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Top 527 Stealth PACs Collect $115 Million

Nov. 1, 2002

Top 527 Stealth PACs Collect $115 Million
in Soft Money to Influence Congressional Elections

Washington, D.C. — Leading “527” political organizations seeking to influence this month’s elections raised $115 million in soft money – equal to 27 percent of the total soft money collected by the national parties – during the 2002 election cycle so far, according to a new analysis by Public Citizen. The money is being used to finance sham “issue ads,” get-out-the-vote efforts and direct mail operations that benefit candidates for Congress.

Public Citizen’s study is based on reports that were collected from the Internal Revenue Service and directly from 527 groups, as many reports are not currently available through the online IRS disclosure system. Named after the section of the Internal Revenue Code they are regulated by, 527 groups can accept unlimited soft money contributions from corporations, unions and individuals.

“As the election approaches, these 527 groups are making a mad dash to raise millions of dollars and influence key races to tip the balance in their favor,” said Frank Clemente, director of Public Citizen’s Congress Watch. “With the help of five- and six-figure checks, these stealthy organizations are able to air sham issue ads, flood mailboxes with direct mail and staff phone banks to influence the upcoming elections, with little or no accountability.”

Findings from the report, entitled Cramming for the Midterm, include:

  • The 170 leading 527 groups identified by Public Citizen have raised $115.5 million in soft money since January 2001. (There is no way to compare these figures to the last election cycle because 527 groups were not required to disclose their contributions and expenditures prior to July 2000.) The final figures are likely to be considerably higher because nearly half of the third-quarter reports (July 1-Sept. 30) and three-quarters of the pre-election reports (Oct. 1-16) were not available as of Oct. 30.
  • The $115.5 million is 27 percent of the total amount of soft money raised by the national political parties this election cycle ($421.3 million). Since soft money to political parties will be banned after the Nov. 5 election, 527 groups are expected to dramatically increase their collection of soft money in the next election cycle.
  • 527 groups controlled by federal candidates raised $41.6 million, or 35 percent of the $115.5 million. Such direct contributions represent a complete subversion of the Federal Election Campaign Act and other federal laws that either prohibit corporate and union contributions to candidates or limit to $1,000 per election ($2,000 per cycle) the amount that individuals may contribute to candidates.
  • The fifty-seven 527 groups controlled by federal Democratic candidates raised $24.6 million, far more than the amount raised by 53 groups controlled by Republicans ($17 million). A majority of the money to these groups came from corporations, and most, if not all, had business before Congress.
  • Sen. John Edwards (D-N.C.) and his New American Optimists 527 group take the honors for exploiting the 527 loophole. In this election cycle, he’s raised more 527 soft money than any other federal candidate – $4.3 million, nearly 12 percent of the total raised by all federal candidates – and more money from one individual donor (movie producer Steve Bing has given Edwards $900,000, or 21 percent of his total) than any other federal candidate.
  • Top corporate donors to the leading 527 groups during the 2002 cycle included the Pharmaceutical Research and Manufacturers of America ($554,480); AT&T ($548,000); Mortgage Insurance Companies of America ($522,500); SBC Communications ($415,000); and American International Group ($410,000).
  • The Club for Growth, a conservative 527 group, is using sham “issue ads” and a massive bundling operation to help elect GOP legislators who want to cut taxes and reduce the size of the federal government. The Club has spent about $1.3 million on issue ads. Among them: a $600,000 ad buy portraying Senate Majority Leader Tom Daschle (D-S.D.), Sen. Edward Kennedy (D-Mass.) and Sen. Hillary Clinton (D-N.Y.) as bobblehead dolls shaking their heads “no” to “job-creating tax cuts,” “homeland security” and “eliminating the unfair death tax.” The spot ran in states with close Senate elections including Arkansas, Colorado, Missouri, New Hampshire, South Dakota and Texas.
  • The liberal 527 group EMILY’s List has raised $5.6 million to help Democratic, pro-choice female candidates. Besides paying for sham “issue ads” and direct mail and making contributions to state and local parties, EMILY’s List has made huge transfers of its 527 soft money to its hard money account that enable it to pay for the cost of raising hard money. It has perfected the art of “bundling,” whereby it pushes donors to pony up hard money contributions that can be given directly to candidates.
  • The Republican Leadership Council, a moderate GOP 527 group that has raised $1.9 million, announced several TV and radio campaigns two weeks before the election seeking to help embattled candidates in Colorado, Connecticut and Iowa. One ad in Connecticut rebukes that state’s Rep. Jim Maloney for “attacking [Rep.] Nancy Johnson’s exceptional record.” The irony is that two of the group’s leaders (Sens. Olympia Snowe (R-Maine) and Susan Collins (R-Maine)) are strong supporters of the new campaign finance law that would prohibit soft money funding of such sham “issue ads” 60 days before the election.

“This is only the beginning,” said Andrew Benore, senior researcher at Public Citizen’s Congress Watch. “When soft money contributions to political parties are banned after November’s elections, donations to 527 groups will become the special interests’ weapon of choice.”

To search Public Citizen’s new 527 group donor database, click here.