'Stealth PACs' Report Campaign Financing
By John Mintz and Susan Schmidt, The Washington Post,
Wednesday 1 November 2000; Page A17
The Caterpillar heavy equipment company gave $100,000 to House Speaker
J. Dennis Hastert (R-Ill.). The Wolfington family, owners of a
Washington limousine company, wrote checks totaling $45,000 to
Sen. Edward M. Kennedy (D-Mass.). Actress Jane Fonda shelled out
$500,000 for the League of Conservation Voters, while three Florida
sugar companies contributed $275,000 to the Republican Leadership
Council, a political group backing George W. Bush.
These are a few of the nuggets buried in the first detailed filings
under a new law aimed at forcing previously secret organizations to
disclose their donors and spending.
The law, which went into effect July 1, targets
organizations--including political committees controlled by members of
Congress--that engage in political activity but argued that they were
not required to report their finances to the Federal Election
Commission because they avoid explicitly supporting or opposing
The first major change in campaign finance law in two decades, the
legislation was approved by Congress after controversy grew about the
explosive growth of the groups, called "527s" after the
section of the tax code governing political groups. The law required
these groups to register with the Internal Revenue Service and reveal
their finances by mid-October. The filings have since been scanned and
posted on an IRS Web site.
Some of the information in the reports has never been publicly
available. Other filings were accessible only through laborious
searches of state election reports, sometimes only obtainable by
visiting state election agencies in person.
"Nobody thought this law would be the final solution" to the
problems of unreported political spending, said Frances Hill, a
University of Miami law professor specializing in
fundraising. "But the 527s were so abusive that just disrupting
those arrangements had some utility. It makes the point that there are
some limits to the use of secret money, that it's a matter of our
Indeed, Steven Moore, president of the conservative Club for Growth,
which reported raising $323,000, said the law "has hurt us with
corporations, no doubt about it."
"Corporations and individuals who had to do business with the
government could give to Club for Growth anonymously before," said
Moore, whose group backs Reaganite Republicans, sometimes those
challenging incumbents. "This has really hurt our ability to raise
money from business."
Because of the law's wording, it prompted hundreds of state-based
political groups to file with the IRS, burying the filings of
big-money fundraising groups in a blizzard of paperwork about plain
vanilla groups of marginal interest.
Any fundraising before the law's July 1 effective date isn't
revealed. As a result, the vast majority of the money brought in for
the Sierra Club's $9 million television advertising campaign against
Texas Gov. George W. Bush and other Republicans won't be
disclosed. For the same reason, a $7 million gift to a 527 group
affiliated with the NAACP will remain anonymous.
In addition, some of the "stealth PACs" at which the new law
was aimed changed their tax status to remove themselves from the
legislation, so the data the IRS makes public are scanty at best.
For example, Citizens for Better Medicare, a group bankrolled by the
pharmaceutical industry, abandoned its 527 status when the disclosure
law was passed earlier this year. The group has spent $40 million on
TV commercials attacking a Democratic prescription drug plan. In the
past three months, the group's phased-out 527 arm has raised no money,
though it reported $8.4 million in spending, according to the IRS
"It's kind of like shining a searchlight inside a cave. You get a
nice bright beam from what the searchlight is pointed at, but there's
all this going on outside the beam of light that you can't see,"
said election lawyer Kenneth Gross.
While about 10,000 groups registered with the IRS as 527s in recent
months, only 2,810 have filed documents outlining their fundraising
Perhaps the biggest new area of disclosure provided by the law
involves the political action committees operated by politicians that
collect large "soft money" contributions from wealthy
individuals, corporations and labor unions in addition to the smaller
contributions that they report with the FEC. Before the new law, the
large donations were either reported in hard-to-obtain state-level
reports or not disclosed.
The Majority Leader's Fund of Rep. Richard K. Armey (R-Tex.) reported
raising $581,473 in the last three months, including $25,000 each from
Verizon and SBC Communications, as well as Texas energy firm Enron
Corp. Two wealthy brothers from Texas, Sam and Charles Wyly, who
financed ads promoting George W. Bush and attacking Sen. John McCain
(R-Ariz.) during the GOP primaries, gave $12,500 each.
The Republican Majority Issues Committee of House Majority Whip Tom
DeLay (R-Tex.) reported $482,240 in contributions, including $150,000
from Amway founder Rich DeVos and $75,000 from executives of
Enron. RMIC is raising and spending money to identify conservative
voters and get them to the voting booth, said chairman Karl Gallant.
Rep. Patrick J. Kennedy (R.I.), who heads the House Democrats'
campaign committee, reported receiving $25,000 from a Nebraska
company, Sense Technologies.
Hastert picked up $549,000. Besides Caterpillar Inc., his contributors
include Associated Builders & Contractors, which gave $90,000, and
AT&T, which contributed $50,000. Texas Democrat Martin Frost's
Lone Star Fund raised $256,800. Senate Minority Leader Thomas
A. Daschle (D-S.D.) raised $84,500, and like several of his colleagues
he contributed some of it to New Hampshire Gov. Jeanne Shaheen's
Politicians use the leadership PACs for a variety of purposes,
including polling, direct mail and contributions to state candidates
or national party committees. Much of the money raised by Hastert and
Armey went to fund events at the Republican convention in Philadelphia
this summer. Armey, for example, spent $138,000 on the country music
duo Brooks & Dunn.
For the first time under the new law, the Democratic Governors'
Association is required to report its finances even though its GOP
counterpart has volunteered the data to federal election officials for
years. For the past three months, contributions to the Democratic
group totaled $1.4 million, including $60,000 from the tobacco
copyright 2000 The Washington Post