Reformation of 527 Organizations: Closing the Soft Money Loophole Created by the Bipartisan Campaign Reform Act of 2002

AuthorBrandi Cherie Sablatura

Page 810

    The author thanks Professors John M. Devlin, Paul R. Baier, and James
I Introduction

Few men have virtue to withstand the highest bidder.

-George Washington

"I don't think we ought to have 527s," commented President George W. Bush in an August 2004 press conference.1 In speaking of 527s, Bush was referring to tax exempt groups, organized under section 527 of the Internal Revenue Code, that raise money for political activities like issue advocacy.2 This includes groups such as Swift Boat Veterans for Truth,, and America Coming Together.3 527 groups achieved notoriety during the 2004 Page 811 election cycle because of the highly controversial ads produced by some 527 organizations.4

Although the Bipartisan Campaign Reform Act of 2002 (BCRA), which consisted of extensive campaign finance restrictions aimed at limiting contributions of soft money,5 was expected by many to clean up campaigns, some third party advocacy groups have been able to avoid being subjected to the new finance regulations. Amounts spent on political advertising that are not directed by, or associated with, a candidate or political campaign are known as independent expenditures and are not subjected to the limits passed in 2002.6 The amounts spent by 527 organizations fall under this exception as long as their efforts are not coordinated with political campaigns. The reason these restrictions do not apply to 527s is because BCRA only applies to political committees.7 Political committees are defined by BCRA's predecessor, the Federal Election Campaign Act (FECA), as "any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or which makes expenditures aggregating in excess of $1,000 during a calendar year."8 The Supreme Court has Page 812 stated that a group does not fall within FECA's definition of political committee unless its "major purpose" is to influence federal elections.9 Even though most 527s seem to fall under this definition, as they have over $1,000 in contributions and influencing federal elections as their main purpose, the Federal Election Commission has chosen not to treat 527s as political committees.10 The best explanation for this decision is found in the distinction between "express advocacy" and "issue advocacy" in Buckley v. Valeo.11

In Buckley v. Valeo, the Court found that express advocacy consisted of communications "that in express terms advocate the election or defeat of a clearly identified candidate for federal office . . . containing express words of advocacy of election or defeat, such as 'vote for,' 'elect,' 'support,' 'cast your ballot for,' 'Smith for Congress,' 'vote against,' 'defeat,' 'reject.'"12 As most ads produced by 527s do not use these explicit words of advocacy, the FEC has chosen to treat them as issue ads.13 Since the FEC has deemed 527s ads to be issue advocacy, rather than express advocacy of a candidate, these organizations do not qualify as political committees and are not subject to the limits imposed by BCRA. This has allowed 527s to support a particular candidate by simply disguising their express advocacy as issue advocacy.

This ability of 527s to engage in issue advertising is fairly broad, as the Supreme Court has defined express advocacy narrowly. 527s used this distinction to their advantage in the 2004 election cycle. For instance, the Swift Boat Veterans for Truth produced an ad that featured a veteran who claimed that John Kerry was deceitful and was openly lying about being in Cambodia Page 813 in 1968.14 Although this ad focused on a particular issue, Kerry's war record, the real purpose of the ad was clear-Vote for Bush. ran an ad alleging that Bush used family connections to get him into the Texas National Guard, where he failed to fulfill his obligations.15 Again, although the form of the ad centered on an issue, Bush's service in the Texas National Guard, the real message behind the ad was "Vote for Kerry."

Although 527s are billed as independent political advocacy groups, there have been allegations that both 2004 presidential candidates, President George W. Bush and Senator John Kerry, have ties to certain 527s.16 Controversy surrounded John Kerry's campaign when he hired Ken Exley, the director of special projects for, as director of online communications for his campaign.17 Allegations of connections to 527s culminated in the resignation of the Bush campaign's legal counsel, Ben Ginsberg, after it was discovered that Ginsberg had also served as independent legal counsel for the Swift Boat Veterans for Truth.18These connections suggest the real threat of 527s-that they are merely a vehicle for doing the dirty work of the official campaigns. 527 organizations have become a strong force in the American electoral system. These groups are able to accumulate large sums Page 814 of money from donors, including multi-million dollar donations from single donors. For example, George Soros contributed over twenty-three million dollars amongst nine 527s during the 2004 election cycle.19 This money allows the groups to communicate their message to massive numbers of people via large media outlets, such as national television advertisements. These ads are quite controversial because many of them are negative attack ads. Some have argued that many of these advertisements contain blatant misrepresentations and falsities, designed to lure the American people into voting against a particular candidate.20 Page 815

As a result of the prominence of these attack ads run by 527 groups during the 2004 election cycle, many have called for reform of 527 groups. This comment examines the battle between those who argue that restrictions on 527 groups are needed in order to maintain integrity in the election system, and those who argue that such restrictions would violate the right of 527 groups to exercise their First Amendment right of free speech. Part II details the history of campaign finance laws, with particular emphasis on the type of restrictions on campaign finances that have been allowed by the courts. Part III explores whether Congress has the power to place any type of restrictions on Section 527 groups without violating the First Amendment and concludes that Congress does in fact have that power. Part IV analyzes several possible limitations that Congress could implement and determines that subjecting 527s to FEC regulation is the optimal starting point for Congress. Although this will solve some of the problems with 527 organizations, the flood of money into politics will continue to cause problems until more drastic steps are taken to reform campaign finance law. One possible method for achieving this reform is by eliminating caps on individual contributions and implementing a system where donors' identities would not be revealed to the candidate.

II The History of Campaign Finance Law
A In the Beginning: Early Campaign Finance Law

Campaign finance law is an area that has troubled our nation since the early twentieth century. President Theodore Roosevelt's first item of Congressional business in 1906 dealt with enacting a law prohibiting political contributions by corporations.21Roosevelt commented, "It is necessary that laws should be passed to prohibit the use of corporate funds directly or indirectly for political proposes; it is still more necessary that such laws be Page 816 thoroughly enforced."22 This was one of the first manifestations of what would prove to be an ongoing congressional concern with keeping elections free from the influence of money. From 1906 to 1947, the legislation was amended several times, with each amendment putting further restrictions on campaign finances.23 In 1925, a comprehensive revision of the existing legislation was accomplished with the Federal Corrupt Practices Act of 1925. The legislative history of the Act suggests it was intended to remedy "the evils" associated with individuals and associations making large contributions to political candidates in return for future political favors.24

Political advertising via the media has been a cause for public concern for years. In 1940, the Hatch Act, which was designed to eliminate the abuses in the political process that accompany the operation of a vast civil administration, was reformed.25 The 1940 amendments to the Act put limitations on both the expenditures of political committees and contributions by individuals or groups.26According to a statement by Senator John H. Bankhead II, the goal of the Act was not only to deter politicians from rewarding large contributors with political favors, but also to limit the sums of money available for campaigning through the media.27 Senator Bankhead was concerned that large contributions enabled politicians to spread their "propaganda, both true and untrue" through use of the media.28 Page 817

B The Enactment of the Federal Election Campaign Act

The presidential...

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