Donors use McCain law loophole

Sen. John McCain, who championed a law imposing strict new political contribution limits, is appearing at fundraisers nationwide where donors can give up to $70,100 each to help him win the presidency through a group set up jointly by his campaign and the Republican Party.

Democrats are launching a similar effort, as both sides expose how easy it is to raise money from donors even if they already have given the maximum amount to the presidential campaigns allowed under a law that Mr. McCain helped enact in 2002.

The McCain-Feingold law caps donations at $2,300 for individuals contributing to a presidential candidate’s general election or primary election fund. But donors to the McCain Victory 2008 committee can give 30 times as much.

The contributions, capped at up to $70,100 each, then get split into smaller donations - all within federal donation limits - between the official McCain campaign, its legal and accounting fund, the Republican National Committee (RNC) and state party groups supporting Mr. McCain.

Some criticize the big-money fundraising at a time when campaigns are railing against one another over ties to lobbyists and corporate interests.

“It’s all perfectly legal, but the point is there are people who can give sizable checks and spend more face time with candidates because they’re able to write $70,000 checks,” said David Donnelly, national campaigns director for the nonprofit Public Campaign Action Fund. “It seems like a gaping hole in the practice of how the McCain-Feingold law operates.”

Tucker Bounds, a McCain spokesman, said joint fundraising is nothing new for presidential campaigns and that the practice “follows every letter of the law and is completely transparent.”

“John McCain doesn’t just have a reputation of rooting out the influence of money and special influence in politics, he has a record of it,” Mr. Bounds said.

With Mr. McCain as the featured guest, the McCain Victory 2008 committee took in $7 million at a single fundraiser in New York on May 7 that included a $25,000-per-couple VIP reception and photo opportunity with the candidate. Yesterday, Mr. McCain was scheduled to attend a joint fundraiser and private reception for supporters in Colorado.

The McCain Victory committee has filed one quarterly financial activity report with the Federal Election Commission showing that 14 donors gave more than $300,000 in March. One donor, Connecticut banker Christian Oberbeck, contributed the maximum $2,300 for Mr. McCain’s presidential primary campaign on March 17, then donated $28,500 10 days later through the McCain Victory fund, FEC records show.

The entire $28,500 given to the joint fundraising committee went to the RNC, the maximum contribution allowed under election law.

With Sens. Barack Obama and Hillary Rodham Clinton raising tens of millions of dollars per month in the drawn-out Democratic primary, the joint fundraising arrangement gives Mr. McCain a boost to compete in the money race during the general election.

The Obama campaign reported $37 million overall in the bank entering last month, compared with nearly $22 million for Mr. McCain. While Mr. McCain reported his best fundraising month to date last month, taking in about $18 million, Mr. Obama collected $31 million. Mrs. Clinton’s debts mounted even after she raised more than $20 million last month.

In a solicitation letter sent last week, Mr. McCain called for donations to the RNC amid “record breaking fundraising” by Democrats, labor unions and “unregulated ‘527’ soft money groups.”

“The aggressive campaign being played out for the Democratic nomination is showing us one very crucial fact: The Democrats and their liberal allies are building the most massive political fundraising machine ever seen,” Mr. McCain said in the letter, which was financed by the RNC and authorized by the McCain campaign.

Still, the RNC is raking in far more in cash compared with the Democratic National Committee. Last month, the RNC raised about $20 million compared with $4.8 million for the DNC. The RNC also reported more than $3 million in donations through the McCain joint fundraising efforts.

“We will have enough resources to get our message out in the fall,” RNC Chairman Mike Duncan said. “We’ve been able to bring different factions together. We have nearly 700,000 individual donors, and there’s a lot of excitement. We were able to raise $20 million in April.”

The DNC recently signed deals with Mr. Obama and Mrs. Clinton for a joint fundraising initiative called the Democratic White House Victory Fund.

Republican campaign-finance lawyer Jan Baran, former general counsel to the RNC, said joint fundraising will be crucial for Mr. McCain.

“The McCain campaign, like any Republican campaign, will put a lot of effort into fundraising for the Republican Party through the RNC, and the RNC has a history of outraising the DNC. So that’s the source of funding that will balance the disparity,” Mr. Baran said.

Though joint fundraising is nothing new, the role of outside money has come under sharp scrutiny during the presidential campaign.

Mr. Obama has refused to take money from federal lobbyists or political action committees, though independent PACs have spent more than $11 million on his behalf, far more than for any other candidate. Obama campaign officials said they have no control over those expenditures and have asked these groups to halt the practice.

The McCain campaign has run ads calling the Arizona Republican an “American reformer,” and has touted his record of “standing up to corrupting special interests.”

Sheila Krumholz, executive director of the Center for Responsive Politics, said talk on the campaign trail about special interests may put the joint fundraising activities under extra scrutiny.

“When you put yourself out there as a defender of ethics and transparency, you’re going to be held to higher standards,” Ms. Krumholz said. “These are huge sums of money.”

She said the situation was more troublesome in 2004, “when it could be hundreds of millions of dollars … in soft money.”

During the 2004 presidential campaign, groups such as Swift Boat Veterans for Truth and America Coming Together accepted unlimited contributions and spent tens of millions of dollars. Years later, both groups paid huge fines to the FEC to settle charges of violating campaign-finance laws.

Nearly half of the money from the McCain Victory fund will go to Republican groups in the battleground states of Wisconsin, Colorado, New Mexico and Minnesota. A portion also will go to the McCain campaign’s general election compliance fund, a special account to pay legal and accounting costs.

Such accounts generally are set up when candidates accept public financing. Mr. McCain’s compliance fund has taken in more than $2 million.

Campaign-finance analyst Jay Mandle, professor of economics at Colgate University, said Mr. Obama is unlikely to take public financing in the general election, despite a pledge to do so if his Republican opponent accepts public money.

“He’s going to make the case that because of his large base of small donors, that’s the functional equivalent of taking public funds,” Mr. Mandle said. “Though he gets a lot of money from small donors, he still gets money from Wall Street and big contributors, too.”

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