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$10.8 Million in Soft Money Flows to Top 527 Groups Gearing Up For Congressional Elections

June 5, 2002

$10.8 Million in Soft Money Flows to Top 527 Groups Gearing Up For Congressional Elections

Amount May Be More, But Reports Are Missing in Flawed Disclosure System ? Including Those of Katherine Harris? Group

WASHINGTON, D.C. ? Shadowy “527” political organizations scrambled to collect nearly $11 million in soft money during the first three months of 2002 as they prepared for the November congressional elections, according to a report released today by Public Citizen. But lingering problems in the 527 financial disclosure system, which has been poorly administered by the Internal Revenue Service (IRS), leave an incomplete picture of activities by these groups, which can accept unlimitedcontributions from unions, corporations and wealthy individuals.

Public Citizen analyzed the first quarter disclosure reports for 2002 and found ? among other trends ? that Jane Fonda continued to be the largest soft money donor in federal politics. During the first quarter of 2002, Fonda gave $400,000 to Pro-Choice Vote, bringing her total donations to the abortion rights group to $12.7 million since July 1, 2000, when 527 groups were first required to disclose their finances to the IRS.

The Public Citizen report, Off to the Races, follows up on two earlier reports Public Citizen issued on 527 groups. First quarter disclosure reports showed that 527s controlled by members of Congress (“politician 527s”) were busy snaring soft money ? mainly from corporations ? before such contributions are banned by the McCain-Feingold reform law, which takes effect after the November election.

Sen. John Edwards (D-N.C.) had the most success, as his New American Optimists 527 collected $471,000, including $100,000 contributions each from trial lawyers Wade Byrd and John Williams. ARMPAC, the 527 of House Majority Whip Tom DeLay (R-Texas), collected $397,517, with most of the receipts coming from corporate donors such as Philip Morris ($50,000), U.S. Tobacco ($25,000) and BellSouth ($25,000). DeLay?s chief deputy whip, Rep. Roy Blunt (R-Mo.), garnered $275,309, mostly from corporations such as Verizon ($50,000) and BellSouth ($25,000). During that quarter these two telecommunications companies and others worked with Blunt and other Republican leaders to push key telecommunications legislation through the House.

Highly partisan “non-politician 527s” ? those not formally controlled by federal officeholders ? were even more successful at garnering soft money in early 2002. These groups, which will still be able to receive soft money after the November elections, were led by Impac 2000 ($1.4 million in receipts), a 527 group that fights for Democrats in congressional redistricting battles. Other top non-politician 527s were the New Democrat Network ($595,300), EMILY?s List ($525,355) and the Republican Leadership Council ($510,750).

First quarter receipts showed some 527 groups increasing their efforts to collect soft money as they moved from 2001 into an election year. The top 50 527 groups collected $14.1 million in the second half of 2001 (groups report just twice in odd-numbered years, but quarterly in even-numbered years). They were on a more aggressive pace in the first three months of 2002, nabbing $10.8 million ? a pace that projects to $21.6 million over six months.

“Because 527 groups were not required to disclose their finances during the comparable period in the last election cycle, there is no way to know if 527s are more active this cycle,” said Frank Clemente, director of Public Citizen?s Congress Watch. “But we expect a surge in spending by these special interest groups as the November election nears.”

In all, after their first-quarter 2002 hauls, the 100 527 groups believed to be most active in federal politics have collected $129 million in soft money since July 1, 2000.

First quarter disclosure reports ? or the lack of them ? showed how difficult it may be to track 527 groups as they try to influence the 2002 elections. Public Citizen continued to find glitches and mistakes in the IRS system. For example, financial reports for 10 of the 50 groups known to be most active in federal politics could not be found in the IRS Web-based disclosure system one month after the first quarter 2002 reporting deadline. It?s not clear if the groups failed to file or whether the IRS lost their reports; the IRS can?t say with certainty.

In other cases, reports on the IRS Web site appear and then mysteriously disappear without explanation. For instance, as of May 31, 2002, the most recent disclosure report for “American Values in Democracy Project, Inc.,” a group chaired by Katherine Harris, Florida?s secretary of state, showed nothing but four entirely blank pages.

“These partisan groups are likely to become major conduits for soft money banned by the McCain-Feingold reform law,” said Joan Claybrook, president of Public Citizen. “Yet the IRS disclosure system is riddled with flaws, lax in oversight and seemingly indifferent to 527 groups that appear to evade the law. This leaves the public in the dark about the influence of these groups as the 2002 election unfolds.”

In a May 2 press release, the IRS announced an amnesty program allowing delinquent 527s to submit late filings without paying any penalties. An IRS spokesman told Public Citizen that the agency will start enforcing 527 regulations after July 15, 2002.

Click here to view Public Citizen?s report.