Feb. 26, 2002

Using Shadowy "527 Groups," Corporations Give Unlimited Dollars Directly to Members of Congress

Groups Allow Companies to Influence Legislation, Underscore Need for Reform

WASHINGTON, D.C. – Corporations are using shadowy and little-noticed groups to put millions of dollars into the hands of lawmakers – a practice otherwise prohibited by federal campaign law – while seeking legislative favors, Public Citizen has found.

Public Citizen’s analysis of recent telecommunications, tobacco and money-laundering legislation shows that these groups, known as "527 groups," enable corporations to gain access to lawmakers and shape legislation.

The 527 groups, products of an exemption carved in Section 527 of the Internal Revenue Code, enable lawmakers to directly amass huge quantities of "soft money" – unlimited contributions from individuals, corporations and unions. (Other soft money is given through political parties.) With the 527 soft money, politicians sponsor events that further their own careers, give money to state and local candidates, and pay for "get-out-the-vote" efforts.

A Public Citizen investigation of 25 leading "politician 527 groups" (non-politician groups will be the subject of a forthcoming report) found that it is difficult and sometimes impossible to learn which politicians have 527s, who contributes to them and what the groups spend money on. Although these politician 527s would be banned under pending campaign finance reform legislation, the defective disclosure apparatus will continue to hinder the tracking of soft money to the 527 groups set up by non-politicians, such as the Sierra Club and Republicans for Clean Air, that want to influence elections.

"The politician 527 groups are a nefarious mechanism for legalized bribery," said Joan Claybrook, Public Citizen president. "They allow corporations to put unlimited amounts of money directly into the pockets of members of Congress. This corporate investment is for one purpose only: to shape the laws that Congress votes on and ultimately approves. They have corrupted our legislative process."

Among Public Citizen’s findings, entitled Congressional Leaders’ Soft Money Accounts Show Need for Campaign Finance Reform Bills:

• Virtually every congressional leader has his or her own 527. At least 61 members of Congress have their own groups, including 19 who created new ones in the past year.
  
• In the one-year period from July 1, 2000 to June 30, 2001, the top 25 politician 527s collected more than $15.1 million. This suggests that these top groups would collect approximately $30 million in a two-year election cycle. (More recent reports for all 25 groups are not available although they were due to the IRS on Jan. 31, 2002.)
  
• The majority of contributions to the top 25 groups from July 1, 2000, to June 30, 2001 came from 27 major industries (including individuals, such as executives, associated with these major industries) that gave at least $100,000.
  
• The top six congressional leader 527s collected 81 percent of their contributions from corporations between July 1, 2000, and June 30, 2001.
  
• The 527 politician groups remain shadowy due to flaws in the disclosure law and the Internal Revenue Service’s Web-based disclosure system. And 527s often appear to skirt the law by ignoring disclosure requirements and providing vague and misleading information.

In new policy investigations, Public Citizen found that:

• Regional Bell telephone companies promoting deregulation of high-speed Internet service poured $277,666 into the 527s of House Speaker Dennis Hastert (R-Ill.), Majority Whip Tom DeLay (R-Texas) and Chief Deputy Whip Roy Blunt (R-Mo.) while their favored Tauzin-Dingell bill was considered in 2001. Republican leaders simultaneously maneuvered to advance the bill despite opposition among the House GOP rank and file. (A vote is scheduled February 27).
  
• The 527 groups of Senate Majority Leader Tom Daschle (D-S.D) and House Democratic Caucus Chairman Martin Frost (D-Texas) received $40,000 and $50,000 respectively from the Stanford Financial Group between July 1, 2000 and June 30, 2001. During this period, Stanford was fighting anti-money laundering legislation supported by the Clinton administration. Stanford gained access to the Texas Democratic delegation through Frost, and neither Democratic leader protested when key congressional Republicans sank the bill.

"Internet access, money-laundering, tobacco legislation -- these are among the issues corporations tried to influence through 527s," said Frank Clemente, director of Public Citizen's Congress Watch. "These 527 groups are just one more reason that the Senate and President Bush must approve the pending campaign finance reform measure."

READ the report.

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