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Party Conventions Feature Lobbyist Influence-Peddling

A Soft Money Loophole Means Lots of Partying, Schmoozing by Lobbyists in Tampa and Charlotte

The Democratic and Republican national conventions which are supposed to be publicly financed electoral events with reasonable ethics restrictions on influence-peddling by lobbyists – have turned into mostly privately financed soirees funded by corporations and lobbying firms that seek favors from the federal government. Today, less happens at the presidential nominating conventions, because the presumptive nominees are chosen in advance. Fewer people care about the conventions, as declining viewership shows. Yet more money is raised and spent at the conventions than when the conventions were major political events.

Two separate codes were intended, but largely have failed, to make the nominating conventions more respectable political events. The first is the decades-old ban imposed by the Federal Election Campaign Act (FECA) on the use of “soft money” funds from corporate or union treasuries or large individual contributions in excess of the legal limits to pay for conventions. The second is the 2007 congressional ethics rules that restrict the manner in which lobbyists and lobbying organizations may host parties and offer gifts to members of Congress.

A. FECA and the $100 Million Soft Money Loophole


The presidential public financing system was created to replace potentially corrupting “soft money” with public money in the selection of the president, largely in response to a soft money slush fund scandal at the 1972 Republican National Convention. In May 1971, the giant International Telephone and Telegraph Corporation (IT&T) pledged up to $400,000 to attract the 1972 Republican National Convention to San Diego. The company was facing several anti-trust lawsuits under the Nixon administration. Just eight days after the selection of San Diego for the Republican convention, Attorney General Richard Kleindienst agreed to an out-of-court anti-trust settlement with IT&T that the company considered very favorable. In the wake of this scandal, Congress approved a system of public financing for presidential elections, which included full public financing of the conventions, removing the potentially corrupting corporate money from the convention process.

1. The Law Regarding Convention Financing
FECA’s public financing program for the presidential nominating conventions created a system in which the parties, in exchange for accepting reasonable spending ceilings on their conventions, would receive a block grant from the federal government to pay for nearly all convention expenses. Originally, the spending ceiling and block grant was set at $2 million, to be adjusted for inflation. FECA was soon amended to increase the spending ceiling and block grant to $4 million.

The law began to unravel after a series of controversial Federal Election Commission (FEC) advisory opinions and regulations issued in the 1980s. The FEC decided to allow corporate and union soft money to help pay for the conventions through “host committees.” Originally, the FEC limited the soft money loophole for host committees and municipal funds to corporations and unions with a “local tie” to the community hosting the convention. In 2003, the FEC dismissed the requirement of a “local tie” for corporate contributions to host committees and municipal funds altogether. [1]

FEC Commissioner Thomas Harris back in the early 1980s saw the danger of these exemptions getting out of control. He wrote in a dissenting opinion: “By permitting corporations and unions to donate unlimited amounts of money to fund political conventions, the Commission is ignoring one of the clear concerns of 2 U.S.C. 441(b) and its predecessor statutes – that is, the fear of the influence of aggregated wealth on the political process.” [2]

2. The Flood of Soft Money into the Conventions
Commissioner Harris’ prediction that the host committee exception could become a gaping soft money loophole has come true with a vengeance. In 1976, both parties paid for their conventions almost exclusively with public funds, about $2 million each. In 1980 and 1984, the parties still relied mostly on public money to pay for their conventions, at slightly more than $4 million in 1980 and somewhat more than $7 million in 1984. Soft money had only begun to creep into the picture.

Then, in 1996, the use of privately financed “host committees” by the parties overwhelmed the public financing program. Both conventions received private funds amounting to nearly double the public grant.

Today, public funds make up only a modest share of the total (inflated) cost of the conventions. In 2000, for example, each party was awarded about $13.5 million to pay for its nominating convention. In reality, private sources chipped in an additional $52 million for the Democratic convention in Los Angeles and $60 million for the Republican convention in Philadelphia. In the 2004 election, the Republicans spent $101 million on their convention and the Democrats spent $72 million, all while the official public funding grant intended to pay for the conventions was $15 million. In 2008, each party was awarded $16.4 million in public grants to pay for their conventions, but total expenditures through the host committees amounted to more than $55 million for the Democratic convention and $57 million for the Republican convention.[3] This year, each party has been given a public grant of $18.3 million, but private sources are expected to add another $37 million for the Democratic convention and $55 million for the Republican convention.

The partisan disparity for the 2012 conventions is the result of the Democratic Party’s new policy of reining in out-of-control financing of its convention. As part of the agreement between the Democratic Party and the convention host committee, direct corporate contributions to the convention are banned, lobbyist contributions are prohibited and all other contributions are capped at $100,000. At the time of the announcement, U.S. Rep. Debbie Wasserman-Schultz (D-Fla.), chairwoman of the Democratic National Committee, said, “We will make this the first convention in history that does not accept any funds from lobbyists, corporations or political action committees. This will be the first modern political convention funded by the grassroots, funded by the people.”[4]

The self-imposed Democratic constraints on special-interest funding are expected to significantly reduce private funding for the Democratic convention even given some of the loopholes in the policy. For example, while corporations cannot make direct contributions to the Democratic convention, they can provide in-kind products and services to the host committee to help finance the convention, which likely will be worth a substantial amount. Furthermore, with the host committee struggling to make its contractual obligation of arranging $37 million in additional private funds for the convention, the host committee has incorporated New American City Inc., a non-profit entity run by the convention host committee. New American City reportedly received funds from Bank of America, Wells Fargo and Duke Energy, calling into question the value of the pledge against accepting direct corporate contributions with this backdoor avenue in place.

Meanwhile, the Republicans have not imposed any such limits on the sources and amounts of special interest money to finance their convention.

3. What Do They Get for Their Money?
Nearly all of the private donors to the convention host committees have business pending before Congress or the White House and have made substantial campaign contributions and lobbying expenditures to press their causes. With the 2008 convention, for example, 173 organizational donors to the host committees have been identified, and all but two are corporations. These donors made more than $100 million in direct campaign contributions to federal candidates and party committees, and about $1.5 billion in lobbying expenditures between 2005 and 2008.[5] Clearly, most companies that donate to the conventions want something from the federal government and they are willing to pay.

Corporations and their lobbyists also purchase a great deal of one-on-one time with lawmakers at the conventions. In return for their donations to the convention host committees, corporate sponsors to the conventions are promised a variety of benefits, ranging from advertising opportunities to VIP tickets to the convention centers. Each host committee advertises numerous levels of sponsorship the greater the contribution, the greater the access to advertising opportunities and elected officials. Additionally, the sponsorship packet offers contributors the chance to buy access to party luminaries by hosting or sponsoring events such as state delegation receptions.

So far, no data on contributions to the 2012 conventions are available. Unlike the 2008 conventions, in which the governors and mayors of the convention sites (as members of the host committees) provided early data on donors in response to Freedom of Information Act (FOIA) requests by the Campaign Finance Institute, the governor’s office of Florida and local offices of the cities of Tampa and Charlotte provided no similar information on donors in response to FOIA requests by Public Citizen. Each of the offices this year claimed that the host committees are private entities not under their control or jurisdiction. The governor’s office of North Carolina did not respond to our inquiry.

Host committees and municipal committees are required to file their financial disclosure reports with the FEC either 60 days following the convention or 20 days prior to the general election (Oct.15), whichever is first.[6]

B. Party Time on the Lobbyists’ Dime? Not So Fast


One way of buying influence with lawmakers is to make soft money contributions to the convention host committees. Another is to pay for a lavish reception or party at the convention for lawmakers and party leaders. Many of the corporate donors, like AT&T, make extensive use of both tactics.

Eight years ago, the parties at the national conventions were more numerous and more pointedly set up for influence-peddling by their corporate sponsors. The Consumer Electronics Association, for example, a lobbying organization with business pending before the House Energy and Commerce Committee, hosted a luncheon at the 2004 Republican convention to honor committee members. Media companies, seeking specific legislation from Congress, hosted a $300,000 “Caribbean Beach Bash” at the 2004 Democratic convention in honor of U.S. Sen. John Breaux, a leading advocate of media interests over the years. Individual partygoers could pony up an additional $20,000 for some one-on-one time with the honoree. Though Breaux was retiring, the media lobbyists sent a clear message to his colleagues who remain: We support our friends.[7]

New congressional ethics rules adopted in 2007 placed constraints on this type of influence-peddling at the conventions by lobbyists and lobbying organizations. The “Honest Leadership and Open Government Act” contains a sweeping set of lobbying laws and ethics rules enhancing disclosure of lobbying activity and regulating the behavior of lobbyists, lobbying organizations, members of Congress and their staffs. (For a detailed summary of the lobbying law, click here.)

The new rules ban any congressional lawmaker from participating in an event at the convention honoring that lawmaker if the event is hosted by a lobbyist or lobbying organization.[8]

This rule expressly prohibits members of Congress from attending any convention party thrown by a lobbyist or lobbying organization where a specific member or members are identified by name and title as the honoree (including as a “special guest”), as well as events honoring a group composed solely of members, such as a congressional committee or congressional caucus. Member participation also is prohibited if the member is to receive a special benefit or opportunity that would not be available to some or all of the other participants, such as if the sponsor were to offer the member an exclusive speaking role or a very prominent ceremonial role.

This is precisely how the Senate ethics committee has interpreted the rule, issuing guidelines to that effect. The House ethics committee, however, has issued partly erroneous guidelines on this matter, which is likely to cause confusion and possibly violations of the rule at the upcoming conventions. In describing the nature of the rule, the House ethics committee has interpreted the ban on parties honoring a member as not applying to parties that honor groups of members in which no specific member is identified, such as congressional committees or caucuses.[9] The House ethics committee has also limited application of the rule to the formal dates of the convention itself, rather than the heavy party weekends immediately before and after the convention.

Both interpretations by the House ethics committee are inappropriate and fail to honor the letter and spirit of the rule. The clear intent of the rule is to prohibit lobbyists from hosting parties honoring one, two or even 100 members, either specifically or by committee or caucus name.

Congressional gift rules also prohibit members and staff from accepting gifts from lobbyists or lobbying organizations at the conventions, except under the following circumstances:

  • Reception – Members and staff may attend a reception hosted by a lobbying organization, including food and refreshment of nominal value offered other than as part of a meal, known as the “toothpick rule.”
  • Widely attended event – Members and staff may accept dinner, refreshments and entertainment at a widely attended event. An event is considered widely attended when at least 25 people from outside Congress are expected to attend and the member’s attendance should be related to official duties. Free attendance does not include entertainment collateral to the event, such as a concert.
  • Charity event – Members and staff may accept free attendance at a charity event, provided the primary purpose of the event is to raise funds for a legitimate charitable organization.
  • Campaign fundraiser – Members and staff may accept free food, refreshments and entertainment in connection with any fundraising events sponsored by party organizations, campaign committees and other political organizations. Such fundraising events must comply with federal or state campaign finance limits and disclosure requirements.
  • Convention event – Members and staff may accept food, refreshments, entertainment or other gifts offered by the convention committees, party organizations and federal, state and local governments.


Public Citizen and seven other reform organizations sent a letter to Congress last month urging all members to abide by the new ethics rules. The letter is available at http://www.citizen.org/documents/convention-letter-2012-house.pdf.

The House Ethics Committee guidance on the conventions is available at http://www.citizen.org/documents/house-convention-guidance-2012.pdf.

The Senate Ethics Committee guidance is available at http://www.citizen.org/documents/senate-convention-guidance-2012.pdf.

C. Conclusion: Lobbyists Gone Wild


Corporations and their lobbyists see the national nominating conventions as an ideal opportunity to buy access and influence with the presidential campaigns, lawmakers and party leaders. The conventions constitute a campaign media blitz for the campaigns and provide a golden opportunity for lobbyists to extend their lobbying activity off Capitol Hill.

The soft money loophole created by the FEC has derailed part of the original intent of the presidential public financing program: to remove the potentially corrupting corporate money (such as from IT&T) from the convention proceedings. The FEC should reverse its previous rulings on corporate sponsorship of host committees and municipal funds. If the FEC will not step up to the plate – and there is no indication that it will do so then Congress must revisit this issue when it considers strengthening the presidential public financing system.

Meanwhile, corporate lobbyists will be partying, schmoozing and lobbying at the national conventions. Though new ethics rules are forcing significant adjustments in the behavior of lobbyists and lobbying organizations at the conventions, there is still confusion that could lead lawmakers to disregard the rules.

It is imperative that members of Congress and their staffs are clear on the ethics rules and approach the party scene prudently. The House ethics committee needs to revisit its guidance so as not to contribute to the confusion. And the public and press must do their best to monitor the convention festivities to ensure compliance with the rules. No one else will.

Public Citizen and the Sunlight Foundation set up a bird-dogging campaign for the 2008 conventions to crash the soirees and identify which are in violation of the ethics rules. We were able to shut down only one party sponsored by a lobbying organization out of the hundreds that took place at both conventions.

Public Citizen and the Sunlight Foundation will be repeating this bird-dogging campaign for the 2012 conventions.


[1] 11 CFR 9008.52.

[2] Commissioner Thomas Harris, Advisory Opinion 1982-27A.

[3] Presidential Campaign Receipts,” Federal Election Commission Web site (July 2012).

[4] Democratic Convention Benefits from Corporate Cash,” Associated Press (July 21, 2012).

[5] CampaignFinance Institute and Center for Responsive Politics, Donors to Party Conventions Have Spent Over $1 Billion on Federal Lobbying Since 2005, reported in Politico (Aug. 19, 2008); and Campaign Finance Institute, “Donors to Party Conventions Have Spent Over $800 Million on Federal Campaign Contributions and Lobbying Since 2005” (June 18, 2008).

[6] 11 CFR 9008.51.

[7] Bill McConnell, “Party Animals,” AllBusiness (June 21, 2004).

[8] House Rule XXV(8); Senate Rule XXXV(5).

[9] House Ethics Manual, p. 78.

 

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