This article originally provided by In These Times

July 31, 2006

How our current campaign finance system breeds political corruption

By Conor Kenny

The irony of the ongoing federal corruption investigations striking fear into the hearts of members of Congress is that nearly everyone who has gone to jail, been indicted or served with a subpoena could have gotten away with it. Under the current campaign finance system, there is more than enough perfectly legal graft to fund all the five-star restaurant dinners and jet trips to luxury golf resorts that a legislator could desire, and still have enough left over to finance a winning reelection campaign for a job that offers a $165,000 salary, healthcare plan and generous pension.

These perks can be funded by perfectly legal campaign contributions as long as they are written off as "campaign expenses." And every day members of Congress collect checks from those eager to gain influence. It is a testament to the hubris and greed of those caught up in this year's scandals that they cross the line between such "legal bribery" and the straight-up bribery of promising legislative favors for bundles of cash.

While federal campaign finance laws severely restrict what you can give directly to a candidate, virtually nothing restricts individuals from going out and collecting massive amounts of other people's money for delivery to a single candidate.

The first people to really figure this out were those on the team charged with raising a presidential campaign war chest for then-Governor George W. Bush big enough to scare off any challengers in the primary election. In a visionary development, the campaign created a sophisticated system by which they recruited surrogate fundraisers and then tracked their progress. Those who raised at least $100,000 for the campaign were awarded the title of "Pioneer." The system was so successful that in the 2004 campaign a special "Ranger" designation was created for those uber-fundraisers who brought in more than $200,000.

Unfortunately, the cachet that comes with being publicly recognized as a friend and financier of the potential president-to-be was too marketable for those influence peddlers for whom access is the ultimate tradable commodity. These men--they are overwhelmingly men--were not the wealthy true believers like real estate mogul and Ranger Alex G. Spanos, or even industrialists seeking a lighter regulatory hand like the late Enron CEO and Pioneer Kenneth Lay. No, this breed saw fundraising as an explicit part of their business model. They either sold this access to others or used it for themselves, but it was always a good investment, generating returns rarely seen in the stock market.

Not surprisingly, many from the ranks of Bush's Pioneers and Rangers would end up on the wrong side of the law in the current bribery scandals. A year and a half after the president's second inauguration, at least nine of his fundraisers find themselves under investigation, indictment or convicted of state or federal crimes; five of them for offenses specifically related to their political activity or exploiting the access that came with it. Super-lobbyist and convicted felon Jack Abramoff is Exhibit A. [See accompanying sidebars.]

The lure of the golden rolodex

On Jan. 25, three weeks after Abramoff pleaded guilty to conspiracy to bribe members of Congress and less than two months after Rep. Randy "Duke" Cunningham (R-Calif.) pleaded guilty to taking bribes from a defense contractor and lobbyist, a Senate committee meeting on ethics reform elicited a rare moment of brutal candor. The meeting, held at the height of the public uproar over the Washington scandals, showed that the surrogate fundraising system has spread to Congress.

In the middle of a discussion about several small-bore proposals to ban members of Congress from accepting gifts of meals and trips from lobbyists, Sen. Dick Durbin (D-Ill.), the minority whip, pooh-poohed such considerations as "carping on trifles."

"Why is it that we warm up to all these lobbyists?" Durbin asked. "It isn't for a meal. ... We know when it comes time to finance our campaigns, we're going to be knocking on those same doors."

Sen. George Voinovich (R-Ohio) agreed. "It's out of control," he said. "We all hate it. And it's about time we collectively think about how we can get off the treadmill."

The treadmill Voinovich was referring to is the relentless fundraising needed to run a modern political campaign. According to the Center for Responsive Politics, in 2004 the average winning House campaign cost $1 million, a winning Senate campaign $7.2 million and President George W. Bush's successful reelection a whopping $345 million. In the 2004 election, 1,403 congressional candidates raised more than $1.2 billion to pay for their campaigns.

To acquire such massive amounts, candidates turn to the best fundraisers in the country: Washington lobbyists. A recent study by the reform group Public Citizen found that lobbyists and their political action committees pumped $33.9 million into the 2004 congressional campaigns, a 90 percent increase from 2000.

"But," says Public Citizen's Legislative Representative Craig Holman, "these numbers are just the tip of the iceberg. The only money we could actually pin down were the checks personally signed by lobbyists. The law, unfortunately, doesn't require candidates to disclose whether those same lobbyists raised contributions from others, and that's where the real money is."

Unlike the Bush campaigns, most congressional candidates take advantage of this loophole to keep their fundraisers secret. Officially, from 1998 through 2005, Abramoff only contributed about $180,000 to congressional candidates. However, when contributions from his clients and associates are factored in, the total rises to roughly 14 times that, $2.6 million.

The phenomenon is a direct result of how federal campaign laws are set up. While the relatively low federal limit of $2,100 per person, per campaign, per election constrains what lobbyists can give personally, it also increases candidates' dependence on surrogates who have "golden Rolodexes" filled with the names of people willing and able to cut checks to politicians at their direction, a process called "bundling."

Ironically, the passage of the landmark McCain-Feingold campaign finance reforms of 2002 helped to foster this reliance on bundling. The reforms' chief achievement was to close a loophole that allowed large donors to effectively launder contributions of hundreds of thousands of dollars by passing them through the political parties. When the reforms were passed, candidates suddenly needed thousands of $2,000-level donors instead of smaller bands of $100,000 donors. The easiest way to accomplish that was to enlist bundlers.

Operating in the shadows

It is impossible to know for sure who the congressional bundlers are or how much they raise because most, if not all, members of Congress guard such information very tightly. However, the rosters of Pioneers and Rangers released by the Bush campaigns--as well as the steadily leaked stream of invitations to after-hours fundraisers held at Washington lobbying firm offices--show that this class of operatives is likely dominated by lobbyists and others who are either trying to gain access to government officials or sell it to the highest bidder. More than one-sixth of the 940 bundlers for Bush's campaigns came from the increasingly melded ranks of lobbyists, lawyers and professional political operatives--people whose professions have come to require such access. More importantly, they are people who have the connections necessary to raise $100,000 in other people's money.

The Bush campaign, for its part, monitored the bundler's progress closely. It issued each one a tracking number to use on each check. This number, as Thomas Kuhn, the head lobbyist for the electric power industry, explained in a 1999 fundraising letter, helped "ensure that our industry is credited, and that your progress is listed among the other business/industry sectors."

The incentive of earning such credit worked extremely well: Bush's Pioneers and Rangers collected at least 30 percent of the $276 million raised for the 2004 campaign. In exchange, they were given access to Pioneer-only events, designated as delegates to the presidential conventions and, for about one-fifth of them, garnered presidential appointments to everything from advisory boards to cabinet-level positions.

However, the public nature of the program is unlikely to be duplicated, especially by members of Congress wary of the reporting enabled by revealing their funders. In fact, the list of Bush's Pioneers and Rangers might never have been made public at all. It was still a secret in 1999 when a watchdog group called Texans for Public Justice began pushing a story about a sophisticated contribution tracking system. On a slow news day in Texas, one of the reporters covering the still-unpolished presidential candidate caught Bush unaware and got him to agree to release the details.

"It's one of those accidents of history," says Andrew Wheat, research director for the group. "If Bush hadn't been caught unprepared for the questions, we probably wouldn't know the tremendous role these fundraisers played in the campaign."

More scandals around the corner?

By the end of Bush's second term we will likely see more Pioneers and Rangers behind bars. Federal prosecutors continue to investigate how far the Abramoff and Cunningham lobbying scandals extend. Tom DeLay's trial for the alleged illegal use of corporate campaign contributions in the 2002 Texas elections is proceeding. One of the funding vehicles allegedly used in that scheme, Texans for a Republican Majority, was headed by Pioneer-lobbyist Bill Ceverha, and it received contributions from Brent Wilkes, now under investigation.

The Pioneer with the most to worry about, however, may be Ralph Reed. Reed, a Pioneer in 2000 and a Ranger in 2004, is running for lieutenant governor in Georgia. In late June, a Senate investigative report on the Abramoff scandal noted that he accepted more than $5 million from Indian tribes that operate casinos. According to the report, Reed used his position as head of the Christian Coalition to generate conservative opposition to the proposed gambling operations of rival tribes, but only accepted the money after it was laundered through a series of intermediary corporations. In fact, when Abramoff got his first lobbying job in 1995, the press release issued by his new employer touted his ties to the Christian Coalition and Reed, whom he first met during their days in the College Republicans. Reed has not been accused of a crime, but the report recommended a further investigation of the procedures used to obscure the source of the payments. One of the tribes on the losing end of that scheme recently named him and Abramoff in a lawsuit for causing its casino to be shuttered.

Systematic problems, systematic solutions

The only way to eliminate the incentive for less than scrupulous individuals to corrupt the political system is the full public financing of elections, according to Public Citizen's Craig Holman. "Because the 'bundling' of other people's campaign contributions is now the state of the art of campaign financing, it should at the very least be disclosed if not outlawed altogether. There is no constitutional right to parlay other people's money into your own power and access," Holman says. "Of course, if you're going to cut off such a large avenue of funding for campaigns you have to replace it with something, and the best solution is public financing."

In fact, the current scandals appear to be fueling public support for just that. Under public financing, known as "clean elections," candidates qualify for public funding through their party's past performance, or by collecting signatures or a set number of small contributions, usually five dollars. Once qualified, candidates agree to accept no private contributions and to abide by strict spending limits. A recent poll by the reform group Public Campaign shows that 74 percent of the public supports full, voluntary public financing for federal elections. And another poll by the Sunlight Foundation found that a similar majority (76 percent) supports the full disclosure of all money raised for candidates by lobbyists. [Full disclosure: The Sunlight Foundation is a funder of my employer, Congresspedia.]

Despite the multiple indictments and convictions of bundlers, members of Congress and lobbyists, substantive reforms appear to be all but dead in Congress. Simply put, candidates need the money raised by surrogate fundraisers more than they need to be seen as reformers. Consider, for example, that convicted New Hampshire phonejammer Chuck McGee is now out of prison and holding a "GOP Campaign School" for Republican activists in New Hampshire. In Illinois, Republican gubernatorial nominee Judy Barr Topinka is not heeding the entreaties of some of her former primary opponents to disown the publicly-tainted Robert Kjellander (and the money he brings to her campaign) in order to win their endorsement.

But perhaps the saddest example is that even a reformer like Sen. John McCain (R-Ariz.) will sacrifice his principles in order to tap into an effective fundraiser's network. In the 2000 presidential primary, McCain was the target of attack ads by a secretive group called Republicans for Clean Air. The group was basically a front for Texas millionaire brothers and Bush supporters Sam and Charles Wyly, the latter a 2000 Pioneer who pumped more than $2.5 million into the group. McCain was incensed, calling them "Wyly coyotes" and Bush's "sleazy Texas buddies" who "ought to be ashamed." "Tell them to keep their dirty money in the state of Texas," he said. He accused Bush of coordinating with the Wylys and demanded a Federal Elections Commission investigation into the ads.

This May, however, McCain apparently forgave and forgot his strong words when he accepted $20,000 in contributions from the brothers to his Straight Talk America fund, which McCain will likely use to finance his nascent presidential campaign. McCain even invited the brothers to co-host a Dallas fundraiser for him. It was only after McCain staffers realized that the brothers are under investigation by the Manhattan District Attorney, the IRS and the SEC for tax evasion that his conscience kicked in, and he retuned the checks and disinvited them from the fundraiser.

A spokesman for the brothers said they understood the decision. Sometimes the price of a golden Rolodex is just too high.

Read more about the major players

• Jack Abramoff: "Captain Jack"
• Brent Wilkes: "The Earmarker"
• Bob Kjellander and Nicholas Hurtgen: "The Pension Pirates"
• Thomas Noe: "The Numismatist"
• James Tobin: "The Operator"
• Rene Vaszues Botet: "The Extortionist"

Conor Kenny is the editor of Congresspedia.org, a collaborative online citizen’s encyclopedia on Congress. He is also a former money in politics investigative researcher for Public Citizen.