Loophole Lets Candidates Skirt Donation Limit

Publication: The Washington Post

John Solomon and Sarah Cohen
July 23, 2007

Real estate executive Jack Rosen has given Sen. Hillary Rodham Clinton $8,800 since last November, nearly double the amount individuals can donate to any single presidential candidate this election.

He is able to do so because of a loophole in political fundraising laws -- one that is allowing several presidential candidates to simultaneously collect donations for their presidential bid and other political entities connected to them.

One contender, Democrat Bill Richardson, has even collected corporate contributions, forbidden at the federal level, by using his New Mexico gubernatorial campaign account, which faces no such prohibition.

In all, 2008 presidential candidates have already raised more than $2 million outside of their official presidential campaigns since the Nov. 7 election, using congressional or state campaign committees, political action committees or IRS Section 527 political groups to do so, a Washington Post computer analysis found.

None of the money raised for that second committee or group can be spent in pursuit of the presidency, but a former elections official says the extra dollars nonetheless benefit presidential candidates.

Kent Cooper, the Federal Election Commission's former chief of public disclosure who now runs a Web site that studies political money, said presidential candidates may want to collect money simultaneously for one of their political groups so they can spend that money sowing goodwill in key primary states. Often, they will give donations to state or local candidates who can help organize local supporters in the presidential race, he said.

As for donors, the extra contributions give them a chance to stand out in a crowd of supporters.

"I've been a longtime supporter of the Clintons, and when they asked me to help again, I responded," Rosen said. He gave $4,200 in late November toward Clinton's Democratic Senate campaign in New York and then turned around in January and gave the maximum $4,600 to her presidential race.

"It is a new phenomenon. I don't remember ever seeing so many candidates raising money for so many different committees," said Ellen Miller, who has studied political donations for three decades and runs a Web site examining the connections between political money and government action.

"These additional donations are investments by individuals who could seek a favor from the candidate. There are now numerous pockets for political contributors to put their cash into," she said.

Clinton quietly filed papers with the Federal Election Commission over the Thanksgiving holiday that declared her to be a candidate for Senate reelection in 2012, even as she runs for president. That allowed her to raise money for both campaign accounts.

Scores of donors took advantage late last year and early this year, allowing Clinton to collect a quarter-million dollars from people who gave to both her 2012 Senate and 2008 presidential committees, the Post analysis found.

Those who did so by writing $4,200 and $4,600 checks include mail catalogue mogul Lillian Vernon, movie producer Judith Zarin and New York banker Jeffrey Volk, FEC records show.

In addition, Clinton transferred $10 million in unspent donations from her 2006 Senate reelection campaign to her presidential bid. Donors who gave to her Senate campaign before Nov. 7 can legally donate again, creating what fundraising insiders call a "double-dipping" opportunity.

Vernon E. Jordan Jr., an investment banker whose father advised former president Bill Clinton, gave $1,000 to Clinton's 2006 Senate campaign on Oct. 27, when her reelection was all but assured, adding to the lump sum she transferred to start her presidential campaign a couple of months later.

This spring, Jordan gave the maximum $4,600 to her presidential campaign. He's still free to donate another $4,200 to her 2012 Senate fund.

"Our staunchest supporters are staunch, and we're grateful for that," Clinton campaign spokesman Phil Singer said.

Clinton has not actively sought Senate donations since she formally filed her presidential candidate papers in late January, although she will continue accepting checks that arrive unsolicited, aides said. The campaign also makes sure no Senate money collected since last November's election gets used for her presidential bid, the aides added.

Still, records show that Clinton's Senate committee has spent money since January on some of the same people and companies that are involved in her presidential campaign.

For instance, communications aide Nina Blackwell has simultaneously collected a salary from both Clinton's Senate and presidential campaigns, FEC records show. Unpaid presidential adviser Ann Lewis had a small amount of travel expenses paid for by the Senate campaign. And both campaigns paid the travel vendor Aircraft Services Group large sums of money.

Sen. John McCain (R-Ariz.), whose name graces the 2002 campaign reform bill that placed strict limits on donation sizes, has kept open his Straight Talk Express political action committee as he runs for president, collecting more than $100,000 since last November's election.

Like Clinton contributors, many givers to McCain's PAC this year have also maxed out contributions to his presidential campaign. San Francisco equity fund executive J. Gary Shansby gave $5,000 to McCain's Straight Talk in March on top of his $4,600 to McCain's presidential bid.

"John's supporters are passionate about him and his experience, and they are looking for any way they can legally support him, and they and I try to do so," Shansby said.

Richardson has already collected more than $600,000 through his state gubernatorial committee since December, including money from corporations legally forbidden from donating at the federal level.

Among the companies to support Richardson's gubernatorial fund since the presidential race started are Hewlett-Packard ($10,000) and utility company PNMR Services ($25,000), according to Richardson's latest campaign report.

Former senator John Edwards (D-N.C.) has kept open his One America political action committee, collecting more than $73,000 through that group since the election. Two of those donations recently caught the eye of campaign watchdogs because they came through the arm of One America that is exempt from federal donation size limits.

Houston trial attorney Richard Warren Mithoff gave $10,000 to Edwards's political group in January plus $4,600 to the presidential campaign in March, while New York businessman Leo Hindery gave $15,000 to Edwards's political group in June.

"Those are amounts way above the federal hard-dollar contribution limits and, while they are going to nonfederal accounts, more than likely they benefit this presidential candidate," said Cooper, the former FEC official.

Former Massachusetts governor Mitt Romney (R) raised $190,000 in late November and December for his political action committee, collecting money from many, including hotel executive Richard Marriott, who donated to his presidential campaign again after the first of the year.

In addition to Clinton and McCain, eight other sitting members of Congress are running for president, and most are simultaneously raising money for their congressional campaign committees.

Sen. Joseph R. Biden Jr. (D-Del.) has raised the most: $77,000 for his Senate bid in the early part of this year, plus $400,000 late last year for his PAC.