LIBERAL 527's MORE ACTIVE IN MINNESOTA THAN PREVIOULSY KNOWN
Law fails to stem political cash tide
Last fall about 150 Minnesota workers in health care and other service industries took unpaid leaves from their jobs to campaign for John Kerry and then were reimbursed through their national union's "527" group, which spent some $1.7 million in Minnesota.
Meanwhile, many Minnesota voters were watching more than $700,000 worth of anti-Kerry or pro-George Bush television ads, all bought by another 527, the Progress for America Voter Fund, with links to Bush.
More than three dozen 527 groups spent at least $4.2 million in Minnesota before the 2004 election -- twice as much as they spent in the 2002 cycle -- according to a summary prepared for the Star Tribune by the Center for Public Integrity. And that total probably is an undercount. The biggest national 527 of all, America Coming Together, spent an estimated $4 million in Minnesota, but it did so indirectly through its national political action committee.
Controversy over the explosive growth of 527s was one of the major sideshows of the last election. It became especially sharp in Minnesota in December, when the national 21st Century Democrats was penalized more than $300,000 for failing to disclose its donors to the Minnesota Campaign Finance and Public Disclosure Board. It is believed to be one of the largest penalties assessed by any state so far against national 527s.
Rivers of money from 527 groups flowed virtually unchecked into all states, and the phenomenon is provoking a call for more inquiry and perhaps more legislation to regulate their activities. Everybody involved seems to agree that the laws pertaining to 527s are complex, even bewildering.
"527s have become the new Laundromats for political money," said David Schultz, a Hamline University professor and an expert in campaign finance. "There are at least four or five different ways to put money into politics, lots of combinations and conduits, and all these permutations are making it impossible to find out how much has been spent."
Lawmakers at the state and federal levels aren't likely to act too soon after the McCain-Feingold legislation put restrictions on the flow of money into political parties. Many experts and watchdog groups describe McCain-Feingold as a dam that created a new 527 channel. But at least one Minnesota legislator is calling for action at the state level.
"Our campaign finance laws need to be tightened," said state Sen. John Marty, DFL-Roseville, a veteran who helped push through major state campaign and ethics overhauls about a decade ago. "Laws have become so convoluted and everybody has found so many ways around them that the public shrugs its shoulders. People don't understand what's happening and both parties are using the confusion to their advantage."
Officials representing 527s on both sides respond that they are simply playing by the rules established by the McCain-Feingold overhaul. Ten of the top dozen 527s were linked to the Democratic Party, and about 80 percent of the 527 money spent in Minnesota was by Democrats.
Democratic-tied 527 leaders say most of their spending was of the wholesome variety: turning out voters and grassroots organizing, rather than TV ads. "We were very proud that we were able to work with a number of fantastic groups doing great work in the state and around the country," said Robert Richman, state director for America Coming Together, the dominant 527 in Minnesota.
However, the 527s -- named for the section of federal tax law that authorizes the supposedly nonpartisan political interest groups -- have mostly avoided state scrutiny. In Minnesota they aren't required to register or otherwise disclose activities with the state campaign finance office unless they contribute more than $100 toward legislative or statewide races or ballot initiatives.
Their reports to the Internal Revenue Service offer few clues as to whether they are complying with state law. As a result, the groups have wide discretion in determining whether to register with the state or not, and most don't.
"Groups that didn't file, who knows what they were up to?" said Aron Pilhofer, who co-authored a report on 527 spending for the Center for Public Integrity in Washington. "They may very well have been doing activities that could have triggered a [state] filing requirement. But ... you have to sort of throw your hands up ... and say, 'We can't really tell.'"
Crossing state lines
Underscoring the point about confusion, one of the most active 527 spenders in Minnesota was the Democratic group called America Coming Together. Yet it doesn't even show up on the Public Integrity top 12.
That's because, unlike most other 527s, ACT transferred much of its national $79 million in contributions to a traditional federal political action committee, so that its spending shows up on Federal Election Commission reports rather than those of the IRS, which collects 527 reports.
The ACT PAC's disclosure statements with the commission show that it spent almost $1.7 million for individuals and organizations in Minnesota, which would put it near the top of the state list.
But that figure doesn't nearly account for all the real political activity. ACT director Richman, who also is co-owner of a political consulting firm that received money from several Democratic 527s, estimates that ACT actually spent about $4 million in Minnesota.
What accounts for the difference? Spending disclosures show the addresses of entities to whom checks are made out, not necessarily where the activity is taking place. Thus, if a Chicago-based telemarketer gets the contract for phoning in Minnesota, the disclosure shows up as an Illinois expenditure, not as Minnesota spending. Richman said much of the Minnesota activity by ACT was in fact administered by out-of-state vendors.
Several of the top Minnesota 527s on the Public Integrity list actually were paying for work in other states. They included Planned Parenthood Votes, the Democratic Legislative Campaign Committee, and the Organizing and Campaign Training Center.
More fines possible?
Regulators are just coming to grips with the 527 growth. The heavy fine on the 21st Century Democrats raises questions about whether more 527s might be in for fines from the Campaign Finance and Public Disclosure Board. The group was fined was fined $317,500 for contributing an equal sum to its Minnesota committee to influence DFL House campaigns while not being registered with the state.
Citing state laws that require confidentiality on such complaints, Board Chairman Wil Fluegel said he could "neither confirm nor deny that we're investigating anyone." At the federal level, although the FEC already has placed some new restrictions on 527s starting with the 2006 election cycle, there are still a number of ways to get around these limitations, Public Integrity's Pilhofer said. Several lawmakers, including Sens. John McCain, R-Ariz., and Russell Feingold, D-Wis., who were the authors of the campaign finance reform law, have already moved to introduce legislation to rein in 527s. Source: Star Tribune, January 24, 2005
Last fall about 150 Minnesota workers in health care and other service industries took unpaid leaves from their jobs to campaign for John Kerry and then were reimbursed through their national union's "527" group, which spent some $1.7 million in Minnesota.
Meanwhile, many Minnesota voters were watching more than $700,000 worth of anti-Kerry or pro-George Bush television ads, all bought by another 527, the Progress for America Voter Fund, with links to Bush.
More than three dozen 527 groups spent at least $4.2 million in Minnesota before the 2004 election -- twice as much as they spent in the 2002 cycle -- according to a summary prepared for the Star Tribune by the Center for Public Integrity. And that total probably is an undercount. The biggest national 527 of all, America Coming Together, spent an estimated $4 million in Minnesota, but it did so indirectly through its national political action committee.
Controversy over the explosive growth of 527s was one of the major sideshows of the last election. It became especially sharp in Minnesota in December, when the national 21st Century Democrats was penalized more than $300,000 for failing to disclose its donors to the Minnesota Campaign Finance and Public Disclosure Board. It is believed to be one of the largest penalties assessed by any state so far against national 527s.
Rivers of money from 527 groups flowed virtually unchecked into all states, and the phenomenon is provoking a call for more inquiry and perhaps more legislation to regulate their activities. Everybody involved seems to agree that the laws pertaining to 527s are complex, even bewildering.
"527s have become the new Laundromats for political money," said David Schultz, a Hamline University professor and an expert in campaign finance. "There are at least four or five different ways to put money into politics, lots of combinations and conduits, and all these permutations are making it impossible to find out how much has been spent."
Lawmakers at the state and federal levels aren't likely to act too soon after the McCain-Feingold legislation put restrictions on the flow of money into political parties. Many experts and watchdog groups describe McCain-Feingold as a dam that created a new 527 channel. But at least one Minnesota legislator is calling for action at the state level.
"Our campaign finance laws need to be tightened," said state Sen. John Marty, DFL-Roseville, a veteran who helped push through major state campaign and ethics overhauls about a decade ago. "Laws have become so convoluted and everybody has found so many ways around them that the public shrugs its shoulders. People don't understand what's happening and both parties are using the confusion to their advantage."
Officials representing 527s on both sides respond that they are simply playing by the rules established by the McCain-Feingold overhaul. Ten of the top dozen 527s were linked to the Democratic Party, and about 80 percent of the 527 money spent in Minnesota was by Democrats.
Democratic-tied 527 leaders say most of their spending was of the wholesome variety: turning out voters and grassroots organizing, rather than TV ads. "We were very proud that we were able to work with a number of fantastic groups doing great work in the state and around the country," said Robert Richman, state director for America Coming Together, the dominant 527 in Minnesota.
However, the 527s -- named for the section of federal tax law that authorizes the supposedly nonpartisan political interest groups -- have mostly avoided state scrutiny. In Minnesota they aren't required to register or otherwise disclose activities with the state campaign finance office unless they contribute more than $100 toward legislative or statewide races or ballot initiatives.
Their reports to the Internal Revenue Service offer few clues as to whether they are complying with state law. As a result, the groups have wide discretion in determining whether to register with the state or not, and most don't.
"Groups that didn't file, who knows what they were up to?" said Aron Pilhofer, who co-authored a report on 527 spending for the Center for Public Integrity in Washington. "They may very well have been doing activities that could have triggered a [state] filing requirement. But ... you have to sort of throw your hands up ... and say, 'We can't really tell.'"
Crossing state lines
Underscoring the point about confusion, one of the most active 527 spenders in Minnesota was the Democratic group called America Coming Together. Yet it doesn't even show up on the Public Integrity top 12.
That's because, unlike most other 527s, ACT transferred much of its national $79 million in contributions to a traditional federal political action committee, so that its spending shows up on Federal Election Commission reports rather than those of the IRS, which collects 527 reports.
The ACT PAC's disclosure statements with the commission show that it spent almost $1.7 million for individuals and organizations in Minnesota, which would put it near the top of the state list.
But that figure doesn't nearly account for all the real political activity. ACT director Richman, who also is co-owner of a political consulting firm that received money from several Democratic 527s, estimates that ACT actually spent about $4 million in Minnesota.
What accounts for the difference? Spending disclosures show the addresses of entities to whom checks are made out, not necessarily where the activity is taking place. Thus, if a Chicago-based telemarketer gets the contract for phoning in Minnesota, the disclosure shows up as an Illinois expenditure, not as Minnesota spending. Richman said much of the Minnesota activity by ACT was in fact administered by out-of-state vendors.
Several of the top Minnesota 527s on the Public Integrity list actually were paying for work in other states. They included Planned Parenthood Votes, the Democratic Legislative Campaign Committee, and the Organizing and Campaign Training Center.
More fines possible?
Regulators are just coming to grips with the 527 growth. The heavy fine on the 21st Century Democrats raises questions about whether more 527s might be in for fines from the Campaign Finance and Public Disclosure Board. The group was fined was fined $317,500 for contributing an equal sum to its Minnesota committee to influence DFL House campaigns while not being registered with the state.
Citing state laws that require confidentiality on such complaints, Board Chairman Wil Fluegel said he could "neither confirm nor deny that we're investigating anyone." At the federal level, although the FEC already has placed some new restrictions on 527s starting with the 2006 election cycle, there are still a number of ways to get around these limitations, Public Integrity's Pilhofer said. Several lawmakers, including Sens. John McCain, R-Ariz., and Russell Feingold, D-Wis., who were the authors of the campaign finance reform law, have already moved to introduce legislation to rein in 527s. Source: Star Tribune, January 24, 2005
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