Campaign fund law has giant loophole

From The Chicago Tribune:

Campaign fund law has giant loophole
`Millionaire's amendment' may unleash spending

By Rick Pearson and Ray Gibson
Tribune staff reporters
Published February 5, 2003

Part of a new federal campaign reform law designed to blunt the influence of special interest money could instead dramatically fire up the cash race in Illinois and other large states where wealthy candidates are financing their own campaigns for Congress.

Known as the "millionaire's amendment" to the McCain-Feingold campaign reform act, the complex provision allows opponents of candidates who pump personal wealth into campaigns for Congress to accept individual donations that could far exceed a basic federal limit.

Illinois is shaping up to be a testing ground of the controversial provision, which many reformers see as a misguided attempt at leveling the playing field that could lead to ever greater spending on campaigns.

With Republican Sen. Peter Fitzgerald up for re-election in 2004, several Democrats are eyeing their party's nomination for his seat. One is Blair Hull, a multimillionaire investor who has notified the Federal Election Commission of plans to use "personal funds in the amount of $40 million" in his campaign.

Depending on how much money Hull actually pours in, his opponents in the primary could be allowed to raise up to $12,000 from individual donors--six times the basic $2,000 fundraising cap set under McCain-Feingold. Under the old campaign finance rules, the limit from individuals was $1,000.

Even if Hull loses the primary, a less well-heeled Democratic winner might still be able to tap donors for another $12,000 apiece in the general election if Fitzgerald wins the GOP nomination. Fitzgerald is also a multimillionaire who spent more than $13 million of his own money to win election in 1998.

Stacey Zolt, a spokeswoman for Sen. Dick Durbin, an Illinois Democrat who was a co-sponsor of the "millionaire's amendment," acknowledged the new rules were "very complicated" and presented a "mind-boggling" task for federal regulators and candidates.

But Zolt said Durbin's interest in the law was motivated by many cases of candidates trying to self-finance their campaigns, including Fitzgerald in his 1998 victory over then-Democratic incumbent Sen. Carol Moseley-Braun and Durbin's 1996 opponent, Republican attorney Al Salvi.

Provisions of law

Under the new law, politicians must file an estimate of how much personal wealth they plan to tap when declaring their candidacies.

Wealthy candidates are also required to notify opponents within 24 hours every time they drop at least $10,000 of their own money into their campaigns. Every time that happens, the opponents are allowed to recalculate upward the amount they can collect from individual donors.

The new rules do not affect contributions from political action committees, which remain capped at $5,000. But there are significant revisions for campaign gifts from individuals.

For House contests, the ceiling on donations begins to rise once a candidate pours $350,000 of his own money into his campaign war chest. The more liberal fundraising rules apply only to the opponents of the wealthy candidate, who can't take in more than $2,000 in the primary per individual and another $2,000 in the general election.

In Senate races, the rules are even more intricate. The increased fundraising limits kick in according to a formula that takes into account each state's voting-age population.

In Illinois, the ceiling is pierced when a candidate contributes slightly over $1 million. Hull has already given himself more than $1.3 million.

At that level, the two less wealthy politicians who have so far declared their candidacy opposing Hull for the Democratic nomination--former Chicago Board of Education president Gery Chico and state Sen. Barack Obama of Chicago--can solicit individual donations of up to $6,000 for the primary.

Other possible candidates for the nomination include state Comptroller Daniel Hynes and Cook County Treasurer Maria Pappas. They, too, will be allowed to take advantage of the higher contribution limits if they jump into the race.

The ceiling is expected to double to $12,000 in coming months since Hull announced last week that he would largely underwrite the cost of his campaign.

Similar rules for higher donations could take effect for the general election, as well, depending on who wins the Republican and Democratic primaries and how much personal wealth they plan to pour into the November campaigns.

The "millionaire's amendment" is only a few months old, and it already is facing federal court scrutiny as part of a legal challenge to the overall McCain-Feingold law. The main goal of the law was to diminish the influence of wide-open soft money contributions to political parties and to restrict third-party advocacy advertising in political campaigns.

But critics of the "millionaire's amendment" contend it could be illegal because all candidates for Congress will no longer be subject to the same set of fundraising limits. The critics also argue the provision clashes with previous Supreme Court rulings that upheld the constitutionality of strict fundraising caps because of the overwhelming public interest in avoiding the appearance of corruption that can cling to large campaign donations.

Reform groups such as Common Cause also contend that by relaxing limits on individual donations for some candidates, the law will only spur the race for political dollars rather than reduce the need for massive amounts of campaign cash.

Joseph Sandler, a Washington, D.C., attorney who is former counsel to the Democratic National Committee, said he expects the act will have an effect on campaigns in large states such as New York, California and Illinois.

"This could have a significant impact," said Sandler, noting that it is easier for a candidate to find a few large donors than a lot of smaller ones.

"If it is upheld, it will have an impact. Every candidate in the race has supporters who can afford to give more than the limit," said Obama.

Chico disagreed. "As a practical matter, I think there just aren't that many people who can write a $10,000 check out of their checkbooks," he said.

A legislative compromise

Larry Noble, executive director of the Center for Responsive Politics in Washington, said he hasn't found "a lot of people who are wholeheartedly enthusiastic" about the "millionaire's amendment," which he described as a legislative compromise to get more votes for the entire McCain-Feingold package.

Noble said he anticipates lesser-funded candidates will spend more time fundraising outside their home to hit up contributors who can afford to give more.

"What they're going to have to depend on is the more well-to-do contributors being willing to pony up," Noble said. He said he believed the new law primarily benefited incumbents who are faced with a self-financed challenger.

"Incumbents have a wider circle of friends, more influence in and out of their own state and can often tap sources of money not available to others," Noble said.

That may not be the case in the general election in Illinois, however, if the incumbent Fitzgerald is the Republican nominee. Fitzgerald is a multimillionaire who amassed his personal wealth through the family's banking business. Fitzgerald aides have been researching the "millionaire's amendment" provisions.