Reformers Prepare Suit on 527s

Legislation, Bush Challenge Could Target FEC Shortly

Posted September 13, 2004 at 6:45pm

Reps. Marty Meehan (D-Mass.) and Christopher Shays (R-Conn.), with help from the same legal team that successfully defended their campaign finance reforms before the Supreme Court, will file suit against the Federal Election Commission today, claiming that the agency has acted negligently by failing to rein in the independent campaign-related groups known as 527s.

The suit is one prong of an effort to derail 527s, which have been labeled by some critics a massive loophole for big money to bypass campaign finance laws and affect American elections.

Next week, Shays and Meehan will join Sens. John McCain (R-Ariz.) and Russ Feingold (D-Wis.) in offering legislation to correct the problem.

In addition, several sources said that President Bush’s campaign is expected to file a similar lawsuit against the watchdog agency in the near future. While the president has repeatedly called for a cessation of activities by 527s, Bush campaign officials did not immediately return calls yesterday seeking confirmation about the possibility of a lawsuit.

McCain told Roll Call that his legislation would bring 527 groups “under campaign-finance-law restrictions,” but he emphasized the importance of attacking the 527 loophole on more than one front.

“It is one of those things we have got to act” upon, he said. “The lawsuit we’ve got to act on and the legislation we’ve got to act on.”

Matt Vogel, Meehan’s communications director, said the legislative and legal efforts share the same aim: “to get the 527s that are acting as political committees … registered with the FEC and subject to the same reporting requirements.”

The issue bubbled over late last month when the FEC, after several months of delays, concluded a controversial rulemaking process on 527s, which receive their name from a section of the Internal Revenue Code.

While the agency’s six commissioners issued new allocation rules for the tax-exempt groups, they punted on the larger question of whether the groups should be automatically considered political committees and thus subject to campaign-finance laws.

Vogel said that Meehan and the other lawmakers were pursuing legal remedies under the Administrative Procedure Act. The APA allows a court to review and possibly set side an agency’s action.

“We see the FEC’s failure to issue rules on 527s as arbitrary, capricious and an abuse of their discretion,” said Vogel, who added that Meehan is seeking to have the FEC “reopen the rulemaking and promulgate the regulations on an expedited basis.”

Because of Senate rules, McCain and Feingold cannot file suit directly. Instead, the reform duo plans to submit a “friend of the court” brief that will be prepared by the Campaign Legal Center, a watchdog and legal-advocacy group headed by former FEC Commissioner Trevor Potter.

“We have 527 groups illegally spending tens of millions of dollars in the 2004 federal elections because the FEC has turned a blind eye to its responsibilities to properly enforce the law,” said Wertheimer, the president Democracy 21 and a participant in the lawsuit. “This lawsuit and the legislation that is expected to be filed next week would both have the effect of overriding the FEC’s misinterpretation of the law and establishing that as the law already states, 527 groups are not allowed to spend soft money in the way they have been doing it during the 2004 elections.”

Feingold and others suggested that Bush’s desire to crack down on 527s — including a widely publicized meeting with McCain to discuss the issue — would help their cause.

“I would love to get it done this year, but I realize it won’t be easy,” he said. “The fact that the president said he wants this acted on should cause the Majority Leader to bring it up.”