Win, and Taco Bell heir-turned philanthropist Rob McKay filed paperwork with the Internal Revenue Service for The Fund for America, a group registered under section 527 of the federal tax code.

Representatives for Podesta, Burger and McKay all declined Roll Call’s request to discuss the new group, but several knowledgeable Democratic strategists confirmed that the The Fund for America will become a clearinghouse for soft money political contributions, limit-free gifts that are known for bankrolling television spots such as the “Swift Boat” television advertisements that during the 2004 presidential campaign questioned Sen. John Kerry’s (D-Mass.) Vietnam War service.

The strategists said it’s too early to know which specific campaigns the new group will underwrite but that it is expected to focus exclusively on issue-based television and radio campaigns, door-to-door canvassing and direct mail.

The fund also is expected to be distinctly different from its 2004 liberal forefathers in two ways: The group will not have employees and it is not expected to magically disappear after the election.

“They don’t intend to replicate America Coming Together or the Media Fund; they intend to raise money and spend money on soft money operations, voter contact through existing organizations or new organizations,” a well-placed source said. “There’s been discussions of creating an organization along the lines of the Media Fund, where they would produce and air TV and radio spots.”

“They intend to raise money and fund existing organizations, such as the Sierra Club — phone, canvassing and mailing,” the source continued.

The source confirmed that one possible recipient of the group’s funds could be First Tuesday Media, a group first unearthed by washingtonpost.com in September. The group is a collective of prominent Hollywood television and film executives.

The unveiling of the new liberal 527 comes on the heels of the Federal Election Commission’s yearlong attempt to crack down on the outside political groups.

Last December, the FEC began handing down hefty fines to 527s active in the 2004 election cycle such as the GOP-leaning Swift Boat Veterans for Truth, its Democratic counterpart, America Coming Together, and roughly a half-dozen others.

Swift Boat Veterans for Truth was fined almost $300,000 by the FEC for its part in a $20 million TV ad buy and direct-mail campaign in key battlegrounds Ohio, Pennsylvania and Florida. In late August the FEC handed down its third-largest penalty ever to America Coming Together, slapping the liberal-leaning 527 with a $775,000 fine for violating campaign finance law.

In the runup to the 2004 election, ACT raised $137 million for get-out-the-vote and voter registration activities in 17 states.

Federal courts, too, have weighed in considerably on outside political activity during recent months. Late last summer, the U.S. District Court for the District of Columbia threw out a case brought by Rep. Christopher Shays (R-Conn.) and former Rep. Marty Meehan (D-Mass.) that would have required the FEC to create a list of do’s and don’ts for 527s. The outside political groups now fall under the jurisdiction of the IRS, and the FEC has argued successfully that it should police 527s on a case-by-case basis.

A Democratic election law lawyer who preferred not to be named suggested that recent court cases and the FEC’s ongoing crackdown has done more to create a template, rather than a deterrent, for motivated activists on both sides of the aisle who are looking for fissures in campaign finance law where soft money may flow: Don’t promise donors that their money will be used for federal elections, and don’t use phrases such as “defeat,” “elect,” “vote for” or “vote against” in ads or mailings.

A Democratic source said that relatively paltry FEC fines, combined with recent interpretations by the John Roberts-led Supreme Court on free-speech issues, have emboldened activists and wealthy donors, who will have a clearer sense in 2008 about what 527s are, and are not, allowed to do.

“Our election and corporate tax system, regulations and legal decisions that have been rendered in the past couple of years provide a panoply of options for … how [activists] can best utilize the different tax vehicle,” the Democrat said. “Smart people on both sides are going to figure it out.”

So-called social welfare groups, registered under section 501(c)(4) of the tax code, too, are expected to multiply in the coming months. Earlier this ear, the anti-tax group Club for Growth shuttered its 527 and moved its activities to its social-welfare arm, which has fewer disclosure requirements.

For now, legislation that would curb 527 activity appears stalled in both chambers of Congress. Shays, a longtime critic of outside influences in federal elections, criticized the agency Friday for using a light touch with the 527 groups that were active in 2004. The lawmaker did not say whether a reform bill is expected to move through the House any time soon. Fred Wertheimer, who often works with Shays and is president of Democracy 21, said last week’s filing hints that next year likely will be more of the same, especially now that 527s know the FEC’s price tag.

“This group creates at least an appearance that we’re headed for the same types of activities in 2008 that the FEC found illegal in 2004, but it did it so late and with such relatively small fines that [the fines] appeared to be the cost of doing business,” Wertheimer said.