Politics & Policy

The Democratic Mega-Money Mega-Scam

Years too late, the feds crack down on America Coming Together.

Author’s Note: On Wednesday, the Federal Election Commission slapped America Coming Together with a $775,000 fine — the third-largest such penalty in history — for violating campaign-finance laws in the 2004 election. Now largely defunct, America Coming Together was the biggest of the so-called “527” groups that took in millions from donors like George Soros for the purpose of defeating George W. Bush. In a case that has taken years to decide, the FEC ruled that America Coming Together did an end-run around the campaign-finance laws in 2004 by claiming it was using its money for non-partisan purposes like voter registration when it was in fact spending millions specifically targeting Bush.

I included a chapter on America Coming Together in my 2005 book, The Vast Left Wing Conspiracy. During my research, in the months before the 2004 election, everyone seemed to know that America Coming Together was openly flouting the rules, but everyone also knew that the group would get away with it until long after the election. And so it did, with the FEC taking until August 2007 to make a ruling. What follows are excerpts from the book — the chapter’s title was “Shell Game” — detailing just what America Coming Together did.

In July 2004, in a conference room on the second floor of the luxurious Four Seasons Hotel near Boston Common, Steve Rosenthal was explaining what might be called the Palm Pilot theory of voter contact. A former political chief of the AFL-CIO, Rosenthal had come to the Democratic National Convention in his role as chief executive officer of America Coming Together, or ACT, the biggest of the “independent” 527 groups working to defeat George W. Bush. ACT did the hard, street-level job of political organizing; other groups like MoveOn might spend time producing Internet attack ads or holding virtual bake sales, but ACT was actually getting in touch with vot­ers, one-by-one and face-to-face, trying to convince them to vote for John Kerry. The work, as Rosenthal explained it, was part shoe leather and part personal digital assistant.

”The system that we’re developing is old as time, but with a modern twist,” Rosenthal told a small group of reporters. ACT had thousands of canvassers spread across the swing states, he explained, and each canvasser was equipped with a Palm Pilot loaded with a software program developed by a pro-Democratic firm called VAN, which stood for Voter Activation Network. When the canvasser turned on the Palm, up popped a list of voters whom ACT wanted him to visit, a map showing him how to get to their homes, and a script of what he was to say once he arrived.

Rosenthal sketched out an example of how the system worked. A canvasser knocks on a door and asks a voter which issue concerns him most. The voter says the economy. The canvasser asks what it is about the economy that the voter finds most worrisome. The voter says low wages. The canvasser enters all this into the Palm, which already has a full file of commercial and demographic information about the voter. If the voter is a Democrat, the canvasser asks if he’ll help the cause by volunteering to knock on some doors, or at least agree to read some “information” from ACT. If the voter says yes, he then begins to receive a stream of customized mailings and e-mails from ACT, focusing on the key problem facing America today, which is, of course, low wages.

The canvasser also shows the voter a brief video, which, like everything else, is programmed into the Palm. ACT pre-produced videos on a variety of topics, and the canvasser shows the voter the one closest to his concerns. The video is exactly sixteen seconds long. “We found that people will watch about sixteen seconds,” Rosenthal explained, describing the painstaking research that went into the project. “Not more and not less. The first three or four seconds they look at the Palm Pilot kind of wondering what it is. It’s a great way to break the ice and get voters involved in a discussion.” And after that ice is broken, Rosenthal said, the canvasser’s job is to give the voter “good, solid information” that will “help them cast a vote.”

Rosenthal appeared with the two other leaders of his group. One was Ellen Malcolm, who had built the pro-choice organization EMILY’s List into the largest political action committee in the country; Malcolm had taken a leave from her job to serve as president of ACT. The other was Harold Ickes, the former Clinton White House aide and veteran of hardball New York politics who headed ACT’s sister organization, the Media Fund, a group that produced and aired anti-Bush ads for television, radio, print, and the Internet. Their presentation was designed to convey the message that America Coming Together was the biggest, best, and most advanced political effort in the history of the world. But Palm Pilots aside, they found themselves with lots of questions to answer.

For example, how could they do what they were doing and not run afoul of the campaign finance laws? ACT was a 527, which meant that it could accept unlimited contributions from anyone. That much was well known; by the time of the Democratic convention, ACT had become famous as the beneficiary of millions of dollars in contributions from George Soros. But being a 527 also meant that ACT could not “coordinate” — that is, act in concert — with either the Kerry campaign or the Democratic Party. ACT was also specifically forbidden from urging people to vote against George W. Bush or for John Kerry. During convention week, ACT’s leaders found themselves insisting, under mounting skepticism, that they were scrupulously following the rules.

First they had to explain why they were at the Four Seasons. During convention week, the hotel served as the headquarters of the Democratic National Committee’s finance operation. Party fund-raisers were gathered on the second floor, which happened to be where America Coming Together had set up shop. And just to put a fine point on it, Ickes was a member of the DNC’s executive committee. Everyone was walking around together, falling into conversations in the halls, going to meetings. Didn’t that at least create the appearance that ACT and the Kerry Democrats were all working together?

Not at all, Malcolm said. In fact, she wondered why anyone would even ask such a thing. “It’s important in our democracy that there are ways that people can come together with common interests to participate in the political process,” she explained. ACT had looked carefully at the law and had determined that everything it did was perfectly appropriate, including staying at the Four Seasons. “There’s absolutely no question that people can participate in politics,” Malcolm continued. “EMILY’s List is here, and ACT is here supporting Democratic candidates. All kinds of organizations are here.”

But what about the question of ACT specifically advocating the defeat of President Bush? At that very moment, Malcolm was sending out a fund-raising appeal that said, “Here’s what America Coming Together is all about. It’s about people like you and me making a personal commitment to defeating George W. Bush.” That seemed to be a pretty specific message. And ACT had on many other occasions made it quite clear that it was working to elect a Democratic president. Didn’t that violate the rules governing 527s?

Rosenthal fielded that question. “We cannot expressly advocate on behalf of Kerry, or against Bush, so we will never use the words ‘Vote for’ or ‘Vote against,’ “he said. Instead, he continued, ACT could provide voters with “information” about issues. You think Bush has messed up the economy? Let us send you some information about how bad it is. You think Bush is destroying our civil liberties? Let us send you some information on that. ACT stuck closely to issues, Rosenthal said, and never made an overt campaign pitch. He did not address the issue of those letters calling for Americans to make “a personal commitment to defeating George W. Bush.”

That question alone made ACT’s compliance with the rules appear iffy at best. But what few, if any, of the reporters in the room that day knew was that questions about ACT’s compli­ance with federal campaign finance laws went far deeper than worries about hotels or direct-mail appeals. At that moment, ACT was engaged in an elaborate financial sleight-of-hand designed to allow it to spend millions of dollars on the anti-Bush effort in ways that violated established standards govern­ing such organizations. In filings before the Federal Election Commission, ACT claimed that it could spend the seven-figure contributions it received from donors like Soros on virtually anything it wanted — a tactic that one campaign finance reformer referred to as “a shell game.” It was a serious matter that might have serious consequences for the organization. But any reckoning would be months in the future — long after the election — and ACT faced few questions about its accounting as the campaign rushed ahead.

AUTHOR’S NOTE: The chapter went on to describe the enormous contributions made by Soros and other Democratic mega-givers like Peter Lewis, Stephen Bing, and Herbert and Marion Sandler — together they topped $75 million, a figure which dwarfed anything on the Republican side in 2004. Then it turned to the sleight-of-hand that was the basis of everything America Coming Together did:

As ACT’s bank account grew and grew, experts in campaign finance noticed something curious going on in the group’s accounting. It had to do with the way ACT spent its money and the explanation it made for those expenditures in filings with the Federal Election Commission. At issue were complex rules covering the arcana of campaign finance and the precise legal meanings of terms like “hard money,” “soft money,” “federal accounts,” “nonfederal accounts,” and “allocation.” The issues were difficult to understand — that’s why they went mostly unreported in the press — but the evidence suggested that ACT had simply decided to ignore the rules that were supposed to govern its activities.

Although ACT is commonly referred to as a 527, it is in fact a two-part organization. One part is an old-fashioned political action committee, or PAC, which is covered by federal election laws and overseen by the Federal Election Commission. The other part is the 527, which is not covered by those laws. The PAC accepts what are called hard-money contributions — that is, those intended for the specific purpose of influencing federal elections, meaning races for president, vice president, the House, and the Senate. Federal law places a $5,000 limit on those contributions; the money went into ACT’s “federal account.” But ACT’s other side, the 527, is allowed to accept unlimited contributions — soft money — for what are called nonfederal purposes, which means things like voter registration, fund-raising, get-out-the-vote activities, and state and local campaigns. That money went into ACT’s “nonfederal account.” Because it can accept unlimited contributions, ACT is not allowed to use nonfederal, or soft, money to advocate the election or defeat of any particular federal candidate.

Two-part organizations like ACT must keep careful records of their federal and nonfederal accounts and report them to the FEC. They can by law spend soft money for get-out-the-vote and other nonfederal purposes only after raising a significant amount of hard money first. Most groups set a ratio of hard-money to soft-money spending of about 60 percent to 40 percent, or perhaps 70 percent to 30 percent; that means that for every two dollars in federal (hard) money that a group like ACT raised and spent, it could raise and spend a third dollar in non-federal (soft) money. The purpose of that practice was to make sure groups did not spend unlimited-contribution soft money to advocate the election or defeat of a specific federal candidate.

At least that’s what the law said. But the leaders of ACT decided to virtually erase the distinction between the organization’s two halves. Instead of following the typical ratios of federal to nonfederal spending, ACT simply declared that it would spend 98 percent of its money for nonfederal purposes and just 2 percent for federal purposes. By making that claim, ACT was saying that 98 percent of its expenditures was going to nonfederal activities — that is, not advocating the defeat of George W. Bush or the election of John Kerry. We’re just helping to register voters, get out the vote, and support Democrats in local offices, ACT was saying. We’re not really involved in that presidential thing.

For anyone who knew anything about the campaign finance laws and who knew the role ACT was playing in the campaign, that position simply did not pass the laugh test. “ACT registered as a political committee [PAC] because I think they realized that they could completely game the FEC rules that applied to federal political committees,” Donald Simon, counsel to the pro-reform group Democracy 21, told me. “They claimed the right to have this 98–2 split in their funding, even though it was clear to anybody that what they were about was influencing the presidential election.”

In January 2004, Democracy 21 joined two other nonpartisan reform organizations, the Campaign Legal Center and the Center for Responsive Politics, to file a complaint with the Federal Election Commission. “The ‘major purpose,’ indeed the overriding purpose, of ACT’s activities, including its purportedly ‘nonfederal’ account, is to promote the election of the Democratic nominee for president, and to defeat President Bush,” the complaint said. “In fact, the soft money being given to the purportedly ‘nonfederal’ account is clearly being donated explicitly for the purpose of defeating President Bush, as George Soros and other donors have made clear.”

The FEC, apparently unwilling to make a ruling in the middle of a presidential campaign, took no action on the reformers’ complaint. In March 2004, the reformers tried again, sending a letter to the commission saying that the whole system of regulations that allowed organizations to allocate their money between federal and nonfederal accounts “leads to indefensible and absurd results.” “Under the Commission’s existing… rules, America Coming Together is claiming a right to spend 98 percent soft money [emphasis in the original] on its voter mobilization activities, even though ACT and its donors have made publicly clear their overriding purpose is to mobilize voters to defeat President Bush in the 2004 elections.”

Still, the FEC took no action. In June, the reformers filed yet another complaint, this one making the case that ACT was in fact created for the specific purpose of influencing a federal election — that is, the presidential race. The complaint cited millions of direct-mail fund-raising appeals, sent out by ACT, which arrived in voters’ mailboxes in envelopes on which the following was printed:

17 States

25,000 Organizers

200,000 Volunteers

10 Million Doors Knocked On

…and a one-way ticket back to Crawford, Texas

That last phrase was one made famous by Howard Dean during his Democratic primary campaign. And other ACT fundraising letters were even more overt. One accused George W. Bush and the Republican Party of “work[ing] hard to undermine a woman’s right to choose,” of displaying “reckless disregard for the environment,” and of “making a shambles of our economy.” The letter continued, “But wishing won’t make Bush, Cheney, Ashcroft, DeLay and their extremist agenda go away. Wishing won’t elect John Kerry. People-to-people organizing will — and organizing is what ACT is all about.” Another fund-raising letter pledged that ACT would fill in “where the Kerry campaign and the Democratic Party simply don’t have the resources to operate.” And yet another appeal said that “when Election Day is over, we will have helped John Kerry defeat George W. Bush and elected progressive candidates across the nation.”

Still ACT claimed, in its filings to the government, that it was largely uninvolved in partisan presidential politics. And the Media Fund, which operated solely on large soft-money contributions, was crossing the line just as often. The Fund, which was required by law to stay away from advocating the election or defeat of federal candidates, claimed that it was “supporting a progressive message and defending Democrats from attack ads funded by the deep pockets of the right wing.” But it was on the offense from the beginning. In its first ad, which aired in the seventeen battleground states in early March, an announcer began, “President Bush, remember the American Dream?” Over video of flags and children and workers and farms, the announcer continued, “It’s about hope, not fear. It’s about more jobs at home, not tax breaks for shipping jobs overseas….George Bush’s priorities are eroding the American Dream. It’s time to take our country back from corporate greed and make America work for every American.”

Months later, the Fund’s last ad was an attack based on themes developed in Fahrenheit 9/11. Over video of the Saudi royal family, accompanied by the kind of generic ominous music characteristic of attack ads, the announcer began, “The Saudi royal family. Wealthy. Powerful. Corrupt. And close Bush family friends.” The narrator said that “rich Saudis bailed out George W. when his oil company went bust” and that fifteen of the nineteen September 11 hijackers were Saudi. “Kind of makes you wonder,” the ad concluded. “Are Bush and the Saudis too close for comfort?”

Reformers believed the evidence would prove that ACT’s and the Media Fund’s contention that they had almost nothing to do with the federal election was in fact “indefensible and absurd.” “There’s no argument that meets the straight-faced test that these groups were not engaged in influencing a federal election,” Donald Simon told me. And indeed, in mid-campaign, the FEC finally adopted new regulations requiring a 50–50 ratio in federal to nonfederal spending in some cases. The move might have significantly reined in ACT’s programs — if it had applied to the 2004 campaign. But the regulation was written to take effect only after the election, so ACT and the Media Fund did not have to worry.


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