Election Panel Won't Issue Donation Rules

The New York Times
Election Panel Won't Issue Donation Rules
By KATE PHILLIPS

WASHINGTON, May 31 — The Federal Election Commission has decided not to issue rules to regulate so-called 527 organizations that used millions of dollars in private donations to become powerful voices in the 2004 presidential election.

A federal judge had told the commission that it had two choices: issue uniform rules or issue a fuller explanation of why it was dealing with 527-related cases one by one even as the 2006 elections near. The commission voted 4 to 2 not to appeal the judge's ruling, and chose the second option.

Its chairman, Michael E. Toner, a Republican, dissented, saying, "The failure to issue rules has fostered uncertainty about what is legally permissible and has undermined the McCain-Feingold law" that governs campaign financing.

The vote by the panel set the stage for another round of court battles that could affect the 2006 Congressional elections, as well as the 2008 presidential race.

Advocates of changing campaign financing — and some Republicans — have been prodding the commission and Congress to regulate the 527 groups, named after a section of the tax code. Critics term the groups' operations an end run around the McCain-Feingold ban on the largely unregulated contributions to federal candidates that is known as soft money.

In the 2004 election, the groups spent money in a way that parties were no longer permitted to do, prompting watchdog groups to call them "shadow parties."

The 527 groups largely aided Democratic candidates through benefactors like the billionaire George Soros. But at the end of the campaign, the best-known group was probably the Swift Boat Vets for Truth organization that attacked Senator John Kerry.

Some advocates of changing campaign finance had pinned their hopes on the commission, recognizing that stiff Democratic opposition in the Senate had made the passage of measures to regulate 527 organizations difficult.

The decision this week grew out of a case brought by Representatives Christopher Shays, Republican of Connecticut, and Martin T. Meehan, Democrat of Massachusetts, and the Bush-Cheney '04 campaign.

In March, Judge Emmet G. Sullivan of Federal District Court gave the commission his two options to address the question.

"Case-by-case adjudication appears to be a total failure," Judge Sullivan wrote in March.

He later elaborated, saying, "Cases arising from the 2004 campaign have languished on the commission's enforcement docket for as long as 23 months, with no end in sight, even as the 2006 election campaign has begun."

Although it has acted on some questions related to 527 groups, the commission has not resolved several complaints by Democracy 21 and other campaign finance groups against some of the biggest organizations.

Fred Wertheimer, president and chief executive officer of Democracy 21 and a lawyer involved in the 527 suit, said the decision was not satisfactory.

"We expect the F.E.C. to act quickly," Mr. Wertheimer said, "and we also expect to be back in federal court to get this matter resolved and to stop the 527's from spending unlimited amounts of money."

Laurence E. Gold, associate general counsel for the A.F.L.-C.I.O., said it would be disastrous for unions and nonprofit organizations if the commission decided to redefine the 527 groups as federal political action committees, because those fall under the umbrella of McCain-Feingold limits.

Mr. Toner said his agency's action raised the stakes on bills in Congress. A lobbying bill approved by the House includes restrictions on 527 groups, but it is unclear whether it will emerge from the conference committee. The Senate's lobbying package has no such component, and many Senate Democrats oppose such a measure.

"Absent Congressional action," Mr. Toner said, "no one should be surprised if 527 soft-money spending in '06 and '08 becomes one of the driving forces in determining which candidates are elected."