FEC to Consider Activities of 527s

Advisory Opinion Touches Off Debate on Scope of Oversight

Posted January 30, 2004 at 6:31pm

His wound-licking days well behind him, Democrat Scott Thomas may well get the last laugh during his final days on the Federal Election Commission.

Pro-reform groups were flabbergasted last fall when Senate Minority Leader Tom Daschle (D-S.D.) and House Minority Leader Nancy Pelosi (D-Calif.) declined to reappoint Thomas and instead chose labor lawyer Robert Lenhard to replace him.

But as the FEC takes up the heated issue of regulating so-called 527 groups, Thomas is poised to cast critical votes that could impact his party’s success in the 2004 elections.

“I’m a very popular guy all of sudden,” Thomas said with a chuckle during an interview Friday.

But the outgoing commissioner, who is widely regarded as a potential swing vote, was coy about exactly where he stands on the hot topic.

This week, the FEC will take up a key advisory opinion request from Americans for a Better Country, a Republican 527 that hopes to counter similar Democratic efforts to raise soft money for issue ads, get-out-the-vote drives and other political activities in the 2004 election cycle.

Michael Toner, a Republican member of the FEC, called Thursday’s action on the advisory opinion a critical “first step” that will be an important “building block” as the FEC takes up rulemaking on 527s later this year.

“It’s critical that the FEC address these issues in an effective, comprehensive and clear manner this election cycle,” Toner said, adding that it is “clear that organizations on both sides of the aisles are poised to spend hundreds of millions of dollars” in the 2004 elections.

Noting that the “stakes are enormous,” Toner added that if history is any guide and if the commission concludes that 527s and 501(c) organizations have “wide running room” to raise and spend money, then “Republican-oriented groups are going to quickly match what is now on the Democratic side.”

Already, Democratic groups such as America Coming Together and The Media Fund have raised upwards of $60 million to $70 million each in contributions and pledges to aid their efforts to defeat President Bush — activities that an odd coalition of reform groups and Republicans are trying to head off at the pass through FEC action.

But Thomas — who has expressed interest in clamping down on certain 527 groups in the past — was more circumspect in his analysis and said it was “a little early” to address more specifically how the FEC should regulate the activities of 527s.

“I’m now convinced, more than ever, that this is a really complicated area, but I’m also happy that these kinds of advisory opinion requests have come to us because they do allow us to try and reach consensus that will provide some clarity to the folks out there,” he said.

“From the draft I’ve seen, it’s fairly apparent that there are some things they say they are contemplating doing that would suggest that if you get into obvious partisan electioneering, you’re going to move over into the territory where the FEC is going to be bound to treat it as our regulatory regime,” Thomas said.

“But that said, there are still a lot of very complex issues there. What about the less obvious references in ads? What about the less obvious references in solicitations? What about the less partisan pitches that you find in some of the efforts to get people registered to vote? There’s going to be a lot of line-drawing.”

While the draft opinion may not address some of the most basic issues at the center of the debate — such as whether 527 groups must register with the FEC as political committees — it does address specifically what sort of activities such an organization may undertake.

Perhaps most significant, the draft proposal penned by the FEC’s general counsel’s office states that Americans for a Better Country would not be able use soft money to pay for an ad that said, for example: “President George W. Bush, Senator X and Representative Y have led the fight in Congress for a stronger defense and stronger economy. Call them and tell them to keep fighting for you.”

FEC lawyers are recommending that officials ban such an ad because it “promotes, supports, attacks, or opposes a clearly identified federal candidate ‘for the purpose of influencing a federal election.’” The draft proposal said that such an ad would have to be financed with hard money.

Election lawyers said the opinion, if adopted as is, would still provide ample wiggle room for certain activities, such as allowing outside groups to use soft money for generic voter registration, voter mobilization and get-out-the-vote activities. More importantly, it allows outside groups to use a mix of hard and soft money when they run issue ads that involve both federal and nonfederal candidates.

In light of the pending advisory opinion, campaign finance law expert Brett Kappel said he believes some groups may opt to follow the MoveOn.org model.

The group is actually three organizations — MoveOn.org is a 501(c)(4), MoveOn.org PAC is a federal political action committee, and MoveOn.org Voter Fund is a 527 organization. MoveOn can therefore raise and spend hard and soft dollars to run issue ads.

“Outside groups will still be able to use soft money to affect the 2004 presidential race — they’ll just have to adjust their fundraising plans to do it, and if it’s one thing we’ve learned this year it’s that the Internet allows groups to raise millions of dollars virtually overnight,” Kappel said. “Kerry, Dean and Edwards all raised over $500,000 within 48 hours of the Iowa caucuses. Grassroots organizations like MoveOn.org should be able to do the same — and get most of it in small contributions.”

Founding directors of Americans for a Better Country — longtime GOP strategist Craig Shirley, counsel Frank Donatelli and George Terwilliger — lauded the FEC for dealing with the issue and offering “concrete” advice to political actors.

“The draft opinion helps to clarify exactly what activities political committees can undertake in the wake of McConnell v. FEC and passage of the Bipartisan Campaign Reform Act (BCRA),” Donatelli said in a statement. “It is now clear that political committees cannot use massive amounts of so called ‘soft money’ to advertise any message whose main purpose is to ‘influence a federal election.’”

Academic experts said the draft advisory opinion appears legally sound.

“It certainly appears to be straight in line with the spirit of BCRA and the McConnell decision,” said Donald Tobin, a law professor at Mortiz College of Law at Ohio State University.

Tobin and law school colleague Edward Foley recently authored an article arguing that the use of tax-exempt groups, such as Section 527 political organizations or nonprofit 501(c)(4) groups, is not an end run around BCRA’s restrictions on soft money. If the major purpose of a 527 group is to influence a federal election, then that organization would be subject to BCRA’s limits on contributions, currently set at $5,000.

The number of 527 organizations that claimed an exemption from filing under federal election law exploded after a 1996 decision by a federal district court determined that GOPAC, a political committee headed by then- Speaker Newt Gingrich (R-Ga.), did not have to comply with federal election law. GOPAC, even though it raised huge amounts of soft money and played a role in federal elections, did not have to report to the FEC because it did not expressly call for the defeat or election of a candidate.

The FEC refused to appeal the ruling. Crafty election lawyers then seized on the decision and the FEC’s lack of interest in overturning the ruling to create a horde of new organizations that fell into a regulatory black hole — able to raise unlimited amounts of money while attempting to influence federal elections.

But BCRA and the Supreme Court decision upholding that law largely erased the express advocacy standard that had been the basis of the GOPAC ruling, leading many legal experts to conclude that 527 groups that are formed to influence a federal election must comply with election law and the hard-money limits of BCRA.

Members of the FEC, meanwhile, are tight-lipped about the upcoming discussion of the advisory opinion. Any final decision by the FEC on the opinion or in the broader 527 rulemaking will require a minimum of four affirmative votes from the agency’s six commissioners.

Several experts noted that the pending advisory opinion does not deal with the threshold question of whether a 527 organization is automatically required to register as a federal political committee subject to the Federal Election Campaign Act — primarily because Americans for a Better Country conceded that fact from the start — but FEC officials are expected to deal with that precise issue in their broader rulemaking.

But Thomas and another sitting Democrat, Danny Lee McDonald, have raised the question previously of whether 527 groups running so-called issue ads during an election season should be regulated by the FEC.

Following the FEC’s dismissal of a complaint against the 527 group Republicans for Clean Air, both Thomas and McDonald issued a joint “statement of reasons” outlining why they felt the commission should have moved forward with an investigation of the group, based in part on “whether the advertising effort should have registered with the [FEC] as a ‘political committee’ subject to the reporting requirements and fundraising restraints.”

Organized by brothers Sam and Charles Wyly, Republicans for Clean Air ran a widely publicized $2 million advertising campaign in 2000 praising then-presidential candidate George W. Bush and attacking Sen. John McCain (R-Ariz.) the week before the “Super Tuesday” primaries.

“There is no indication that Republicans for Clean Air was formed for any purpose other than to support or oppose certain candidates,” Thomas and McDonald wrote. “For example, there is nothing to suggest that Republicans for Clean Air engaged in lobbying members of Congress or issue discussion outside the context of the Republican ‘Super Tuesday’ primaries. Since Republicans for Clean Air apparently spent all of its money on advertisements designed to influence elections, there is evidence that the organization’s sole purpose, let alone ‘major purpose,’ was the election or defeat of candidates or campaign activity.”

Along those lines, in March 1996, when the FEC failed to appeal the GOPAC decision, the three Democratic-appointed Commissioners McDonald, Thomas and John McGarry issued a joint statement condemning the court’s ruling.

“This test would mean that a group devoted exclusively to defeating the current Republican majority in the House or Senate could spend millions on ads saying, ‘Let’s defeat each and every Republican running for Congress’ without registering and reporting as a federal political committee because, in the District Court’s view, it would not be targeting particular candidates,” the commissioners wrote.

Meanwhile, for all the political intrigue surrounding his ouster from the FEC, Thomas isn’t paying much attention.

“I don’t worry about any of that stuff. I’m a simple public servant,” Thomas says now, giving his standard reply these days. “I tend to look at this stuff from the dull, boring legal perspective and try to analyze the regulations, the statute, and Congressional legislative history and figure out what the people who passed the law [intended].”

It’s unclear when he’ll even make his exit since President Bush has to forward Lenhard’s name to the Senate to get the ball rolling and has shown little inclination, thus far, to do so.

But for the record, he doesn’t see himself as the “angry commissioner,” as some have described him.

“I have been trying to tell people I understand the Washington game,” he said. “I understand that there are always folks who are trying to get these commissioners slots and if they are clever enough to line up the deal, it’s not unusual for someone like myself to be told we want to give someone else a chance. I accept that. Lord knows I have had a great run.”